by Louis Navellier

December 7, 2021

Initial reports are that the Covid-19 Omicron variant from South Africa has up to 30 “spike proteins,” and it can therefore more easily infect people and be more vaccine-resistant, but so far existing vaccines have been effective at blocking the spike proteins that the Covid-19 virus utilizes to infect people.

That’s good news. The other good news is that Dr Angelique Coetzee, the first South African doctor to alert the authorities to this new variant, said that, “Symptoms were so different and so mild from those I had treated before.”  Apparently, due to the malaria vaccine so prevalent in Africa, many people in Africa have been naturally resistant to Covid-19 and have not had the high death rates of other countries.

Nonetheless, travelers from Africa can be Covid-19 carriers, so Dr. Anthony Fauci said that the U.S. is rushing to get new scientific data on the new Covid-19 variant from South Africa. He also stressed that existing vaccines must be tested against the new Covid-19 variant.

Overall, markets are manic crowds and like to panic from time to time. The press also loves to print the worst possible scenario, to scare us – as do some government officials, in order to control us better.

Historically, viruses tend to mutate and become less deadly over time, just like the Spanish Flu did in 1918-1919. Although Dr. Anthony Fauci said that the U.S. should be prepared to do “anything and everything” to fight the Covid-19 Omicron variant, he also added that it is “too early to say” whether we need new lockdowns or mandates. I think it would be political suicide to impose new domestic lockdowns or major mandates going into a third year of Covid and a mid-term election, so I do not expect the media paranoia over the Covid-19 Omicron variant to impact consumer confidence and holiday spending.

In the meantime, the fear of the Covid-19 Omicron variant and reduced international travel have pushed crude oil prices down below $70 per barrel, allowing gasoline prices to drop a little, putting more money into consumers’ pockets. Natural gas prices are much more dependent on winter weather, since a cold winter can cause natural gas prices to surge, so overall energy inflation may persist for a while longer.

Consumers Could Push Fourth-Quarter GDP Back to High (First-Half 2021) Levels

Consumers are buying again, so I still expect this holiday shopping season to set all-time records.

For example, the Commerce Department reported that personal income rose 0.5% in October, while consumer spending rose 1.3%. That means consumers were dipping into savings or using credit. The personal savings rate declined to 7.3%, down from 8.2% in September. Anytime consumers are willing to incur debt to make purchases, that bodes well for both consumer confidence and holiday spending.

I should add that the Atlanta Fed last Wednesday revised its fourth-quarter GDP estimate up to a stunning 9.7% annual pace, up from its previous estimate of 8.6%. This is absolutely stunning. The upcoming November retail sales report may confirm indications of a very strong consumer spending holiday season.

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

The manufacturing sector also remains strong. For example, the Commerce Department announced that durable goods orders rose 0.5% in October, well above the economists’ consensus forecast for a 0.3% increase. Durable goods have risen for 15 of the past 18 months – during the pandemic!

Core capital goods rose 0.6% in October as businesses rebuilt inventories and consumer spending remained strong. Year to date, durable goods orders are up 22.1%, while shipments are up just 13.1%, so businesses continue to have robust order backlogs despite complications from shortages of components and parts.

Last Wednesday, the Institute of Supply Management (ISM) announced that its manufacturing index rose to 61.1 in November, up from 60.8 in October. The new orders component rose to 61.5 (up from 59.8 in October), while the production component surged to 62.2 (up from 59.3 in October). The backlog of orders component slipped to 61.9 in November (down from 63.6 in October), which is still very healthy, since any reading over 50 signals an expansion, and 13 of 15 surveyed industries expanded in November.

On Friday, the ISM announced that its non-manufacturing (service) index surged to an all-time high of 69.1 in November, up from 66.7 in October. Especially impressive were the business activity component surging to 74.6 (from 69.8 in October) and backlog of orders component at 65.9 (from 64.5 in October). All 18 service industries surveyed by ISM improved in November, so the service sector remains strong.

The Conference Board on Tuesday announced that its consumer confidence index declined to 109.5 in November, down from 111.6 in October. The present situation component declined to 142.5 (down from 145.5). This drop is very minor, and consumers were likely perturbed by the prices at the pump and other inflation that is finally starting to moderate as crude oil prices decline on the Covid-19 Omicron fears.

When both consumers and businesses are healthy, that’s usually a “one-two” punch that can propel the U.S. economy and the stock market dramatically higher. The Fed remains dovish and although the monthly quantitative easing has been cut back from $120 billion to $105 billion per month, the decrease in quantitative easing is (so far) slower than many economists anticipated. Furthermore, Fed Chairman Jerome Powell was reappointed for a second four-year term, so the Fed is expected to remain dovish.

As a result, the “Goldilocks” environment of low interest rates and persistent quantitative easing persists.

And finally, National Association of Realtors announced that existing home sales rose 7.5% in October (vs. September), although the volume of existing home sales has declined 1.4% in the last 12 months. One reason is rising mortgage rates. Mortgage rates have risen to an average of 3.22% at the end of October, according to Mortgage News Daily, up from slightly below 3% in mid-September. There are only 1.25 million homes for sale, which represents a 2.4-month inventory at the current sales pace. Median home prices are expected to continue to rise, due to tight inventories and continued low mortgage rates.

What’s Behind Friday’s Anemic Jobs Report?

Last Wednesday, ADP reported private payrolls rose by 534,000 in November, slightly better than the economists’ consensus estimate of 520,000, so everyone had high hopes for the Friday jobs report.

Then, on Thursday, the Labor Department announced that weekly unemployment claims in the latest week declined to 222,000, up from a revised 194,000 in the previous week. Continuing unemployment claims declined to 1.956 million, down from 2.049 million the previous week. Economists were expecting weekly and continuing unemployment claims at 240,000 and 2.003 million, respectively, so these results were better than expected. The previous week’s unemployment claims hit the lowest level in 52 years.

Then came the big shock Friday morning, when the Labor Department reported that only 210,000 payroll jobs were created in November, a massive disappointment, since economists expected 550,000 new jobs.

The good news was that the October and September payroll reports were revised up to 546,000 (from 531,000) and 379,000 (from 312,000), respectively, and due to a shrinking workforce, the unemployment rate actually declined to a post-COVID low of 4.2%, down from 4.6% in October.

Interestingly, the Labor Force Participation rate rose to 61.8% in November, up from 61.6% in October, but it is still below the 63.3% rate which prevailed prior to the pandemic. Average hourly earnings rose 0.3% (8 cents) to $31.03 per hour in November and have risen 4.8% in the past 12 months. Overall, November represented the slowest monthly payroll growth this year, but due to a shrinking workforce and lower unemployment rate, the Fed should stop trying to restore the approximately 2.4 million civilian jobs lost since the pandemic began, and move on to fight inflation. After all, they can’t force people to work.

Speaking of the Fed, Chairman Jerome Powell, fresh from being reappointed for a second term, told the Senate Banking Committee on Tuesday that “The risk of higher inflation has increased.” Hmmm! No more talk of “transitory” inflation now that he has job security? Furthermore, Powell said, “To get back to the kind of great labor market we had before the pandemic, we’re going to need … price stability.”

Translated from Fedspeak, Chairman Powell basically admitted that the Fed is finally getting ready to pivot from its unemployment mandate to address its inflation mandate.

Chairman Powell also hinted that the Fed may further reduce its quantitative easing by saying, “The economy is very strong and inflationary pressures are high, and it is therefore appropriate in my view to consider wrapping up the taper of our asset purchases … perhaps a few months sooner.” So the Fed Chair is starting to lay the groundwork for fighting inflation in the New Year. Amazingly, the 10-year Treasury bond yield fell below 1.5% as the Fed Chairman spoke in front of the Senate Banking Committee.

The Fed’s Beige Book survey was also released on Wednesday in anticipation of its mid-December Federal Open Market Committee (FOMC) meeting. The Beige Book survey said that the U.S. economy was growing at a “modest to moderate” pace and that both supply chain issues as well as labor shortages are holding back overall economic growth, despite strong demand. The Fed survey quoted a logistics firm that said “Gas, electric, food, raw materials, products – everything is going (up).”

Clearly, at the next FOMC meeting (December 14-15), curtailing inflation will be the Fed’s top priority.

All content above represents the opinion of Louis Navellier of Navellier & Associates, Inc.

Please see important disclosures below.

POLL QUESTION:

Marketmail Survey #13 is now closed.

Also In This Issue

Global Mail by Ivan Martchev
Analyze This: Treasuries Rally into the Taper

Sector Spotlight by Jason Bodner
When Good Stocks Go Down, Buy Them

View Full Archive
Read Past Issues Here

About The Author

Louis Navellier
CHIEF INVESTMENT OFFICER

Louis Navellier is Founder, Chairman of the Board, Chief Investment Officer and Chief Compliance Officer of Navellier & Associates, Inc., located in Reno, Nevada. With decades of experience translating what had been purely academic techniques into real market applications, he believes that disciplined, quantitative analysis can select stocks that will significantly outperform the overall market. All content in this “A Look Ahead” section of Market Mail represents the opinion of Louis Navellier of Navellier & Associates, Inc.

Important Disclosures:

Although information in these reports has been obtained from and is based upon sources that Navellier believes to be reliable, Navellier does not guarantee its accuracy and it may be incomplete or condensed. All opinions and estimates constitute Navellier’s judgment as of the date the report was created and are subject to change without notice. These reports are for informational purposes only and are not a solicitation for the purchase or sale of a security. Any decision to purchase securities mentioned in these reports must take into account existing public information on such securities or any registered prospectus.To the extent permitted by law, neither Navellier & Associates, Inc., nor any of its affiliates, agents, or service providers assumes any liability or responsibility nor owes any duty of care for any consequences of any person acting or refraining to act in reliance on the information contained in this communication or for any decision based on it.

Past performance is no indication of future results. Investment in securities involves significant risk and has the potential for partial or complete loss of funds invested. It should not be assumed that any securities recommendations made by Navellier. in the future will be profitable or equal the performance of securities made in this report. Dividend payments are not guaranteed. The amount of a dividend payment, if any, can vary over time and issuers may reduce dividends paid on securities in the event of a recession or adverse event affecting a specific industry or issuer.

None of the stock information, data, and company information presented herein constitutes a recommendation by Navellier or a solicitation to buy or sell any securities. Any specific securities identified and described do not represent all of the securities purchased, sold, or recommended for advisory clients. The holdings identified do not represent all of the securities purchased, sold, or recommended for advisory clients and the reader should not assume that investments in the securities identified and discussed were or will be profitable.

Information presented is general information that does not take into account your individual circumstances, financial situation, or needs, nor does it present a personalized recommendation to you. Individual stocks presented may not be suitable for every investor. Investment in securities involves significant risk and has the potential for partial or complete loss of funds invested. Investment in fixed income securities has the potential for the investment return and principal value of an investment to fluctuate so that an investor’s holdings, when redeemed, may be worth less than their original cost.

One cannot invest directly in an index. Index is unmanaged and index performance does not reflect deduction of fees, expenses, or taxes. Presentation of Index data does not reflect a belief by Navellier that any stock index constitutes an investment alternative to any Navellier equity strategy or is necessarily comparable to such strategies. Among the most important differences between the Indices and Navellier strategies are that the Navellier equity strategies may (1) incur material management fees, (2) concentrate its investments in relatively few stocks, industries, or sectors, (3) have significantly greater trading activity and related costs, and (4) be significantly more or less volatile than the Indices.

ETF Risk: We may invest in exchange traded funds (“ETFs”) and some of our investment strategies are generally fully invested in ETFs. Like traditional mutual funds, ETFs charge asset-based fees, but they generally do not charge initial sales charges or redemption fees and investors typically pay only customary brokerage fees to buy and sell ETF shares. The fees and costs charged by ETFs held in client accounts will not be deducted from the compensation the client pays Navellier. ETF prices can fluctuate up or down, and a client account could lose money investing in an ETF if the prices of the securities owned by the ETF go down. ETFs are subject to additional risks:

  • ETF shares may trade above or below their net asset value;
  • An active trading market for an ETF’s shares may not develop or be maintained;
  • The value of an ETF may be more volatile than the underlying portfolio of securities the ETF is designed to track;
  • The cost of owning shares of the ETF may exceed those a client would incur by directly investing in the underlying securities; and
  • Trading of an ETF’s shares may be halted if the listing exchange’s officials deem it appropriate, the shares are delisted from the exchange, or the activation of market-wide “circuit breakers” (which are tied to large decreases in stock prices) halts stock trading generally.

Grader Disclosures: Investment in equity strategies involves substantial risk and has the potential for partial or complete loss of funds invested. The sample portfolio and any accompanying charts are for informational purposes only and are not to be construed as a solicitation to buy or sell any financial instrument and should not be relied upon as the sole factor in an investment making decision. As a matter of normal and important disclosures to you, as a potential investor, please consider the following: The performance presented is not based on any actual securities trading, portfolio, or accounts, and the reported performance of the A, B, C, D, and F portfolios (collectively the “model portfolios”) should be considered mere “paper” or pro forma performance results based on Navellier’s research.

Investors evaluating any of Navellier & Associates, Inc.’s, (or its affiliates’) Investment Products must not use any information presented here, including the performance figures of the model portfolios, in their evaluation of any Navellier Investment Products. Navellier Investment Products include the firm’s mutual funds and managed accounts. The model portfolios, charts, and other information presented do not represent actual funded trades and are not actual funded portfolios. There are material differences between Navellier Investment Products’ portfolios and the model portfolios, research, and performance figures presented here. The model portfolios and the research results (1) may contain stocks or ETFs that are illiquid and difficult to trade; (2) may contain stock or ETF holdings materially different from actual funded Navellier Investment Product portfolios; (3) include the reinvestment of all dividends and other earnings, estimated trading costs, commissions, or management fees; and, (4) may not reflect prices obtained in an actual funded Navellier Investment Product portfolio. For these and other reasons, the reported performances of model portfolios do not reflect the performance results of Navellier’s actually funded and traded Investment Products. In most cases, Navellier’s Investment Products have materially lower performance results than the performances of the model portfolios presented.

This report contains statements that are, or may be considered to be, forward-looking statements. All statements that are not historical facts, including statements about our beliefs or expectations, are “forward-looking statements” within the meaning of The U.S. Private Securities Litigation Reform Act of 1995. These statements may be identified by such forward-looking terminology as “expect,” “estimate,” “plan,” “intend,” “believe,” “anticipate,” “may,” “will,” “should,” “could,” “continue,” “project,” or similar statements or variations of such terms. Our forward-looking statements are based on a series of expectations, assumptions, and projections, are not guarantees of future results or performance, and involve substantial risks and uncertainty as described in Form ADV Part 2A of our filing with the Securities and Exchange Commission (SEC), which is available at www.adviserinfo.sec.gov or by requesting a copy by emailing info@navellier.com. All of our forward-looking statements are as of the date of this report only. We can give no assurance that such expectations or forward-looking statements will prove to be correct. Actual results may differ materially. You are urged to carefully consider all such factors.

FEDERAL TAX ADVICE DISCLAIMER: As required by U.S. Treasury Regulations, you are informed that, to the extent this presentation includes any federal tax advice, the presentation is not written by Navellier to be used, and cannot be used, for the purpose of avoiding federal tax penalties. Navellier does not advise on any income tax requirements or issues. Use of any information presented by Navellier is for general information only and does not represent tax advice either express or implied. You are encouraged to seek professional tax advice for income tax questions and assistance.

IMPORTANT NEWSLETTER DISCLOSURE:The hypothetical performance results for investment newsletters that are authored or edited by Louis Navellier, including Louis Navellier’s Growth Investor, Louis Navellier’s Breakthrough Stocks, Louis Navellier’s Accelerated Profits, and Louis Navellier’s Platinum Club, are not based on any actual securities trading, portfolio, or accounts, and the newsletters’ reported hypothetical performances should be considered mere “paper” or proforma hypothetical performance results and are not actual performance of real world trades.  Navellier & Associates, Inc. does not have any relation to or affiliation with the owner of these newsletters. There are material differences between Navellier Investment Products’ portfolios and the InvestorPlace Media, LLC newsletter portfolios authored by Louis Navellier. The InvestorPlace Media, LLC newsletters contain hypothetical performance that do not include transaction costs, advisory fees, or other fees a client might incur if actual investments and trades were being made by an investor. As a result, newsletter performance should not be used to evaluate Navellier Investment services which are separate and different from the newsletters. The owner of the newsletters is InvestorPlace Media, LLC and any questions concerning the newsletters, including any newsletter advertising or hypothetical Newsletter performance claims, (which are calculated solely by Investor Place Media and not Navellier) should be referred to InvestorPlace Media, LLC at (800) 718-8289.

Please note that Navellier & Associates and the Navellier Private Client Group are managed completely independent of the newsletters owned and published by InvestorPlace Media, LLC and written and edited by Louis Navellier, and investment performance of the newsletters should in no way be considered indicative of potential future investment performance for any Navellier & Associates separately managed account portfolio. Potential investors should consult with their financial advisor before investing in any Navellier Investment Product.

Navellier claims compliance with Global Investment Performance Standards (GIPS). To receive a complete list and descriptions of Navellier’s composites and/or a presentation that adheres to the GIPS standards, please contact Navellier or click here. It should not be assumed that any securities recommendations made by Navellier & Associates, Inc. in the future will be profitable or equal the performance of securities made in this report.

FactSet Disclosure: Navellier does not independently calculate the statistical information included in the attached report. The calculation and the information are provided by FactSet, a company not related to Navellier. Although information contained in the report has been obtained from FactSet and is based on sources Navellier believes to be reliable, Navellier does not guarantee its accuracy, and it may be incomplete or condensed. The report and the related FactSet sourced information are provided on an “as is” basis. The user assumes the entire risk of any use made of this information. Investors should consider the report as only a single factor in making their investment decision. The report is for informational purposes only and is not intended as an offer or solicitation for the purchase or sale of a security. FactSet sourced information is the exclusive property of FactSet. Without prior written permission of FactSet, this information may not be reproduced, disseminated or used to create any financial products. All indices are unmanaged and performance of the indices include reinvestment of dividends and interest income, unless otherwise noted, are not illustrative of any particular investment and an investment cannot be made in any index. Past performance is no guarantee of future results.