by Louis Navellier
February 3, 2026
Due to last fall’s government shutdown, some statistics are coming out later than usual. For instance, the November Producer Price Index (PPI) was released on January 14 (about a month later than usual), and the December PPI was released just 16-days later, last Friday. In this report, the U.S. Labor Department calculated the Producer Price Index (PPI) for December rose substantially more than expected, at +0.5% (a 6% annual rate), more than double the economists’ consensus estimate of just a 0.2% increase.
The core PPI surged 0.7%, due mostly to a 1.7% rise in trade services, even though wholesale food prices declined 0.3% and energy prices declined 1.4%, which is good news. Wholesale service costs rose 0.7%, while wholesale goods costs were unchanged. So, it seems trade services distorted the December PPI, but there were encouraging details, like lower food and energy prices and stable wholesale goods prices.
I noticed many overreactions to this single inflation report, including a big drop in gold and silver, on the mistaken assumption high inflation will cause the Fed to delay any further interest rate-cuts. The truth of the matter is gold has soared during times of high interest rates in history, and we’re seeing falling rental and home prices, low crude oil prices, plus waves of deflation imported from China and other economies. All of this adds up to a serious deflation risk, requiring the Fed to slash rates by at least 1% this year.
One example of America importing deflation is the price of television sets falling 6.7% in the past year. If you go to a major box store, you can get a 98-inch TCL television set for under $1,300. China’s TCL built the biggest factory for mini-LED televisions in the world and can now out-price anyone, which may explain why Sony and TCL are now teaming up together, otherwise Sony would not be able to compete.
I have been predicting 5% GDP growth later this year but the fourth-quarter 2025 GDP just took a hit as the trade deficit resurged in November. Specifically, exports declined by 3.6% to $292-billion and imports surged 5% to $349-billion, so the trade deficit rose a whopping 94.6% to $56.8-billion compared with last October’s record low trade deficit – the biggest monthly change in the trade deficit since 1992!
This rising trade deficit caused the Atlanta Fed to revise their fourth-quarter GDP estimate significantly lower to a 4.2% annual pace (down from 5.4% previously estimated) but for the first 11-months of 2025, exports still grew faster than imports, with exports up 6.3%, vs. +5.8% for imports. The November data was skewed by imports of pharmaceuticals, up $6.7-billion, and gold exports declining by $6.8-billion.
There is no doubt the Trump administration’s shifting tariff polices may have impacted the trade deficit, but since most tariffs are largely finalized, except for South Korea, we should be getting more reliable trade data. While these trade figures may cut GDP estimates, some further evidence of GDP growth came from the Commerce Department, which reported durable goods orders surging 5.3% in November – well above economists’ consensus estimate of a 4% increase. Excluding a 143% surge in commercial aircraft orders, durable goods still rose by 0.5% in November, which is positive for fourth-quarter GDP growth.
Interestingly, gold peaked at over $5,500 per-ounce last week, but gold fell sharply on Friday, in an overreaction to the PPI data and Fed nomination. I believe gold will continue its rally soon, as many central banks around the world have lost credibility and lost faith in their own currency by buying more gold. We are teetering on the verge of a deflationary environment, where interest rates around the world may collapse, so gold remains an oasis and a great deflation hedge. (I now recommend 19-gold stocks).
I would not fear any return to inflation, but I do fear a deflationary spiral. What started in China and Japan may spread around the world, due in part to shrinking households from aging demographics and a failure to assimilate immigrants efficiently. Britain and France tried to tax the rich and failed, so more middle-class tax hikes may be in store. This could trigger new elections. Germany and Italy are blaming the European Union (EU) for impeding innovation and hindering growth. In my opinion, the EU may break up after their series of 2027 elections, when many anti-EU parties may gain leadership roles.
President Trump Tells Europe (at Davos) to Create Growth in the American Image
With the fastest economic growth in the world, it is difficult to argue with the U.S. economic agenda which President Trump, Scott Bessent and Howard Lutnick laid out in Davos, despite heckling from Al Gore and Gavin Newsom, plus ECB President Christine Lagarde walking out as Howard Lutnick talked.
In Davos, President Trump said Europe should reject globalism and follow U.S. economic policies if they want to prosper. So essentially, the Trump administration went to Davos to blow up the global elite’s club and assert themselves on Greenland, NATO, energy and other important matters.
AI is also making America more productive, and the 4.9% productivity gain in the third-quarter was the strongest surge I can remember. All these efficiencies promote falling prices as well as GDP growth!
Another boost to GDP will be the output produced by an estimated $20-trillion of on-shoring underway.
Optimism for America’s future can be addictive, so it will be interesting to see how well the Trump administration can sell their economic agenda through cheerleaders like Kevin Warsh, Kevin Hassett, Scott Bessent and Howard Lutnick. Obviously, President Trump is working hard to win the November mid-term elections, so he will not face impeachment and other unpleasant events from his first term.
One last point: Although we are in the midst of an incredible small-cap rally and a strong January effect, I see my large-cap stocks posting their strongest relative out-performance (compared to the S&P 500) in the past 22-months!
On the latest price gold correction, I’ve added more gold stocks, as my fundamentally superior stocks are poised to post record sales, earnings, surprises and raise guidance in the upcoming weeks, so please enjoy the ride! I just want to remind you how special the current economic environment is and why being invested in my fundamentally superior stocks – including my 19 gold stocks – is a key to getting rich!
As the following chart shows, natural gas has now joined gold in a sudden price spike early this year:
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
In conclusion, a new world order of peace and prosperity is unfolding. Countries are being told to reject globalism, take care of their citizens, protect their borders and prosper. Even though countries like the Czech Republic, Hungary, Poland and Slovakia are already benefitting from these policies; these policies are now finally spreading to Germany and Italy as they push back on Brussels’ influence. Meanwhile, a new economic experiment is now underway in America, and 5% GDP growth is just the first result. The next scenario could be 6% GDP growth and a stock market doubling, as President Trump predicted in Davos!
All content above represents the opinion of Louis Navellier of Navellier & Associates, Inc.
Also In This Issue
A Look Ahead by Louis Navellier
Is Inflation Returning – or is Deflation a Greater Threat?
Income Mail by Bryan Perry
Kevin Hassett’s Base Case for an Economic Supply Shock
Growth Mail by Gary Alexander
What’s Behind the Surge (then Collapse) in Gold and Silver?
Global Mail by Ivan Martchev
The Stock Market is Worried about Iran
Sector Spotlight by Jason Bodner
What A Stock Market Rotation Looks Like
View Full Archive
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Louis Navellier
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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.
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