by Louis Navellier

March 9, 2021

The news that Texas Governor Greg Abbott lifted its mask mandate on Tuesday is good news and will help to stimulate new job growth in the upcoming months. Mississippi Governor Tate Reeves announced similar moves. Many businesses, such as Kroger and Target, will remain open but continue to mandate masks in their stores, so their customers feel more comfortable. So even through Texas, Mississippi, Iowa and a growing number of states no longer have a mask mandate, these states encourage personal responsibility and businesses can continue to mandate masks as well as occupancy limits. Although California Governor Gavin Newsom called Texas’ mask decision “absolutely reckless,” more states are expected to follow Texas as the number of Covid-19 cases diminish in the upcoming months. President Joe Biden disagreed, saying, “masks make a difference,” adding that, “the last thing we need is Neanderthal thinking.”

The other exciting thing that briefly boosted financial markets early last week was that the 1-shot Johnson & Johnson vaccine for Covid-19 was approved by the FDA, with distribution now underway.

Navellier & Associates owns Kroger (KR), and Target (TGT) in managed accounts but we do not own Johnson & Johnson (JNJ). Louis Navellier and his family personally own Kroger (KR), and Target (TGT) via a Navellier managed account but they do not personally own Johnson & Johnson (JNJ).

The number of new Covid-19 cases continue to plummet, but our elected leaders are reluctant to tell us that things are getting better, since Congress is striving to jam through the Covid-19 relief/stimulus bill, with the Senate passing it on Saturday. Ironically, it is mostly full of pork and not much Covid-19 relief. However, since Covid-19 is the “excuse” for the stimulus bill, since it will include $1,400 personal relief to millions of Americans, our elected leaders have to propagate the Covid-19 crisis a bit longer. However, as soon as President Biden signs the Covid-19 relief/stimulus bill, it will likely soon be announced that we are miraculously cured. This essentially means that unemployment claims will continue to decline, and consumer spending will remain strong, aided by $1,400 relief being sent to millions of Americans!

Economics 101 is all about the “velocity of money,” which is how fast money changes hands. If we all hoard our money, the velocity of money slows down and we destroy the economy, which is what the Covid-19 shutdowns did around much of the world. However, as we get out and about, the velocity of money naturally picks up and prosperity rises. Interestingly, we also tend to get out and about more in the spring as the weather improves. Additionally, it is hard to remain pessimistic in the spring as the flowers bloom and the weather improves, so I am expecting U.S. GDP growth to improve and to remain strong.

Another Stunning Week of U.S. Economic Indicators

Last week closed with a stunning jobs report, but let’s not forget the other indicators which preceded it:

First, the Institute of Supply Management (ISM) reported that its manufacturing index rose to 60.8 in February, up from 58.7 in January, reaching the highest level in three years (since February 2018). This was the ninth straight month the index has risen, and the details were especially encouraging: (1) The new orders component rose to 64.8 in February, up from 61.1 in January; (2) the production component rose to 63.2 in February, up from 60.7 in January; and (3) the order backlog component rose to 64 in February, up from 59.7 in January. Fully 16 of 18 manufacturing industries surveyed by ISM expanded in February.

A strong housing sector is helping to boost manufacturing activity for appliances, furniture and building materials. The automotive sector is hindered by the global chip shortage, but this means that a backlog is growing that will likely keep the ISM manufacturing index strong over the upcoming months.

The Labor Department announced that jobless claims rose to 745,000 in the latest week, up from a revised 736,000 in the previous week, but continuing unemployment claims declined to 4.295 million vs. 4.419 million in the previous week. These weekly jobless claims were essentially in-line with economists’ expectations but they do not seem strong enough to have a meaningful impact on overall payroll statistics.

Then on Friday, the Labor Department reported that 379,000 payroll jobs were created in February, which was substantially (80%) above economists’ consensus expectation of 210,000. The other good news was that the January payroll total was revised 239% higher to 166,000, up from 49,000 previously reported!

The unemployment rate declined to 6.2% in February, down from 6.3% in January. The hospitality sector added 355,000 new payroll jobs as Covid-19 restrictions were lifted in many states. Education jobs declined by 69,000, so the decision by California and some other states to keep schools closed continues to destroy education jobs. There are 8.5 million fewer payroll jobs than there were a year ago, many of which are working mothers, so as long as schools remain closed, many working mothers cannot return to the workforce, so reopening schools is becoming an increasingly important national priority!

In other news, the Atlanta Fed revised its first quarter GDP estimate to an 8.3% annual pace, down from its previous estimate of a 10% annual pace. In the wake of strong retail sales and manufacturing activity, plus Covid-19 restrictions being lifted in many states, first-quarter GDP growth may be very strong.

Canada is Not Doing as Well

Interestingly, our neighbor to the north is struggling, similar to Britain, which is in the midst of its worst economic contraction in 311 years! Specifically, Statistics Canada announced on Tuesday that Canada’s GDP in 2020 contracted 5.4%, its biggest contraction since World War II. Unlike America, where consumers tend to spend their government handouts, in Canada, consumers have been hoarding their handouts. Canada has been borrowing to stimulate its economy and its government debt now stands at 343% of GDP, which is more than three times higher than the current U.S. federal debt-to-GDP ratio.

One factor not helping Canada, a major energy exporter, is that the Energy Information Administration (EIA) reported on Wednesday that U.S. crude oil inventories soared by 21.5 million barrels in the latest week, which was a shock, since analysts were expecting a decline of 928,000 barrels. A lower refinery utilization rate was one culprit behind this historic surge in crude oil prices, as Texas continues to recover from its big freeze. The EIA also reported that gasoline inventories declined by 13.6 million barrels in the latest week, so as refinery activity comes back on-line, gasoline inventories should need to be replenished.

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

Please see important disclosures below.

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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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