by Louis Navellier

April 13, 2021

We are now essentially in “economic nirvana.” Let me give you some examples. On Wednesday, the Atlanta Fed raised its first-quarter GDP estimate to a 6.2% annual pace, up from 6% previously estimated. The U.S. is still expected to boost the global GDP growth rate more than China in 2021, for the first time since 2005. Since the U.S. is a robust consumer-driven market, the U.S. has the potential to keep pace and exceed China’s overall GDP growth in 2021, since the U.S. economy is about one-third larger than China’s.

Here’s another example: March retail sales (to be released Thursday) are expected to be stunning due to the $1,400 stimulus checks that were sent out by the federal government. The $600 debit cards that were sent out by the federal government caused retail sales to soar 7.6% in January, so the expectations for March retail sales are even higher! Another example of how strong the U.S. economy is: some container ships must wait up to eight days at some U.S. ports to unload their goods due to robust consumer demand!

As I reported last week, the Labor Department announced that a whopping 916,000 new payroll jobs were created in March, the biggest monthly gain since August and well above economists’ consensus estimate of 675,000. In addition, the January and February payroll reports were revised higher by over 150,000 jobs so that we created at least 1,617,000 jobs in the first quarter and reduced the jobless rate to 6.0%.

Especially encouraging was that hotels and restaurants added 280,000 jobs in March as many states lifted Covid-19 restrictions. Interestingly, average hourly earnings declined 0.1% in March, which indicates that many lower-wage workers returned to the workforce. There still remains a problem with many education jobs and working parents being unemployed due to school closures, but many companies are starting to report labor shortages, so I expect strong payroll growth to continue in the upcoming months.

After announcing that its manufacturing index reached a 37-year high last week, ISM announced that its non-manufacturing (service) index surged to an all-time high of 63.7 in March, up from 55.3 in February. The previous high for the ISM service index was 60.9 in October 2018. All 18 service sectors surveyed by ISM reported growth. The strongest ISM components were business activity/production, which surged to 69.4 in March (up from 55.5 in February); also, new orders soared to 67.2 in March (up from 51.9 in February). These dramatic monthly gains are amplified by “the big freeze” in the U.S. in February, but the fact that the ISM service index surged so high illustrates much more than just a temporary recovery.

All this positive economic news caused the International Monetary Fund (IMF) to raise its 2021 U.S. GDP forecast by a giant step to 6.4% (from 5.1% previously estimated). That would represent the strongest annual economic growth rate since 1984. The IMF is also forecasting 4.4% 2021 GDP growth for the eurozone – the 19 countries that use the euro. Interestingly, the eurozone is expecting to achieve “herd immunity” by June, despite a much slower vaccine rollout than Britain and the U.S., so they are still currently restricting their respective economies. The strongest forecasted GDP growth by the IMF in 2021 is 12.5% for India (with a fiscal year ending in March 2022) and then +8.4% for China (up from 8.1% previously estimated). Also notable is that the IMF is forecasting 3.3% 2021 GDP growth for Japan.

The one warning flag is inflation. The Labor Department announced on Friday that the Producer Price Index (PPI) rose 1% in March (a 12% annual rate), substantially higher than the economists’ consensus expectation of a 0.5% increase. Wholesale energy prices rose 5.9%, while food prices rose 0.6%. Excluding food, energy, and trade margins, the core PPI in March rose 0.6%. In the past 12 months, the PPI and core PPI have risen 4.2% and 3.1%, respectively. The PPI declined from April through August of 2020, during the height of the pandemic, so the year-over-year comparisons are going to be much more dramatic in the next few months. Clearly, the Fed has succeeded in “sparking” wholesale price inflation, so we now have to see if this inflation is “transitory,” which is how the Fed has previously described it.

Treasury Secretary Yellen and President Biden Are Keen on Raising Corporate Taxes

There was a G-20 meeting last week on “tax harmonization.”  Treasury Secretary Janet Yellen called for a Global Tax Agreement on corporations, which was positively received by the European Union (EU). The EU has tried to impose additional taxes on some U.S. technology companies headquartered in Ireland. It looks like the Biden Administration is trying to resolve this tax uncertainty question early in his first term. The EU also likes the fact that Secretary Yellen is calling for a minimum corporate tax. The Organization for Economic Cooperation & Development (OECD) has been calling for a 12.5% minimum corporate tax, but Secretary Yellen and President Biden would like to double that rate by calling for a raise in U.S. corporate taxes from 21% to 28%, even if it impacts U.S. competitiveness.

Speaking of taxes, there remains a lot of infighting within Congress because the Biden Administration did not propose raising the state and local tax (SALT) deduction limit from $10,000, which hurts many higher income tax (“blue”) states that continue to suffer from an exodus to one of the several states with no state income tax (Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming). Naturally, raising federal income taxes without a higher SALT deduction would just increase the exodus to states with no income tax. What really makes America great is that our respective states can compete with each other for business, so I expect the pro-business states to continue to prosper!

The Semiconductor Supply Glitch is Slowing Down the Auto Industry

The big news on Friday was that Ford and General Motors announced that they are idling or extending plant closures due to the ongoing semiconductor chip shortage. These semiconductor chips are used in infotainment systems, electric power steering, braking systems, stop/start engine management, and other vehicle control systems. Both Ford and GM are prioritizing high margin vehicles, like luxury pickup trucks and SUVs, during this semiconductor chip shortage, so plants that make lower margin vehicles, like crossovers, are increasingly being idled. Since global supply chains are fragile, the long-term outlook for U.S. manufacturing remains bright, because we need components to be built closer to assembly plants.

After the semiconductor chip shortage is resolved, the next industry crisis is expected to be the lithium battery shortage. VW Group announced during its “Power Day” that premium lithium batteries with cobalt, which is in scarce supply, will be reserved for its premium vehicles, like Porsches, while cobalt-free batteries will be used in lower-priced electric vehicles.

Interestingly, Tesla is utilizing cobalt-free batteries at its Shanghai plant, and even though these vehicles do not have the range of its other electric vehicles that have Panasonic lithium batteries with cobalt, the company just posted record sales in China and strong sales in Europe with these lower-range EVs.

The primary reason that you have to wait to get a Hummer EV is that the batteries from LG Chem to make the Ultium battery packs are not yet available. Clearly, VW Group is keenly aware of the impending lithium battery shortage, since it just announced six Giga-factories during its Power Day with partners in Europe to improve its future supply chain. In the U.S., LG Chem and SK Innovations are expected to dominate the supply of lithium batteries through new manufacturing plants being developed.

The other supply glitch is that LG Chem and SK Innovation were fighting over trade secrets at the International Trade Commission (ITC). LG Chem won this fight, and the ITC imposed a 10-year ban on imports from SK Innovation which further complicates the U.S. supply chain. SK Innovation has a massive new lithium battery plant in Georgia and received ITC approval to sell to Ford for four years and VW Group for two years, but clearly SK Innovation must eventually settle with LG Chem to resolve the ITC ban; so I expect that lithium battery shortages will persist for several years, especially in the U.S.

Navellier & Associates owns Tesla (TSLA) in 1 account, per client request in managed accounts. We do not own General Motors (GM), VW Group, Panasonic, or Ford (F). Louis Navellier does not own Tesla  (TSLA), General Motors (GM), VW Group, Panasonic, or Ford (F).

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

Please see important disclosures below.

Also In This Issue

A Look Ahead by Louis Navellier
We Are Now Essentially in Economic Nirvana

Income Mail by Bryan Perry
Taxing Foreign Profits – GILTI As Charged

Growth Mail by Gary Alexander
Inflation Will Roar Again – And Probably Soon

Global Mail by Ivan Martchev
Tuesday’s CPI Numbers Will Be Interesting

Sector Spotlight by Jason Bodner
Is the Stock Market a “Yellow Light Turning Red”?

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.