by Louis Navellier

April 2, 2024

It’s odd that the Fed’s favorite inflation indicator is the Personal Consumption Expenditures (PCE) “core” index when that “core” portion excludes the costs of food and energy. (The same goes for the Consumer Price Index (CPI), which also excludes food and energy in its “core” index).  If you polled most families in America – and especially those in Europe and other nations – you would likely discover that food and energy are the two categories of purchases that impact their lives the most each month, often each day.

Ironically, rising food and energy prices now threaten to destroy the European Union (EU), as farmers struggle to comply with energy shortages and new rules that emerged from the Paris Climate Accord. Extreme Green measures have been destroying farmers’ businesses, which is why they have been staging protests all over Europe. Furthermore, the war in Ukraine has disrupted agricultural and fertilizer markets, pushing food prices higher. As that war continues, there are going to be a lot of hungry people, especially in other war-torn regions, like Cuba, Haiti and Gaza, which are currently struggling to feed their people.

Closer to our shores, Russia just sent a fuel tanker last week with 715,000 barrels of crude oil to Cuba to help alleviate the acute energy and food crisis nearest us. This is the first shipment of crude oil to Cuba this year and it may not be the last, since tighter sanctions have caused India to curtail its buying of Russian crude oil. The fuel tanker arrived on Friday and should supply Cuba with enough crude oil for 35 days, so another tanker may be needed by early May. Venezuela has reduced its crude oil shipments to Cuba to 35,000 barrels per day, down from 80,000 bpd in 2020, so Brazil may also send oil to Cuba.

In the U.S. and Canada, we are fortunate to be food and energy independent. In addition, our energy exports have helped to prevent a recession in the U.S. The U.S. also has better demographics, including a higher birth rate than Europe and an ability to assimilate more immigrants, which fuels overall economic growth. Although there is a growing myth that we are a nation on the verge of a new Civil War – with a fictional Civil War movie being released April 12th, in which 19 states secede, and the U.S. military bombs militia groups in California, Florida and Texas – this is just a political fantasy, promoting division.

The Wall Street Journal recently published an article entitled, “Why ESG Investing Might Never Recover,” (with ESG referring to the fad for investing in companies with an emphasis on Environmental, Social and Governance issues). Most of these funds are failing due to their polarization of mandating EVs, banning natural gas, chemical fertilizers and causing seemingly endless culture wars. Whatever ESG leaders like BlackRock and the Rockefeller Family were trying to achieve with ESG, they have been undermined by collapsing prices of EVs, batteries and solar panels, some due to overproduction in China.

Another publication, The Financial Times, has reported that “red state” investment funds have pulled about $13.3 billion from BlackRock in the start of an ESG backlash. The latest withdrawal is the Texas Permanent School Fund, which said they would pull $8.5 billion from BlackRock at the end of April.

Academic professors continue to lead the charge for ESG. I grew up in Berkeley, California and my wife went to U.C. Berkeley Law School, so we keep up to date on this ESG push, which is being led by Kate Gordon, a former senior advisor in the Energy Department for the Biden Administration. In fact, there was a University of California Berkeley Corporate Climate Summit held last week, where the climate change rhetoric was endless. This only goes to show you that the epic battle between ESG and non-ESG investing persists, as UC Berkeley and the Davos-led ruling elites and are not swayed by public opinion.

Anytime a government mandate is forced upon a population against their will, an opposite but equal reaction tends to arise, and that is what is causing right wing leaders to emerge in Argentina, Italy, the Netherlands and soon in Germany, as well as the re-emergence of former President Donald Trump.

Wars Are Also Pushing Food and Energy Prices Higher

There could be an acute food shortage in the next couple of years, especially if the fighting in Ukraine persists that long, and if a fertilizer shortage in Brazil and elsewhere is added to the Russian shortage. The war in Ukraine has already disrupted fertilizer markets, due to a ban on Russian fertilizer.

The Ukraine war is also keeping crude oil prices high, as crude oil prices are now nearing their highest level in almost five months due to the 1-2 punch of seasonal demand plus a series of drone strikes by Ukraine on Russian refining facilities. The Biden Administration has subsequently asked Ukraine to halt attacks on Russia’s energy infrastructure due to surging crude oil prices. In a Presidential election year, it would appear the prices at the pump are more important to the President than Ukraine’s successful war efforts.

And finally, something as random as the tragic collapse of the 1.6-mile Francis Scott Key Bridge over the Port of Baltimore after a container ship struck the bridge will also have a major impact on trade and commerce, since the Port of Baltimore is the largest U.S. port for cars and trucks. In 2023, 847,158 vehicles passed through the Port of Baltimore. Additionally, the Port of Baltimore is the largest port for coal exports, plus imports of sugar, gypsum and coffee. LNG and wastepaper are also shipped from there.

So, in a world of rising food and energy prices, central banks are waiting for a decline in inflation to 2%, as measured by “core” indexes, which ignore the rising prices of food and energy! Does that make any sense?

Rising Earnings (and Election Years) are Net Positive for Stocks

Regardless of any coming shortages of food and energy outside North America, the U.S. remains an oasis. Our home-grown food and energy abundance will power our economy in ways the rest of the world can only envy during this new era of hindered shipping lanes, plus energy and fertilizer shortages. The U.S. is also a technology leader. We also have 50 states competing to offer businesses advantages for setting up shop in their respective states. On top of that, presidential elections are meant to unify the country.  The candidate with the most charisma and the most inspirational message of unity usually prevails in the end.

If history repeats itself, the stock market usually rallies during a presidential election year. Even if this year’s choices don’t seem too appealing, I’ve got to remind you that beyond these political divisions, we have stunning quarterly sales and earnings announcements to look forward to. Due to strong quarterly results and three Fed likely interest rate cuts, I expect superior growth stocks will rally this election year.

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
Food and Energy – The Overlooked Inflation Drivers

Income Mail by Bryan Perry
A Changing of the Market’s Guard

Growth Mail by Gary Alexander
Is the Economy Really Growing at a Robust 3.4%?

Global Mail by Ivan Martchev
Stocks Are Partying Like It is 1995

Sector Spotlight by Jason Bodner
Raiders of the Lost Art of Investing

View Full Archive
Read Past Issues Here

About The Author

Louis Navellier

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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