by Louis Navellier

May 10, 2022

The Bank of England raised key interest rates last Thursday by 0.25% to 1%, and they also forecast a recession later this year as high energy prices are taking a toll on economic growth, but amazingly Japan has refused to change its interest rate policy due to inflation, and Christine Lagarde, President of the European Central Bank (ECB), recently rejected increasing interest rates, despite soaring inflation rates.

Due to the fact that both Japan and the ECB have refused to increase interest rates, the U.S. dollar remains very strong, which means that domestic companies have a big advantage compared with multinational companies suffering from lackluster international economic activity and getting paid in weak currencies.

Some astute stock market observers are pointing out that due to inflation, a massive P/E (price-to-earnings ratio) compression is now underway. That is an understatement, since our average growth stock trades at only 15.9 times median current earnings and a microscopic 4.1 times median forecasted earnings! Under no rational circumstances can I justify seeing such low valuations, which seem to price Armageddon into the market – a nuclear war. While Russian television has indeed depicted nuclear annihilation of Ireland and Britain, that was just propaganda. Clearly, Ukraine is suffering enough from conventional missiles.

The European Union (EU) proposed its sixth package of penalties against Russia last week, but the biggest news is that the EU is proposing a ban on all Russian oil that will be phased in over the next six months. There is also a proposed ban on all refined Russian crude oil products by the end of 2022.

Hungary and Slovakia are particularly reliant on Russian crude oil and will have until 2023 to comply with the import ban. In fact, Slovakia is asking for a three-year exception to change its refineries and pipelines. If the EU succeeds in implementing this crude oil ban for its 27 member nations, it will help keep crude oil prices high in the fall and winter months, when global crude oil demand normally drops.

This is bad news for consumers but great news for all the oil and oil service companies that I recommend.

Don’t Believe the Negative GDP Figures – At Least Not Yet

As I said last week, you can’t have a negative quarter when nearly all the constituent components of GDP are rising! According to the Commerce Department, the primary reason for its negative GDP estimate for the first quarter was due to inflation, trade imbalances and supply chain disruptions, but I have a hard time believing that supply chain disruptions from China’s Covid lockdowns have triggered a U.S. recession!  Do we really buy all our stuff from China? I have never seen a recession begin when the ISM manufacturing and service surveys are both positive. Consumer spending and sentiment remains positive!  And the Commerce Department flash GDP estimate for the first quarter doesn’t include March trade data.

Looking ahead to the second quarter, the Atlanta Fed on Wednesday revised its second-quarter GDP estimate to a 2.2% annual pace, up from its previous estimate of a 1.6% annual pace. The consensus of most economists ranges from a 1.6% to a 4% annual pace, so the Atlanta Fed is in the middle of those estimates. If the supply chain bottlenecks diminish in the second quarter, I expect GDP growth to resume.

There is mounting evidence that inflation peaked in March as crude oil and other commodity prices fell back. The fact that China’s Covid lockdown has spread outside of Shanghai, and is now in Beijing, means that another big Chinese region will likely incur draconian lockdowns. Already, China’s energy demand has fallen 20% due to its Shanghai lockdown, so crude oil prices have substantially moderated near-term.

The Institute of Supply of Management (ISM) said that its manufacturing index slipped to 55.4 in April, down from 57.1 in March and is now at its lowest level since July 2020. However, since any reading over 50 signals an expansion, the manufacturing sector is still growing. The new orders component slipped to 53.5 in April (down from 53.8 in March), while the production component declined to 53.6 (from 54.5 in March). On a more positive note, the backlog component declined to 56 in April (from 60 in March), so the ISM manufacturing index is expected to remain healthy due to persistent order backlogs. Also notable is that fully 17 of the 18 manufacturing industries that ISM surveyed expanded in April.

The ISM’s non-manufacturing (service) sector index declined to 57.1 in April, down from 58.3 in March. The main culprit was the new orders component, which declined to 54.6 in April (from 60.1 in March), while the business activity component rose to 59.1 in April (from 55.5 in March). The supplier deliveries component rose to 65.1 in April (from 63.4 in March) and 17 of the 18 industries expanded in April.

On Tuesday, the Commerce Department announced that factory orders rose 2.2% in March, which was well above economists’ consensus estimate of a 1% rise. Especially encouraging was that new orders for durable goods rose 1.1% in March after declining 1.7% in February. This improvement is indicative that companies are increasingly able to procure the raw materials that supply chain bottlenecks disrupted.

The Commerce Department on Wednesday announced that the trade deficit in March soared 22.3% to a record $109.8 billion, as imports soared 10.3% to $351.5 billion, and exports rose 5.6% to $241.7 billion. Both numbers indicate a powerful increase in trade volumes following the two-year pandemic shutdowns.

Although the U.S. exports of crude oil, fuel oil, natural gas and other petroleum products soared, the reason imports soared more was due to a surge in industrial supplies and materials ($11.3 billion) as well as finished metal shapes ($6.8 billion), as order backlogs were fulfilled. Overall, the widening trade deficit better explains why the Commerce Department reported negative GDP growth in the first quarter.

In the meantime, the stock market has a psychological problem as well as some mechanical trading problems, since the Citadel algorithms have been overrun by reckless selling pressure, especially from ETFs that all too often trade at a big discount to their underlying stocks, which in turn fuels panic selling.

One thing that I have learned in the past 40+ years is that I cannot fix “stupid.” Don’t sell into a panic! If you sold ETFs during market hours on April 29th, for instance, you were “fleeced” by Wall Street and received less than the underlying stock values due to wide bid/ask spreads. Many in the financial media are unduly influenced by Wall Street firms, who use them to boost volume, so Wall Street can fleece naïve investors. In general, you will always get a better price and tighter spreads selling into strength.

What I expect in May is a series of relief rallies where major stock market indices find firmer footing. We are fortunate that our dividend growth and growth stocks are still posting record quarterly sales and earnings, so we should continue to get an extra boost from these announcements. I must say, however, that the biggest macro event would be a change in leadership in Russia and/or a ceasefire in Ukraine. In such an event, a 20% relief rally in the NASDAQ Composite and Russell 2000 is certainly very possible!

Positive Job Totals Round Out America’s Non-Recessionary Landscape

Turning to jobs, ADP reported on Wednesday that 247,000 private payroll jobs were created in April. Small businesses (with fewer than 49 employees) shed 120,000 private payroll jobs in April, but medium businesses (50 to 499 employees) added 46,000 jobs and large businesses created 321,000 private payroll jobs. Small businesses appear to be incurring a higher “quit” rate as employees try to find higher paying jobs. The ADP private payroll report has declined for three straight months, so there may be changes underway, but the payroll numbers seem to be distorted by the movement of workers seeking higher pay.

The Labor Department on Thursday announced that weekly unemployment claims rose to 200,000 in the latest week, up from a revised 181,000 in the previous week. Continuing unemployment claims declined to 1.384 million in the latest week compared to a revised 1.403 million in the previous week. Continuing unemployment claims remain at the lowest level since January 1970, clearly not indicating a recession.

On Friday, the Labor Department announced that 428,000 payroll jobs were created in April, better than the economists’ consensus expectation of 400,000 payroll jobs. The unemployment rate remained at 3.6%. The labor force participation rate declined by 0.2% to 62.2% in April, which is indicative that some folks are likely retiring or quietly looking for better jobs. The March payroll report was revised higher by 3,000 to 428,000. Average hourly earnings rose 0.3% ($0.10) to $31.85 per hour and have risen 5.5% in the past year. Overall, the April payroll report was very encouraging for continued steady job growth.

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

Please see important disclosures below.

Also In This Issue

Global Mail by Ivan Martchev
On The Threshold of Bond Market History

Sector Spotlight by Jason Bodner
It’s Only Money – and It Will Likely Return

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.

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 or by requesting a copy by emailing 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.