by Louis Navellier
May 16, 2023
Treasury Secretary Janet Yellen turned up the heat by setting a June 1 deadline for the federal government’s debt ceiling debate. Last Tuesday’s meeting between House Speaker Kevin McCarthy and President Joe Biden did not make any progress, but at least they said they will meet again this week.
Since the House of Representatives already passed a debt ceiling bill, all President Biden has to do is sign that bill to lift the debt ceiling; but he does not like the slower spending growth in that bill, so for now McCarthy has the leverage, and it will be interesting to see who blinks first. The debt ceiling is a political football and since 2024 is an election year, both sides are seeking to score political points.
If a deal is not reached by June 1st, pension payments for federal retirees might be postponed, giving lawmakers a little more time to hammer out details. A partial government shutdown is also possible, which has happened in the past, but that is expected to be a last resort. Treasury Secretary Janet Yellen in a Bloomberg interview on Friday said, “If Congress fails to do that, it really impairs our credit rating. We have to default on some obligations, whether it’s Treasuries or payments to Social Security recipients.”
In his New Hampshire Town Hall interview, televised on CNN last Wednesday, Former President Donald Trump urged the House Republican leadership to allow the federal government to default if the Biden Administration and Democratic leadership do not agree to slower spending growth. Specifically, Trump said, “I say to the Republicans out there — Congressmen, Senators — if they don’t give you massive cuts, you’re going to have to do a default.” Then Trump added, “I don’t believe they’re going to do a default because I think the Democrats will absolutely cave, because you don’t want to have that happen. But it’s better than what we’re doing right now because we’re spending money like drunken sailors.”
At one point in the CNN interview, Trump took a question from the audience about energy inflation.
“If elected President again, what is the first thing you would do to bring down costs?”
Trump: “Drill, baby, drill.”
He said this in response to the anti-drilling energy policy of the Biden Administration, as well as the radical policies of the Environment Protection Agency (EPA), which recently introduced new emission rules for utilities. The EPA also exempted natural gas peaker power plants that turn on and off during peak load demand, like during high air conditioning demand. Excuse me, but if natural gas peaker power plants are exempt from the proposed EPA rules, won’t the utility industry just install more peaker power plants to circumvent the EPA’s proposed rules? Frankly, this is great news for the domestic natural gas industry!
The Wall Street Journal also published a great article last week about “carbon-capture.” There is only one commercial power plant in North America that does this, namely the Boundary Dam Power Station Unit 3 in Saskatchewan, Alberta, which is a coal-fired power plant that is fitted with a $1.1 billion carbon-capture system. SaskPower said the benefits of operating a coal-fired power plant utilizing carbon-capture are becoming less apparent, which is raising doubts about the Biden Administration’s goal of achieving carbon dioxide free electricity by 2035. The oil industry has been experimenting with carbon capture technology to recover more oil from existing wells, which is where much of SaskPower’s carbon dioxide is piped 36 miles to extract more crude oil from geological formations.
The only commercial-scale carbon capture plant in the U.S. was the Petra Nova coal-fired plant in Texas that closed in 2020 after operating three years. Even if carbon capture can be perfected, the next hurdle is how to be profitable when there are no producing oil fields. As a result, the Biden Administration’s goal of shifting to hydrogen or carbon capture for electricity generation is beginning to look futile.
Inflation is Retreating, and Growth is Returning
There continues to be no recession in sight, as the Atlanta Fed estimates second-quarter GDP growth at a 2.7% annual pace. Furthermore, first-quarter GDP growth is expected to be revised higher due to the fact that the March trade deficit declined sharply: Imports declined 0.3% to $320.4 billion, and exports surged 2.1% to $256.2 billion, led by vehicles, crude oil, refined products, and natural gas. The U.S. trade deficit with China is now at its lowest level in three years. China’s total April exports declined by 6.4% to $295 billion, which raises concerns that its economic growth is slowing. The Chinese purchasing managers index declined to 49.2 in April, down from 51.9 in March. Any reading below 50 signals a contraction.
Last Wednesday, the Labor Department announced that the Consumer Price Index (CPI) rose 0.4% in April and 4.9% in the past 12 months. What got Wall Street most excited was that Owners’ Equivalent Rent only rose 0.4% in April, down from 0.6% in March and 0.8% in February, so finally the cooling housing market is showing up in the CPI report. Also encouraging was the fact that service prices, excluding energy and housing costs, rose by only 0.1%, which was very encouraging! Food prices were unchanged in April, while energy prices rose 0.6%. The core CPI, excluding food and energy, rose 0.4% in April and 5.5% in the past 12 months. Overall, Wall Street is excited that service costs are moderating.
As I told CNBC Singapore last Wednesday, the CPI will likely be falling dramatically in the next couple of months, since the biggest monthly inflation surges were in May 2022 (0.9%) and June 2022 (1.2%). They will soon be “cut off” in the 12-month calculations, so the annual rate of CPI inflation will likely decelerate to about a 3% annual pace in July. A 3% inflation rate should be low enough to dampen any inflation expectations and get the Fed to think about cutting rates in the December 2023 FOMC meeting.
On Thursday, the Labor Department announced that the Producer Price Index (PPI) rose 0.2% in April and just 2.3% in the past 12 months. The biggest surprise was that the March PPI was revised to a decline of -0.4%, which helped push the annual PPI down to a 2.7% annual pace through March. Food prices declined -0.5% in April, while energy prices rose 0.8%. The core PPI, excluding food, energy, and trade services, rose 0.2% in April and 3.4% in the past 12 months. The bad news was that the wholesale service costs rose to the highest level in six months, so the Fed will likely keep rates high for a few more months.
The Labor Department also reported on Thursday that weekly unemployment claims rose to 264,000 in the latest week, up from 242,000 in the previous week. This is the highest level of unemployment claims since October 30, 2021. Continuing unemployment claims also rose to 1.813 million, up from a revised 1.801 million in the previous week. The four-week moving average of weekly unemployment claims rose to 245,250, its highest level since November 20, 2021, so with unemployment claims now running at the fastest pace in over 17 months, the Fed should pause their interest rate hikes for the time being.
All content above represents the opinion of Louis Navellier of Navellier & Associates, Inc.
Also In This Issue
A Look Ahead by Louis Navellier
Countdown to the Debt Ceiling Deadline
Income Mail by Bryan Perry
Business Development Companies to Benefit from a Credit Crunch
Growth Mail by Gary Alexander
On James Madison’s Birthday, Let’s Review His Rule Book
Global Mail by Ivan Martchev
Real-Time Inflation Indicators are Quite Weak
Sector Spotlight by Jason Bodner
To Find Big Treasures, You May Need Ballast
View Full Archive
Read Past Issues Here
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.