by Louis Navellier

May 18, 2021

Many of my fellow authors here have seen high inflation numbers coming – and so have several other leading analysts – but last week’s inflation numbers apparently caught the Federal Reserve by surprise!

Last Wednesday, the Department of Labor reported that the Consumer Price Index (CPI) rose 0.8% (a nearly 10% annual rate) in April, the largest monthly increase in 13 years and four times higher than the economists’ consensus expectation of a 0.2% increase. Food prices rose 0.4%, while energy prices declined 0.1%. Interestingly, gasoline prices declined 1.4% in April, even though the prices at the pump are surging in May due to the Colonial Pipeline disruption. Transportation services surged 2.9% in April, while electricity prices rose 1.5%. Also notable is that prices for used cars and trucks surged 10%, the largest monthly increase ever recorded. This huge gain was likely exaggerated by the chip shortage constraining new vehicle production. Excluding food and energy, the core CPI rose 0.9% in April, which was three times economists’ consensus expectation of 0.3%. In the past 12 months, the CPI and core CPI have risen 4.2% and 3%, respectively, which are both well above the Fed’s 2.4% expectation for inflation.

In the past 12 months, overall energy prices have risen 25.1% as gasoline prices have risen 49.6% and natural gas prices have risen 12.1%. Used car and truck prices have risen 21% in the past 12 months, while new vehicle prices have risen only 2%. These dramatic price increases may very well be “transitory,” as the Fed maintains. However, energy prices may not decline until the fall when demand naturally ebbs. The semiconductor chip shortage should also begin to ebb by the fall and eventually help boost new vehicle production, which in turn should put downward pressure on used car and truck prices.

Then, on Thursday, the Department of Labor reported that the Producer Price Index (PPI) rose 0.6% in April, which was double the economists’ consensus expectation of a 0.3% increase. Wholesale food prices rose 2.1%, while energy prices declined 2.4%. The core PPI, excluding food, energy, and trade services, rose 0.7% in April, which was also above consensus expectation of a 0.4% increase. In the past 12 months, the PPI and core PPI have risen 6.2% (the largest increase since 2010) and 4.6%, respectively.

Higher housing, food, and energy prices are going to hurt the Biden Administration’s popularity, so I expect there will be some interesting comments from the Administration’s economic advisors. Most of Biden’s inner circle aren’t that well known but Treasury Secretary Janet Yellen was known as the “Fairy Godmother” when she was Fed Chair, so I expect that her economic commentary will likely be the most authoritative and most upbeat. Therefore, I expect Secretary Yellen to sprinkle some of her “fairy dust.”

Amazingly, Fed Vice Chairman Richard Clarida said that he was “surprised” at the CPI announcement, saying, “This number was well above what I and outside forecasters expected.” Well, we weren’t that surprised. We (and many other analysts) have been predicting these higher numbers for a long time.

Fed Vice Chairman Clarida, in a video link before the National Association for Business Economics International Symposium, signaled that the Fed remained more focused on its unemployment mandate, saying, “Right now, that means focusing especially on the labor market.” Interestingly, Clarida summed up his comments by saying “Honestly, we need to recognize that there’s a fair amount of noise right now, and it will be prudent and appropriate to gather more evidence.” Translated from Fedspeak, he signaled that the Fed may not change its policies until the unemployment rate falls much lower, to perhaps 4%.

Another Fed Governor, Christopher Waller, said on Thursday that “The economy is ripping, it is going gangbusters,” but he said we must see several more months of job data before scaling back monetary policy. Specifically, Waller said, “The May and June jobs report may reveal that April was an outlier, but we need to see that first before we start thinking about adjusting our policy stance.” Waller added that “We also need to see if the unusually high price pressures we saw in the April CPI report will persist in the months ahead.” Translated from Fedspeak, the Fed is not ready to change its easy money policies.

Fortunately, the U.S. economy is booming. According to the Atlanta Fed, it is now growing at an 10.5% annual pace, despite last Friday’s flat retail sales report. Surprisingly, the Commerce Department announced on Friday that retail sales were unchanged in April, which was a big shock, since economists were expecting a 0.8% increase. However, this is not so bad when you consider that March retail sales were revised UP to a whopping 10.7% increase from the 9.7% rise originally reported, making “no rise” in April a 1% increase from the original reports! Core retail sales, excluding vehicles, gasoline, building materials, and food services, declined 1.5%, so that gives the Fed an excuse to remain accommodative.

Most First-Quarter Earnings are In – Here’s “What Worked Best”

Over 90% of the stocks in the S&P 500 have announced their first-quarter results and, so far, the average sales and earnings surprises are running at 3.7% and 23.2% (respectively) above consensus analyst estimates. This is why analysts are so busy revising their consensus sales and earnings estimates higher.

I once predicted that sales and earnings momentum would peak in the first quarter, but I was premature, since second-quarter results could surpass the first quarter and help sustain this earnings momentum.

Our friends at Bespoke issued a great report on Tuesday that illustrated “what is working in the S&P 500” based on their decile analysis since February 12th. Here are the highlights based on their decile analysts. (Bear in mind that the overall S&P 500 rose just 5.5% in those 90 days, so these gains are exceptional.)

  • The Top 30% of stocks in the S&P 500 with the lowest P/E ratio have risen 16.42% (lowest 10%), 16.48% (next lowest 10%) and 17.15% (third lowest 10%), respectively.
  • The Top 30% of stocks in the S&P 500 with the lowest Price to Sales have risen 19.37%, 16.98% and 15.00%, respectively.
  • The Top 50% of stocks in the S&P 500 with the highest Dividend Yield have risen 12.75%, 15.09%, 16.05%, 15.11% and 13.19%, respectively.
  • The Bottom 20% of stocks in the S&P 500 with the lowest Share Price are up 11.59% and 12.15%, respectively.
  • The Bottom 10% of stocks in the S&P 500 with the lowest Market Capitalization are up 10.63%.
  • The Bottom 30% of stocks in the S&P 500 with the least International Revenues are up 8.61%, 11.24% and 10.25%, respectively.

In summary, what the Bespoke decile report on the S&P 500 illustrates is that we are in a “mean reversion” market, since NASDAQ (the previous leader) has been correcting. Although this can also be interpreted as a “value shift,” value stocks without strong forecasted sales and earnings are expected to stall in the upcoming weeks. Essentially, mean reversion markets build a base for NASDAQ and growth stocks to “re-launch,” so I think it is important that if and when you buy value stocks, you stick to those with strong forecasted sales and earnings, like some of the steel and copper stocks that I recommend.

Also, since many companies are awash in cash, stock buy-back announcements have soared. According to The Financial Times, $484 billion in stock buy-backs have been announced in the first four months of this year. This is the biggest surge in stock buy-backs in two decades, according to Goldman Sachs. In absolute terms, this “buy-back bonanza” is expected to increase at least 35% vs. a year ago. Due to low rates, many companies can borrow in the bond market at ultralow interest rates to issue new bonds to refinance their existing debt as well as buy back outstanding shares, so I expect this trend to continue indefinitely.

Chaos Whips the Market from Day to Day…But the Market Usually Keeps Rising

Let’s face it, there is a lot of chaos in the world, and the market is reacting to it; but in the end, the market usually rises, month after month – and most weeks. Last week, Israel was under siege from rocket attacks, and Russia’s DarkSide criminal group was apparently responsible for the cyberattack on the Colonial Pipeline that serves the Southeast region. They collected almost $5 million ransom via cryptocurrency.

Speaking of cryptocurrencies, according to The Wall Street Journal, the cryptocurrency market was worth more than all of the physical U.S. dollars in circulation at the end of April. But then, so far in May, the cryptocurrency market has lost as much as $365.85 billion, according to CNBC, especially after Elon Musk tweeted that Tesla suspended taking bitcoin for vehicle purchases due to environmental concerns associated with Bitcoin mining. It is widely known that many bitcoin miners were setting up operations in Wyoming to take advantage of cheap electricity there – approximately 80% of which is derived from coal, according to the Energy Information Administration. Elon Musk responded: “We are concerned about rapidly increasing use of fossil fuels for Bitcoin mining and transactions, especially coal.”

The cynic in me finds it hard to believe that Elon Musk would mislead his listeners about how bitcoin is “mined” (not like a metal or mineral, but by using vast amounts of electric power). I suspect that he may have tweeted about bitcoin “mining” to deflect attention from news that Tesla’s April vehicle sales in China were disappointing. I also find it interesting that Musk said Tesla wouldn’t sell bitcoin and would resume using cryptocurrency for transactions “as soon as mining transitions to more sustainable energy.”

In an interesting coincidence, the cryptocurrency market collapse appeared to trigger a stock market recovery on Thursday, so at least Elon Musk helped Tesla stock recover a bit! Confused? Join the crowd.

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

Please see important disclosures below.

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.