July 24, 2018

President Trump told an interviewer last week that he is “not happy” about the Fed raising rates. The Fed is probably “not happy” about the President raising tariffs, either, but most Fed governors talk in a veiled language called “Fedspeak,” so we’re not likely to see any escalating war of words between Gentleman Jay Powell and our outspoken President. However, we’ll soon see a showdown on their GDP projections.

After the Tax Cuts and Jobs Act passed last December, the White House Council of Economic Advisers projected that annual GDP growth would average above 3% per year over the next decade. The Federal Reserve’s Summary of Economic Projections (SEP) is not so optimistic. In their June SEP, the Fed’s median projections for real GDP growth in 2018, 2019, and 2020 are 2.8%, 2.4%, and 2.0% on a full-year (Q4 to Q4) basis, respectively. Beyond that, the Fed sees a dismal run of 1.8% growth in the early 2020s.

The Fed’s downbeat projections may be related to rising federal deficits, rising in conjunction with their projection of the median federal funds rate, which they see rising to 3.1% in 2019 and 3.4% in 2020. With annual deficits projected to rise to $1 trillion in 2020, that implies $700 billion or more in interest costs to service the $22 trillion in federal debt by the year 2020, if federal spending is not contracted before then.

So far, the White House is right. The preliminary second-quarter GDP figures come out this Friday, but we have the Atlanta Fed’s “GDPNow” econometric model to go on between now and then. Their latest estimate (as of July 18) is for a robust 4.5% annualized growth rate in the quarter that ended June 30.

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary

Some of the latest second-quarter growth-related statistics are coming in at very high single-digit rates. Retail sales were up 6.6% in June over the same period in 2017 and 5.4% excluding gasoline sales. Even more impressive, May’s business sales (released at the same time) were up 8.5%, year over year, the largest yearly gain since November. 2011. Ed Yardeni reminds us (in “Happy Sales,” July 17, 2018) that “this series is highly correlated with aggregate S&P 500 revenues,” so this augurs well for Q2 revenues.

Despite all the dire warnings of trade war slowing global growth, the global picture is actually improving. According to Yardeni (in “Happy World Revenues,” July 18, 2018), the forward revenues of nearly all of our major trading partners are going up “at record highs, providing an upbeat assessment of the current global economic outlook.”  Since the start of 2017, Japan’s forward revenues are up 6.8% and the UK series is up 6.9% since the start of 2016, defying all the doomsday prophecies of the anti-Brexit crowd.

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary

Is This Bull Market About to Become the Longest in History?

Last Friday in Monaco, Beatrice Chepkoech of Kenya knocked more than eight seconds off the world record for the women’s 3,000-meter steeplechase during a Diamond League race of world-class runners.

Records are made to be broken, including stock market records.

In less than a month, this bull market could become the longest in history. The previous record ran for 3,452 days (almost 9.5 years) from October 11, 1990 to March 24, 2000, when the S&P 500 rose from 295.46 to 1527.46, a huge 417% gain. According to most pundits, the current bull market began March 9, 2009. It will turn 3,453 days old on August 22, 2018, but there are two problems with this calculation:

#1: The S&P 500 may have already peaked on January 26, 2018 at 2,872.87. If we don’t exceed that number sometime after August 22, then the bull market ended in January, at less than nine years’ length. Granted, the S&P closed within 2% of that all-time high last Wednesday, but “close” is no all-time high.

#2: We have already seen two 15% corrections in the last nine years, so this bull market has already been slain, twice. According to Ned Davis Research, there have been two bear markets since 2009:

Although the S&P 500 “only” fell 15% in 2015-16, shares of small companies fell over 26% in that time span, as measured by the Value Line Geometric Index. This is why Ned Davis Research called the 2015-16 decline a “bear market.” According to Davis, the current bull market dates from February 11, 2016 so, according to this reckoning, the current bull market is just a toddler – three years and five months old.

Even if you want to be a stickler and insist on a 20% S&P correction, this bull is under seven years old – not within shouting distance of the 1990s record. Neither is it as robust. This bull market, at its January peak, was up 330%, which is still far short of the 417% gain amassed during the Roaring 1990s. And don’t forget, the recent decade’s gain was preceded by a “lost decade” of net losses from 2000 to 2009.

Even after considering all of these historical comparisons, all records are made to be broken. The 1990s recovery broke the previous record, and this bull market could break that record, if you want to stretch the numbers to ignore the two downdrafts in 2011 and 2015-16. Either way, bull markets do not die of old age, but of deteriorating fundamentals, and we do not see any deterioration in U.S. corporate earnings yet.

About The Author

Gary Alexander

Gary Alexander has been Senior Writer at Navellier since 2009.  He edits Navellier’s weekly Marketmail and writes a weekly Growth Mail column, in which he uses market history to support the case for growth stocks.  For the previous 20 years before joining Navellier, he was Senior Executive Editor at InvestorPlace Media (formerly Phillips Publishing), where he worked with several leading investment analysts, including Louis Navellier (since 1997), helping launch Louis Navellier’s Blue Chip Growth and Global Growth newsletters.

Prior to that, Gary edited Wealth Magazine and Gold Newsletter and wrote various investment research reports for Jefferson Financial in New Orleans in the 1980s.  He began his financial newsletter career with KCI Communications in 1980, where he served as consulting editor for Personal Finance newsletter while serving as general manager of KCI’s Alexandria House book division.  Before that, he covered the economics beat for news magazines. *All content of “Growth Mail” represents the opinion of Gary Alexander*


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 intended as an offer or 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.

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 of any offer 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 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 you. 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. Results presented include the reinvestment of all dividends and other earnings.

Past performance is no indication of future results.

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 intended or 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. Request here a list of recommendations made by Navellier & Associates, Inc. for the preceding twelve months, please contact Tim Hope at (775) 785-9416.

Marketmail Archives