by Louis Navellier
July 7, 2026
On our 250th national birthday – when thousands of soccer fans from Europe, Africa, Latin America and elsewhere are seeing the “real America” in a new and positive light – the European press is dominated by stay-at-home skeptics, especially some poison pens writing for the British and other European media.
I realize Europe has been sizzling hot and miserable lately, but that is no reason to keep trashing America.
Let me give you an example of the negative media emanating from Britain: The Telegraph reported: “The Bank for International Settlements (BIS) said on Sunday that ‘excessive’ spending on new AI data centers and opaque transactions risked a financial meltdown similar to the global credit crunch nearly two decades ago. The BIS, known as the bank for central banks, said there was growing ‘peril’ in financial markets from the complex web of financial ties between AI giants, shadow banks and data center builders unravelling.” The BIS also said, “Financial stability could … be at risk in the event of an AI bust.”
European Central Bank (ECB) President Christine Lagarde said the same thing in a speech in Vienna, implying AI will trigger a financial crisis! But our new Fed Chair, Kevin Warsh, attended an ECB Forum in Portugal last week, and I suspect he chatted with Lagarde privately about her misinformed scare tactics, since Warsh argues, within the Fed and amid central bankers, to the effect AI is boosting productivity and U.S. non-inflationary GDP growth, so central bankers should not worry so much about our strong GDP growth rates and a rising dollar.
At the ECB Forum last week, after repeated questions from moderator Sara Eisen, Chairman Warsh refused to provide forward guidance on rates, since he had previously declared that such guesswork about the future is not allowed under his new Fed regime. A more significant thing Warsh said was the Fed would let financial markets dictate Fed policy. Essentially, that means if Treasury yields decline, the Fed would follow and cut key interest rates. This was not an outrageous statement by Warsh, but more of an acknowledgement that the bond vigilantes (the large institutional investors) will continue to influence Treasury yields and any future central bank policy.
In the meantime, a technology war between Europe and the U.S. persists. President Trump recently said:
“Numerous European Countries have been discussing the imminent implementation of a Digital Services Tax on American Companies. Some of these countries are close to actually doing this. Please let this presidential statement serve to represent that any Country that imposes such a Tax will immediately be met with a 100% TARIFF on any and all Goods sent to the United States of America. This TARIFF will supersede Trade Deals made with the Country, whether implemented, signed, or not. Additionally, the 100% TARIFF will be immediately imposed, if they proceed.”
Apparently, we are at war with the EU, as the fight over taxing American technology companies persists!
So, we have a choice, America. We can oppose air conditioning and data centers, like they do throughout much of Europe, or we can instead be comfortable (via air conditioning) and prosper (from AI and data-center investments). We can choose to complain about everything and blame technology companies, or we can follow the leaders and get rich along with them. In the end, we have to decide whether we want to complain or grow and prosper. I have chosen to grow and prosper. The current economic and market environment is the best since 1999 and it would be a shame if investors listened to the army of naysayers and missed out on the best stock market environment in almost 30-years. I hope you share my outlook.
In other global news, the Iranian Revolutionary Guards Corp (IRGC) attacked two ships traveling through the Strait of Hormuz and the U.S. Navy responded with overwhelming force, so, at this moment, the cease-fire between Iran and the U.S. is back on, and WTI crude oil prices have fallen to around $70 per barrel.
Several countries are striving to replenish their depleted crude oil inventories, so worldwide demand is expected to remain strong for the next few months. Europe’s LNG inventories are at a 15-year low and have likely been exasperated by the recent heat-wave, so that bodes well for U.S. LNG exports. Although the Middle East situation is not yet normal, commerce is picking up and energy volatility has diminished.
Second Quarter Sector Analysis – Led by Semiconductors
Although energy-related inflation is receding, a new problem is AI-related inflation after Apple raised the price of its computers and iPads due to the higher cost of memory. Apple has not yet raised the price of its iPhones, but price increases are anticipated for its new iPhones in September. Microsoft reduced the RAM in its surface laptops to avoid a price increase, but if you add the RAM back in, the price increases.
While some investors are worried about price increases, we are profiting from higher memory prices. Micron Technology’s revenues surged 346% to $41.46-billion vs. $9.3-billion in the same quarter a year ago. During the same period, the company’s earnings soared 1,368.5% to $28.24-billion or $24.67 per share compared to $1.89-billion or $1.68 per share! Micron also raised its quarterly guidance to around $50-billion in revenue, well above consensus estimate of $43.2-billion, so the tech boom is for real.
Please don’t worry about the recent sell-off in AI and data-center-related stocks late last week. The Financial Times reminded us, “In the U.S., AI plays constitute more than 40% of the market cap and have constituted 80% of returns this year. The return and concentration is similar in Japan and even more extreme in South Korea and Taiwan.” Those who unload their AI and data-center stocks literally have no better place to go, since spectacular returns are forecasted. For example, Micron Technology now trades at just 7.4 times forecasted 2027 earnings, while Nvidia trades at 15.3 times forecasted 2027 earnings. As a result, any dip in the AI and data center related stocks is a screaming buy!
When I say investors have “no better place to go,” I mean it. Our friends at Bespoke documented the S&P 500 returns in the second quarter were driven by Semiconductors (up 41.6%), followed by Technology Hardware & Equipment (up 25.3%). Historically, when these two-sectors have performed strongly:
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
CNBC continues to throw cold water on the AI boom. For example, they interviewed aging permabear Jeremy Grantham, who said, “This is the most expensive market in American history.” On CNBC’s Squawk Box, Grantham said, “Based on the value of the stock market compared to GDP, with modifications, this is the most expensive market in American history.”
Folks, this is nonsense. First, Jeremy Grantham is a bond investor who has never liked stocks, to my knowledge. Secondly, Grantham does not look at earnings growth, order backlogs, analyst earnings revisions, earnings surprises and forecasted price-to-earnings ratios – so why would CNBC have such an un-American, negative naysayer on Squawk Box? Thankfully CNBC’s Joe Kernan gave Grantham a good grilling, pointing out he has been bearish since 2010 and wrong ever since then with his stock forecasts.
The U.S. Job Situation – Updated
On Wednesday, ADP reported 88,000 new private payroll jobs created in June, well below the economists’ consensus estimate of 110,000. Small, mid-size and large businesses all added jobs in June, according to ADP. According to Challenger, Gray & Christmas, a global outplacement firm, employers based in the U.S. announced about 45,000 job cuts in June, down 53% from the 97,000 layoffs in May, so the job market is steadily improving, which is good for improving consumer confidence and GDP growth.
Since Friday was a government and market holiday, the Labor Department issued their monthly jobs report on Thursday, saying there were 57,000 payroll jobs created last month, far below the economists’ consensus estimate of 115,000. April and May payrolls were revised down by a cumulative 74,000. The jobless rate was 4.2% in June, down from 4.3% in May, due to 720,000 people leaving the labor force.
There was a large drop of 61,000 jobs in leisure and hospitality – the largest monthly decline since 2020. This was largely responsible for the lower-than-expected June payroll totals. The Labor Department said this drop in leisure and hospitality workers reflected “weaker than usual seasonal hiring.”
The good news is manufacturing and construction employment increased, indicative of the AI data center building boom – accounting for more than 50% of construction in the U.S. last month. In June, average hourly earnings rose by 13 cents (+0.35%) to $37.64 per hour and are up 3.5% in the past year.
Treasury yields declined slightly in the wake of this weaker-than-expected June payroll report.
In other economic news, the Institute of Supply Management (ISM) announced its manufacturing index slipped to 53.3 in June, down from 54 in May, but any reading above 50 signals an expansion and this is the sixth month in a row that the ISM manufacturing index has been expanding. The new orders component remained strong at 56 in June, down from 56.8 in May. Interestingly, the price component plunged to 73 in June, down from 82.1 in May. This was the largest monthly drop in the price component in almost four years (since July 2022) and is signaling that commodity inflation is cooling off! Fully 14 of the 17 manufacturing industries that ISM surveyed reported an expansion, which is a good sign.
Navellier & Associates; own Nvidia (NVDA), Micron Technology, Inc. (MU), Apple Inc. (AAPL), Microsoft Corporation (MSFT) and Alphabet Inc. Class A & C (GOOGL) in managed accounts. Navellier and his family own Nvidia (NVDA), Micron Technology, Inc. (MU), Apple Inc. (AAPL) and Alphabet Inc. Class A & C (GOOGL) via a Navellier managed account and Nvidia (NVDA) and Apple Inc. (AAPL) in a personal account. They do not own Microsoft Corporation (MSFT) personally.
All content above represents the opinion of Louis Navellier of Navellier & Associates, Inc.
Also In This Issue
A Look Ahead by Louis Navellier
Europe Keeps Attacking America, Despite our Big Birthday Party
Income Mail by Bryan Perry
Emerging Market Debt Now Seen As a “Go To” for Income
Growth Mail by Gary Alexander
America is Still the Economic Engine of the World
Global Mail by Ivan Martchev
This Tech Rotation is as Bad as it Gets
Sector Spotlight by Jason Bodner
Ignore the Headlines – Focus on the Inner Market Data
View Full Archive
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