by Louis Navellier
August 18, 2026
Before getting into the latest inflation news and other economic indicators, let me bring you another major stock update. Taiwan Semiconductor Manufacturing (TSM) announced its revenue rose 5.6% in July (compared to June) and +44.7% in the past 12-months to $14.51 billion. This level of revenue growth is well above TSM’s guidance and bodes well for the entire semiconductor industry.
The only possible negative component in this report is the U.S. trade deficit, which will likely continue to rise due to all the technology imports from TSM and other Asian companies manufacturing CPUs, GPUs, and memory chips. A higher trade deficit from technology imports curtailed second-quarter GDP growth.
Bloomberg had an excellent article entitled, “AI-Dominated Leveraged ETFs Are Rattling Markets.” Although only 1% of ETFs are leveraged, Bloomberg pointed out how these leveraged ETFs are causing excess volatility in underlying stocks. There are some legacy ETFs with 3-fold leverage, but new filings for 3x leverage are being increasingly rejected, due to liquidity concerns. My main objection to leverage is seeing wild trading swings – such as we saw in July – wiping out heavily leveraged positions, erasing the gains from strong corporate earnings, record sales, positive guidance and the rising order backlogs.
In California, Phillips 66 (PSX) is coming to the rescue, since that state now has to import approximately 30% of its specialty blended gasoline from South Korea and India. Specifically, Phillips 66 is proceeding with a $5 billion project called the Western Gateway Pipeline system, to build a 900-mile pipeline to ferry 230,000 barrels a day of gasoline, jet fuel and diesel from the Texas Panhandle to Arizona and California. The new Phoenix pipeline will connect with an existing 500-mile pipeline ending in Colton, east of L.A.
When you refine a barrel of crude oil, you typically get 19-gallons of gasoline and 12-gallons of diesel, but refineries continue to close in California as state regulations mandate diesel not be made from crude oil, substituting organic material like soybeans. As a result, California refineries have been closing, and remaining refineries have to ship the diesel made from crude oil to other markets, like Mexico and China.
Our Major Inflation Reports Were Benign in June and July
Last Wednesday, the Labor Department announced the July Consumer Price Index (CPI) was perfectly in line with economists’ estimates of a small (0.1%) increase and a 0.2% increase in core CPI, excluding food and energy prices. In the past 12 months, the CPI has increased 3.4% and the core CPI rose 2.5%.
The best news is in housing costs (owners’ equivalent rent), which rose only 0.1% in July and 3.2% in the past 12 months. This is the second month in a row in which shelter costs have only risen by 0.1%, so it appears this stubborn housing inflation component has finally cooled. Treasury yields meandered lower on the CPI announcement, and that is helping to take pressure off the Fed to raise key interest rates.
On Thursday, the Labor Department announced the Producer Price Index (PPI) was unchanged in July, much better than the economists’ consensus estimate of a 0.2% increase. The core CPI, excluding food and energy, rose 0.2%, below economists’ consensus estimate of a 0.3% increase. Wholesale food prices declined 0.9% in July, while wholesale energy prices plunged 3.1%. The best news is wholesale goods prices declined 0.7% in July, while wholesale service costs rose 0.2%. In response, Treasury yields meandered lower, and that should help to take some pressure off the Fed to raise key interest rates.
On Friday, the Commerce Department said retail sales declined 0.6% in July, which was substantially below economists’ consensus estimate of a 0.1% increase. The culprit for this was a 2.2% decline in on-line sales in July, which was due largely to Amazon’s Prime Day in June. Additionally, sales at gas stations declined 0.9% in July due to lower prices at the pump, and auto sales declined 1.8% in July after surging in June. One highlight was apparel sales rising 1.9%, while furniture sales rose 0.3%.
Also positive, sales at bars and restaurants rose 0.5%, which is indicative consumers were out and about. Due to July’s lower-than-expected retail sales, economists are expected to trim their third-quarter GDP estimates. For example, in the wake of the July retail sales report, the Atlanta Fed is now forecasting 4.3% annual GDP growth for the third quarter, down from its previous estimate of 5.8% growth rates.
Headline inflation is down, in part, due to the prospects for peace (or at least a long stalemate) in the Iranian conflict. Despite a deal between Oman and Iran being “close,” the Strait of Hormuz remains largely closed, so crude oil prices are meandering higher. All my energy stocks are performing well due to the chaos surrounding the Strait of Hormuz, since a U.S. Navy blockade remains in place. Iran’s top security official has resigned and been replaced by another IRCG official. Whether this change is significant remains uncertain, but clearly who is in charge of Iran remains in flux. In the meantime, the U.S. remains an oasis and is largely not impacted by the bottlenecks surrounding the Strait of Hormuz.
Navellier & Associates; own Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR(TSM) and Phillips 66 (PSX), in managed accounts. A few accounts own Amazon.com, Inc. (AMZN) per client request. Louie Navellier and his family own Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR (TSM) and Phillips 66 (PSX) via a Navellier managed account and Amazon.com, Inc. (AMZN) in a personal account.
All content above represents the opinion of Louis Navellier of Navellier & Associates, Inc.
Also In This Issue
A Look Ahead by Louis Navellier
Inflation Remains Tame, for Now
Income Mail by Bryan Perry
Probing the Complexities of Domestic Energy Policy
Growth Mail by Gary Alexander
Five Big Financial Surprises in the Last 25-Years
Global Mail by Ivan Martchev
The Global Bond Boomerang Effect
Sector Spotlight by Jason Bodner
Seeing the Unseen – A Source of Superior Market Profits
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Louis Navellier
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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.
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