by Louis Navellier
September 17, 2024
Plenty of important news happened on September 10, Debate Tuesday, but these events were ignored by the ABC News moderators and Presidential candidates. One was the Congressional Budget Office (CBO) release of the $381 billion of deficit spending by the Biden/Harris administration in August, and $2 trillion for the fiscal year, soon ending – yet there were no questions about how to limit runaway spending.
Another important news event last Tuesday was that Ukraine launched a massive drone strike into the Moscow suburb of Ramensky that hit a high-rise apartment building and killed at least one person. This is the kind of attack – on civilians in Moscow – that Vladimir Putin said could escalate into a major reprisal against NATO nations supplying aggressive weapons to Ukraine. Tass, Russia’s state media, said that fragments of an intercepted drone hit the high-rise apartment building in what looked like a direct hit.
Russian President Vladimir Putin warned NATO that if they lift the restrictions on long range missiles for Ukraine that such action will be considered an “act of war.” During a recent visit to Kyiv, Secretary of State Antony Blinken suggested that the White House was considering lifting restrictions in line with a broader strategic shift among its NATO partners. On Friday, British Prime Minister Keir Starmer came to Washington for talks with President Biden and they are expected to finalize the use of NATO weapons against targets in Russia, so it seems that we are now dangerously close to World War III once again, as Ukraine strives to mount more attacks deeper into Russia with weapons from the U.S. and Western Europe.
Yet all the ABC News team wanted from the former President was a yes/no answer on who should “win.”
DAVID MUIR, ABC News: “Mr. Trump, I want to ask you a very simple question tonight. Do you want Ukraine to win this war?”
FORMER PRESIDENT DONALD TRUMP: “I want the war to stop. I want to save lives that are being uselessly lost – people being killed by the millions.”
On Thursday, The New York Times reported that Russia had captured more land since June 1st and is close to seizing Pokrovsk, a key transportation rail and road hub in Eastern Ukraine. If Russia captures Pokrovsk, Ukrainian troops will be cut off, and more of Eastern Ukraine may be captured by Russia, and it will be embarrassing to the Biden Administration if Russia captures a much larger region of Ukraine.
As Ukraine continues to venture further into Russia, I suspect that NATO is concerned about escalation of that War into Western Europe and is therefore instructing Ukraine to stick to disrupting infrastructure like railways, bridges and energy storage facilities, while avoiding civilian targets, like apartment buildings.
In an attempt to reach a peace agreement, U.S. Secretary of State Antony Blinken and Britain’s Foreign Secretary David Lammy spent the weekend with Ukrainian officials to discuss how best to define “Plan B,” which is how Kyiv can redefine a Ukrainian victory and what aid it will need to achieve that goal. Several other senior U.S. and European officials have been in Kyiv in the past two weeks. As Russia continues to capture more territory in Ukraine, it appears that Blinken and Lammy are trying to convince Ukraine to realize that they will not be able to recapture all the territory that Russia has seized.
Meanwhile, in an attempt to shore up the ruble, as well cope with domestic war-related inflation, Russia’s central bank on Friday raised its key interest rate 1%, to 19%, so the West has some negotiating leverage, as Russia suffers from inflation, war deaths, trade embargoes and global isolation for their aggression.
Oil Prices Are Falling in a Deflationary World
Due to weak economies around the world, Brent crude oil prices fell below $70 per barrel early last week for the first time since 2021. Even after Louisiana was hit with Hurricane Francine and widespread flooding disrupted many refineries, energy prices didn’t surge. Normally, weak seasonal demand in the fall causes crude oil prices to decline, but if a bigger Hurricane hits Texas or Louisiana, all bets are off.
Bloomberg recently posted an article entitled “China’s Deflationary Spiral Is Now Entering Dangerous New Stage.” In China, even wages are now falling. Robin Xing, chief China economist at Morgan Stanley, said, “We are definitely in deflation and probably going through the second stage of deflation,” adding that, “Experience from Japan suggests that the longer deflation drags on, the more stimulus China will eventually need to break the debt-deflation challenge.” Bloomberg also reported that China is in the midst of a demographic collapse. In 2023, China’s population shrank by 2.08 million and is expected to experience a similar decline in 2024 due to its “one baby” restriction implemented decades ago.
Europe is also experiencing some soul searching, trying to figure out how to stimulate economic growth, especially in the wake of the euro-zone’s green polices that caused food and energy prices to rise. Former ECB President and Italian Prime Minister, Mario Draghi – once dubbed “Super Mario” – is calling for “radical change” if Europe wants to remain more competitive. Draghi calls for the euro-zone to institute (1) a more aggressive industrial policy and subsidies, (2) changes to the European Union’s competition policy and (3) a reshaping of European capital markets to attract investment. In his conclusion, Draghi said failure to implement his recommended reforms would leave Europe in “an existential crisis.”
I should add that the European Central Bank (ECB) cut key interest rates by 0.25% last Thursday due to weak economic growth and to tame inflation statistics. This is the second ECB key interest rate cut in the past three months. Economists are expecting one to two more 0.25% key interest rate cuts this year. In the wake of the ECB interest rate cut, most European government bond yields declined. Both the Bank of Canada and Bank of England are also expected to cut interest rates again due to their weak economies.
The political fallout is that Pennsylvania is a big energy state and employs approximately 250,000 people in fracking, natural gas extraction and pipelines to LNG terminals, so the Biden Administration’s executive order to ban LNG expansion back in January has put Kamala Harris at a disadvantage there. Although she wisely reversed her anti-fracking stance, the fact that one of Biden’s first actions was to ban fracking on federal land makes her unpopular in energy-rich Western Pennsylvania. I still believe that the candidate that is the most pro-domestic energy, and is sincere and believable, will win the electoral vote.
The Fed is Set to Cut Key Interest Rates Tomorrow
I’m happy to report that the Treasury yield curve officially un-inverted, as short, intermediate and long-term Treasury yields have all declined, so the pressure is mounting on the Fed to cut key interest rates by at least 0.25% (or up to 0.5%) at its Federal Open Market Committee (FOMC) tomorrow, September 18.
At a University of Notre Dame speech, FOMC member Christopher Waller said that it’s important for the Fed to begin cutting interest rates this month amidst rising risks of further weakening in the labor market. Specifically, Waller said that he’s also “open-minded” about the potential for a bigger rate cut and would advocate for one, adding, “The balance of risks has shifted toward the employment side of our dual mandate.” Furthermore, Waller said that the Fed’s “policy needs to adjust accordingly” and concluded by saying that, “The current batch of data no longer requires patience, it requires action.”
In preparation for the FOMC meeting, the Fed’s Beige Book survey revealed that nine of the 12 Fed districts reported flat or declining economic activity in August, adding fuel to the Fed’s interest rate decision on September 18th. Especially alarming is the fact that manufacturing activity dropped in most districts, underlined by the fact the August payroll reported 24,000 fewer manufacturing jobs. Also, most districts reported softer home sales, so the Fed now has all the evidence it needs to cut rates this week.
On the inflation front, the Labor Department reported last Wednesday that the Consumer Price Index (CPI) rose 0.2% in August and 2.5% in the past 12 months. The core CPI, excluding food and energy, rose 0.3% and 3.2% in the past 12 months. This is the largest monthly increase in the core CPI in four months. Much of the increase in the core CPI was attributable to a 0.5% increase in shelter costs (owners’ equivalent rent), so all the evidence of softening home prices is not showing up in the data. In the wake of the CPI report, the Fed is now anticipated to cut key interest rates by only 0.25% on September 18th.
The Labor Department on Thursday announced that the Producer Price Index (PPI) rose 0.2% in August and 1.7% in the past 12 months. The core PPI, excluding food, energy and trade margins, rose 0.3% in August and 3.3% in the past 12 months. Food prices rose 0.1% in August, while energy prices declined by 0.9%. Wholesale service costs rose 0.4% in August, while wholesale good prices declined 0.1%. One reason why the PPI is lower than the CPI is because we continue to import deflation from China.
After the CPI and PPI reports, most economists are anticipating three 0.25% key interest rates cuts this year. However, Bloomberg reported that traders are still expecting a 40% chance of a 0.5% key interest rate cut on September 18. A 0.25% cut is likely, since the FOMC does not want to appear to be panicked.
All content above represents the opinion of Louis Navellier of Navellier & Associates, Inc.
Also In This Issue
A Look Ahead by Louis Navellier
We Barely Dodged World War III (Again) Last Week
Income Mail by Bryan Perry
The Rally That Nobody Saw Coming
Growth Mail by Gary Alexander
Debaters Dodge Deficits (and Growth, and Lots More)
Global Mail by Ivan Martchev
A Fresh All-Time High in the S&P 500 Likely This Week
Sector Spotlight by Jason Bodner
September 18th Creates a Turning Point for Stocks
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.