by Louis Navellier

September 9, 2020

The economic news last week was very positive. The biggest news came on Friday when the Labor Department reported that the unemployment rate declined dramatically to 8.4% in August, down almost two percentage points from 10.2% in July. A whopping 1.371 million payroll jobs were created in August after 1.734 million were created in July, so over 3.1 million jobs were created in the last two months.

The labor force participation rate rose to 61.7% in August, up from 61.4% in July. The average workweek increased to 34.6 hours in August, up from 34.5 in July, boosted by the fact that full-time workers rose by 2.8 million to 122.4 million. Average hourly earnings rose 0.4% by 11 cents to $29.47 per hour. Overall, this was a very positive payroll report, indicative of a V-shaped economic recovery!

The Labor Department also reported on Thursday that weekly unemployment claims declined by 131,000 to 881,000 in the latest week, which was below the economists’ consensus expectation of 940,000. Actual claims, excluding seasonal adjustments, were significantly lower, at 833,352. Continuing unemployment claims declined to 13.25 million, down from 14.49 million in the previous week, which is encouraging.

In other news, the Institute of Supply Management (ISM) reported on Tuesday that its manufacturing index rose to 56 in August, up from 54.2 in July – the fourth straight month the ISM manufacturing index has risen. The index is at its highest level in 21 months after falling to an 11-year low of 41.5 in April.

This remarkable manufacturing turnaround is being fueled by a resurging domestic auto industry as well as a booming construction sector. The ISM new orders component surged to 67.6 in August, up from 61.5 in July, which is the highest level since 2004 and indicative of a V-shaped economic recovery. Fully 15 of the 18 manufacturing industries that ISM surveyed improved in August, up from 13 industries in July.

ISM reported that its non-manufacturing (service) index declined to 56.9 in August, down from 58.1 in July. Since any reading over 50 signals expansion, the service sector is still growing, but at a slower pace.

The Fed released its Beige Book survey on Wednesday, reporting that all 12 of its districts enjoyed modest growth. Despite high unemployment, some districts reported an emerging labor shortage, since some workers preferred staying on unemployment insurance. Childcare workers were in especially short supply as many families are forced to hire folks to look after their children, since many schools employ on-line learning. The Beige Book survey concluded by saying, “Continued uncertainty and volatility related to the pandemic, and its negative effect on consumer and business activity, was a theme echoed across the country.” As soon as a coronavirus vaccine is approved, economic activity should improve immensely.

Speaking of vaccines, the best news for the market is that the CDC last week asked states to be prepared to distribute an FDA approved coronavirus vaccine as soon as November 1st. Specifically, CDC Director Robert Redfield sent a letter asking governors to fast-track permits and licenses so that vaccine distribution sites can be up and running by November 1st. Naturally, healthcare workers and other high-risk folks would be first to get the vaccine. Multiple vaccines are now in Phase 3 trials that have been accelerated by “Operation Warp Speed.”  Clearly, President Trump wants a vaccine to be available before election day, so FDA approval, manufacture, and distribution of a vaccine are being expedited.

The only “bad” economic news is not really bad at all, since it signifies a resumption of global trade and consuming power. On Thursday, the Commerce Department announced that the U.S. trade deficit surged 18.9% in July to $63.6 billion, up from $53.5 billion in June, but that was only due to surging imports over exports. In July, imports soared 10.9% to $231.7 billion, while exports rose 8.1% to $168.1 billion.

Even though a higher trade deficit is calculated as a drag on GDP growth, the fact that both exports (+8.1%) and imports (+10.9%) are rising sharply is a very good sign of worldwide economic growth.

After Tesla Stock Split 5:1, its Price Nosedives

Even though I see the overall stock market rallying again soon, there are stock bubbles out there.

After Apple and Tesla split their stock shares 4:1 and 5:1, respectively, on Monday, August 31, both stocks initially rose; but then Tesla fizzled badly, down 16% on the week after the company announced that it would raise another $5 billion in a secondary stock offering to fund its new manufacturing plants in Austin, Texas and Berlin, Germany. Tesla also announced that July sales were poor in the hottest electric vehicle (EV) market, namely Europe, so the analyst community slashed its third-quarter consensus earnings estimate to just 53 cents per share, down 80% from $2.67 per share a week earlier.

Naturally, an 80% earnings cut by the analyst community would hurt almost any stock, but Tesla has a large and fanatical following, which limited the damage. Tesla’s fans are arguing that the company’s future growth will now come from selling its Powerwalls in conjunction with solar systems, which could help turn homeowners into “mini-utilities” that sell electricity back to major utilities. Furthermore, the “buzz” about Tesla’s much delayed “battery day” on September 28th, is expected to possibly boost the stock, especially if a “million-mile battery” or a more efficient, lighter lithium battery is revealed.

Due to the fact that Tesla has already lost its EV market leadership in Europe for this year, some fanatic Tesla investors are expecting that the company will become a lithium battery company, even though it currently buys lithium batteries from CATL, LG Chem, and Panasonic. What is especially interesting is that Tesla has awarded approximately 80 of its $250,000 roadsters to its most fanatical promoters on YouTube and other social media channels via its discontinued referral program, but some of these promoters are now reportedly getting perturbed that their $250,000 sports cars have not yet shown up!

The good news for investors is that as Tesla stock stumbled last week, the money rotated into other exciting stocks. This is an important sign that money is not leaving the stock market, but that it is merely getting reshuffled. This is also an exciting preview that many of the stocks we recommend will likely benefit from quarter-ending window dressing in the last couple of weeks of September as institutional managers reshuffle their portfolios ahead of the upcoming third-quarter announcement season.

Navellier & Associates does not hold Tesla, CATL, LG Chem, and Panasonic, in managed accounts but does own Apple. Louis Navellier & his family do not own Tesla, CATL, LG Chem, and Panasonic in private accounts but they do own Apple.

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

Please see important disclosures below.

Also In This Issue

Global Mail by Ivan Martchev
Why Lumber and Stocks Dance Together

Sector Spotlight by Jason Bodner
Timing Your Next Buying Points

View Full Archive
Read Past Issues Here

About The Author

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.