by Louis Navellier
October 29, 2024
The Financial Times said that Trump overtook Harris in its final poll, and they are not alone in that view. The Wall Street Journal, Forbes/Harris, Rassmussen, Atlas Intel, CNBC and Fox News all have Trump leading with a week to go. The Wall Street Journal had an article entitled “Candidates Step Up Their Attacks After Trump Erases Harris’s Lead,” which covered the fact that Donald Trump is now leading in the key swing states, which is confirmed by Real Clear Politics (RCP) in its electoral map summary.
The most devastating trend facing Kamala Harris pertains to how some Democratic senators in Montana, Ohio and Pennsylvania are actively trying to separate themselves from the Biden Administration by campaigning on Trump’s talking points, such as a Pennsylvania ad about the Biden Administration’s opposition to fracking. Since Harris now says she is no longer opposed to fracking, this Pennsylvania Senate ad essentially just confuses voters and hurts her credibility in that most important swing state.
After the election, I believe that many of our petty political differences will be resolved in the New Year. Most presidents get 100 days’ “honeymoon” before criticism mounts. If foreign conflicts can be resolved, and the threat of a nuclear World War III diminishes, the market should benefit from a peace dividend.
In the meantime, central banks will continue to cut interest rates. In fact, the Fed is expected to cut key interest rates two days after the Presidential election and again at the December Federal Open Market Committee (FOMC) meeting. Along with the boost in M2, that should fuel a continued market advance.
The U.S. remains the investment and economic oasis to many around the world. Even with a $35.8 trillion cumulative budget deficit, the U.S. dollar remains the premier currency for global trade. The euro has now been replaced as #2 (by gold) in central bank coffers, and the BRIC nations can’t seem to generate any interest in their competing paper currencies. Furthermore, while most Asian and European nations struggle with a declining population, the U.S. benefits from greater household formation and better assimilation of immigrants, so despite all the warnings, the U.S. still leads the world in economic growth.
Last week, Bloomberg reported that Europe is increasingly worried about a trade war with the U.S. as the momentum of a Donald Trump victory increases. Specifically, some European central bankers apparently fear an escalation of “tit for tat” tariffs against European goods. ECB President Christine Lagarde told Bloomberg TV, “Fair trade is a key boost for growth, employment, innovation and for productivity, but Lagarde forgot to mention that the European Union has protectionist tariffs in many sectors, such as the automotive industry. Lagarde clearly prefers Harris, but if the European Union removed its sky-high tariffs, the U.S. (and Trump) would also likely lift its tariffs. Essentially, the Trump tariffs are designed to force “free trade” and to adjust for other unfair advantages, like government subsidies or cheaper labor.
The first job of our President-elect will be to de-escalate the tensions in the Middle East and reach an acceptable peace agreement between Ukraine and Russia. If our President-elect can minimize these global conflicts and avert escalation into World War III, then the stock market will benefit from a “peace dividend” and rally strongly into the New Year. In the meantime, we are in the midst of another exciting earnings announcement season that should drive our fundamentally superior stocks significantly higher.
The Latest Earnings and Economic Updates
In the meantime, outside politics and wars, the stock market is going to need some earnings surprises from more flagship stocks to get its “mojo” back. Fortunately, Tesla beat big time last Wednesday and should help lead the overall stock market. Here are some highlights of Tesla’s earnings report:
1) Operating margins resumed expanding to 19.8%, up from 17.9% in the second quarter.
2) Earnings rose 8% to $2.5 billion, higher than analysts’ expectations of $2.1 billion.
3) The Cyber-truck was Tesla’s third best seller and is now profitable.
4) Deliveries rose 6.4% in the third quarter and were led by a surge in China.
5) Tesla passed BYD to become the global EV leader.
6) Tesla’s energy storage business was up 52% in past year, and
7) …its FSD software sales were also encouraging.
Speaking of EVs and energy, China’s CATL announced that its third-quarter earnings rose 26% to $1.8 billion – but its sales declined 12.5% and were far below its projections made earlier this year. Weak sales of electric vehicles (EVs), especially in Japan and Germany, adversely impacted CATL, the world’s largest battery manufacturer, which supplies nine major EV manufacturers, including Tesla.
CATL’s EV market share rose to 37.1% (up 1.6% from a year ago), while South Korea’s LG Energy’s market share declined to 12.1% (down 2.3%). CATL dominates the production of the cheaper, iron-phosphate batteries that are increasingly used in EVs, especially cheaper city EVs, while LG Energy makes predominately lithium-ion batteries, used in more expensive EVs.
Turning to economic data, the news does not look so good, which may favor Trump among undecided voters (if any remain). The Wall Street Journal reported last Wednesday (in “Home Sales on Track for the Worst Year Since 1995”) that the National Association of Realtors reported that existing home sales declined 1% in September to an annual pace of 3.84 million. In the past 12 months, existing home sales were down 3.5% and 2024 is shaping up to be the second year in a row that home sales are declining after hitting the slowest sales pace in 30 years. Rising homeowner insurance rates are increasingly being cited, as well as rising mortgage rates (again!) as the primary reasons that existing home sales continue to fall.
The Fed released its latest Beige Book survey last week in preparation for its upcoming Federal Open Market Committee (FOMC) meeting, and five of 12 Fed districts reported declining economic activity. The Beige Book survey said, “Expectations for the future of the economy were for slower-growth over the next six-months due to uncertainty around the upcoming election, domestic policy, geopolitical conflict, and inflation.” Furthermore, the Beige Book survey also said that nearly every district “mentioned retailers discounting items or price-sensitive consumers only purchasing essentials, trading down in quality, buying fewer items, or shopping around for the best deals.” As a result of this Beige Book survey, another Fed rate cut is certain at the next FOMC meeting, two days after the Presidential election.
And finally, the Commerce Department on Friday announced that durable goods orders declined 0.8% in September, due largely to a 22.7% decline in commercial aircraft orders, mostly due to Boeing’s woes. August durable goods orders were also revised lower to a 0.8% decline (commercial aircraft orders also declined 20% in August). The good news is, excluding defense and aircraft, durable goods orders rose 0.5% in September, which is a good sign, but core capital goods shipments, excluding defense and aircraft, declined 0.3%. In the past five months, core capital goods shipments declined, so until the 33,000 workers on strike at Boeing can ratify a new contract, durable goods orders will remain under pressure.
Navellier & Associates, a few accounts own Tesla (TSLA), per client request in managed accounts. We do not own BYD Company ADR (BYDDY). Louis Navellier does not own Tesla (TSLA), or BYD Company ADR (BYDDY), personally.
All content above represents the opinion of Louis Navellier of Navellier & Associates, Inc.
Also In This Issue
A Look Ahead by Louis Navellier
The Election (and the World After) Start to Come Clear
Income Mail by Bryan Perry
The Timely Allure of Tax-Free Bonds
Growth Mail by Gary Alexander
Welcome to Transition Week – NOVEMBER, Here We Come!
Global Mail by Ivan Martchev
Have Stocks (Finally) Begun to Notice Bonds?
Sector Spotlight by Jason Bodner
Are We Seeing “Cracks” in This Bull Market?
View Full Archive
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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.
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