All Eyes (and Hearts)

All Eyes (and Hearts) are Watching Europe This Week

by Louis Navellier

November 17, 2015

*All content in the Marketmail Introduction is the opinion of Louis Navellier of Navellier & Associates, Inc.*

Stained Glass Windows ImageDue to the tragic terrorist attacks in Paris, all eyes will be on the European stock markets this week.  Global bond yields are expected to continue to fall as cautious investors hide in fixed-income assets.  Travel, tourism, and some commerce are expected to slow down in Europe, which essentially means that last week’s plunge in crude oil prices will likely continue due to slack worldwide demand and a growing glut of crude oil.  As a result, deflationary forces continue to envelop the globe and it will be fascinating to see how central banks respond to the continuing threat of deflation.  In particular, I foresee that the ECB meeting in early December will likely influence the Fed’s interest rate decision in mid-December.

We are now at the end of earnings announcement season, a time when profit-taking and consolidation is quite common.  Like the first two quarters of 2015, the S&P 500 was plagued by negative sales growth in the third quarter.  However, in the first two quarters, the S&P 500 eked out minimal earnings gains due to relentless stock buy-back activity. In the third quarter, stock buy-backs remained high, according to the Wall Street Journal’s article “What $1.5 Trillion in Stock Buybacks Doesn’t Buy”, published on November 8, but it was not strong enough to deliver positive earnings, so the S&P 500 recorded negative earnings growth last quarter.

Complicating matters further, the original sector leadership in October – namely energy, materials and commodity-related stocks, which had the worst sales and earnings – are being “crushed” in November due to a resurging U.S. dollar and the perception that the Fed will raise key interest rates in December.

In the meantime, the current leadership of the stock market is too narrow and unfortunately a bit too pricy, so the consolidation continues.  At Friday’s close, Amazon.com traded at 920 times trailing earnings and 114 times forecasted 2016 earnings.  There is no doubt that Amazon’s 20.9% forecasted 2016 earnings growth is impressive, but a triple-digit price-to-earnings multiple is truly ridiculous. In my view, Amazon is one of many “cult” stocks, including Tesla (which has no current earnings but sports a forward P/E of 106) and Netflix, a company that trades at 276 times trailing earnings and 399 times forecasted 2016 earnings.  These examples of “froth” in the stock market will likely end badly.  I hate to be a party pooper, but be prepared for some of these big “cult” names to cause more volatility in the next few weeks. (Note: I do not personally own positions in AMZN, TSLA, or NFLX, and Navellier & Associates, Inc. does not currently own positions in AMZN, TSLA, or NFLX for client portfolios.)

At the end of any quarterly earnings announcement season, profit-taking is common as professional managers realign their respective portfolios.  Fortunately, as the holidays approach, the market tends to firm up fast. As we gather with family and friends for food and football on a long Thanksgiving weekend, consumer sentiment typically improves and it seems to rub off on investor sentiment.  Furthermore, year-end pension funding and gifting to kids and grandkids also seem to boost seasonal inflow and help stocks.

In This Issue

Ivan Martchev is taking a break from Income Mail this week.  In Growth Mail, Gary Alexander will cover the strange turn of events in the market indexes so far this year – we’re actually in danger of seeing the first overall decline in the DJIA and S&P 500 during any pre-election year since the 1930s. Then, in his Sector Spotlight, Jason Bodner will profile the Bi-Polar disorder we’ve seen in various sectors, then I’ll return to dissect the evidence for continued deflation and what the world’s central banks may do about it.

Growth Mail:
Will We See the First Negative Pre-Election Year Since 1939?
by Gary Alexander
The Volume of Available Shares Continues to Shrink
Other Fruits of Peace – Low Inflation, Free Trade, and Rising Markets

Market History:
Happy Birthday to America’s Central Bank
by Gary Alexander
Ticker Tape Parades, Perp Walks, and Presidents Moving Markets

Sector Spotlight:
Psycho-Analyzing a Bi-Polar Market
by Jason Bodner
The Long-Term View is More Positive

Stat of the Week:
Deflation Reigns in Imports (-10.5%) & Producer Prices (-1.6%)
by Louis Navellier
Other Forces weighing on the Fed’s Decision

Growth Mail:

*All content in Growth Mail is the opinion of Navellier & Associates and Gary Alexander*

Will We See the First Negative Pre-Election Year Since 1939?

by Gary Alexander

Through last Friday, both the Dow and S&P 500 were down year-to-date.  That’s pretty big news, all by itself. According to The Almanac Investor, the DJIA has risen in EVERY pre-Presidential election year since 1940.  Going back a full century, the DJIA was only down in three of 25 pre-Presidential election years, and two of those were trivial and long ago (-3.3% in 1923 and -2.9% in 1939).  The only major decline in a pre-election year since the Panic of 1907 came in the Great Depression (1931), down 52.7%.  So what’s going on here? Are we finally going to break a 75-year stretch of the DJIA rising in every pre-election year?

Dove ImageAs I write over the weekend, the world is reeling from the attack on France, which will no doubt send the European markets down this week, perhaps depressing Wall Street stocks as well.  This attack has been dubbed “the worst since World War II.”  That’s also pretty big news, all by itself.  Why won’t anyone in the mainstream press remind us of the obvious implications of that statement? Europe has been at peace for the last 70 years, especially in the 25 years of post-Cold War free trade in the European Union (EU).

A century ago, World War I was killing millions of Europeans each year.  According to Wikipedia, total casualties in World War I reached 17 million deaths and 20 million wounded.  For a war lasting just 1,594 days, that works out to over 10,000 deaths and 12,500 injured on an average day in those muddy trenches.

I’m not trying to minimize what happened in Paris last Friday. It was grotesque, and the evil perpetrators will be hunted down and exterminated, just like Osama bin Laden was hunted and killed; but the world has been in far worse situations than we’ve seen in Paris recently, and the world (and stocks) went on.

In the midst of the Great War, 1915 became the best year in stock market history.  Using the historical data from The Almanac Investor, we see that the DJIA rose 81.7% in 1915.  That year, the Lusitania was sunk off the coast of Ireland in May, killing 1,198 civilians, including 128 Americans, many of them famous, like author Elbert Hubbard, Broadway producer Charles Frohman, multi-millionaire Alfred Vanderbilt, and Albert L. Hopkins, president of Newport News Shipbuilding.

In other seemingly-dismal pre-election years, the DJIA rose 38.5% in 1935, when Hitler ruled Germany.  It rose 17% in 1963, when President Kennedy was killed.  It rose 15.2% in 1967, when the Vietnam War was escalating and America suffered campus riots and racial unrest.  It rose 38.3% in 1975, when Saigon fell.  It rose 20.3% in 1991, the year of Gulf War I; and it rose 25.3% in 2003, the year Gulf War II began.

We tend to watch TV or our mobile news delivery systems every waking hour, creating out-of-this-world fears of what could happen to us.  Few do the math of figuring out the one-in-a-million chance we will be a victim of terror.  We also dwell on the most dismal predictions about global economies and markets. Last Wednesday, for example, Louis and I hosted a Teleforum on market strategies for 2016.  Our first poll question asked our 1500 callers to identify their biggest fear for 2016.  In a multiple-choice quiz with four possible threats (including inflation, deflation, and a loss of interest income), over half (57%) worried most about “my portfolio is unprotected from a market crash.”  Most of our callers feared a market crash.

Frankly, I don’t harbor such fears.  Yes, I lost a lot of money in 2000, 2002, and 2008.  I held on to stocks throughout all those crash years, but I also held plenty of bond funds and gold to minimize those declines.  And I participated fully in the strong recoveries that ran from 2003 to 2007 and from 2009 to the present.

I don’t believe it is possible to time market crashes in advance.  Furthermore, I don’t think it’s likely that those who are lucky enough to guess the timing of a market crash are also sanguine enough to buy back into the stock market near the bottom. From my experience, most bears tend to stay on the sidelines as they watch the market take off to new highs – such as the strong recoveries after 1987, 2002, and 2008.

Therefore, I will continue to make the case to buy or hold on to well-selected stocks in this environment.  This week’s reason involves supply and demand – specifically, the shrinking supply of available shares.

The Volume of Available Shares Continues to Shrink

The Wilshire 5000 Total Market Index was founded in 1974 to represent a benchmark for all U.S. equity securities.  It was named for the nearly 5000 securities extant then.  The index grew to a high of 7,562 securities as of July 31, 1998.  Since then, the number dropped to 3,812 at the start of 2015 and 3,691 companies as of June 30, 2015.  The last time it contained 5,000 or more securities was in 2006.

America's Shrinking Stock Market Chart

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

The number of company names continually shrinks through bankruptcies, mergers and acquisitions, and a growing tendency of companies choosing to go private.  Applying the law of supply and demand to this index, the same money chasing fewer names delivers more capitalization (market value) per stock name.

We have also seen stock buy-backs reduce the number of shares available for certain stocks.  According to Ed Yardeni (in “Counting Shares,” November 10, 2015), S&P 500 corporations have purchased $2.5 trillion of their own shares from January 1, 2009 to June 30, 2015.  Yardeni says that this practice makes financial sense “when the forward earnings yield of a company’s stock exceeds the cost of borrowing funds in the bond market to buy back shares,” and “that’s been the case since 2004.”

Yardeni’s team conducted a study of total stock volume going back over 10 years (from Q1-2004 through Q2-2015) and found that “the S&P 500 and six of 10 sectors had their shares outstanding fall in the past 10 years since Q2-2005.” There was a big share build-up in Financials, he said, but “Removing Financials from the S&P 500 share count shows that the remaining shares outstanding actually declined 7.8%.”

Over the past four quarters (through June 30), Yardeni says the net equity issuance of the S&P 500 was minus $490 billion, “the most negative this series has been since Q2-2008.”  Most share buy-backs have been funded through bond offerings. “Over the past four quarters through Q2, they raised a net amount of $402 billion in the corporate bond market,” plus another $475 billion in refinancing outstanding bonds.

According to Yardeni’s November 3 Morning Briefing (“Urge to Merge”), global M&A activity rose to $4.2 trillion over the past four quarters (through Q3), of which nearly half ($1.9 trillion) was in the U.S.

Picture of a Shrinking Market Chart

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

This trend will likely continue in the current quarter.  According to Kristen Scholer, writing in The Wall Street Journal two weeks ago (“Buyback Binge Looms for Stocks,” November 3):

“Companies typically ramp up their stock buybacks as winter sets in, a trend which could provide a boost to equities…. Nearly 25% of all annual buyback activity happens, on average, in the final two months of the year, according to Goldman Sachs Group Inc. November is typically the busiest month with companies spending 13% of their annual repurchase dollars then…in part because companies need to complete their announced authorizations before the calendar year wraps up.”

All of this logical analysis was written before last week’s market swoon and the attack on Paris.  So: If a panic attack occurs this week, please do yourself a favor and turn off the TV for a while, then take a deep breath and read a history book.  We’ve been in far worse places before, and the market has kept on rising.

Market History:

*All content in Market History is the opinion of Navellier & Associates and Gary Alexander*

Happy Birthday to America’s Central Bank

by Gary Alexander

The birth of the Federal Reserve System was caused by the shocking events that culminated on this week in 1907. On November 15, 1907, the DJIA bottomed out at 38.83, at the nadir of the Panic of 1907.  The DJIA had fallen 48.5% from 75.45 in early 1906. The DJIA wouldn’t surpass its 1906 high until 1915.

As I wrote in my history column on October 27, the Panic of 1907 was resolved by J.P. Morgan and his fellow bankers, but the nation was in such danger of financial collapse that national leaders clamored for a “national bank.” The idea took a while to gestate but it was officially born exactly seven years later.

November 16, 1914 marks the opening day for the 12 Federal Reserve district banks, but the Fed’s birth was easy to overlook.  World War I dominated the headlines in America, even though we were not yet mired in that deadly conflict. The stock market was closed that day.  In fact, it had been closed every day of the previous 3-1/2 months, and it would be closed for yet another month.  On December 15, 1914, the New York Stock Exchange reluctantly opened its doors, but stocks were only available for trading under strict price restrictions. Full trading restrictions were not removed on the NYSE until April 1, 1915.

Ironically, 1915 was the best year in stock market history.  The DJIA rose 81.7% in 1915 alone, and 110.5% by the bull market peak on November 21, 1916. But very few bought stocks in late 1914. On December 30, 1914, fewer than 50,000 NYSE shares traded, the lowest daily volume in the 20th Century.

The Fed was initially designed to prevent future bank panics (like the killer Panic of 1907).  But like any inexperienced team, the agency had to learn through experience.  First, they fueled wartime liquidity and postwar inflation, flooding the system with liquidity through most of the 1920s.  Then, in a morning-after repentance, they overly throttled money supply by one-third, 1929 to 1932, making the Great Depression far deeper and longer than any Panic of the previous century. Here’s a sample of their early extremes:

  • Double-digit Inflation: The Consumer Price Index doubled from 1915 to 1920, including double-digit price gains in 1916 (+12.6%), 1917 (+18.1%), 1918 (+20.4%), and 1919 (+14.5%).
  • Rapid Deflation: The Fed slammed on the brakes in 1920, causing a flash Depression: The CPI fell 10.8% in 1921, followed by a 2.3% drop in 1922.  Then came the killer deflation of 1930-32: 6.4% deflation in 1930, -9.3% in 1931, and -10.3% in 1932. From 1929 to 1933, the CPI fell 27%.

On November 13, 1929, the DJIA fell to 198.69, 48% below its peak on September 3.  But the DJIA then gained 48% by the next April. America may never have had to suffer a Great Depression, but the Smoot-Hawley tariff law (June, 1930) and Fed policies deepened the Panic of 1929 into a 12-year nightmare.

The Fed learned its lessons, and it now fights deflation with a vengeance – hence quantitative easing and seven years of a Zero Interest Rate Policy (ZIRP), but what tricks are left in its century-old policy bag?*

*Sources: “A Monetary History of the United States, 1867-1960,” by Milton Friedman and Anna Schwartz and “America’s Great Depression” by Murray Rothbard (both books published in 1963).

Ticker Tape Parades, Perp Walks, and Presidents Moving Markets

On November 15, 1867, a stock “ticker” machine was unveiled in New York.  Like the Internet today, this new medium fed traders a steady stream of data, and lots of waste paper. The first use of this paper for a parade was an impromptu celebration at the dedication of the Statue of Liberty on October 28, 1886.

Two ticker-tape parades were held in New York City on November 18 after World War I in honor of the leaders of the two allied nations that suffered the most casualties.  Edward Albert, Prince of Wales (later King Edward VIII in 1936, before he abdicated the throne) was so honored on November 18, 1919.  Then, on November 18, 1921, Georges Clemenceau, France’s leader in World War I, had a ticker-tape parade.

The first high-profile Wall Street scandal was revealed on November 23, 1937, when the former head of the New York Stock Exchange, Richard Whitney, was exposed as an embezzler.  He was $2 million in debt and had been stealing from the NYSE’s “Gratuity Fund,” which was something like a life insurance pool for members of the exchange and their families. Whitney had never adapted his high-living Roaring 20s lifestyle to 1930s reality.   He was trustee of the Gratuity Fund since his retirement, and siphoned off over $1 million in securities from literal widows and orphans.  He went off to Sing Sing Prison in 1938.

On Tuesday, November 19, 1963 (the week President Kennedy was killed), a strange “vegetable oil” scandal rocked Wall Street, when Anthony “Tino” DeAngelis and his Crude Vegetable Oil Refining Co. filed for bankruptcy.  Like the fictional olive oil tycoon, Vito Corleone, Tino’s vegetable oil firm turned out to be a shell for speculation in vegetable oil futures. On this date, Tino owed two major brokerages (Williston & Beane and Ira Haupt & Co.) so much margin money that it endangered both firms.  The next morning, NYSE suspended both firms from trading, which put their other 9,000 speculative trading customers at risk.  Even American Express was at risk, for guaranteeing the warehouse receipts for all these traders. Merrill Lynch and others stepped up to rescue their broker brethren on Friday, November 22.  They were scheduled to resume trading at noon, but tragic news from Dallas soon closed the market.

Presidents also moved the market in 1973 and 1987:

On Saturday, November 17, 1973, President Richard Nixon told reporters in a press conference, “People have got to know whether or not their president is a crook. Well, I am not a crook.”  The stock market was not convinced. The Dow fell 5.2% in the next two trading days and 34.4% in the next 10-1/2 months.

On Tuesday, November 18, 1987, a Congressional committee on President Reagan’s “Iran-Contra affair” issued its final report.  The next day, the DJIA fell 44 points (2.3%) in another post-1987 aftershock.

Free-trade measures also boosted the market twice in the 1990s:

On Monday, November 19, 1990, the Cold War officially ended, as leaders of NATO and the Warsaw Pact agreed to stand down and the Treaty on Conventional Forces in Europe cut back their arsenals. The end of the Cold War and the spread of global trade and freedom supercharged the 1990s bull market.

On Tuesday, November 16, 1993, the North American Free Trade Agreement (NAFTA) was set to pass the House and become law.  This news energized Wall Street, which had been pushing for free trade in the hemisphere.  The DJIA rose 33 points to close at 3700, rising to over 11,000 just six years later.

Sector Spotlight:

*All content in Sector Spotlight is the opinion of Navellier & Associates and Jason Bodner*

Psycho-Analyzing a Bi-Polar Market

by Jason Bodner

Napoleon Bonaparte ImageIt fascinated me to find out that several famous world leaders have suffered from Bipolar Disorder: Abraham Lincoln, Napoleon Bonaparte, and Winston Churchill to name a few…

It may seem as though those who suffer with this malady would find their path to success hindered. The reality, however, is that many of history's greatest artists and leaders dealt with life as bipolar sufferers. In addition to the trio of leaders cited above, Mozart, Beethoven, and Van Gogh were also suspected to be bipolar. Those with the condition have been well documented to be extraordinarily creative and visionary.

Bipolar disorder is characterized by extremes of moods – manic highs and debilitating lows.

This seems to be true of the stock market as well.  For the week ending November 6, the market seemed to be a pretty joyous place with signs of promise abounding. There were bright spots as some companies exceeded expectations on their quarterly earnings reports. Tech stocks and financials seemed to be the new engines of the market. Volatility seemed to be dissipating and the market seemed as though it was finding its legs. What a difference a day (or week) makes! A strong jobs report and Fed-speak interpreted as openness to a potential December rate hike, and the fact that now it seems clear earnings and sales overall are shrinking for the S&P 500 ushered in a downer of a week. The selling in the market spared only one sector from finishing the week negative: Utilities. Everything else bore the brunt of the latest round of jitters to roil the markets. The market is clearly exhibiting classic signs of being bipolar.

Here’s last week’s dismal report card:

Standard and Poor's Sector Index Table

Putting energy aside for a moment, the real story this past week was that retail stocks were dragging down the S&P Consumer Discretionary Index by 4.59%. In looking at a one-year chart of this index, we see a significant recovery from the August lows, yet last week represented a clear break from its recent uptrend. The index is just 0.02% lower from its level of one month ago but it is still +12.67% from 12 months ago.  The S&P 500 Retailing Industry Group Index is -6.61% for the week, -0.12% for one month, but it is still up an eye-popping 25.52% for one year, as the following one-year charts demonstrate:

Standard and Poor's Discretionary and Retailing Sectors Chart

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

As crude oil falls to 10-week lows, we also find many other commodities breaking down, including metals and some grains. The dollar is strengthening and this puts renewed pressure on the equity market.

Looking at the S&P 500 Energy Index this week, it was the clear loser, down nearly 6% and dragging down equities in general.  As production continues and demand for oil wanes with a global growth slowdown, it may not bode well for the near-term future of oil prices. This also lends credibility to the idea that the energy rally from October was sparked by short-covering or “deep value” hunters.  The sales and earnings of energy stocks are shrinking, and with the continued price pressure, it seems likely that this trend can continue. The energy index is down 22.6% over the last year.

Standard and Poor's 500 Energy Sector Chart

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

Of course we are seeing great stocks with solid and strengthening fundamentals getting caught up in the selling. These would be the first we'd expect to recover when the fear comes out of the system and therefore this may present a buying opportunity in the higher quality stocks.

The S&P 500 Information Technology Index helps tell this story.  Many companies have been beating expectations and propelling this index higher for several weeks now. Some recent gloomy guidance from bellwethers have helped pressure this strong performer.

The Long-Term View is More Positive

While we are talking about recent strength, I want to look at one of the last few months’ underperformers.  Once Hillary Clinton made her comments targeting drug pricing practices, the healthcare sector fell under heavy pressure. Then some activist research targeting a well-known pharmaceutical company threw gas on the proverbial fire of what seemed like the new least favorite sector. Well the S&P 500 Healthcare Index has staged a noticeable recovery, even if it is not talked about much in the media. In fact, it sits almost right in the middle of its 52 week high (-10.23 from 894.36) and 52 week low (+8.96% from 736.87.) Just to put things into perspective, the five year chart shows healthcare is up nearly 225%!

Standard and Poor's 500 Health Care Sector Chart

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

While the Fed’s “rate-hike see-saw” is seemingly playing a game of “Simon says” with the market, investor frustration mounts. One of the best recent performers has been financials.  The S&P 500 Financials Index, even though down 3.37% for the week is still +3.2 % for one-month.

Standard and Poor's 500 Financials Sector Chart

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

The sectors seem to be waiting for who is next on the chopping block. Energy was on the hit list for a long time. Then higher growth multiples were punished. Then stocks with China exposure were pressured. Next was healthcare. Now, it is retail’s turn. It really did seem as through the week ending November 6th found us in a market that wanted to right itself. We had weeks of positive data from the market itself. Highs were outnumbering lows. New leadership was emerging and there were finally stocks that were posting what I consider to be superior fundamentals. Volatility was calming down significantly.

Well this past week (ending November 13) reminded us just how jittery this market is and how much fear is still in the system. With the heartbreaking events that took place in Paris on Friday night, that very well could inject even more fear into the system and potentially destabilize the frazzled U.S. stock market even further. As market participants look to find opportunity and a steadying market, one may feel as though they are trying to find that perfect moment when the market is in the right mood. With extremes of bullishness and bearishness rotating on what feels like a weekly basis at times, it feels like we are dealing with a bipolar market. One thing is for sure: When it does settle down, stocks with strong fundamentals will lead the way.

Stat of the Week:

*All content in this "Stat of the Week" section of Market Mail represents the opinion of Louis Navellier of Navellier & Associates, Inc.*

Deflation Reigns in Imports (-10.5%) & Producer Prices (-1.6%)

by Louis Navellier

Waterway Bridge ImageThe Labor Department announced last Tuesday that the price of imported goods declined by 0.5% in October for the fourth straight monthly decline.  Excluding fuel, import prices declined by 0.3%, so deflationary forces remains prevalent.  Due to the U.S. dollar’s recent strength, November’s import prices will likely continue to decline.  In the past 12 months, the price of imported goods has fallen 10.5%.

On Friday, the Labor Department reported that the Producer Price Index (PPI) declined 0.4% in October, more than the economists’ consensus estimate of a 0.3% decline.  Interestingly, the price of services declined 0.3% in October after declining 0.4% in September.  Excluding food and energy, the core PPI declined a more modest 0.1% in October.  In the past 12 months, the PPI has declined 1.6%.

Deflation also ran rampant last week in the energy patch and may influence the Fed’s decision whether or not to raise key interest rates at their upcoming Federal Open Market Committee (FOMC) meeting in mid-December.  Specifically, the American Petroleum Institute (API) announced on Tuesday that U.S. crude oil inventories soared by 6.3 million barrels in the latest week.  This was a massive surprise, since a Platts analyst survey was only expecting the API to report a 500,000-barrel increase.  On Thursday, the Energy Information Agency (EIA) reported that crude oil inventories rose by 4.2 million barrels in the latest week, which was well above analyst estimates of a 1.1 million barrel increase.  Canada continues to export a record amount of crude oil to the U.S., while domestic U.S. oil production continues to rise.

These deflationary forces could potentially sway the Fed to postpone raising interest rates in December.

Other Forces weighing on the Fed’s Decision

Besides deflation, there are some other important events that may influence the Fed’s interest rate decision at it December Federal Open Market Committee (FOMC) meeting.  First, the Beige Book survey is due to be released on December 2 and the last Beige Book survey reported that three of the 12 Fed districts were experiencing decelerating economic growth.  Based on the latest ISM manufacturing survey (released November 2, at 50.1), manufacturing activity is now at a 2½-year low and dangerously close to falling into a contraction.

Secondly, the European Central Bank (ECB) will meet in early December and may cut its key interest rate from -0.2% to -0.3% or possibly even -0.4%.  If the ECB lowers its key interest rate further, it would cause the U.S. dollar to rally further, raising a deflationary risk and further undermining the Fed’s ability to raise key interest rates.  Also, the November payroll report will be announced on December 4th.  Since only 185,000 of the 271,000 October payroll jobs were full-time, October’s payroll may be revised lower.

Retail Shoppers ImageOn Friday, the Commerce Department announced that retail sales only rose 0.1% in October, which was substantially below economists’ consensus estimate of a more robust 0.4% increase.  Excluding gasoline and vehicle sales, retail sales rose 0.3% in October.  The strength in retail sales was in drug stores, home improvement, home furnishings, restaurants, and internet retailing.  In the past 12 months, overall retail sales are up 1.7%, which is below wage growth and personal income, so consumers remain very cautious.

Overall, these upcoming events, plus growing deflationary fears, may cause the Fed to reconsider raising key interest rates. Still, I’ll stick with my previous prediction that they will raise rates only once, in December, in an attempt to “normalize” market rates.  If the Fed raises key interest rates 0.25% in December, it will most likely be a “one and done” event, since the Fed wants to stay out of the political debate in a Presidential Election year, so December will effectively represent the Fed’s “last chance.”

The lack of confidence in central banks around the world – due to negative interest rates and seemingly endless money pumping, especially by the Bank of Japan and the ECB – is making investors look at alternative places to invest.  Specifically, the World Gold Council announced on Thursday that global gold demand rose by 8% in the third quarter to 1,120.9 metric tons, up from 1,041.9 metric tons in the same quarter a year earlier.  Jewelry demand, led by a 15% surge in India, accounted for 60% of the overall gold demand in the third quarter.  During the same period, global investment demand surged 27%.  Gold demand from China and India account for approximately 50% of global demand.  Due to religious festivals in India and the Chinese New Year, gold demand is expected to remain strong going into winter.


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Past performance is no indication of future results.

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 intended or 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 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 performances should be considered mere "paper" or proforma performance results. Navellier & Associates, Inc. does not have any relation to or affiliation with the owner of these newsletters. There are material differences between Navellier & Associates' Investment Products and the InvestorPlace Media, LLC newsletter portfolios authored by Louis Navellier. The InvestorPlace Media, LLC newsletters and advertising materials authored by Louis Navellier typically contain performance claims that do not include transaction costs, advisory fees, or other fees a client may incur. As a result, newsletter performance should not be used to evaluate Navellier Investment Products. The owner of the newsletters is InvestorPlace Media, LLC and any questions concerning the newsletters, including any newsletter advertising or performance claims, 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. Request here a list of recommendations made by Navellier & Associates, Inc. for the preceding twelve months, please contact Tim Hope at (775) 785-9416.

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It should not be assumed that recommendations made in the future will be profitable or will equal the performance of the securities in this list. Click here to see the preceding 12 month trade report.

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 intended as an offer or 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.

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 of any offer 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 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 you. 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. Results presented include the reinvestment of all dividends and other earnings.

Past performance is no indication of future results.

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 intended or 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 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 performances should be considered mere "paper" or proforma performance results. Navellier & Associates, Inc. does not have any relation to or affiliation with the owner of these newsletters. There are material differences between Navellier & Associates' Investment Products and the InvestorPlace Media, LLC newsletter portfolios authored by Louis Navellier. The InvestorPlace Media, LLC newsletters and advertising materials authored by Louis Navellier typically contain performance claims that do not include transaction costs, advisory fees, or other fees a client may incur. As a result, newsletter performance should not be used to evaluate Navellier Investment Products. The owner of the newsletters is InvestorPlace Media, LLC and any questions concerning the newsletters, including any newsletter advertising or performance claims, 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. Request here a list of recommendations made by Navellier & Associates, Inc. for the preceding twelve months, please contact Tim Hope at (775) 785-9416.

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