Despite Monday’s Retest

Despite Monday’s Retest, April Should be a Strong Month

by Louis Navellier

April 3, 2018

The S&P 500 has now retested its lows three times and bounced back, but NASDAQ had yet to test its February 8 lows – until yesterday. I know yesterday felt like a stomach-churning roller-coast ride, but all that’s happening is that NASDAQ is retesting its February 8 low of 6,777. Several of the leading tech stocks are being hit hard, including most of the FAANG stocks, as well as the “driverless car” problem hitting Tesla and Nvidia (which I’ll discuss later on). As a result, NASDAQ may continue to test its lows later this week, but many tech stocks are also set to post strong first-quarter earnings in the upcoming weeks. Until then, the market is not always liquid, so these “air pockets” can emerge.

One encouraging point is that the market picked up in the last two hours on Monday – that’s the opposite of the past two weeks, when the market tended to fall off sharply in the last two hours of the trading day.  Yesterday, the Dow was down 750 points around 2:00 pm, but it rallied nearly 300 points in the last two hours.

Looking forward, April is seasonally a very strong month. According to Bespoke Investment Group, April is the strongest month over the last 50 years, with an average 2.04% gain. Over the last 20 years, April has done even better, averaging +2.39%, but in those years April ranks #2 to October, which averaged 2.49%.

Looking backward, the first quarter was volatile but essentially flat, with the S&P 500 down 1.2% and NASDAQ up 1.0%, but April should look better. As trading volume perks up in April, I expect stocks to surge due to an onslaught of stunning first-quarter sales and earnings announcements, beginning soon!

In This Issue

We all welcome April from different angles: Bryan Perry looks at the De-FAANGed tech stocks and the modest forward P/E ratio. Gary Alexander takes a contrarian look at the downbeat spring forecasts being published, while Ivan Martchev revives his forecast of a disappearing bitcoin. Jason Bodner undertook his own volatility study with interesting results. In the end, I’ll take a closer look at Nvidia and tech stocks.

Income Mail:
Market Still Has Plenty of Bite After Getting DeFAANGed
by Bryan Perry
When JPMorgan Talks, People Listen

Growth Mail:
Whatever Happened to Spring Optimism?
by Gary Alexander
Watch for the Emergence of Spring Shoots

Global Mail:
Is the End of Bitcoin Coming Soon?
by Ivan Martchev
Why the Term “Bitcoin Market Cap” is Absurd

Sector Spotlight:
The Market is Getting Hit by a “Solar Storm”
by Jason Bodner
A Short Week, Long on “Motion Sickness”

A Look Ahead:
What Happened to Nvidia Last Tuesday?
by Louis Navellier
Last Week’s Economic News was “Light” (and Mixed)

Income Mail:

*All content of "Income Mail" represents the opinion of Bryan Perry*

Market Still Has Plenty of Bite After Getting DeFAANGed

by Bryan Perry

The first quarter thankfully came to a close this weekend, with the storm clouds of uncertainty showing the first signs of lifting. Whether clear skies are in the offing will be determined over the next six to eight weeks as the mother of all earnings announcement seasons descends upon the investing landscape.

The first three months of 2018 have truly been like a roller coaster ride, as the major averages soared to a dozen new all-time highs in January followed by a textbook correction in early February, followed by two failed attempts to reassert the uptrend after which a retest of the February lows was realized in late March.

When geopolitics, domestic politics, and highly-charged emotions collide with trillions of dollars in real money, it sows the seeds of fear, mistrust, and a host of bad decisions that put many investors in a “sell first, ask questions later” mindset. It’s really too bad that so many people buy with irrational exuberance on the way up and sell on irrational fears when a fundamentally sound stock market is pulling back.

Elevated levels of volatility are never fun to ride out, and there is plenty of volatility being fueled by what I would call “overblown headline risk.” As if investors needed more angst to complicate the landscape, the notion of retesting key technical support levels for the S&P 500 was again on the minds of market participants. Equities tried to rebound at the start of last week but ended up giving back the bulk of Monday's big gains midweek and then closed on a fairly positive note Thursday when some last-minute end-of-quarter repositioning and portfolio rebalancing provided a solid bid for equities, including the banged-up FAANG stocks (namely Facebook, Amazon, Apple, Netflix, and Google, aka Alphabet, Inc.)* 

Please note: Bryan Perry does not currently hold a position in Facebook, Apple, Netflix, Google or Amazon. Navellier & Associates does not currently hold a position in Facebook,  Google or Amazon. But does own Apple, Netflix for client portfolios

Speaking of FAANG, these darlings of Wall Street dropped between 2.6% and 6.1% last week, while NVIDIA tumbled nearly 8% after announcing that it has temporarily suspended autonomous driving tests in order to learn more about last week’s fatal Uber crash. Needless to say, the S&P's most influential sector, Information Technology, had a poor month, losing 4%, but it still remains at the top of the 2018 sector standings with a year-to-date gain of 3.2% vs. a -1.2% loss for the S&P 500 in the same quarter.

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

The one-year chart of the PowerShares (QQQ, above) pretty much tells the story of how influential these five FAANG stocks have been on the broader Nasdaq market. Together, the FAANG stocks make up 36.4% of the QQQ with the other 98 stocks making up 63.6%. It is truly remarkable the sway these five stocks have on the stock market as a whole. From the latest dip on the chart, you can see how the Q’s are trading well off their all-time high of $175.21 (set in early March), closing last Thursday at $160.13, which is still solidly above its rising 200-day moving average of $152.13. Additionally, all five FAANG stocks rose nicely on the final trading day of the month as some of the recent headline risk has abated.

On the final trading day, as we predicted, fund managers aggressively window-dressed their portfolios to reflect winning stock holdings, so the quarter closed on a solidly higher note, led by none other than the IT sector. Computer-generated program trading was to blame for a good portion of the March selling pressure, but if one had cash to put to work, then it’s my firm belief that the storm clouds will lift with opportunities aplenty, especially since earnings season gets into full swing starting late next week.

When JPMorgan Talks, People Listen

Last Tuesday, March 27, JPMorgan noted that the S&P 500 had declined 7.5% since its high for the year on January 26. In a note to clients, their U.S. equity strategist Dubravko Lakos-Bujas wrote: “Most of the selling seen over this period has been largely technical (trend-following strategies and option hedging in an illiquid market environment), and as such represents a buying opportunity for fundamental investors.”

The note continues: “The market appears to be overreacting to sequential negative narratives (e.g., inflation scare, rising yields, hawkish Fed, rising deficits). We believe strong macro and fundamentals will continue to prevail.” Lakos-Bujas said the S&P 500 is trading at 16 times forward earnings estimates, which is lower than its 30-year historical median valuation. He believes the market’s fundamentals are “strong” and predicts earnings per share will grow by more than 30% over the next two years due to lower tax rates and robust sales growth. “In our view, there is still room for estimates to move higher given indirect benefits of tax reform are difficult to model (i.e., the impact of dynamic scoring, rising disposable income, higher business investment).” He reiterated his year-end 3,000 target for the S&P 500.

I am quoting this analysis since I personally place more significance in the views of the largest U.S. investment bank and equity research firm. What JPMorgan says tends to matter more than most others. The 46th edition of Institutional Investor’s All-America Research Team shows that for 2017 JPMorgan Chase & Co. once again took the crown as the best American research firm, with the bank’s analysts recognized in 42 of the 60 investment sectors covered in the annual survey of money managers.

Trying to put a year-end target on the market only three months into the year is elusive, but the base-case for a higher market is solidly supported by the few big cap companies that have already posted Q1 results.

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

Dr. Edward Yardeni’s latest earnings forecast (above) is for the S&P 500 to earn $157.99 per share in 2018 and $173.97 for 2019. With the S&P 500 closing at 2,640.87 on Thursday, its forward Price Earnings Ratio is just 15.18 for 2019. By historical standards, that is right in the middle of the range, and actually low relative to the expected rate of year-over-year earnings growth for this year and next.

After a rough and tumble month of March – which came in like a lamb and went out like a lion – we should see the bull trend resume its upside bias this week, as the heart of earnings season approaches. Earnings are ultimately what the market cares about most and, by all accounts, they will be fantastic.

Growth Mail:

*All content of "Growth Mail" represents the opinion of Gary Alexander*

Whatever Happened to Spring Optimism?

by Gary Alexander

Spring this year has got me feeling like a horse that never left the post.
I lie in my room staring up at the ceiling. Spring can really hang you up the most!

--The opening of “Spring Can Really Hang You Up the Most,” by Fran Landesman and Tommy Wolf

You would think that songs about Spring would be all about love and flowers and hope and all that jazz, but as a part-time musician and jazz DJ, I can tell you that’s “square,” man. Every March 21, I play about a dozen songs with Spring in the title and most of them are downers, like this hip 1955 torch song by Fran Landesman (words) and Tommy Wolf (music) based on T.S. Eliot’s 1922 poem, “The Waste Land,” which begins with this famous line, “April is the cruelest month, breeding lilacs out of the dead land…”

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Rodgers & Hart’s “Spring is Here (I Hear)” is also a wrist-slasher, as is Frank Loesser’s “Spring Will be a Little Late This Year” (“…a little late arriving in my lonely world over here…. Where is our April of old? For you have left me, and winter continues cold.”) I could quote more Spring songs, but you get the point.

Well, this is a financial newsletter, so I’ll switch gears. The financial pundits are singing the same kind of sad songs. The main investing article in the April Money Magazine is \ “The Bull Market’s Last Leg,” by Paul J. Lim, along with a companion sidebar, “This is the Market Tumble You Should Really Worry About: The downturn in bonds is even more troublesome than the stock slide.” Another Spring downer!

Put in context, you must understand that most of the other articles in Money were about securing the best travel deals and finding new careers in retirement. In effect, the authors and editors were telling older, passive investors to basically be fearful of stocks as they travel the world and indulge in their hobbies.

Meanwhile, I have been consistently trying to do the opposite here for the last nine years – trying to keep investors IN the market, counteracting the fears that the talking heads keep throwing at you each week. In this particular Money Magazine article, the author posed fears of a return of inflation. These fears were fairly common in January and February, when inflation indicators were running high. Knowing that most magazines have six-week lead times, this article was probably written in late February, when those fears were running high, but inflation indicators have trended down since then and aren’t such a big worry now.

The sidebar article in Money Magazine was concerned with the rapid rise in bond rates, signaling a bear market in bonds at just the time when stocks were turning south. While it’s true that the 10-year Treasury rate rose from 2.06% last September (and 2.40% at the start of 2018) to a peak of 2.94% on February 21, the benchmark 10-year rate has since declined to 2.74% as of March 31, at quarter’s end. This probably reflects, once again, that this article may have been written in late February, timed to outdated concerns.

Another dismal article last week was titled “April May Be Even Worse for U.S. Stocks as Demand Dries Up” (Marketwatch, March 29, by Thomas H. Kee, Jr.). The author, a former Morgan Stanley broker and founder of Stock Traders Daily, basically tells us that demand has dried up. He is referring to two kinds of demand. One is “natural demand,” which is “based on population growth, natural inflation levels and natural economic cycles.” A second source is demand from central banks, mostly the Federal Reserve and the European Central Bank (ECB), which over the past six years were buying assets. But the Fed has now reversed roles and is selling assets. He says the Fed is scheduled to remove $420 billion from its balance sheet this year, while “the buyer at the other end of the table is not buying…”

I’m not sure that’s a major concern. The Fed’s balance sheet is primarily made up of Treasury securities and mortgage-backed securities, not common stocks. And when it comes to public demand, you have to ask yourself, “Where else are you going to go?” Let’s look at that middle-aged or retired couple reading a popular financial magazine. Are they going to invest more of their money in gold, which is in a narrow trading range? Or in cash, which yields under 1%? Or bonds, which yield little, are in danger of losing principle if rates rise, and are taxed at high rates? What are the options for passive investors if not stocks?

Watch for the Emergence of Spring Shoots

Just as a tree is sure its leaves will reappear
(It knows its emptiness is just a time of year)
The frozen mountain’s dreams of April’s melting streams
How crystal clear it seems, ‘You must believe in spring’

--From “You Must Believe in Spring” by Michel Legrand (music), Alan & Marilyn Bergman (words)

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Those living in the Northeast know this was a tough winter with recurrent storms – even into late March. The south and west were also hard hit. A tough winter followed three killer hurricanes and California fires in the fall. Retail sales were surprisingly weak this winter. That doesn’t make sense, given the pay raises and bonuses from tax cuts, plus the new hires, but it does make sense when you consider people couldn’t shovel out the snow to get to the malls or restaurants. Even sales were slow since deliveries were delayed by the weather. This cut into retail and restaurant sales, but Americans should begin to thaw during April.

The GDPNow model began the year anticipating 5.4% growth in Q1, then they retreated to 1.8% but their current estimate for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2018 is 2.4%, which isn’t bad for a quarter which saw such weak retail sales in the consumer sector.

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

Also in the first quarter, the dollar declined despite rising interest rates. Gold was up 2% and Bitcoin was down 47%. The Wall Street Journal Dollar Index declined 2.5% in the first quarter, and more vs. some key trading partners: -7.5% to the Mexican Peso, -5.6% to the Japanese yen, -3.6% to the British pound, and -3.3% to the Chinese yuan. This should help boost U.S. exports and reduce the trade deficit later on.

In short, look for some spring shoots to emerge – and don’t believe all those downbeat Spring songs. 

Global Mail:

*All content of "Global Mail" represents the opinion of Ivan Martchev*

Is the End of Bitcoin Coming Soon?

by Ivan Martchev

The sanity of the person who paid $19,891 for ONE bitcoin on December 17, 2017 has to be called into question as this is the all-time high that the cryptocurrency traded on the Bitfinex exchange. As of this writing, bitcoin is hovering near $6,500 and seems en route to take out the first-quarter low of $6,000.

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

Why do I think bitcoin will decline to well below $6,000? It is very simple. Because bitcoin is a bubble that has now burst and, given the regulatory backlash against bitcoin trading, it would be very difficult to re-inflate it. Bitcoin is nothing more than an electronic tulip bulb, where the “Greater Fool theory” of mobs paying ever greater amounts of money for a line of code they don't understand has now stopped working. For more on the how bubbles work, please see my take that was posted 48 hours after the all-time high (December 19, 2017 Marketwatch article, “Bitcoin is perfectly tracking major bubble phases”).

Furthermore, the explosion of other cryptocurrencies reminds me of the numerous dot.com IPOs that emerged just before the Nasdaq top at the turn of the century. Many of those dot.com IPOs began dropping like flies before the actual top in the Nasdaq in March of 2000. In the current case, other cryptos like ethereum (ETHUSD) and ripple (XRPUSD) have long taken out those climactic lows from where bitcoin traded at $6,000 in January, so in essence they are leading the crypto universe to the downside.

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

There is no telling where bitcoin will bottom out, but I wouldn't be surprised if it eventually disappears. That is not to say that the blockchain technology that is associated with bitcoin is invalid – it is very much valid – but the unnecessary step of buying bitcoin in order to use blockchain transaction verification via a public ledger will be removed by the market by the sheer virtue of the collapsing bitcoin price.

I think this is the end of cryptomania because the idea that one can bid up the price of bitcoin by sheer virtue of the rising number of greater fools bidding for it is absurd. This very same Greater Fool theory has been tested many times in history and has failed miserably every time. (For other similar bubbles, see Bloomberg, January 17, 2018, “Did Bitcoin Just Burst? How It Compares to History's Big Bubbles.”)

The reason why bitcoin ended up being a bigger bubble than most prior bubbles is that it was not geographically isolated. During the Dutch Tulip Mania or South Sea Bubble, we did not have an Internet, so the bubbles were localized. Bitcoin is the first global mania. The price rose via the virtue of cramming an ever-rising number of people into a limited number of bitcoins, which was originally estimated to top out at 21 million or so. Since there are about 17 million bitcoins at present, it would be fascinating to watch if the bitcoin total ever reaches the 21 million goal. The collapsing price may very well turn out the lights at many of those fascinating creatures of capitalism called “bitcoin mining farms.”

Why the Term “Bitcoin Market Cap” is Absurd

I know bitcoin farms make money by running algorithms that unlock new bitcoins, but if there was ever an example of making money out of thin air, this has to be it. Many market observers on numerous occasions refer to the “value” of bitcoin by using the term “market capitalization.” Using that term in this case is absurd, as in finance the term is used to describe the equity value of companies.

When it comes to stocks, market capitalization is the discounted value of future sales and earnings (as reflected in the price times the number of shares) for as far as investors, or the market, can see into the future. Since there are no future sales and earnings with bitcoins, the term market capitalization is absurd.

Last November 21, a client asked me how to invest in bitcoin and asked whether Navellier & Associates offered a crypto-managed account. I did not mince words. This is my reply in writing, verbatim:

“In my professional opinion, since you are a client and we owe you fiduciary guidelines, bitcoin is a scam. It is designed to cram a rising amount of people into a limited number of bitcoins (will top out at 21 million or so), that’s why the price is rising. This is a bigger scam than Madoff in plain sight. I think it ends like Madoff, but it is not over yet.”

I sure did look a little silly for the next few weeks but the idea that one can pinpoint the exact moment when a bubble would burst is not how markets work, as they very often overshoot both on the upside and downside. If the mania is big, as bitcoin is (due to its global nature), it would tend to overshoot more.

The bubble has now burst. We have wiped out $200 billion off the so-called bitcoin market cap. It is only a matter of time before we see the remaining $114 billion (as of the time of this writing) evaporate.

Sector Spotlight:

*All content of "Sector Spotlight" represents the opinion of Jason Bodner*

The Market is Getting Hit by a “Solar Storm”

by Jason Bodner

I’m pretty sure you’re reading this article on an electronic device. Our technological infancy in the 1800s gave way to our technological toddlerhood in the late 1900s, and now we are arguably in our adolescence. The truth is that we are all pretty much addicted to our devices: phones, tablets, and laptops. There are onboard computers in planes, trains, and automobiles. Satellites in the sky keep us all connected. Imagine life without modern technology. And no, I don’t just mean your ability to play “Words with Friends.” I mean all electricity and telecommunications. We would literally be in a new Dark Ages.

We take our infrastructure for granted, but the fact is that earth is a delicate flower floating in space, and we humans have built an even more delicate interconnected system to communicate with each other and live our convenient and efficient lives. Thank goodness nothing could really threaten that. Or could it?

In 1859, astronomer Richard Carrington observed a massive solar flare. A CME (Coronal Mass Ejection) from the sun took place – a massive ejection of X-rays, protons, electrons, and radiation. This time, it was aimed directly towards Earth. Thankfully the planet’s magnetosphere helps protect us from everyday radiation, but the Carrington Event was like a “circuit overload.” In fact, circuits did exactly that. This was a time when electrical grids and telegraph systems were just being laid and beginning to be relied upon. The solar flare caused auroras to be visible all over the world. They were so bright, one could read a book by them at night. Within hours, the CME knocked out telegraph communications worldwide, and took out power grids everywhere. Telegraph circuits got fried, and telegraph paper caught fire. There was even a documented instance of telegraphs being transmitted even after removed from their power source!

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If that happened today, our entire way of life would be impacted in a major way. The good news is that by observing ice core samples, scientists believe that these massive CMEs aimed towards earth happen only once every 500 years. That’s good for us short-lived humans. The bad news is that they have happened about nine million times since the earth began 4.5 billion years ago. So even though the odds are that we don’t see another Carrington Event in our lifetimes, the margin of error does not inspire confidence.

So it goes with stocks. We investors become inspired and lulled into confidence during long bull markets. The market goes higher. More people buy. Eventually a CME hits the market and causes all sorts of issues. This past week continued with some severe aftershocks of the early February market event.

Looking into sector strength and weakness is a rewarding exercise over the long term. Identifying sector leadership helps us identify the leading stocks of tomorrow. These trends reveal themselves over time, but one thing we can witness everywhere in life is that when trends hit turbulence, chaos can ensue.

It may be useful to add a little context. Last week, I did a little study. I downloaded Open, High, Low, and Closing prices for the SPY ETF for the past 18 months. I then calculated the Average True Range. It’s great for measuring true volatility because it does not discount intraday or overnight ranges. I then calculated a 20-day moving average to smooth results over time. What I found was interesting:

Since September 30th, 2017:

  • The average daily True Range (TR) of SPY was 0.77%
  • There were 16 days where SPY TR was greater than 2%
  • MAP sent a market overbought alert on January 24th, 2018
  • 14 of these 2% TR days took place since February 1, 2018
  • 6 of these took place since March 5, 2018
  • The average daily True Range prior to 2/1/18 was 0.64%
  • The average daily True Range post 2/1/18 has been 1.87%
  • The 20-day Average True Range prior to 2/1/18 was 0.62%
  • The 20-day Average True Range post to 2/1/18 has been 1.64%
  • MAP sent a “Caution: Speed Bumps Ahead” alert March 2, 2018

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

What this context implies is that the current level of volatility is nearly three times the average volatility of the preceding 16 months. We are getting hit by a solar storm. Let’s see what’s going on in the sectors:

A Short Week, Long on “Motion Sickness”

The short trading week was long on motion sickness. Monday’s massive surge was met with a wicked Tuesday. The week still finished strong, though. Consumer Staples saw the most buying along with Real Estate and Utilities. The weakest sectors were Tech, Materials, Discretionary, and Energy. It’s too early to tell, but typically when sectors are stacked like this, it’s defensive. Investors fleeing to safety in rate-sensitive securities as bond yields compress is not bullish. I prefer to see growth-heavy sectors in the lead.

The 3- and 6-month trends show this to be the case. Tech, Discretionary, and Financials are the leaders, which is frankly what we want to see, so the recent volatility feels like it was another bump in the road.

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The good news is that April marks the beginning of a great new earnings season. These reports should be an extension of the record earnings we’ve been seeing recently. This will also be the first earnings season to reflect tax reform. I believe this will be the ballast the market needs to stabilize and continue higher. But ultimately, my opinion doesn’t matter. I am a slave to the data. This data told me the market topped out on January 24th, and to expect lower prices and higher volatility. This scenario played out to a “T.”

We become used to our situation until something comes along to upend it. In 1857, the Carrington Event disrupted everything. The current market chop is unsettling, but it should give way to smooth sailing.

As the Roman Stoic philosopher Seneca said, “It is a rough road that leads to the heights of greatness.”

A Look Ahead:

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

What Happened to NVIDIA Last Tuesday?

by Louis Navellier

On Tuesday, my flagship stock, Nvidia (NVDA) announced that it is halting self-driving vehicle tests after an Uber self-driving car killed a bicyclist in a horrifying video. As a result, NVIDIA triggered a tech-stock correction on Tuesday, even though many tech stocks will be posting strong first-quarter sales and earnings in the upcoming weeks. The truth of the matter is that in between earnings announcements, the stock market is not always liquid and “air pockets” can emerge. That is what happened on Tuesday.

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As a bicyclist who suffered a head-on collision with a car last year, I am all for fixing autonomous cars to see bicyclists, deer, and other objects that may stray into the path of vehicles. The problem with self-driving vehicles is that they have yet to “see” all objects or animals that suddenly appear, like kangaroos in Australia. In fact, last summer, Volvo admitted[GA1]  that it is having a hard time “seeing” kangaroos.

So the news that an Uber self-driving car killed a bicyclist that crossed its path at night should come as no big surprise, just like a “pre-safe” sensing system in many cars cannot protect you from deer, kangaroos, or even guys like me on a bicycle. One death is tragic, but statistically it is still a rare occurrence. The real problem is that the stock market likes to “react” and not “think,” which is why stocks soared last Monday only to fall Tuesday and Wednesday, thanks to the computerized trading programs that can only “react” and not “think.”  Fortunately, when the first-quarter announcement season heats up, we will all be forced to “think” first, for a change. In my opinion, last week’s “tech wreck” may have been the last great chance to buy many of my favorite stocks, as I explained on my Tuesday podcast. (In addition, Nvidia investors can also check out Nvidia CEO Jensen Huang’s presentation at last week’s investor conference.)

Nvidia was not alone. On Wednesday, Amazon sold off sharply on news from the website Axios that President Trump wants to use anti-trust laws to go after Amazon for destroying “Mom and Pop” shops. Axios also reported that President Trump wanted to change Amazon’s tax treatment. You never know about these negative articles, but the timing of this news could have been for the benefit of short sellers, to hit Amazon.com during light trading volume heading into a holiday weekend due to Passover/Easter.

After White House Press Secretary Sarah Huckabee Sanders refuted the Axios article on Wednesday, President Trump tweeted on Thursday that he is no fan of Amazon, due to (1) the U.S. Postal Service subsidizing its business, (2) the company paying “little to no taxes to state and local governments,” and (3) “putting many thousands of retailers out of business!”  Ouch!  So suddenly, Axios’ news from an anonymous source suddenly became “real news” on Thursday, as verified by President Trump’s tweet!

Speaking of market manipulation, our friends at Bespoke uncovered some very interesting facts regarding “SPY,” the S&P 500’s exchanged-traded fund (ETF). Specifically, they wrote (in “Fear the Day”):

“Since SPY began trading [in 1993], had you bought SPY at the close every day and sold at the next trading day’s open, you’d be up 565%. Had you done the opposite and bought SPY at the open of trading and sold at the close, you’d currently be down 11.9%.”

Yikes! Since SPY is the largest and most liquid ETF, this effectively means that any ETF index could be rigged. If you need to know more about how ETF specialists try to “fleece” naïve investors, please refer to two recent white papers that my management company has written on front-running and ETF sharks.

Last Week’s Economic News was “Light” (and Mixed)

The economic news last week was light. On Tuesday, the Conference Board announced that its consumer confidence index slipped to 127.7 in March, down from a revised 130 in February. This was a surprise, since economists’ consensus estimate was a rise to 131. Since February’s consumer confidence was the highest in 18 years, we should not worry too much, since consumers are still in a relatively good mood.

On Wednesday, the Commerce Department announced that fourth-quarter GDP was revised up to a 2.9% annual pace in the fourth quarter, up from the +2.5% previously estimated. The primary reason that GDP growth was revised higher was due to higher than estimated consumer spending, especially on consumer goods, which surged to a 7.8% annual pace, the strongest in 12 years. A high trade deficit remains the primary drag on GDP growth, so if the Trump Administration’s tariff threats and negotiating skills can narrow the trade deficit this year, then the U.S. economy should be able to sustain 3% GDP growth.

I should add that on Thursday, the Commerce Department announced that the Fed’s favorite inflation indicator, the Personal Consumption Expenditures Price index (PCE), rose 0.2% in February and has risen 1.8% in the past 12 months. The core PCE index, excluding food and energy, also rose 0.2% in February and 1.6% in the past 12 months. Personal income rose 0.4% in February, so as long as incomes exceed inflation, prosperity should rise. Ironically, the 10-year Treasury bond yield declined after the PCE news.

Overall, the best news last week was that the 10-year Treasury bond yield hit 2.74%, its lowest level in seven weeks, so if market rates remain soft, there will be no pressure on the Fed to continue raising key interest rates. The S&P 500’s dividend yield remains at a healthy 1.86%, which remains extremely attractive due to favorable tax treatment on corporate dividends versus interest income.

As greater liquidity returns this week, I expect a massive stock market rebound. Furthermore, as the first-quarter announcements commence in the next couple of weeks, I expect that the strongest sales and earnings in my lifetime will propel the overall stock market significantly higher in the weeks to come!

Welcome to April, which should be a better month. I hope that you had a wonderful holiday weekend.


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 Blue Chip Growth, Louis Navellier’s Emerging Growth, Louis Navellier’s Ultimate Growth, and Louis Navellier’s Family Trust, 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. 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. Navellier & Associates, Inc. does not have any relation to or affiliation with the owner of these newsletters. As noted above, there are material differences between Navellier Investment Products’ portfolios and the InvestorPlace Media, LLC, newsletter portfolios. In most cases, Navellier’s Investment Products have materially lower performance results than the InvestorPlace Media, LLC newsletter portfolios and advertising materials claim to have. The InvestorPlace Media, LLC newsletters and advertising materials typically contain performance claims that can significantly overstate the performance results compared to actual results for similar Navellier Products.

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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