Earnings May Eke Out Small Gain

Earnings May Eke Out a Small Gain in the First Quarter!

by Louis Navellier

April 30, 2019

Social Media Leadership Image

The S&P and NASDAQ both reached all-time highs on Friday, but the big news last week is that there may be a switch in leadership in the social media space. Previously, investors seemed worried that Twitter (TWTR) was purging some users. However, last week Twitter posted better-than-expected first-quarter sales and earnings, due largely to the fact that advertisers and users appreciated the company’s attempt to curtail abuse from (1) disinformation, (2) fake news, and (3) bullying. The fact that Twitter is tackling social media abuse while boosting advertising revenue bodes well for Twitter surpassing Facebook as a social media leader. (It doesn’t hurt that President Trump is an active Twitter user.)

Meanwhile, negative 10-year yields in both Japan and Germany put downward pressure on U.S. Treasury bond yields, which promotes the “Goldilocks” environment that has fueled much of the stock market rally this year. So far, nearly half (46%) of the S&P 500’s announcements are in, and first-quarter sales are up at a 5.1% annual pace, and 77% of S&P companies have reported a positive surprise in earnings!  The analyst community now expects the S&P 500’s first-quarter earnings to fall 0.6%, up from -3.9% just a month ago. It is now possible that the S&P 500 may eke out a small gain when all is said and done.

In This Issue

Bryan Perry takes a closer look at the FAANG stocks, with a focus on Apple and its delayed entry into the 5G phone market. Gary Alexander compares April 30 to May 1 in history – both in the market sense (should we “Sell in May”?) and in the political arena. Ivan Martchev sees higher market highs by looking at comparative bond yields in the U.S., and by comparing the dollar to the euro and yen. Jason Bodner looks at “stealth buying” by institutional investors as another sign that this bull market has legs, while I examine America’s newfound power in energy independence and our global economic leadership.

Income Mail:
Apple’s Earnings are at the Core of Further Market Gains
by Bryan Perry
Apple iPhones Will be Late to the 5G Party

Growth Mail:
April Was Great, but Don’t Sell in May (or Go Away)
by Gary Alexander
Do We Prefer our Constitution (April 30, 1789) or a Socialist May Day (May 1, 1889)?

Global Mail:
The U.S. Yield Curve Has Still Not Inverted
by Ivan Martchev
Implications for the Stock Market

Sector Spotlight:
The Market Image I Can’t “Un-See”
by Jason Bodner
What are the Big Buyers (and Sellers) Doing Now?

A Look Ahead:
In Oil Markets, The U.S. is the “New OPEC”
by Louis Navellier
Our Economic Dashboard is Still “Under the Speed Limit”

Income Mail:

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

Apple’s Earnings are at the Core of Further Market Gains

by Bryan Perry

It seems like the FAANG stocks are back in fashion with Wall Street bulls, having received solid first-quarter numbers from the likes of Facebook (FB), Amazon.com (AMZN), and Netflix (NFLX). By the time this column is published on Tuesday morning, Alphabet (GOOGL) will have posted results on Monday after the close, leaving only Apple (AAPL) to leave its impression on investors late Tuesday.

(Navellier & Associates owns NFLX in managed accounts and NFLX and AMZN our sub-advised mutual fund but does not own FB, GOOGL or AAPL.  Bryan Perry does not own FB AMZN, NFLX or GOOGL in his personal account.)

Bullish buying in the three FAANG stocks that have already reported led the S&P and Nasdaq to new all-time highs last week, setting the table for the market “melt up” that is being thrown around on business cable channels. The fuse to light the next bonfire of buying is apparently going to be attributable to Apple’s numbers due out after the bell today. The Street is looking for $2.36 per share in earnings, which would be lower year-over-year from the $2.73 per share reported in Q1 2018 on sales of $57.9 billion.

Quite frankly, Apple has a lot on the line in this report. The stock has rallied 31% from its $155 low after warning of lower first-quarter iPhone sales, closing at $204.30 last Friday. The options market is net bullish on the stock, with calls outweighing puts by 2:1 and volume on the $220 calls swelling from 8,000 contracts to over 25,000 contracts from April 17 to April 25. That’s a pretty bullish swing. The stock has to trade around $222 for those options to break even.

In the prior quarter, iPhone sales made up 61.66% of Apple’s total sales, with iPads accounting for 7.98%, Macs 8.80%, Wearables 8.67%, and Services 12.90% (source: Statistica). For the past three years, Services have steadily grown as a percentage of total revenue as the company strives to head off an eventual peak in the global iPhone product cycle. And while 12.9% is a good and rising number, it may not be enough to win the day if iPhone sales come in light of already-lowered expectations.

iPhone Sales - Last Thirteen Quarters Bar Chart

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

According to IDC, the global smartphone market shrank by more than 4% in 2018 and could shrink again this year. Earlier this month the world’s largest seller of smartphones, Samsung, warned that its profits will drop 60% as smartphone demand slumps. China, the world’s biggest market for smartphones, has been particularly weak, hit by saturated markets, consumers replacing their phones less often, and by frustration over rising prices. (iPhones start at $749 and go up to $1,500+ with all the trimmings.)

The Global Smartphone Plateau Bar Chart

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

Apple iPhones Will be Late to the 5G Party

Another major challenge is whether Apple can release a 5G iPhone by Christmas after settling with Qualcomm, which has the 5G chipset Apple so desperately needs after Intel dropped its plans to deliver one to Apple some time in 2020. Samsung and other smartphone makers will deliver 5G smartphones in 2019. I would think anyone willing to spend upwards of $1,000 for a new smartphone will demand 5G, and 5G smartphones are available now. The Motorola 5G Moto Mod is out and is capable of connecting to Verizon’s just-launched 5G network. Many other new 5G models will hit the market this quarter – the Huawei Mate X, Samsung Galaxy S10 5G, Xiaomi Mi MIX 3, LG V50 ThinQ, and ZTE Axon 10 Pro 5G.

Navellier & Associates owns INTC in some in managed accounts but not in our sub-advised mutual fund. Navellier & Associates does not own Qualcomm, Samsung, Motorola or Verizon.  Bryan Perry does not own Intel, Qualcomm, Samsung, Motorola or Verizon in personal accounts.

There is always a first-to-market advantage, and there is genuine concern that Apple may not have a 5G iPhone until mid-2020, which in the crushingly competitive gadget business, is considered a lifetime. It’s a huge task for Apple to deliver 100 million new iPhones by the end of 2019, considering the beta testing that has to go into a new launch. The Mac rumor mill says a 5G iPhone is a 2020 event and is testament to why tethering current customers to Apple Services is so vital to the company’s 2019 performance.

Apple’s late entry into 5G is why there is inherent risk in owning Apple at its current PE of 16x – its highest in three years – as earnings are expected to decelerate slightly in Q1 2019. There could be a sizable waiting period for Apple 5G iPhones shaping up as consumers are already balking at higher prices and are getting peppered with “5G now” ads from brands that are already on the market.

The other major obstacle is the arrival of multiple “mid-market’ Android smartphones priced in the $200 to $400 range capturing a rising number of consumers looking for a product that is simply “good enough” for the majority of their daily usage. This new breed of mid-market phones has core performance that equates to recent generations of flagship iPhone and Galaxy smartphones that don’t require upgrading to get much higher quality features. This is the “commoditization” of an industry at work.

Worldwide Smartphone Shipments Bar Chart

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

It will be hugely interesting to see if the big bet on the Services side of Apple’s business can weather the storm that is probably brewing – later this afternoon – in its high-margin side of the business – hardware. 

Growth Mail:

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

April Was Great, but Don’t Sell in May (or Go Away)

by Gary Alexander

Through last Friday, the S&P was up 17.3% for the year (and 25% since Christmas), while NASDAQ was up 22.8% for the year (and 31.6% since Christmas), but don’t think about selling today, April 30!

Why do I say this? Because for many years the stock market went to sleep from May to October. About five years ago, pundits loved to show people a chart like this, saying we’re in for flat-to-falling markets.

The Best Months for Stocks Bar Chart

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

If you had followed this advice, you would have missed last summer’s gains and you would have gotten back into the market just in time to suffer December’s terrible market bloodbath. Ouch! Let me hasten to say: Past performance does not indicate future performance. In fact, this chart is VERY misleading.

This chart stops the clock in 2012, so I’d like to tell you what I wrote in 2013 and what happened since then. Six years ago, I wrote the following headline in MarketMail for April 29, 2013: “This Bull Market Has Legs: Don’t ‘Sell in May & Go Away.’”  I guess I got lucky, since the “Sell in May” formula stopped working in 2013. In the last six years, the S&P has gained an average 5.69% from November 1 to April 30, and an average 5.03% from May 1 to October 31 – that’s hardly any meaningful difference.

Sell in May and Go Away Table

There are several problems with this “sell in May and Go Away” theory. If you own stocks in a taxable account, you must pay short-term capital gains taxes every year you sell. Even if you have a non-taxable account, the paperwork is still a pain in the neck. Secondly, when do you re-enter? July is usually a great month. Do you nibble a little then? October has been great in recent years (although not last year). Truth to be told, there is no guarantee, so just hold on for the long-term. There is no way of knowing about what stocks will do in the next few months, and the general long-term trend (for 225 year or so) is UPWARD.

Do We Prefer our Constitution (April 30, 1789) or a Socialist May Day (May 1, 1889)?

America’s Presidential history began 230 years ago today, and a Socialist response began a century later:

On Wall Street, 230 years ago today, the first U.S. government was born. On April 30, 1789, George Washington took the oath of office as our first president on the second-floor balcony of what had been New York’s City Hall, on the corner of Wall Street and Broad. Washington’s first words were that he preferred “a retreat which was rendered every day more necessary as well as more dear to me, by the addition of habit to inclination, and of frequent interruptions in my health to the gradual waste committed on it by time,” but he pledged to uphold “the Great Constitutional Charter under which you are assembled and which, in defining your powers, designates the objects to which your attention is to be given.”

George Washington's Inauguration Image

A century later, the Centennial celebration of Washington's inauguration as first president took place from April 29 to May 1, 1889, as various societies held parades and inaugural balls to honor Washington, but such celebrations were soon overtaken by the labor movement and the primacy of “May Day” on May 1.

In France, May 1 was chosen as “International Workers' Day” on May 1, 1889 – the very day and year that Americans were celebrating the centennial of Washington’s inauguration. Five years later, the May Day Riots began in Cleveland. By the turn of the century, May 1 had driven April 30 from our memories.

To this day, we are re-enacting something like the conflict between George Washington’s defense of our traditional Constitutional limits on April 30 and the May Day socialist fantasies of recently-announced Democratic candidates, who go far beyond the enumerated Constitutional roles of our government in promising Medicare for All, a Green New Deal, Free College (and debt forgiveness) for all, Jobs for All (even for those who won’t work), and (for all I know) Free Vacations to the Destination of Your Dreams.

It’s a grand dilemma: Where is America going -- and who will we vote for in 2020? For now, it looks like neither Party wants to abide by the “defining powers” of the Constitution to which they swear allegiance.

Global Mail:

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

The U.S. Yield Curve Has Still Not Inverted

by Ivan Martchev

The 10-year Treasury closed at 2.50% on Friday while the 2-year note closed at 2.29%. That’s a positive 2-10 spread of 21 basis points. As the classic measure of the slope of the Treasury yield curve, that means it has not yet inverted. It is true that the 10-year Treasury closed below some shorter-term government rates like T-bills and the like quite a few times in 2019, but I do not believe that this is a kosher inversion.

Longer-term Treasury yields are being pulled by action in the German and Japanese bond markets, where 10-year bunds close at -0.02% while 10-year JGBs closed at -0.03%. There simply isn't enough yield in key global bond markets, so multinational financial companies end up in the U.S. Treasury market.

United States Yield Curve Chart

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

This is what is behind the fresh 52-week high in the U.S. Dollar Index and the fresh 52-week low in the euro. Europe has a deflationary problem that the delayed Brexit has intensified. In that environment, I expect further gains in the dollar and further lows in the euro. Under a certain scenario that is not all that unlikely, the euro can hit parity (1:1) to the U.S. dollar later in 2019.

Euro Versus United States Dollar Chart

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

I don’t base my decisions on the fascinating world of charts alone, but there is a “head-and-shoulders top” in the euro with the head near $1.25 and the “neckline” around $1.12-1.13. The breakdown below that neckline, which happened last week, points to an exchange rate of $1. The way the currency markets work is that they stay in a state of suppressed volatility for a while and then they violently break in the direction where the imbalances have been building up. That direction for the euro is down.

If U.S. interest rates rebound later in 2019 because of better U.S. economic performance, this will expand the interest-rate differential again in favor of the U.S. dollar and it will have nowhere to go but up, particularly if  the “trade deal of the century” with China is a done deal by then.

U.S. interest rates have a chance of rebounding as major tax cuts tend to have a second surge in economic activity, which may come by the end of 2019. There was a similar pattern following the 2003 Bush tax cuts, in which there was a first sugar high, a pause, and then another second wave of heightened economic activity. The same pattern may happen now, which would mean no recession in either 2019 or 2020.

Implications for the Stock Market

The Nasdaq 100 and the S&P 500 have already made fresh closing highs and the Dow Industrials are less than 1% off all-time highs. Unless the Chinese trade deal that is 90% done completely fails because of some dumb holdup, we are likely to see further gains in share prices in 2019. I know the stock market is up a lot in 2019, but that's simply normalizing the abnormal performance in 4Q’18. Stocks today are where they were at the end of last September, after experiencing a giant swoon lower and a surge higher.

Dow Jones Industrial Average versus United States Central Bank Balance Sheet Chart

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

December 2018 (through Christmas Eve) was the worst December since 1931. It was truly a challenge to explain to clients that sell-offs in a good and growing economy tend to reverse pretty quickly. Not every sell-off in a good economy reverses immediately, but they are very different than real bear markets, where earnings per share (EPS) for the index tends to shrink dramatically for 1-2 years during a recession.

The fact that EPS for the S&P 500 could decline marginally when all companies have reported is not real “shrinkage,” as George Costanza would say. This is simply a factor of the sugar rush from the Trump tax cuts and the fact that EPS growth in Q1, Q2, and Q3 in 2018 was very strong. EPS growth should return by late 2019 and into 2020.

A lot of investors are scratching their heads as the stock market is going up “without earnings.” That’s simply a lack of perspective. Today’s stock market action is just a mirror image of it going down lot in Q4 2018 “with earnings,” or a “reversion to the mean” of sorts. The stock market is a forward-looking mechanism. What the stock market sees right now is no recession in 2020 and normalized EPS growth.

I do not believe that the Fed overshot on monetary tightening, but because the pace of quantitative tightening (aka, balance sheet shrinkage) picked up so dramatically in 2018, that alone could be the simplest explanation for the pickup in volatility in 2018. Quantitative tightening is simply the removal of electronic cash from the financial system. It is still ongoing as the shrinking Fed balance sheet indicates.

Also, the Trump Twitter attacks on the Fed Chairman did not help, nor did Chairman Powell’s backlash at the President by sounding firmer than appropriate at the December 19 FOMC press conference and his “autopilot” comments when it comes to the Fed balance sheet. With a President like Donald Trump, it is admittedly easy to lose one’s temper, particularly if one is the subject of his legendary Twitter diatribes.

Chairman Powell appears to have learned a valuable lesson that, as a Fed Chairman, it’s not just what you say that moves the markets, but it’s also how you say it.

Sector Spotlight:

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

The Market Image I Can’t “Un-See”

by Jason Bodner

Did you ever see something you can’t un-see?  The next time you go to your grocery store, pay attention to the eyes on cereal boxes. You won’t be able to un-see that every mascot is looking down. Why is that?

Eyes on Cereal Boxes Image

Messed up as it may be, the eyes are positioned so that the mascots can make eye contact with kids. This helps get attention and establish trust. That way, kids are more likely to ask their parents to buy cereal.

So it goes for me and my monitoring of unusual trading. It all started years ago, when I got a client order like I had never seen. My job was to match buyers and sellers of large blocks of stock and options. The order was from an activist investor taking a huge stake in a company. When someone needs to buy millions of shares, the fundamentals go out the window, at least temporarily. A nearly bankrupt company’s share price surged 70% in a few weeks, solely because my client was a buyer.

It was shocking to witness first-hand what impact big investors can have on a stock. They can literally move markets. It changed the way I see markets, and now that image cannot be un-seen. That’s why monitoring what big institutional investors are doing “unusually” is so crucial to me.

Last week saw earnings season begin in full swing. And while the indexes are up, there is some volatility beneath the surface. According to FactSet, 46% of the companies in the S&P 500 reported Q1 results. 77% beat EPS, which is above the 5-year average. The average beat is +5.3% higher, also above the 5-year average, and 59% of companies that reported beat sales estimates. These are solidly strong metrics.

We may see the first year-over-year decline in earnings since Q2 2016, largely due to tough year-over-year (y-o-y) comparisons. Six sectors are reporting y-o-y growth in earnings, led by Health Care and Utilities. Five sectors are reporting y-o-y declines in earnings, led by Energy and Infotech, which leads the pack for earnings beats at 96% (see the table below):

Earnings Per Share Summary Bar Chart

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

A noteworthy long-term trend is that earnings growth is tightly tied to the market’s appreciation. Notice that when there were hints of earnings deceleration, it had a negative impact on the market.

The most recent downdraft seemed like overkill, relative to the temporary EPS slowdown:

Standard and Poor's 500 Change in Earnings per Share Versus Change in Price Chart

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

The macro picture sets up quite nicely for continued strong earnings. Trade resolution is now on the lips of the media. Equity performance since the December 24 lows has been stellar with Infotech and Semiconductors still supreme. Growth performed well last week with S&P 500 Growth, Russell, NASDAQ, and the Russell Growth indexes all surging higher. The individual sectors are also responding well. Last week saw Health Care take a belly-flop. This week saw it bounce as the best performing sector of the week, +3.7%. Communications was 2nd best at +2.7%, followed closely by Utilities and Real Estate. On the surface, though, this is defensive sector action and warns of possible volatility ahead.

Standard and Poor's 500 Sector Indices Changes Tables

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

What are the Big Buyers (and Sellers) Doing Now?

Back to unusual institutional activity: We saw big buying in Tech, Industrials, Financials and, to a lesser extent, Energy. Selling was less than the week prior. Note the deceleration of Health Care selling.

Map Signals Table

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

When looking at how the sectors stack up, MAP ranks all stocks that can be easily traded by institutions – about 1400 on average, and then averages the score per sector. We see a mimicking of recent price action: Tech, Industrials, and Discretionary are top in terms of both technicals and fundamentals, while Materials, Telecom, and Health come in last. Once again growth is tops…

Sector Strength/Weakness Table

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

Lastly, let’s look at unusual buying versus selling. As you can see below, the Q1 surge in unusual buying has managed to sustain itself quite well in April. Selling has picked up slightly recently. This is a good thing as a balanced ratio of buying to selling is healthy for a sustained bull run in stocks. I usually like to see around 2:1 buys versus sells. That is the daily average of unusual buy-to-sell signals (66% buys and 33% sells) necessary to sustain a healthy uptrend.

Unusual Buying Versus Selling Signals Chart

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

In grocery stores, little eyes peer up at cartoon cereal characters gazing down at them, while parents just see breakfast food boxes. Likewise, markets ebb and flow in a sea of everyday buyers and sellers, while I see big players trying to buy quietly. Sometimes a different perspective is just what’s needed. As Pablo Picasso said, “Others have seen what is and asked why. I have seen what could be and asked why not.”

Pablo Picasso Style Image

A Look Ahead

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

In Oil Markets, The U.S. is the “New OPEC”

by Louis Navellier

Crude oil prices initially rose last week after the Trump Administration ended the waivers for countries to import Iranian crude oil. The U.S. had previously granted eight countries a 180-day waiver to continue to buy Iranian crude oil despite U.S. sanctions. Now, with countries like China, India, and Turkey no longer buying Iranian crude oil, the Trump Administration’s intention is “to bring Iran’s oil exports to zero.”

Specifically, the White House said, “The Trump Administration and our allies are determined to sustain and expand the maximum economic pressure campaign against Iran to end the regime’s destabilizing activity threatening the United States, our partners and allies, and security in the Middle East.”  The White House added that the U.S., Saudi Arabia, and the United Arab Emirates “are committed to ensuring that global oil markets remain adequately supplied.” On Friday, President Trump told reporters, “Gasoline prices are coming down. I called up OPEC. I said you’ve got to bring them down. You’ve got to bring them down.”  As a result, crude oil prices fell sharply on Friday and erased all of last week’s gains!

In the meantime, Iran has threatened to close the Straits of Hormuz in response to the U.S.’ waiver of sanctions expiration, but this is not likely to occur. Specifically, Republican Guard General, Alireza Tangsiri, signaled that if Iran was prohibited from using the Strait of Hormuz, that Iran would “defend Iranian waters.”  Former Secretary of State John Kerry has admitted meeting with Iranian leaders “three or four times,” and President Trump has pointed out that his actions are a violation of the Logan Act.

Secretary of State Mike Pompeo said, “What Secretary Kerry has done is unseemly and unprecedented” and added that “This is a former secretary of state engaged with the largest state sponsor of terror.”  The Logan Act criminalizes unauthorized negotiations between U.S. citizens and foreign governments who have disputes with the U.S. Clearly, the Iran sanctions are designed to crush the Iranian economy, which is suffering from a collapsing currency and rampant inflation (running at 47.5%, with food up 73.2%).

Our Economic Dashboard is Still “Under the Speed Limit”

The economic news was mixed last week, ensuring the Fed will stay “on the sidelines.”

First, the National Association of Realtors (NAR) reported that home sales declined 4.9% in March to an annual pace of 5.21 million, following an 11.2% decline in February, the largest monthly decline in more than three years. A sharp slowdown in expensive properties led the decline. Lawrence Yun, NAR’s chief economist, said that the tax changes have limited the ability of wealthier homeowners to deduct mortgage interest payments and property taxes, which effectively discourages sales of more expensive homes. Yu said that “the lower-end market is hot, while the upper-end market is not.”  Overall mortgage applications have been rising in recent months, so it appears that the less expensive homes will continue to sell.

Home Sales Image

In contrast, the Commerce Department reported on Tuesday that new home sales rose 4.5% in March to an annual rate of 692,000. This was a pleasant surprise, since economists were expecting new home sales to decline 2.5% in March. In the past 12 months, new home sales have risen 3%. Three of the four major U.S. regions reported growth. The South was especially impressive with its strongest sales growth in a decade. The only region to dip in March was the Northeast. The supply of new homes declined to a 5.3-month supply and median new home prices declined to $302,700, the lowest in more than two years. Now that homebuilders are building more affordable homes, new home sales should remain strong.

The Commerce Department on Thursday announced that durable goods orders surged 2.7% in March, due largely to strong demand for commercial aircraft (up 31%), vehicles (up 2.1%), and networking equipment, which is a big surprise, since economists were expecting only a 0.5% increase. February durable goods orders were revised to a 1.1% decline, up from a 1.6% decline previously estimated.

Core durable goods orders, which reflect business investment, rose an impressive 1.3% in March.

The best news was that the Commerce Department reported on Friday that the preliminary estimate for first-quarter GDP growth was an amazing 3.2% annual rate, substantially higher than economists’ consensus estimate of 2.5%. I have to say that I am astonished that GDP growth accelerated from a 2.2% annual pace in the fourth quarter to a preliminary 3.2% pace in the first quarter, since typically extreme winter weather hinders GDP growth in the first quarter. I cannot remember when first-quarter GDP growth was this strong, but strong durable goods and retail sales reports helped to boost first-quarter GDP.

The Fed’s favorite inflation indicator, the Personal Consumption Expenditure (PCE) index, rose at only a 0.6% annual pace in the first quarter, which is incredibly bullish for continued low interest rates. Overall, that implies a “Goldilocks” environment of stable interest rates, low inflation, and 3%+ GDP growth.

Across the pond, business sentiment is not so encouraging. Specifically, German Ifo business sentiment fell to 99.2 in April, down from 99.7 in March. This was a big surprise, since economists were expecting sentiment to improve to 99.9 in April. German GDP is now forecasted to rise only 0.5% in 2019. Klaus Borger, an economist at KfW Research, said that the Ifo business survey confirms “the export-driven industry is in recession, whereas the domestic economy remains rather healthy.”  In other words, slowing demand from China and other major markets is hindering mighty Germany’s exports. I should add that the German 10-year bund yields turned negative after the Ifo business survey was released.


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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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