Facts Will Drive Out Rumors

Facts from Earnings Reports Will Drive Out Rumors & Fake News

by Louis Navellier

April 24, 2018

Apple Logo Image

All the major indexes rose last week, but Apple’s woes apparently spooked a lot of investors. Even though I do not own Apple (I instead own some of Apple’s suppliers), I want to assure everyone that the semiconductor companies I own are all forecasted to post very strong first-quarter sales and earnings, and they are not characterized by analyst cuts. Unscrupulous short sellers have been preying on technology companies for the past several weeks and spreading vicious rumors – like micro LED will replace OLED screen technology. That was thoroughly refuted last week by Apple. There are endless rumors that China will stop buying U.S.-made optical equipment, which is also entirely false, just like the micro LED story.

In the past several weeks, there has been an excessive amount of fake news posted by short sellers that are desperate to try to manipulate technology stocks before we get too deep into earnings announcement season. I should also add that I have diversified away from technology in recent months, so I am much less dependent on tech stocks this earnings season, but I for one will enjoy “squeezing the shorts” as wave after wave of stunning first-quarter results are announced, just like we have seen in previous quarters.

(Please note: Louis Navellier does not currently hold a position in Apple. Navellier & Associates does currently own a position in Apple for some client portfolios).

In This Issue

Earnings season is still in its early stages, but the news is coming in as strong as expected. Brian Perry covers the latest overall data, while Gary Alexander focuses on Technology and Jason Bodner focuses on the red-hot Energy sector. Ivan Martchev wonders how long the market can stay flat while earnings rise. Later on, I’ll bring you the latest array of good economic news, which has not yet lifted market sentiment.

Income Mail:
Earnings Season Yields Flowers and Thorn
by Bryan Perry
The Fed’s Ongoing Dilemma with the Flattening Yield Curve

Growth Mail:
Believe it or Not, Technology Still Leads This Market
by Gary Alexander
Some Major Tech Disruptions in U.S. History

Global Mail:
Investor Reflexivity in Action
by Ivan Martchev
News Channels’ Reality TV-Like Ratings

Sector Spotlight:
Fossil Fuels ‘R’ Us – For Now
by Jason Bodner
Energy Leads the Pack for the Week and Month-to-Date

A Look Ahead:
Positive News (and Rising Rates) Raise Chances for a June Rate Increase
by Louis Navellier
Crude Oil Supply Crunch Pushes Prices Up

Income Mail:

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

Earnings Season Yields Flowers and Thorns

by Bryan Perry

Markets are constantly in a state of sector rotation, always trying to anticipate the next rising trend. Every earnings season has a way of re-defining the current market leadership by either reaffirming its confidence in those sectors that led going into earnings season or by rapidly rotating into other sectors, where unexpectedly good business conditions weren’t priced into the underlying stocks in those sectors.

As for the current earnings season, you just don’t know how the Street is going to react to a stock when company results cross the tape. A good example of this would be the big banks that kicked off the latest reporting period. All reported top- and bottom-line results that beat estimates, but they all fell in price. Whether the bank stocks had priced in great numbers or the rising fear of an inverted yield curve put doubts in investors’ minds, the big banks clearly underperformed on some seemingly excellent news.

As of April 20, the S&P 500 is expected to report earnings growth of 17.3% for the first quarter. Based on the average change in recent earnings growth due to companies reporting actual earnings above estimates, it is likely the index could report earnings growth closer to 20% for the first quarter. In fact, J.P. Morgan Chase experts think analysts are underestimating earnings power, which they think will be closer to 21% (source: CNBC – “The Market Is Underestimating How Great Earnings Will Be” – April 12, 2018).

EstimatedEarningsVersusActual.jpg

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

As of last Friday, 17% (85) of the companies in the S&P 500 have reported earnings results for the first quarter. Of the 25 companies with conference calls, 15 (or 60%) discussed a positive impact or expressed a positive sentiment about foreign exchange rates favorable to their earnings, thanks to a weaker dollar.

All 11 S&P sectors are reporting (or are predicted to report) year-over-year earnings growth. Seven sectors are reporting (or are expected to report) double-digit earnings growth, led by Energy, Materials, Information Technology, and the Financial sector. Historically, earnings win out over other market forces and I’m of the view that history will repeat itself over the next few weeks and months.

Looking at what the market is most excited about from a pure price momentum standpoint, the energy sector is receiving plenty of attention. While none of the major oil companies have yet to report Q1 results, stocks of the major integrated oil companies and a bevy of other energy stocks are in full-blown rally mode for two reasons: (1) The average price of oil in Q1’18 ($62.89) was 21.5% higher than the average price in Q1’17 ($51.78), and the trend is still up, near $69 per barrel; and (2) year-over-year earnings growth is expected to lead all the S&P sectors, at +79% (source: Factset.com Earnings Insight, April 20, 2018). This unusually high earnings growth rate is due to both a significant year-over-year increase in oil prices and a comparison to unusually low earnings a year ago. Additionally, the energy sector is under-owned by institutions and thus is the target of accumulation, pushing prices higher.

On the flip side, one company’s cautious comments can wreak havoc on an over-owned sector of the market, namely technology. Last Thursday, Taiwan Semiconductor (TSM), the world’s largest contract chipmaker and a major supplier to Apple, revised its full-year revenue target to the low end of its earlier forecast. The fear of a “peak earnings cycle” surfaced with this headline and certainly with Apple being such a huge component (14.6% of the Nasdaq 100), its stock price action carries a lot of sway as to the investor sentiment in the tech sector. (Bryan Perry has no position in Taiwan Semiconductor or Apple.)

(Please note: Bryan Perry does not currently hold a position in Apple or Taiwan Semiconductor. Navellier & Associates does currently own a position in Apple and Taiwan Semiconductor for some client portfolios).

So, while the market sorts out the winners from the losers during the next couple of weeks, investors can take comfort that the current up trend is in their favor. Will the S&P 500 challenge its all-time high of 2,872 from its current level of 2,670? Based on the fact that second-quarter earnings growth is expected to exceed first-quarter growth, yes, but I’m not so sure the market trades to new highs until later this year. With that said, just making another run at the previous high will represent a gain of just 7.6%.

And if the market can accomplish that move by the end of May, it will provide a fine opportunity to head into the seasonally more skittish summer months on a bullish note of confidence. After first-quarter earnings season winds down in late May, investors will turn their focus to the Fed’s FOMC meeting scheduled for June 12-13, followed by second-quarter earnings season that kicks off mid-July.

The Fed’s Ongoing Dilemma with the Flattening Yield Curve

The spread between the 2-year and 10-year Treasury closed last week at 48 basis points, near its multi-year low. Until last week’s bump in the 10-year T-Note to 2.95%, it was threating to become inverted.

YieldCurve.jpg

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

The fed funds futures market is now 98.4% certain that the next rate hike will be announced in June as per the CME FedWatch Tool. Another rate hike is expected in September while the probability of a fourth hike in 2018 has increased to 42.6% from last week's 29.3%, according to the same source. Last week's batch of Fed speakers underscored the Fed’s hawkish stance, boosting rate hike expectations even further.

I believe the 2/10 spread will stay positive and not invert for the simple fact that inflation is picking up. The 5y5y forward rate edged up four basis points to 2.15% from 2.11%. The gauge of inflation expectations sits 19 bps below a three-year high notched in early February. The recent rally in energy prices will most likely push this gauge higher, resulting in a widening of the 2/10 spread.

FiveYearFiveYearForwardRate.jpg

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

How the market reacts to all of this expected good news against the crosswinds of geopolitics is anyone’s guess, but if the fundamentals win out, then we should see the market trade higher, even though it may happen in a more volatile fashion than is comfortable for the average investor. Market turbulence is never pleasant, but volatility reflects the process of how the weak holders of great stocks transfer ownership to those investors who are confident in the sales and earnings proposition of those same great companies.

Growth Mail:

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

Believe it or Not, Technology Still Leads This Market

by Gary Alexander

Year-to-date through last Friday, NASDAQ is up 3.5% vs. -1.0% for the Dow Industrials, so tech stocks are beating the industrials this year, but it doesn’t feel that way, does it? On Friday, NASDAQ fell 1.3% while the DJIA fell just 0.8%. According to Ed Yardeni’s accounting (April 19, 2018), tech leads the 11 S&P sectors in year-to-date performance as well as in “recovery performance” since the February 8 lows:

TopThreeSectors.jpg

With crude oil recovering from $60 at year-end 2017 to nearly $70 now, Energy is rising fast, and the defensive Utilities are holding strong, but the growth-oriented Tech sector is still in the catbird’s seat.

When you look at Apple’s latest fall, plus the President’s attacks on Amazon, and then Congress roasting Mark Zuckerberg of Facebook, you would think that the NASDAQ Composite would be tanking, but that index has been above 7,000 since April 10, after closing 2017 at 6,903. That’s because technology is the path to future productivity, even though we don’t always know the reigning technology of the future.

(Please note: Gary Alexander does not currently hold a position in Apple, Facebook or Amazon. Navellier & Associates does currently own a position in Apple, Facebook and Amazon for some client portfolios).

For years after its launch, the beef with Jeff Bezos’ business plan (which analysts constantly mocked) was that he planned ever more gigantic sales volume with little or no profit, plunging every dime back into the business, expanding from the original plan to “sell books cheap” to “sell everything to everyone.”

AmazonLongTermGrowth.jpg

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

Now, Bezos just announced that over 100 million households – about half the nation – are Amazon Prime members, at $99 per year. Profits are finally shooting up. Amazon made more money in the last quarter of 2017 than in its first 14 years in business. After never earning $1 billion in any year until 2010, it crossed $2 billion in 2016 and then $3 billion in 2017. Now, Bezos is the richest man in the world.

Unfortunately, Bezos also owns The Washington Post, which seems to have a vendetta against President Trump, hence the war of words between Trump and Amazon (in lieu of the President attacking the Post).

Facebook faces a different challenge – no direct income stream from customers, only ads. A cover article in this week’s Barron’s labels this challenge “Tech’s Great Divide.”  This “Internet of (free) Things” is also a great challenge to economists who measure GDP growth by sales volume. How should economists account for free things? People used to pay for encyclopedias, newspapers, classified ads, cameras, long-distance calls, gas for shopping trips, going to the movies, or seeing relatives in distant cities. Now all those things are essentially free when you buy a low-cost package attached to a computer or smart phone.

How do investors profit from the next wave in technology? To see the future, let’s look at the past.

Some Major Tech Disruptions in U.S. History

The history of technology is a story of “creative destruction” in business and in the stock market.

Canals: 200 years ago, the big new technology was canal building, especially the Erie Canal, which ran 363 miles, dropping 555 feet through 83 locks. It was 40 feet wide and four feet deep, dug entirely by hand. It was like a “moon shot” that everyone thought would take decades to build, but in 1817 New York Governor DeWitt Clinton sounded like JFK when he said, “The day will come in less than 10 years when we will see Erie water flowing into the Hudson.” He was right. The canal opened in 1825. His boosterism caused a mania in canal securities, which put the young NYSE on the map. Tolls collected from 1824 to 1882 amounted to $121 million, peaking at $4.5 million in 1862, but railroads soon replaced canals.

Railroads: Canals soon gave way to rail-mania. On this date, April 24, 1832, the New York legislature granted a charter to the Great Erie Railroad. The charter said the company had to raise $10 million but prohibited it from organizing until half the stock was underwritten – a huge hurdle by the standards of the day. The charter also stated that the train routes must lie entirely within New York state and not connect to any other state’s railroad line, so Erie ran a 483-mile line from the Hudson River to Lake Erie. But by the end of the 1800s, railroads dominated over 60% of the New York Stock Exchange’s capitalization.

Cars: 100 years ago, the new tech stocks were cars – dozens of promising names, but a big sorting out was needed. On April 24, 1920 (a Saturday), the day of reckoning arrived for the Stutz “bear raiders.”  Stutz chairman Allan Ryan arrived at 10 am and asked 58 brokers (who were short Stutz stock) to make a bid on his stock. Their bids averaged $550 a share for a stock that was only $100 in January. That day, Ryan made over $1 million in profits, but he and Stutz were soon wiped out in 1922, when the stock traded for $5 on the Curb exchange, outside the NYSE doors. Soon, only the “Big 3” survived. By 1960, GM was #1 in the Fortune 500, Ford was #3, Chrysler #9, along with four oil companies in the Top 10.

Computers: 50 years ago, April 22, 1970 was the first “Earth Day” but it was also a “back to earth” day for some overpriced computer stocks. At that time, I was working in an IBM facility, where we scoffed at the “seven dwarfs” who deigned to compete with Big Blue. Sure enough, most of those dwarves fell by the wayside, but even IBM stock fell 29% from $16.89 on April 1 to $12.05 on May 25,1970. Tech stocks fell precipitously in the second quarter of 1970, bringing the entire S&P 500 down 19% for the quarter.

The Internet: In the late 1990s, dot.com stocks were red-hot, but there were too many ‘dot-bombs’ with little or no earnings. It was the same old story: Too many companies at first, followed by a grand “sorting out” as the leaders emerge. Then those leaders become big-cap blue chip giants – which may or may not survive when the next new idea emerges. What’s next? Artificial intelligence, nanotechnology?  Keep following the tech stock analysts at Navellier & Associates for the best bets on our miraculous future.

Global Mail:

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

Investor Reflexivity in Action

by Ivan Martchev

George Soros is a great investor, not only because he made a lot of money in the markets but because he has a rather rare combination of skills: He is a great trader and a great analyst. He is by no means perfect – no one is – but in my experience most good traders are not the greatest longer-term thinkers and most analysts are not the greatest shorter-term traders. He is both. While wearing his analyst hat, Mr. Soros came up with the “theory of reflexivity,” which goes like this (as explained by Investopedia):

“Reflexivity theory states that investors don’t base their decisions on reality but their perceptions of reality. The actions that result from these perceptions have an impact on reality, or fundamentals, which then affects investors' perceptions and thus prices. The process is self-reinforcing and tends toward disequilibrium, causing prices to become increasingly detached from reality. Soros views the global financial crisis as an illustration of the theory. In his view, investors assumed that on a nationwide basis housing prices would never decline. And as they came to believe a financial instrument made up of subprime mortgages, if properly packaged, could be as safe as their AAA credit rating implied, prices of those assets became detached from reality. This bubble eventually collapsed, resulting in the financial crisis.”

“This theory runs counter to mainstream economic theory. This theory states that economic participants are on the whole rational and that they make decisions that in the aggregate amount to good choices. It also holds that free markets are effective at balancing supply and demand, at pricing assets correctly, and that they are self-correcting, resulting in equilibrium. And at equilibrium, market prices reflect fundamentals, but do not change fundamentals.”

We now have something truly bizarre – reflexivity going on at a moment when the stock market sold off sharply while earnings growth for most companies is accelerating. In a normal environment, accelerating earnings mean appreciating share prices. Here we have the opposite. The stock market is worried about World War III starting in Syria or a trade war with China and the rest of the world, which investors clearly perceive as negative potential outcomes that would reverse the present acceleration in earrings.

Be that as it may, if such undesirable outcomes are avoided, prices can decline only so much in an accelerating earnings environment. Declining prices with accelerating earnings typically result in a coiled spring or “beachball under water” effect that ultimately ends up correcting itself to the upside.

ForwardVersusPrice.jpg

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

Pictured above is the S&P 500 Index (blue line) with forward 12-month EPS estimates which have now climbed above $160, an all-time high. So far, with only 17% of S&P 500 reporting, earnings growth for the quarter is running at 18.3%, which is a very high rate. It is not knowable what the exact growth rate will be at this point, as the majority of index components have not reported, but suffice to say that earnings have accelerated in a very mature stock market and economic cycle, which is almost unheard of.

Earnings tend to grow the fastest in the early stages of an economic recovery because they get depressed during a recession, so it is easier to grow faster from a smaller base. Now we have record profit margins in the S&P 500 and late-cycle acceleration. Some of it is due to the concentrated global recovery, but a lot of it has to do with the Trump tax cuts, which have basically left more money to circulate in the economy and have increased the profitability for the economy at large.

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

News Channels’ Reality TV-Like Ratings

As I have mentioned previously, if Mr. Trump manages to denuclearize the Korean peninsula, rebalances the hopelessly out-of-balance U.S.-China trade relationship, and pulls out of Syria without starting World War III, he will be revered as much as Ronald Reagan. But because of Mr. Trump’s chaotic nature, many observers are missing the fact that he is executing on his election promises with remarkable consistency.

Still, it would be best for everyone that Mr. Mueller finishes his investigation with the findings that Mr. Trump has not been compromised by the Russians so he can execute on his economic agenda. But, as James Comey so famously opined last week, it is possible, however unlikely, that Mr. Trump has been compromised by the Russians. Comey should know, as he ran the investigation before Mueller took over.

I have dubbed the President’s first year in office The Presidential Apprentice Season 1, since he was learning on the job with a high turnover of key administration officials. So far, his second year in office can be dubbed The Presidential Apprentice Season 2, with significantly more drama than year 1. CNN has become far more entertaining to watch than any of the reality TV shows, including the President's own Apprentice (the actual show, not in its present reincarnation on CNN). The twists and turns of an adult movie actress and a Playboy model suing the President have become convoluted, magnified by the legal battles of the President's own lawyer’s personal legal team after the FBI raided his office and residences. (It has to be pointed out that all senior DOJ officials that signed off on Michael Cohen’s warrant are Republican appointees so there may be something there, unrelated to Mr. Mueller’s investigation.)

If all this CNN drama can be reduced to normal levels, the stock market will likely rally, based on the present economic fundamentals. Still, if one were to borrow an eloquent phrase from Mr. Comey, it is possible, however unlikely, that “normal” may not exist in the present situation.

Normality may just be my wishful thinking.

Sector Spotlight:

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

Fossil Fuels ‘R’ Us – For Now

by Jason Bodner

Love or loathe fossil fuels, they’re here to stay for a while. The trouble with energy consumption is that our current energy consumption is incredibly inefficient. Consider that just one-third of the energy in burning coal reaches the consumer as electricity. 1 Only 10% of the energy in a light bulb is used to create light, while the other 90% escapes as heat. 2 There are considerably more efficient energy consumption models out there. For instance, compact fluorescent light bulbs, use 80% less electricity than our standard incandescent bulbs and last 12 times as long. 2 I have to say I find the light those energy efficient bulbs give off is unpleasant. I feel like it’s a school overhead light trying not to be too obnoxious, but it fails.

Yelling is an energy source, too. If you can channel the energy of a person yelling for eight years, seven months, and six days, he or she would produce enough energy to heat one cup of coffee. 1 It’s shocking to think that Jim Cramer was only capable of heating up a pot or so of coffee in his lifetime, but incessant yelling by an early fishwife could have been the real reason evolution leaped from the ocean to land:

TheRealReason.jpg

Also: Enough sunlight reaches the earth’s surface each minute to satisfy the world’s energy demands for an entire year. 3 Solar energy has attracted much media attention and the industry has been steadily growing. Yet widespread adoption is not here yet. We will rely on traditional energy for a little while yet.

You may remember the latest energy crash, when Brent crude oil fell from around $115 per barrel in June 2014 to just over $25 per barrel in January of 2015. This took the Oil & Gas Exploration industry group with it. Those stocks were punished for months and several companies went belly up. The glut was real, as we were “drowning in oil.” Well, fast forward almost three years and Brent Crude is trading at over $74/barrel. In nine months, the price of Brent is up 54%, but we’re still 35% away from the 2014 highs.

CrudeOilSpotPrice.jpg

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

Energy Leads the Pack for the Week and Month-to-Date

The reason I’m harping on energy is that in the wake of market volatility like we’ve seen this year, starting in late January, a sector usually emerges as a new leader, or at least a strong candidate. A week or so ago, I began writing about how I started noticing significant buying in Oil & Gas Exploration stocks. My research firm specializes in trying to track down what big institutions are trying to keep quiet about. Here’s what’s most amazing: We determined that out of more than 300+ energy companies, 117 are “institutionally tradeable.” This means that when a big institution needs to trade, they shouldn’t ordinarily impact the stock materially. Out of those 117, 40 are Oil & Gas Exploration and Production companies. This past week I noticed buying on all 40 of them, so someone is buying up O&G companies!

Logically, this makes sense: a rising price of a physical commodity should mean higher profit margins, assuming relatively stable production costs. Then, we must layer in the seasonality of oil prices. This is a time of year when demand surges. Both the U.S. and China are growing economically and together their energy consumption is massive. Add in a nice jolt from U.S. tax reform, and we should see some healthier performance from this subsector. This is how I would explain how this move could become a significant upward trend. More times than not, the story becomes clear to all only after the move takes place.

Let’s see how the sector performance is echoing my observations:

Energy is up more than 8% month-to-date. It was up +2.6% this past week alone. This is a stunning performance, especially from a sector that was in no-man’s land for quite a while. Yes, we have seen strong performance in oil since last summer, but prior to that, it was bumping around in sideways trade. What I see here is a potential trend underway with Oil & Gas Exploration & Production stocks. Energy still has some work to do, though, as you can see in its dismal -6.08% record for the last three months.

Energy is the clear leader so far in April, while Consumer Staples is the clear loser. Sadly, for consumer staples, they are also the all-around loser for the week, month, and past three months.

StandardAndPoors500SectorIndices.jpg

Earnings season is here, and I suspect we’ll see another banner season once it’s in the books. This bodes well for stocks with growing earnings and sales and, I believe, given the rally of physical crude oil prices, we can expect some nice earnings reports in the Oil & Gas space, so I believe this theme will continue.

Like it or not, oil is here to stay for a while. We are tied to its price in the open market. For now, stronger oil prices mean higher prices at the pump. One way to hedge that is to own some Oil & Gas stocks.

In life and markets there is always an opposite reaction for each action. Or, as Isaac Newton famously said, “For every action, there is an opposite and equal reaction.”

IsaacNewon.jpg

A Look Ahead:

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

Positive News (and Rising Rates) Raise Chances for a June Rate Increase

by Louis Navellier

The economic news was very positive last week. The Commerce Department announced that retail sales (finally!) rose 0.6% in March, which was significantly better than economists’ consensus estimate of 0.4%. This was a welcome relief after three previous monthly declines of 0.1% to 0.2%. A 2% surge in vehicle sales in March (the strongest in six months) led overall retail sales in March. Excluding vehicles, retail sales rose 0.2% in March. Overall, it now appears that an early Easter and early tax refunds may have contributed to strong March retail sales. In the past 12 months, retail sales have risen 4.5% and on-line sales have risen nearly 10%, so it appears that consumers are still shopping online for the best deals.

On Tuesday, the Commerce Department announced that housing starts rose 2% in March to an annual pace of 1.32 million. This was good news, since housing starts had been erratic in previous months due to severe winter weather. The fact that spring is finally here and the long winter is ending in most regions means that economic activity will likely finally perk up. In the past 12 months, housing starts are now up 7.5%, which means that there will likely be robust growth for construction suppliers and homebuilders.

Also on Tuesday, the Fed reported that industrial production rose 0.5% in March, due largely to a 2.7% rise in vehicle production. Capacity utilization is now at a very healthy 78%, up 4.3% in the past 12 months. On Wednesday, the Fed also released its Beige Book survey for its upcoming Federal Open Market Committee (FOMC) meeting. All 12 Fed districts posted growth at a “modest to moderate” pace. Nine of the 12 Fed districts expressed concerns about tariffs, but since fears over a trade war have fizzled with China’s latest concession, I expect these tariff fears will subside.

As far as the Fed raising key interest rates at its June 13 FOMC meeting, the probability is rising, since intermediate Treasury yields between 2-year and 5-year notes have risen significantly. The Fed does not want to invert the yield curve, since it would be devastating to the banks they regulate. If market rates and inflation pressures continue to rise, the Fed will likely feel forced to raise rates 0.25% in mid-June.

On Thursday, the Conference Board announced that its index of leading economic indicators (LEI) rose only 0.3% in March, the smallest increase since last September, but nine of the 10 components rose, so the LEI still bodes well for continued economic growth, especially as the spring weather improves.

Crude Oil Supply Crunch Pushes Prices Up

OilRig.jpg

Crude oil prices continued to rise last week due to strong economic activity, improving weather, and tightening inventories. Crude oil prices typically rise this time of year and ebb in late September for seasonal reasons. This time, supply constraints are magnifying that move. On Wednesday, the Energy Information Administration reported that crude oil supplies declined by 1.1 million barrels in the latest week, while gasoline and distillate (e.g., diesel, jet fuel, heating oil, etc.) inventories declined by 3 million and 3.1 million barrels, respectively. The global energy glut is slowly abating due to robust demand. The news last week that China’s first-quarter GDP expanded at a 6.8% annual pace reinforced that outlook.

On Friday, President Trump blamed OPEC for crude oil prices rising, implying that they are trying to insure that Aramco’s Initial Public Offering sells well by allowing crude oil prices to meander higher. Saudi Arabia’s Energy Minister, Khalid al-Falih, told CNBC, “Markets should determine price.”

Interestingly, the U.S. Strategic Petroleum Reserve (SPR) is the largest supply of emergency crude oil in the world and President Trump recently approved a 15% release of SPR. I suspect that if WTI breeches $70 per barrel, President Trump will release more of the SPR to help stabilize global energy prices.


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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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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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