Great Time to Buy

Pre-Thanksgiving is Traditionally a Great Time to Buy Stocks

by Louis Navellier

November 20, 2018

Thanksgiving Dinner Image

Yesterday, November 19, NASDAQ successfully tested its October 29 lows, so it looks to me like the selling pressure is finally being exhausted. Traditionally the best day to buy is the Tuesday before Thanksgiving, when an early ‘January Effect’ typically commences. If Treasury yields continue to fall, that could take pressure off the Fed to raise rates much further, since the Fed seldom fights market rates. If that trend continues, any dovish comments from Fed officials in the upcoming weeks could spark a big market rally.

In This Issue

In Income Mail, Bryan Perry asks some hard questions about America’s resolve in standing up to China’s many economic and human (and animal) rights violations. In Growth Mail, Gary Alexander has some positive news on earnings and historical market trends over the holiday months. In Global Mail, Ivan Martchev links last week’s NVIDIA earnings call to the sinking fate of bitcoin, then goes on to project bitcoin’s future price to zero. Jason Bodner rehashes the market’s positives, which so many doubters have ignored when asking him to “tell me again why you are so bullish?” Then I’ll return to look at the dramatic 20% decline in oil prices since early October as a potential sign of a slowing global economy.

Income Mail:
Wall Street’s Whine-and-Cheese Party
by Bryan Perry
Will America Finally Stand Up to China’s Excesses?

Growth Mail:
2018 Earnings May Double Late-2017 Expectations
by Gary Alexander
Another Reason for Thanksgiving: Rising Markets

Global Mail:
Victims of the Bitcoin Insanity
by Ivan Martchev
My Technical Take on Bitcoin

Sector Spotlight:
Another Week, Another Nail Biter…
by Jason Bodner
“So, Jason, Tell Me Again – Why Are You So Bullish?”

A Look Ahead:
Crude Oil Prices are Falling Fast
by Louis Navellier
The Fed Weighs Evidence of a Slowing Global Economy

Income Mail:

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

Wall Street’s Whine-and-Cheese Party

by Bryan Perry

This past week had investors dealing with gyrating markets, wild headlines, and what seemed to be some rips in the fabric of this nearly 10-year-old bull market. Heading into what is supposed to be a highly confident time of the year – especially during times of a strong domestic economy – the thunder of a banner third-quarter earnings season is being swept to the sidelines by the high-profile politics of a countdown with China on doing a deal so the market can check the “tariff” box and trade higher – delivering the catalyst that satisfies the widespread thirst for a year-end rally.

The political ping-pong match being played by President Trump, China’s President Xi, and the senior staff members of each nation is going down a bad road, in my view. On Friday, through a tweet, President Trump reiterated his claim that China wants to make a trade deal. He said that China sent a “large” list of things they are willing to do, but the list is not yet in-line with the President’s standards. Nevertheless, the market, desperate for a positive solution on trade, reacted positively to the President’s comments.

Also, a more dovish perspective from Fed Chairman Jerome Powell acknowledged that the global economy was slowing, which he called “concerning.” Powell tried to downplay recent stock market turbulence but did admit that the Fed is “looking really carefully” at how financial markets, the economy, and business contracts are responding to rising interest rates. Powell gave both bond and equity markets a huge vote of confidence when he said, “We have to be thinking about how much further to raise rates, and the pace at which we will raise rates,” adding that the Fed’s goal is to “extend the recovery, expansion, and to keep unemployment low, to keep inflation low.”

So, let’s put these responses from Trump and Powell into perspective, because they are arguably the two most powerful men in the world – sorry President Xi, you are #3 on the short list of “Who Matters Most in the World.” The S&P plunged by over 10% in three weeks and the yield on the 10-year benchmark Treasury gapped higher from 2.82% to 3.24% from early September to early October, producing a nasty correction. Now we have a change in tone from both Trump, tweeting “a deal is in the works,” and Powell, back-peddling hard on his now famous “we’re a long way from neutral” statement.

What we have here is the bond and stock markets dictating how Trump and Powell are shaping domestic policy – and quite frankly, it’s unsettling that the animal spirits have taken hold of the narrative of what has become what I call a “drama queen” market. Not doing the right thing to reign in the decades of abuse by China for the sake of making the year-end numbers is nothing short of shameful. I’d say Trump ought to back off from promising a deal when Wilbur Ross, Mike Pence, Peter Navarro, Robert Lighthizer, and Larry Kudlow all state we are a long “country mile” away from any real deal.

Will America Finally Stand Up to China’s Excesses?

This past weekend, both Mike Pence and President Xi exchanged harsh criticism of each country’s trade policy, and Pence laid out in no uncertain terms what the situation is and what needs to happen if there is any shot at coming to terms. China is grossly abusing the boundaries of mutual trust. But would anyone expect any other sort of behavior from a nominally communist country set on economic, political, and military dominance? I’d say, “Take off the rosy red Chinese glasses and get a clue.”

And yet, as painful as it is for me to admit, Wall Street and Main Street investors seem to be stooping to a bad case of ‘weak knees’ and sniveling millennial values, fully capitulating to the long-term risk of letting the U.S. get “played” once again because of our heroin-like addiction to short-term market gains.

Mike Pence Image

Until there is an end to China’s theft of intellectual property rights, forced exchange of technology to Chinese companies in return for access to their markets, restrictions of U.S. companies taking large stakes in Chinese companies, government sponsored cyber-attacks on all manner of U.S. property, imposing tremendous barriers to foreign companies entering its giant market, recognizing international waters in the South China Sea, and dialing back its aggressive “Belt and Road Initiative,” then there should be no let-up in tightening the grip on China’s economy.

This is what goes on in China. Aside from getting the shaft in almost every channel of business, Ron Baron, at his 2018 Baron 27th Annual Investment Conference, made a big point about the over one million Uighurs that have been committed to “re-education camps,” which the Chinese state has denied exist.

Why does Beijing condone the annual “dog meat festival,” where over 10,000 dogs are skinned alive and boiled down as an aphrodisiac for thousands of crazed Chinese men? This is insane behavior and yet it is completely ignored by American intermediaries because of the power of the almighty dollar (or yuan). Have our elected officials lost their soul? So, before everyone gets all steamed up about why a deal isn’t getting done yet, it’s because we’re dealing with something akin to the devil himself, and thankfully, we have some people that are sticking to principles.

Ronald Regan broke Russia by outspending the Kremlin in a massive arms race and, aside from Vladimir Putin baring his chest on a sad-sack horse from time to time, Russia is of no global economic significance these days. China is leveraged to the eyeballs, as Ivan Martchev and I have noted for several months here. The U.S. has a huge opportunity to neuter China now and hopefully bring about dramatic concessions that will alter the way the world does business with a corrupt regime over the next 100 years.

This needs to happen now, despite any short term pain it may cause.

So, heading into the holiday season, when many squeamish investors that just want to make a buck and want the whole China thing to just go away, we need to see what’s at stake. China is going to do what it takes in its negotiation tactics to try to get Trump to do a deal on their terms. My fear is that Trump puts his finger in the air, like a true reality show star, and compromises, so as to take a bow. It kind of fits the profile of his deal-making history, as anyone knows who got stung by his bond dealings in Atlantic City.

What the Chinese don’t want to deal with is Mike Pence – because he “gets” it. The real question is: Does today’s America’s populace have the stones, or even care, to put down a fire-breathing dragon like China? I guess, for the sake of the American republic, it is this last question that concerns me the most.

Growth Mail:

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

2018 Earnings May Double Late-2017 Expectations

by Gary Alexander

Conference calls from S&P 500 companies are nearly all over now. The third quarter marked another record-high quarter for earnings and sales. Collectively, the S&P 500 results through the second week of November were 4.9% better than analysts expected during the last week of September – at the end of the third quarter – and 2018 full-year results are on pace to more than double late 2017 analyst expectations.

That’s important, because this market has only risen by about one-tenth the pace of earnings, and lately a gloomy spell has been cast over the market due to some bearish guidance about future quarters, perhaps delivered with an eye toward surprising analysts yet again with positive results in the coming quarters.

Despite all this downbeat rhetoric, economist Ed Yardeni wrote last Tuesday, “The negative guidance corporate managements provided during earnings conference calls didn’t deflate analysts’ consensus earnings estimates for Q4-2018 and the four quarters of 2019. In fact, the 2018 estimated earnings growth rate was steady during the 11/1 week at 23.6%, the highest reading for this series. The 2019 estimated growth rate edged down to 9.4%. The 2020 projected growth rate remained solid at 10.2%.” 

As Yardeni’s chart shows below, in the rising red line, the 2018 earnings growth rate is liable to be more than double that expected at the end of 2017, reaching 23.6% vs. a predicted 11% at the end of 2017. The main reason for these revisions, of course, is the positive effect of the lowering of corporate tax rates for 2018, due to the tax reform act passed in late December 2017, giving the market a huge boost in January.

Standard and Poor's 500 Operating Earnings Annual Growth Forecasts Chart

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

If you look at the actual and projected S&P 500 corporate earnings growth rates in the table (left, above), it works out to a cumulative growth rate of 65.7% in Trump’s first term (2017-2020) vs. just 15.8% in President Obama’s second term (2013-2016). Much of that growth is due to the corporate tax reform bill that took effect this year. The reversal of House leadership after the 2018 elections could halt any new Trump reforms, but it likely won’t reverse those 2018 tax benefits, so earnings growth could keep rising at double-digit rates (or nearly so) over the next two years, which should fuel continued market gains.

The scope and volume of business deregulation in the first two years under Trump has also helped grow earnings. Deregulation will no doubt slow under Democratic control of the House, but the combination of a tax cut and massive regulatory relief has given a big boost to small businesses, which caused the Small Business Optimism Index to soar after the Trump election and then to reach new all-time highs this year.

NFIB Small Business Optimism Index Chart

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

Last Tuesday, NFIB came out with an October reading of 107.4, down from 107.9 the previous month, but the summer NFIB readings were the most optimistic in the history of that index, founded in 1986 at the “100” mark, in the height of the Ronald Reagan-era boom, so small business is still clearly euphoric.

Another Reason for Thanksgiving: Rising Markets

The market has been frustrating this year. From a series of manic highs in the first four weeks of January, the market careened down 10% in just 10 trading days at the end of January and early February. After clawing back slowly for six months, the S&P 500 reached a new high of 2,930.75 on September 20, only to collapse by nearly 10% once again during a spooky October panic. Then, a fairly predictable election outcome lifted the market out of its doldrums with a 6.5% gain between the Halloween eve lows of October 29 and the Election Day morning-after glow of November 7, but the disputed House and Senate seat races over the next week sent the S&P down 4% in the following week. As we tally all the ups and downs through last Friday, the S&P is up barely 2% for the year, even though earnings are up over 20%.

United States Stock Indices 2018 Gains Table

Looking ahead to the Thanksgiving-to-New-Year’s Eve period, however, we can hold out some hope.  As Louis Navellier has said (above), “Traditionally the best day to buy is the Tuesday before Thanksgiving,” so I looked at the closing price on the Monday before Thanksgiving and compared it to the closing price of the year over the last 15 years. The results weren’t earth-shattering, but it was a healthy +2.5% gain.

Stretching out to 60 days and 67+ years, the average gains in November and December since 1950 are over 3%. According to the Stock Trader’s Almanac 2018, November and December (combined) gained 3.1%, while the best consecutive three months were November through January at +4.2%. The best six-month span was November through April, at +7.1%. In an easier-to-scan form, here are the best months:

Best Stock Market Months Table

If this history is any indication, we’re likely to gain about as much in the next six weeks as we’ve gained in the last 46 weeks. The holiday season typically has a euphoric effect on traders and investors, with holiday breaks, football, feasting, and family gatherings.  In addition, many folks get Christmas bonuses to invest. Traders tend to unload some losers and switch to presumed future winners in smaller stocks, creating the “January Effect.” Others load up their pension plans in January, lifting the markets then.

Happy Holidays to all!

Global Mail:

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

Victims of the Bitcoin Insanity

by Ivan Martchev

Last Thursday NVIDIA (NVDA) issued revenue guidance for the current quarter of $2.7 billion, falling well short of analysts' consensus estimates of $3.4 billion. The culprit? The deflating bitcoin bubble!

Some explanations for earnings and revenue warnings you just can’t make up.

The global cryptocurrency mania – not only for bitcoin but similar absurdities – led to strong demand for graphics processing units (GPUs), which NVIDIA is a leader in, as they are used to run the computations necessary to “mine” cryptocurrencies. As the air has rapidly left the global crypto bubble, mining those worthless lines of code has gotten less lucrative and hence the demand for GPUs has rapidly declined!

NVIDIA Corporation Nasdaq Stock Index Chart

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

Granted, NVIDIA’s chips are not only about bitcoin mining but are vital to a number of other applications that are centered on the global phenomenon of Artificial Intelligence (AI). As the maker of some of the most-advanced chips on the market, NVIDIA will survive the disappearance of bitcoin and other similar absurdities. For real-time observation of how the cryptocurrency mania is imploding you can visit coinmarketcap.com. (For more, see Marketwatch December 14, 2017 “Why bitcoin is now the biggest bubble in history, in one chart.”)

As I’ve explained previously several times in this column, the term “market cap” when used to describe a cryptocurrency is absurd. Market cap is short for “market capitalization,” or the total worth of all publicly traded stock of an operating company. It is supposed to discount all earnings (or cash flows) as far as all investors in the company’s stock (dubbed “the market”) can see and thus value the company that way.

The way we know bitcoin, and all other cryptos, are a bubble, is by making the glaringly obvious observation that they cannot produce any cash flow whatsoever, making the term market cap absurd. That’s not to say that blockchain as a technology cannot be useful without the unnecessary step of buying a digital token called bitcoin, which is calculated to limit the amount of bitcoins at 21 million and thus make their price rise as more poor souls cram themselves into this line of code in search of riches. (For more Marketwatch December 19, 2017, “Opinion: Bitcoin is perfectly tracking major bubble phases”).

As history has proven on multiple occasions, most bubbles end with the majority of investors losing massive amounts of money as they hold and hope for the bubble to reflate. Regrettably, after bubbles pop they can take decades to recover and “take out” the bubble price high, or, worst-case scenario, disappear. I think bitcoin will be a worst-case scenario situation.

Amazon Nasdaq Stock Market Index Chart

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

A case in point is Amazon.com (AMZN), which made its founder Jeffrey Bezos the richest man in the world. It used to be a bubble (rapidly rising price with no earnings). But that is no longer the case as it has rising sales and earnings and is expanding into new businesses. Amazon’s sales were rising in 1997-2000 but so were its losses. The more sales it had, the more money it lost, so the stock got overvalued in the 1999 dot.com bubble. That’s why it went from $113 to $5.51 after the dot.com bubble burst in 2000-02.

Then, when Bezos turned it around, Amazon became the company that had institutional and board support for the longest of any large company without making any money, plowing all cash flows into the growth of the business. The stock went parabolic without becoming a bubble. In fiscal year 2018, AMZN is set to have $233.37 billion in sales, while in 2019 they are estimated to rise 21.3% to $293.11 billion, based on consensus analyst estimates. Then, AMZN will be more than half the size of Walmart (WMT), the largest retailer in the world, but growing much faster than Walmart.

That’s why Jeff Bezos is the richest man in the world and likely to grow richer, if he doesn't get broken up by the Trump administration or any later administration for that matter, which is not the course of action that I am rooting for as a satisfied customer. After all, they did that to Standard Oil and AT&T.

(Navellier & Associates holds NVDA, AMZN but not WMT in managed accounts. Ivan Martchev & his family do not own NVDA AMZN or WMT.)

My Technical Take on Bitcoin

My job requires me to talk to a lot of clients about the bigger picture when it comes to their investments. Therefore, I am a lot more macro-oriented and try to see through short-term market gyrations. But, if one is around charts for a couple of decades in the trenches of the fascinating world of finance, one sooner or later gets to know something about the use of charts.

To be absolutely clear, I will never make an investment by looking at a chart alone. I have to understand what makes the chart “tick” and what makes an investment, as in the case of specific stocks, rise or fall. Since there never will be any profits, or cash flows for that matter, generated by bitcoin, ever, it is conceivable that it will go to zero, nada, or nil. It does not take a genius to figure that one out.

BitStamp Index Chart

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

That said, let me put my amateur technician’s hat on. It appears that bitcoin has broken below a major support level at 6000. The chart shows declining peaks and even lows that got taken out last week at that key level. If one reads the chart as 6000 being the climactic low that was hit after the top was set on December 18, 2017 and 12000 is the first major rebound off that climactic low, then the bitcoin chart has formed a “bearish wedge,” or a “descending triangle” pointing from 12000 to 6000. The measured move of that breakdown is 6000 below the point of breakdown (or the width of the triangle).

In other words, bitcoin’s own chart is suggesting that it's going to zero. How about them apples?

Sector Spotlight:

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

Another Week, Another Nail Biter…

by Jason Bodner

Are cats solid or liquid? The question seems easy enough to answer, but it turns out it’s more in the eye of the beholder. A recent study was conducted to tackle that seemingly ridiculous question because of cats’ tendencies to take the form of whatever container they are in. I now present to you…. liquid cats!

Liquid Cats Image

This question – liquid or solid cats – once won the “Ig Nobel Prize” for trivial achievements in science.

Why am I bringing you cat pictures? Because looking at liquid cats is more pleasant than looking at this market! So if I show cat photos, does that make this a bad market week? That’s in the eye of the beholder.

Another week, another nail-biter…

This past week saw more volatility, but, despite what it looks like, some constructive action for U.S. equities. When we saw selling, the volume was not present to make it a significant concern. According to my research, when the intense selling of late October came about, I would often notice well over 1,500 stocks tripping my abnormal volume and volatility ranges. That meant that nearly 100% of my institutionally tradable universe was getting sold hard.

Since the bottom for the S&P 500 on October 29th, I have been seeing an average of around 600 stocks traded in unusual volume and volatility each day – or less than half of the heavy selling we saw in October. What’s also encouraging is that up days saw 600 to 800 stocks triggering volume and volatility trips. For me to get buy or sell signals, the stock first has to trade on unusual volume and volatility, but it also has to trade outside interim highs and lows of roughly a 12-week period. So, I see a daily average of roughly 700 stocks making it through the first phase of signal generation, and 100 actual buy or sell signals each day. I’ve seen a daily average 4 out of 10 stocks being bought in an unusual way over the past 13 days since the bottom. This is significantly above the MAP-IT oversold ratio threshold of 25% and is a big uptick compared to the week of October 22nd when we saw daily unusual buying of only 5%.

Speaking of the MAP-IT ratio, it has been slowly but steadily climbing out of the depths of oversold territory. Remember it’s a 25-day Moving Average of unusual institutional buying and selling of stocks. It currently sits at 27.9%. This is interesting because the S&P 500 is now more than 3% above its closing 10/29/18 low of 2641.25. The same goes for the Russell 2000. It’s +3% from the 10/24 low of 1468.70.

My data says I should expect this trend to continue unless we see more heavy volume selling breaking new lows. We haven’t seen that as much as normal aftershocks and higher lows on lower volume. This indicates the selling – while still clearly present – is exhausting itself and the market is trying to firm up.

Russell 2000 Index Chart

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

With all that positivity, though, the 1-week performance for the S&P 500 sectors was ugly across the board save for Real Estate and Materials. Tech and tech-related consumers continue to be painful.

Here’s the rundown, according to FactSet:

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.

“So, Jason, Tell Me Again – Why Are You So Bullish?”

So, this is the perfect segue into the most frequently-asked questions I have been asked recently:

“Jason- are you still bullish? And if so, how can you be?”

I can’t tell you how many times I’ve been asked that recently, especially on days like last Monday, when the market is all red. This volatility has been gut-wrenching for well over a month now and all along I have been telling you why I am bullish on U.S. stocks. How can that be when we seem to be going lower?

According to FactSet:

  • U.S. companies continue to beat sales and earnings expectations for now a record third quarter in a row. With a majority of the S&P 500 companies reporting Q3 earnings, 78% reported a positive EPS surprise and 61% have reported a positive sales surprise.Standard and Poor's 500 Third Quarter 2018 Earnings and Revenues Estimates Bar Charts
  • For Q3 2018, the blended earnings growth rate for the S&P 500 is 25.2% which if it stays like that will be highest earnings growth since Q3 2010.
  • The blended (year-over-year) revenue growth rate for Q3 2018 is 9.4% - the second best since 2011.
  • All 11 sectors have higher growth rates today (compared to September 30) due to positive EPS surprises and upward revisions to EPS estimates.
  • The forward 12-month P/E ratio for the S&P 500 is 16.0, which is below the 5-year average (16.4) but above the 10-year average (14.5). Lower P/E’s mean cheaper valuations.
  • Only 33% of companies reporting cited “tariffs” on their calls vs. to 38% for Q2, meaning it’s less of a concern than previously thought.
  • The Consumer Discretionary (+15.6%) is reporting the largest upside aggregate difference between actual earnings and estimated earnings, meaning consumers are out there spending!
  • Corporate taxes are at record lows – companies are keeping more money!
  • Cash repatriation continues from overseas.
  • Corporate buy-backs continue on a mind-numbing pace, on a path to $1 trillion this year.
  • U.S. Indexes are still up respectably from corrective lows this year and 1-year lows.

So, I say in response, “Why is everyone so glum?” There are so many reasons to be cheerful about U.S. stocks. This list is almost unmatched at any point in history! In addition, I believe a trade deal with China will come soon and remove the last barriers of uncertainty to lift the market higher. But if all that’s not enough, I still always fall back on my “ace-in-the-hole.” Just do yourself a favor and look at a 100-year chart of U.S. stocks. It should tell you all you need to know. The game is rigged to the upside:

Dow Jones Industrial Average Long-Term Trend Chart

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

As far as the market goes, the rapper Talib Kweli understood the importance of being fluid and flexible when he said: “Things are fluid in this world, and if you don't remain fluid, you get lost in the sauce.”

So cheer up and enjoy some turkey!

A Look Ahead

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

Crude Oil Prices are Falling Fast

by Louis Navellier

During November, crude oil prices have been falling like a rock. From a peak of $76.41 as recently as October 3, crude oil prices collapsed to $55.69 last Tuesday on fears of a global slowdown. In last week’s MarketMail, Ivan Martchev wrote about China’s role in the oil price collapse due to falling industrial demand there, reflecting indications of a possibly severe recession coming in China.

I should add that the current glut in crude oil supplies is expected to cause Saudi Arabia to curtail its domestic production – a trend which was thoroughly discussed in The Wall Street Journal last week. There are other factors influencing the crude oil glut, namely the fact that Iran (despite sanctions) is still exporting over one million barrels per day. Another factor is record U.S. production. Finally, this is the time of year when crude oil demand usually drops due to winter weather in the Northern Hemisphere.

The real test for crude oil prices will come next spring, when worldwide demand rises as the Northern Hemisphere warms up and driving weather resumes. In the meantime, energy stocks will likely have strong earnings for the next couple of quarters, due largely to more favorable year-over-year comparisons.

If crude oil prices remain weak, it will cause wave after wave of downward analyst revisions, which could complicate any stock market rebound. Fortunately, while crude oil prices are sliding, natural gas prices are soaring due to an early start to winter for much of the U.S. Overall, I am carefully monitoring the developments in the energy patch and will only recommend the very best energy-related stocks.

The Fed Weighs Evidence of a Slowing Global Economy

On Wednesday, Fed Chairman Jerome Powell gave a speech acknowledging that the global economy was slowing down, which he called “concerning.”  Regarding the housing market, Chairman Powell cited the scarcity of building lots and labor as one of the factors impacting the housing industry. He also mentioned that many younger Americans have never experienced higher mortgage rates than the current rates.

Powell tried to downplay the recent stock market turbulence, but he did admit that the Fed is “looking really carefully” at how financial markets, the economy, and business contracts are responding to rising rates. Translated from “Fedspeak,” he definitely came off as dovish, after he said, “We have to be thinking about how much further to raise rates, and the pace at which we will raise rates,” adding that the Fed’s goal is to “extend the recovery, expansion and to keep unemployment low, to keep inflation low.”

Also on Wednesday, the Labor Department announced that the Consumer Price Index (CPI) rose 0.3% in October, in-line with economists’ consensus estimate. Higher gasoline prices accounted for more than a third of the increase, but due to falling crude oil prices, gasoline prices will decline in November. In the past 12 months, the core CPI has risen 2.1% and is now running at the slowest annual pace since April. Overall, due to lower crude oil prices, I expect inflation rates to continue to slow in the next few months.

There are a couple of international complications also weighing on Fed policy. First, on Wednesday, Germany’s Federal Statistics office announced that in the third quarter, German GDP contracted by 0.2% (an 0.8% annual pace) due to an abrupt slowdown in exports, attributable largely to new vehicle certifications that curtailed exports and put an estimated drag of 0.4% on third-quarter GDP.

British Pound Image

Second, as British Prime Minister Theresa May proceeded with Brexit plans, members of Parliament openly laughed at her as two senior cabinet ministers resigned, which triggered a big sell-off in the British pound. Prime Minister May’s pledge to exit the European Union “in a smooth and orderly way” by the March 29 deadline is highly suspect. The capital flight from the British pound is now helping to push U.S. Treasury yields lower, which could cause the Fed to reconsider raising key interest rates.

The U.S. economy is doing better than most of the rest of the world. On Thursday, the Commerce Department announced that retail sales rose 0.8% in October, significantly better than the economists’ consensus estimate of a 0.6% increase. Vehicle sales rose 1.1% as durable goods sales improved. Both department store sales and home improvement stores rose 1%. Overall, this was a very positive retail sales report after two weak months and a very good omen heading into the holiday shopping season.

Finally, the Fed reported on Friday that industrial production rose 0.1% in October, which was a bit less than economists’ consensus estimate of 0.2%. The Fed said the aftermath of hurricanes reduced industrial production in both September and October. Manufacturing boosted industrial production by 0.3% in October, while mining and utilities were a drag. The fact that U.S. crude oil production continues to rise steadily should continue to boost the mining component of industrial production. Additionally, abnormally cold weather for much of the U.S. caused natural gas prices to soar. This should boost the utility component in November. In the past 12 months, industrial production has risen 4.1%. Overall, I expect industrial production to soar in November, due largely to abnormally cold seasonal weather.


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.

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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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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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