Low Inflation Slow Growth

Low Inflation and Slow Growth May Deflate Today’s Fed Meeting

by Louis Navellier

March 20, 2018

Retail Sales Image

The Consumer and Producer Price Indexes each rose just 0.2% in February and retail sales declined 0.1%. Due to disappointing retail sales for three straight months, plus a sudden deceleration in both existing and new home sales, first-quarter GDP estimates are plunging. Specifically, the Atlanta Fed now forecasts only 1.9% first-quarter GDP growth, down from their initial “red hot” 5.4% GDP forecast in January.

The Fed will likely notice that inflation-adjusted hourly wages were flat in February and rose only 0.4% over the last 12 months. This lackluster news on inflation and economic growth virtually guarantees a “dovish” Federal Open Market Committee (FOMC) statement (released tomorrow). A dovish FOMC statement could serve as a “launching pad” for the stock market, so I expect a strong finish for the market in the last half of March. Stocks typically finish each quarter strongly due to institutional buying pressure from quarter-end window dressing. In addition, smart Beta ETFs are typically realigned every 90 days, so I look forward to a rising market in late March and then another seasonal rally in the first half of April.

In This Issue

The overall market declined last week, but many tech stocks rose in anticipation of more enforcement of intellectual property rights in China. Bryan Perry covers that news. Gary Alexander covers the first two chapters of Ed Yardeni’s new book – on doomsday warnings from 1988, and a new look at trade and tariffs. Ivan Martchev covers the snail’s pace of quantitative tightening (QT) at the Fed and how that could impact the euro and the dollar, while Jason Bodner covers how to beat the market, fair and square. Then, I’ll return to discuss underperforming specialty ETF funds and trade policies under Larry Kudlow.

Income Mail:
It’s “High Noon” for China’s Pirating of U.S. Technology
by Bryan Perry
On Larry Kudlow, Tariffs, and Technology’s Torrid Rally

Growth Mail:
More Dire Warnings of “Manufactures Decaying and Trade Undone”
by Gary Alexander
Not All Tariffs are Bad

Global Mail:
Jerome Powell’s First FOMC Meeting
by Ivan Martchev
QT Effect on the Dollar

Sector Spotlight:
What Happens When Some Investors Cheat?
by Jason Bodner
Investors Can Beat the Market Fair and Square

A Look Ahead:
Beware Investing in Trendy “Specialty” ETFs
by Louis Navellier
No Trade War! Larry Kudlow to the Rescue

Income Mail:

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

It’s “High Noon” for China’s Pirating of U.S. Technology

by Bryan Perry

It is being reported that President Trump is seeking to impose tariffs on up to $60 billion of Chinese imports and will target the technology and telecommunications sectors. While the tariffs would be chiefly targeted at information technology, consumer electronics, and telecoms, they could be much broader. The White House declined to comment on the size or timing of any move, but some form of tariff is coming.

As can be expected, China is not taking these threats lightly. Chinese foreign ministry spokesman Lu Kang said Sino-U.S. trade relations should not be a zero-sum game, and that the two countries should use “constructive” means to manage tension. “We have said many times that China resolutely opposes any kind of unilateral protectionist trade measures,” Lu stated. “If the United States takes actions that harm China’s interests, China will have to take measures to firmly protect our legitimate rights.”

Trump’s team is targeting Chinese high technology companies to punish China for its investment policies that effectively force U.S. companies to give up their technology secrets in exchange for being allowed to operate in China, as well as other intellectual property (IP) practices that Trump and his advisors consider unfair. The other longstanding issue is China’s hard rule that “if you want to sell it here, you have to build it here,” and how this rule has welled the trade imbalance between the U.S. and China.

The temptation of expanding revenues in the world’s second largest economy has compromised many American companies to give up the “secret sauce” of many of their most coveted innovations. Then, all too often, those patented technologies are turned into pirated software and hardware products that are exported around the globe at a fraction of the cost while the Chinese government “looks the other way.”

China runs a $375 billion trade surplus with the United States. When China’s President Xi Jinping’s top economic adviser visited Washington recently, the administration pressed him to come up with a way to reduce that number. U.S. House Ways and Means Committee Chairman Kevin Brady stressed that Trump was serious about addressing the issue of intellectual property theft with China. “He’s serious about calling their hand on this, and my understanding is they are looking at a broad array of options.”

Shortly after Trump took office, the Information Technology & Innovation Foundation (ITIF), a U.S. technology think tank whose board includes representatives from top technology companies, called for coordinated international pressure on Beijing. It is no secret that China pirates American technology and has been doing so for decades. Until Trump’s election, past Presidents did little or nothing to stem the rate of theft from U.S. tech companies. It now seems to be ‘High Noon’ for the tech pirates, and it’s about time.

According to data compiled by Statista, software piracy is a lot more rampant in China (70%) than the U.S. (17%), but the value of unlicensed software in the U.S. is still slightly higher than in China. The chart below shows the global picture. The U.S. has such a huge economy, and uses so much software, that even though the rate of unlicensed software is only 17%, the value of that software is over $9 billion. Countries like China, India, Russia, and Indonesia have higher rates of unlicensed use, but the value is a lot less.

Cost of Software Piracy Bar Chart

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

On Larry Kudlow, Tariffs, and Technology’s Torrid Rally

The appointment last week of Larry Kudlow to replace Gary Cohn as Trump’s top economic advisor is a good move in that Kudlow holds an anti-tariff position and will likely act as a counter to any overdoing of tariff impositions. A more measured approach with Kudlow’s assistance will probably be the course of action and the markets are warming up to this notion after enduring a few days of tariff-related selling. Plus, Larry Kudlow is a Reagan-era supply-side cheerleader, which delights most stock market bulls.

It’s interesting that during this past week, with the S&P and Dow declining, led by multinational companies, many leading tech stocks traded higher on the notion that new trade rules and protection for the U.S. tech industry will be forthcoming soon. Breaking the cycle of having to divulge technological secrets and patents in order to do business in China has always been a bad idea, and now it appears that this structure is about to undergo a radical change. Tech stocks are ramping higher as a result. There will be more clarity on this fluid situation in the days ahead, but the tech sector isn’t waiting.

Technology Select Sector SPDR Fund Chart

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

One of the favorite investment ETFs that mirrors big cap tech stocks is the Technology Select Sector SPDR Fund (XLK). Just over 84% of the fund’s total assets are made up of the top 25 holdings. There are 72 total positions with only 4% annual turnover in a category that exhibits 92% annual turnover (source: Morningstar). It’s like a stable aircraft carrier amidst rough seas, pressing forward with a 5-year average gain of 20.25% vs. the S&P 500’s 5-year average return of 15.83%. Technology is the draft horse of the economy and innovation is what separates us from the rest of the world – by a wide margin.

Income investors who want to capitalize on low-yielding technology stocks can do so by selling volatility back to the market in the form of covered call options. It’s a great way to generate immediate income on a monthly basis from the best technology stocks showing the strongest revenue and earnings growth. As market volatility rises, option premiums expand, or increase in value.

Instead of paying up for call options, in my opinion, a better idea is to sell expensive short-term out-of-the-money calls in the best tech stocks. It might be as simple as just buying shares of the Technology Select Sector SPDR Fund (XLK) and selling out-of-the-money covered calls against the ETF, month-after-month. It’s a nice way to be invested in the top stocks that are fueling the stock market rally and a wonderful way to get paid a 5%-7% annual yield on your money. High-tech income – what a concept!

Growth Mail:

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

More Dire Warnings of “Manufactures Decaying and Trade Undone”

by Gary Alexander

“Five years have seldom passed away in which some book or pamphlet has not been published… pretending to demonstrate that the wealth of the nation was fast declining, that the country was depopulated, agriculture neglected, manufactures decaying and trade undone.”

–Adam Smith, The Wealth of Nations (1776)

Books weren’t published very often 250 years ago. Today, a doomsday book is published every few days – or a ‘pamphlet’ every five minutes on the Internet. Fifty years ago, doomsday books came out every few months. In 1968, I was reading (and believing) William & Paul Paddock’s “Famine 1975,” which said it was impossible for food production to keep up with population growth and we would soon starve. Also in 1968, Paul Ehrlich published “The Population Bomb,” which he opened by saying, “The battle to feed humanity is over. In the 1970s and 1980s, hundreds of millions of people will starve to death.”

In the same year, with no fanfare, Dr. Normal Borlaug was launching the Green Revolution, which has managed to feed billions more people on less arable soil than in the 1960s. Instead of starving against our will, millions of us are trying to starve voluntarily – by dieting. Food is far cheaper relative to the overall growth of the cost of living than in the 1960s, but we believed the best-selling prophets of doom in 1968.

Now, I’ve just finished reading the first two chapters of Ed Yardeni’s new book “Predicting the Markets: A Professional Autobiography,” just released last Thursday. The first chapter (“Predicting the Past”) tells the story of Ed’s education, concluding with a PhD in economics at Yale in 1976, the bicentennial of America and also of Adam Smith’s “Wealth of Nations,” which he studied avidly and quoted (above).

Later in that chapter, Yardeni cited a Topical Study he co-authored with David Moss in October 1988 in which they countered the “rampant pessimism of our day.” Despite the general optimism of the Reagan years, the last two years of Reagan’s presidency were marred by the 1987 crash, the Iran-Contra scandals, and the shady kinds of financial shenanigans portrayed in Oliver Stone’s film “Wall Street” (which came out two months after the Crash). Yardeni named several books published in the late 1980s that captured the spirit of the times: A 1987 #1 best-seller, “The Great Depression of 1990” (by Ravi Batra), and several books published in late 1988: Day of Reckoning, Blood in the Streets, The Debt Threat, etc.

Doomsday Books Image

In 1989, Harry Browne wrote “The Economic Time Bomb,” predicting “a deep recession and severe inflation.” I must admit that I wrote a similar book, “How You Can Profit from the Panic of 1989.” I cited a dozen economic, political, and social forces “set to converge in 1988-89.” I hesitate to name them here, but in shorthand terms they were: The Kondratieff cycle, global cooling (!), a 30-year political cycle, inflation, deficits, bank failures, a farm crisis, trade war, a dying dollar, oil shortages, terrorism, AIDS.

Stop me if you’ve heard all this before. However, that was my last hurrah! I’ve been a “recovering Apocaholic” ever since those forecasts failed in 1989. I climbed on board the bull market just in time.

In 1988, Yardeni predicted that the pessimists would be proven wrong, and he didn’t have long to wait. The stock market set new highs by July 1989 and the Berlin Wall came tumbling down in November.

Even with that greatest of good news, Yardeni writes, “Pessimists warned that the increased demand from all those people who had been liberated from Communism would lead to higher inflation.” That never happened, of course, because global trade flourished, and production mushroomed all over the world – so supply easily matched demand. That brings us to the subject of global trade, protectionism, and tariffs.

Not All Tariffs are Bad

In Chapter 2 (“Predicting the World”), Yardeni shows clearly how the 1930 Smoot-Hawley tariffs turned a stock market panic into a 12-year Depression, but he also shows how the Reagan-era tariffs led to some important reforms in global trade practices. It was a time when Japan had some of the same unfair trade practices with the United States which China now enjoys. In other words, not all tariffs are permanent, or bad. They are, as Trump supporters might say, bargaining positions to rectify unbalanced trade practices.

“During April 1987,” Yardeni writes, “President Reagan placated the chorus of protectionists with a 100% tariff placed on selected Japanese products. ‘The health and vitality of the U.S. semiconductor industry are essential to America’s future competitiveness,’ he said. ‘We cannot allow it to be jeopardized by unfair trading practices.’”  Japan dominated our car market then but would not allow any American-made cars on their roads. Partly as a result of pressuring Japan into accepting “voluntary restraints” on their exports of autos, Japan decided to beat the tariffs by moving some production facilities to the U.S.

This was a case of installing a temporary tariff toward a constructive end. Today, tariffs on steel and aluminum serve no purpose if they punish Canada, Mexico, or Europe, but China does not always play fair in trade. Larry Kudlow, the newly-appointed head of the President’s National Economic Council, said on CNBC last Wednesday, “I don’t like blanket tariffs,” but “I think China has earned a tough response.” Kudlow said that he would like to see the U.S. “lead a coalition of large trading partners and allies against China, to let China know it is breaking the rules left and right.” Perhaps Mr. Kudlow – who can talk anybody’s ear off – can help the President find the golden mean between protectionism and fair trade.

Global Mail:

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

Jerome Powell’s First FOMC Meeting

by Ivan Martchev

The unwinding of the Fed’s short volatility position – aka, its impregnated balance sheet – continues at a snail’s pace. As of March 5 (the latest available data), it stood at $4,366,093 million. The all-time high was 4,473,860 million in February of 2015. That means the Federal Reserve has reduced its balance sheet by a tad under $108 billion from its all-time high, so they only have $3.5 trillion to go to reach their pre-crisis levels of 10 years ago, in early 2008, when the Fed’s balance sheet was about $850 billion.

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.

To be fair, the Fed is unlikely to go down to pre-crisis levels. Under normal conditions, the Fed’s balance sheet grows slowly over time as the economy grows and as the fractional reserve banking produces credit growth. Under the “new normal” doctrine of QE, and now under quantitative tightening (QT), the growth in the balance sheet can be accelerated dramatically – and later shrunk far less dramatically.

I am watching with great interest how this monetarist operation is progressing as such a thing has never before been tried in the history of central banking. For QE to be ultimately deemed successful QT has to be successful – as one operation is the flipside of the other. QE was the brainchild of Ben Bernanke, while QT will have to be performed without Ben Bernanke and the top three people at last year’s Federal Reserve, who are leaving or have left at the same time due to decisions made by President Trump.

First, Vice Chairman Stanley Fischer resigned last year (in my opinion, because he learned he was not getting the top job). Then, Chair Janet Yellen did not get re-nominated and left in February. Finally, FRBNY President William Dudley is retiring this year (probably for reasons similar to Mr. Fisher). Before becoming President of the most important bank in the Federal Reserve system, Dudley ran open market operations there and was responsible for the numerous asset purchases during the 2008 crisis.

So the top three people at the 2017 Fed are now practically gone at a time when the balance sheet will have to be reduced. Needless to say, this increases the pressure on Fed Chairman Powell to deal with a very delicate central banking operation, which makes his first FOMC meeting this week very important.

Before the FOMC meeting this week, the fed funds rate had a target range of 1-¼ to 1-½ %. The interest rate on excess reserves was set at 1-½%. Since one of the rates is set via open market operations and the other is simply charged by the Fed on excess reserve balances on the banks accounts with the FRBNY, both rates need to be viewed in context.

When QE was introduced in 2009, many market participants assumed that it was going to produce hyperinflation as the Fed was monetizing debt. However, if the Fed charges interest on excess reserves that is always higher than the target fed funds rate, excess reserves do not enter the fed funds market (as they earn a higher rate at FRBNY). If excess reserves do not multiply in the fed funds market via fractional reserve banking, the credit multiplier in the U.S. financial system effectively goes to zero.

United States Ten Year Government Bond Chart

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

From conversations with investors, I can say that many market participants still do not understand QE even if the Fed has already started to unwind it via QT. Still, QT is a rather delicate operation that requires a lot of experience and Mr. Powell is a novice central banker with some top lieutenants that have either left or are in the process of leaving.

The 10-year Treasury yield closed at 2.85% last Friday. It has been consolidating under its recent multi-year high of 2.95%. but given the expectation of accelerating runoffs from the central bank balance sheet (above the present $10 billion monthly rate), it is probably a matter of time before we cross 3%. How fast we cross 3% to the upside in the 10-year Treasury yield and how far we carry above that psychologically-important barriers will probably impact the performance of the stock market to a great degree.

The sell-off in the stock market in February was certainly catalyzed by spiking long-term interest rates, although the air pocket of inflows into stocks in February after the record $103 billion January inflow probably bears the bigger part of the blame. Fed Chairman Jerome Powell is in the hot seat this week and based on his actions he can serve as a catalyst for rising volatility in both stocks and bonds – as is often the case with a new Fed chairman.

QT Effect on the Dollar

Even though January was weak for the greenback, we have seen some bottoming action in February and March, which arguably is hard to see on a 50-year chart. Be that as it may, the dollar’s decline in 2017 was more politically-driven than having to do with interest-rate differentials, which are in its favor.

United States Dollar Index Chart

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

A wave of pro-EU political victories in the Netherlands, France, and to a lesser degree Germany (which finally had its federal government formed six months after the election) lit a fire under the euro. The pricing out of the eurozone disintegration trade caused the euro to go above $1.25 in early 2018 after it traded under $1.04 on the first day of 2017.

I think the rally in the euro is over and with Brexit frictions and interest rate differentials in favor of the dollar, which may rise based on Chairman Powell’s actions, that euro appreciation could be reversed. It is possible we see the U.S. Dollar Index trade above 100 by the end of 2018, a huge move from its Friday close of 90.23. All eyes in the currency and bond markets are on the FOMC meeting this week.

Sector Spotlight:

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

What Happens When Some Investors Cheat?

by Jason Bodner

The stock market has winners and losers. It also has fair players and cheaters.

The stock market has always been a tug of war between bulls and bears, good versus evil, profit versus loss, right versus wrong – the market has all this drama. Often, there is strong evidence for both sides of many debates about the market. The “efficient market theory” basically says that all available information is already priced into the market, therefore all price movement is random. Long-term charts can easily buck this argument, as it shows constant price appreciation over the decades. For instance, in 1906 the Dow Jones Industrial Average crossed 100. In 1972 it crossed 1,000. In 1999, the Dow cross 10,000.

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.

The darker market stories tend to captivate our imagination and get the juices flowing. There was a study done between 1993 and 1998 showing that most U.S. senators were trading stocks and beating the market by an average of 12%. They even trounced the insiders, who were beating the market by an average 5%. Meanwhile, the average household underperformed by -1.4%. Someone should have started a “Senators” hedge fund. A follow-up article in 2004 revealed that during the 1990s, 62 senators disclosed 6,000 stock trades. New Jersey Senator Jon Corzine shrugged off a journalist’s question about the practice, but that was long before he was embroiled over a missing $1.5 billion of MF Global, which he later presided over.

Jon Corzine Image

Darker still is when someone clearly knows something is wrong before something bad happens. In 1954, for example, economist Armen Alchian said he could figure out the secret fuel for a hydrogen bomb by observing share prices of chemical suppliers in the stock market. How about this one: In 1986, after the Challenger explosion, shares of every company involved in the space shuttle dropped. By day’s end, most shares had rebounded except for Morton Thiokol. It stayed down and closed on its lows. Months later, the official investigation found officially Thiokol responsible.

Challenger Example of Efficient Markets Chart

On Thursday, September 6, 2001, we saw an unusual spike in put purchases on United Airlines (UAL). Monday, September 10, 2001 saw a similar unusual spike in put purchases on American Airlines. (Puts become profitable in the event of a decline in stock prices.) The day following 9/11, American Airlines shares plunged more than 30%. United fell precipitously as well. Between August 20 and September 10, unusual put volumes were observed in Boeing, Merrill Lynch, J.P. Morgan, Citigroup, Bank of America, Morgan Stanley, Munich Re, and the AXA Group. All these stocks were particularly negatively affected by 9/11. September 10, 2001 saw a 600% spike on Raytheon call buying. (Call options become profitable when a stock price spikes.) Raytheon shares spiked within a week after the attacks when the U.S. military began sending Tomahawk missiles to Afghanistan. These missiles were made by Raytheon.

Put to Call Ratio Chart

It’s important to note that this suspicious trading activity was investigated and nothing conclusive was ever found. But one would have to agree, at a bare minimum, that this coincidence raises questions.(Please note: Jason Bodner does not currently hold a position in UAL American Airlines, Raytheon Boeing, Merrill Lynch, J.P. Morgan, Citigroup, Bank of America, Morgan Stanley, Munich Re, and the AXA Group . Navellier & Associates does not currently own a position in UAL American Airlines, , Merrill Lynch, J.P. Morgan, Citigroup, Bank of America, Morgan Stanley, Munich Re, and the AXA Group for any client portfolios. Navellier does own Raytheon Boeing, J.P. Morgan, and, Morgan Stanley for client portfolios.)

Investors Can Beat the Market Fair and Square

If the efficient market theory says, “You can’t beat the market,” and shady traders have beaten the market, is there any hope for honest investors? The answer of course is yes. Many great and honest stock pickers have beaten the market, such as Warren Buffett, David Tepper, and Louis Navellier. They are out there, and they play by the rules. They use different approaches. One that I favor is quantitative analysis. This means you look at a ton of cold-hard data, form opinions based on science, and invest according to that.

I use this type of approach to research stocks. My process begins with sectors. I always look to see where new leadership or weakness is emerging. Then I can measure each sector in terms of technical strength as well as fundamental trends. Are earnings and sales moving in the same direction for the aggregate stocks in the sectors? Is strength coming from a certain sub-industry?

For example, last week I said, “I am keeping my eye on Infotech. At this early stage, I am paying attention to Software companies, since we observed big institutional accumulation of tech stocks, specifically Software & Services companies. In fact, about 80% of the companies we track in the Software Services space exhibited big buy signals based on unusual institutional accumulation.” This type of information is material for me, as it starts to point to where we can expect leadership to emerge.

If there is broad-based institutional buying in a segment of the market, it seems only natural that one or a group of investors placing such large bets, would also assume they would increase in value over time. “Do they know something we don’t?” is an appropriate question, and typically the answer is yes. Therefore, we must keep looking at sector performance week in and week out.

Standard and Poor's 500 Daily, Weekly, and Quarterly Sector Indices Changes Tables

Last week was an underwhelming week. This is to be somewhat expected after such a strong performance the prior week. Financials, Materials, and Tech sagged while Utilities vaulted. This defensive behavior indicates we are still in a market sloshing around, but I still believe we are headed higher.

The stock market may seem “rigged” when you consider all the nefarious stories circulating out there. But you can also “rig” the flow of valuable information in your favor. You do that by performing tons of analysis and stack the odds in your favor – or you can hire someone to do that for you. Either way, if you’re putting your money in the market, the “efficient market theory” doesn’t have to apply to you.

Heddy Lamarr was not only a well-known film actress, but she was also an accomplished inventor. In fact, she invented frequency hopping, which is the basis of today’s wireless technology. She said, “Analysis gave me great freedom of emotions and fantastic confidence. I felt I had served my time as a puppet.”

Heddy Lamarr Quote 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.*

Beware Investing in Trendy “Specialty” ETFs

by Louis Navellier

I noted that CNBC last week pointed out that some specialty ETFs have been lagging the overall stock market. The explanation is simple. Even with the best ETFs, investors have to pay a premium to buy – and a discount to sell. When these ETF premiums and discounts are just a penny or two per share, no one really cares about paying these trading costs. However, with the explosion of specialty theme-oriented ETFs – like those for investing in blockchain or marijuana – we’re seeing ETFs routinely trade at 15% to 30% premiums to Morningstar’s “Intraday Indicative Value” (i.e., their version of net asset value). I have also noticed that Morningstar has stopped publishing an Intraday Indicative Value for leading marijuana ETFs, so investors have no idea of how much they are being fleeced by an ETF specialist trading them.

If you want to know more about this process, my management company has written multiple white papers about how ETF specialists fleece investors. Here is a link to our latest white paper on the subject.

I want to stress that I am NOT anti-ETF, in general. However, one major reason for my management company’s success in ETF management is that we do not like to pay excessive premiums or discounts to buy or sell ETFs. As a result, sometimes we have to wait to trade ETFs when premiums or discounts are extraordinarily high, such as they were in August 2015 (during a major intraday flash crash) or in 2016 (in the Brexit aftermath) or in February 2018 (the inverse VIX option failure in Exchange Trades Notes).

The bottom line is that ETFs are very delicate and not always liquid, so excessive premiums or discounts all too often emerge during rapidly changing market conditions. My biggest fear is that the new robo-advisor ETF programs could exacerbate any market sell-off, since the discount to sell ETFs could widen dramatically if too many robo-advisors try to sell at the same time, which we discuss in this white paper.

No Trade War! Larry Kudlow to the Rescue

Trade War Image

There was a lot of talk last week about a brewing trade war with China, which hurt Boeing’s stock on Wednesday. There is no doubt that China takes advantage of the U.S. in trade and some additional tariffs may be imposed. However, since the U.S. and China need each other, a major trade war is unlikely.

President Trump merely wants to shrink the U.S. trade deficit and will continue to use tariffs to try to protect U.S. industries, but these tariffs will likely continue to be very selective, just like he was with the steel and aluminum tariffs. These tariffs are merely being used so President Trump can negotiate better and more equitable trade deals for the U.S. and are not expected to adversely impact overall trade.

Last Friday, the Trump Administration’s new National Economic Advisor, Larry Kudlow, privately told the White House that the U.S. economy is on the verge of 4% to 5% annual GDP growth. Specifically, Kudlow told President Trump that “We’re on the front end of the biggest investment boom in probably 30 to 40 years.” I know Larry Kudlow from being on his former show on CNBC as well as talking to him at various Money Shows. I think he will be a truly outstanding National Economic Advisor.

Like President Trump, Larry Kudlow will be a cheerleader for America and will likely be more articulate in his explanations of both tax policy and economic growth. As I have said before, the key to economic prosperity is to increase the “velocity of money,” which is how fast money changes hands. The combination of both President Trump and Larry Kudlow should be a powerful “1-2 punch” in that I expect both of them will be relentless cheerleaders for U.S. economic growth and positive fiscal policies.


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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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