Lows Push Yields Higher

Market Lows Push Dividend Yields Higher

by Louis Navellier

April 10, 2018

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The market careened up and down last week – with the S&P 500 falling 2.23% on Monday, then rising 3.13% from Tuesday through Thursday, only to fall 2.19% on Friday.  I recorded podcasts three times – on Monday, Wednesday, and Friday – due to three more attempted “retests” of the February 8th lows.  On my Wednesday podcast, I was a bit testy, since the stock market sold off on the retaliatory China tariff news, but the $50 billion from 25% tariffs were just threats; they had not actually been implemented.

The bottom line is that the S&P 500 has now retested the February 8th lows multiple times, bouncing back each time.  With stock prices falling and dividends rising, the S&P 500’s annual dividend yield rose above 2% during these retests.  Since a 2% annual dividend yield is taxed at a top rate of only 23.8% – far more favorable than the 10-year Treasury bond yield, taxed at a maximum 40.8% rate – the stock market will naturally rally on most pullbacks, since those dividends provide a higher after-tax income than Treasury bonds.  Furthermore, dividends keep being increased due to the latest corporate tax reform, so dividend growth strategies are unquestionably a sound investment, as these dividend increases are widespread.

The good news is that after Mark Zuckerberg testifies in front of Congress this week, the financial media will likely refocus on corporate earnings, since they should be especially strong and simply cannot be ignored.  In other words, the financial media’s sideshows about the Fed’s proposed future interest rate increases or the President’s proposed tariffs can finally be put on the back burner. 

It is very frustrating for investors to see the political media providing the financial media with all these bogus talking points, thereby aiding and abetting the short sellers that try to needlessly scare investors.

In This Issue

Both Bryan Perry and Gary Alexander have a lot to say about China and the market’s latest “tariff tantrum.”  Bryan writes from the perspective of China’s long-term game plan and Gary compares today’s China fears to similar fears about Japan’s trade supremacy 30 years ago.  Ivan Martchev’s Global Mail focuses on geopolitical concerns over Russia and Syria as well as China and Korea, while Jason Bodner looks for some early signs of sector leadership in the current spin-cycle maelstrom of alternate selling and buying. In the end, I’ll look at history and current indicators to find some solid reasons for hope.

Income Mail:
Market Psychology Getting Whipsawed by “Tariff Tantrum”
by Bryan Perry
China’s Long-Term Game Plan

Growth Mail:
Higher Earnings (and Dividends) are Coming Soon
by Gary Alexander
Today’s China Threats Recall Similar Japanese Fears 30 Years Ago

Global Mail:
Deconstructing Russian Conspiracy Theories
by Ivan Martchev
Likely Implications for the Stock and Bond Markets

Sector Spotlight:
Common Misconceptions About Life and the Markets
by Jason Bodner
Looking for Leaders in a Red-Ink Sector Scorecard

A Look Ahead:
First-Quarter Rise (and Fall) Could Lead to a Strong Recovery
by Louis Navellier
The “Tariff Tantrum” is Overwrought – Global Trade is Growing

Income Mail:

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

Market Psychology Getting Whipsawed by “Tariff Tantrum”

by Bryan Perry

Friday’s negative trading session for stocks, which erased the earlier gains for the week, left a burn mark on the ever-resilient underlying bullish sentiment that has characterized the primary uptrend. Global trade matters greatly and the prospect of a real and escalating trade war with China made its way into the fabric of current market psychology. When the initial $50 billion of proposed tariffs was massaged with the new National Economic Council Director Larry Kudlow’s remarks that tariffs take several months to implement and there is time to find common ground to avert tariffs altogether, markets caught a huge bid.

What followed caught Kudlow and the market flat-footed. President Trump’s threat to impose an additional $100 billion in tariffs on Chinese imports came as a surprise to Kudlow and investors heading into Friday’s session. This was followed by Treasury Secretary Steven Mnuchin implying that “there is potential of a trade war” in his interview with CNBC. He stressed that the objective is to rein in the trade deficit and pressure China on their decades-long practice of stealing American intellectual property (IP).

President Trump is trying to create a more level trading relationship with China by attempting to boldly reverse the neglect of preceding Presidents that chose to do nothing to hold China responsible for the IP abuses that stemmed from requiring companies to reveal trade secrets in order to access China’s markets.

It has to be noted that when American companies ship raw materials to China and have them assembled there for a fraction of the labor cost in the U.S., those same assembled and packaged goods that are exported back to U.S. markets become part of our trade deficit. So, it’s not just products from Chinese-owned companies that create the trade deficit. American products, like Apple’s iPhones, are considered imports from China, so it will take a lot of creative bargaining to figure out how to mend that problem.

You’d think that the folks that own and operate Silicon Valley would be cheering loudly from the sidelines for a President fighting to protect their trademarks, innovations, “secret sauces,” and global distribution franchises, but not so. The ultra-liberal groupthink that permeates Silicon Valley can’t bring itself to do so. The political media has clouded the thinking of those making billions of dollars from cloud computing, while Mr. Trump, for all his foibles, is trying to protect the future of American innovation.

China’s Long-Term Game Plan

The main problem I see in this geopolitical quagmire is that China operates by a different moral code – they don’t have one. Let’s never forget that we’re dealing with a communist party that will say anything and do anything to gain its long-term goal of global economic and military leverage. Seizing and stealing intellectual property and fomenting cyber warfare against U.S. companies and government agencies is the modus operandi at all levels of the Chinese government. Having seen this behavior flourish unchecked for all these years makes the challenge of reining in these abuses all that much more difficult.  

China has an $8 trillion plan in place to dominate global trade. They have already partnered with 60 other countries, many of which are authoritarian, some of them corrupt, to allow large Chinese infrastructure investments to expand their land and sea trading routes throughout that part of the world where 60% of the world’s population resides. It’s called the Belt and Road Initiative (BRI) and it spans three continents. It’s how China plans to become the world’s next superpower – by controlling trade on their terms.

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China is financing these projects in the form of issuing loans to those nations that sign up for them, pushing them as “shared” efforts, where there is a “win-win” outcome for all. Terms of the deals include the use of Chinese laborers to feed China’s massive construction industry. Financing from the West typically involves meeting high ethical standards involving lengthy public disclosure, which China bypasses for its long-range goals. So, it’s no surprise BRI has been a big hit with authoritarian countries.

The BRI essentially has two parts. The first, the economic belt, is made up of six corridors that direct trade to and from China. These corridors include railways, bridges, and power plants – basically anything that makes it easier for Europe, Asia, and Africa to trade with China. The second part, a maritime silk road, is a chain of seaports from the South China Sea to the Indian Ocean for maritime trade with China.

Here is the rub. As part of the terms of the partnerships crafted by China’s government, if the nations that borrow the money can’t pay back those loans, China assumes control of those projects. That means there is more to the BRI than just economics. A case in point: China loaned $1.5 billion to Sri Lanka for the construction of a deep-water port, a key stop in the maritime Silk Road. Sri Lanka defaulted on the loan in 2017. As a result, Sri Lanka had to cede to China control of that port as part of a 99-year lease.

China also now controls a strategic port in Pakistan, where it has a 40-year lease. It’s pushing for a similar agreement in Myanmar (formerly Burma) and just opened an actual Chinese naval base in Djibouti. It is part of what is called the String of Pearls, a plan for eight naval bases to control trade throughout that part of the world, thereby coercing western nations into favorable terms in order to access those markets.

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China’s strategy is to take control of global trade. America should wake up to this reality when the stock market has a hissy fit over American leaders taking the bull by the horns and saying to China, “Not so fast.” The right course of action is rarely an easy road but taking action now will hopefully make us all more aware of what we are really dealing with. China plays by a different set of rules, but that doesn’t mean that the U.S. has to go along with those rules. If we do, then we only have ourselves to blame.

Growth Mail:

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

Higher Earnings (and Dividends) are Coming Soon

by Gary Alexander

There’s been a great deal of electronic ink spilled (some of it ours) over the growth rate of quarterly earnings coming in the next month, with reports starting later this week. According to FactSet’s Earnings Insights for April 6, “The estimated earnings growth rate for the S&P 500 is 17.1%,” which would mark the highest growth rate in seven years, since Q1’11. But let’s not forget that this is also one of the key seasons of the year for dividend payments. A March 29 article in Bloomberg (“Stocks are About to Get a $400 Billion Dividend Boost”) quoted a note from Morgan Stanley strategists who said that as much as $400 billion could be paid to investors between March and May, giving us a new reason to consider that this April should be a strong month for global equity returns, despite April’s sluggish start last week.

This $400 billion figure came as a shock to me since total annual S&P 500 dividends were $424 billion last year, using Thomson Reuters data based on the composition of the current index. Thomson Reuters analysts expect a modest rise to $450 billion in S&P 500 dividends this year and $486 billion in 2019, so where did these $400 billion dividend income estimates for “March through May” 2018 come from?

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

 A little research from the Yardeni Research team (in their “Record Corporate Cash Flow” report, April 3, 2018) showed that the Morgan Stanley team included all global stock market dividends. Many global companies only pay dividends semiannually, often in April, bumping up global total returns in the spring.

The new corporate tax reform bill has helped many large corporations repatriate their cash with minimal tax friction, so they are awash with cash to use as dividends, or for cash bonuses or raises to employees, or for share buy-backs, or for strategic mergers or expansions. Before this new tax bill passed in late 2017, corporate stock buy-backs slowed to $548 billion in 2017, down from a cyclical peak of $646 billion. This year, we are likely to see corporate buy-backs and dividends total over $1 trillion for calendar year 2018.

Today’s China Threats Recall Similar Japanese Fears 30 Years Ago

I have just finished Ed Yardeni’s new book, “Predicting the Markets: A Professional Autobiography.” I reviewed and riffed off his first two chapters three weeks ago (March 20, 2018, “More Warnings of ‘Manufactures Decaying and Trade Undone’”). Yardeni’s book is a phenomenal resource for investors, not only a 40-year memoir of his work in the trenches of the market, but a guide to all the important indicators he follows, like an annotated encyclopedia of what they mean to us as investors. I hesitate to call it “the only book you need,” but it certainly ranks up there as one of the top guides you should use.

There are so many segments I’d like to excerpt, but the current kerfuffle over China and the looming “trade war” cry out for some historical perspective. I wrote about this before, but in 1988, America feared the economic power of Japan as we now fear China. Several best-selling books lauded Japan’s management style as being superior to ours. Japan was so rich that a single square mile of Tokyo real estate was valued higher than all of the state of California. They were so rich they were paying way too much for Hawaiian hotels (in 1986, a Japanese company paid $245 million for a Hyatt hotel near Waikiki Beach; the same hotel sold for $108 million two years earlier), or art work (in 1987, a Japanese insurance company paid $50 million for Van Gogh’s ‘Vase with 15 Sunflowers’ – triple the price paid for any previous painting), or for Hollywood studios (in 1989, Sony paid $3.4 billion for Columbia Pictures, and in 1990 Matsushita paid $6.1 billion for MCA). The Nikkei 225 stock index was a classic stock bubble.

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

America had a massive inferiority complex toward Japan, which was supposedly taking over the world economically – or so we thought in 1988. Yardeni referred to two magazine covers from 30 years ago, one about the end of the Pacific Century from Newsweek (February 22, 1988, pictured below) and another, “Taking Stock: Is America in Decline?” from The New York Times Magazine, April 7, 1988 (picture not available). It featured “a caricature of an old overweight, stooping bald eagle, dressed in red, white, and blue. The old bird held a cane for support and stared anxiously into a small mirror. Ironically,” Yardeni reminds his readers on page 510 of his new book, “the United States was less than two years away from winning the cold war and embarking on one of the most prosperous periods in history.”

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The two books (above) include one of many best-sellers about superior Japanese management (“Theory Z”) and a scary best-selling novel about how Japanese business was taking over the world (“Rising Sun”), later made into a movie starring Michael Douglas, which grossed $107 million after its 1993 release.

But the Japanese economy was skating on thin ice. Their stock market bubble burst in 1990. Their gross overpayment for global assets came back to haunt them. Their demographics proved to be a ticking time bomb. As Yardeni noted, on page 526, “Japan is the poster child for aging demographics. Japan’s overall population is declining at the fastest pace on the globe.” The ratio of workers to retirees is now just 2:1. The working age population (age 15 to 64) will fall from 87.8 million in 1995 to 55.6 million by 2050.

Japan doesn’t allow much immigration. They are a homogenous nation with very few non-Japanese people or products. While that may sound “patriotic,” it can be a long-term death knell to any economy. 

There’s a lesson here. It now applies to us and China. China is going deep into debt in domestic spending as well as into their trade deals in Asia, Africa, and other regions as they spend vast amounts overseas. We fear their economic power now, as we did Japan in the 1980s, but China could become overextended, as Japan was 30 years ago. China is much bigger and stronger, of course, but China also needs our trade and trade of other nations. They will not likely throw that all away over a President finally calling their bluff.

Global Mail:

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

Deconstructing Russian Conspiracy Theories

by Ivan Martchev

On March 31, 2018, the Russian Embassy in Paris addressed a list of questions to France titled, “Russia’s questions to France regarding the Skripal case fabricated against Russia by the United Kingdom.”  (This refers to the poisoning of Sergei Skripal and his daughter Yulia in Salisbury, England on March 4.)

Here are their questions, as taken from the Russian Foreign Ministry website:

  1. On what grounds did France become involved in the technical side of the United Kingdom’s investigation of the incident in Salisbury?
  2. Has France officially notified the Organisation for the Prohibition of Chemical Weapons (OPCW) of its involvement in the technical side of the investigation of the incident in Salisbury?
  3. What evidence did the United Kingdom hand over to France as part of the technical side of the investigation?
  4. Were French specialists present when biological samples were collected from Sergey and Yulia Skripal?
  5. Did French specialists conduct their own tests of the biological samples collected from Sergey and Yulia Skripal and, if so, at which specific laboratory?
  6. Based on which attributes did the French specialists conclude that the chemical warfare agent of the Novichok type (in accordance to British terminology) or its analogues were used in this case?
  7. What expert knowledge does France have in studying chemical warfare agents of this type or its analogues?
  8. Based on which attributes (markers) was the alleged “Russian origin” of the substance used in Salisbury established by French specialists?
  9. Does France have control samples of the Novichok chemical warfare agent (in accordance to British terminology) or its analogues?
  10. Have samples of the chemical warfare agent of this type or its analogues been developed in France and, if so, for what purpose?

As French author Voltaire once noted, one has to “judge a man by his questions rather than his answers.” Voltaire also said, “I disapprove of what you say, but I will defend to the death your right to say it.”

I bring up the Skripal poisoning case as it seems absurd to me for the Russians to be so stupid (and so obvious) as to draw immediate parallels with the poisoning of another Russian spy in 2006 with a radioactive material in London. Neither would they be so stupid to use something called Novichok so that the attempted poisoning could immediately be blamed on them.

The peculiarities mounted on Sunday as we saw news that the Syrians have again seemingly used chemical weapons in a military situation in land that they control with ISIS on the run. It is so obvious that Syria did this that it would make zero sense for them to use chemical weapons in such a situation. In previous situations, there has been proof that chemical weapons attacks have been caused by others but staged so that they can be blamed on the Syrian government. The only explanation is that whoever staged them wanted to draw a particular response from powers outside the region, namely the U.S. government.

Here are some relevant parts of the U.S. President’s tweetstorm response on Sunday:

“Many dead, including women and children, in mindless CHEMICAL attack in Syria. Area of atrocity is in lockdown and encircled by Syrian Army, making it completely inaccessible to outside world. President Putin, Russia and Iran are responsible for backing Animal Assad. Big price…to pay. Open area immediately for medical help and verification. Another humanitarian disaster for no reason whatsoever. SICK!”

“If President Obama had crossed his stated Red Line In The Sand, the Syrian disaster would have ended long ago! Animal Assad would have been history!”

We will never know all the facts, but isn’t it peculiar that just after President Trump mentioned pulling out of Syria, this chemical attack happened? Could it be that someone does not want the U.S. to pull out?

I absolutely agree with Mr. Trump’s repeated points that too many American lives and too much money has been spent in the Middle East since 2001 without a lot of results. While I fully supported intervening in a failed country like Afghanistan in 2001 to get the Taliban out and chase Osama bin Laden out of hiding, the fabricated WMD evidence in the case of Iraq was the low point of the Bush administration.

Likely Implications for the Stock and Bond Markets

I am worried that a military attack on the Syrian forces will provoke a military response by the Russians and all hell will break loose. In such a scenario the February lows in the stock market may not hold.

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

Here’s another tweet from the President on Sunday morning:

“President Xi and I will always be friends, no matter what happens with our dispute on trade. China will take down its Trade Barriers because it is the right thing to do. Taxes will become Reciprocal & a deal will be made on Intellectual Property. Great future for both countries!”

I find it most interesting that on this last leg lower in the stock market, which started with Chinese trade tensions, the Treasury market has been rallying, which is very different than the selloff in Treasuries we saw in February, at the start of the first leg in the selloff. This has caused massive yield curve flattening and a new low for the 2-10 spread (below 50 basis points) for this economic cycle. That means investors are worried about the economy.

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

I happen to think that if Mr. Trump pulls out of Syria, de-nuclearizes the Korean Peninsula, and rebalances the U.S. trade imbalance with China he will be regarded as great a President as Ronald Reagan. Although I do not like his behavior towards adult film actresses and models, I will say to Republican party supporters who have been eerily silent about this that it will have been worth it if he could accomplish all the above.

But it seems to me that someone really does not want him to succeed. 

Sector Spotlight:

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

Common Misconceptions About Life and the Markets

by Jason Bodner

Fair warning: I am either going to enlighten you or ruin your day right now.  Here are some myth-busters: 

  • Napoleon wasn’t short. When he was measured at death he was found to be above average height for a Frenchman at the time.
  • That yummy breakfast pastry the Danish really came from Austria.
  • Blind as a bat? Bats aren’t blind. They have normal eyesight, but just don’t like bright light.
  • A duck’s quack does of course echo.

And toilet flushes don’t actually spin the opposite directions in different hemispheres. That phenomenon is reserved for monstrous storms like hurricanes, hundreds of miles large.

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Why are these misconceptions taken for given, making their way into our daily lives? Let’s look at a controversial current example. In 1988, a doctor named Andrew Wakefield published a paper claiming that he found a link between a vaccine given for measles, mumps, and rubella (MMR) and autism. The study consisted of just 12 people – a very small sample: A drug study done on 12 subjects is not a study. It must be done on thousands of participants to be a controlled study. Nonetheless, this paper caused a huge debate. But the part you may not know about is that investigators found Wakefield changed his data to fit the premise of his theory. The beauty of science is that it is peer-reviewed. The system is set up so that other scientists can try to replicate the results of a published experiment. If they confirm the results, that’s great, but if they can’t, the theory must be amended and tried again or abandoned. Well, no one could replicate Wakefield’s results. The paper was retracted, and Wakefield lost his medical license.

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My point is that once a misrepresentation is planted in the minds of some of the public, it is presented as fact.  Now I risk upsetting some people, including Jenny McCarthy, but I must admit I am a man of science. I like data. If looked at clinically and cold, the facts don’t lie. Data manipulators know that “massaged” data can tell the story they want to tell.  There’s even an instruction manual (first published in 1954), “How to Lie with Statistics,” by Darrell Huff.  Yes, it’s easy to twist facts, but when used as part of an honest search for the truth, empirical research and historically proven data will lead you to the truth.

How does this apply to the stock market? Is the market overvalued or does it have room to grow? The answer is in the data. I look at hundreds of stats on more than 4,000 stocks a day. Why do this? Because the truth is often different from the rumor, noise, and theatrics we are exposed to by the financial media.

Is the market headed for another major correction or crash? Let’s see where the financial market was in the fall of 2007, right before the last big crash. What were the interest rates and the P/E ratios then?  The data showed that we were in a sinkhole that economists labeled a “repression.” That sounds much worse than a recession, because it is. The world’s banking institutions were in serious jeopardy back then.

For the past nine years we have seen a gradual recovery with a gradual rise in employment amid low interest rates. We are now in a healthy growth environment. Companies are strong and NOT overvalued because their balance sheets reflect growth at reasonable rates. Profits are rising, hiring is increasing, and retail purchasing power and participation are all growing. So, why are we seeing all this market volatility?

Looking for Leaders in a Red-Ink-Stained Sector Scorecard

It’s tough to look at sectors when everything is sloshing around.  It’s like trying to look for a trend in a see-through dryer. It’s better to watch which sector leads us out of volatility than focus on the day-to-day action, but let’s look at the facts anyway. It’s no surprise that the past three months are entirely in the red.

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What’s really going on here? A friend who runs a derivatives desk at a major bank told me that this volatility is still an aftershock from the VIX blowup in February. He said that there was $4 billion worth of “short-gamma” heading into February through correlation trades.  In plain English, that means the big players had massive leveraged bets that the S&P 500 volatility would remain subdued. Surprise! When things went against them, there wasn’t even enough room to run for the exits.  Some of these positions must be unwound over several months. In short, this has become a very big and crowded unwind.

To make matters worse, when the market starts to find its footing, all it takes is a new Presidential tweet to stir up the hornet’s nest again. Whether or not it’s rhetoric or a negotiating position or a real threat, tariffs on an additional $100 billion of products have major implications, and the market doesn’t like it.

Volatility is rampant right now but don’t lose sight of the underlying facts. Fear of the stock market forcing you to sit on the sidelines can cost you valuable future growth. This is especially true if current theories are not rooted in reality. When you were a kid, you heard, “Do your homework!” If you can’t do homework on your investments, at least make sure you take advice from someone who does it for you.

Irresponsible actions of a former doctor may have endangered the lives of many children with some popular public opinion embracing his ideas vilifying vaccination. Science and data say otherwise and it’s ultimately up to you to decide what you believe. The markets are anxious right now. Whether it’s diabolical derivatives traders, China trade wars, or ever-murkier uncertainty, we may never know.

Keep focused on facts, but when the going gets smooth again, beware of the rogue tweet. You may end up feeling like Michael Corleone when he said, “Just when I thought I was out, they pull me back in!”

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A Look Ahead:

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

First-Quarter Rise (and Fall) Could Lead to a Strong Recovery

by Louis Navellier

Bespoke Investment Group came out with an encouraging study last Friday.  Apparently, there have been very few recent years in which the S&P 500 rose more than 5% during the first part of the first quarter and then fell by more than 5% from that peak until the end of the quarter. That, of course, happened this year with a 7.5% rise through January 26 and an 8.1% decline by the end of the quarter. Most years with these wide swings took place in the 1930s. There have only been three such occurrences in the last 70 years – in 1980, 1997, and 2003 – and the results following those wide swings are very encouraging:

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Including all 10 years of rising and falling first-quarter market years going back to 1931, Bespoke calculated that the median market returns following a rapidly rising and falling first quarter were +5% in April, +10.6% in the second quarter, and +27.9% for the rest of the year.  There is no guarantee that we will see anything like those returns this year, but I’ll certainly settle for numbers half that size.

The “Tariff Tantrum” is Overwrought – Global Trade is Growing

The financial media’s hysteria over threatened tariffs is not helping the national mood or the market mood, but the improving weather in the Northern Hemisphere should help to bolster ISM numbers in the spring.  For example, robust global chip sales have grown for 19 straight months and February’s chip sales rose 21% to $36.8 billion, just shy of the monthly record of $37.6 billion, set in January.  This essentially means that the first-quarter results for many technology companies should be truly stunning!

The news media tell us that the U.S. trade deficit continues to rise, but that’s due largely to a strong global economy.  Specifically, on Thursday, the Commerce Department announced that the U.S. trade deficit rose 1.6% to $57.6 billion in February, the highest level in 9½ years (since October 2008).  Exports rose by 2.3% in February to $137.2 billion, while imports rose by 1.6% to $214.2 billion.  Putting those numbers together, total trade grew 1.9% from $344.9 billion in January to $351.4 billion in February.

Interestingly, imports from China declined 14.7% in February, so President Trump cannot blame China for the jump in the February trade deficit.  Typically, the stronger the U.S. economy, the faster the trade deficit tends to rise, so robust GDP growth seems to be the primary reason for a larger trade deficit.

The Institute of Supply Management (ISM) reported last week that its manufacturing index slipped to 59.3 in March, down from a 14-year high of 60.8 in February.  Since any reading over 50 signals an expansion, the ISM manufacturing index is still very robust.  Furthermore, on Wednesday, the ISM service index decelerated to 58.8 in March, down from 59.5 in February, which is still very strong.

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On Friday, the Labor Department announced that March payrolls rose by a surprisingly small 103,000, substantially below economists’ consensus estimate of 178,000.  The unemployment rate remains at a 17-year low of 4.1%.  January and February payrolls were revised down by a cumulative 50,000 to 176,000 in January (down from 239,000) and 326,000 in February (up from 313,000).  Average hourly wages rose modestly by 8 cents (+0.3%) to $26.82 per hour in March and have risen 2.7% in the past 12 months. 

I should add that on Wednesday, ADP reported that the private sector created 241,000 new payroll jobs in March, the fifth straight month that the private sector created in excess of 200,000 payroll jobs. Since the Fed tends to follow the Labor Department’s payroll figures more than ADP, the Fed will likely postpone another interest rate increase until there is more evidence of wage inflation and more robust job growth.


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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 Blue Chip Growth, Louis Navellier’s Emerging Growth, Louis Navellier’s Ultimate Growth, and Louis Navellier’s Family Trust, are not based on any actual securities trading, portfolio, or accounts, and the newsletters reported performances should be considered mere “paper” or proforma performance results. The owner of the newsletters is InvestorPlace Media, LLC and any questions concerning the newsletters, including any newsletter advertising or performance claims, should be referred to InvestorPlace Media, LLC at (800) 718-8289. Navellier & Associates, Inc. does not have any relation to or affiliation with the owner of these newsletters. As noted above, there are material differences between Navellier Investment Products’ portfolios and the InvestorPlace Media, LLC, newsletter portfolios. In most cases, Navellier’s Investment Products have materially lower performance results than the InvestorPlace Media, LLC newsletter portfolios and advertising materials claim to have. The InvestorPlace Media, LLC newsletters and advertising materials typically contain performance claims that can significantly overstate the performance results compared to actual results for similar Navellier Products.

Navellier claims compliance with Global Investment Performance Standards (GIPS). To receive a complete list and descriptions of Navellier's composites and/or a presentation that adheres to the GIPS standards, please contact Navellier or click here. It should not be assumed that any securities recommendations made by Navellier & Associates, Inc. in the future will be profitable or equal the performance of securities made in this report. Request here a list of recommendations made by Navellier & Associates, Inc. for the preceding twelve months, please contact Tim Hope at (775) 785-9416.

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