Market Indexes are Down

Market Indexes are Down in May Over Several Global Crises

by Louis Navellier

May 29, 2019

China 5G Image

The S&P 500 is down about 4% so far in May (through last Friday) mostly due to trade tensions with China, but those tensions were loosened somewhat on Friday after U.S. officials eased some of the trade restrictions on China’s 5G giant, Huawei, granting them a 90-day temporary extension to stock up on U.S. semiconductor orders. Since Google provides their Android system, Huawei’s 5G phones will be at a tremendous disadvantage without access to Android’s voice recognition. Clearly, Huawei will be forced to develop its own voice-activated system if the fight over 5G continues and lasts for over 90 days.

This move gives Presidents Trump and Xi time to work out a face-saving solution to the trade war.  As I have repeatedly said, both Trump and Xi want to say they “won,” so the new trade deal must benefit both China and the U.S.  In the meantime, do not be surprised if China devalues the yuan to offset tariff costs.

In my opinion, however, Thursday’s market decline stems more from European fears than China, as I’ll explain below. There’s also a crisis brewing in Iran, which Bryan Perry examines in more detail below.

(Navellier & Associates does not own Google or Huawei in managed accounts and our sub-advised mutual fund.  Louis Navellier and his family do not own Google or Huawei in personal accounts.)

In This Issue

Bryan Perry doesn’t think President Trump will authorize any Mideast War, but he recognizes the risk.  More importantly, he chronicles a record quarter of global and domestic dividends and buy-backs. Gary Alexander takes us back a century to a very troubled year, 1919, but a great (+30%) year for stocks. Ivan Martchev settles in for the long-game in the China-U.S. “trade storm,” while describing what seems to be a typical bit of deception in Huawei’s intellectual property (IP) practices. Jason Bodner shares a personal angle on how stocks tend to return to their long-term ascent after normal corrections. Then I’ll examine the unrest in Europe as the main culprit for last Thursday’s market malaise, and a closing note on Tesla.

Income Mail:
Perception of Risk of an Iran War Feeds Market Tension
by Bryan Perry
U.S. Leads Record Quarter of Rising Dividend Payouts

Growth Mail:
A Memorial Day to Remember – 1919
by Gary Alexander
We Don’t Know History, So We Don’t Know How Good Things Are Today

Global Mail:
The Calm before the Chinese Trade Storm
by Ivan Martchev
An Anecdote on Chinese IP Practices

Sector Spotlight:
Remember – Great Stocks Always Go Back Up
by Jason Bodner
A Return to Red Ink Last Week

A Look Ahead:
European Unrest Was a Big Cause of Last Thursday’s Sell-off
by Louis Navellier
Analyst Sees Decline of Tesla to $10 a Share

Income Mail:

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

Perception of Risk of an Iran War Feeds Market Tension

by Bryan Perry

For four weeks, the S&P 500 has slid lower amid trade tensions with China, while the European Union (EU) devolves into a body losing support as populist and nationalist movements take hold throughout Europe. The resignation of British Prime Minister Theresa May only brought more uncertainty to the Brexit process that triggered a nasty sell-off in the pound last Thursday.

Both China and the EU are situational challenges the U.S. stock market has done a pretty good job of coping with – for the most part – supported by a healthy labor market, bond yields hitting multi-year lows, vigilant corporate stock buy-backs, and low inflation in areas that impact businesses and consumers. But the market has narrowed in recent weeks. It was reported on CNBC last week that 56% of S&P 500 stocks are in a bear market, even though the S&P is trading at roughly the same level as a year ago.

Currently, hopes are that the G20 meeting on June 28-29 in Osaka, Japan will generate progress. But that possibility is a full month out.  And now, seemingly out of nowhere, the U.S. is getting closer to an armed conflict with Iran. National Security Advisor John Bolton, working with Secretary of State Mike Pompeo, has begun sharing intelligence that had come into their possession from Israel that there were imminent attacks by Iranian forces or Iranian-supported factions in Iraq that were to be waged against U.S. forces.

Within a very short period of time, a U.S. Navy battlegroup moved from the Mediterranean through the Suez Canal and into the Persian Gulf, along with large numbers of aircraft. Now there is news that 1,500 soldiers will be deployed there. Normally, this would be deemed a military exercise, but when this large a concentration of military power so close to Iran is displayed it has the appearance of a pending conflict that may be averted, but a rogue attack on any U.S. assets could prompt a swift and heavy response.

The fact that alleged attacks were intercepted and averted is typically categorized as “business as usual” in the Mideast, but such threats run counter to President Trump’s ambition to remove U.S. forces and military operations from that region. The problem is that the latest round of rhetoric coming from the leaders of the Islamic Republic of Iran and the White House has turned provocative, and the longer we stay, the higher the probability of a mass casualty event at an American military installation.

There is no public support for another war in the Middle East. That is why I believe President Trump will not commit to launching a war in front of an election year, but rather he will make every effort to get out of the region – despite pressure from the military industrial complex. In past decades, our vital interest was oil, and now it’s not. Israel has excellent intelligence and precision strike capability. If there is clear-cut evidence of Iran making weapons-grade uranium, those targets can be taken out by Israeli air strikes.

Despite last week’s saber rattling, oil prices actually fell hard last week, on much higher weekly inventory data. WTI closed the week at $58.83/bbl. Oil traders are betting that war with Iran is not on the table.

Crude Oil Price Chart

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

Given the angst over a potential trade war with China and political disarray in Europe, it’s my view that the stock market is vulnerable to an escalation of a potential military exchange with Iran and how it brings Russia and China into the fray. Where Iraq was alone in their war with the U.S., Iran is not. As far as I can tell, one of the best ways to lower the threat against U.S. assets in the Mideast is to leave the region.

U.S. Leads Record Quarter of Rising Dividend Payouts

And now for some positive news. Global dividends reached a first-quarter record of $263.3 billion, rising 7.8% despite well-publicized fears of a slowing world economy. The Janus Henderson Global Dividend Index showed that U.S. dividends totaled a record $122.5 billion for the quarter, up 8.3%.

The report stated that “almost 90% of the companies featured within the index raised dividends, the highest increases coming from the banking sector.” Janus Henderson also says, “Investors can look forward to dividend growth of around 4% to 5% in 2019 and another record year for dividend payments.”

Global Dividend Growth Image

The report cited the Asia-Pacific region as posting the strongest year-over-year dividend growth rate of 14.7%, exceeding the global average for the past five years as Japan adopted a more pro-dividend culture with its aging population. Stock buy-backs for the first quarter of 2019 were also on pace to set yet another record. As of March 15, companies had bought $253 billion worth of their own stock, $18 billion more than the same period a year ago, according to Michael Schoonover, COO of Catalyst Funds.

A rebounding economy, low interest rates, and the windfall from the 2018 tax cuts are driving the record share repurchases and dividend increases that – in spite of what may come out of China, Europe, and Iran – are providing an underlying bid for U.S. stocks. These are huge numbers, which support a new paradigm and a higher market, especially if quarterly sales and earnings continue to surprise to the upside, as was the case in the first quarter. The headlines may be full of angst, but the data still favors the bulls.

Growth Mail:

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

A Memorial Day to Remember – 1919

by Gary Alexander

Memorial Day weekend is a time for, well, remembering, especially American history, and for honoring those who have sacrificed so much so that we can have so much and, apparently, be so unthankful for it.

I say “unthankful” because nearly every press outlet, TV station, and internet platform seems obsessed with what’s wrong with America, from one side or the other. Headlines seem determined to tell us that this is the “worst generation” for this or that, including the first generation to earn less than their parents (I’ve heard that for the last two generations), but I don’t think we’d want to live in any other generation.

To dramatize history, I produced a play last weekend in my hometown. It was set 100 years ago in 1919, at a meeting of the Woodmen of America, as they planned a Memorial Day tribute for returning soldiers of The Great War, while facing multiple challenges of that era – two Constitutional Amendments sifting their way through the states, one ultra-conservative measure for alcoholic Prohibition and one liberal measure for women’s suffrage. There was also a killer Spanish flu epidemic, an anti-immigrant mania, war resistance and trials for sedition, wounded veterans, new forms of dance and jazz, inflation, and more.

In my play, I contrasted a meeting of the all-male Woodmen of America with the all-female Maccabees, debating the virtues of Prohibition and women voting, the health challenges of flu, and the war wounded, but also a real-life story of a religious commune on our island, in which the pastor counseled evasion of the war draft, resulting in a sedition trial and a midnight escape by boat – all real historical events, which I reduced down to an intimate drama, “The Mystery of the Vanishing Quilt Lady,” who left with the pastor.

Woodmen of America Hall Image

On the same day I was staging this play about the historical challenges of 1919 in rural Washington State, The New York Times published a similar historical survey of 1919 events by Dr. Matthew Avery Sutton, a professor of history at Washington State and author of “American Apocalypse: A History of Modern Evangelicalism.” The article tells how a meeting on May 25, 1919 in Philadelphia changed America.

Dr. Sutton sets the stage: “For many Americans, it was thrilling to be alive in 1919. The end of World War I had brought hundreds of thousands of soldiers home. Cars were rolling off the assembly lines. New forms of music, like jazz, were driving people to dance. And science was in the ascendant, after helping the war effort. Women, having done so much on the home front, were ready to claim the vote, and African Americans were eager to enjoy full citizenship, at long last. In a word, life was dazzlingly modern. But for many other Americans, modernity was exactly the problem. As many parts of the country were experimenting with new ideas and beliefs, a powerful counterrevolution was forming … Beginning on May 25, 1919, 6,000 ministers, theologians, and evangelists came together in Philadelphia…”

In short, these ministers believed these massive changes signaled an approaching Apocalypse. The Four Horsemen were saddling up. The Great War was the first Horseman. Another horse was the killer global plague, the flu. The reshaping of Palestine in 1917 served as another warning that the end was near. The prospect for a League of Nations was another landmark on the road to Armageddon. And women voting!?

President Wilson’s wartime Committee on Public Information validated their fears. “The demand of the State will leave no room for freedom of thought, or independence of action in any direction whatsoever,” wrote evangelist W.W. Fereday. “Practically everything and everybody,” he worried, would soon be under government control. The growing prominence of Darwinian evolution was another huge bugaboo.

Spanish Flu Deaths versus Dow Jones Industrial Average

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

P.S. The Dow Jones Index rose 30.5% in 1919. The big rise began as deaths from the flu epidemic ended.

We Don’t Know History, So We Don’t Know How Good Things Are Today

Pundits on cable TV howl about how conditions are worse now than at any time in U.S. history, when they are by most measures the best ever. We also hear that Mr. Trump is our “worst President ever,” when 150 years ago we had scandal-ridden Andrew Johnson and Ulysses Grant, and 100 years ago we had a racist and semi-dictatorial Woodrow Wilson, who was incapacitated by a stroke in 1919 (his wife was effectively President for 17 months), and 50 years ago we had “Tricky Dick” Nixon running things.

In 1919, we also had general strikes in Seattle and Portland, a police strike in Boston, and the Red Menace threatening our coal and steel industries. And the 1919 World Series was fixed! Looking back further…

200 years ago, the financial Panic of 1819 swept America, triggering one of the worst depressions in American history. As one observer put it, “Nothing is to be seen but a boundless expanse of desolation! Wealth is impoverished, enterprise checked, commerce at a standstill, the currency depreciated.” Prices for basic goods plunged. Cotton prices dropped 50% in one year. Congress passed severely protectionist tariff legislation, to protect America’s “infant industries” and tariff levels grew throughout the 1820s.

Some recommended history books covering these three years:

Three Recommended History Books Image

150 years ago, we began the final months of the first impeached President, Andrew Johnson, and the first year of one of the most disgraced Presidents in history, Ulysses Grant, starting with the gold speculation ring. By mid-September 1869, the “gold pool” held many times the gold supply available on any market.  President Grant was part of that pool!  The North and South were bitterly divided under Reconstruction, but we also united the East and West with the Golden Spike linking the nation by rails on May 10, 1869.

I have picked three years that “rhyme with 2019,” but there were difficult times in almost every year in our distant past. Memorial Day is a time to honor past sacrifices, which made today’s prosperity possible.

Global Mail:

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

The Calm before the Chinese Trade Storm

by Ivan Martchev

With about a month to go before the G20 summit in Osaka, it is unlikely that we will see any more key developments on the trade front between China and the U.S. The U.S. has already declared that it will cut off Huawei from key components and technology, but it has given them a 90-day waiver to “stock up.”

It looks like the Chinese either never intended to make a trade deal and were just stalling to buy time, or they are testing the limits of President Trump, who may have oversold the progress of the trade deal as “90 percent done” and “on the 5-yard line” just days before he tweeted his tariff hikes. It is very likely that the U.S. trade negotiators were mis-led in calculated fashion into this awkward position.

If readers of this column want some top-notch entertainment on how Asians tend to negotiate, I would recommend the 1993 film Rising Sun about the takeover of a fictional U.S. semiconductor company by an equally fictional Japanese conglomerate. Despite the numerous entertaining twists and turns, the film does a good job of delving into the “cloak and dagger” strategies of how some countries negotiate. At any rate, this certainly appears to be true about the calculated last-minute U-turn by the Chinese trade delegation.

If the Chinese have decided to go into a full-blown trade war with the Trump administration, that means they have concluded that they have more to win without a trade deal than with the one that seemed “90 percent done” just a few weeks ago. I suppose we will find out soon enough if the Chinese were merely testing President Trump or had decided long ago not to have a trade deal.

Right now, this trade friction is not yet an economic event, but it has the potential to become one very quickly.  This is why the 10-year Treasury yield dropped to 2.29% last week, below the fed funds rate. This is why the eurodollar and fed funds futures markets are calling for an interest rate cut by the Fed!

Yield Curve Chart

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

The classic slope of the yield curve, as reflected in the 2-10 spread, is still not inverted, even though both the 2-year and 10-year note yields are dropping, as the trade headlines worsen and as German bund yields go further into negative territory. (Europe and Brexit are another big source of global deflation.)

While a deal can still be saved (if the Chinese were merely testing Trump), the worst case scenario of no trade deal (where the Chinese were just buying time) should make the economic environment much more hostile, suggesting further drops in Treasury yields and perhaps a Federal reserve rate cut, especially if the Chinese have decided to devalue the yuan, which would be a deflationary shock to the global economy.

We should not forget that the December 1993 yuan devaluation sowed the seeds of the Asian Crisis of 1997-1998. The 1993 34% yuan devaluation capped a period when the yuan was devalued from 3.73 in 1989 to 8.73 in 1994. The trouble is that the Chinese economy is now 20 times larger, so a devaluation to counter U.S. tariffs and create the necessary inflation to inflate away part of the mountain of debts in the Chinese financial system will have a much bigger effect on the global economy than it did in 1993.

An Anecdote on Chinese IP Practices

I have an acquaintance, a semi-retired tech executive who used to work for a company that makes optical components for telecom equipment in China. My friend relayed and interesting experience he had while working for the company in China.

When the executive arrived in China, his predecessor warned him that there were likely some eavesdropping devices in the offices and that he should take sensitive discussions out of the office (reminiscent of the film, Rising Sun). Our tech executive flew in a sweeping team from Japan (out of concern that any such service delivered within China might be compromised). The Japanese team swiftly presented him with a map of 300 listening devices and warned him not to disrupt the devices as they feared that they will just show up in different locations a month later. Removing eavesdropping devices would be pointless, as this was a normal practice in China.

Sector Spotlight:

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

Remember – Great Stocks Always Go Back Up

by Jason Bodner

The past few days were an emotional roller-coaster for me. A good friend beat an 18-month battle with leukemia only to succumb to pneumonia weeks later. The next day, my family enjoyed a massive party for two of my sons after their bar mitzvah. We were filled with joy and pride. Naturally, the DJ played “We are Family,” the Sister Sledge hit from the 70s. Everyone knew the song, since it is often played at weddings and parties around the world, but it was initially turned down by Atlantic Records.

The song was composed by Bernard Edwards and Nile Rodgers, the guys who went on to found the group Chic, whose song “Good Times,” is one of the most copied pieces of music in history.  The song’s bass line was the inspiration for Queen’s hit, “Another One Bites the Dust.” Edwards and Rodgers went on to produce tons of music for major stars in the 1980s, including Dianna Ross, ACDC, Rod Stewart, and more. Edwards died just after a performance in Tokyo with Rodgers. The cause was also pneumonia.

Bernard Edwards and Nile Rodgers Image

Life is amazing. Sometimes things just line up and come full circle. My weekend of joy, following a week of tough news, was summed up with one mega-successful 1979 hit. Personal trials and failures were echoed by the initial rejection of the song that captured the joy of my family celebration, which was also tainted by the same disease that got my friend in the end. A full-circle emotional journey in a short time.

When I heard that my friend passed last Thursday, the market was also having a bad day. Anxiety was sweeping the Street. Trade tensions made people nervous and popular long positions were unwinding.  It was a cruddy day, but in the end, it gave me perspective.  I suddenly didn’t care about ugly price action. The emotion of the moment wasn’t getting the better of me. I was able to focus on the important things – like happiness, humility, and thankfulness. I suddenly stopped fretting about the market, the news, and the volatility because I could relax in the security of one notion that we have at our research firm: “TAGU.”

TAGU stands for “They All Go Up,” meaning that all GREAT stocks (and many GOOD stocks), not all stocks, go UP. When we began our infatuation with great stocks, we watched some of them for years.  We sifted them to find the best traits: solid fundamentals of strong growth, technical strength, and institutional support. One thing about great stocks became shockingly clear:  THEY ALL GO UP (TAGU!)

Seriously, the best companies continue to be great.  These are the outlier stocks. They weren’t brought down by the bubble bust in 2000, or 9/11 the next year, or recessions, or even the financial crisis. Sure, there was temporary price pressure as nervous investors fled, but eventually, they all went up!

What I am saying is this: Don’t freak out about the trade news. TAGU! Don’t worry about border walls, or politicking, or inflation. TAGU! The trick is knowing which handful of stocks out of the thousands have this resiliency. Stocks have gone up for 100 years, but only 4% of them account for 100% of the net gains (above Treasuries) during that time. (Source: “Do stocks outperform Treasuries” by Henrik Bessembinder.) If we own TAGU stocks, we can stop worrying, turn off the noise, and focus on data.

A Return to Red Ink Last Week

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.

Energy was the laggard last week, down 3.5%. WTI crude oil fell -6.6% for the week.  Transports were down as well.  Recent selling was focused in sectors or groups but last week saw gentle selling across all groups and market caps. Focused pain points were energy and Semis.  While semiconductors were the top performing sub-sector since New Year’s, the PHLX semis index fell another -2.5% last week. China trade chatter caused traders to target semiconductor stocks. Wall Street shoots first and asks questions later.  I believe this profit taking will give way to some near-term pessimism.  But semis are the place to be long-term.  So have your TAGU shopping list ready – some great deals are out there!

When we look at unusual institutional selling, we see Tech logged a bunch of sells last week: software and semis saw many sell signals. Consumer Discretionary saw the most selling, led by specialty-retail and autos.  Metals & Mining stocks, Oil & Gas stocks, and Biotech also showed focused big selling.

Map Signals Table

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

I believe we are in a phase of profit taking.  After a major run up, the latest trade news was a perfect chance for traders to take some chips off the table.  Sales and earnings for Q1 were strong, and this looks just like a mini-replay of the last two times we saw a market reaction to trade war tactics. 

One thing is clear: The market doesn’t like it. But don’t worry, because …. TAGU.

Listen to Nile and Bernard of Chic:

“Good times, these are the good times
Leave your cares behind, these are the good times
Good times, these are the good times
Our new state of mind, these are the good times”

A Look Ahead

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

European Unrest Was a Big Cause of Last Thursday’s Sell-off

by Louis Navellier

Fractured European Union Flag Image

In my opinion, Thursday’s stock market sell-off had more to do with anticipation of European elections, a collapsing British pound, and the resignation of British Prime Minster Theresa May.  The elections for the 753 members of the European Parliament will run through Sunday. With the leadership of many major European Union (EU) countries – like Britain, France, and Germany – being weak or very unpopular, new members of the European Parliament are expected to be more nationalist and “populist,” which ultimately undermines EU unity, which German Chancellor Merkel and French President Macron are trying to build.  The strongest nationalist movements are currently in Italy and Spain, so it will be interesting to see if this populist uprising spreads to France and Germany. As a result, the EU will be viewed as much less unified.

The fact of the matter is that the EU is increasingly viewed as “the new Japan,” as far as interest rates are concerned.  Specifically, due to an aging population with generous social benefits, most EU countries cannot raise interest rates, and negative interest rates are becoming increasingly common.  These negative interest rates, plus the ongoing quantitative easing by the European Central Bank, which is preparing even more stimulus plans for September, is expected to further undermine the euro. A weak euro and a weaker British pound – as yet another Brexit deadline approaches – essentially assures that the U.S. dollar will remain strong and benefit from the international capital flight that continues to suppress U.S. Treasury yields.  (I discussed this international capital flight on my Thursday podcast, available on our Website.)

The 10-year U.S. Treasury bond hit a new multi-year intraday low of 2.297% on Thursday. This was likely caused by the currency panic in the British pound. As a result, market rates are now increasingly being controlled by international capital flows – and less by central banks.  The Fed is openly debating how to deal with the lack of inflation and whether or not an interest rate cut is warranted.  Furthermore, the collapse in crude oil prices on Wednesday and Thursday after higher-than-expected gasoline and crude oil inventories were reported is yet another clear signal that deflationary forces persist. 

The Fed does not fight market rates, especially the Treasury yield curve, so I suspect that the next Fed interest rate decision will be a cut, in order to get in-line with market rates.  In the meantime, this “Goldilocks” environment of low interest rates, decelerating inflation, and steady GDP growth persists.

I should add that the Federal Open Market Committee (FOMC) minutes were released on Wednesday, revealing that the Fed intends to remain “patient” on interest rates for “some time.” The minutes said, “Members observed that a patient approach to determining future adjustments to the target range for the federal-funds rate would likely remain appropriate for some time, especially in an environment of moderate economic growth and muted inflation pressures, even if global economic and financial conditions continued to improve.” The note added, “several” FOMC officials expressed concerns about the risk of low inflation readings leading to lower expectations of future inflation, but these Fed officials did not explicitly call for an interest-rate cut. Overall, the FOMC does not apparently want to invert the Treasury yield curve, so its balance sheet will remain a powerful tool for influencing interest rates.

Analyst Sees Decline of Tesla to $10 a Share

Some of the most interesting news last week happened on Tuesday, when Morgan Stanley analyst Adam Jonas cut his bearish scenario for Tesla to $10 per share, down from $97 per share previously estimated.  At $10 a share, Tesla would be worth less than $2 billion in market capitalization, down from $34 billion last Friday. Complicating matters further, Tesla recently sold over $2 billion in convertible bonds and has $12.7 billion in outstanding debt.  Although some debt could be converted to stock if Tesla defaults on its bonds and negotiates with bondholders, there is no doubt the company is in the midst of a “cash crunch.” 

As bearish as I have been about Tesla, I do not think its market capitalization will fall below $2 billion, as Morgan Stanley suggested. However, if and when Tesla “cracks” $10 billion in market capitalization (at less than $60 per share), I suspect the company will be acquired by a much larger auto maker.  I still believe that Geely, which owns Volvo and its electric car brand, Polestar, would be the most likely suitor.

Geely is based in China and Tesla is striving to shift its manufacturing to China as fast as possible, now that it has stopped expanding its Gigafactory outside of Reno, due to a lack of demand and continued battery manufacturing problems.  It is highly questionable if Tesla has the capital or partners to move its manufacturing to China.  As a result, it simply makes more sense for Tesla to team up with a big Chinese manufacturer like Geely, which has an ambitious electric vehicle push via its new Polestar brand.  This would also allow Geely to temporarily dominate the electric vehicle market until VW Group (Audi, Bentley, Bugatti, Porsche, Seat, and VW) catches Tesla in electric vehicle output in the upcoming years.

Also, the automotive industry is generally weak, as orders for motor vehicles and parts declined 3.4% in April.  The Commerce Department announced on Friday that durable goods orders declined 2.1% in April, due predominantly to a 25% plunge in commercial aircraft orders and a smaller drop in motor vehicle orders.  Excluding transportation, durable goods orders were unchanged in April.  Orders for defense goods were especially strong and rose 4.8% in April.  Orders for core capital goods, excluding defense and transportation, declined 0.9% in April, which marks the first decline in four months.  In the past 12 months, core capital goods orders, which represent business investment, decelerated from a 3.8% annual pace to only a 1.3% annual pace in April, the lowest pace since January 2017, but the fact that business investment is decelerating should help keep interest rates low, which is good for stocks.

(Navellier & Associates does not own Tesla in managed accounts or our sub-advised mutual fund.  Louis Navellier and his family does not own Tesla in personal accounts.)

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