Market Leadership Continues

Market Leadership Continues to Narrow in the Second Quarter

by Louis Navellier

June 1, 2015

The S&P 500 fell 0.88% last week but it rose 1.05% in May (and 2.36% year-to-date), as the seismic shift in market leadership continues.  The best way to illustrate this is by the following chart, which shows that only 18 of the 50 largest stocks are anticipated to post positive sales and earnings growth this quarter:

Top Fifty Stocks by Market Capitalization Chart

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

Many of the largest multinational companies are expected to post negative second-quarter sales growth due to a strong U.S. dollar taking a toll on their earnings and on overall GDP. In my opinion, the rotation into quality stocks with growing sales and earnings will continue to persist in this continuing flight to quality.

Jackson Hole ImageIt is also becoming increasingly obvious that the Fed does not want to talk about interest rates, since on Tuesday the Fed announced that Fed Chair Janet Yellen would skip the Kansas City Fed’s annual conference in Jackson Hole in late August. Her behavior strikes me as odd since top central bankers from all over the world attend the Jackson Hole conference every year and this year will be no exception.  It is also one of the most beautiful places in the world to be, especially in late summer. Perhaps the dovish Ms. Yellen does not want to support the historically hawkish Kansas City Fed, but this is no reason to hide from the financial media and not discuss Fed policy.  This may raise more speculation about what the Fed will do next but, in my opinion, it is further proof that the Fed may not want to raise rates in September.

In This Issue

Income Mail:
Fresh 12-year Yen Lows
by Ivan Martchev
The Fed Funds Rate is Not the Fed Funds Rate Anymore

Growth Mail:
Is the U.S. Market Overdue for a June Swoon?
by Gary Alexander
Market Sentiment Remains Dismal
The Virtue of Humility in Making Specific Market Predictions

Stat of the Week:
First-Quarter GDP Revised Down to -0.7%
by Louis Navellier
Housing Remains the Brightest Light on the Economic Dashboard

Income Mail:

Fresh 12-year Yen Lows

by Ivan Martchev

While the U.S. Dollar Index still has not recaptured the 100 mark – which is only a matter of time, in my opinion – the yen has renewed its slide for the past two weeks and in the process has managed to register fresh 12-year lows against the dollar. This move followed the announcement that the U.S. registered a large trade deficit in the first quarter, which caused 1Q GDP to contract while Japan had been improving its trade balance of late as the yen has gone from under 80 to above 124 so far in this weakening cycle.

Still, the trade balance is only a small part of the currency equation as monetary policy, governmental budget balances, and overall productivity and competitiveness also play large roles in the currency relationship. The yen is in a multi-year slide because the central bank has facilitated the policies of Prime Minister Shinzo Abe, dubbed Abenomics, by which excessive quantitative easing coupled with deficit spending is meant to end 20 years of deflation and get Japan on a sustainable growth path.

It’s not working, as this chart shows:

Japanese Inflation versus Central Bank Balance Chart

Source: TradingEconomics.com

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

Since the Japanese QE is 3X more aggressive than the Fed’s, relative to the size of the Japanese economy, and it is designed to create higher inflation via numerous channels that are supposed to inject that monetary liquidity into the broad economy and the stock market, it is amazing how the inflation picture is still so benign. The inflation rate pickup in 2014 has completely unwound itself courtesy of falling commodity prices and weakening demand in Asia due to the ongoing Chinese economic slowdown. At present, Japanese inflation runs at a rate of 0.6%. This collapse in inflation is happening at a time when the central bank’s balance sheet has gone parabolic and is at present valued at ¥ 332,819 billion.

United States Dollar Japanese Yen Exchange Rate - Weekly OHLC Chart

Source: Barchart.com

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

While the policy of bringing down the yen via aggressive quantitative easing has done little for the overall inflation outlook, it has lit a fire under the Nikkei 225 index (green line, above) which has tended to be heavily correlated to the decline in the yen. While multinationals cause the S&P 500 to have about 40% of EPS derived from operations outside for the U.S., in Japan the ratio of foreign-generated EPS is much higher for members of the Nikkei 225. Some Japanese exporters derive upwards of 80% of their earnings from abroad so this decline in the yen (more yen per dollar is a counter-intuitive rising trend in the USDJPY rate, black line) has been closely correlated to the rise in the Nikkei 225 benchmark index.

The Nikkei has also done something remarkable – it has cleared the high from 2007 at 18,300. By taking out that previous multi-year high and by staying above the 6995 low from October 2008, the Nikkei is now beginning to register a series of higher highs and higher lows that indicate that a major multi-year uptrend may be starting.

The problem is that the Japanese debt-to-GDP ratio keeps rising while the population keeps shrinking, so a day of reckoning is coming in the sense that the Japanese have no way of paying back the money they have borrowed under the present shrinking population/rising deficit dynamics. This manufactured bull market in the Nikkei appears to be primarily due to the policies of the BOJ and may not necessarily represent anything structurally positive occurring in the Japanese economy.

If the Japanese financial system does blow up, it may be many years, as the BOJ is confident that they can stop their printing presses just before the country runs out of trees. Why the BOJ is confident escapes me as such a monetary experiment has never been done before on such a scale.

If the bull market in Japan continues, possible ways to capitalize are through two yen-hedged ETFs from both Wisdom Tree and Blackrock that would be able to roughly capture the rise in the Japanese stock market by largely removing the counterbalancing effect of the yen.

After all, what good is a Nikkei that doubles (to a U.S.-based investor) if the yen gets cut in half? They will largely cancel each other out. As long as the BOJ promotes deforestation policies in Japan, the yen may continue sliding and the Nikkei may continue rising. I just have trouble believing that they will know the exact moment when to stop before Japan begins to look like Easter Island.

The Fed Funds Rate is Not the Fed Funds Rate Anymore

On the main page on Bloomberg.com, there was a peculiar article this weekend titled, “What Will Happen to a Generation of Wall Street Traders Who Have Never Seen a Rate Hike?”

My answer: The same thing that will happen to all traders.

There isn't a person alive and trading today who has ever seen an excess reserves rate hike and reverse repo activity to the tune of hundreds of billions of dollars, but that appears to be coming.  As far as quantitative easing maneuvers are concerned, all traders are freshmen.

Federal Fed Rate Hike Chart

Source: Bloomberg.com

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

When this excess reserve interest of 0.25% was introduced by the Federal Reserve in late 2008, the fed funds rate began to matter less, a lot less. The fed funds rate may still be dubbed “the policy rate,” but it is not how the Fed conducts policy anymore. It is via balance sheet operations that the Fed has engineered the Great Recovery following the Great Recession, not by fed funds rate cuts.

In many respects, interest on excess reserves is the new policy rate and it is at least as important as the fed funds rate. This is because if interest on excess reserves is higher than the fed funds rate, why would a financial institution in its right mind lend those excess reserves in the fed funds market? This is why the Fed has kept the interest rate on excess reserves above the fed funds rate the whole time this QE business has been ongoing. And this is why fed funds sold (see below) have shrunk dramatically from pre-QE levels. If you can get a higher interest rate from the Fed, there is no point in lending them in the fed funds market.

Total Federal Funds Sold Chart

Source: New York Fed

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

What the hyper-inflationists and bond bears do not get is that the Fed, for lack of better words, has printed absolutely nothing. Excess reserves, which are the result of QE operations, are electronic entries in banks’ accounts at the Federal Reserve Bank of New York, so no “ink” is spilled. If excess reserves are not lent in the form of new loans, they stay at the Fed earning 0.25% in excess reserve interest.

The bond bears seem to miss the fact that interest on excess reserves killed the credit multiplier in the U.S. financial system. This is why monetary velocities are down across the board, as they are a function of QE operations. A lot of money is being electronically created by the Fed, but none of it is multiplying as before. If excess reserves do not multiply in the system via the fed funds market the way they did before there was any interest paid on them, then how could there be out-of-control inflation?

Excess Reserves - Total Assets Chart

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

QE was a gigantic monetarist maneuver to facilitate the force-feeding of credit in a financial system that was trying to deleverage naturally. In that regard it was a success. But the key question still remains: Can the Fed unwind its balance sheet without destroying the financial system and get back to doing business the way they did before?

I simply do not know the answer to this key question. I am not sure that even the central banker that introduced QE in the U.S. – Ben Bernanke – knows the answer, either.

Growth Mail:

Is the U.S. Market Overdue for a June Swoon?

by Gary Alexander

“…based on many years of making economic projections, I can assure you that any specific projections I write down will turn out to be wrong, perhaps markedly so.”

– Fed Chair Janet Yellen, May 22, 2015

Three years ago, the S&P 500 closed at 1278.04 on Friday, June 1, 2012.  The Page 1 headline in The Wall Street Journal the following Monday was: “Investors Brace for Slowdown…Global Economic Worries Deepen.” That gave me the idea for the column I wrote here that week (“Today’s Big Worries Could Spark a Flash Rally”).  The recovery didn’t actually come in a “flash,” but the S&P 500 was up 28% a year later and 65% three years later.  I concluded that 2012 piece by saying, “Whenever headlines are gloomiest, like now, smart traders buy,” so I guess I can claim some market-timing credentials.

A year later, on Tuesday, June 4, 2013, the Page 1 Wall Street Journal headline above the fold was: “Weak Signs for U.S. Output: Factories Suffer Worst Slump Since End of Recession.”  We disagreed again.  Our MarketMail headline that week was: “Japan (or China or Greece or the Fed) Can’t Kill this Bull Market.”

Last weekend (May 30-31, 2015), the big Page-1 above-the-fold headline in the Wall Street Journal was yet another version of this same concern over slowdowns: “Recovery Stumbles Yet Again: GDP Shrinks for the third time in 6 years.”  The cover story also included a series of nine charts outlining the weakness of this recovery.  Inside, the big stock market headline was, “Stocks Droop, Closing out a Weak Month.”  “Weak” implies a declining month, but the S&P rose 1.05% in May, setting four new all-time highs.

Earlier in the week, on Wednesday, May 27, the Journal’s “Money & Investing” section’s headline struck the same chord: “Stocks Swoon over Worries on Economy: Dow falls 190.48 Points.” (There was no equivalent-sized headline the next day, when the Dow recovered by 121 points. Good news is so boring.)

I’m not picking on The Wall Street Journal.  I love the paper. They are more positive than most, but they also know that bad news sells. It gets the adrenaline flowing, but it may turn some of us into adrenaline junkies, so here are some of my personal guidelines about evaluating headlines in the financial press:

  • When the financial news looks bad, that’s good (since a bull market “climbs a wall of worry”)
  • When the financial news is euphoric, that’s bad (too many are fully invested, so who will buy?)
  • That which we fear most is least likely to happen (since we usually take measures to prevent it)
  • Likewise, we can’t foresee big Black Swan events (like 9/11, a Flash Crash, earthquakes, etc.)
  • When the biggest headlines are soccer scandals, that’s good (since nothing worse is happening)

Using these guidelines, we seem to be in safe territory now (except for those “unknowable unknowns”).

Market Sentiment Remains Dismal

We’re certainly not euphoric. The weekly survey of the American Association of Individual Investors reveals that only 27% are bullish – the 12th straight week in which the number of bulls is below the long-term bullish average of 38.5%.  When the market hits new highs – as it did recently – you would expect to see a rise in bullish sentiment.  Well, the AAII survey “rose” (a baby step) from 25.2% the previous week to 27.0% last week; but both numbers remain far below the historical average of bulls in the AAII survey.

Investors are not pouring into stocks.  Quite the opposite. Over the last five weeks, investors have been net sellers of nearly $23 billion in domestic stock funds, according to the Investment Company Institute.  We’ve seen five straight weeks of negative flows. This is hardly consistent with a bubble-type euphoria.

 *Domestic equity mutual funds, in billions of U.S. dollars;
  Source: Investment Company Institute and Reuters 
Week ending Net outflows *
April 22 -$3.397
April 29 -$7.269
May 6 -$1.729
May 13 -$5.052
May 20 -$5.390

 

The pessimists want us to worry about the huge (215%+) gain in the S&P 500 since March of 2009.  They cite the fact that this bull market is far stronger (and has run longer) than the average length and strength of historic bull markets.  But they fail to tell you about the Lost Decade from 2000 to 2009, in which the S&P fell by over half.  From a longer-term perspective, we’re still climbing out of that huge black hole.

 Source: Yahoo Finance 
  Stock Index     May 31, 2000     May 31, 2015     15-Year Gain     Per Year  
DJ Industrials 10,522.33 18,010.68 +71.2% +3.65%
NASDAQ 3,400.91 5,070.03 +49.1% +2.70%
S&P 500 1,420.60 2,107.39 +48.3% +2.67%

 

From this perspective, we’re still reverting to the mean, i.e., rising toward normal historical growth rates.

I would further argue that the market is on firmer footing now than it was in 2000. For example, the price-to-earnings ratio of NASDAQ peaked at 175 in March of 2015. It is under 23 today, according to the weekend Wall Street Journal. Birinyi Associates estimates NASDAQ’s 12-month forward P/E is 19.44.

If you recall 1999, people were quitting their jobs to get rich overnight in day trading.  Is that happening today?  Employees with stock options in Silicon Valley became paper millionaires, bidding up prices of McMansions.  A best-selling 1999 book was “Dow 36,000.”  Seen any similar new book titles lately?

According to the Federal Reserve’s triennial Survey of Consumer Finances, the percentage of families owning stocks fell from a peak of 21.3% in 2001 to 15.1% in 2010 to 13.8% in 2013. They were burned by two long, brutal crashes in 2000-02 and 2007-09. Counting mutual funds and indirect stock holdings in their retirement plans, only 48.8% of U.S. households held stock directly or indirectly in 2013.  Once again, that’s not indicative of “bubble” territory, but of a time when most are still suspicious of stocks.

The Virtue of Humility in Making Specific Market Predictions

Are we long overdue for a market correction? Maybe. The last Big One came nearly four years ago, in the summer of 2011, when the S&P 500 fell from a 1345 close on July 22 to 1119 on August 8, down nearly 17% in 17 days.  The Dow careened down (or up) 420 points or more in four consecutive trading days from August 8 to August 11.  There was real fear in the air as the U.S. Congress debated a debt ceiling and government closure after Standard & Poor’s placed U.S. Treasury debt on Credit Watch on August 4.

A 10% correction might be good medicine for this slowly-rising market.  Corrections are normal, but we can’t know when they will occur.  When Federal Reserve chair Janet Yellen said in her Rhode Island talk on May 22 that “the outlook for the economy, as always, is highly uncertain,” those words got a lot of headlines, including here in MarketMail.  But in all fairness, let’s read her next two sentences as well:

“I am describing the outlook that I see as most likely, but based on many years of making economic projections, I can assure you that any specific projections I write down will turn out to be wrong, perhaps markedly so. For many reasons, output and job growth over the next few years could prove to be stronger, and inflation higher, than I expect; correspondingly, employment could grow more slowly, and inflation could remain undesirably low.”

– Fed Chair Janet Yellen in Providence, Rhode Island, May 22, 2015

I respect that level of honesty about the unknown future.  Even her key words “highly uncertain” should cause no red flags to wave.  It only means we can’t count on any hard-wired outcome from the existing indicators. This level of humility is refreshing. More investors would invest more profitably, in my view, if they didn’t buy into any firm predictions about “the coming crash” or the timing of the next correction.

Our recommended strategy here since the beginning of this year has been to be far more stock-selective. Louis Navellier has been writing about a massive rotation in stock market leadership since February. (See the February 9 MarketMail: “A ‘Seismic Shift’ in Market Leadership is Now Underway.”)  The market averages may remain fairly flat this year – or they may decline or rise more rapidly at an unknown moment – but we recommend investors focus on those few stocks in the “critical path” of growth in this new and more “highly uncertain” market terrain.   As Louis has identified (in his chart, below), only 18 of the 50 biggest S&P 500 stocks are anticipated to post positive second-quarter sales and earnings growth.

Small Cap Stocks Leading the Recovery Chart

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

Most of this switch in leadership appears to be due to lower U.S. export profits due to a rising U.S. dollar.  If the dollar keeps rising, the earnings erosion at many large multinational U.S.-based exporting firms may continue.

Stat of the Week:

First-Quarter GDP Revised Down to -0.7%

by Louis Navellier

The biggest economic news came on Friday, when the Commerce Department revised its estimate of first-quarter GDP down to a -0.7% annual pace, from its initial estimate of +0.2%. This negative revision was due in part to a surging trade deficit and smaller-than-previously-estimated inventories.  Exports fell 7.6% in the first quarter, while imports rose 5.6%. A strong U.S. dollar is clearly adversely impacting U.S. exports.  This strong dollar is a bigger problem than the West Coast port slowdown, which also contributed to the decline.  Economists are currently estimating that second-quarter GDP growth will be at an annual rate of 1% or less.  There is no doubt that disappointing GDP growth is taking a toll, so it appears that the “data dependent” Fed cannot rationalize raising rates during a time when first-half growth is near zero.

The Commerce Department also announced on Friday that pretax corporate profits declined 5.9% in the first quarter, so clearly the U.S. economy is not well.  This was the largest decline in pretax corporate profits since 2008 and is a major concern, since it will likely impede business investment and put further downward pressure on overall GDP growth.  Business investment plunged 20.8% in the first quarter and must improve dramatically, fairly soon, for overall GDP growth to improve significantly in this quarter.

The Conference Board reported on Tuesday that consumer confidence rose to 95.4 in May, up from 94.3 in April.  This was welcome news, since consumer confidence peaked at 101.4 in March and has fallen in the past two months.  Ironically, consumers’ assessment of their current economic conditions improved in May, but their outlook for the next six months dropped.  Then, on Friday, we learned that the other major consumer sentiment survey, the University of Michigan/Reuters consumer sentiment index, was revised to a final reading of 90.7 in May, down from a final reading of 95.9 in April.  The University of Michigan/Reuters consumer sentiment index is now at a six-month low, while the Conference Board’s consumer confidence index peaked two months ago.  Overall, most consumers clearly remain cautious.

Housing Remains the Brightest Light on the Economic Dashboard

New Homes ImageOn Tuesday, the Commerce Department reported that new home sales rose 6.8% in April to an annual rate of 517,000.  In the past 12 months, new home sales have risen 26.1%, so clearly the housing market has improved.  New home sales rose 36.8% in the Midwest and 5.8% in the South, but they fell 5.6% in the Northeast and 2.3% in the West. Perhaps the severe winter may have impeded new home construction in the Midwest so that home builders there were merely catching up in April.  Median home prices have risen 8.3% to $297,300 in the past 12 months and the supply of new homes is at a 4.8-month sales pace.  (When the supply of new homes falls below 6 months, home prices tend to rise due to the tight supply.)

I should add that on Thursday, the National Association of Realtors reported that its Pending Home Sales Index rose 3.4% to 112.4 in April, up from a revised 108.7 in March.  Pending homes sales are now up 14% in just the past 12 months and running at the highest level in nine years.  Overall, the new home and pending home data is clearly encouraging for GDP growth, since the housing market is a major sector.

The other news was that the Commerce Department reported on Tuesday that durable goods orders fell 0.5% in April, due largely to a 4% decline in commercial airplane orders and a 3.4% decline in computer orders.  Excluding transportation, which consists of commercial airplanes and vehicles, durable goods orders rose 0.5% in April, which was very encouraging.  Additionally, core capital goods orders rose 1% and were revised to a 1.5% increase in March, which is indicative that business investment is on the rise.

So far this year, business investment is running 2.5% behind last year’s pace, due largely to a strong U.S. dollar hindering orders; but the fact that business investment picked up recently is very encouraging.

Greece Dancers ImageThe wild card impacting the dollar remains the euro and what will eventually happen to Greece.  After making two significant payments to the IMF, Greece’s Interior Minister Nikos Voutsis told Mega TV last week that Greece cannot pay the $1.76 billion to the IMF that comes due between June 5 and June 19.  Specifically, Voutis said that, “this money will not be given,” adding that, “it does not exist.”

The European Union refuses to provide any more aid to Greece, so it will be interesting to see if the IMF will restructure its debt with Greece or provide it with even more aid due to a growing refugee crisis from Syria in Greece.  Overall, the euro is expected to remain weak until this latest Greek tragedy is resolved.


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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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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