May Delivers Record Highs

May Delivers Record Highs: 2,400 S&P & 6,100 NASDAQ

by Louis Navellier

May 9, 2017

*All content in this Introduction to Marketmail represents the opinion of Louis Navellier of Navellier & Associates, Inc.*

In the first week of May, the Dow Industrials closed above 21,000 for the first time since March 3, while the S&P 500 closed near 2,400, a record high, and NASDAQ topped 6,100, also a record high.

Jobs Report Image

The biggest gains came after Friday’s monthly payroll report, in which the Labor Department announced that 211,000 jobs were created in April, significantly more than the consensus estimate of 188,000. The unemployment rate declined to 4.4%, down from 4.5% in March, so unemployment is now at the lowest level in almost a decade. Average hourly earnings rose by 0.1% or 7 cents per hour to $26.19 per hour, up 2.5% in the past 12 months, while average hours worked rose by 0.1 hour to 34.4 hours per week.

The other big news last week was that the Federal Open Market Committee (FOMC) unanimously decided to hold key interest rates steady and declared that the slump in first-quarter GDP growth was “transitory.” Specifically, the FOMC statement said, “The FOMC views the slowing in growth during the first quarter as likely to be transitory.” Additionally, the FOMC statement said that the recent job gains were “solid,” as were the fundamentals underpinning the continued growth in consumer spending. Finally, the FOMC pointed out that fixed business investment “firmed.” Essentially, the Fed wanted to imply that it is still on track to continue to raise key interest rates – but only IF the economy improves.

In This Issue

In Income Mail, Bryan Perry argues that we’re still firmly in the “expansion” phase and nowhere near a bubble peak. In Growth Mail, Gary Alexander recalls our eight years of bullish “pep talks” here and the likelihood for more future gains. In Global Mail, Ivan Martchev sees an imminent sell-off in the emerging markets and junk bond sectors. In Sector Spotlight, Jason Bodner advocates diversity as a way to spread risk across a wider area – like the tires on a car, truck, or jumbo jet. Then I’ll examine research issued by Bespoke Investment Group last week on what is working on Wall Street and how the economy is faring.

Income Mail:
History Supports the Current Rally in Dividend Stocks
by Bryan Perry
Bears Emerge from Hibernation Every Spring

Growth Mail:
Eight Years of Bullish Pep Talks – Justified
by Gary Alexander
The Fundamentals Support an Even Higher Market

Global Mail:
A Sell-off in Emerging Markets and Junk Bonds May Be Imminent
by Ivan Martchev
Crude Implications for Junk Bonds

Sector Spotlight:
Diversification Lessens Portfolio Risk
by Jason Bodner
Information Technology Leads – While Energy Lags

A Look Ahead:
What’s Working (and What’s Not) on Wall Street
by Louis Navellier
Economic Indicators Begin to Fall Below Expectations

Income Mail:

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

History Supports the Current Rally in Dividend Stocks

by Bryan Perry

In light of the fact that very few people can time the market just right, most investors can improve their returns by knowing where we stand in the business cycle. Historical market trends are fairly well correlated to the business cycle, and with this particular recovery in its ninth year, one would think we would be at or near the end of the cycle; but this isn’t your average business cycle by any means and this argues for a different vantage point based on current inflation, interest rates, and growth expectations.

When taking these economic components into account we can make proper asset allocation to take full advantage of the various phases within the business cycle. The typical business cycle has four stages:

  • An Expansion, in which the economy grows by about 2% to 3%, and stocks are in a bull market.
  • The Peak, when the economy grows by more than 3% and inflation re-emerges, leading to asset bubbles, including market peaks and sky-high evaluations, including extremely high P/E levels.
  • A Contraction, when economic growth slows but isn’t negative. P/E ratios and stock values fall.
  • The Trough, when the economy contracts for more than two quarters, which signals a Recession.

So where are we right now? My view is that we are still in the expansion phase and have been since June 2009. That’s almost eight years – about four years longer than the average historical expansion – but this isn’t a typical business cycle. The “Great Recession” of 2008-9 was one of the four steepest economic contractions in U.S. history and the worst since 1929. So, the recession of 2008-9 was atypical, leading to a longer workout for the broader economy. We have also seen inflationary forces remain fairly subdued.

We don't appear to be anywhere near the peak because inflation is still at or below 2%. The bond market votes every day on interest rates and, of late, there is rising conviction that even as corporate earnings are on the rebound, the fall in commodity prices led by the steep decline in crude oil speaks loudly to a massive global supply/demand imbalance that will take years to work off. Following the surge in yield on the 10-year T-Note after Trump’s win, the benchmark bond has shed 30 basis points to 2.35%, which is not much above the 1.95% yield for the S&P 500. Before the 2008 correction, the 10-year yield was 5.3%.

United States Ten Year Treasury Yield Index Chart

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

It’s hard to come up with a more accommodative scenario for equities than the present situation – expanding organic earnings growth, low inflation, cheap commodity inputs, pro-business tax reform, deregulation, and few alternatives to blue chip stocks for high after-tax yields. Since dividends are largely taxed at a maximum federal rate of 23.8% (20% under Trump’s proposed plan), while Treasury bond investors have to pay maximum 43.4% rates on interest income (or 35% under Trump’s proposed plan), dividend stocks have a massive after-tax advantage for wealthy investors. Furthermore, anytime the 10-year Treasury bond yield gets near the S&P 500 dividend yield, it is a great buy time for the stock market.

Bears Emerge from Hibernation Every Spring

On Friday, May 5 – Cinco de Mayo -- perma-bear investor David Tice appeared on CNBC, predicting that the economy is just months away from a deep correction that will send stocks down by as much as 50%. That kind of bearish warning is music to my ears. Tice, like many fear-mongering types, is best known for his tenure as manager of the Prudent Bear Fund; but he sold the fund, which depends on market pullbacks for profits, to Federated Investors just as the financial crisis was unfolding in 2008.

Perma-Bear Investor David Tice CNBC Interview Image

At the time he sold the fund, it had $1.2 billion in assets under management. According to Morningstar, it now has just $254.7 million under Federated’s leadership. The steep losses serve as a stark reminder that this stock market rebound has been unusually strong, with the S&P 500 now up 260% since its 2009 low.

Tice cited historic figures from prior business cycles while ignoring the depths of the 2008-9 crisis. He argues, “We’re 93 months into an economic recovery. We have the Federal Reserve starting to tighten. We have banks actually starting to tighten,” he said. Tice pointed out that the economy is not doing very well, with the GDP growing by an anemic 0.7% in the first quarter. Evidently, he hasn’t paid attention to the current earnings season. Tice also fails to acknowledge the rapid recent rise in M2 money supply.

As of November 2016, there were $394 billion in deposits at the Fed, a 194% increase over November 2015. October 2016's growth rate in Treasury deposits reached an 84-month high at 547%. The last time deposits grew by as large an amount was during 2009 in the most active days of Fed stimulus following the 2008 financial crisis. (Source: Mises.org 1/6/2017 Money-Supply Growth Accelerates in Late 2016.)

The supply of U.S. dollars accelerated during late 2016 with October's year-over-year percentage increase in the money supply hitting a 46-month high. This came after a long period of relatively sedate growth in the money supply through most of 2013, 2014, and 2015. This recent surge in money supply growth suggests that the likelihood of an economic contraction in the near future has been reduced, with the next downturn being pushed out further into the future.

Generally speaking, inflation occurs if M2 Money Supply expands faster than the rate of productive growth in the overall economy. This means prices are higher than they otherwise would have been. The fact that the Fed is increasing M2 indicates it still feels the economy is in the early stages of the overall business cycle ‘expansion’ phase and not topping out or ‘peaking,’ as Tice and other bears contend.

Treasury Deposits at the Federal Reserve Chart

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

There’s no arguing that Tice sold his Prudent Bear Fund at the perfect time, but his subsequent calls during the past nine years haven't materialized. He's calling for a 30% to 50% S&P pullback over the next six to ten months. He also made this same prediction in 2012 and 2014, and as we all know, if you say something long enough, you’ll eventually be right. As for why CNBC trotted him out last week, I can only imagine it was for shock value. As we all know, bearish news grabs more attention than good news.

Growth Mail:

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

Eight Years of Bullish Pep Talks – Justified

by Gary Alexander

Last Friday, the S&P 500 closed at an all-time high of 2,399 – up 260% from its low of 666 in March, 2009.  Here at Navellier, we have been net bullish on the overall market during this entire glorious run.

This week marks my 8th anniversary of editing MarketMail for Louis Navellier.  Since 2009, both Louis and I have been bullish about this market, running against the grain of the Doomsday press and pundits. We fearlessly scaled the perennial “Wall of Worry” to see the positive long-term trends beyond that wall.

The current bull market started on March 9, 2009, but the recovery didn’t seem real at first.  In April 2009, I gave a talk to a generally bearish audience (and mostly bearish speakers) at the Atlanta Investment Conference.  I said the recent market decline – the second worst in market history – implied an equally strong recovery.  Specifically, the S&P fell 56.8% in exactly 17 months – from October 9, 2007 to March 9, 2009.  That was second only to the 89% decline (in the Dow Industrials) from 1929 to 1932.  But after that decline, the Dow surged 372% from 1932 to 1937 – a huge crash begetting an equally huge recovery.

Based on history, I wrote a piece for Navellier.com in May 2009 entitled, “The Worst Crash Since 1929 Implies the Best Recovery since 1932.”  My main point was that massive crashes usually lead to strong and rapid recoveries in a “reversion to the mean.”  I repeated that analysis in a compendium of speeches and interviews I conducted at the 2009 Atlanta Investment Conference, called “The Evergreen Portfolio.”

In May 2009, my conclusion seemed controversial enough that it prompted USA Today financial reporter Matt Krantz to call me for an interview.  “How can you be so sure?” he asked me.  (The Dow was around 8,300 when he called me.)  The bull market was still fragile, only two months old, but I laid out the record of earlier mega-crashes in 1929-32, 1974, 1987, and 2002.  Each major historical crash gave birth to historically strong recoveries – a “reversion to the mean.”  Huge crashes imply equally huge recoveries.

From today’s perspective, the crash of 2007-09 seems like a bump in the road, but it sure felt cataclysmic:

Three Indexes - Percent Change from Their 2000 Peaks Chart

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

In less than two years, this bull market made its first doubling.  On February 18, 2011, the S&P 500 closed at 1343, doubling its 666 low.  The Wall Street Journal called it “the fastest doubling since 1936.” But it wasn’t smooth sailing.  There was a Flash Crash in May 2010, followed by a European debt crisis in June (Source: Money and Markets The Fastest Doubling of the S&P 500 Since the Great Depression!).

There was never smooth sailing in this bull market.  I recall the particularly panic-prone summer of 2011, when there was a near-shutdown of the U.S. government, a U.S. sovereign debt downgrade, and several Euro-based panics in the PIGS nations – Portugal, Italy, Greece, and Spain.  Then, at the end of 2012, fear of a “fiscal cliff” caused another 7.7% correction.  Next came fears of sequestration and recession.  Last year, we saw surprise votes for Brexit and Trump.  They not only failed to generate panic but energized the bull market to higher highs.  After Brexit, the market fell for just two days before soaring to new highs.  After the Trump win, the market fell sharply overnight but then started surging the next morning.

The Fundamentals Support an Even Higher Market

This market still has room to grow, from a long-term perspective.  Despite the 260% gain in the S&P 500 since 2009, that index is still just 56% above its 2000 peak (see chart, above).  That’s an average gain of under 2.7% per year, which is far below historical norms.  NASDAQ is hot so far this year, but it is still up just 19.8% in the last 17 years.  The Dow index, surprisingly, is up four times the rate of NASDAQ.

Earnings are up faster than the market so far this year, so stocks still have room to run.  Last Wednesday (in “Seinfeld’s Market,” May 3), economist Ed Yardeni theorized that investors have been “prone to recurring panic attacks” due to the pain of 2008.  “They feared that something bad was about to happen again, so they sold stocks.  When their fears weren’t realized, the selloffs were followed by relief rallies to new cyclical highs.”  Specifically, Yardeni identified four double-digit corrections in this bull market, plus two other corrections near 10% (at 9.8% and 9.9%, see chart below).  He and his team identified a total of 57 panic attacks during the current bull market, with 2012 alone delivering 12 panic attacks.

Standard and Poor's 500 Bull and Bear Markets and Corrections Chart

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

Stocks seldom rise in a straight line but thanks to rising earnings and tax reform, future corrections should be as short and shallow as the 10 corrections identified in the chart above, ranging from 5.8% to 19.4%.

According to Ed Yardeni in his May 1 morning briefing (titled “Hot Money”), “Industry analysts are currently expecting S&P 500 operating profits to show a gain of 10.3% y/y during Q1, 11.0% during 2017, and 12.1% during 2018. As a result, analysts’ forward earnings estimates for the S&P 500 have been rising sharply this year into record-high territory with a current reading of $135.90 per share.

Standard and Poor's 500 Operating Earnings Per Share Chart

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

Another bearish theory is that we are overdue for a recession, but GDP growth has been so slow since the last “Great Recession” that we could continue to eke out small but positive GDP numbers for years to come.  Last Tuesday (in “Rolling Recessions & Recoveries”), Ed Yardeni wrote that “the U.S. economy may be in the midst of a very long economic expansion because it is experiencing rolling recessions now, which reduce the chances of an economy-wide recession in the foreseeable future.”  He defines a rolling recession as a “downturn that hits an industry or sector while the overall economy continues to grow.”

For instance, the recent energy recession is an example of a rolling recession: The oil industry fell into a severe recession after oil prices dropped 76% from mid-2014 to early 2016.  But low oil prices boosted the automobile industry, which is now suffering its own rolling recession, with sales down over 10% from its peak.  Also, brick-and-mortar retail outlets are in recession while online sales outfits pick up the slack.

Barring trade wars or long-running shooting wars, we’ll likely continue to see a panic-prone bull market.

Global Mail:

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

A Sell-off in Emerging Markets and Junk Bonds May Be Imminent

by Ivan Martchev

The big story last week was the falling price of crude oil, which hit $43.76 per barrel on the June 2017 WTI futures contract before rebounding, registering a fresh 52-week low. Something must be wrong if we are making fresh 52-week lows in crude oil at the start of the seasonally strong March-September period.

In the case of oil, I think this is a demand issue and not a supply issue as U.S. shale production has rebounded but not enough to cause such a decline. Readers of this column will not be surprised that I point the finger at China, the world’s #1 consumer of oil. I think the Chinese are experiencing the effects of a busted credit bubble which will ultimately result in a hard landing for the Chinese economy.

I am greatly surprised that we have not seen any more bad news out of China over the past year as such a busted credit bubble situation tends to gather momentum to the downside. In this case, the situation has been moving in fits and starts as the Chinese authorities have a much stronger grip on the economy than any of the countries involved in the Asian Crisis of 1997-98. The busted credit bubble in 1997 involved more than one country and it unraveled rather quickly with a notable domino effect in the region.

In this case, we could see a domino effect since China has a GDP of over $11 trillion, which is bigger by several multiples compared to the combined GDP of all the countries involved in the 1997 Asian Crisis.

Then there is the rather strong correlation of crude oil to the MSCI Emerging Markets Index.

MSCI Emerging Markets Free Index Chart

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

This correlation is to be expected as many emerging economies are oil producers. As to the consumers of oil, they affect the MSCI Emerging Markets Index too as weakening economies mean lower demand for oil. Be that as it may, I have seen the price of oil diverge from the MSCI EM Index before, but not for long. My conclusion is that if this sell-off in oil continues, it will hit emerging markets rather sharply.

CommodityIndex.jpg

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

Many commodities are down. Iron ore is down 25% in the past month and a high-beta metal like silver is down 12%. Incidentally, silver is more of an industrial metal than a precious one and it tends to move rather violently when there is a change in the supply/demand dynamics as it is a much smaller market than gold. Something is wrong in the commodity markets and the most likely explanation to me is China.

Crude Implications for Junk Bonds

The sell-off in crude oil is also highly relevant for emerging markets debt and the currencies of countries whose finances are dependent on crude oil as well as the U.S. junk bond market. Junk bonds financed the surge in North American shale production and they had not yet been hit to any meaningful degree. This is either the junk bond market thinking that this sell-off is transitory or the fact that junk bond investors are behind the curve in discounting the effects of falling crude oil prices on the finances of those debt issuers.

JunkBondsVersusOil.jpg

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

Since energy bonds are the biggest part of the junk bond market, a sell-off in crude oil has implications for the whole market, not just the energy sector. It is clear that the oil price has an inverse correlation with the spread of B-rated bonds to Treasuries (see chart, above). On March 1, the B-spread got to 3.46% to the relevant Treasuries which was close to the multi-year low hit in mid-2014 of 3.28%.

Suffice to say that if the sell-off in crude oil continues, junk bond spreads have nowhere to go but up.

JunkBonds.jpg

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

In the previous big leg down in crude oil that ended in January 2016, B-rated junk bonds had spreads of 8.66% to the relevant Treasuries while BofA Merrill Lynch CCC or below rated bonds showed an average spread of 20%! This junkier part of the bond market has not sold off either and I suspect that just like in 2015 and 2016, CCC bonds or below will lead to the downside if this sell-off in crude oil continues.

CrudeOil.jpg

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

It is surreal how junk bonds (green line, above) have the same correlation to the price of crude oil in much the same way that emerging markets do, which leads them to be called “risk assets.” It is also surreal how both emerging markets and junk bonds have so far ignored the commodity carnage. I would conclude that either risk assets are wrong or the price of crude oil is confused in this case. I think it is the former.

In the middle of this drama in the crude oil market, we got news last Friday that China’s finance minister skipped a very important meeting with his Korean and Japanese counterparts to attend an emergency meeting on domestic matters. When asked what the emergency was about, the Chinese authorities refused to elaborate. I would not habitually assume that the wheels are coming off the wagon in China if the Chinese finance minister skips an important scheduled meeting if it were not for the freefall in the price of oil in a seasonally strong period for energy prices.

Something is wrong here and action in the crude oil over the past week supports that view.

Sector Spotlight:

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

Diversification Lessens Portfolio Risk

by Jason Bodner

We tend to take a lot of things for granted in life.  Modern conveniences become so commonplace that we seldom contemplate the mechanics of say, an air conditioner, a computer, or even an airplane.  But then again, I bet many passengers actually don’t want to think about the science that keeps a fully-loaded 747 aloft while it weighs nearly one million pounds.  The laws of physics and the genius of engineering touch many aspects of our lives, even on a simple level.  Take tires, for instance.  Forget the thousands of large and small components inside a car.  Let’s focus on where the rubber meets the road.  Maybe you’ve never wondered how 35 pounds per square inch air pressure in four air-filled rubber pouches can hold up a car that weighs two tons and travels 80 mph or faster.  It all comes down to the “contact-patch.”

If you were to look up at your car through a glass garage floor, you would see four squished points where your tires meet the floor.  If you took the area of all four and added them up, you would get the total area of the contact patch.  The size of this patch roughly equals your car’s weight.  My car weighs about 4,000 pounds.  If you divide that by 35 psi, the contact patch is just over 114 square inches.  Divide by 4 and a width of roughly 7 inches and you will get a length of contact 4 inches long.  So, if each tire has a contact area of 28.5 inches (times 35), each tire supports 1,000 pounds and four tires support 4,000 pounds.  Presto!

A 900,000 pound 747 works in the same way.  The force of lift is divided in small parts along the surface of the wings.  To support the plane on landing, the tires on a 747 have a pressure of roughly 300 psi.

OverloadedTire.jpg

It’s always better to keep all four tires on the road – or 18-tires in the case of a long-haul trucker.  In the world of investing, it also pays to diversify.  You overload one “tire” (or sector) at great risk.  Several notable activist money managers like to take a focused approach.  You likely know these people well; they tend to soak up headlines and media attention, usually serving as an echo chamber for their thesis or story.

Well known, extremely successful investors like Bill Ackman (pictured below) or David Einhorn or Carl Icahn have vocally promoted their investment theses in many forums over the years.  The press loves the extremes of investors like these because both their wins and losses have been mammoth.  For instance, a Business Insider article published at the depth of the last bear market (on March 3, 2009) detailed Bill Ackman’s Target Fund, which at that time invested exclusively in Target options.  (I have no position in Target.)  The article said that his fund was likely down 95% since inception at that point.  That particular fund was the antithesis of diversification.  It invested in one company and only in options. Because of this focus, the fund’s performance profile had a high likelihood of being spectacular in either direction.

BillAckman.jpg

The opposite, of course, is diversification of one’s portfolio – an old axiom of investing and one practiced far and wide.  I would further argue that diversification should take place at the sector level as well.  Over the past few months, I have highlighted many violent sector rotations.  While having an overweight focus in one top performing sector can feel great on the way up, it can also feel horrible on the way down.

Information Technology Leads – While Energy Lags

This past week was a good example.  Although the one-week sector performance was largely bullish, with no visible out-sized moves, Energy saw bumpy volatility.  WTI Crude Oil saw a choppy week with Thursday’s session ending down -4.81%, according to FactSet.  The ripple effect on equities only saw a sympathetic move of -1.90%, but the S&P 500 Energy Sector Index up to that point would have been down -2.34% for the week.  Bargain hunters in energy stocks – or those looking for broad sector exposure – would have been feeling the pressure.  If there was heavy concentration in that particular sector, the portfolio would have suffered more volatility than, say, a portfolio with balanced exposure to sectors.

Not all sectors are created equal, as we know.  An example might be that Real Estate is heavily rate-sensitive, while Information Technology is growth heavy.  One way to potentially seek to neutralize sectors and their idiosyncratic risk might be to look at their individual volatilities and adjust to be volatility-neutral.  For those seeking a less-bumpy ride, diversification must figure into the equation.

StandardAndPoors500DailyWeeklySectorIndices.jpg

Sector exposure diversification becomes more apparent when we look out across a longer time horizon. For instance, an overweight concentration in Energy and Telecommunications with an underweight in Information Technology would have yielded potentially frustrating results for the past three months.

StandardAndPoors500QuarterlySectorIndices.jpg

The weight of your car is held up by dividing the load onto four manageable contact patches.  The flight of a fully-loaded 747 works the same way.  Investors seeking to withstand volatility due to concentration can diversify their sector exposure, and then further diversify their holdings within sectors.

Hellen Keller overcame unimaginable challenges and was able to have the vision to say, “Alone we can do so little; together we can do so much.”  Her wise words apply to many subjects important to us all…

DoNotPanic.jpg

A Look Ahead:

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

What’s Working (and What’s Not) on Wall Street

by Louis Navellier

Last Tuesday (in “2017 Decile Analysis,” May 2), the folks at Bespoke Investment Group updated their decile analysis of the S&P 500’s performance year-to-date.  In these studies, Bespoke breaks the S&P 500 into 10 groups of 50 stocks each, arranged from top to bottom, using several different search parameters.

In some of the more interesting comparisons in this report, the 50 largest-cap stocks rose by an average 6.12% while the 50 smallest-cap stocks fell 2.08%.  The biggest difference came between the 50 stocks with the highest percentage of international revenues (up 12.68%, due mostly to a weaker dollar), vs. the 50 stocks with the least international revenue, which rose only 0.72%.  The most fascinating tidbit (to me) is that the top 10% of stocks in the S&P 500 with the best analyst ratings were up 11.27% vs. just 0.4% for the 50 stocks with the lowest analyst ratings.  Score one for the analyst community this time around!

Economic Indicators Begin to Fall Below Expectations

In another Bespoke report (“Economic Indicator Diffusion Index Sees Sharp Pullback,” May 3), Bespoke measures the pace at which economic indicators come in above (or below) analyst estimates over a 50-day period.  In the last six months, this index rose from -11 before Trump’s election to +19 in April; but then it fell below zero last week, indicating a slowdown in economic results vs. consensus expectations.

IndustrialRobots.jpg

Last week, some key indicators backed up the Bespoke study.  For instance, the Institute of Supply Management (ISM) reported that its manufacturing index declined to 54.8 in April, down from a robust 57.2 in March.  This was surprising since economists estimated a small drop to 56.5 in April.  There is no doubt that the recent drop in vehicle sales is impacting the ISM manufacturing index.  Furthermore, the ISM’s new orders component decelerated to 57.5 in April, down from a lofty 64.5 in March.

On the positive side, ISM reported that its non-manufacturing (service) index improved to 57.5 in April, up from 55.2 in March, the second highest reading in the past 18 months; 17 of 18 sectors surveyed expanded.  Businesses were optimistic about improving business in the spring.  When the weather warms up, business optimism also tends to improve, so it will be interesting if the optimism persists this summer.

I should also add that the Labor Department reported on Thursday that productivity declined at a 0.6% annual pace in the first quarter, which puts a drag on GDP growth.  Due to extremely slow (0.7%) GDP growth in the most recent revision, Treasury bond yields remain weak.  As long as 10-year Treasury bond yields remain super-low, stocks with high and reliable dividends continue to look attractive.


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.

Marketmail Archives Trade Summary

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.

Marketmail Archives