Rising Earnings Should Revive Market

Rising Earnings Should Revive Market after Trump’s Policy Reversals

by Louis Navellier

April 18, 2017

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

First-quarter announcement season is shaping up to be stunning, with the strongest sales and earnings for the S&P 500 we’ve seen in years!  It will be interesting to see if these positive sales and earnings reports can overpower any potentially negative political and international events.  Technology and energy could lead the way.  Specifically, many companies associated with cloud computing are prospering and should post impressive sales and earnings, propelling the U.S. stock market higher in the upcoming weeks.

North Korea from Space Image

Politically, the tension between the U.S. and Russia regarding Syria, as well as the North Korean situation is causing added uncertainty for financial markets to digest, but such global tensions tend to dissipate over time.  Since Wall Street is easily distracted, I suspect the focus will return to domestic policies fairly soon.

Speaking of domestic policies, President Trump told Maria Bartiromo on Fox Business last week that he apparently insists on first passing healthcare reform and eliminating healthcare taxes before implementing any other tax reforms.  This essentially means that the August timetable for tax cuts may now be in jeopardy, which means that the corporate tax reforms that Wall Street is currently counting on may be delayed.

In This Issue

The escalation of terrorism and war clouds have dominated the news so far in April.  In this week’s report, Jason Bodner and Gary Alexander will examine the likely impact of escalating wars on U.S. markets.  But first off, Bryan Perry argues that corporate earnings, sales, and new spending can help penetrate this fog of war with some domestic clarity.  Then, Ivan Martchev will cover the upcoming French elections and the surprisingly strong yen, while I will review the energy markets and the outlook for the U.S. dollar and the Fed.

Income Mail:
Delays Create Clouded Investor Expectations
by Bryan Perry
Business Spending to the Rescue

Growth Mail:
Why Isn’t the Market Responding More to The Rocket’s Red Glare?
by Gary Alexander
Some Bombs are More Explosive than Others

Global Mail:
France Enters the Spotlight
by Ivan Martchev
Why the U.S. Dollar is Lagging but not the Yen

Sector Spotlight:
War is Usually NOT Good for the Economy
by Jason Bodner
Real Estate Up, Financials Down

A Look Ahead:
Oil Prices Under $55 Keep Inflation in Check
by Louis Navellier
President Trump Talks Down the Dollar…and Interest Rates

Income Mail:

*All content in "Income Mail" is the opinion of Navellier & Associates and Bryan Perry*

Delays Create Clouded Investor Expectations

by Bryan Perry

It became rather clear this past week that President Trump has grossly miscalculated his ability to make deals in Washington with the kind of speed with which a multibillion-dollar business merger can come together. He is quickly walking back or dialing down most of the populist issues that won him the election while playing chicken with Syria and North Korea without much coalition building among our allies. For a guy who ran as a nationalist, he sure is looking more like a global Lone Ranger every day.

Trump’s flip-flopping on domestic issues and global saber-rattling means investors must recalculate how to price in these unforeseen elements of newfound risk. What’s the new time line for healthcare repeal and reform? Or tax reform, infrastructure spending, and deregulation? The only thing the market is sure of is that even though the government reinstated the so-called “debt ceiling” in March – meaning that the current spending resolution expires on April 28th – the government will still be able to continue to operate pretty much as usual until this fall. Why? Basically, the Treasury can fund governmental “extraordinary measures” that don’t officially add to the national debt – at least not yet. So, it’s likely to be business as usual until late October, unless Congress gets serious about drafting a new federal budget before then.

Aside from the daily policy changes at the White House and the government’s “funny money” approach to paying its bills, the U.S. economy continues on a path of steady recovery, albeit with a couple of notable misses. The March employment situation showed that the U.S. economy added only 98,000 non-farm payrolls last month, missing the consensus for 180K. The unemployment rate fell to 4.5%; however, well below the consensus for 4.7%, the lowest rate seen since the financial crisis. Average hourly earnings grew by 0.2% last month (2.7% y/y), suggesting that wage pressures remain contained.

The Labor Department also revised down its estimates for job creation in January and February, with the combined total falling by 38,000. Average hourly earnings rose at an annual pace of 2.7% in March, following a 2.8% increase in February. The retail sector suffered the most in March, with almost 30,000 jobs cut. Big-box department chains are expected to close at least 3,500 stores this year. It remains to be seen if the much weaker-than-expected March jobs report was an aberration or a sign of things to come.

Change in Jobs Bar Chart

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

The ISM Services Index fell to 55.2 for March (57.6 prior), missing the consensus of 57.0. This index is probably the most important activity survey on the calendar, given that the service sector accounts for two-thirds of U.S. output. The notion of another weak jobs report, flagging retail sales, and a hiatus on Trump’s policy bucket list could, in my view, cause the Fed to delay raising rates at its June meeting.

If the bond market is any predictor of what lies ahead, it would suggest that the nervous and cautious tone brought about by recent events is not just geopolitics, but some legitimate apprehension as to what the domestic economic output will look like without all the stimulus promises from the “Trump trade.”

The yield on the 10-yr Treasury plumbed a fresh five-month low last Friday after Trump talked down the U.S. dollar and interest rates while at the same time, in an apparent olive branch bouquet, said that Federal Reserve Chair Janet Yellen was “not toast” when her term leading the Federal Reserve ends next year.

Ten Year United States Treasury Yield Index Chart

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

Business Spending to the Rescue

Since we’re in season #1 of the White House reality show, we can only take what comes at face value, since there is little in the way of a pattern of progress at work. With that said, just when the market is teetering on the verge of a breakdown in confidence, earnings season is about to bloom and the latest independent read on key business spending is nothing short of being resoundingly bullish! For instance, last week’s ChangeWave Research corporate survey shows planned second-quarter business IT spending as the strongest since 2010 (source: ChangeWave 2Q 2017 Corporate IT Spending Trends April 12, 2017).

As the following chart shows, business spending is up a net nine points (from -2 to +7), building on the four-point improvement from the previous quarter. The latest findings represent the best IT spending growth rate in five years. This is like the cavalry showing up at the end of a good Spaghetti Western.

Projected Information Technology Spending for the Next Quarter Dot Plot

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

When business spending is trending up, there is a wide and deep impact on the broader economy that historically results in positive GDP growth, positive jobs data, and positive consumer spending, all of which were soft in the first quarter. In spite of the many domestic and geopolitical issues that beset Trump, Congress, and the rest of the world, there is harmony between a strengthening IT sector for the U.S. economy and stock market performance. To that end, bond yields will likely stay low across the entire curve, Q1 corporate profits for the S&P will likely come in at or near a record level, and blue chip dividend growth stocks should have a banner second quarter and another solid year of total returns.

Growth Mail:

*All content in "Growth Mail" is the opinion of Navellier & Associates and Gary Alexander*

Why Isn’t the Market Responding More to The Rocket’s Red Glare?

by Gary Alexander

“The Rocket’s Red Glare, the Bombs Bursting in Air
Gave Proof through the Night that our Flag was Still There.”

– Francis Scott Key, “The Star-Spangled Banner,” 1814

If you watch 24-hour financial or news television, monitor various Internet news sites, or read the leading financial journals, you might be wondering why all the fireworks exploding around the world aren’t moving the market – in one direction or another – far more dramatically than what we’ve already seen.

In the first week of April, violence struck almost every day.  First, a suicide bombing in the St. Petersburg Metro in Russia (April 3rd) killed 15 and injured 64.  On April 5th, a suicide bomb killed seven and injured 19 in Lahore, Pakistan, while another shootout and suicide bomb in Tikrit, Iraq killed 35 and injured 40.  In addition to several other terrorist attacks that week, the U.S. bombed a Syrian air base on April 6th.  The next day a truck driven by an Uzbek terrorist plowed into a Stockholm crowd, killing four, injuring 15.

That weekend’s Wall Street Journal (“Nothing to Fear but the Lack of Fear in Markets” by Stephen Russolillo, April 9th) said, “Very little seems to spook financial markets these days. That itself is a cause for concern. Traders for years have been conditioned not to overreact to geopolitical events. Dips following incidents such as the invasion of Crimea in 2014, the Paris terror attacks in 2015 and the Turkish coup attempt last year quickly turned into buying opportunities. The S&P 500 was higher after all three of them within five trading sessions.”  That trend held true in early April, as the S&P 500 futures fell 16 points after the overnight U.S. missile attack April 6, but shortly after Friday’s opening, stocks moved higher.

During the second week of April, the U.S. dropped the Mother of All Bombs (MOAB) in Afghanistan, followed by a bellicose military parade in North Korea and a failed missile test there.  How did the market respond to these April showers of exploding ordnance?  Basically nothing, falling 1.43% so far in April.

Is the market complacent – or smart?  Do these bombs and terrorist events really change the outlook for global trade, rising profits, and healthy economic growth around the world?  Or are they relatively minor events in the context of the history of violence in this war-scarred planet – hence fairly market-neutral?

Let’s look at a variety of explosions on this date (April 18th) in history for some context.

Some Bombs are More Explosive than Others

“Listen my children, and you shall hear, of the midnight ride of Paul Revere.
On the 18th of April in ‘75, hardly a man is now alive, who remembers that famous day and year.
One if by land, and two if by sea; And I on the opposite shore will be,
Ready to ride and spread the alarm, Through every Middlesex village and farm.”

-- Henry Wadsworth Longfellow

The major economic and political issues during this week in 1775 were “trade war” and “gun control.”  Sound familiar?  America’s main British nemesis of the day, Frederick Lord North, British Prime Minister from 1770-1782, kept passing onerous measures targeting the colonists.  On April 13, 1775, he expanded the New England Restraining Act to all colonies, forbidding trade with any other nation than England.

In Boston, on April 18, 1775, British General Thomas Gage issued an order to march against the colonial arsenal at Concord the next day – and also to capture John Adams and John Hancock, known to be hiding at Lexington.  But two rookie defensive backs for the New England Patriots, Paul Revere and William Dawes, ran long and intercepted the pass, as these two heady horsemen roused the Patriot Minutemen.

Early on April 19, 1775, the “shot heard ‘round the world” launched the American Revolution.

In the 20th century, we’ve seen several notably violent and market-moving events on or near this date:

At 5:13 a.m. on April 18, 1906, a 7.8-magnitude earthquake struck San Francisco, California.  Shock waves from the quake were felt from Coos Bay, Oregon, to Los Angeles, and east to Nevada.  Fire quickly consumed most downtown buildings.  This was hugely destructive to the local economy and also to the national economy.  Damage totaled about 1% of GDP, equivalent to $200 billion today.  The widespread failure of banks and insurance companies (unable to meet claims) contributed to the Panic of 1907, as the Dow Jones Industrial average (DJIA) declined 48.5% from January 19, 1906 to November 15, 1907.

On April 16, 1917, Vladimir Lenin returned to Russia after an eight-day train trip from Switzerland through Scandinavia to the Finland Station in St. Petersburg, sealed in a rail car like a travelling bacillus, protected by the Germans, who knew Lenin would cause disruption in Russia.  In the same month, the U.S. entered World War I.  As recounted in two recent books (“Lenin on the Train” by Catherine Merridale, and “March 1917” by Will Englund), Lenin’s revolution launched what historians call “the age of ideology.”  And, as I showed here last week, these events led to a sharp decline in U.S. stocks in 1917.

On April 17, 1930, the DJIA climbed all the way back to 294, almost 50% above its mid-November 1929 panic low.  But this day was the start of an 86% drop in the next 27 months.  That’s because a quiet bombshell was working its way through Congress starting that month – the Smoot-Hawley tariff bill, signed into law in June.  The Crash of 1929 did not need to become a Great Depression, but several political blunders in 1930 (including Federal Reserve tightening, freezing wages in a deflation, and this political tariff) turned a normal stock market correction into something incredibly more severe by 1932.

On April 18, 1942, James H. (“Jimmy”) Doolittle bombed Tokyo and other Japanese cities.  His squadron of 16 American B-25 bombers took off from the aircraft carrier USS Hornet 650 miles east of Japan. Then, they had to crash land in China and escape Japanese reprisals.  This “9/11-style” event came as such a shock to Japan, America, and the world that it lifted the stock market out of a deep 12-year slump.  From April 17, 1930 to April 28, 1942, the DJIA declined 68.4%, but it then grew 129% by 1946.

World War Two Dow Jones Industrial Average Chart

The market recovery in 1942 seemed to anticipate America’s surprise victory at Midway.  Barton Biggs wrote that “At the point of maximum bearishness, the U.S. stock market made a bottom for the ages.”

After the war, bombs exploded three times near this date: (1) On April 18, 1984, a suicide car bomber destroyed the U.S. Embassy in Beirut, killing 63.  The DJIA dropped less than 1% that day but continued rising the rest of the month.  Then (2) on April 19, 1993, U.S. agents stormed the compound of 87 Branch Davidians near Waco, Texas.  The market did not respond to this event.  Then, (3) two years later, on April 19, 1995, Timothy McVeigh cited Waco as his motive for igniting a bomb that killed over 160 men, women, and children in Oklahoma City.  Oddly, the DJIA rose that day and for the rest of that month.

My basic point in this historical litany is to show that (1) bad trade policies (1930) and bad ideas (Lenin, 1917) hurt markets more than bombs, and (2) modern financial safeguards make another Panic of 1907 unlikely to happen in the wake of a major earthquake (like 1906) or terrorist event.  Also (3) victory can be a positive tonic to a market (1942), but defeat usually hurts markets.  And finally, (4) terrorist events since the 1970s have become so common that, after a short sell-off, the market tends to shrug them off.

The quiet events outside the news cycle are the major fuel of growth.  For instance, the telegraph ticker was patented on this day in 1846 by R.E. House, and on April 18, 1882, Germany’s Gottlieb Daimler and Wilhelm Maybach drew up plans for the first internal combustion engine, which transformed the world.

Global Mail:

*All content in "Global Mail" is the opinion of Navellier & Associates and Ivan Martchev*

France Enters the Spotlight

by Ivan Martchev

The German 10-year bund, as government bonds are called in Germany, closed at its lowest yield for 2017 last Friday at 0.19%. This is not surprising, as the first round of the French Presidential election is coming next Sunday, on top of escalating tensions in Syria and North Korea. The ultimate risk-free rate in Germany, the yield on the bundesschatzanweisungen – the two-year federal note dubbed the Schatz – is again getting close to its all-time low yield, closing last week at -0.86%. It looks to me like the 10-year bund and the 2-year Schatz yield will end up in negative territory again before the EU drama is over.

German Ten Year Government Bonds and Two Year Schatz Yield Chart

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

While I am not surprised to see the bunds performing their usual safe-haven yield-dive, I am surprised to see the euro as perky as it has been. At $1.0586 on Friday the euro is over two cents above its 2017 lows, even though the fundamentals suggest it is headed to parity at some point in 2017. As to where it is ultimately headed in an EU dissolution scenario, the extrapolated history of all sovereign exchange rates that were folded into the euro suggests it can go much lower in an EU dissolution scenario.

Euro and United States Dollar Exchange Rate Chart

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

It is interesting to note that even though the French election is putting pressure on German yields and the euro, the French government bond market is not seeing falling yields as much as Germany is, resulting in the expansion of the Franco-German 10-year spread, much like when we had the eurozone crisis in 2011.

In my opinion, the present tension in the EU is simply an outgrowth of the eurozone crisis from 2011, which was never really resolved. The present tensions in the EU, catalyzed by Brexit, stem from the fact that there are divergent fiscal policies clashing with a common monetary policy. This is further exacerbated by a populist backlash, which is the result of sub-par economic performance.

French Government Ten Year Bond Chart

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

It will not be easy for France to leave the EU even if Madame Le Pen becomes the French President as there are French parliamentary elections a month later and, unlike the U.S., the French political establishment is largely pro-EU. France may have an anti-EU presidential candidate leading in the polls, but that candidate cannot get a parliamentary majority to affect a Frexit. Still, there are elections in Germany in September and the Brexit negotiations are unlikely to be amicable, so the EU story is unfolding on several fronts.

Throughout the whole deflationary drama in Europe, the Swiss government bond market has remained mostly in negative yield territory. Even as former and present bond kings proclaimed German bunds to be the short of the century (or of a lifetime), Swiss government bonds kept calling their bluff (see the March 16, 2017 MarketWatch article, “The ‘short of the century’ in investing isn’t working out”).

It is true that, technically speaking, Swiss government bonds used to be perceived as a “safer” haven than German bunds; but it is also true that Switzerland is a much smaller economy than Germany and has a smaller government bond market, despite having a disproportionately large banking sector relative to the size of its GDP. The disproportionately large Swiss banking system may make German bunds safer havens than Swiss government bonds as the domino effect of bank failures and sovereign defaults expected upon a dissolution of the EU and the eurozone puts Switzerland at a greater risk.

Switzerland Ten Year Government Bond Chart

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

With the election cycle in Europe and all of the other developments on the geopolitical front, it is surreal that the U.S. Dollar Index is not ripping higher; but perhaps this has to do with U.S. economic performance in Q1 2017, which seems a little wobbly despite the bombastic promises of the Trump administration. Three months in office is not enough time to judge the merits of a new President, but if six months have passed and he is still spinning his wheels on tax reform, I think we will have some disappointed investors.

Perhaps this is why the 10-year Treasury closed on Friday at its lowest point so far for 2017 at 2.24%. If U.S. Treasury yields are falling faster than equivalent German bunds, it would be difficult for the U.S. dollar to rally and, consequently, for the euro to sell off. German 10-year bunds are down from 50 bps (0.50%) to 19 bps at present, while U.S. 10-year Treasury yields are down from 2.63% to 2.24%.

Why the U.S. Dollar is Lagging but not the Yen

Still, one place where interest rate differentials play a lesser role in FX exchange rates is the yen, which in this case is ripping higher. (In this inverted USDJPY chart, fewer yen per dollar means a stronger yen).

Japanese Yen versus United States Ten Year Government Bond Chart

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

There has been an increasing correlation between the yen and U.S. 10-year Treasury yields in the past couple of years, in which increasing deflationary pressures have meant stronger yen and lower U.S. Treasury yields and vice versa. What we are experiencing in the foreign exchange markets and the U.S. Treasury market at the moment is an unwind of the so-called Trump reflation trade. This reflation trade does not have to unwind completely if there is success on the tax reform front, but so far the indications are that the Trump policy agenda is moving slower than expected.

Personally, when I see the yen strengthen I get concerned. To me, this is an indication of institutional investor risk aversion as it suggests the unwinding of yen-funded carry trades (for more see February 11, 2017 MarketWatch column, “The stronger yen may be a warning for stock-market bulls”). The yen tends to strengthen in a stealthy manner and before any major repercussions have been felt in other markets, but I have found it to be a reliable “risk-off” indicator despite the long lead time. Right now, what the yen is saying is that risks in global financial markets have risen quite considerably in a short period of time.

Sector Spotlight:

*All content in "Sector Spotlight" is the opinion of Navellier & Associates and Jason Bodner*

War is Usually NOT Good for the Economy

by Jason Bodner

Most people you ask seem to assume that wars are good for the economy. That perception is certainly persistent, yet many leading world economists have done work to debunk this myth. Joseph Stieglitz wrote in 2003 that the prosperous boom of the 1990s serves as strong evidence that sustained peace-time is far better for economic growth than conflict. Award one point to the tree-huggers.

We all now know that the U.S. military recently dropped the Mother of All Bombs on a suspected ISIS target in Afghanistan. The name reportedly is a spoof on Saddam Hussein’s promise of “the Mother of All Battles” in Kuwait. The Massive Ordinance Air Bomb (MOAB) reportedly killed nearly 100. The $16 million-dollar bomb was the largest non-nuclear bomb in the U.S. arsenal, with a one-mile blast radius.

Believe it or not, since 1950 there have been 32 “Broken Arrows,” defined as the accidental launching, firing, detonating, theft, or loss of a nuclear weapon. Six nuclear weapons were lost and never recovered! 

Nuclear Explosion Image

To understand their destructive power, the Hiroshima detonation of 1945 was caused by just 0.7 grams of uranium. That's the weight of a paper clip. This devastating weapon was considered, on an efficiency level, to be quite primitive. Currently, a single B-2 bomber can carry 16 nuclear bombs, each one of which packs 75 times the force of the bomb dropped on Hiroshima. The U.S. bought 21 B-2 bombers at a cost of a mere $2 billion apiece. That’s $42 billion, not including the cost of the weapons. And those are only the planes we know about! (Incidentally, the budget for nuclear arms does not come from the Department of Defense, as one might expect, but from the Department of Energy!)

Uranium Converted Image

So, with the remaining 20 of our nearly 30-year-old planes, the U.S. can inflict 1,500 Hiroshimas. In uranium terms, that would require just 4.4 pounds. What will be the outcome of the escalation of war talk over Korea?  In the last two weeks, with a Syrian strike of 59 Tomahawk missiles, a MOAB-busting of ISIS bunkers, and arguably the world's most recognizably coiffed leader’s “braggadocious” military parade has done wonders for erasing Trump's previous troubles. The Russian collusion cloud and several conflict-of-interest issues have taken a very significant back seat to what we witness today.

Select Hairdos Images

In the last two weeks, we have seen a jittery market that clearly doesn't adore the prospects of escalating geopolitical tensions. Looking at a sector level, let's see what's going on under the hood.

Real Estate Up, Financials Down

Financials felt the pain last week, due in part to some comments by Trump about the frothiness of the U.S. dollar and his preference for lower rates. This naturally implies a potential delay in rate hikes, which would be adverse for banks but bodes well for the REIT-rich Real Estate sector. The month-to-date performance of these indices (Financials -3.60% vs. Real Estate +1.37%) reflects the same sentiment.

Despite seeing a small glimmer of positivity in the form of slightly-declining crude inventories, Energy resumed its down tick, sliding -1.83% on Thursday alone. Other noteworthy losers for the week were Materials (-2.42%) and Industrials (-1.63%).

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

Looking back three months, Financials definitely halted its meteoric post-election rise and is now the second weakest sector. Information Technology reigns supreme, up more than 14% in three months. Rate-sensitive Utilities and Real Estate have also fared very well in the last three months, +12.15% and +9.79%, respectively. Energy is the only negative sector for the last three months, -6.73%.

Standard and Poor's 500 Quarterly Sector Indices Changes Table

It will be interesting to see how the markets continue to respond to global saber-rattling. It reminds me of a story. I once was visiting family in Belgium and got an upper respiratory infection that was bothersome to say the least. I went to see my wife's family doctor and he suggested a fairly benign course of treatment. I asked if I could get some antibiotics and told him what I took for prior instances.

The Belgian doctor said, “You Americans! You don't need to kill a mosquito with an atomic bomb!"

I replied, “True, but it does kill the mosquito.”

Bug Bomb Image

A Look Ahead:

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

Oil Prices Under $55 Keep Inflation in Check

by Louis Navellier

Last week, the Labor Department reported on Thursday that its Producer Price Index (PPI) declined 0.1% in March.  Wholesale gasoline prices declined 8.3% in March, contributing to a 2.9% decline in wholesale energy prices.  In the past 12 months, the PPI has risen 2.3%, while the core PPI has risen 1.7%.

The next day, the Labor Department reported that its Consumer Price Index (CPI) declined 0.3% in March, significantly lower than economists’ consensus estimate of a 0.1% decline.  Lower gasoline prices (down 6.2%) were largely responsible for the decline.  In the past 12 months, the CPI has risen 2.4% and the core CPI has risen 2.0%, so consumer inflation is starting to moderate a bit with lower energy prices.

Interestingly, both the American Petroleum Institute (API) and the Energy Information Administration (EIA) announced that crude oil inventories finally declined a bit in the latest week, after rising for three straight weeks.  We are at the time of year when worldwide demand for crude oil typically rises as the weather warms up in the Northern Hemisphere.  The EIA has forecasted that domestic crude oil production will rise steadily for the next two years, so the domestic energy glut is expected to continue.  OPEC is clearly nervous about high crude oil inventories and rising non-OPEC production, so OPEC is proposing extending its production quotas for at least another six months.  We’ll see if they can hold to this promise.

Also, the Commerce Department announced on Friday that retail sales declined 0.2% in March and February retail sales were revised dramatically lower to a 0.3% decline (from a previously estimated 0.1% increase).  With retail sales declining for two consecutive months – the weakest two-month stretch since 2015 – economists are now revising their first-quarter GDP estimates lower.  The silver lining is that lower gasoline prices were a big reason for the decline in March retail sales.  Excluding auto and gasoline sales, retail sales rose 0.1% in March.  By the same token, retail sales should increase if energy prices creep up.

President Trump Talks Down the Dollar…and Interest Rates

As inflation cools, Treasury yields are also meandering lower.  The 10-year Treasury bond yields just 2.24%.  This decline in market rates essentially means that the Fed may not raise key interest rates in June.

In the meantime, further complicating matters near-term, the federal government is expected to hit its deficit ceiling in late April.  Speaker of the House Paul Ryan needs plenty of Democratic votes to raise the deficit ceiling.  This will be an interesting process, since President Trump and Speaker Ryan may have to reach across the aisle and promise to pass some pork projects for selected Democratic Congress members.  The Freedom Caucus, which initially defeated healthcare reform, is currently silent on the deficit ceiling.

On Wednesday, President Trump told The Wall Street Journal that the U.S. dollar “is getting too strong” and that he would prefer that the Fed keep interest rates low.  The U.S. dollar sold off on these comments and the 10-year Treasury bond hit a five-month low Thursday, so there is no doubt that President Trump can temporarily influence financial markets, but the biggest surprise in the WSJ interview was that the Trump Administration would not label China as a “currency manipulator,” since he needs China’s cooperation in taming North Korea.  A more pragmatic, centrist Trump agenda should be welcomed by financial markets.


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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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