Rising Global Conflicts

Rising Global Conflicts Lift Some Markets, Depress Others

by Louis Navellier

April 11, 2017

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

Crude oil and gold prices surged in the wake of Thursday’s U.S. missile attack on a Syrian airbase where chemical weapons were believed to be stored.  Clearly, President Trump wanted the world to know that the U.S. would not tolerate Tuesday’s chemical weapon attack on Syrian citizens.  Trump’s quick response certainly made last Friday’s discussions with Chinese President Xi Jinping much more interesting, especially regarding the recent missile testing by China’s communist neighbor, North Korea.

United States Dollar and Chinese Yuan Composite Currency Image

I got a front-row seat for this global intrigue, since China’s massive entourage encamped at a hotel just a mile up the street from my Florida home and the security is unbelievable in the way it shut down the area from access.  I was recently a guest at Mar-a-Lago for dinner when President Trump and Vice President Pence were dining outside in a courtyard.  The security was much lighter when U.S. officials, including former President Obama and Vice President Biden, stayed nearby.  Clearly, Chinese officials think they need extra security precautions when they come to the U.S. – more security than our own President needs.

Meanwhile, stocks fell marginally last week, as the S&P 500 dropped 0.3%; but that small change masks a more dramatic oscillation in market leadership, which will likely continue this week as the first-quarter earnings announcement season commences.  With those earnings announcements coming in the midst of a French election, a war in Syria, and saber rattling in North Korea, the market will likely get a stress test!

In This Issue

Our team of analysts examine the latest dramatic developments from several angles.  Bryan Perry and I take a closer look at recent economic indicators in light of how the Fed might respond.  Gary Alexander and Ivan Martchev look at last week’s geopolitical tensions in light of market history, while Jason Bodner looks at the conflicting results from indexes (Russell 2000 vs. S&P 500) and the various S&P sectors.

Income Mail:
The Latest Conflict Between Markets and Fed Policy
by Bryan Perry
Finding Equilibrium After Reflating the World of Financial Assets

Growth Mail:
War Doesn’t Necessarily Hurt (or Help) Markets
by Gary Alexander
Presidents Can (and Do) Attack (or Favor) Specific Sectors

Global Mail:
“Wag the Dog” Returns in the Levant
by Ivan Martchev
Stock Market Volatility Likely to Surge

Sector Spotlight:
The Russell 2000 is Declining Faster than the S&P 500
by Jason Bodner
Telecom Took the Biggest Hit Last Week

A Look Ahead:
What the Jobs Report Tells the Fed
by Louis Navellier
New Realities in the Automotive World

Income Mail:

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

The Latest Conflict Between Markets and Fed Policy

by Bryan Perry

One would think the Fed would like to get out of the spotlight and just read the data, meet every 45 days to decide to raise (or not raise) rates, state their findings, and then return to their cozy offices. That’s how the Fed used to operate. There was no pre-FOMC forecast, nor a litany of Fed Governor speeches at every high-dollar luncheon spanning the country. Although many of the functions the Fed conducts are routine, the big difference today from years gone by is how the Fed fails to speak with one voice. As a result, investors have to play the proverbial guessing game about Fed policy, resulting in market volatility.

This past Friday the 10-year Treasury briefly traded under 2.3% before reversing higher, leaving U.S. Treasuries little changed. Some of last week’s key U.S. economic data came in light of consensus (like the ISM Services index and non-farm payrolls), but the U.S. GDP growth rate for the fourth quarter of 2016 was finalized at a +2.1% (seasonally-adjusted annual rate, or saar), revised up from the prior estimate of 1.9% (see www.bea.gov). The GDP forecasts for the first quarter are all over the place with the Atlanta Fed's model forecasting 1.2% while the New York Fed's model shows 2.9% growth.

Real Gross Domestic Product Percent Change From Preceding Quarter Bar Chart

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

Pushing against the softer data of the past two weeks, the Conference Board's Consumer Confidence index jumped to 125.6 for March, a 16-year high and further evidence of the non-correlation between rosy economic sentiment in the U.S. and actual economic activity. That was especially the case after U.S. personal spending growth for February came out at 0.1% m/m, missing the consensus of 0.2%. Again, if the consumer is feeling the best in 16 years about their situation, why the miss on personal spending?

United States Personal Spending Growth Bar Chart

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

It’s only the first week of baseball season and the Fed threw the market a sharp curve ball, bringing up the idea of reducing the central bank's $4.5 trillion balance sheet instead of holding assets to maturity as is the conventional thinking. New York Fed President Dudley said that the Fed could potentially pause rate hikes once it began that process. Other Fed officials have not discussed a serious pause, with nine policy makers seeing three or four rate hikes in 2018 on top of the generally-expected three rate hikes this year. Those forecasts do not suggest any kind of “pause” ahead, so perhaps Dudley is a minority of one.

Finding Equilibrium After Reflating the World of Financial Assets

Over the course of history – going back to 1870 – the peak 10-year Treasury rate was in September, 1981, at 15.3%. This led to a 35-year bull market in bonds, taking us down to an all-time low yield of 1.5% in July 2016. In the 150 years since the Civil War, the mean (arithmetical average) rate was 4.58%, while the median (that point at which half the rates lie above and half below) was lower, at 3.87%. We are currently well below the mean and median, with a closing 10-year Treasury rate of 2.38% last Friday.

Interest rates have been down so low for so long that the thought of the 10-year Treasury reverting back to its historical mean of 4.58% sounds surreal. That’s about 2.2% higher than where the 10-yr currently trades. If the economy is humming on all cylinders in a couple of years, I don’t see this as a major issue as it would certainly provide the swelling numbers of retirees a decent savings rate and lofty bond yields.

Ten Year Treasury Rate History Chart

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

Financial markets have been living the dream of an ultra-low interest rate market with low inflation, but now both are returning to a more normal level of 2%+. In my view, investors should not only accept the fact that interest rates should normalize in the coming years, given a healthier economy, but prepare for higher rates by repositioning assets accordingly. Below are current 10-yr sovereign bond yields of developed countries. This shows why U.S. notes remain in high demand; aside from Australia, they pay the most.

Ten Year Sovereign Bond Yields of Developed Countries Table

How much the Fed intends to reduce its balance sheet is anyone’s guess, but in today’s global market, U.S. currency in circulation has grown to $1.5 trillion. Before the 2007-08 financial crisis, the Fed’s balance sheet consisted of about $800 billion in currency liabilities and slightly above that in assets, almost all of which were Treasuries. Because of nominal GDP, low interest rates, and increased foreign demand for U.S. dollars, the Fed estimates that the amount of circulation will grow to $2.5 trillion or more over the next decade (source: Brookings.edu, “Shrinking the Fed’s Balance Sheet”– January 26, 2017).

In short, demand for U.S. dollars in the public domain alone implies that the Fed will need a much larger balance sheet than it had before the 2007-2008 financial crisis. The Fed would do well by the markets to explain these realities in rational terms – perhaps in conjunction with market-moving headlines at a post-FOMC press conference. Two things would happen. Investors would better understand the scope and scale of the Fed’s intentions and the stock market would likely enjoy a smoother ride.

Growth Mail:

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

War Doesn’t Necessarily Hurt (or Help) Markets

by Gary Alexander

A century ago last Thursday, Woodrow Wilson and Congress declared war on Germany.  Despite his firm campaign promise against U.S. entry into the Great War, German submarine activity and subterfuge in Mexico forced the President’s hand.  The U.S. entered World War I fairly late in the game (April 6, 1917), after nearly three years and millions of lives were lost in the trenches of northeastern France.

Last week, President Trump seemed to mark that anniversary in an odd coincidence of dates by bombing Syrian air bases on the exact centennial date.  How did the market react?  Last Friday, the stock market shrugged off the U.S. bombing sortie, neither rising nor falling much.  Something similar happened when America entered World War I.  The market basically yawned.  The New York Stock Exchange was closed for most of late 1914, but when it re-opened in 1915, stocks soared.  After a correction, stocks reached higher highs (Dow 110) in late 1916.  Stocks were flat after the war declaration, but fell in late 1917.  After the war ended, in 1919, as odd as it may seem, the Dow rose strongly during a global influenza epidemic!

Market History During the Second Decade of the Twentieth Century Chart

I keep hearing the cynical statement that “Wall Street likes war,” or war is good for stocks.  Sometimes, that seems to be true, but what does the historical evidence of America’s wars in the last century tell us?

Robert Prechter has just published a fascinating book, “The Socionomic Theory of Finance,” in which he spends the first few chapters demystifying all the exogenous “causes” of financial market action.  In Chapter 2, for instance, Prechter tests and refutes the “fact” that (1) interest rates drive stock prices; (2) rising (or falling) oil prices are bearish for stocks; (3) a trade deficit is bad for the economy and stocks; (4) earnings drive stock prices; (5) jobs drive stock prices; (6) GDP drives stock prices; and (7) wars (or peace) are bullish (or bearish) for stocks.  He moves on to more myths, but I want to focus on war here.

In America’s four major wars in the last century, stocks fluctuated wildly in three cases, as seen in the charts below.  First came World War I, when stocks rose in 1915 while Europe fought but fell after the U.S. entry.  In World War II, stocks did the opposite: They fell sharply from September 1939 (after Hitler invaded Poland) until April 1942, when the first rays of hope for Allied victory emerged.  Then stocks rose for four years, until mid-1946.  The opposite happened in the Vietnam War, as stocks rose strongly in the early 1960s, when Vietnam seemed winnable, but then the market sagged sharply from 1968 to 1970 and again from 1972 to 1974, when America lost that war and had to watch the enemy enter Saigon.

Here is Prechter’s summary of market actions during America’s four largest 20th Century wars.  (Please note that this 1917 chart differs from the Dow chart, above, since these charts are adjusted for inflation.)

Market Actions During Wars of the Twentieth Century Charts

During the Korean War, as you can see from Figure 13, stocks rose each year, 1950-53.  The market also soared during the quick initial victories in Gulf War I (in early 1991) and Gulf War II (in early 2003).

In the past, I have written about how stocks generally go up or remain unchanged after serious traumatic events like Pearl Harbor, the assassination of John F. Kennedy, the Challenger explosion, or 9/11.  Stocks also remained relatively calm during the Cuban missile crisis of October 1962, but there was a serious correction earlier that year, and that contains a lesson, too, about why stocks and sectors can rise or fall.

Presidents Can (and Do) Attack (or Favor) Specific Sectors

While outside events don’t usually impact the markets as much as the pundits tell us, a President can hurt or help a specific industry.  We’ve all seen how Big Pharma stocks tanked after candidate Hillary Clinton threatened that she would put a cap on prescription drug prices – and she was just a candidate!

Fifty-five years ago this week, on April 12, 1962, President John Kennedy held a special press conference to demand that the executives of U.S. Steel (and many other domestic steel companies) roll back their recently-announced $6 per ton price increase.  He accused steel executives of being virtually traitorous in their “pursuit of private power and profit.”  He said that the Department of Defense would only order steel from the firms that rolled back prices.  Steel companies quickly complied, rolling back prices the next day.

By the next day, Friday the 13th of April 1962, the nation’s eight biggest steel companies surrendered to the President’s demands in quick succession: At 3:05 pm, Kaiser Steel was the first domino, followed by Bethlehem Steel at 3:21.  U.S. Steel bowed at 5:25, followed by Republic Steel (5:57), Pittsburgh Steel (6:26), Jones & Laughlin (6:37), National Steel (7:33), and finally Youngstown Sheet & Tube (at 9:09).

That did not end the war of words.  When it came time to announce U.S. Steel’s disappointing first-quarter 1962 earnings on May 7, CEO Roger Blough told his shareholders: “This concept is incomprehensible to me – the belief that Government can ever serve the national interest in peacetime by seeking to control prices in competitive American business, directly or indirectly, through force of law or otherwise.”

All through May of 1962, stocks kept falling.  From its December 1961 peak at 741, the Dow fell by 29% in six months, to 525 by late June, 1962.  It turned out to be the worst bear market to befall America in the 32-year expansion between 1942 and 1974.  May 28, 1962 was the worst day on Wall Street since the 1929 crash.  On that day, steel stocks dropped to 50% of their 1960 levels, as part of a long, long decline.

Steel companies weren’t price-gouging.  Profits at U.S. Steel fell 61% from 1958 to 1963, with the biggest drop coming in 1962.  The industry lost over 100,000 jobs from 1958 to 1960, including 70,000 jobs lost at U.S. Steel alone.  Their profit margin was cut in half.  While salaries in the steel industry rose 13% from 1958 to 1961, profits fell, as 85% of U.S. Steel’s 1961 profits were paid out in shareholder dividends.

In 1958, U.S. Steel was #4 in the Fortune 500, and Bethlehem Steel was #9.  By 1985, U.S. Steel was in the process of changing its mix of businesses, emerging as USX Corp.  The only pure steel company in the Fortune 100 in 1985 was Bethlehem Steel, ranked #68.  Clearly, the U.S. steel industry was slowly dying.

The President killed an already-dying industry.  By July 1962, the steel industry was working at just 55% capacity, vs. 70% in April, when the President attacked them.  Very soon, Japan began to dominate the steel market, which was already beset by competition from non-steel construction products made from plastics, aluminum, cement, or glass.  While the normal challenges of business are always present, the President’s attack contributed greatly to the decline of the U.S. steel industry over the next few decades.

As history shows, Presidents possess great powers to inspire or destroy when they propose to take any particular industry to the woodshed.  Chances are, market forces are already disciplining those companies.

Global Mail:

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

“Wag the Dog” Returns in the Levant

by Ivan Martchev

In the dark comedy Wag the Dog, the U.S. President lands in the middle of a scandal two weeks prior to reelection. In need of creating a diversion, presidential adviser Winifred Ames (played by Anne Heche) hires an experienced political spin doctor Conrad Brean (played by Robert De Niro), who approaches Hollywood producer Stanley Motss (played by Dustin Hoffman) to help him fabricate a war in Albania. Very soon, the media is completely focused on the war and the president's problems start to fade away.

Wag The Dog Movie Image

I remember thinking that this film was quite surreal. It debuted on Christmas Day 1997 and it was in theaters in March when Yugoslavia was falling apart and the Kosovo Liberation Army of the Albanian minority started a war on March 6, 1998. About a year later, the U.S. bombed Yugoslavia as the Monica Lewinsky sex scandal and its consequences were leading to impeachment proceedings against President Bill Clinton. Suddenly, thanks to this war, the serious political problems of President Bill Clinton disappeared from the headlines.

On April 6, 2017, the alt-right website Breitbart News (of Steve Bannon fame) carried a headline quoting a former conservative Republican congressman: “Ron Paul: ‘Zero Chance’ Assad Behind Syria Chemical Weapons Attack.” Generally, Breitbart is highly supportive of President Trump, but the crux of the story is that if the Syrian Army and the Russians have turned the tide in the Syrian civil war and are making progress against ISIS without chemical weapons, it makes no sense to use them at this stage in the war.

While I find it hard to believe that the U.S. would have anything to do with staging a false flag attack in Syria, I think it is entirely plausible to think that local warring parties who are being squeezed by the Russians, Shiite militias, and the Syrian army are big enough monsters to do just that. Given that there is evidence of them staging similar attacks in 2013, a detailed investigation would have been the more prudent choice.

Even the “moderate opposition” is suspect. After taking Aleppo, the Russian military found mass graves with heads and limbs missing, which may have been due to this moderate opposition. Suffice to say the term “moderate opposition” in such circumstances has become a rather obvious oxymoron.

This geopolitical discussion is very important to the direction of financial markets as tensions seem to be heating up on the global stage. The Syrian missile strike came as Chinese President Xi Jinping was meeting President Trump in Mar-a-Lago. The Syrian attack stole Xi’s spotlight and put the focus more on North Korea. We found out a day later that the U.S. Navy’s Carrier Strike Group One has been directed to leave Singapore and head towards Korean waters. A week before Trump’s talks with President Xi, Mr. Trump told The Financial Times that he was prepared to take unilateral action against North Korea if China did not cooperate with the U.S. in dealing with that rogue nation’s nuclear threat.

Stock Market Volatility Likely to Surge

Under a scenario of sharply rising geopolitical tensions, stock market volatility is likely to surge. We will also face the French presidential election on April 23rd and the all-important runoff on May 7th. It would not be an understatement to say that we are witnessing the equivalent of a “Frexit” referendum coupled with flying Tomahawk missiles across the Mediterranean and a U.S. Armada traversing the East China Sea.

The Last Five Years of the Dow Jones Industrial Average Chart

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

We have not had a meaningful sell-off since February 2016. Even the Brexit referendum saw only two days of selling, the effects of which were completely reversed in the following three days. It is impossible to say ahead of time how large a potential correction may be – other than to say that we are overdue for one, due to the combination of political risks in Europe coupled with tensions in multiple other regions.

CBOE Volatility Index Chart

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

I think the S&P 500 Volatility Index (VIX) – dubbed “the fear gauge” by many – may increase by a factor of 2-3x in short order. Any VIX spike in the past five years has been an opportunity to sell volatility and “buy the dip” in the stock market – and this time may very well turn out to be the same case.

A note of caution on buying dips: While I do not believe we are at the start of the next bear market in stocks, you never know how large a dip will be ahead of time. To have a real bear market, we need a recession in the U.S. – and we don't have that at the moment. Typically, sell-offs triggered by external events tend to reverse themselves. Some cases in point would be the sell-offs in August 2015 (triggered by a Chinese yuan devaluation) and the sell-off in January 2016 (triggered by malfunctioning circuit breakers on the Chinese stock exchanges). A much bigger sell-off triggered by an external event happened in the summer of 2011, which was partly due to the Eurozone Crisis. A similarly large and sharp sell-off was triggered by the 1997 Asian Crisis and the following Russian government debt default in August of 1998.

The short bear markets of late 1997 and late 1998 came during the late-1990s NASDAQ bubble. Then came the real estate bubble and the mortgage meltdown in 2008, leading to the Great Recession. We have no similar “bubble” situation in the U.S. at the moment. No matter if the next correction is a small or a not-so-small dip, I do not believe that investors who are currently long U.S. stocks should sell, because that assumes they can turn around and buy stocks back at the bottom, which is almost impossible to do.

The present geopolitical situation and its effects on the stock market remind me of the beeping sensor in a running car that reminds the driver to put on the seat belt. A beeping sensor doesn't mean the car is about to crash, but it does remind you that the prudent course of action right now is to fasten your seat belt.

Sector Spotlight:

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

The Russell 2000 is Declining Faster than the S&P 500

by Jason Bodner

People have a way of taking things at face value; it's our nature. The same is true of ideas, or memes. When everyone around you perpetuates the same ideas, they have a habit of becoming facts, or at least believed to be. Yet many times there's little or no basis to some stories that we have all accepted as fact.

Take for instance the fact that nowhere in the children's nursery rhyme Humpty Dumpty does it say he's an egg. In fact, there's good historical evidence to point to Humpty Dumpty being a large cannon used in 1648 in the English civil war. An opposing cannon fired a shot which crumbled the wall supporting Humpty, and due to its size and weight, "all the king’s horses and all the king’s men" could not put the cannon together again. The nursery rhyme has been a childhood classic since 1870 and we can thank Lewis Carroll for his depiction of Humpty Dumpty as an egg in his work "Through the Looking Glass."

Humpty Dumpty Image

In another interesting misconception, there is no evidence that author Lewis Carroll used (or was even interested in) mind-altering drugs when writing his famous fantasies.

So, what does it mean that we are now in an age where media stories (true or false) drive the world? We are faced with the conundrum of not being able to trust the accuracy of most media stories. This certainly complicates and intensifies the human tendency to believe something is a fact if we hear it long enough.

This applies to stock markets, too. There is plenty of talk about “the market that won't go down,” but in fact there has been a visible rotation going on for weeks now. Small-cap stocks have been under pressure for a few weeks now. This could, of course, be a normal breather or a small correction, but the Russell 2000 index is down -3.47% from its peak on March 1, 2017 versus -1.69% for the S&P 500 which peaked the same day. Looking at a six-month chart, below, we see that in fact, the SPX has been playing “catch-up” with the Russell, but if it was the S&P down almost 4%, there would likely be more fear in the system.

Standard and Poor's 500 Versus Russell 2000 Chart

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

Telecom Took the Biggest Hit Last Week

From a sector perspective, this week saw Real Estate being praised along with Energy and Materials, while Telecom took a hit on Thursday, down -1.59%, erasing gains from earlier in the week. The sector finished -1.11% for the week. Financials faired second-worst with a -0.98% performance. As rates potentially rise, that’s a positive for banks, but should there be tax reform and a massive repatriation of money to the U.S. it would pressure interest rates, which would hamper bank performance.

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

Three-month performance still tells an interesting story. Information Technology is still up almost 9% with Utilities and Consumer Staples coming in second and third. Telecom and Energy are the two weakest three-month sectors. This performance profile seems dispersed from the usual clustering in that we would expect Real Estate, Telecom, Utilities, and Staples to move together, while more growth-concentrated sectors would be expected to move in tandem.

Standard and Poor's 500 Quarterly Sector Indices Changes Table

The Financials rally has clearly lost steam. In the last six months, Financials vaulted almost 20% yet in the past three months it’s near zero. Energy prices may perk up a bit with some aggression in Syria and military movements, but for now it is still the weakest sector for three and six months.

Standard and Poor's 500 Semi Annual Sector Indices Changes Table

This weekend brought about a chill when the U.S. sending 59 Tomahawk missiles to a Syrian airbase was accompanied by a naval excursion toward North Korea. The U.S. fleet there is composed of an aircraft carrier, two destroyers, and a cruiser, the last three with guided missile capability. They can also intercept ballistic missiles. North Korea has a maximum calculated range of around 5,000 miles, or a little more than a third of the globe. If for nothing else, these military operations certainly cast a counterpunch on the cloud of suspicion over the White House and its potential involvement with Russia. This could be a case of “distracting from distractions,” but the implications are troubling at the very least.

Humpty Dumpty had a great fall, but he wasn't a fragile egg. The current administration is headed for trouble regarding its relations with Russia – or is it? The market is impervious to a fall of its own – or is it? All of these points make me think of Edward de Bono when he said, "Logic will never change emotion or perception." This may not make us feel better as we head deeper into uncertainty, but Lewis Carroll may offer some solace: "If you don't know where you are going, any road will take you there."

Cheshire Cat 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.*

What the Jobs Report Tells the Fed

by Louis Navellier

The big surprise last week was Friday’s payroll report, when the Labor Department reported that only 98,000 payroll jobs were created in March, well below the economists’ consensus estimate of 175,000 jobs.  Furthermore, the January and February payroll reports were revised down by a cumulative 38,000 jobs, to 435,000 (from 473,000 previously estimated).  These downward revisions are typically caused by one person holding two or more temporary jobs or part-time jobs, which distorts the unemployment rate.

I must add that for the fifth month in a row, ADP continues to report much more job growth than the Labor Department.  Specifically, on Wednesday, ADP announced that 263,000 private payroll jobs were created in March, substantially more than the economists’ consensus estimate of 180,000 jobs and the second strongest reading in over two years.  Like the Labor Department, ADP revised its February private payroll report down to 245,000 (from an initial estimate of 298,000).  Despite this downward revision, however, ADP continues to post much more robust job growth than the Labor Department.

The unemployment rate declined to 4.5%, down from 4.7% in February, since the people looking for work declined by 326,000 to 7.2 million.  Average hourly earnings in March rose 5 cents to $26.14 per hour and have risen by 2.7% in the past year.  Usually, downward revisions in job totals tend to cause the Fed to hesitate, so expectations of higher interest rates in the upcoming months have diminished a bit.

New Realities in the Automotive World

The remnants of Detroit’s old “Big Three” car companies did not fare well last week after it was announced that vehicle sales in March declined to a two-year low of 16.82 million (annual pace), down 4.3% from a 17.58 million annual pace in February and 9.3% lower than December’s annual pace of 18.54 million.  Used car prices have fallen dramatically and are apparently interfering with new car sales, since the gap between new and used cars is unusually wide after Autodata reported that used car prices declined 4% in February after a glut of previously leased vehicles hit the market.  Naturally, with falling used vehicle prices, leasing costs tend to rise as well as the ability to bundle and sell auto loans.

Female Construction Worker Image

The other economic news last week was largely positive.  First, on Monday, the Institute of Supply Management (ISM) reported that its manufacturing index declined to 57.2 in March, down from 57.7 in February, but since any reading over 50 signals an expansion, this was still an impressive number.  In fact, for the second straight month, 17 of 18 industries tracked by ISM reported expansion.  This has not occurred for almost three years, so the resurgence in U.S. manufacturing appears to be real.  In the same vein, the Commerce Department announced on Tuesday that factory orders rose 1% in February and January’s factory orders were revised up to a 1.5% gain due to the boom in commercial aircraft orders.

Across the pond, on Wednesday, Markit announced that its purchasing managers index (PMI) for the euro zone rose to 56.4 in March, up from 56 in February.  The Market PMI is now at its highest level in almost six years, so the euro zone is prospering despite Brexit and the upcoming French Presidential election.


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IMPORTANT NEWSLETTER DISCLOSURE: The performance results for investment newsletters that are authored or edited by Louis Navellier, including Louis Navellier's 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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