September Begins Down

September Begins Down, but Ends Up Nearly 2% in Week 1

by Louis Navellier

September 10, 2019

Even though the stock market initially stumbled last week, like any good bull market, every dip is seen as a good buying opportunity. Both the S&P 500 and NASDAQ gained 1.8% last week. When the market was volatile, I was online with an explanation why. Here are links to my Tuesday and Thursday podcasts.

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As I discussed on the Tuesday podcast, I expect energy prices to decline in September due to weaker seasonal demand. There are billions more people in the Northern Hemisphere than in the Southern Hemisphere, so as the summer driving season winds down and the weather cools, demand for crude oil and natural gas ebbs. Currently, natural gas prices are near record lows and crude oil prices may fall to $45 to $48 per barrel, due to the fact that excess supply will persist. This is great news for continued low inflation. The Fed’s favorite inflation indicator, the Personal Consumption Expenditure (PCE) index, has risen only 1.4% in the past 12 months, well below its 2% target, and may drift lower as energy prices ebb.

In This Issue

 Bryan Perry leads off with an examination of the likelihood of 50-to-100-year Treasury bonds – a trend already underway in Europe and in some U.S. corporate bonds. Gary Alexander is “off the grid” in Alaska but writes from his historical viewpoint about what drives markets – and what puts them to sleep. Ivan Martchev has just returned from his native Bulgaria, so he examines his two native lands for clear trends over the last 30+ years. Jason Bodner sees a welcome return of big institutional buying in the last week, while I examine the latest drama in China and Britain, along with last week’s economic tea leaves.

Income Mail:
The Coming of “Ultra-Long” Treasury Bonds to the U.S.
by Bryan Perry
50-Year and 100-Year Corporate Bonds in the U.S. are Alive and Well

Growth Mail:
With no Internet Service, an Eerie Quiet Overtakes the Market…
by Gary Alexander
America is (or Was?) the Land of Exploration and Innovation

Global Mail:
A Stranger in the Homeland
by Ivan Martchev
The Euro is An Unfinished Experiment

Sector Spotlight:
I’m Changing My Tune to Short-Term Bullish
by Jason Bodner
Rates are Crazy Low – and Going Lower

A Look Ahead:
Don’t Be Surprised if We See a Trade Agreement by Year’s End
by Louis Navellier
Economic Indicators are “Mixed” but Not Strong Enough to Prevent Rate Cuts

Income Mail:

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

The Coming of “Ultra-Long” Treasury Bonds to the U.S.

by Bryan Perry

The topic of whether the U.S. will see the issuance of 50- and 100-year Treasuries in the next few years, if not sooner, has started to become a genuine dialogue. What was reserved for very special emerging market situations, like the 7.9% 100-year government bond that Argentina sold in 2017 to raise $2.75 billion amid optimism about a new administration, is now commonplace among developed countries.

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

Case in point, the UK issued a 50-year Gilt in July 2018 with a 3.50% coupon at a lofty premium. It matures in 2068. As European sovereign yields have gone negative, the yield on this particular issue has plummeted by -69.25% YTD – trading with a current yield of just 0.934% as of last Friday (source: Bloomberg.com). Bear in mind that UK 10-year Gilts are yielding 0.50%, meaning that investors are buying the century bonds at a hefty premium to par value just to capture a 3.50% coupon rate in government-backed debt while only getting less than half of one percent difference in current yield.

The advent of QE among every major central bank around the globe that has fashioned skyrocketing sovereign debt loads is seeing an historic opportunity to take advantage of record-low borrowing costs to finance their ongoing deficit spending in efforts to thwart macro recessionary and deflationary pressures. The global bond markets have been pricing in slowing global growth for several quarters now, with yields at levels that seem just too good to pass up for issuing what are called “century bonds.”

It was only a few years ago that the U.S. Treasury poo-pooed the notion of 50- and 100-year debt, citing slack market demand for the size of issuance that actually moves the needle in a weekly Treasury auction – but that aversion to ultra-long-term debt has changed against the current crashing of bond yields.

So, during the last week of August, the U.S. Treasury noted that they are canvassing their largest buyers to measure the appetite for interest in such long-dated paper. The primary buyers of such debt are corporate pension plans and insurance companies. There are many bond pundits that are now forecasting zero to negative interest rates for the U.S. and the long-term chart below argues well for such a scenario.

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

50-Year and 100-Year U.S. Corporate Bonds are Alive and Well

This will likely be new information for most readers, but a handful of corporations, healthcare networks, and deep-pocket universities have already issued century debt. Walt Disney has a 7.55% 100-year bond outstanding that matures in 2093. At the time Disney issued the bonds in 2013, the company planned on selling $150 million worth of the issue, but demand was strong enough that Disney was able to raise $300 million. In recent years, the Cleveland Clinic and University of Pennsylvania also issued century bonds.

Ford Motor, Boeing, and McDonalds have all sold bonds with 50-year maturities since 2013. 100-year bonds were common among railroad operators when they were building their lines and leasing land under long-term contracts. The last railroad to sell 100-year bonds may have been the Chicago & Eastern Illinois, a subsidiary of Union Pacific, which peddled a 5% issue in 1954 (see: LA Times, July 22, 2013).

(Navellier & Associates does not own MCD, F, WMT or DIS in managed accounts and our sub-advised mutual fund but does own BA in the Sub-Advised mutual Fund.  Bryan Perry does not own MCD, F, WMT, BA or DIS in personal accounts.)

Driving the fresh interest in ultra-long debt is the flat yield curve, as it costs relatively little more to borrow for two to three times what it costs for 20- or 30-year debt. “Already, 14 countries within the 34-country OECD have issued debt with maturities ranging from 40-100 years, and Austria, Belgium, and Ireland have all issued century-bonds within the past two years” (source: Fortune – August 23, 2019).

While it may be some time before the first century bond is auctioned by the U.S. Treasury, I suspect some small trial issues will be floated to test the waters so as to determine the level of widespread interest. The U.S. has this nagging problem of a ballooning federal debt held by the public that is expected to top $16.6 trillion at the end of this year, representing 78% of GDP and nearly twice its average over the past 50 years. Come 2029, federal debt is forecast to hit $28.7 trillion, or 93% of GDP and keep growing to reflect 150% of GDP by 2049 (source: www.cbo.gov, The Budget and Economic Outlook: 2019 to 2029).

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

A lot can and probably will change these estimates going forward, but the concern is they will be adjusted radically higher. Just over one month ago, on August 1, deficit hawks from the Freedom Caucus lost out as Congress passed a budget deal that increased government spending by $320 billion for the next two years while allowing continued borrowing as needed. Basically, it’s an open checkbook courtesy of the U.S. taxpayer, which is why I think hundred-year bonds will eventually make their way to public auction.

Just for the record, President Trump never met a king-sized bond deal that he didn’t like, and he blessed the zealous budget deal after the Senate pushed it through. With large stresses on Social Security and Federal benefits programs looming, that just happens to coincide with bi-partisan support for an up to $3 trillion infrastructure deal in the works, the idea of taking out a $10 trillion line of credit for the next 100 years at or under 3.0% is probably too attractive to a free-spending Trump and Congress to pass up. 

Growth Mail:

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

With no Internet Service, an Eerie Quiet Overtakes the Market…

by Gary Alexander

I’m in the middle of Glacier Bay, Alaska, and there is spotty Internet service today, so I’m flying blind, living on my memory of history alone (plus a few stored memories from my ample historical data files).

It makes me wonder if we would worry so much about the markets if there were no Internet service…

This week was remarkably placid in stock market history 20 years ago, until a dramatic event happened in 2001: In 1999, the Dow centered around 11,000 all week long (September 7-10). The next year (2000), the market enjoyed a second peak around Labor Day (a double top), and then the Dow was eerily calm, not changing more than 45 points in any day, staying right around 11,230 for the first half of September.

The stock market was also unusually placid on Monday, September 10, 2001. The Dow changed less than half a point that day, falling from 9605.9 to 9605.5. (Then came disaster the following morning.)

Going into September 2001, America had enjoyed three straight years of federal budget surpluses, but in the 18 years since 9-11, American boots have been on the ground in Afghanistan for nearly 18 years and in Iraq 16+ years, draining our Treasury and costing thousands of lives and denting our global reputation.

We’re coming up to Constitution Day (more on that next week). In the 230 years since our first President and Congress took power, America became #1 by (mostly) avoiding foreign conflicts and reaping the fruits of Europe’s folly in their own endless warfare. The Louisiana Purchase (1803) doubled the nation’s size for a song ($15 million) due to Napoleon’s need for fast cash to fight wars. President Jefferson then sent Lewis & Clark to explore the West. So vast and forbidding was the far West that Jefferson predicted it would take 1,000 years to populate the frontier to the Pacific Ocean, but it took less than a century.

We laugh at President Trump’s bid to buy Greenland from Denmark, but in 1917 America bought the U.S. Virgin Islands from Denmark for $25 million in gold during World War I, so there is a precedent….

After World War I, in the 1920s, America owned the majority of the world’s automobiles, radios, and other consumer items, because we weren’t devastated by World War I. The same held true for the two bounteous decades after World War II, and then the high-tech 1990s, after the end of the Cold War.

In the 18 years since 9-11, however, we have drained our Treasury. In that way, perhaps, the terrorists scored a victory. Now, 18 years later, we need to decide whether or not we intend to police the planet.

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 Afghanistan decimated the British Army and helped bankrupt Soviet Russia. We may fare no better.

America is (or Was?) the Land of Exploration and Innovation

“Go West, young man, Go West”

– John L. B. Soule, writing in the Terre Haute Express in 1851.

The rallying cry to young men to “go west” was famously picked up by Horace Greeley in the New York Tribune. It overtly referred to “men,” not women, and that is what happened. Almost 100,000 East coast American males answered the gold call in 1849. Another 90,000 men made the difficult trek in 1850. This meant that almost 2% of American males headed west via three very dangerous routes: Panama, the Cape, or overland. After California became a state in 1850, its first official census showed that 92% of the state’s population was male. Gold lured Argonauts from all over the globe. Over 2.5 million immigrants came to America in the 1850s. Then, America bought “Seward’s Folly,” aka Alaska, for just $7.2 million.

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Today’s trade war revolves around the question of property rights. America is a land of invention, while China is a land of intellectual property theft. America invents things. In the 19th and 20th centuries, most of the major technological innovations came out of America, in part because our copyright laws protected rights of ownership (and hence financial royalties), and in part due to our innovative national spirit.

Here are just a few of the “famous firsts” that fell on this date alone – September 10 in American history:

  • 1608: The first American election: John Smith was elected as the first president of Jamestown, Virginia.
  • 1623: The first export: Lumber and furs were sent from New Plymouth, Massachusetts to England.
  • 1776: Our first spy: George Washington needed information. Nathan Hale volunteered to be our first spy.
  • 1846: The first sewing machine: Elias Howe patented the first practical lock stitch sewing machine.
  • 1897: The first DWI: George Smith drove a car into a building, becoming the first-ever DWI conviction.
  • 1913: The first paved coast-to-coast highway opened, when the Lincoln Highway was completed.
  • 1953: Swanson marketed its first TV dinner.
  • 1982: The first edition of USA Today was published.

Now, physical frontiers are deep under the ocean or land, or in space, while most inventions are in micro-technology, but we need to keep rewarding inventors and punishing thieves, if we wish to remain great.

Global Mail:

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

Stranger in the Homeland

by Ivan Martchev

I hadn’t thought of it this way before, but I have lived in the United States longer than I have lived in my native Bulgaria, which is 5,000 miles away. Does that make me more American now?

They say that if you arrive in the U.S. before the age of 10, you tend to lose the accent, but later on – the way the brain cells work – it’s very hard to lose your accent. My daughter, who was born in the U.S., and now goes to a top-ranked high school in New Jersey, speaks perfect English, but she also speaks her mother tongue (both of her parents are Bulgarian) with “an American accent.”

I had a very interesting cross-cultural experience last week at the checkout counter while shopping in my homeland. The store attendant asked: “Should I put all items together in one bag, or do you want them bagged separately? One bag?” As I nodded “yes,” she froze with a look of misunderstanding in her eyes.

“Yes, one bag,” I confirmed with a nod.

I got the same bizarre look.

Something is not right here, I thought, and nodded again. Then, after a few nods and some uncomfortable silence, I figured it out! It may seem hard to believe, but my nod – an up and down affirmative movement of the head – means “no” in Bulgarian. A decline in the English-speaking world is a sideways movement of the head, while Bulgarians, when shaking their heads sideways “affirmatively” incorporate a wobbling pattern similar to a sideways number “8.” Still, any affirmative sideways shaking is a “yes” in Bulgaria.

In the 25 years since I left my homeland to get a graduate degree in finance in the U.S. and a career “on Wall Street” (isn't that quite a nebulous term?), the place shook itself up from the ashes of the post-Cold War wreckage and decided to get a life. Bulgaria entered NATO in 2004 and the EU in 2007. Its GDP per capita is double what it was in the “old days,” and when speaking to a cabbie it's probably 3X better.

Here is the math, which reflects official gains of between 2- and 3-fold per-capita income since the 1990s.

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

During the old days, prior to 1989, the dark economy was maybe 20-30% of GDP. Provided the “normal” economy is at least two times better, constant-dollar-wise, and that with more private enterprise there is more underground activity, the present Bulgarian economy is at least 3X as big as the best of the old days.

GDP per capita is going up not only because the population is declining, but because the overall GDP is rising. That's the good news. The bad news is that the rate of the population decline was huge (over 20% in under 30 years), but the biggest exodus is likely behind us, given where the economy is going.

The Euro is An Unfinished Experiment

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

Quantitative easing (QE) from the ECB affects Bulgarian interest rates via the hard peg to the euro, driving the Bulgarian 10-year bond rate down to 0.4%, while the overall inflation rate is 2.4%.

The euro hangs on the premise that there is one monetary policy for the Euro-zone but separate fiscal policies are holding it together. That premise is misfiring in a major way. Maybe this problem can be resolved amicably, but the euro is going towards a breakup without too much drama, so far.

The problem with the euro is that there is no unified fiscal account. Personally, I think it will do better, when the fiscal issue is resolved, but I have no idea when that might be coming.

Sector Spotlight:

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

I’m Changing My Tune to Short-Term Bullish

by Jason Bodner

It’s not the information itself, but what you do with the information. As a kid, I got my class schedule and went to class. That’s what I did with that information – I complied. But one summer in the early 1970s, a kid wrote a class-scheduling program of his own for his high school. He “preloaded” himself into an English class with a dozen girls and no other boys. That clever young student was Bill Gates.

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Now, the market is giving us a ton of bipolar info. How do we make sense of a market with a personality disorder?

Remember last week, I told you the Big Money Index fell below 45% and that was short-term bearish, but medium- and long-term bullish. It stopped right at that crucial 45% level and now looks to be heading up.

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

With last week’s data, I might be changing my tune to short-term bullish. Here’s why:

September arrived and so has “up-volatility.” Tuesday, September 3rd saw sharply lower stock market index prices. Tariffs started against China. Hurricane Dorian was bearing down on Florida after wrecking the Bahamas. Financial professionals had to come back to the real world and go to work after Labor Day, the official end of summer vacation. In short, everyone was edgy and cranky last Tuesday.

Two days later was a very different story. The broad markets rallied wildly. People ask a lot fewer questions when a market goes up than when it goes down. Either way, here’s the question I always ask: What was going on under the surface? If you want to know what direction the market is really headed, you’ve got to pay attention to the big money. Tuesday’s down day didn’t mean much in that regard.

Here’s what I saw: Out of over 5,500 stocks and over 2,500 ETFs, Tuesday’s down day showed 71 buys and 66 sell signals, meaning that the big money was buying slightly more than selling on an ugly start to September. That buying trend continued the whole four-day holiday-shortened trading week. In fact, this was the first week in five when buying outnumbered selling, and Thursday’s buying was the largest single day in four weeks. That’s bullish. The main thing I noticed when trawling through the Mapsignals data was that Energy selling stopped. That sector had been weighing the market down for weeks. But as shorts started to cover in energy, other weak-fundamental stocks also saw short-covering.

That alone does not inspire confidence for a rally. I don’t like “crap” rallies, meaning only the weak stocks go up. The good news from what my data says is that it’s not only the weak stocks. We saw big money buying in solid growth names this past week as well, most notably in tech.

Looking below, when 25% or more of a sector universe sees buying (or selling) in a week, it goes yellow. For the first week in many, nothing was going on in energy. Tech saw notable buying, with a lot of high-quality stocks being snatched up by big investors. But there was BIG buying in Utilities, Real Estate, and Telecom. These sectors would ordinarily be associated with defensive action, but maybe not this time.

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

This latest move is about rates.

Rates are Crazy Low – and Going Lower

Interest rates are crazy low, and they will likely get lower in the U.S. Rates are already mostly negative in much of the rest of the world. For instance, Denmark released their first negative interest mortgage rate, available for their best borrowers. You could literally earn 0.50% a year from buying a home there.

Big companies are taking advantage by selling long-term bonds. Why? Because they borrow cheap and buy back their own stock. They get better return on their own equity. Buy-backs lift the market. In this low-rate environment, investors seek higher yields – specifically stocks with typically higher dividend yields. For instance, Utilities, Real Estate, and Telecom are rich with higher-yielding stocks.

And as we see investors allocating capital to equities, it’s good for all equities. Remember: owning stocks right now is way better than owning bonds, especially after tax:

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

The S&P 500 dividend yield is even 20% better than the 30-year Treasury yield, after taxes:

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

On the news front, most fundamentals remain bullish. Second-quarter sales and earnings were great, and I expect the upcoming Q3 earnings will be strong as well. Impending China trade talk schedules were confirmed by both parties, but we know by now that this is far from certain. A no-deal Brexit was met with a roadblock with a vote of no-confidence for Boris Johnson. These things won’t necessarily ward off a normally bumpy September, but we usually see a strong rally at year’s-end to bolster the bullish case.

The market is up-and-down, which is normal for the choppy August and September months.

We all have access to the same information. It’s what we do with it that matters. I see bullish days ahead for U.S. stocks. They are strong on their own merits and are a sanctuary compared to the rest of the world.

As far as tolerating the stomach-churning volatility that the market can give us, listen to Fred Jung from the movie Blow: “Sometimes you're flush and sometimes you're bust, and when you're up, it's never as good as it seems, and when you're down, you never think you'll be up again, but life goes on.”

A Look Ahead

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

Don’t Be Surprised to See a Trade Agreement by Year’s End

by Louis Navellier

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The biggest ongoing news story centers around Chinese trade negotiations in Washington D.C., which are now scheduled to start in early October. China’s Commerce Ministry said that in mid-September they will conduct “conscientious consultations.”  In the meantime, China wisely decided not to retaliate against the latest U.S. tariffs, since this trade spat is hurting China more than the U.S., especially after President Trump encouraged companies to change their supply chains. It is obvious that Chinese President Xi’s goal – to dominate five major industries by 2025 – may not come to fruition as companies outsourced to Indonesia, Malaysia, and other nations disrupt China’s trade dominance and intellectual property fight.

I would not be surprised if we see a late-year signed trade agreement in which both sides say they “won.”

Speaking of China, Hong Kong’s embattled leader, Carrie Lam, on Wednesday withdrew the controversial extradition bill to mainland China that sparked mass protests. Specifically, Lam said, in a video statement, “We must find ways to address the discontent in society and look for solutions,” adding that, “After more than two months of social unrest, it is obvious to many that this discontentment extends far beyond the bill.”  There are greater reasons for Hong Kong citizens to protest – like demands for greater democracy – but hopefully Hong Kong can resume normal daily life, since these protests disrupted the airport and commerce. In the meantime, Asian stocks staged an impressive relief rally.

Speaking of embattled leaders, British Prime Minister Boris Johnson suffered a major defeat last Tuesday in Parliament by a 328 to 301 vote, clearing the way to delay Brexit without a European Union (EU) deal. Clearly, Parliament did not like Johnson’s maneuver asking the Queen to suspend Parliament to proceed with Brexit. Immediately after losing the vote Tuesday evening, Johnson said, “I don’t want an election but if MPs vote tomorrow to stop negotiations and to compel another pointless delay of Brexit, potentially for years, then that will be the only way to resolve this.” In the wake of this chaos, the British pound plunged, but then rallied on the hope that Britain would remain in the EU. I should also add that British factory output hit a seven-year low last week, which also put downward pressure on the British pound.

The next day, Johnson goaded his opposition, Labour Party Leader Jeremy Corbyn, for not backing a new election. Specifically, Johnson called Corbyn’s policy “dither and delay” and called him a “chlorinated chicken.”  The reason for such colorful language is that on Tuesday, Corbyn mocked Johnson’s backing of a trade deal with the U.S. by mocking U.S. food standards – hence the “chlorinated chicken” barb.

Interestingly, there have been multiple Conservative MP resignations lately, including Boris Johnson’s own brother, so Parliament remains in chaos after successfully blocking a “no deal” Brexit. As a result, if Boris Johnson cannot negotiate favorable Brexit terms with the EU, it seems inevitable that Brexit may be delayed beyond October 31. Interestingly, as long as Johnson remains Prime Minister, President Trump may get much less attention from the media, since political infighting in Britain is now more dramatic!

Economic Indicators are “Mixed” but Not Strong Enough to Prevent Rate Cuts

The economic news last week was mixed, starting with mixed messages from the ISM indexes.

First, on Tuesday, the Institute of Supply Management (ISM) announced that its manufacturing index slipped to 49.1 in August, down from 51.2 in July, the first time the index slipped below 50 in 35 months (any reading below 50 signals a contraction), and the lowest reading since January 2016. Economists were expecting the index to be 51 for August, so this was a big surprise. Among the ISM components, new orders plunged to 47.6 (down from 51.3 in July) and the production component slipped to 49.5 (from 50.8 in July). Only nine of 18 manufacturing industries reported an expansion in August and only three reported an increase in new orders. There was also “a notable decrease in business confidence” among purchasing managers. It looks like the trade spat with China and lower energy prices were the culprits.

Delivering the opposite message, ISM announced on Thursday that its non-manufacturing (service) index rose to 56.4 in August, up sharply from 53.7 in July, with fully 16 of the 17 industries surveyed reporting expansion in August, which is great news for continued strong GDP growth, since services represent a far greater share of the U.S. economy than manufacturing.

In between those two reports, the Fed released its latest Beige Book on Wednesday – that’s an economic report card from the 12 Federal Reserve districts. It was relatively upbeat, saying that the U.S. economy is expanding at a “modest pace.”  The report continued repeated concerns about U.S. trade policy with China, so it is not surprising that agriculture and manufacturing were cited as two weak sectors.

The Beige Book Survey also said that the majority of business owners “remain optimistic about the near-term outlook.”  Overall, the Beige Book Survey provided confirmation that the Fed will cut rates by 0.25% at its upcoming Federal Open Market Committee (FOMC) meeting on September 18.

The Commerce Department announced on Wednesday that the U.S. trade deficit declined 2.7% in July to $54 billion, compared to a revised $55.5 billion in June. Exports rose 0.6% to $207.4 billion in July and were led by exports of drugs, vehicles, crude oil, drilling equipment, and soybeans while imports remained at $261.4 billion. This report shows that global trade remains steady, despite tariffs. Ironically, soybean exports are running higher than last year despite media reports of irate farmers and soybeans piling up.

In addition to agricultural and energy exports, the trade deficit is also influenced by commercial aircraft exports, and the Commerce Department on Thursday announced that factory orders rose 1.4% in July, primarily due to commercial aircraft orders, which bodes well for a lower trade deficit.  

Speaking of GDP growth, the Atlanta Fed cut its third-quarter GDP estimate on Tuesday to an annual pace of 1.7%, down from 2% previously estimated in the wake of the ISM manufacturing report for August. However, since the U.S. economy is dominated by the service sector and consumer spending, third-quarter GDP growth should remain strong. The truth of the matter is that consumers feel good when their pocketbooks are healthy, and they tend to spend more when they have extra money. Falling energy prices alone are acting like a tax cut and boosting consumer spending. As a result, I expect steady GDP growth for the remainder of the year and leading up to the 2020 Presidential election.

Finally, the Labor Department announced on Friday that 130,000 payroll jobs were created in August, significantly lower than economists’ consensus estimate of 150,000. The payroll reports for June and July were also revised down by a combined 20,000 to 178,000 (down from 193,000) and 159,000 (down from 164,000), respectively. Approximately 25,000 census jobs were added in August, so the August payroll report was boosted by temporary government jobs. The jobless rate remains near a 50-year low at 3.7%.

The labor force participation rate rose to 63.2% in August, up from 63% in July. The best news was that average hourly wages rose 0.4% by 11 cents per hour to $28.11 per hour and have risen by 3.2% in the past 12 months. I should add that on Wednesday, ADP reported that 195,000 private payroll jobs were created in August, which is substantially higher than the economists’ consensus estimate of 140,000. Overall, the job market remains healthy, but not enough to stop the Fed from cutting key interest rates.

The Wall Street Journal this week featured multiple articles about how corporate America, led by Apple and Deere, are selling corporate bonds to take advantage of ultralow 30-year yields below 3%. Other companies that have been selling 30-year corporate bonds below 3% include United Airlines, which will likely use the proceeds to finance the purchase of more airplanes. The currently ultralow interest rate environment will likely fuel more stock buy-backs, which is very bullish for the overall stock market!

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


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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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