Stock Selection is All-Important

Stock Selection is All-Important in a Global Market

by Louis Navellier

September 12, 2017

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

Evacuation Route Street Sign Image

For all of you in Florida, I hope that you were able to stay safe over the onslaught from Hurricane Irma!  My Florida home has suffered power outages, but I have generator power and Internet access to write to you today.  However, after we go to press on early Tuesday, I will have a lot of debris to start removing.

In the holiday-shortened week, the S&P 500 declined 0.61%, while the ADRs (American Depositary Receipts) continue to lead the way, as our friends at Bespoke Investment Group illustrated last week (see “ADR Acceleration,” September 7, 2017).  Through last Thursday, they said, “ADRs are up an average about 15% vs a more modest 10% for the S&P 500 ETF,” and that gap widened significantly in August.

The big news last week was the collapse in the 10-year Treasury bond yield to only 2.05% on Friday, based on fears of a potential nuclear war with North Korea as well as dovish central bank trends.  As for war with North Korea, I believe it will end peacefully and, if it doesn’t, I am betting on the U.S. to win.  (I’ll have more to say about declining 10-year Treasury yields and the flattening yield curve later on.)

In This Issue

In Income Mail, Bryan Perry argues that now is a good time to consider income-bearing equities in strong and growing sectors.  In Growth Mail, Gary Alexander continues to fact check the media’s pessimistic bias that promotes fear and ignores progress.  Ivan Martchev examines the low 10-year Treasury yields in parallel with the Japanese yen, U.S. dollar, and euro, while Jason Bodner escaped the ravages of Irma to examine disaster control in nature and in the markets.  In the end, I’ll continue my review of current Fed policies.

Income Mail:
Backing Up the Truck for When the Storms Pass
by Bryan Perry
The Miracle of Compounding Interest Income

Growth Mail:
Why Do We Insist on Believing the Worst?
by Gary Alexander
All Continents Are Growing Together – Finally

Global Mail:
New 2017 Lows for 10-year Treasury Yields
by Ivan Martchev
Why the Yen Follows the U.S. Treasury Yield Curve

Sector Spotlight:
Surviving Harvey, Irma, and Sudden Market Storms
by Jason Bodner
Surviving Market Hurricanes Requires Skill – and Some Luck

A Look Ahead:
A Flattening Yield Curve Handcuffs the Fed
by Louis Navellier
The Other Economic News is (Mostly) Positive

Income Mail:

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

Backing Up the Truck for When the Storms Pass

by Bryan Perry

There is a general rule of thumb in the investing world that when the yield on the 10-year gets at or near the yield of the S&P 500, we should back up the truck and buy stocks. As of this writing, the yield for the S&P is 1.92%, or barely 10 basis points below that of the benchmark bond. What makes this development even more compelling is that it comes in September, which is notorious for being a month that delivers poor stock performance. Getting long the market at this time of year is counterintuitive, to say the least, but buying into the market now just might prove to be one of the great buying opportunities of 2017.

Heading into mid-September, the U.S. equity markets have been trading in a very skittish manner, unnerved by uncertainty surrounding the military threats from North Korea and the totality of damage inflicted by Hurricanes Harvey and Irma. Investors have sought the safety of the Treasury market, driving the yield on the benchmark 10-yr T-Note down to 2.03%, a level not seen since the 2016 elections.

The S&P is in its fourth month of consolidation, trading only about 20 points above where it was at the start of June. Assuming the market is an efficient forward price discounting mechanism that takes into account inherent risks (like North Korea and Mother Nature), the case for getting into the market for dividend income is a sound one. Inflation, in all its forms, is tame, due primarily to softer energy and commodity pricing, due in part to visible oversupply of just about every commodity in the world.

This would also explain to some extent why the dollar is trading at low levels not seen since 2015. The notion of the Fed standing pat on any further rate increases is getting traction and is being realized in lower currency valuations and bond yields that are going to frustrate fixed income investors and further the bullish case for equity income due to economic growth, Fed policy, and flows into equity funds.

The Miracle of Compounding Interest Income

For income investors seeking yields well above those offered by the S&P 500 or the 10-year T-Note, there are sectors where outsized yield and capital appreciation can be captured in specific holdings that are trading at meaningful discounts to many other market sectors, simply because growth stocks have worked so well in 2017. In fact, growth stocks have been responsible for delivering a 20%+ gain for the Nasdaq year-to-date, and no one with investing capital wants to miss out on the party. At the same time, man does live on capital gains alone, and investors should never take the power of compounding income lightly. After all, there are two kinds of people in the world – those that collect interest on their money and those that pay interest on their debt. Compounding interest separates the rich from the broke.

According to a report from the Economic Policy Institute (EPI) published at the end of 2013, many Americans have some catching up to do. The mean retirement savings of those 50 to 55 years old is $124,831. For families with members between 56 and 61, the mean retirement savings is $163,577.

Retirement Savings Chart

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

Since so many families have zero savings and since super-savers can pull up the average, the median savings, or those at the 50th percentile, may be a better gauge than the mean. The median retirement savings for households aged 50 to 55 is only $8,000. For households aged 56 to 61, it's $17,000.

Yikes! No wonder there are so many people that voted for Bernie Sanders!

Promises of Free Stuff Image

Just this past week, President Trump and Senate Minority Leader Chuck Schumer discussed scrapping the federal debt ceiling altogether, opening the way further to unaccountable federal spending. The urge to spend now and pay later is politically intoxicating and continues to supercharge campaigns every year. Thankfully, the great majority of capable folks we interface with at Navellier Private Client Group every day have salted away a solid nest egg, not waiting on Uncle Sam to bail them out in their retirement years.

So, where’s the beef in the world of equity-oriented yield? In my view it’s in those sectors where (1) yield exceeds 2.0%, yet (2) prices have been sorely lagging all year, but will (3) reassert its upward bias when the world sees that the Fed may well be done in terms of normalizing short-term interest rates. There aren’t any other decent alternatives to garner yield other than those based on specific market themes that should take hold of investor sentiment for the balance of 2017 and into 2018. They would include:

  • Blue-chip stocks with rapidly growing dividend payouts
  • Business development companies (BDCs)
  • Hotel/Casino REITs, office REITs, data center/cell tower REITs, industrial REITs
  • Short-term corporate, convertible, and distressed credit debt funds
  • Publicly traded private equity firm stocks
  • Covered-call total return strategies
  • Liquefied Natural Gas (LNG) MLPs
  • Select gas pipeline/transfer/storage/logistics and refining MLPs

The more investors know and become familiar with these themes and sectors, the more confident they will be putting capital to work generating a stream of income that is consistently reliable, diversified, and well above the paltry yields bonds offer. When the perceived market risk dies down and the fourth quarter approaches, there could well be a very strong finish to the year for equities and especially those where bond investors shift more of their allocation to dividend income paying assets.

Call it a ‘melt up’ or just a solid year-end rally, there is a growing case for using the current uneasiness in market sentiment to buy into the best high-yield assets available at very attractive entry points where you can put your income capital to work and give your portfolio a nice year-end pay raise.

Growth Mail:

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

Why Do We Insist on Believing the Worst?

by Gary Alexander

The market seems to be smarter than the media these days. For all the bad news dominating the headlines, the market just keeps rising. We are inundated with the worst images of Texas and Florida on TV, but I have talked with several in those states who are doing fine. It’s important we help those in need, but it’s also important that we realize that thousands of volunteers are unharmed enough to help their neighbors.  I’d love to see more stories about these courageous volunteers, not just endless shots of the storm damage.

A dramatic example of how we unconsciously accept the worst about this world is an emailed slide show I just received from both friends and family. The slide show is intended to have a positive message – to be thankful for what we have – but that positive message was polluted by some outdated or bogus statistics:

The slide show begins like this: “If the world were a village of 100 people, there would be:

  • 57 Asians
  • 21 Europeans
  • 14 Americans (North, Central and South)
  • 8 Africans

Right away, I knew these numbers were at least 40 years old, if not entirely made up. In the last 40 years, Europe has shrunk in population share. Africa has doubled in population since 1990 (despite AIDS, Ebola and other plagues, wars, and poverty). The last time Africa had only 9% of global population was 1960, the year of African independence (Uhuru). Since then, Africa has gained almost a billion people, from 285 million in 1960 to 1,216 million in 2016 and, believe it or not, most of Africa is now growing briskly:

African Gross Domestic Product Growth Choropleth Map

Next, the slide show gets a little loopy. The next slide lists eight false facts about our global village:

If our world were reduced to a village of 100:

  • 6 would have 59% of the wealth and they would ALL come from the USA
  • 80 would live in poverty
  • 70 would be illiterate
  • 50 would suffer from hunger and malnutrition
  • 1 would be dying
  • 1 would be being born
  • 1 would own a computer
  • 1 (and only 1) would have a university degree

The one death is the only accurate number. Per 100 people, there are roughly two births and one death per year, so a more accurate image would be “one died and two were born, netting one new person.” As for the dearth of computers and degrees, this might have been true in 1980, but today there are over three billion smartphone accounts serving 40% of us, and that number is expected to reach six billion (about 80% coverage) by 2020. Each phone has access to the Internet – a universe of knowledge unheard of 25 years ago. (As of 2010, 6.7% of global citizens had a university degree, but many more learn on line.)

Getting back to the first of these silly numbers, the U.S. now hosts 4.4% (not 6%) of world population and controls about 33% of the world’s wealth, not 59%. In 2016, the IMF listed the U.S. as #11 in per capita GDP. For four years (2010 to 2013), Mexico’s Carlos Slim was the richest man in the world. Last year, Spain’s Amancio Ortega was #2, and a growing number (six of the richest 30) now hail from China.

The second statement, “80% live in poverty,” hasn’t been true for at least 50 years, depending on how you define poverty. The absolute number of poor people is down and the percentage of poor is way down:

World Population Living in Extreme Poverty Chart

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

Princeton economist Angus Deaton won the Nobel Prize for economics in 2015 for his detailed studies of global wealth and poverty. Born in 1945 as the son and grandson of coal miners in South Yorkshire, he has seen first-hand the evolution of health and wealth in the late 20th century. His 2013 book, “The Great Escape: Health, Wealth and the Origins of Inequality,” opens with this stunning series of sentences:

“Life is better now than at almost any time in history. More people are richer and fewer people live in dire poverty. Lives are longer and parents no longer routinely watch a quarter of their children die.”

In explaining his book’s title, Deaton calls the “reduction in global poverty since 1980” the “greatest escape in all of human history, and certainly the most rapid one.” In China and India alone, he says, “recent economic growth has transformed the lives of more than a billion people. That global poverty should have fallen goes against the almost universally accepted doomsday predictions of the 1960s…”

Sadly, most people don’t believe this – as evidenced by the gullible readers of the “world as 100 people” meme demonstrates. Here is what 373 educated Britons thought about poverty, contrary to the clear facts:

Extreme Poverty Survey Results Bar Chart

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

In a similar U.S. poll, the results were even worse. Over 1,000 Americans were asked: “In the last 20 years the proportion of the world population living in extreme poverty has (a) almost doubled; (b) remained more or less the same; or (c) almost halved: 66% said (a) almost doubled, while 29% said (b) the same, and only 5% got the right answer: (c) halved (source: Novus, from a GAPMINDER poll).

Rounding out the doomsday numbers (70% illiteracy and 50% hunger), the Green Revolution has fed the world to the point where obesity is a growing problem on most continents, not just in America. Those suffering undernourishment in the developing (poor) countries has declined from 34.8% in 1970 to 13.1% in 2014, according to the U.N.’s Food and Agriculture Organization (FAO). Illiteracy has fallen faster:

World Literacy Chart

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

The last time the world’s overall rate of illiteracy was 70% or greater was over a century ago, in 1910.

All Continents Are Growing Together – Finally!

I’m writing about this subject since it has direct application to our long-term wealth accumulation. The fact that 88% of Britons and 95% of Americans believe global poverty is static or growing indicates that they believe the Doomsday press. Since the majority don’t know or believe the world is getting better, they also may be reticent to invest, resulting in stunted portfolio growth or a paranoid hoarding of cash.

As I reported last week, this is the first time since 2007 that all 45 of the biggest economies are growing at once. The Economist lists 36 nations that have reported second-quarter GDP so far, and all are positive.

In his September 5 briefing (“Back to School”), economist Ed Yardeni wrote that 2017 marks “the most synchronized expansion of economic activity that the global economy has had since the recovery from the 2008/2009 recession.” Yardeni cites Europe’s 2.2% second-quarter GDP growth, the best in over six years. The Eurozone’s August Economic Sentiment Index rose to 111.9, the highest since 2007:

Economic Sentiment Indicator versus Real Gross Domestic Product Chart

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

Europe’s Manufacturing Purchasing Managers Index (M-PMI) stands at 57.4, the best since April 2011. Europe has been the slowest-growing developed economy for a long time, so its recovery to 2011 highs, amid the mainstream election victories in 2017, augurs well for the euro, the Eurozone, and global growth.

In Asia, once-torpid Japan’s real GDP rose 4% in the second quarter, and China’s growth is back at 7%. The five fastest-growing global economies (all with 5% or greater GDP growth) are in Asia. Getting back to our slide-show meme, it’s nice to know that the region with 60% of the world’s people is getting richer faster than the rest of us. I’m just as thankful for their success as I am thankful to be born an American.

Global Mail:

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

New 2017 Lows for 10-year Treasury Yields

by Ivan Martchev

The standouts last week were the moves in U.S. Treasury bonds and the Japanese yen, which are somewhat correlated. The 10-year note yield fell as low as 2.03% last week and closed the week at 2.06%. The yen closed at 107.83. Both are breaking to fresh 2017 lows.

Since early 2015, the yen has been closely correlated to the slope of the U.S. Treasury yield curve or more precisely the difference between the 2- and 10-year Treasury note yields. As a reminder, 2-year notes are more heavily influenced by Fed policy while 10-year notes are more correlated to inflation and economic growth. As the Fed has hiked the fed funds rate and mulled how to unwind its balance sheet, 2-year note yields have gone up while 10-year note yields have been range-bound, resulting in a flatter yield curve.

Yield Curve versus Japan United States Exchange Rate Chart

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

Most market participants would probably have guessed that the 10-year note would see a rising yield in 2017, given how the bond market reacted after the November election. But here we are – 10 months after the election, in September 2017 – and the 10-year note is setting new lows for the year. What gives?

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.

The surge in the 10-year note yield after the November election was based on the election promises of the incoming Trump administration. Those promises have not materialized yet. Mr. Trump has until late 2020 to deliver on tax reform and infrastructure spending, but Congress may turn further against him in 2018, so he may have only 16 months left to act. So far, the bond market is saying that the likelihood that the U.S. economy kicks into high gear because of any policies from the Trump administration is virtually nil.

The flattest the U.S. Treasury yield curve had been in 2016 was 76 basis points, right after Brexit. Last week (September 5) we made fresh 2017 yield lows at 77 basis points. To be fair, a flatter yield curve is normal in a more mature economic cycle, where the Federal Reserve is hiking short-term interest rates. A flatter yield curve is also how the bond market tells us it anticipates a slowdown in economic growth.

As a reminder, every one of the last five recessions has seen an inverted yield curve, or a situation where the 2-year Treasury note yields more than the 10-year note. We are not there yet, but the bond market does not seem to anticipate the economic acceleration that was promised during the election last year. So far, the bond market forecasts an economic expansion that is close to ending. While there is still time for the Trump administration to get its act together and for the bond market to change its mind, the erratic nature of White House policy making and the deep divisions within the Republican party (sometimes described as civil war) do not indicate that a change in that dynamic is a high probability event.

Why the Yen Follows the U.S. Treasury Yield Curve

As to the Japanese yen, I am on record saying that if one is not too careful one might confuse a chart of the Japanese currency with that of the U.S. 10-year Treasury note. That’s because lower longer-term U.S. Treasury yields coincide with a slower U.S. economy and higher volatility in financial markets, which means fewer yen-funded carry trades.

Japanese Yen Index Chart

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

The yen tends to appreciate when the yen-funded carry trades are being unwound, which happens when large institutional investors want to take less risk. The borrowed yen (yen sold short) will be returned as the loans are being repaid when the yen shorts are covered and the yen tends to appreciate. Since the yen is the ultimate carry trade funding currency due to low Japanese short-term interest rates (recently -0.1%), borrowing the yen is the cheapest funding mechanism for institutional investors.

Japan Interest Rate Chart

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

It is true that the euro also offers low policy rates – a function of the deflationary environment in the eurozone – but it is also true that the euro has appreciated significantly in 2017. In this case, the reason for covering euro shorts is less of a function of carry trades and more a function of political trends.

European Central Bank Benchmark Rate Chart

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

A lot of analysts incorrectly assumed that the eurozone was in trouble due to the election cycle in Europe. But elections in the Netherlands and France in the first half of 2017 went for pro-EU candidates and it looks like the same will happen in Germany later this month. This is causing the eurozone disintegration trade to unwind and for the euro to rise back to $1.20.

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.

I do think the euro is ahead of itself near $1.20, which is now a major resistance area. As the above chart shows, $1.20 used to be an area of support (from 2010 to 2015). I would be surprised to see more upside for the euro before the end of 2017. Any decline for the euro is likely to see a rebound in the U.S. Dollar Index, as the euro is by far the largest component in the index.

A rebound in the dollar is not inconsistent with a rallying yen, which has happened many times in the past. For instance, an escalation of hostilities on the Korean peninsula, which now looks likely, would be the perfect trigger for a simultaneous rise in both the yen and the dollar.

Sector Spotlight:

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

Surviving Harvey, Irma, and Sudden Market Storms

by Jason Bodner

Surviving natural disasters taps into the most primal instincts all creatures share. It's the one event that typically overrides all other thoughts and drives people and creatures to find safety and ensure life. There have been extreme feats of survival that are remarkable by any standards. I've already written about Jose Alvarenga's 428-day ordeal drifting across the Pacific Ocean in a 25-foot skiff. There are other miracles:

  • Harrison Okene (pictured below, top) is a Nigerian cook on a Chevron tugboat which capsized and sank. Somehow he managed to survive three days in shark-infested, icy seawater by living in an air pocket with a source of light and a single can of coke for hydration.
  • In 1958, Howard Ulrich and his 8-year-old son went on a boat trip in Alaska and found themselves riding a tsunami wave an incredible 1720 feet high – taller than the Empire State Building.
  • Matt Souter was a 19-year-old Missouri kid who was sucked out of his trailer home by a tornado and managed to ride it a quarter of a mile in only his underwear, surviving with just minor scrapes.

Incredible Survivals Image

Sometimes survival is luck and sometimes it is skill. I write this article from a hotel room in Duluth Georgia. My family of five plus two dogs hopped in the car last Thursday to flee from mega-storm Irma. We live in South Florida so for us instinct kicked in early. Many elected to stay.

I write about survival because I have a unique relationship with close calls. I was once on a flight which had some sort of loud bang. We lost an engine, depressurized, and had an emergency landing wearing oxygen masks as I watched one flight attendant drag another unconscious one to be strapped into a seat.

Coincidence or not, I have also survived some of the 21st century’s most notorious events. Three weeks before 9/11, I transferred to London from my office at 104 World Trade Center's North Tower working for Cantor Fitzgerald. Three years later, I was in the Thai islands during the Boxing Day Tsunami which claimed the lives of more than 300,000 people. Then, I moved back to New York from London just three weeks before the London Tube attack on my daily commute line. Then, I was stuck in the floods of Hurricane Irene in Vermont. I was ensconced in my New York apartment for Sandy; I narrowly missed Matthew, so now I have fled Irma. I greatly appreciate the factor that luck plays in the part of survival.

Thailand Tsunami Hotel Damage Images

Surviving Market Hurricanes Requires Skill – and Some Luck

Survival in markets is also part luck, part skill. How many times have you entered a long position a day before it drops? Survival mode kicks in. Some cut and move on, enduring just a minor scrape. Some “manage the position” for a long time, hoping to steer it back to flat. Any seasoned investor or trader will tell you that an exit plan is actually more important than the entry. This is, of course, our survival instinct.

Let's look at what the major sectors did last week and then come back to see how to survive any storms.

Health Care surged in the face of an overall weak market, leading the sectors with a 1.53% pop. Energy also benefitted. Clearly, Irma brings with it a surge in gas prices and potential to disrupt distribution. Rate-sensitive securities saw an influx of capital as Utilities and Real Estate rounded out the winners.

Telecommunications was the weakest sector falling over -4.5%. Financials took a drubbing as well as insurance companies were pelted in anticipation of Irma’s impacts.

Standard and Poor's 500 Weekly, Quarterly, and Semiannual Sector Indices Changes Tables

If you find yourself in a situation that you have enough time to plan an exit, whether or not you act on it is up to you. If you find yourself in the middle of a tsunami you weren't expecting, you then have to react and make decisions along the way. Trading your investments is no different. Some will offer you signs and signals that trouble may lurk ahead. Without a plan, you may find yourself stuck in a losing position.

I like to use volatility as a guide. On any given day, we can measure how much a stock moves on a daily basis and over a period of time. If, say, it's moving on average 1.5% every day for the past month then we can expect similar movement going forward. If we wake up and the stock is down 6%, that may be a sign that something may be wrong or certainly different from our original expectations. At this point, you can exit for a known loss, you can sell options to try to recoup some loss through income, you can 'average in' (I’m not a huge fan of this strategy), or you can leave it be. There are many options to survive a nasty situation, but having some guideline is advisable. I use volatility and bands of expected ranges as my guideline. You can employ whichever works best for you, but it's best to have a plan – and then act fast.

Remember the words of Tacitus:

He that fights and runs away
May turn and fight another day;
But he that is in battle slain
Will never rise to fight again.

Take it from a guy who has survived a thing or two – it helps to be both flexible and proactive.

A Look Ahead:

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

A Flattening Yield Curve Handcuffs the Fed

by Louis Navellier

European Central Bank (ECB) President Mario Draghi said last Thursday that the ECB would begin to consider how quickly it will reduce its purchases of government bonds in 2018.  That means the ECB’s quantitative money pump will continue to buy 60 billion euros ($71.5 billion) worth of bonds per month at least through December “or beyond, if necessary.”  Draghi’s comments were very dovish, so bond yields around the world meandered lower everywhere except Japan, where rates are already super-low.

The flattening U.S. yield curve is now making it much more likely that the Fed will not be able to raise key short-term rates anytime soon.  One big dove on the Fed, Minneapolis Fed President Neel Kashkari, said last Tuesday that the central bank's four interest-rate hikes since late 2015 could be doing “real harm” to the U.S. economy.  Specifically, Kashkari said, “It is very possible that our rate hikes over the past 18 months are leading to slower job growth, leaving more people on the sidelines, leading to lower wage growth, leading to lower inflation.”  Kashkari voted against the Fed’s last two key interest rate hikes, so he is not bending to the majority of voting members of the Federal Open Market Committee (FOMC).

On Wednesday, the highly-respected Vice Chairman Stanley Fischer announced that he intends to resign for personal reasons in October.  Fischer’s exit will allow President Trump to start to remake the Federal Reserve Board faster than previously anticipated.  I suspect that the President will strive to keep interest rates low, especially due to all the rebuilding to be done in the wake of Hurricanes Harvey and Irma.

Also on Wednesday, the Fed released its Beige Book survey of its 12 district banks in preparation for its upcoming (September 19-20) FOMC meeting.  The Beige Book’s biggest surprise was that the Cleveland Fed said that production in auto assembly plants declined more than 16% vs. the same period a year ago.

Overall auto sales in August were the weakest in three years, even though GM’s sales surged 8% and Toyota sales rose 7%.  Ford’s sales declined 2%, Chrysler’s sales plunged 11%, and Nissan sales tumbled 13%.  Interestingly, several Fed districts also cited slowing vehicle sales and rising inventories as major auto lenders like Wells Fargo pulled back, due to declining used car prices.  Looking forward, due to the devastation associated with Hurricane Harvey (and probably now Hurricane Irma, too), the demand for vehicles is anticipated to rise dramatically in the upcoming months.  Nonetheless, the recent weakness in the auto industry cited in the Beige Book survey will likely cause the FOMC to proceed more cautiously.

The Other Economic News is (Mostly) Positive

The other economic news last week was largely positive.  On Wednesday, the Institute of Supply Management (ISM) announced that its non-manufacturing (service) index rose to 55.3 in August, up from 53.9 in July.  The ISM employment component was especially strong at 56.2 in, up from 53.6 in July.

Also on Wednesday the Commerce Department reported that the trade deficit edged up to $43.7 billion in July, well below the economists’ consensus estimate of $44.8 billion.  In the first seven months of 2017, the trade deficit is running almost 10% higher than the same period a year ago.  A weaker U.S. dollar should eventually help to boost exports, but in July exports declined 0.3% to $194.4 billion.

Since the July trade deficit was still below economists’ consensus estimates, I do not expect any large downward revisions to third-quarter GDP estimates.  Currently, the Atlanta Fed is estimating third-quarter GDP at a 3.0% annual rate, down from a 3.7% annual pace a month ago.  Some of the recent downward revisions may be related to the expected impact of Hurricane Harvey and Hurricane Irma.


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.

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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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