Summer Storms Precede Profits

Summer Storms Often Precede Year-end Profits

by Louis Navellier

August 8, 2017

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

Thunder Storm Image

Bespoke Investment Group prepared an excellent report (July 31, “August Seasonality”) which showed that August is the worst month for the Dow Industrials, with an average loss of 1.39% in the last 20 years.  Also, September is the worst month of the last 50 and 100 years.  By contrast, the fourth quarter is very strong.  October, November, and December averaged gains of 1.96%, 1.93%, and 1.47%, respectively, over the last 20 years, a compounded quarterly gain of 5.5% vs. a 1.3% average loss in the third quarter. This tells me that any summertime dips should be viewed as great buying opportunities for longer-term gains.

Typically, the best earnings come out early, so it may get bumpier in the next couple of weeks as second-quarter earnings announcement season winds down.  For now, the market remains near all-time highs but profit taking materialized intraday on Wednesday, which prompted me to send out a podcast to let clients know that we will start trimming excessive risk as it materializes.  Specifically, I am carefully monitoring the intraday gyrations of selected stocks and plan to sell those that have become excessively volatile

In This Issue

Bryan Perry explains why inflation should keep the Fed on the sidelines for a while, so investors should look more to dividends than bond yields for a decent real income.  Then, Gary Alexander has some fun with today’s date (8-8) as well as the tradeoffs between a 2% tortoise economy vs. the 4% rabbit variety.  Then, Ivan Martchev reports on currency trends from his homeland in Bulgaria.  Stateside, Jason Bodner takes advantage of some lessons learned in the Florida surf last week.  Then, in the end, I’ll close with some positive economic statistics along with a caution to avoid the doomsday rhetoric of retired Wizards.

Income Mail:
High Expectations Amid Low Inflation Data
by Bryan Perry
Fed Walking Back Blueprint for Normalizing Rates

Growth Mail:
Let’s Have Some Fun with Numbers
by Gary Alexander
Who Wins? A 2-2-2 Turtle, or a 4-4-8 Rabbit?

Global Mail:
My Annual Intercontinental Jet Lag Report
by Ivan Martchev
Commodities Get Back Their Inverse Dollar Correlation

Sector Spotlight:
Surf’s Up! But Beware of Rip Currents
by Jason Bodner
Financials Rally to the Front

A Look Ahead:
Pay No Attention to That Man Behind the Curtain
by Louis Navellier
Some Hopeful Economic Statistics Should Boost GDP

Income Mail:

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

High Expectations Amid Low Inflation Data

by Bryan Perry

As the latter weeks of summer are historically a choppy time for stock market performance, it should come as no surprise that after a strong showing for stocks during June and July some volatility entered the market landscape in August. Buffering some of that volatility was Fed Chair Janet Yellen assuring the U.S. Congress that any future interest rate increases would be gradual and data dependent. She also signaled that key interest rates would not need to rise much further. This is sweet music to market bulls.

Ms. Yellen also acknowledged the recent softness in inflation and said that the Fed could alter its policy if inflation weakness proved to be more stubborn than the Fed expects: “We’re watching this very closely and stand ready to adjust our policy if it appears that the inflation undershoot will be persistent.” This was a pleasant surprise and a very dovish statement. As a result, the Fed Futures market now expects the next key interest rate hike by the Fed to be postponed until as late as December. More sweet music for bulls.

Underscoring this modified view of the economy was the recently released Beige Book survey of the 12 Fed districts, which showed that economic growth was “slight to moderate,” which is less upbeat than its previous Beige Book survey. With wages rising only modestly, some senior Fed officials believe inflation is likely to remain on the low side for a longer period than previously forecasted. More sweet music!

I think this calls for Goldilocks to start singing karaoke.

Fed Walking Back Blueprint for Normalizing Rates

The Beige Book survey revealed that the Fed clearly wants to take a cautious approach on raising interest rates until more inflation emerges. In testimony before Congress, Yellen said she believes the slowdown in inflation is temporary. Only time will tell if she is right, but her position gained traction last week when Treasuries succumbed to selling across the curve following gains in each of the two preceding weeks. The selling pressure was more pronounced at the long end of the curve as demand softened in the face of a positive Q2 GDP report, another week of strong earnings, and Friday’s better-than-expected jobs report.

In addition to slow wage gains suppressing inflationary pressures, low crude oil prices also contribute to a lack of inflation. The U.S. Energy Information Agency reported that total crude oil production rose to almost 9.4 million barrels a day in the latest week. The fact that non-OPEC oil producers are boosting their production and OPEC is not abiding by its self-imposed quotas is helping to keep WTI crude prices below $50 during peak demand season in the summer months. The next decline in crude oil prices will likely occur in September, when worldwide demand falls after Labor Day and the heat of summer passes.

More inflation-tempering data: The Labor Department announced that its Producer Price Index (PPI) rose 0.1% in June. Excluding food, energy, and retail trade margins, the core PPI rose 0.2% in June. In the past 12 months, the PPI rose 2% (down from 2.4% in the previous month) and the core PPI rose 2% (down from 2.1% in the previous month). In addition, the Consumer Price Index (CPI) was unchanged in June.

In the past 12 months, the CPI has risen 1.6%, while the core CPI has risen 1.7%. The Fed’s favorite inflation indicator, the Personal Consumption Expenditure (PCE) index, decelerated to only a 1.4% annual pace in the past 12 months. That probably accounts for Ms. Yellen’s dovish testimony. So, no matter how you slice it, inflation is decelerating, which is why the Fed seems reluctant to raise interest rates and explains why the yield on the 10-year T-Note has declined to 2.24% from 2.62% five months ago while at the same time S&P earnings are accelerating into the third quarter. More music, please.

As long as interest rates bump along the bottom end of the range, the case for an extension of the stock market rally gains credence, both from a valuation and earnings standpoint. The alternative to qualified, tax-favored stock dividends are paltry money market, CD, and Treasury yields taxed at ordinary income tax rates. If you back out 1.5% to 2.0% inflation and these high tax rates, the numbers below indicate that it is still a zero-sum game for would-be savers in these “safest” of havens offering guaranteed returns.

Highest Published Rates Table

When looking outside the U.S. for yield, it doesn’t get any easier – unless one is willing to take currency and repayment risks in sovereign debt issued by the likes of Portugal, Brazil, Mexico, Greece, Australia, New Zealand, and India. With the dollar at seven-month lows, U.S. investors are buying less face-value foreign bonds with weaker dollars. I would argue that waiting for a rally in the dollar makes considerably more sense if one wants to invest in foreign sovereign debt. With the strong jobs data, the Dollar Index (DXY) saw buyers step in at a key technical support level of 92.5 that I pointed out in last week’s update.

Global Ten Year Rates Table

In sum, Fed Chair Yellen’s testimony; the Beige Book survey; and the PPI, CPI, and PCE inflation indexes all confirmed that inflation is less threatening than it was six months ago, while government bond yields in the U.S., Europe, and Japan have mostly ratcheted lower in the last month, reflecting these new realities. Bond prices have now stabilized following a bout of selling in late June and that is good news for dividend-paying stocks, because quite frankly, there is nowhere else for money to go for liquid yield.

Growth Mail:

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

Let’s Have Some Fun with Numbers

by Gary Alexander

The other day at the local deli, I bought a bottle of wine.  The clerk asked for my birthdate, ostensibly to prove that I was over 21 (I am 72).  I said July 15, 1945.  Then, she asked, “What is that in numbers?”

I think she wanted me to say ‘7-15-45,’ but I pointed to a sign on the deli wall that said, “To buy alcohol, you must be born before this date in 1995” (it should have been 1996), so I said, “1945 is before 1995.”

That exchange only exacerbated my level of despair over the innumeracy of our youth.  Too many people can’t figure out how to perform simple math tasks in their head.  Making change is a major challenge for check-out clerks without an automatic cash register, and numerical logic now seems to be a lost art.

Numbers were always fun for me.  I won our school’s National Math Test in the 11th grade and I love to show off math tricks to dazzle (or more likely bore) friends and family.  My first job after college in 1967 was as fact-checker for a major magazine.  (One common error was to call a tripling a 300% increase.  No, it’s 200%.)  I annoyed authors by questioning their statistics so, at age 22, they dubbed me Elder Statsman.

Hardly a day goes by when I don’t see a wrong use of numbers.  Over the weekend, I was reading a new book from the semi-socialist rack of “new non-fiction” at our town library.  “Toxic Inequality” by Thomas M. Shapiro purports to tell us “how America’s wealth gap destroys mobility, deepens the racial divide & threatens our future.”  In the Introduction (“Dreams Deferred and Derailed”), the author profiles a school where “nearly three-quarters qualify for subsidized lunches because they come from families with incomes 185 percent below the poverty line.”  That stat was footnoted, which supposedly frees the author from thinking for himself, but income cannot fall 185% below any metric.  The farthest any number can go down is 100%.  If one’s income were 185% below any measuring rod, it would be outgo, not income.  (P.S. He likely meant to say that subsidized lunches are for those earning up to 185% of the poverty line.)

Let’s turn to today’s calendar page.  Today is August 8 (8-8 on the calendar).  Is it a lucky day?  In China, “8” is a lucky number, due to its closeness in sound to the word for prosperity.  When I toured China in 1996, our hotel in Wuhan had an “8” for each hotel room.  Room 221 became room 8221, and so forth.  Later on, I wrote a memoir of that China trip and am proud that I ended the book at exactly 88,888 words.

China launched its 2008 Summer Olympics at 8:08 pm on 8-8-08.  Somebody even added a sixth Olympic ring to the Olympic logo – so it would resemble ‘888’ – and added two smaller orbs to make 8 total rings:

Chinese Olympics Logo Image

The latest kerfuffle in China happened on August 11, 2015, when they devalued the yuan 2%, fueling a global market crisis.  Did they purposely postpone that devaluation so it wouldn’t fall on August 8?

Double 8’s are doubly lucky – or are they?  On 8-8-88 (August 8, 1988), the 8-year Iran/Iraq war finally ended, but on 8-8-90, Saddam Hussein occupied Kuwait.  Earlier, with Richard Nixon and Spiro Agnew, 8-8 became a manic-depressive date: On August 8, 1968, the Republican national convention in Miami nominated Nixon and Agnew for President and Vice President.  But five years later, on August 8, 1973, news reports surfaced of Agnew accepting kickbacks (he had to resign two months later).  A year later, on August 8, 1974, President Nixon resigned – the only President ever to resign our highest office.

What's In a Number Image

August 8 is also Day #220 of the calendar year.  On cue, the venerable Dow Jones Industrial Average topped 22,000 for the first time last week.  Alas, the DJIA is a narrow index.  The Dow has set eight consecutive record highs through last Friday, but the S&P 500 declined in four of those eight days.  In addition, the S&P has now gone 12 straight days without a daily move of 0.3% or more, the longest streak on record (source: “Dow Industrials Post 8th Record in a Row,” Wall Street Journal, August 5-6, 2017).

Who Wins? A 2-2-2 Turtle, or a 4-4-8 Rabbit?

In his July 31 morning briefing (“2-2-2 Scenario”), economist Ed Yardeni explains the current incarnation of our Goldilocks economy as a “deuces wild” event.  Specifically, he sees (1) the U.S. GDP continuing to rise 2% a year, with (2) CPI inflation remaining around 2%, and (3) the federal funds rate likely to top out at 2% in the current rate-raising cycle.  True to form, U.S. GDP is up 1.9% so far this year and it has hovered around 2% since 2010.  Inflation has tended to hover just under the Fed’s target rate (2%) and the molasses-slow Fed rate increases may indeed peak at 2%.  If so, the next recession might wait until 2022!

By contrast, the Reagan recovery (1982-88) was a 4-4-8 experience, with annual GDP growth around 4%, inflation down from double-digits but still 4%, and a fed funds rate ranging from 6% to 10%, averaging 8%.  Pundits point to that as a robust recovery – since the GDP growth rate was so much higher – but the second two numbers are negative drags – 4% inflation and 8% interest rates.  I would argue that 2-2-2 is safer (slower 2% growth accompanied by inflation and interest rates at or below 2%) than a 4-4-8 world.

The problem with a 4-4-8 economy – like Aesop’s hare – is that it runs out of gas and has to rest: Most economists call that a recession.  The tortoise keeps moving – no rest needed – so it can endure longer.

Stock markets don’t die of fatigue; they usually die due to deteriorating fundamentals.  Any look at the current earnings environment tells us that business fundamentals are strong and getting stronger.  According to Zack’s Research, as of the end of the second quarter, the forward P/E on the S&P 500 was 17.5, not much higher than the 25-year average of 16.0 or the 15.4 average since 2000.  Forward P/Es were higher, approaching 20 in 1998, but the S&P 500 gained 28.3% that year and another 20.9% in 1999.  The market bubble didn’t burst until March 2000, when the S&P 500’s forward P/E reached 25.

Standard and Poor's 500 Stock Price Indexes Forward Price/Earnings Ratios Chart

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

The most positive fundamental right now is that earnings have been rising slightly faster than stock prices, so the forward P/Es of the S&P 500/400/600 have actually edged down this year (source: Ed Yardeni on July 26).  In his August 2 briefing (“Call of the Wild”), Yardeni added that the level of forward earnings for all three of these S&P indexes is at record highs, implying that recent gains are justified by the market looking forward to more rising earnings – and maybe positive surprises above that.

Of the 312 S&P 500 companies that have reported second-quarter earnings as of August 2, 71% exceeded industry analysts’ earnings estimates by an average of 5.7%, netting y/y earnings gains of 14.3%.  A similarly high percentage (69%) exceeded sales estimates.  Revenues are up for 83% of reporting firms.

Those are the kinds of numbers that most investors can live with.

Global Mail:

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

My Annual Intercontinental Jet Lag Report

by Ivan Martchev

About once a year (usually August), I get to visit the motherland (Bulgaria) and work there for a couple of weeks before cutting all cords (save for an iPhone) and heading for the mountains and/or the beach for two weeks. While some might find it elitist to work remotely 5,000 miles away from America, coming to the land of my birth is a resetting experience that puts the passing parade of world events in perspective.

Last Friday, we had another decent employment report for the month of July, so U.S. bonds sold off, stocks experienced a violent rotation, and the dollar finally surged. While it is difficult to see the latest surge on a five-year chart, the action on Friday came right “on support” near 93, as traders like to say.

United States Dollar Index Chart

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

It is worthwhile pointing out that support and resistance are never precise numbers. Is there support at 92 or 93 for the U.S. Dollar Index? That’s hard to say. It is between the two numbers. The low last week was 92.43, while we closed on Friday at 93.43. I think we are headed up, way past 100, a number that could be conquered quite rapidly if what looks to be a military option against North Korea materializes soon.

As a reminder, the U.S. government banned all travel to North Korea and recalled all U.S. citizens a couple of weeks ago. If this is not a preparation for a military strike, then I don't know what is. To boot, that bloke Kim Jong Un staged another ICBM test after the travel ban was issued. If there was a case where the North Koreans were practically begging for an intervention, this would be it. If a North Korean war leads to the deposition of Kim, I expect the U.S. Dollar Index to make a new multi-year high past the 103 high in 2016. Naturally, it is hard to call the exact date of such an event, but suffice to say that if the North Korean escalation happens this quarter, I would expect a dollar surge to happen by year’s end.

Gold and Silver Prices Chart

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

This raises interesting questions about the price of precious metals, which tend to move inversely to the U.S. Dollar Index. The silver market is very weak having recently experienced a “dead-cat bounce” that is in the process of rolling over again. The silver market is clearly locked in a bearish pattern of lower lows and lower highs that suggests much lower prices for gold bullion in the weeks ahead, since silver tends to lead gold. So far, silver is suggesting that gold is headed much lower.

I would say that if my $1,000 bet with Gary Alexander (that gold will drop below $1,000/oz. between now and year end) were to work out, we would have to have both a North Korean bombardment/invasion (which looks likely in 2017) and a Chinese yuan devaluation (which is less likely in 2017, but very likely next year). I still state my odds at 50/50, despite gold bullion closing at $1,253 per ounce last Friday.

Commodities Get Back Their Inverse Dollar Correlation

Between January and June 2017, as the U.S. Dollar Index declined so did the CRB Commodity Index. This is not normal as those tend to move inversely to each other from a historical perspective. The reason for this inversion is the largest U.S. Dollar Index component, the euro. This year, pro-EU election victories in The Netherlands and France ended the eurozone disintegration discount that had been plaguing the euro since Brexit. In that regard, it hasn't been so much that the dollar is weak but the euro has been strong.

Commodities Research Bureau Commodity Index versus United States Dollar Index Chart

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

In July, all that changed as the CRB Commodity Index rebounded and the dollar index kept going lower. While a surge in the U.S. Dollar Index last week and a weak performance for commodities has so far been a short-term event, there are reasons to think that the inverse correlation between commodities and the dollar is about to return. Commodities did not rally in the seasonally strong March-September period. If they are that weak when they are supposed to be strong, what will happen in the fall and winter months?

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.

Also, the largest U.S. Dollar Index component (the euro, representing 57% of the Dollar Index) has moved from under $1.04 to over $1.18 and has simply run too far too fast. Europe’s common currency went from undervalued to fairly valued in a very short period of time. While currencies typically don't stop rallying at fair value, if we have an escalation of hostilities in North Korea the euro should come under pressure.

In addition, the German federal election in September is already discounted as a win for Angela Merkel due to the way several local elections have gone so far in 2017. In other words, there are no more pro-EU election victories to look forward to, while we still have some difficult Brexit negotiations to consider.

Sector Spotlight:

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

Surf’s Up! But Beware of Rip Currents

by Jason Bodner

Ahh, summer! The word conjures up images of beach trips, cannonballs into pools, and cookouts. It’s a time universally associated with relaxation and shelf-time for our worries. I am fortunate enough to live in Florida, a short drive from the local beach. I was relaxing this weekend with family from out of town. My kids were swimming and playing in the water. It was sunny, hot, and breezy. All was good. Suddenly I heard a bunch of loud lifeguard whistles. The guard on duty was directing swimmers out of a portion of water that seemed relatively calm into a region that seemed choppier with breaking waves. Looking out at the sea, it looked like there was an imaginary fence with no swimmers on the left and many on the right.

No, there was no “Sharknado,” but for those of you who frequent the beach, you might recognize this as a rip current – seemingly calm water that strongly pulls away from the beach, frequently at high speeds. Rip currents often form when there is a break in the sandbar. Previously called “riptides,” these swift currents are actually most dangerous at low tide, when the water is already naturally pulling away from the beach.

Rip Current Image

Sadly, rip currents claim the lives of swimmers each year. The lure of calm waters draws in unsuspecting swimmers who may quickly find themselves drifting out to sea. Many panic and try to swim against the current, exhausting themselves in the process. Rip currents are responsible for 80% of lifeguard rescues.

The best way to survive a rip current is to swim parallel to the beach, not towards it. Look for waves that break and swim toward them. This will bring you back to shore faster than swimming straight to shore.

Escaping Rip Currents Image

Markets often exhibit similar traits. Despite all the news about robots taking over the stock market, robo-trading is designed by human beings acting on natural emotions. We all know markets ebb and flow, and for the most part throughout history, we expect them to go up, just like we expect waves to crash towards the shore. But strong markets, sectors, and stocks can get ahead of themselves, just like waves cresting. Markets need to “correct” back into their broader rhythm. Stocks can’t go up all the time. The same goes for the ocean. All water can’t just keep moving toward the shore; some has to flow out, under, and away.

Events like these could indicate a potential opportunity to evaluate a stock with strong growth as a possible candidate. The funny thing about human nature is we all want a good deal on something we are eyeing. Sometimes the deal comes and we hesitate because now it’s too cheap. “What if there is a better model coming out later?” Summer Madness sales happen all the time as retailers make way for new inventory. The stock market is no different. Great stocks have a tendency to stay great for a long time.

This week saw some stellar earnings reactions for stocks, as well as some wild overreactions. Stocks like Arista Networks (ANET), Solar Edge Technologies (SEDG), and Stamps.com (STMP) gapped up after positive earnings. These stocks exhibit great earnings, sales growth, and hefty profits. Other stocks with similar qualities may have terrific traits, but if they issue downbeat guidance, the aftermath is usually a severe downdraft in their stock price. (Jason Bodner owns shares in SEDG, but not ANET or STMP. Navellier & Associates has positions in ANET. Navellier & Associates has no positions in STMP or SEDG.)

Stocks ebb and flow and so do the sectors. This week, however, saw muted volatility at the sector level.

Financials Rally to the Front

Last week, financials popped while energy lagged. This trend is further evident at the three-month level.  Financials lead the way, up 6.32%, while energy lags as the only negative sector, at -0.84%. Going back six months, Information Technology is still king. There is a lot of chatter about tech being “frothy” and we may indeed see profit taking accelerate. However, this sector is still replete with companies sporting growing sales, earnings, and most importantly profits. The engine of the future still relies heavily on tech.

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

The best defense for not getting caught in a stock’s rip current is recognizing its qualities early on, that is, if one had looked at a stock and recognized great fundamental and technical qualities and bought in order to reap big rewards, a nasty rip current shouldn’t wash you away. Rip currents in stocks are inevitable.

Surviving a rip at the beach means getting out of the way. Surviving a rip current in the stock market is often much easier by employing a smartly diversified portfolio with a strong recognition of risk. There is plenty of analysis that compares the market to waves. If only it were as easy as this chart indicates!

Market Emotions Graph

Or, as the famed surfer Laird Hamilton put it: “We are all equal before a wave.”

Breaking Ocean Wave 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.*

Pay No Attention to That Man Behind the Curtain

by Louis Navellier

“Alan [Greenspan] was a great wizard. No one understood what he said, but he said it in such a way that everybody bought it.”  -- Alan Levitt, SEC chairman (1993-2001)

Former Fed Chairman Alan Greenspan warned last week that he has “ominous” concerns about a bond bubble.  Please remember that Alan Greenspan is now 91 years old and since he traditionally had most of his money invested in Treasury securities, like most retired folks, it is perfectly normal for him to worry.

However, current Fed Vice Chairman Stan Fischer does not seem to share Alan Greenspan’s concerns and gave a long speech last week that attempted to explain that global interest rates remain stuck at historically low levels, even though the Fed has been raising key short-term interest rates.  In effect, Fischer is having a bit of fun debunking the Wizard: “Pay no attention to that man behind the curtain.” 

There is no doubt that both Fischer and Greenspan are puzzled by the fact that bond yields remain ultra-low as fixed income investors strive to find higher yields, so they can retire with enough income to live on.  Until bond yields resurge, no bond bubble can burst.  Currently, a lack of inflation is helping to keep bond yields low, so the Fed has stopped raising key interest rates until inflationary pressures reemerge.

As a result, with an annual dividend yield of 1.91%, the S&P 500 represents a great income oasis for many retirees, since the 10-year Treasury bond now only yields 2.27% and is taxed at a much higher federal rate (up to 43.4%) than qualified stock dividend income (usually taxed at up to 23.8%).

Some Hopeful Economic Statistics Should Boost GDP

The big news on Friday was that the Labor Department announced that 209,000 new payroll jobs were created in July, significantly higher than economists’ consensus estimate of 180,000.  The unemployment rate declined to 4.3%, the lowest level in 16 years.  Average hourly earnings rose 0.3% (9 cents per hour) to $26.36 per hour.  The labor force participation rate rose by 0.1% to 62.9% in July, but it is still too low.

Earlier, the Institute of Supply Management (ISM) on Tuesday announced that its manufacturing index slipped to 56.3 in July, down from 57.8 in June, which was the highest level in three years.  Since any reading over 50 signals an expansion, the manufacturing sector remains very healthy.  In fact, fully 15 of the 18 industries surveyed reported growth in July, which is very positive.  Then, on Thursday, ISM announced that its service sector index dropped to 53.9 in July, down from 57.4 in June.  There is no doubt that this was a disappointing ISM service number, since it was the lowest level in 11 months. Economists were expecting a reading of 56.9.  However, any reading over 50 signals an expansion – and midsummer slowdowns are common – so I expect that the ISM service index will rebound in the upcoming months.

Finally, the Commerce Department announced that the trade deficit declined 5.9% in June to an 8-month low.  In June, exports rose by 1.2% to $194.4 billion, which is the highest level since late 2014.  Imports declined 0.2% in June to $238 billion as the imports of crude oil and cell phones declined.  Interestingly, if the U.S. decides to cut off Venezuelan crude oil imports, it could further improve the trade deficit by restricting crude oil imports.  On the other hand, when Apple introduces the iPhone 8 later this year, imports are expected to surge.  A smaller June trade deficit means that second-quarter GDP calculations will likely be revised higher, so the U.S. is getting closer to 3% GDP growth as the trade deficit shrinks.


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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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