Tech Stocks Sag

Tech Stocks Sag Then Recover Strongly

by Louis Navellier

October 3, 2017

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

The S&P 500 reached another all-time high last Friday, closing September up nearly 2% (and +12.5% for the year-to-date).  However, last week began with another market scare.  On Monday, there was a serious correction in technology stocks and a big rotation into crude oil as well as cyclical stocks.  Fortunately, many of the more fundamentally sound tech stocks subsequently rebounded impressively after Monday’s “tech wreck.”  The best news is that money isn’t leaving the stock market; instead it is being reshuffled.  For three straight weeks, dividend stocks have been performing well.  This surge in dividend stocks is a good omen, since it means that the foundation under the latest bull market surge remains very solid.

Technological Expertise Symbolism Image

One of my favorite tech stocks, Micron Technology (MU), posted better than expected quarterly sales (a 3% surprise) and earnings (a 9.8% surprise) after the market closed on Tuesday.  The company also raised both its current quarter’s sales and earnings guidance well above previous analyst estimates.  As a result, on Wednesday, Micron Technology led the entire technology sector higher, erasing memories of Monday.

Moving into October, I expect wave after wave of similar sales and earnings surprises to propel select technology stocks higher, especially after October 15, when third-quarter earnings announcement season commences.  In addition, October marks the start of the seasonally strongest time of the year.  Last week’s monthly seasonality report from Bespoke Investment Group (“October Seasonality,” September 28, 2017) shows that October, November, and December have been the #2, #3, and #5 best months for the DJIA over the last 20 years.  Over the last 20 years, the Dow Jones Industrial Average has gained an average of just 1.32% in the first nine months of the year, but then it delivered a 5.46% average gain in the fourth quarter.

(Please note: Louis Navellier does currently hold a position in MU. Navellier & Associates does currently own a position in MU for client portfolios).

In This Issue

In Income Mail, Bryan Perry suggests a rebalancing of one’s income portfolio considering that the Fed may raise rates 3-4 times in the next 15 months.  In Growth Mail, Gary Alexander examines the surprisingly-strong third quarter, with a positive look at the closing quarter – and the latest tax debates.  In Global Mail, Ivan Martchev examines the two largest geo-political threats now, and the two strongest growth engines still available from the Trump agenda.  In Sector Spotlight, Jason Bodner examines the latest growth spurt (10% in six weeks) in small stocks, with a focus on the best sectors.  In the end, I’ll take a look at the latest media scare stories and what the latest economic indicators may be telling us.

Income Mail:
Uptick in Bond Yields Sparks a Rebalancing of Portfolios
by Bryan Perry
Bull Trap in the Oil Patch

Growth Mail:
Third-Quarter Gains Surprise Market Historians
by Gary Alexander
Some October 3 Market Scares in History
How to Monitor the Tax Bill Debate

Global Mail:
The Biggest Risks and Drivers of Stock Prices Now
by Ivan Martchev
The Strongest Catalysts for Stock Prices

Sector Spotlight:
What Causes Explosive Growth?
by Jason Bodner
Russell 2000 Up 9.9% Since August 21

A Look Ahead:
Market Traders Usually Act First, Think Later
by Louis Navellier
A Mixed Array of Economic News

Income Mail:

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

Uptick in Bond Yields Sparks a Rebalancing of Portfolios

by Bryan Perry

Bond yields have been moving higher for the past month as fixed income traders are taking the notion that the Fed may raise rates in December more seriously. There is also a growing chorus of Fed officials talking of two more rate hikes in 2018. Even if there are four quarter-point rate increases that fit the Fed’s dot-plot plan, the Fed Funds Rate will still be at a historically low 2.0%-2.25%. Investors have gotten very comfortable with super-low interest rates and, to a large extent, global equity markets have as well.

With that said, the old saying of “don’t fight the Fed” is being heard again, and with the S&P 500 trading at an all-time high, there is an elevated level of chatter as to how high the market can trade in a rising-rate environment. In that light, it might be surprising to hear that, historically, equity prices have often rallied in both the run-up to policy rate-hike cycles and in the year following the onset of rate increases.

The health of the economy is a key consideration in rate hikes. While there is no perfect historical precedent for the Fed’s extraordinary post-crisis monetary policy that has added $3.6 trillion to the Fed’s balance sheet, there is a precedent of equity market performance amid rising interest rates. Equities have advanced in the majority of periods when the broader economy was expanding – so higher rates simply reflect the rising pace of economic activity. Economic expansion has historically been an underpinning of corporate earnings growth, which has often been identified as a driver of long-term stock market returns.

In the immediate wake of any change in monetary policy, markets can most certainly endure bouts of volatility and rapid sector rotation, as has been the case for the past month. Fund flows out of telecoms, utilities, and consumer staples have been very pronounced, whereas fund flows into financials, energy, information technology, consumer discretionary, and natural resources have been quite bullish. The repositioning of capital during September is to be taken seriously, because whether the Fed actually raises rates in December takes a backseat to investors’ perception that they will move. Perception has always trumped reality in how markets trade and this natural law of the stock market is at work once again.

For income investors, taking the sector rotation at face value, the hunt for yield should be directed at data center REITs, cell tower REITs, floating rate senior loan lending companies (BDCs), and commercial finance REITs with adjustable-rate sources of revenue. Rebalancing portfolios for income in a rising-rate market doesn’t mean wholesale jettisoning of one’s telecoms and utilities as these stalwarts will still grow earnings and dividends, but they may underperform in the short term.

Bull Trap in the Oil Patch

From the preceding list, please note that I specifically excluded energy income assets – at least for the time being. I am of the view that the recent bump in oil prices has not changed the secular supply/demand imbalance. And I’m not alone. WTI crude has rallied from $43 to $52 per barrel and yet the great majority of energy-related stocks are trading barely above their 52-week lows. I think the smart money feels like this rally is a bull trap that could lead to another trap-door sell off.

The JPMorgan Alerian MLP Index ETF (AMJ) tracks all the leading energy MLPs on an unleveraged basis. It is a very useful barometer of the health of the more conservative income producing assets within the energy sector. This actively-traded ETF pays a very attractive distribution yield of 6.85%, but its share price has failed to impress during the latest rally. This kind of behavior raises a yellow if not a red flag.

J. P. Morgan Alerian MLP Index Exchange Traded Funds Chart

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

Taking appropriate action to adjust for a different investing landscape is prudent, especially if one’s portfolio is heavily skewed towards long-term bonds and other fixed-income investments, like preferred stocks, closed-end bond funds that use leverage to generate yield and other long-dated assets like Ginnie Maes or corporate bonds. These classes of securities stand to be at serious risk of principal erosion once the Fed embarks on a tighter monetary policy and, as such, should be considered for pruning – either reducing the size of one’s positions or swapping for shorter-term maturities and settling for less yield.

(Please note: Bryan Perry does not currently hold a position in AMJ. Navellier & Associates does not own a position in AMJ for client portfolios).

It pays to be proactive, because markets tend to overreact to the upside and especially to the downside. At Navellier & Associates we take a dynamic approach to the changing investment landscape, being sensitive to these shifts in policy and sentiment by reducing exposure to fixed-rate assets and moving more into rate-sensitive assets. When it comes to dividend investing, the following chart shows the phenomenal impact of reinvesting dividends that average between 2%-3% annually. The long-term results (in this case, 17 years) are a better than 2-for-1 return over that of the S&P 500.

Dividend Kings versus Standard and Poor's 500 Index Chart

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

Having some cash on the sidelines during a transition in interest rate policy can also reduce risk while affording opportunities in short-term bouts of market selling pressure.

Fear is more powerful than greed, and when many rate-sensitive, high-yield assets get thrown out with the fixed-income bathwater, it really pays to have some dry powder that can be put to work in heavily discounted assets. Having a well-seasoned and stress-tested dividend strategy can be a valuable asset in one’s investing toolkit. We take dividend growth very seriously and so should you. 

Growth Mail:

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

Third-Quarter Gains Surprise Market Historians

by Gary Alexander

In the quarter just past, the S&P 500 rose almost 4%, the Dow Industrials rose almost 5%, and NASDAQ rose 5.8%. Most major indexes reached a new all-time high last Friday, including the S&P, NASDAQ, and Russell 2000. That’s not supposed to happen. According to Bespoke Investment Group’s “October Seasonality” report last Thursday, the third quarter is the worst quarter of the year over the last 20, 50, and 100 years. Over the last 20 years, the Dow Industrials have declined an average 1.3% in the third quarter.

Dow Jones Industrial Average Performance by Quarters Table

In the last 20 years, October has been the second-best month (April is #1). Better yet, November is #3 and December is #5, making the fourth quarter far and away the best part of the year – delivering four times the gains of the previous nine months combined. In the last seven years, October is up strongly:

Standard and Poor's 500 October Performance Table

Through the first nine months of 2017, most markets (including internationals) are up by double digits:

Year to Date Market Gains Table

The U.S. dollar is down 11% to the euro and 12% to the once-laughable Mexican peso, but the dollar is only down about 4% to the Chinese yuan and Japanese yen. Despite a weak dollar, the CRB Commodity Index is down 5% so far this year. Natural gas is down 19.3% and crude oil is up recently but down 3.8% year-to-date. Gold continues to be the star of the commodity universe, up a healthy 11.4% year-to-date.

Some October 3 Market Scares in History

There are no promises that October or the entire fourth quarter will be as positive as they have been in the past. The Bespoke report charted the performance of the S&P 500 on an intraday basis over the last 20 years and showed that the first week of October has averaged a decline of about 0.7% before recovering.

We’ve seen some chilling market declines on this date in history. On October 3, 1974, for instance, the Watergate trials began, and the S&P 500 hit its lowest point of the 1970s, at 62.28! The Dow fell below 600 for the first time in 12 years, closing at 587.61, down 44% from its peak of 1,052 in early 1973.

The week of October 3-7, 1932 was also chilling, with a 12.4% decline in the Dow, the third worst weekly decline to that date and the sixth worst percentage weekly decline of the century. America was on the verge of electing Franklin Roosevelt, but his policies were such a mystery to most investors that the market kept falling from September 1932 through FDR’s first week in office, in early March 1933.

Sixty years ago today, on October 3, 1957, the Dow closed at 465.82. The next day, the Soviet Union sent Sputnik into space and America panicked. The Dow fell 10% in the next 13 trading days.

Sputnik Satellite Image

On the following Monday, October 7, 1957, my 7th grade math class suddenly went into overdrive. Over the next decade, science and math courses were pushed relentlessly – in order to close “the missile gap” and win the “space race” against the supposedly superior technology of our bitter Communist rivals.

On Tuesday, October 8, 1957, President Eisenhower appointed Neil McElroy as Secretary of Defense. To counteract Soviet technology, McElroy created a blue-sky DoD research laboratory called the Advanced Research Projects Agency (ARPA), which led directly to the Internet, so Sputnik kick-started progress. That silver Sputnik – the size of a beach ball – pushed America to reach the moon safely 12 years later.

The market not only recovered from the Sputnik shock, but the Dow rose 63% by the end of 1959. On Tuesday October 23, 1957 the Dow rose 4.1% – the best single-day rise in the 1950s – in response to Eisenhower’s speaking tour lifting America’s spirits and generating support for post-Sputnik policies.

Alas, there’s one more dismal October 3 anniversary to honor.

How to Monitor the Tax Bill Debate

On October 3, 1913, the Federal Income Tax was passed into law, with rates ranging from 1% to 6%.  The threshold for paying 1% taxes was $3,000 per year, so a very small percent of Americans paid the income tax. Those wishing to appear successful would proudly wave their tax bill for everyone to envy!

That tax honeymoon didn’t last long. When the U.S. entered World War I, the top rate shot up to 77%, then over 90% in World War II. Top income tax rates remained above 70% for 45 years, 1936 to 1980.

Top Marginal Federal Individual Income Tax Rates Chart

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

We are now engaged in a great debate about bringing top tax rates below 39.6% and business rates under 35%. Nobody knows what final shape the eventual tax revision will take, so I won’t pretend to pontificate about how to profit from the new tax landscape. Instead, I’ll tell you without the faintest doubt that smart people (and most dull folks) will take full advantage of whatever new tax provisions may come, while an army of CPAs at the Congressional Budget Office (CBO) will fail to factor in our behavioral changes.

For instance, on Friday at a gym workout, I heard one business owner say that a key employee said she couldn’t work anymore this month, since “that would cut into my benefits.” A consultant added, “I’m not taking on any new work, since that will push my tax bracket higher.” Previously, I heard a business owner say, “I can’t hire any more full-timers or new regulations will kick in, so I only hire part-timers now.”

These are not CPA tax accountants talking – just normal people reacting normally to tax incentives. If you punish work, people won’t work as much. If you favor one kind of purchase (like home-owning), you get more people buying homes on deep margin (no-or-low money down). If you punish low-interest savings with high tax rates, you get terribly low savings rates. If you raise top tax rates, rich people will find non-productive ways to shelter their income. Human beings predictably change their behavior to fit tax reality.

The CPAs at the CBO use “static” accounting: They don’t factor human nature into their projections. The same is true of the talking TV heads who mock any “trickle down tax cuts for the rich.” Whatever tax law emerges, remember that “what one man invents another can circumvent.” High tax rates don’t generate high tax collections. As John Kennedy said in 1962, “The paradoxical truth is that …the soundest way to raise revenues in the long run is to cut rates now.” Most politicians have forgotten that paradoxical truth.

Global Mail:

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

The Biggest Risks and Drivers of Stock Prices Now

by Ivan Martchev

The two biggest risks for the stock market at the onset of the historically-strongest seasonal period of the year (October through January) are the just-commenced unwinding of the Federal Reserve balance sheet and a potential military conflict with North Korea and/or Russia.

The two biggest upside catalysts? Sensible tax reform followed by an infrastructure program.

First, the threats: The Russians have suggested that if there is another incident of U.S. missiles hitting Syrian government targets or their own positions, they will respond militarily. The North Korean risk is hard to quantify. I don't think Defense Secretary James Mattis will announce when aerial bombardments of North Korean missile sites will commence, so we could wake up one morning and see quite the down open for stocks, since the North Koreans could theoretically use nuclear weapons in retaliation.

Military escalation on both fronts is impossible to analyze ahead of time, although I do think that the chances of the Syrian and Korean situations spiraling out of control are much higher than they have been in a long while. Both hot spots have the chance to create a sharp sell-off in stock prices.

United States Central Bank Balance Sheet Chart

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

As far as the Federal Reserve is concerned, they just commenced the unwinding of the infamous $4.5 trillion balance sheet. They let $10 billion worth of maturing bonds run off in September and the 10-year Treasury yield immediately went from 2.03% to 2.33%, while the U.S. dollar notably rebounded. What would happen to the 10-year Treasury yield when they start letting $50 billion worth of bonds run off in 2018? I know the Fed can adjust that run-off rate, but the bond market reaction so far sure looks panicky. It is possible that the bond market overshoots and a spike in long-term rates creates a recession in 2018.

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.

In due course, Treasury yields are likely headed to 1% or lower as the Fed is now comfortable with large balance sheet operations and may restart such QE programs in a recession. The likelihood that an aggressive monetarist intervention of the QE type happens before President Trump’s first term in office runs out is very high as the present expansion is 8 years and 3 months long, less than two years away from setting a new record-long recovery. The historical statistical distribution of economic cycles suggests a very high probability of a recession by January 2021. If there is a recession by that date, I expect the 10-year yield to hit 1% or lower due to the likelihood of aggressive monetarist intervention.

It is entirely possible that long-term interest rates overshoot to the upside first because of the unwinding of the Fed’s balance sheet and then later decline because of the Fed “rewinding” its balance sheet.

The Strongest Catalysts for Stock Prices

If we don't get military surprises, I think the stock market will focus on the Trump tax plan overhaul, which so far appears to be significant, slashing the top corporate tax rate from 35% to 20%, slashing individual taxes, and possibly closing some tax loopholes. The Republican leadership in the House and Senate may be timing the passage of a significant tax cut with the midterm elections in 2018 in mind.

Any political majority loves nothing more than maintaining its political majority, so timing the tax cut to go into effect in the February-March period of 2018 may create a boost to the economy in time for the November 2018 midterm elections. Any economic acceleration is likely to also accelerate earnings growth, which should be good for the stock market.

Furthermore, we all know that an infrastructure program is highly necessary. Those living in the New York City area have seen the ruins of abandoned buildings, rusty bridges, and crumbling concrete structures from the windows of the trains running into midtown Manhattan. If Mr. Trump can pull off an infrastructure package after what appears to be reforming taxes, the stock market could celebrate in 2018.

Dow Jones Industrial Average Chart

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

As things stand now, the pros and cons against a further rally in the stock market appear to be somewhat evenly balanced, with the caveat that a military escalation in global hot spots is difficult to analyze ahead of time. If no such escalation occurs, I think the odds are better that the stock market will run at least to the November 2018 midterm elections.

Sector Spotlight:

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

What Causes Explosive Growth?

by Jason Bodner

I want to tell you a few cool things about bamboo. It grows without pesticides or fertilizer, rarely needs replanting, inhibits soil erosion, and produces 35% more oxygen than an equivalent area of trees. Stronger than steel, it is used to make houses, schools, and other buildings. It is used in road or bridge construction, it is made into medicines, its fibers are used in clothing manufacture, furniture, rugs, paper, cooking fuel, and it’s edible. Bamboo is hardy, strong, and its uses are almost endless. It’s kind of a wonder plant.

Perhaps the most amazing fact about bamboo is that it is actually the fastest growing plant on earth.  Given the right conditions, it can grow three feet in 24 hours! Now that’s explosive growth!

Bamboo Forest Image

Growth is an area of the market that holds special interest to me, and when indexes show sudden spurts of positive price action, I sit up and take notice. A growth spurt is the best time to look under the hood and see if the positive performance is driven by solid fundamentals, or if it is just a recovery from weakness.

Let’s look at the sector movements last week (and longer-term) to see what is driving them now.

Russell 2000 Up 9.9% Since August 21

This past week’s activity may just seem like a volatile week which finished on an uplifting note, but I see much more going on under the hood. Looking down at the market from above, I like to track sector movements – and then I look at the stocks underneath to see what is driving the sector performance.

This past week began with a SmackDown in technology. Monday’s close saw the Information Technology sector index fall -1.42% on some seemingly unimportant news about Facebook cancelling a class of shares – and some other generally trivial headlines. Some stocks were hit deep and wide, making the move look suspiciously like selling algorithms kicking in, exacerbating volatility.

I admit that last Monday’s one-day sell-off brought about eerie reminders of the “high-beta sell-offs” that we saw in prior years. In the past, a sell-off like Monday’s was the first crack in the dam. Yet looking back at the week we find it looks more like a bump in the road. The broad indices finished higher for the week: the Dow Jones Industrials rose +0.25%, the S&P 500 Index was +0.68%, and the Nasdaq Composite rose +1.07%. The real sleeper, though, was the Russell 2000 Index with an eye-popping +2.76% performance.

According to FactSet, the Russell 2000 has rallied 9.9% since August 21. Now that’s explosive growth!

Russell 2000 Index Chart

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

Last week’s winners were Energy and Financials. On the surface, this is somewhat disconcerting as those sectors do not have the strongest fundamentals in terms of earnings and revenue growth over a long period. Energy showed superior growth for Q2, as I pointed out last week, but typically we want to see a longer-term trend develop before getting behind it as a leading sector. Naturally the problem with waiting and seeing is that waiting guarantees missing the beginning of a major move – if it develops into one. But waiting is a safer bet, and safer bets over the long run tend to exhibit a higher winning probability.

Looking at the past six months we see that Technology still reigns supreme with a +12.4% performance, followed by Health Care and Financials. Energy, however, still lags, at -1.32% for six months. It’s worth noting that the sector has regained some lost ground as it tries to find its feet, but it is not yet a leader.

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

Looking under the hood as to what is driving this movement, I look at several metrics to try and identify unusual institutional buying and selling. That’s a powerful indicator of where the markets might go in the future and which sectors are attracting serious capital. In terms of high-volume buying, we saw significant accumulation in Financials, Consumer Discretionary, Energy, Information Technology, Industrials, and Health Care. This means institutions were clamoring to grab stocks and were trading more volume than the market could handle pushing all of those indices – and thus the overall market – higher.

This is a healthy sign. Even with historically weaker sectors like Financials and Energy attracting capital, if we couple that fact with stronger sectors like Tech and Health Care, I see a healthy market is getting healthier. The Monday tech drubbing seems to be a “woke up on the wrong side of the bed” scenario for now. The post-Monday recovery was a signal of growth-explosion to me. Small cap, energy, Financials, Tech, and Health Care are all getting bought with vigor, fueling a higher market in my opinion.

Bamboo can shoot up three feet in a day. When that happens it’s visually noticeable. I can’t think of many plants that you can just watch growing in front of your eyes. The market can also show you periods of growth – taking place right in front of your eyes. This past week wasn’t much looking at the Dow or S&P 500, but when we look at technology, we find a strong NASDAQ and an explosive Russell 2000.

As Sri Mulyani Indrawati, the Minister of Finance of Indonesia, eloquently said, “Development is an endurance exercise with incremental improvements.”

Sri Mulyani Indrawati Quote 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.*

Market Traders Usually Act First, Think Later

by Louis Navellier

At Navellier & Associates, we try to provide a sound-minded and non-emotional analysis of the stock market and the economy, rather than reacting to headlines that come streaming across our computer screens every minute. Last week, the negative financial media posted their usual series of articles trying to stir up market panic. After the Sunday elections in Germany, for instance, the press cited the right-wing seats won in the German election rather than concentrating on Angela Merkel’s victory.

Next, the press cited OPEC production limits as one reason why the stock market was rotating into energy stocks. I would counter that crude oil inventories should rise in upcoming weeks, despite the disruptions in the oil patch from Hurricane Harvey and any (non-sustainable, in my opinion) OPEC production limits. This is the time of year when oil demand drops, so I do not expect crude oil prices to rise much further.

On Tuesday, it was the bond market’s turn to overreact. In a speech before the National Association for Business Economics in Cleveland, Fed Chair Janet Yellen said, “My colleagues and I may have misjudged the strength of the labor market,” adding that “There is a risk that inflation expectations may not be as well anchored as they appear and perhaps are not consistent with our 2% goal.” Translated from Fedspeak, she is essentially admitting that the Phillips Curve (where prices rise if unemployment falls) is apparently not working. That is puzzling her and her colleagues, but I would cite poor productivity gains, globalization, and Amazon.com causing everyone to price-shop as causes for why inflation is no longer a major threat.

In her speech, Yellen raised the following question: “How should (Fed) policy be formulated in the face of such significant uncertainties?” She answered by saying, “In my view, it strengthens the case for a gradual pace of adjustments,” but quickly added, “We should be wary of raising rates too gradually.”

It is very odd for a Fed Chair to admit economic and inflation uncertainties, so Treasury bond yields temporarily moderated a bit in the wake of Yellen’s overall dovish speech.

The bottom line is that traders often react to news rather than analyzing all sides. One thing I can assure you is that we try to avoid any such knee-jerk reactions. I hope that is evident in each MarketMail issue.

A Mixed Array of Economic News

No wonder the Fed is confused. Most weeks offer an array of positive and negative economic indicators.

Here’s an example of good and bad news in one report: On Tuesday, the Conference Board reported that its consumer confidence index slipped to 119.8 in September, down from a revised 120.4 in August. The Conference Board noted that confidence fell “considerably” in Texas and Florida in the wake of Hurricanes Harvey and Irma. The present situation component slipped to 146.4 in September, down from 148.4 in August, while the future expectations component rose to 102.2 in September, up from 101.7 in August. Overall, it appears that consumers will cheer up after most of the hurricane cleanup is completed.

New Home under Construction Image

Also on Tuesday, the Commerce Department reported that new home sales declined 3.4% in August to an annual pace of 560,000. In the past 12 months, new homes sales have declined 1.2% and are now running at the slowest annual pace since last December. New home sales are only running at about 70% of their long-term average due apparently to a national shortage of construction workers. New home sales peaked in March at an annual pace of 638,000 and have slowed precipitously, so the inventory of new homes now stands at 6.1 months, which should help median home prices soften a bit. CBS News Sunday Morning show’s story was the lack of skilled labor “reaching a crisis stage.” In the past 12 months, median home prices have risen only 0.4% to $300,200. Since higher housing/rental prices have been an inflationary component in the Consumer Price Index (CPI), it appears that inflation may now be cooling even faster.

On Wednesday, the Commerce Department announced that durable goods orders rose 1.7% in August, significantly above economists’ consensus expectations of a 1% increase. A surge in the transportation component due to a 45% surge commercial aircraft was largely responsible for the surge. Excluding transportation, durable goods rose at a much more modest pace of 0.2%. A key measure of business investment, namely core capital goods, rose 0.9% for the eighth time in the past nine months. In the past three months, business investment is running at an 8% annual rate, which should boost GDP growth.

Speaking of GDP growth, on Thursday the Commerce Department revised their second-quarter GDP calculation up to a 3.1% annual pace, up from 3% previously estimated. In the second quarter, consumer spending grew at a 3.3% annual pace, while business spending grew at a robust 7% annual pace (up from 6.2% previously estimated). Overall, stronger business spending and higher inventories (revised up to $5.5 billion) were the primary catalysts for the slight upward revision of second-quarter GDP growth.


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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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