The Market Rose

The Market Rose Through Two Painful Historical Anniversaries

by Louis Navellier

September 18, 2018

Last week the S&P 500 rose every day of the week, closing up 1.16% despite two tragic anniversaries – the 9/11 observance and the 10th anniversary of the 2008 market crash. Like every 9/11 anniversary, I am relieved that there has not been another major terrorist attack on U.S. soil, but I must say that the financial media’s coverage of the cause behind the 2008 financial crash has been pathetic, since they fail to account for the government’s role in causing and then exacerbating the crisis. I did my best to name names and reveal exactly what happened in my white paper, “Did the Government Really Cause the 2008 Crash?” 

Financial Crisis Headline Image

This report lays out the chain of events that triggered the collapse of Bear Stearns and Lehman Brothers as well as why Citigroup eventually was deemed “too big to fail.”  Furthermore, this white paper discusses the biggest risk to financial markets since 2008, including the August 2015 intraday “flash crash.” 

Just click this link to read my white paper.

I sincerely hope that all of you in the Carolinas and nearby regions are safe from Hurricane Florence!

In This Issue

Even though the media headlines are getting more negative by the week, the market seems to ignore the noise. Bryan Perry examines the under-covered trend of global financial assets pouring into the U.S. as a safe haven. Gary Alexander cites the epidemic of toxic headlines. The problem, he says, is that too many people believe this bad news and avoid the stock market altogether. Ivan Martchev returns to his New Year’s predictions that gold would go down this year, but Bitcoin would go down a lot more. Jason Bodner examines whether Technology is in the process of a ‘Tech Wreck’ or merely taking a much-needed breather. In the end, I’ll return to examine inflation and other recent indicators to determine whether the Fed will be hawkish or dovish in their statement after their FOMC meeting next week.

Income Mail:
The Capital Flight to U.S. Assets is Relentless
by Bryan Perry
There’s No Place Like Home – the USA

Growth Mail:
The Negativity in the Air Is Getting Crazier by the Week
by Gary Alexander
Headlines Tell Us What to Think – And We Mindlessly Obey

Global Mail:
Bitcoin: When Manias End
by Ivan Martchev
Update on the Gold/Bitcoin Ratio

Sector Spotlight:
Change is All Around Us – But Which Direction Next?
by Jason Bodner
Technology Still Holds the Key to Mankind’s Future

A Look Ahead:
Inflation Remains Subdued, Despite Oil’s Price Rise
by Louis Navellier
The Other Economic News Should Cause the Fed to Be “Cautious” Next Week

Income Mail:

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

The Capital Flight to U.S. Assets is Relentless

by Bryan Perry

For the past several weeks, foreign capital flows into U.S. dollars, U.S. equities, and bonds has dominated the global investing landscape. There are a number of factors at work that most of us are fairly well aware of, but I thought that putting some of them into the form of charts and graphs here might lend some further insight into the bullish inertia that this collection of variables is having on the stock market.

The strength of the U.S. dollar is a serious attraction, though its price advance has backed off recently after a year-to-date advance of nearly 10%. In the world of developed currencies, that is a huge move. The chart below of the U.S. Dollar Index shows how the greenback has performed against five major developed country currencies, namely the euro, yen, pound, Canadian dollar, Swedish krona, and Swiss franc.

United States Dollar Index Chart

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

The six are not evenly weighted. The euro is heavily weighted (57.6%) in the Dollar Index and though the dollar’s rally has been impressive, it doesn’t put any color on what has and still is taking place with the pain being exacted on emerging market currencies. It will be interesting to see where the dollar trades going forward given that the largest weighting in the euro represents a region where growth from the 19 countries that make up the Eurozone slowed to an annualized rate of 1.4% in the second quarter from 1.5% in the first quarter, the slowest expansion in three years. Fear that new tariffs will slow global commerce have been weighing on the outlook in the Europe, which is heavily dependent on trade.

United States Dollar Index Currency Weightings Pie Chart

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

Among the emerging market currencies there is chaos, confusion, and fear driving an exodus from those markets into the U.S. dollar. Below is a table of the countries that make up the MSCI Emerging Market Currency Index. The Brazil real, Russian ruble, and Chinese renminbi comprise 42% of the entire index and while China’s government is reported to be manipulating its currency, Brazil is the eighth largest economy in the world and is in urgent need of addressing its shaky finances. With over $1.5 trillion in public debt, a Brazilian debt crisis has the potential to cause real waves in the global financial system.

And unbeknownst to most investors, India has the second-worst debt problem in the world, right behind Italy. Bloomberg reports that India’s $1.7 trillion formal banking sector is presently struggling with $120 billion in bad loans, most of which are concentrated within its state-owned banks. With 2018 growth slowing to 6.7% from 7.1% in 2017, the trend for further rise in bad loans looks worse.

MSCI Emerging Markets Currency Index Table

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

The black line across the bottom of the chart below is a key 5-year technical support line that was breached earlier this month. Having already shed 7.6% of its value since May, there is only another 5.2% cushion available before reaching the next key support level at 1,506.

MSCI International Emerging Markets Currency Index Chart

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

This bears close attention, as a further run on EM currencies is very possible over the short term.

There’s No Place Like Home – the USA

A look at comparative global 10-year bond yields (below) supports further the attraction to the U.S. 10-year Treasury Note that traded last Friday at 3.00%. When compared with what’s available in Europe, Greece (4.04%) is the only nation sporting a higher yield. Brazil (at 12.37%) is trading like junk, with Mexico (8.01%) and India (8.12%) not far behind. It is amazing that the yield on Italian debt (2.98%) is trading in line with U.S. debt despite most of Italy’s largest banks swimming in emerging market debt, where defaults are expected to rise dramatically in 2019 if economic conditions don’t materially improve.

United States Ten Year Government Bond Yields Table

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

Foreign holdings of U.S. securities rose to a record $18.4 trillion as of the end of June, according to data released by the Treasury. An annual survey of foreign portfolio investments, including U.S. stocks, along with short- and long-term debt, showed holdings rose by 8%, up from $17.1 trillion a year earlier. Japan was the largest investing country with $2 trillion, followed by the Cayman Islands at $1.7 trillion and the U.K. and China at about $1.5 trillion each. Luxembourg rounded out the top five at $1.4 trillion.

Breaking it down, foreign holdings of U.S. equities climbed to $7.2 trillion as of June 30, from $6.2 trillion a year earlier. Short-term debt holdings increased to $954 billion from $909 billion, while long-term debt holdings rose to $10.3 trillion from $10 trillion. The chart below shows how much of the accumulation in U.S. equities is in the form of ETFs. It’s hard to imagine the slope of this chart changing much as there is no sign of a deal with China to slow the increase in tariffs levied in addition to sanctions applied against Russia and Iran, with President Trump threatening to pull out of the WTO “if they don’t shape up.”

Equity Exchange Traded Funds Bar Chart

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

And I’ll add just two more items of note as to why the bull market will very likely go into extra innings – stock buy-backs and rising dividends. Stock repurchases could reach a record $1 trillion by November according to Trim Tabs. Based on third-quarter earnings projections of 19.9% by FactSet as of September 14th, there is every reason to believe that further dividend increases will keep the slope of quarterly payouts to shareholders up and to the right.

Standard and Poor's 500 Dividends and Buybacks Bar Chart

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

So, while many key players in the global financial system are fighting some strong headwinds – including a serious rise in public debt – the U.S. remains the safe zone for wealth-seeking stability and attractive yield. This is not a quick turnaround scenario for the global financial system, and this is why the bull market in American assets has room to run for quite a while.

Growth Mail:

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

The Negativity in the Air Is Getting Crazier by the Week

by Gary Alexander

It really is getting out of hand – crazy, uncontrollable, borderline lunatic. I’m talking about headlines.

The latest edition of The Atlantic – one of the most prestigious journalistic institutions in American history, one I have subscribed to for decades – crowded 10 negative headlines onto its October cover, which I received in the mail Saturday afternoon as I was about to enjoy a neighborly home tour on my small island. Reading from top to bottom in the October 2018 Atlantic, the 10 headlines read like this:

“Trump Builds His Autocracy”
“What Getting Shot Taught Me About Politics”
“Is Democracy Dying?” (that’s the main headline in the biggest type, below)
“A Warning from Europe: The Worst is Yet to Come”
“How AI Could Give Rise to Tyranny”
“James Madison vs. the Mob”
“The Slow-Motion Crisis in America & the World” (the second-biggest headline)
“The Descent into Tribalism”
“Racism’s Threat to the American Idea”
“Stephen Breyer on America’s Isolated Courts”

Looking for some balance on the inside of The Atlantic’s Table of Contents, I only found more dismay, including articles like “The Killer in the Cubicle” on how “Office workers murder each other more than you think.” I quickly turned to that article on page 34, hoping for some actual facts, but the author said that the FBI doesn’t track these crimes, “nor does OSHA,” yet they must be “more prevalent than most people suspect.” But how does he know what we expect, and why doesn’t he know any real statistics?

Lunatic Headlines Image

It seems to me that these covers became more Apocalyptic after Trump won the 2016 election, carrying the clear implication that “since our least favorite candidate won, Democracy must be dying.”

What bothers me most in The Atlantic’s swath of negativity is the articles on “tribalism” and racism, in which Ibram X. Kendi asserts that “the country remains divided by racism – and the threat is as existential as it was before the Civil War,” a claim which seems preposterous when you consider the great advances made by all segments of American society since 1968 or 1953, much less 1853 – “before the Civil War.”

A report published by the Census Bureau last Wednesday showed that the minority segments of America have increased their wealth faster than the rest of U.S. society over the last five years – under both Obama and Trump – reaching record levels of employment, wage income, and real household income in 2017.

Growth in Real Median Household Income Table

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

Real median household income rose 1.8% to a record-high $61,372 in 2017, and Hispanic income rose twice that rate, by 3.7%. The black unemployment rate is still higher than the white rate, but this year it reached an all-time low of 5.9% in June. There is still room for improvement, but the progress is clear.

Black Unemployment Chart

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

The focus of media anger seems to be aimed at Donald Trump, but the first half of this recovery under President Obama was fairly slow for everyone, according to Census Bureau data. From 2009 to 2014, median household incomes stagnated, poverty increased, and welfare programs expanded. For instance, over 1.5 million workers were added to the disability rolls. But since 2014, family income is up strongly.

Headlines Tell Us What to Think – And We Mindlessly Obey

The reason these negative headlines are destructive is that they are misleading the public. A 2015 survey asked 18,235 adults in the U.S., Australia, and Europe if “All things considered, do you think the world is getting better or worse, or neither…?”  Only 6% of Americans said “better,” but that was rosier than the 4% who said the world is getting better in Great Britain and Germany, and 3% in Australia and France.

Share of Population Who Think World is Getting Better Bar Chart

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

In a similar survey, only 8% of respondents in Germany and the U.S. thought that extreme poverty had declined in the world over the last 30 years (55% thought it had increased and 33% thought it was the same) when in fact the proportion living in extreme poverty in those years (1981-2011) had declined from 40% to 10%. Similarly, most people believe crime has increased, when it has actually decreased, and most people think more millions die from war and terrorism now than ever before, but that’s not true.

This is mostly due to the negative drumbeat of the press, and our inner willingness to believe the worst.

Turning to investing, the negative drumbeat has convinced the majority of Americans that stocks have been flat-to-down for the last decade. A survey by Betterment Research from July 31 to August 6, 2018 polled 2,000 Americans over age 18 and found that 48% believed that stocks had been flat (had gained nothing) over the past 10 years. Another 18% believed stocks had declined. The truth? The S&P and the Dow are both up over 120% from July 31, 2008 to July 31, 2018, and the Nasdaq is up 230%.

Investor sentiment has been fairly low throughout this 9.5-year “unloved” bull market. Back in April 2018, a survey by Bank of America Merrill Lynch found that 58% of global money managers thought the market had already peaked or would peak later in 2018. The majority think the bull is dead or dying.

That’s actually good news. A bull market climbs a “wall of worry” and sentiment is a contrary indicator. The American Association of Individual Investors (AAII) has only polled about one-third bulls over the past three years, as this chart shows (the 29.35 bullish reading was taken last November, at S&P 2,585).

American Association of Individual Investors Sentiment Poll Chart

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

Partly because of the negative press, and partly due to normal human fears, a May 2018 Gallup poll found that only 55% of American households owned stocks – after a full nine years of bull-market growth – vs. 65% of households owning stocks at the previous market peak in 2007. The younger generation is even more spooked. Over half (52%) of those under 35 owned stocks from 2001 through 2007 but only 38% of that younger age cohort owned stocks from 2009 to 2018, due to the psychological scars from 2008 and the unending scare stories from the bears and the downbeat press. Don’t believe them. Dare to be bullish.

Global Mail:

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

Bitcoin: When Manias End

by Ivan Martchev

As of this writing, there are 15 cryptocurrencies with market caps of over $1 billion. The largest, of course, is bitcoin, where the market cap is $112 billion. As a reference point, bitcoin had a market cap of over $300 billion at the start of the year.

As I have mentioned previously in this column, the term “market cap” is a rather nebulous concept when it comes to a cryptocurrency. When describing operating companies, market cap is the price of the stock times the number of shares. It is a way for the market to discount future cash flows for as far as the eye can see. Companies with consistently rising profitability have more expensive share prices than those with declining or stagnant profitability.

Bitcoin Index Chart

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

When it comes to bitcoin or any other cryptocurrency, the term market cap is the number of bitcoins in existence times the price of bitcoin, but with bitcoins there are no future cash flows to discount. The way you know an investment is a bubble is that you know it can never produce the cash flows to justify its current price, which is a description that fits bitcoin to a T.

I know that, in theory, blockchain technology can be revolutionary as a way to facilitate transactions, but blockchain can be made to work without bitcoin. In fact, most people speculating in bitcoin today did not buy the cryptocurrency to use in a transaction, but to profit from a continuation of its past meteoric rise.

Which phase is the bitcoin mania in now?

On December 19, 2017, one day after bitcoin hit its all-time high, I wrote that “Bitcoin is perfectly tracking major bubble phases” and showed the following chart of major bubble phases. If I had to guess what bubble stage bitcoin is in, I would guess anywhere between fear and capitulation. I do not believe that bitcoin has actually reached capitulation yet, as it is still hovering near major support of $6,000, down from $19,000 at the time of the referenced article.

Classic Bubble Phase Chart

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

While bitcoin is holding up despite being close to capitulation, other cryptos are capitulating. While there are 15 crypos with “market caps” of over $1 billion, they have lost significantly more than bitcoin so far in 2018, so it will be interesting to see if there will be fewer than 15 by year end. My bet is there will be.

Other Cryptos Chart

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

A case in point is Ethereum, going by the symbol ETHUSD (market cap: $22.1 billion), which keeps cascading lower like a busted dot.com IPO late in the year 2000, or even Ripple (market cap $11.1 billion), going by symbol XRPUSD, which actually looks worse than Ethereum, if that were possible.

Very similar to the Nasdaq in 2000, some cryptos are flaming out faster than others. In fact, back in 2000 some of the crappier dot.coms began to decline before the technology index made its bubble high in March of that year. Similarly to the Nasdaq in 2000, many of those cryptos will disappear just as the cash burning dot.coms could no longer raise money and had no viable business models to keep them operating.

Update on the Gold/Bitcoin Ratio

As I opined back in December 2017, the alternative to paper money is not bitcoin but gold, so if the choice were given to me to hold bitcoin or gold bullion for 10 years without being allowed to sell the investment until the decade ran out, I would take gold bullion without a doubt.

Gold Index Chart

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

While gold is down in 2018, as I expected at the time, bitcoin is down a lot more, making this a successful relative choice. And if the dollar keeps rallying as the Federal Reserve keeps hiking rates and unwinding its balance sheet, gold may very well be down some more by the end of 2018 and in 2019.

Broad Trade-Weighted Dollar Index Chart

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

I think that the Broad Trade-Weighted Dollar Index will make an all-time high in this cycle with continued Fed tightening, particularly if President Trump’s controversial trade negotiations continue to bear fruit. That reaffirms my bearish stance on precious metals, but it does not change my belief that if one has to hold gold bullion or bitcoin for a decade, one will be a lot better off with gold bullion. This is because the gold bar will still be here in 10 years, whereas with that overvalued line of code called bitcoin, there may be nothing real to sell.

Sector Spotlight:

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

Change is All Around Us – But Which Direction Next?

by Jason Bodner

Change.

It’s all around us. But our human instinct is to crave structure, order, equality, and predictability. We become accustomed to the status quo and expect it to continue, even after a tumultuous change. Think about some recent examples. In the 1940s, there was life before the war and after the war. In the 1950s, there was life before the Polio vaccine and after. In the 1960s, there was life before the Beatles and after. Yet once the “after” rolls around, everything seems like that’s the way it always was.

Change is Inevitable Image

As September is peak hurricane season, Florence is fresh in our minds, so let’s use hurricanes as an example. Hurricanes have all sorts of names, like Wilma, Hugo, Andrew, and Irma. But prior to 1979, hurricanes were only given women’s names, much like the tradition of ships and cars having a female name. But feminists protested over the implication that only women were turbulent and volatile. So that year storms started being named after both sexes. “Bob” earned the dubious distinction of being our first male hurricane. But now, we don’t even think about it, and routinely expect either a male or female name.

Hurricane Image

When everyone believes something, nature has a funny way of making that the precise moment when change comes. The same thing happens in markets. A great example is the strength of a given sector. Information Technology has been a leading sector for so long now that it’s almost expected that Tech will continue to lead. The question is: Will it? My answer may surprise you…

The Information Technology sector is not a current leading sector. I define a leading sector as a leader in one of the top three spots over a recent time frame, but infotech flunks out over the last six months.

Infotech was not a leader this past week. Telecom, Industrials, and Energy nabbed the top three spots, just barely nudging out Infotech in fourth place. While Telecom is the smallest sector in terms of constituents, it’s still # 1 this week. Financials was the only negative sector for the past week’s price action.

Standard and Poor's 500 Weekly Sector Indices Changes Table

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

Looking back three months, we see Health Care, Utilities, and Telecom as the top three performers. Infotech came in eighth in terms of three-month performance.

Standard and Poor's 500 Quarterly Sector Indices Changes Table

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

Once we start looking at six-month performance, we begin to see some stronger bullish indications. Consumer Discretionary, Energy, and Health Care were the top three sectors. Infotech came in a not-so-distant fourth place, but again was not in the top three.

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

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

It’s only when we look back nine and 12 months that we see the top sectors are the growth engines for a bull market. Consumer Discretionary, Information Technology, Health Care, Energy, and Financials are all there, with consumers and tech taking the top two spots.

Standard and Poor's 500 Nine Month Sector Indices Changes Tables

Standard and Poor's 500 Yearly Sector Indices Changes Table

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

It’s fine to sit and Monday-morning-quarterback here, but what does this survey really mean?

Technology Still Holds the Key to Mankind’s Future

Information Technology was the single strongest sector by a mile for nearly 18 months after President Trump won the 2016 election. We saw all sectors surge but none quite as strong as tech. Recently, Infotech has fallen back in the pack. Should we worry?

I think tech is the single most important sector to watch as a clue for an outlook on the overall market. This is because tech is the key bellwether for growth. One could argue that it always has been. Railroads were undoubtedly industrial stocks, but in the time of their infancy, they were the kings of technology. The same could be said for airlines and aerospace stocks 50 to 60 years ago. They eventually became industrials, but in the fifties was there any higher tech than planes and spaceships? Telecom is a defensive sector now, but decades ago, it was the key sector for growth. Yes, there was a time many can remember where a telephone was a luxury and not a necessity.

The point here is that technology holds the key to the future progress of mankind. It would be downright difficult to argue that our future will not be shaped by new emerging technologies. We will be in the Information Age for an unlimited (and unknown) period of time. How long? Only time will tell.

That’s why Infotech is such a key component, in my view. The sector’s leadership from the election forward turned this past summer into a period of rest. Infotech is “taking a break,” in my opinion. The “tech-wreck” story that CNBC loves to transmit is a natural thing. Like any bull market, there will be periods of correction and consolidation, but the engines for growth still live in tech stocks, and I believe they will resume their march higher soon. Of course, you will want to ask me, how “soon” is soon?

Market pundits are currently engaged in lots of debate over how much longer this bull market can go on. It is my opinion that we still have much fuel in the tank and the right conditions to see higher prices. At the risk of sounding like a broken record, we have record low taxes, near record low rates, record sales and earnings, record cash repatriation, record buy-backs, and P/Es that are not at feverish levels yet.

I think this fall will bring resumed vigor for tech stocks and a higher overall market. No one knows for sure, but I believe the data points to a tech resurgence. Salesforce.com’s founder Marc Benioff said, “The only constant in the technology industry is change.” How true. The tech sector is just a part of the whole market. The whole is a microcosm for life as we know it. And in life, the only constant is change.

Heraclitus 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.*

Inflation Remains Subdued, Despite Oil’s Price Rise

by Louis Navellier

The news on the inflation front last week was very encouraging. On Wednesday, the Labor Department announced that the Producer Price Index (PPI) declined 0.1% in August, which came as a big surprise, since economists’ consensus estimate was for a 0.2% increase. This is the first drop in the PPI in 18 months. In the past 12 months, the PPI decelerated to a 2.8% annual pace, down from a 3.3% annual pace in July. The core PPI, excluding food, energy, and trade, rose 0.1% and 2.9% in the past 12 months.

Then, on Thursday, the Labor Department announced that the Consumer Price Index (CPI) rose 0.2% in August, below economists’ consensus estimate of a 0.3% increase. The core CPI, excluding food and energy, rose 0.1% in August. In the past 12 months, the core CPI rose 2.2%. This deceleration from a 2.4% rate last month caused Treasury yields to moderate a bit. The fact that inflation is moderating is just another reason that I think that the Fed will pause in raising key interest rates after its meeting next week.

Brent crude oil prices touched $80 per barrel last week over concerns that global inventories are rapidly shrinking. The mounting U.S. pressure on Iran via sanctions and the fact that U.S. crude oil inventories are now at a 3½-year low is contributing to the supply fears. Furthermore, Hurricane Florence temporarily disrupted East Coast supplies, which could keep crude oil prices high. Russia and Saudi Arabia have yet to significantly boost their crude oil production, which is another reason for escalating supply concerns.

Chess Game with Oil Image

I am not concerned, as supplies usually decline in the fall, and supplies usually emerge as prices rise. In today’s world, we also know that Iran has been hiding crude oil offshore in tankers, as has Venezuela, in a futile attempt to try to transfer crude oil at sea to circumvent sanctions. I suspect that the U.S. will get more assertive with both Iran and Venezuela after the mid-term elections, since they actively are trying to circumvent sanctions. All this chaos around the world effectively guarantees that the U.S. dollar will remain strong, since it is a reserve currency that is benefitting from ongoing global capital flight.

The Other Economic News Should Cause the Fed to Be “Cautious” Next Week

Moderate inflation is one reason the Fed may not be motivated to raise rates after next week’s pro forma rate increase. The Fed’s Beige Book survey was released last Wednesday in time for its upcoming FOMC meeting. Essentially, the Beige Book survey cited “moderate” economic growth and expressed multiple concerns about trade and tariffs. According to the Beige Book, some businesses have postponed new investments due to rising trade tensions. In its best “double speak,” the Beige Book also said that the impact of tariffs has been “minimal.” Overall, this mixed message within the Beige Book is expected to cause the upcoming FOMC statement to say that monetary policy after its next rate hike will move from “accommodative” to “neutral,” and that any further interest rate increases will be “gradual.”

On Tuesday, the NFIB Small Business Optimism Index for August surged to 108.8, up from 107.9 in July and the highest reading in the 45-year history of the survey. NFIB President and CEO Juanita D. Duggan said, “Today's groundbreaking numbers are demonstrative of what I'm hearing every day from small business owners – that business is booming.”  Since small businesses are happy, GDP growth is expected to continue strong. The Atlanta Fed is now estimating third-quarter GDP at a 4.4% annual pace.

The Commerce Department on Friday announced that retail sales rose only 0.1% in August, which was substantially below economists’ consensus estimate of 0.4% and the slowest pace in six months. But the good news was that July’s retail sales were revised up to a 0.7% increase from 0.5% previously estimated. These increases may seem small, but they are month-over-month figures (0.7% is an 8.4% annual rate). Excluding vehicles, retail sales rose 0.3% in August and 0.8% in July, so these numbers are very healthy when annualized. In the past 12 months, retail sales have risen at a very healthy 6.6% annual pace.


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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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