Wall Street Shoots First

As Usual, Wall Street Shoots First, Thinks Second

by Louis Navellier

December 12, 2017

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

Three Eggs in a Basket Image

The S&P 500 rose just under 0.5% last week to a record close above 2,650, but the big news is that the rotation out of international and technology companies into domestic companies (expected to benefit from the impending tax reform) seems to be losing some steam due to mounting criticism of the latest tax bill. As always, Wall Street seems to have overreacted to the ultimate beneficiaries of the impending tax reform.

While some Democrats say that the tax bill is a “tax cut for the rich” (they always say that), some of the rich complain about how their taxes will rise. For example, have you noticed how stressed some CNBC commentators like Jim Cramer and David Faber become when they talk about the impending tax reform bill? That’s because they would have to pay more income taxes due to the fact that their state income tax deductions would be eliminated, while their property tax deductions would be capped at $10,000.

Clearly, high-tax states like California, Hawaii, New Jersey, New York, and Oregon – or anyone with big itemized deductions or high property taxes – are expected to be taxed significantly higher, which is causing some doubt about the reconciliation of the House and Senate versions of the proposed tax reform.

This temporary doubt about the final version of tax reform halted the previous switch from multinational stocks to domestic stocks. In the end, what I really care about are positive analyst earnings revisions and what stocks are going to post the strongest fourth-quarter results in January and February. Since the analysts are not yet changing their earnings estimates, I do not think we should overreact, since any corporate tax benefits would not show up until the first-quarter results come out in April and May.

In This Issue

Bryan Perry sees a return to sanity in last week’s market action. He also sees the fundamentals pushing the S&P 500 to 3,000 in 2018. Gary Alexander agrees, based on the trends of rising GDP, 10%+ profit margins, and rising after-tax profits if tax reform passes. Ivan Martchev predicts a rising U.S. dollar (along with a drop in gold and a yuan devaluation) in 2018. Jason Bodner examines historical bubbles as they differ from real bull markets, examining bitcoins, tulip bulbs, and tech stocks – then (1999) and now. I’ll also take a look at tech stocks – particularly how to divide the winners from the losers going forward.

Income Mail:
Santa Claus Rally Sends Stocks Up, Bond Yields Down
by Bryan Perry
My Bullish Prediction for the S&P 500 in 2018

Growth Mail:
Rising Corporate After-Tax Profits Should Drive Stocks Higher
by Gary Alexander
December 12 in Market History

Global Mail:
My Fearless Forecast for 2018: Dollar to Gain 10%+
by Ivan Martchev
Gold May Finally Decline Below $1000 in 2018

Sector Spotlight:
Bitcoin – Bubble or “Real Thing,” or Both?
by Jason Bodner
Is the 2017 Tech Sector Comparable to Dot.Coms in 1999?

A Look Ahead:
Look for a Tech-Stock Bounce Back
by Louis Navellier
New Hiring Continues to Beat Forecasts

Income Mail:

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

Santa Claus Rally Sends Stocks Up, Bond Yields Down

by Bryan Perry

Approaching the mid-point of the month, leaving only 13 trading days left in 2017, we’re seeing the first signs of a Santa Claus rally triggered by a robust employment report in which non-farm payrolls added 228,000 jobs versus a consensus of 190,000, with an unemployment rate staying at 4.1%. Job growth was strong, but wage growth wasn’t, but that isn't likely to keep the Fed from raising rates at this week’s meeting, yet it could give the Fed a data-based reason to move more slowly on the next rate hike in 2018.

The past week in the Treasury market saw a continuation of the yield curve flattening trend, though the 2/10 spread dipped by just one basis point to 57 basis points (bps). While last week's contraction was minor, it is worth remembering that the 2/10 spread has contracted by 72 bps over the past year.

The yield spread between Germany's 10-year bund and the U.S. Treasury 10-year note contracted seven basis points to -200 after a five-basis point expansion the previous week. Inflation expectations expressed by the 5y5y forward rate saw another very slight uptick, rising one basis point to 1.97%. The fed funds futures market is certain that the FOMC will call for a 25-bps rate hike this week. Looking past 2017, the fed funds futures market shows a 61.4% implied likelihood of another rate hike in March 2018.

Fed Funds Futures Rate Prediction Table

Ten Year Treasury Constant Maturity minus Two Year Treasury Constant Maturity Chart

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

I and others on this post have been writing about the flattening yield curve and if it signifies any trouble ahead. I remain in the camp that the current lid on wage inflation, coupled with strong economic and earnings data, will feed investor optimism and push stocks higher. I can’t remember a time in my 33 years as an investment professional where this set of conditions existed. Typically, at this juncture of low unemployment and GDP above 3%, upward pressure on wages would be widely evident in the jobs data.

For now, wage pressure just isn’t there. Without question, wage inflation could become a headwind to this bull market because it brings with it the highly unwelcome uncertainty of how high the inflation rate could rise, which would cause the Fed to hike rates at a faster-than-expected rate. The fact that the inflation genie is still being kept in the bottle gives the stock market a green light to trade meaningfully higher with or without tax reform. (We’ll know more about what the final tax package looks like later this week when the Senate and House versions go to conference for reconciliation towards a final bill.)

Magic Lamp Image

My Bullish Prediction for the S&P 500 in 2018

With a final tax bill version becoming law, together with a smooth transition from outgoing Fed Chair Janet Yellen to newly confirmed and fellow dove Fed Chairman Jerome Powell on February 3, the sky for the bullish stock camp will become bright blue. The S&P has just broken out above 2650 again and is technically well on its way to 3000 by this time next year, barring a black swan event. That’s a 13.2% move up for the S&P and one that is very achievable given the current economic outlook.

Standard and Poor's 500 Market Index Chart

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

For the moment, I think I might be on my own island calling for a target of 3000 for the S&P, but once fourth-quarter earnings season gets under way and it becomes clear how the macro data feeds into strong quarterly earnings results, I doubt that I will be in a small minority. Not only is inflation a non-threat now, but the futures market doesn’t see it as much of a threat five years out. Under these circumstances, the flat yield curve should be viewed as ironically bullish in that history might show it to have been a leading indicator of a prolonged economic expansion and not a warning flag that precedes a recession.

After the crisis of 2008, financial engineering (six years of QE) revived the patient (domestic economy) but the patient has only recently started to breathe on its own. The Fed refrained from paring its bloated $4.5 trillion balance sheet until it was sure the economy was ready. As of last October, that process began with the Fed letting maturing bonds “roll off” its portfolio rather than selling Treasuries outright. This process could take five to seven years, according to former Fed Chairman Ben Bernanke, and it would help greatly to minimize another ‘taper tantrum’ in the stock market. This blueprint for unwinding QE is seen by market participants as prudent and it may be why the bull market has a lot of snort left in it.

Growth Mail:

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

Rising Corporate After-Tax Profits Should Drive Stocks Higher

by Gary Alexander

There’s nothing mysterious about the market’s recent rise. Corporate profits keep rising by double digits (or nearly so), and they may rise even faster if corporate tax rates are dramatically decreased in 2018.

We already know that corporate earnings are up strongly in the third quarter. With nearly all (495) of the S&P 500 companies reporting their third-quarter results, the near-final results are that earnings are at record highs, up 8.4% over the third quarter of 2016. When you expand that to all of the companies in America, we learned on November 29 from the National Income & Product Accounts (NIPA) that after-tax corporate profits rose to a record high of $1.86 trillion last quarter, up 10.0%. Many other numbers from the NIPA report are also at record highs. Corporate cash flow rose to a record $2.38 trillion last quarter, while the S&P 500’s operating profit margin was at a record high 10.8% (see chart, below).

Standard and Poor's 500 Operating Margin Chart

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

Double-digit profit margins have been the norm for the last three years. These profits can fuel a lot of shareholder-friendly actions, like dividends, share buy-backs, expansions, mergers, strategic hiring, and more product research. That’s one reason why jobs reports and confidence surveys have been rising.

This third-quarter data plus rising online sales data for Black Friday and recent holiday sales are evidence that the fourth quarter should also deliver 3% or greater growth, which can sustain 10% or greater profits growth and 10% or greater corporate profit margins, especially if we see corporate tax rates significantly cut if Congress can pass tax reform this month, and if those new rates take effect as of the start of 2018.

We can’t count our chickens before they’re hatched, but the major historical tax cuts of the 1920s, 1960s, 1980s, and 2000s each fueled rapid economic and huge stock market gains. First came the Coolidge tax cuts in the 1920s, then the Kennedy-Johnson cuts in the 1960s, then Reagan in 1983, and Bush in 2003.

The investment payoffs were stunning in each of these four tax-cutting decades:

 Decade  Low  High  Dow Gain
 1920s  1921 (August 21)  1929 (September 3)  496.5% in eight years
 1960s  1962 (June 26)  1966 (February 9)  85.7% in 3.6 years
 1980s  1982 (August 13)  1987 (August 25)  250.4% in five years
 2000s  2002 (October 9)  2007 (October 10)  97.3% in five years
 Source: Stock Traders’ Almanac 2010, using the Dow Jones Industrial Average

This time, corporate tax cuts are more important for investors than personal tax rates, since corporate tax rates leverage corporate profits and therefore earnings. With so much corporate cash stored overseas, a dramatic lowering of corporate rates could generate a one-time economic burst if this cash is repatriated.

OECD Average Bar Chart

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

In this context, any tax rate around 20% would be a massive inducement to bring that capital home.

December 12 in Market History

Twelve is an elegant number. In Las Vegas, 12 at the craps table is “boxcars.” In a more sacred space, there were 12 tribes of Israel in the Old Testament, and 12 apostles in the New Testament. In the calendars of old there were 12 signs of the Zodiac, leading to the 12 months of today’s calendar, loosely based on the lunar cycle, but not exactly. Twelve is conveniently broken down into four quarters since 12 is evenly divided by four integers – 2, 3, 4 or 6. Here are 12 notable events that happened on 12-12:

#1: On December 12, 1791, America’s first central bank, the Bank of the United States, opened in Philadelphia. It was the brain child of Alexander Hamilton, the first Secretary of the Treasury. Thomas Jefferson opposed the idea. As a compromise, the bank had a 20-year charter. (It expired at age 20.)

#2: On December 12, 1792, in Vienna, Austria, just four days before his 22nd birthday, Ludwig von Beethoven received his first lesson in music composition from the reigning European maestro, Franz Joseph Haydn, age 60. The cost of the lesson: 19 cents. The value: priceless. The torch was passed.

#3: On December 12, 1800: Washington, DC, was established as the new capital of the United States. The first American capital was New York, then Philadelphia, but Washington DC was a political compromise.

Moving a century forward:

#4: On December 12, 1900, U.S. Steel was born when the original Charles Schwab, age 38, president of Carnegie Steel, spoke before 80 great titans of industry, including Andrew Carnegie, E.H. Harriman, Jacob Schiff, and J.P. Morgan, who rolled his unsmoked cigar back and forth during the entire talk, and then asked for a private meeting with Schwab. Morgan bought the idea and U.S. Steel was born.

#5: On December 12, 1901, Guglielmo Marconi (1874-1937) sent a radio signal from Cornwall, England, to Newfoundland, Canada, 2,232 miles away. Previously, the scientific community argued that the curvature of the earth would limit the transmission of any radio waves to a 100-to-200-mile radius.

#6: December 12, 1914 marked the largest one-day percentage drop (-24.4%) in the history of the Dow Jones Industrial Average, due to pent-up selling pressure. The New York Stock Exchange had been closed since the end of July, in fear of panic selling at the outset of the Great War in Europe.

Speeding up the pace a bit…

#7-9: During World War I: On December 12, 1917: Father Edward J. Flanagan, founded Boys’ Town in Omaha. On December 12, 1915 and 1918, two “alpha male” singers of the 20th century were born: Francis Albert Sinatra in Hoboken, NJ and Joe Williams of Gordele, GA, the lead singer for Count Basie’s band.

#10: On December 12, 1925, the world’s first motel, the Motel Inn, opened its doors in San Luis Obispo, California. Owner Arthur Heineman coined the term as a clever alliteration of two words, “motor hotel.”

I’ll close with two 12-12 events that helped to define the early 21st century:

#11: On December 12, 1991, the World Wide Web came to America, when physicist Paul Kunz installed the first web server in America on an IBM mainframe computer at Stanford’s Linear Accelerator Center.

#12: On December 12, 2000, the U.S. Supreme Court issued their ruling to resolve the 2000 Presidential election in favor of George W. Bush over Al Gore, thereby halting the recounts of the Florida votes.

So, what will happen today that we will remember in years to come?  My hope is that Ivan Martchev in his Global Mail, below, will renew his bet with me that gold will fall below $1,000 sometime in 2018…

Global Mail:

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

My Fearless Forecast for 2018: Dollar to Gain 10%+

by Ivan Martchev

The middle of December is the traditional time to dust off the crystal ball and make annual predictions.

So far the annual predictions I started making here in 2014 have a success of 75% (3 out of 4), where only last year’s prediction that gold will decline below $1000 in 2017 did not work out (with two weeks to go).

United States Dollar Index Chart

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

For 2018, I think the U.S. Dollar will rally big time. In 2017, the dollar reached its highest level on the first trading day of the year and it went pretty much straight down until September. In the fourth quarter of 2017, we have seen some bottoming action in the greenback. I think the chances are better than 50-50 that the dollar recovers all of the losses it saw in 2017 and makes a fresh multi-year high in 2018.

Why did the dollar decline in 2017? Primarily because the euro – the largest component of the U.S. Dollar Index, at 56.7% – had a massive unwinding of what I call “the eurozone disintegration trade.” Instead, the eurozone delivered a wave of political victories for pro-EU parties in the Netherlands, France, and to a lesser degree Germany. Nonetheless, Angela Merkel’s party must yet again start negotiations with the SPD this week, which originally wanted to stay in opposition. But the SPD realized that if no government is formed, they might be worse off with a new federal election, so they changed course.

Meanwhile, the ECB is in “QE mode,” while the Fed is in quantitative tightening (QT) mode. The seeds have been sown for the dollar to rebound, particularly if the tax plan survives the negotiations between the Senate and the House committees, and if President Trump executes on his infrastructure program.

Another reason for the dollar to rally in 2018 is China, which I believe is in the early stages of unwinding its credit bubble. Chinese GDP is forecasted to end 2017 at $11.8 trillion while at the turn of the century it stood at just $1.094 trillion. The trouble is that at the turn of the century China's total debt to GDP ratio was about 100%, while now it stands at 400%, if one counts the infamous shadow banking system, which is conveniently omitted from many official statistics. The reason why it should not be omitted is its size, where some credible sources, not the least of which is the Brookings Institution, estimate the size of Chinese unregulated lending as larger than the size of China’s GDP.

China Total Social Financing versus China Gross Domestic Product Growth Rate Chart

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

In other words, as the Chinese economy grew more than 10-fold since the turn of the century, total credit in the Chinese financial system grew more than 40-fold. I believe we have reached a tipping point in this massive credit cycle and now we are “over the hill” in the sense that GDP growth has begun to slow while credit growth is still surging. Bigger mountains of debt cannot produce an accelerating economy in China, which is a sign of a busted credit bubble.

GSCI Commodity Index Chart

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

The better than 50% decline in major commodity indexes in the 2014-2016 period is a direct result of this Chinese economic slowdown. One indicator to watch for Chinese economic deterioration is renewed weakness in commodity prices. China is the #1 consumer in most commodities, so their prices should act like canaries in a coal mine. Typically, busted credit bubble situations result in a hard landing which I think will be like what we saw in the Asian Crisis of 1997-1998, which had similar debt-to-GDP dynamics. The trouble is that the Chinese economy today is several times bigger than the total GDP of the local economies affected by the Asian Crisis 20 years ago.

Chinese Yuan versus China Foreign Exchange Reserves Chart

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

I think China’s credit bubble will ultimately result in a devaluation of the yuan similar to the devaluation that they engineered in December 1993 to the tune of 34%. One way to see the hard landing coming is to see a sharp acceleration of foreign exchange outflows. A Chinese yuan devaluation, if it comes in 2018, is highly deflationary for the global economy and will be decidedly a dollar-bullish event.

Gold May Finally Decline Below $1000 in 2018

With two weeks to go in 2017, it looks like I will lose the bet I made with Gary Alexander in early 2017. He has agreed to enter into another bet for 2018 on the same terms – that gold will decline below $1000 at any point in 2018. That’s like a binary put option on gold with an expiration date of December 31, 2018.

Gold and Silver Prices Chart

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

While some may see my entering into a second binary put options contract on gold after the 2017 one is getting ready to expire worthless is an attempt to hope that a broken clock will be right twice a day. I don't think this is the case. Thinking that gold will decline in 2018 is derived directly from the fact that I think the dollar is likely to rally in 2018, which I believe is a better-than-even-probability event.

There are already signs that the precious metals markets are weakening again, with silver leading to the downside and trading at levels not seen since December 2016, when gold bullion was near $1120/oz. I think that decline that takes gold below $1000 is likely to happen if my dollar forecast for 2018 works out.

Sector Spotlight:

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

Bitcoin – Bubble or “Real Thing,” or Both?

by Jason Bodner

Bitcoin. Bitcoin, bitcoin bitcoin bitcoin, bitcoin bitcoin. No matter what anyone says these days, “bitcoin” is what people actually hear. The cryptocurrency’s god-like ascent seems to have captivated everyone’s eyes, minds, wallets, and hearts. To some this is the beginning of a much larger move higher. There is the argument that there is limited supply and overwhelming demand, which would push prices much higher on simple supply and demand economics. The reality also exists that, as a non-regulated currency with no government oversight, there exists a natural draw to unscrupulous characters who wish to move money in the dark. These arguments combined with the frothy euphoria witnessed as futures get launched and CNBC posts a Bitcoin ticker on the screen are fuel for the feeling that Bitcoin has room to run.

Last week, I had no fewer than 10 people ask me about bitcoin. Out of the 10, zero were financial professionals. There was a gardener, a mortgage broker, a retiree, and a full-time mom in that group. This would typically be the tipping point in classic bubbles throughout history. Amongst the numerous bubble examples is the time when a single tulip bulb commanded prices higher than luxury homes in the peak of the Dutch Tulip Bubble in 1637. There was also the time when Japanese Real Estate and their stock market surged so much that land values tripled from 1985 to 1989. At the peak, the market value of a square mile around the Imperial Palace was valued at more than all of the real estate in California.

Bitcoin Bubble Image

Let’s not forget the surge in NASDAQ from 750 in 1995 to over 5000 in March 2000, until it puked 80% in two years. Within five years, we saw another painful bubble in the housing market, peaking in 2006.

The stories of recent bitcoin millionaires echo the dot.com windfalls, or the successful cab-driver/home flippers in the early 2000s or the resourceful bulb growers in the Tulip age. One story comes to mind of a hunchback renting himself out as a mobile writing surface to consummate contracts on tulip bulbs.

One thing in common with all of these bubbles is that all of the assets had a speculative value and an underlying value. The value of bitcoin is still very unclear and almost entirely speculative. This asset is rising because people are buying it. Its price could go to the moon first, but it will likely end very badly.

Is the 2017 Tech Sector Comparable to Dot.Coms in 1999?

When so much focus is placed on bitcoin, and then to see and hear investors quickly write off entire sectors of stocks, I think we need to pause and analyze that. The recent news in U.S. equities has been a precipitous sell-off of Information Technology stocks that was catalyzed by potential tax reform. The fact of the matter is this: The forward P/E for the S&P 500 Index is 18.2. This compares to the S&P 500 Information Technology Sector Index’s forward P/E of 18.9. This is a near-zero divergence.

The tech bubble of the 90s was based on companies with no earnings or sales, and infinite valuations. Today’s Infotech index is based on superior sales and earnings. According to FactSet, “The Information Technology sector is expected to report the third highest (yoy) revenue growth of all 11 sectors at 10.7%.”

The Infotech sector saw 90% of its companies beat estimates for Q3, and 84% beat revenue estimates. This recent exodus out of tech names seems more like a needed breather than a long-term trend shift. The tech sector’s YTD surge of +36.3% is based on superb fundamentals – not speculation fanning a flame.

The subject of Energy will invariably come up and I want to give it to you right now: energy is expected to report the highest earnings growth rate for Q3 at 123.5%! While this is superb, I have to say that the unusually high growth is because last year’s Q3 earnings were pitiful for energy companies. To go from bad to better is not the same as going from expected to leading by a mile, as is the case of Infotech.

Financials, Industrials, and Consumer Discretionary sectors have all been on fire recently and benefitting from rotations into their respective areas. Financials are +16.28% in three months with 76% of companies beating earnings estimates, and 74% beating revenue estimates. Retail was all but written off for dead and we have seen a massive short-covering rally which is evident in the fact that a smaller 67% of companies beat earnings, and 61% beat revenues. Again: “Not as bad as we thought” has been a main drive in this rally. That is not to say I don’t expect it to continue, it is just worth qualifying where it is coming from.

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

I guess the bottom line here is this: before you say tech is too high, dead, and it’s time to get out, just look under the hood. You have leading companies showing superior fundamentals, and the future of the planet is undoubtedly technology. The equity markets of today are built upon sales, earnings, and fundamentals with a healthy amount of speculation built in. This is diametrically opposed to bubbles which were built of shoddy fundamentals and huge speculation, as in the case of the dot.com bubble, or worse yet, no fundamentals and pure speculation: read tulips and possibly bitcoin. Just to summarize: below are 1-year charts of all 11 sector indices and their matching performances ranked best to worst for 12 months:

Standard and Poor's 500 Yearly Sector Indices Table

Yearly Sector Performances Charts

While we watch the rotations unfold, fueling the market higher, just know what is powering each sector. As the artist Rene Magritte said about a certain painting, “Everything we see hides another thing…”

Rene Magritte 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.*

Look for a Tech-Stock Bounce Back

by Louis Navellier

I have been watching the technology stocks carefully. Last Monday and Tuesday, there was some significant selling pressure in the last hour from the ETF industry – when big block trades are typically done. Specifically, according to the Financial Times, the PowerShares QQQ was hit with $848 million in redemptions and State Street Technology Select Sector SPDR was hit with $720 million in outflows.

In my opinion, the recent technology sell-off is grossly overdone. Bloomberg had a great article on Wednesday illustrating that when technology stocks faltered, the most-shorted stocks performed the best.

Most Shorted Stocks Gains Bar Chart

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

This is a good time to remind investors that a short-covering rally is not a real or sustainable rally, since it represents artificial demand. In the meantime, Broadcom announced better-than-expected earnings on Thursday and also provided positive guidance, which helped to boost all the Apple iPhone X suppliers. (Please note: Louis Navellier does currently hold a position in Broadcom in Mutual Funds. Navellier & Associates does currently own a position in Broadcom and Apple for client portfolios).

Only those stocks that post better-than-expected earnings will be able to squeeze the shorts, while heavily-shorted stocks with poor fundamentals should continue to falter. Fundamentals win in the end.

New Hiring Continues to Beat Forecasts

Last Friday, the Labor Department reported that 228,000 payroll jobs were created in November, which was significantly higher than the economists’ consensus estimate of 195,000. The unemployment rate remains at 4.1%. Despite more workers finding full time work, average hourly earnings rose by only 0.2% or 5 cents per hour to $26.55 per hour. The average workweek rose by 0.1 hour to 34.5 hours.

In parallel with Friday’s Labor Department report, ADP reported that 190,000 private sector jobs were created in November. Most of these private sector jobs (150,000) were created in the service sector, but the manufacturing sector also added an impressive 40,000 new jobs.

Speaking of the service sector, last Tuesday, the Institute of Supply Management (ISM) announced that its service sector index slipped to 57.4 in November, down from a robust 60.1 in October, but both numbers are very bullish. Since any reading over 50 signals an expansion, this “deceleration” from the strongest service sector pace in 12 years essentially means that the service sector slowed down from 150 mph to just 135 mph. The service sector is strong as 16 of 17 industries surveyed expanded in November.

Overall, the economic situation is strong enough to insure that the Fed will likely raise key interest rates tomorrow by 0.25%. The more important news is what they SAY afterward. The Federal Open Market Committee (FOMC) statement will be crucial, since it will hint at any future key interest rate hikes. Due to the impending exit of the three highest-ranking Fed members, plus a flatter Treasury yield curve, I actually expect a relatively dovish FOMC statement, which might spark an impressive stock market rally!

Finally, I hope all of you in Southern California are safe from the horrific fires there. After three major hurricanes and the horrible fires in Northern California, we have had enough natural disasters for one year. Ironically, all the rebuilding in the aftermath of these disasters will likely boost GDP growth in the upcoming quarters. Despite these disasters, please try to stay safe and enjoy the holidays.


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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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