Weak U.S. Dollar Lifts Stocks

A Weak U.S. Dollar Lifts Multinational Stocks

by Louis Navellier

July 11, 2017

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

Bespoke Investment Group just came out with their “2017 First Half Decile Analysis” (July 3, 2017), in which they broke down the S&P 500 into its top 10% (50 stocks), worst 10%, and all the eight mid-range deciles in between, as measured in eight different investment categories.  While the average stock in the S&P gained 6.96% in the first half, the best-performing decile was the top 10% of stocks with the most international revenues (+13.83%) and the decile with the best analyst ratings (+13.56%).  The worst performing deciles were stocks with the highest short interest (-4.07%) and highest P/E ratios (-3.33%).

Computer Glitch Image

Even though the market was closed last Monday afternoon and all-day Tuesday for the July 4th holiday, there was one disturbing development that happened during the holiday break.  A computer glitch on Tuesday morning priced three key large-cap market leaders at $123.47 per share on the leading quote services.  Two stocks were listed 87% below their previous day’s closing price.  Yikes!  These pricing errors are very disturbing and if they occurred during market hours, they could trigger a “flash crash.”  In my view, such computer pricing errors comprise a far bigger risk than any normal market correction.

In This Issue

The major market indexes rose slightly last week, but the biggest news came in the sector switches, as described by Bryan Perry and Jason Bodner, below.  Looking forward, Ivan Martchev examines the chances gold could slip below $1,000 later this year, while Gary Alexander argues for retiring two now-irrelevant economic theories.  In my closing column, I look closely at rising bond yields and the jobs data.

Income Mail:
First-Quarter Economic Green Shoots Yield Mid-Year Corn Stalk Growth
by Bryan Perry
More Summer Sizzle from the Semiconductor Sector

Growth Mail:
R.I.P. to the Misery Index and the Phillips Curve
by Gary Alexander
It’s Time to Retire the Phillips Curve

Global Mail:
Mid-Year Musings on the Midas Metal
by Ivan Martchev
What Could Cause Gold to Drop Below $1000 in 2017?

Sector Spotlight:
The Investment Angle on the Health Care Debate
by Jason Bodner
Health Care is the Leading Sector in the Last Three Months

A Look Ahead:
Global Bond Yields Suddenly Start Rising
by Louis Navellier
Ignore Conflicting Jobs Data – Focus on ISM Indexes Instead

Income Mail:

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

First-Quarter Economic Green Shoots Yield Mid-Year Corn Stalk Growth

by Bryan Perry

There’s an old saying among farmers that a good growing season is under way if the corn is “six feet high by the fourth of July.” High corn is an early telling sign to the farming community that a good harvest is coming. Progress usually depends on the amount of good rain and sunshine. And this year, the corn belt has had plenty of both. Corn is the most widely-produced crop in the U.S. and 2017 is shaping up to be a bumper crop that translates to very good news for the food, liquor, ethanol, and livestock feed industries.

Corn Field Image

Similar to the “six feet high by the fourth of July” metaphor, the U.S. economy displayed some early green shoots in the opening months of 2017 that are giving rise to a mid-year bumper crop of market expectations. First-quarter earnings for the S&P 500 grew by 12.2%, a remarkable start to the year that was accompanied by decent forward guidance by CEOs. As of today, the S&P 500 is expected to report earnings growth of 8.0% for the second quarter as forecast by Thompson Reuters (Lipper Financial Insight, “S&P 500 17Q2 Earnings Dashboard,” July 5, 2017), recently revised up from 6.5%.

What is the likelihood of 8% earnings growth for the second quarter? Pretty good. Based on the average positive surprises – companies reporting actual earnings above estimated earnings – it is likely we’ll see near-double-digit earnings growth for the quarter. Heading into the July 4 holiday, 23 of the S&P 500 companies reported second-quarter results with 90% of those companies beating estimates. Year-over-year sales growth is averaging 8.5% and earnings are averaging +12%. Both are nicely above the numbers forecast by FactSet Research. Based on the forward momentum of revenue and earnings growth, the current cycle doesn’t look to peak until the second quarter of 2018 according to the same Lipper forecast and then taper off only moderately. This would seem logical in a low-interest rate, low-inflation world.

Standard and Poor's 500 Year-to-year Second Quarter Growth Rates Chart

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

More Summer Sizzle from the Semiconductor Sector

Following a well-deserved pullback for the tech-rich Nasdaq in the latter part of June, the Semiconductor Industry Association reported last week that the month of May was the strongest monthly chip sales report in seven years, giving a boost to technology stocks on Wednesday. Global sales of semiconductors rose 22.6% to $31.9 billion in May, the strongest year-over-year growth rate since September 2010.

Shares of chipmakers and semiconductor equipment makers that had been slammed of late snapped a seven-day losing streak and found strong buying interest off this extremely bullish report. John Neuffer, CEO of the Semiconductor Industry Association, stated (in prepared remarks with the monthly report):  

“The global semiconductor market has settled into a period of significant and steady growth in 2017.”

The report said chip-market growth has been consistent across all major regional markets and semiconductor-product categories, with sales of memory products continuing to lead the way.

Below is a weekly chart of the Van Eck Vector Semiconductor ETF (SMH; I do not hold any position in SMH) that illustrates the powerful uptrend the sector is trading on and how the recent pullback to the first 20-week trend line found good technical support and an attractive entry point for new money.

Van Eck Vector Semiconductor Exchange Traded Fund Chart

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

The SIA report said chip sales increased across all regions in May from the same month a year ago, led by the 30.5% growth in the Americas region, followed by China's 26%, and Europe at 18% growth. The chip sector led Nasdaq for the first half of 2017, up over 17%, far outpacing the Dow, S&P, and Russell 2000. The sector posted a torrid 28% move from January to June 9 before enduring the recent consolidation.

Similar to my previous commentary on the sizzling software sector, spearheaded by the transformational shift to cloud computing, the chip sector is also undergoing transformational change regarding self-driving cars, artificial intelligence, mobile payment systems, interactive media, exponentially faster computing, robotic manufacturing, medical applications, and a host of other new technologies that require specialized chips. I for one am more convinced that the market for next generation technologies will extend the cycle of bullish conditions for pricing in the chip industry considerably longer.

For income-oriented investors, putting together a covered-call strategy consisting of the most robust stocks in the chip and chip equipment sector is in my view an excellent way to invest with a very high level of confidence and at the same time hoist one’s output for monthly and quarterly income.

Technology is what America does best. Like the software sector I outlined in the June 27 MarketMail, the semiconductor sector is in the cat bird seat of a period of strong foreseeable revenue and earnings growth.

While the market may wring its hands over geo-political uncertainty, volatile energy prices, the crumbling of brick-and-mortar retail, tighter Fed policy, fake news, and Trumponomics, the tech sector is being led by sizzling software and semiconductor stocks that should continue to enjoy their own stealth bull market.

Growth Mail:

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

R.I.P. to the Misery Index and the Phillips Curve

by Gary Alexander

On this date in history, two great Americans died suddenly, dramatically, and prematurely.  On July 11, 1804 in the early New Jersey dawn, Aaron Burr shot and killed Alexander Hamilton, age 47.  Hamilton, whose son had been killed in a duel, deliberately fired his shot into the air as a peace offering, but Burr took deadly aim.  Hamilton’s life and work is now honored in a popular Broadway musical, insuring that that the Mona Lisa-like smile of our first Secretary of the Treasury will likely forever grace our $10 bills.

And on July 11, 1937, the most popular and promising of the Great American Songbook composers, George Gershwin, died of a previously-undiagnosed brain tumor in his Beverly Hills home at age 38.  A popular novelist of the day, John O’Hara, responded: “I don’t have to believe it if I don’t want to.”

John O'Hara Quote Image

Ideas – even bad ideas – often last longer than human beings.  Today, I’d like to stick a fork into two ideas that have lived longer than Gershwin or Hamilton – the “Misery Index” and “The Phillips Curve.”

When I began studying economics in the late 1960s, these two ideas were just gaining traction.  They both cover the relationship of the two most-widely watched indexes for economic progress and well-being in America – the unemployment rate and the inflation rate, i.e., if you have a job and what your pay can buy.

The Misery Index and Phillips Curve are closely related, but somewhat contradictory.  The Misery Index was first developed by economist Arthur Okun in the Johnson Administration of the late 1960s.  It is simply the product of adding the unemployment rate to the inflation rate – the higher the number, the greater the misery.  (I find it intriguing that economics, “The Dismal Science,” didn’t cast this index in a positive light, as ‘The Prosperity Index,’ in which a lower number means that we are more prosperous).

The Misery Index’s all-time low came in July 1953 at just 2.97.  The all-time high was 21.98 in June of 1980, when inflation and unemployment rates both reached double-digits.  This gave birth to another term, “Stagflation,” high inflation in a slow-growth economy.  In the Stagflationary Seventies, the Misery Index soared to 17 in President Richard Nixon’s last full month in office (July 1974), then it peaked at 19.90 in January 1975 before retreating during the rest of Gerald Ford’s short (2-year, 5-month) Presidency.  The Misery Index soared during the Carter malaise and remained in double-digits for over a decade, 1973-84.

United States Misery Index Chart

May of 2017 marked the lowest Misery Index in 60 years – lower than at any time since the Eisenhower era.  Specifically, the unemployment rate was 4.3% in May, while the inflation rate was near zero, yielding a Misery Index under five.  Inflation can be a rapidly moving target, but economist Ed Yardeni wrote (in “Wonder Men & Women,” June 19, 2017) that the annualized PCE inflation rate was precisely zero for the three months of March/April/May 2017.  He cited outright deflation in wireless telephone services fees (-12.3%), used car prices (-4.3%), airfares (-2.9%), and furniture & bedding (-1.4%).

Rather than retiring the Misery Index, why don’t we just flip the chart and call it The Prosperity Index?

It’s Time to Retire the Phillips Curve

The Phillips Curve needs to be put out to pasture.  Renaming it is insufficient medicine.  This statistic is terminally ill.  William Phillips (1914-75) was a New Zealand-born economist who developed the theory named after him in the 1950s at the London School of Economics.  He hypothesized that there is a trade-off between inflation and the unemployment rate – as one goes down, the other goes up, like a see-saw.

The theory is that unemployment can’t keep going down without sparking higher inflation, and that prices must decline during times of high unemployment, since the public doesn’t have the cash to bid prices up.

That’s a fairly elegant theory, and it worked during Phillips’ professional life in the 1950s and 1960s, but the theory fell apart in the 1970s, when both rates rose in tandem.  Then they fell in tandem in the 1980s.

Phillips Curve Image

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

More recently, both unemployment and inflation have fallen in tandem during the 2010s.  Inflation has been slowly declining since 2011 even as the unemployment rate plunged from over 10% down to 4.3%.

When the Federal Reserve started expanding its balance sheet in late 2008, followed by several rounds of Quantitative Easing (QE), the monetarists said that inflation would inevitably follow, but it hasn’t.  Then, when the unemployment rate slipped below 5%, the Phillips Curve advocates (the Flat Earth Society) said that inflation would surely rise, but it didn’t.  One explanation is the third leg of the economic tripod – Growth, as reflected in the Gross Domestic Product (GDP), which has been chronically weak over the last decade.  Since wage growth and economic growth are slow, inflation can’t gain traction.  As for all that new Fed liquidity, the lion’s share of the cash has been sitting in banks, untouched.  Banks were reticent to loan after the 2008 debacle, so money sitting in vaults can hardly bid up prices out there in the real world.

If a theory has failed for the last 50 years, perhaps it is time to retire the theory.  In retrospect, any theory which is ginned up to reflect the realities of the day simply invites the actors in the real world to prove the theory false.  It’s like the Nobel Prize winners at Long-Term Capital Management who theorized that the Russian ruble never varied more than a specific range, therefore it never will, until, in fact, it did, in 1998.

The economy is more complex than a simple trade-off between two statistics, so let’s retire Mr. Phillips.

Global Mail:

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

Mid-Year Musings on the Midas Metal

by Ivan Martchev

I walked into an over-the-counter binary put option contract of sorts when I made my 2017 annual prediction (see Marketwatch, December 29, 2016, “2017 is the year gold drops below $1,000”). Gary Alexander, who edits these Navellier market commentaries, bet me $1,000 that gold will not decline below $1,000 in 2017 and I took the bet. It was probably my assuredness after having correctly made three previous annual predictions in a row that were somewhat contrarian for 2014, 2015, and 2016.

In market terms, this is similar to an over-the-counter binary options contract that pays the full amount if gold drops below $1000 in 2017. What are the chances of this bet working out? About 50-50. Here’s why.

Silver Price Image

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

Silver has now taken out its December 2016 lows, when the gold price was near $1120. Silver is a high-beta precious metal. In other words, when precious metals are ripping higher, silver tends to outperform gold, but when precious metals are weak, silver tends to lead to the downside – as it is doing now.

Gold Price Image

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

In December 2015, the gold price declined to $1045. That low would need to be taken out in order for my binary options contract to pay in 2017. While silver sure looks hell-bent on retesting its December 2015 low in 2017, the gold market has held up a lot better, despite having a bad month of June. Why?

Commodities Research Bureau Index versus United States Dollar Chart

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

I think correlation traders are looking at the U.S. Dollar Index and making the erroneous assumption that the dollar is weak. It is down but not all that weak. I would have expected it to be stronger by this point in 2017 because of the Federal Reserve monetary policy tightening cycle and the desire of the new Trump administration to rebalance the U.S. trade situation, which arguably does need some serious rebalancing.

In reality, the euro is recovering nicely due to pro-EU political victories in the Netherlands and France. Euro traders can basically smell victory in Germany in September due to the way several local elections went in favor of Chancellor Merkel. This has caused the strange situation where the CRB Commodity Index (which includes gold and silver) is weak at the same time the U.S. Dollar Index is also weak.

Supply and demand drive the prices of raw materials. If the global economy is weak, then the prices of commodities are weak. The dollar gets a bid in such situations as a safe haven. There are other factors that drive currencies – like monetary policy – so I still think we could see a potential surge in the U.S. Dollar Index for the rest of 2017. This is unlikely to be good for the price of gold, even though I would have felt a heck of a lot better about the prospects of my quasi-binary put option contract if gold bullion were below its December 2016 lows of $1120, just as the silver market is now below its late 2016 lows.

What Could Cause Gold to Drop Below $1000 in 2017?

I have seen gold bullion decline $250 per ounce between July and September 2008 when all commodity prices were under pressure, before Lehman Brothers failed. There are other instances of similarly sharp gold moves before and after 2008. So the key question to be answered here is: What could cause gold to decline over $200 – to below $1000 – on any given day between now and December 31, 2017?

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.

One possibility is that the Chinese decide to devalue the yuan to the tune of 20% to 40%, like they did in 1993. After losing $1 trillion since 2014, China’s forex outflows have calmed down. The exchange rate mechanism has been tinkered with twice in the past year so as to appease the new Trump administration. Still, I do not believe that China’s popped credit bubble can be stopped from deflating. It can be slowed but not stopped. Since such a devaluation is impossible to predict ahead of time, I would say, what better time to do this than during an escalation of hostilities on the Korean peninsula? In a scenario that leads to a deposition of Kim Jong Un, the noise will be such that a yuan devaluation will get less press.

Kim Jong Un Image

Another potential source of gold price weakness is the sharp re-steepening of the U.S. yield curve that began in the last week of June. This has caused the financial sector to see serious investor interest as banks tend to perform better in a steep yield curve environment. Rising U.S. interest rates are definitely one factor that pushed the gold price lower after last November’s surprise election results.

United States Ten Year Government Bond versus United States Two Year Treasury Note Yield Chart

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

The thing is, there was a lot of emotional trading after the U.S. election last year, and so far I have seen little evidence of these election promises being put into motion on the tax and infrastructure fronts, which is what caused the yield curve flattening between December 2016 and early June 2017. But the Federal Reserve may still pick up the pace of its rate-hiking cycle and good economic news may put pressure on long-term interest rates in 2017, which is unlikely to be positive for gold bullion.

If this quasi binary put option on gold bullion does pay the promised $1,000, I plan to take our New York Navellier team to the I Gemelli Ristorante in East Hackensack, N.J. and make sure the profits stay there. This is one of the finer Italian restaurants in North Jersey, despite not being pompous. As they say in N.J., that ristorante is...forget about it!  (Or, as we say and spell it, “Fuhgeddaboudit.”)

Sector Spotlight:

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

The Investment Angle on the Health Care Debate

by Jason Bodner

Health Care: It’s one of the great American debates. People talk of cost, subsidy, insurance, and the seemingly endless other topics associated with it. The U.S. is still conspicuously absent from the list of developed nations with universal healthcare, but is also a country associated with some of the best healthcare available. I'll leave the debate about what the future state of U.S. health should look like to other forums and focus instead on the rapid development of the quality of healthcare in the last 150 years.

Anyone who is a parent knows that fussy or teething babies can be a real drain. In the 19th century, there was a cure-all for kids who were cranky and disobedient. These “soothing syrups” were formulated especially to be safe for kids, but in reality they were chock full of narcotics. Decades later, in 1910, the New York Times published an article showing how these remedies often contained “...morphine sulphate, chloroform, morphine hydrochloride, codeine, heroin, powdered opium, cannabis indica, and sometimes several in combination.” That ought to take the edge off a cranky kid! In fact, on a less subtle note, a common 19th century cough suppressant was pure heroin – developed by Bayer, who gave us aspirin.

If you can deal with the side effects and addiction risks, heroin has great cough suppressant properties!

Mrs. Winslow's Soothing Syrup Image

It may be frustrating that some common ailments don't yet have desirable treatments, but it helps to recall that lobotomies and bloodletting were standard treatments not long ago. Leaving aside the often-barbaric medical practices of old, the medical field is constantly improving and innovating. Change is constant but it doesn't happen overnight. Yet look at where we are today versus 100 years ago in medicine. People now live longer, and many diseases like polio have been nearly eradicated through medical advancement.

That brings us to our new star sector, Health Care.

Health Care is the Leading Sector in the Last Three Months

Last week, Health Care flat-lined (0.04%). July 3-7 was a choppy week which saw a surge in Financials (+1.47%) and a bit of a bounce in the recently-pressured Information Technology Sector, +0.56%. The pressure continued in Utilities (-0.93%), Energy (-1.25%), Real Estate (-1.51%), and Telecom (-2.18%).

Standard and Poor's 500 Weekly Sector Indices Changes TablesThe three-month picture (below) shows Health Care clearly in the top rank with Financials close behind. Since the index hit its six-month low of 763.33 on November 3, 2016, according to FactSet, it has rallied just about 20%. This is a powerful move, threatening to take longer-term leadership away from Info Tech and Financials. The recent 3-month surge of nearly +6.6% in Health Care is largely attributable to strength in certain key areas, like Health Care Equipment & Supplies, Life Sciences, Health Care Tech, Health Care Providers, Health Care Supplies, Managed Health Care, Health Care Equipment, and Biotech.

Standard and Poor's 500 Quarterly Sector Indices Changes TableWith the unofficial earnings season kicking off next week, it will be interesting to see if this recent (since November) surge is confirmed with strong sales and earnings growth for these key groups.

Standard and Poor's 500 Health Care Index Chart

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

Sadly for Energy and Telecom lovers, those sectors have been mired at the bottom for quite a while now.  Energy is still slave to the price of crude oil, most notably West Texas Intermediate, which is in a down trend since its February peak. The channel is deep and wide in that the price fluctuations from trough to peak in the channel have been over 10%. This pattern has repeated nearly every month. If present trends continue, oil could see $41 before recovering. Energy stocks will continue to move in tandem with oil.

Standard and Poor's 500 West Texas Intermediate Crude Oil Index Chart

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

While we are on the subject of poor performers, let’s talk about Telecom. The index is clearly unloved right now, but it is always important to remember that the S&P 500 Telecommunications Services Index is the smallest of the 11 GICS sectors in terms of constituents. By this I mean that, according to FactSet, there are only four stocks in the index: CTL, VZ, LVLT, and T (I hold no position in any of these stocks). It seems a bit unfair to compare Telecom with a larger S&P Sector Index of say Information Technology, which has 68 stocks, Financials (with 66), or Consumer Discretionary, the biggest, with 85 stocks. (Please note: Jason Bodner does not currently hold a position in CTL, VZ, LVLT, and T. Navellier & Associates does currently own a position in CTL, VZ, LVLT, and T for client portfolios).

Standard and Poor's 500 Telecommunications Services Index Chart

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

Health Care has come a long way in the last few centuries, and it has also come a long way in the market in the last few months! Progress may not always be immediately apparent when one is in the midst of heated debates over what's wrong. There are many struggles in health care, but health care advancements are undeniable. As Fredrick Douglass summed up the situation: “If there is no struggle, there is no progress.”

Health Care Advancements 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.*

Global Bond Yields Suddenly Start Rising

by Louis Navellier

“Would I say there will never, ever be another financial crisis? You know probably that would be going too far but I do think we’re much safer and I hope that it will not be in our lifetimes and I don’t believe it will be.”

– Janet Yellen, Chair of the Federal Reserve, speaking June 27, 2017 in London.

I always get nervous when I see a public official like Janet Yellen make a bold prediction that no financial crisis will come “in our lifetimes.”  Yellen is 70; her statistical life expectancy is maybe 20 years.  Former Fed chair Alan Greenspan is 91 and Paul Volcker is near-90, so will we have smooth sailing for 20 years?

Like most investors, I’m more concerned with the coming quarterly earnings announcements and GDP trends than what happens 20 years from now.  In that context, the most surprising news last week was that global bond yields began rising right after Ms. Yellen gave her talk in London.  Specifically, the 10-year German bond has more than doubled its yield from 0.248% on June 26 to 0.576% last Friday, July 7.  In the same 11 days, the Italian 10-year bond has risen from 1.896% to 2.329%, the Spanish 10-yead bond has risen from 1.373% to 1.717%, and the British 10-year bond yield has risen from 1.012% to 1.31%.

Bond yields are rising on the growing perception that central banks around the world are preparing to end their ultra-easy monetary policies.  For instance, last Thursday, the European Central Bank (ECB) revealed some clues about when it might begin to unwind its 60 billion euro ($68 billion) per month in quantitative easing.  However, the ECB is still continuing with its quantitative easing, so I’d say they are not yet ready to “normalize” rates, like the Fed is doing, so this surge in bond yields may be premature.

Speaking of the Fed, the latest Federal Open Market Committee (FOMC) minutes were released on Wednesday.  In those minutes, the Fed debated the $10 billion per month program of selling Treasury bonds and mortgage-backed securities.  Several Fed officials “preferred to announce a start to the process within a couple of months,” while other Fed officials called for more patience since “a near-term change to reinvestment policy could be misinterpreted as signifying that the committee had shifted toward a less gradual approach to overall policy normalization.”  Essentially, several Fed officials want to start unwinding in September, while others want to wait until December.  At the next FOMC meeting on July 25-26, the Fed will likely elaborate a bit more specifically about when its asset sales will commence.

Ignore Conflicting Jobs Data – Focus on ISM Indexes Instead

Like the first Friday of every month, the big news last week was the June payroll report where the Labor Department reported that 222,000 payroll jobs were created in June, substantially higher than economists’ consensus estimate of 179,000.  Also bullish was the fact that the April and May payroll reports were revised up by a combined 47,000.  April payrolls were revised up to 207,000 (up from 174,000 previously estimated) and May payrolls were revised up to 152,000 (up from 138,000 initially estimated).

Job Search on the Internet Image

The unemployment rate in June rose to 4.4%, up from 4.3% in May, since more people entered the labor force.  Average hourly wages rose 0.2% to $26.25 per hour in June and have risen 2.5% in the past 12 months.  This pace of wage growth is lower than Fed officials have been forecasting and may cause some hesitation before raising key interest rates further.  The average workweek expanded 0.1 to 34.5 hours.

I should add that on Thursday, ADP reported that only 153,000 private payroll jobs were created in June, well below economists’ consensus estimate of 180,000.  ADP also revised May totals to 230,000, down from 253,000.  As usual, these two reports had conflicting job totals and huge revisions, so I would just advise investors to ignore these premature monthly jobs reports and focus more on the overall economy.

Specifically, I look closely at the monthly Institute of Supply Management (ISM) manufacturing and service indexes.  The manufacturing index rose to 57.8 in June, up from 54.9 in May, substantially higher than the economists’ consensus estimate of 55.6.  This is the highest ISM manufacturing reading since mid-2014, so there is no doubt that a manufacturing resurgence is underway.  Fifteen of the 18 industries surveyed reported expanding in June.  A weaker U.S. dollar, which dropped 7% against the euro in the second quarter, is helping to boost exports, which also bodes well for second-quarter GDP growth.

The service sector is also very strong.  On Wednesday, the ISM service index rose to 57.4 for June, up from 56.9 in May, significantly higher than economists’ consensus estimate of 56.5.  Sixteen of the 17 service industries surveyed reported expansion in June.  Some ISM components were especially strong in June, like business activity at 60.8 (up 0.1 from May) and new orders at 60.5 (up from 57.7 in May).


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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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