The Market Returns to "Normal" After Christmas Lows

Excerpt from Louis Navellier's Marketmail - 1/15/2019

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I think the best way to describe the market recovery in the past three weeks is a “return to normal,” or “normalization.” I was especially encouraged to see many small-capitalization stocks “melt up” after suffering from liquidity woes in the fourth quarter. It was also rewarding to see some of the best stocks on the board rising strongly, even before their fourth-quarter earnings announcements come out. For instance, analyst upgrades from Raymond James and UBS helped Netflix (NFLX) steadily appreciate last week. The next big test will be the actual fourth-quarter earnings announcements – which begin this week.

Navellier & Associates owns NFLX in managed accounts and or our sub-advised mutual fund. Louis Navellier and his family own NFLX, via the sub-advised mutual fund and in a personal account.


In This Issue of Marketmail (Click Here to Read)

Bryan Perry offers a fascinating analysis of the changing dynamics of Chinese and neighboring Asian manufacturing plants, which portend a Chinese compromise on trade. Gary Alexander follows with an equally fascinating analysis of the “clean, green, and unseen” nature of GDP growth, the opposite of the belching steel mills of old. Ivan Martchev offers an encouraging message from the junk bond market, which never confirmed any “bear market” warnings during the recent stock slide. Jason Bodner gives an equally vital analysis of recent stock market actions in light of his unique “unusual institutional buying” indicators. Then I’ll take a look at “normalizing” ETF spreads, Treasury yields, and economic indicators.

Income Mail:  

The Sino-U.S. Trade War is Adding Fuel to The Chinese Exodus 

           By Bryan Perry

Companies to China: “We’re Outta Here!”

  

Growth Mail:  

Most Growth is Clean, Green, and Unseen

           By Gary Alexander

The Internet Increases Productivity Without Boosting GDP Much

  

Global Mail:

The Dichotomy Between Junk Bonds and Stocks Continues

           By Ivan Martchev

It’s the Market (before the Economy), Stupid!

 

Sector Spotlight:

What Happens When Stocks Fall 15%+ Then Rapidly Rise 10%?

           By Jason Bodner

ETFs are the “Tail that Wags the Dog”

 

A Look Ahead:

ETF Spreads and Treasury Yields Have “Normalized” in 2019

           By Louis Navellier

The Market Recovery Has Coincided with the Partial Government Shutdown

"Smart Money" Buyers are Helping the Market to Firm Up

Excerpt from Louis Navellier's Marketmail - 1/8/2019

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Trading volume has been gradually improving, now that the holidays are over. I was encouraged that when the stock market initially sold off early Wednesday, the “smart money” quickly materialized and helped the overall stock market to stabilize. This smart money has been appearing predictably during down trading days for the past three weeks and is certainly helping the overall stock market to firm up.

Unfortunately, after the market close on Wednesday, Apple (AAPL) lowered its fourth-quarter sales forecast, blaming China for its lower-than-expected trade growth. As a bellwether stock, Apple’s lower guidance naturally spooked many other technology stocks. The truth of the matter is that approximately half of the S&P 500’s sales are outside of the U.S., so investors are increasingly concerned that other multinational companies may also lower their fourth-quarter sales guidance, due to slowing global GDP growth and eroding foreign currencies. Here is a link to my Thursday podcast that discussed these topics.

Navellier & Associates owns AAPL, NFLX, and LULU and does not own Ford in managed accounts and or our sub-advised mutual fund. Louis Navellier and his family own AAPL, NFLX, and LULU and does not own Ford via the sub-advised mutual fund. Louie Navellier & his family own AAPL and NFLX in a personal account.


In This Issue of Marketmail (Click Here to Read)

Bryan Perry likes Jerome Powell’s conciliatory script from last Friday, but he still prefers the safety and income of REITs in 2019. Gary Alexander looks back in history 25 to 200 years ago for those who think America has insurmountable problems today. Ivan Martchev thinks Apple’s recent decline reflects the economic slowdown in China and the general slowdown in global growth. Jason Bodner shares some very good news about past recoveries following long periods of depressing down days like we’ve seen lately. Then, I’ll close with the latest news on sinking Treasury yields and Friday’s robust jobs report.

Income Mail:  

Taking Stock of the New Year’s Bounce 

           By Bryan Perry

REITS Look Attractive for Income

  

Growth Mail:  

Memo to Those Wimps Who Think These are Hard Times

           By Gary Alexander

Crazy Bloggers and Negative Media Cause Sane Investors to Sell Stocks

  

Global Mail:

Apple Didn't Tell Us Anything New About China

           By Ivan Martchev

Don't Blame Trump for China

 

Sector Spotlight:

Press Releases (Pens) Move Markets More than Wars (Swords)

           By Jason Bodner

A Happy Ending for a Sad MAP-IT Ratio

 

A Look Ahead:

The Biggest (Ignored) News is the Decline in Treasury Yields

           By Louis Navellier

The Jobs Report (and the Fed) Lifted the Market on Friday

We Finally (Thankfully) End a Very Tough Market Year!

Excerpt from Louis Navellier's Marketmail - 1/2/2019

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I hope everyone had a wonderful New Year’s Day. From a market perspective, Christmas Day came as a relief after the annual lows set on Monday, Christmas Eve Day, when the S&P fell just two ticks (-19.8%) short of closing down 20% from its recent peak – the general definition of a “bear market.” After a lower opening last Wednesday, the major indexes gained about 6% in the three days after Christmas, but most indexes remain down about 7% for 2018 as a whole, as December wiped out all 2018’s hard-fought gains.

I did a podcast last Monday that explained why we are now grossly oversold, based on the S&P 500’s dividend yield of 2.22% vs. the 10-year Treasury bond yield of 2.72%. Since most stock dividends are taxed at a maximum Federal rate of 23.8%, while Treasury interest is taxed at a maximum Federal rate of 40.8%, the stock market yields more (after taxes) than getting out of the stock market, for most investors.  

The wild stock market gyrations last week may have been complicated by tax selling. Specifically, last Monday’s dramatic sell-off seems to be largely attributable to record ETF redemptions, which adversely hit many stocks due to light holiday trading volume. Then Wednesday’s record one-day surge seemed to be propelled by short covering and “smart money” that was bargain hunting. Finally, Thursday’s intraday pullback was complicated by year-end tax selling, as well as quarter-end window dressing. 

As I said in my Thursday podcast, these daily oscillations will likely persist into January, when trading volume typically picks up. The analyst community was largely absent last week (many were out skiing), but when they get back later this week, I will be on the lookout for any analyst upgrades and downgrades. 

After a rough 2018, I am expecting that we’ll see a more prosperous New Year!


In This Issue of Marketmail (Click Here to Read)

The year ends with some volatility, so 2019 has to basically dig us out of last year’s December “hole” in the market. Bryan Perry discusses some of the technical hurdles the S&P 500 must face, along with the many unresolved political threats lingering over Washington, DC. Gary Alexander uses the year-end to review last year’s best books, not only on the market but on the major mega-trends of global growth. Ivan Martchev reviews the manic-depressive market, along with some advice for the rookie Fed Chair and President. Jason Bodner looks deeper into the ETF algo-traders and how they may be subverting this market. Until the government opens for business again, most economic statistics will not be released, but I look at the latest economic trends (and market rates) to argue that the Fed need not raise rates again.

Income Mail:  

Shifting Winds of Sentiment Greet the New Year 

     By Bryan Perry

Reality Check for the Reality-Show President

  

Growth Mail:  

The Top 10 Books of 2018

     By Gary Alexander

Give Good Books to the Next Generation – to Build Their IQ and Civilize Them

  

Global Mail:

2018 Was the Year of Manic Depression for the Stock Market 

     By Ivan Martchev

The Rookie Fed Chairman Faces the Rookie Politician

 

Sector Spotlight:

The ETFs are in Control Now

     By Jason Bodner

Look for Today’s Hated Stuff to be the Bright Spots of 2019

 

A Look Ahead:

Why the Fed is Not Likely to Raise Rates in 2019

     By Louis Navellier

The Stock Market Decline Hit Consumer Confidence Hard

The Fed and Political Deadlock Derailed the Market Yet Again

Excerpt from Louis Navellier's Marketmail - 12/26/2018

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Stocks rebounded only briefly last Tuesday and intraday Wednesday, until a shocking Federal Open Market Committee (FOMC) statement derailed the overall stock market and resulted in high-volume “capitulation” selling to set new annual lows on three consecutive days last week, but if you look at a chart of each index, it is evident that all three major indices initially “retested” on light trading volume on Monday and then subsequently on higher trading volume on Wednesday, Thursday and Friday. 

Unfortunately, on Wednesday, the FOMC statement was not dovish, as I had anticipated. The Fed not only raised its key interest rate 0.25%, but also signaled two additional key interest rate hikes in 2019. At his press conference, Fed Chairman Jerome Powell did nothing to calm financial markets. Although the Fed lowered its inflation forecast, their forecast was still way too high, ignoring all of the recent commodity price deflation. Here’s a link to my podcast on Wednesday, and yet again on Thursday.

So even though the Fed is providing guidance of higher rates in 2019, Treasury yields were falling in the wake of its FOMC statement. Confused? I cannot say enough how perplexed I am about why the Fed is ignoring obvious market forces and a lack of inflation. It is very odd for Treasury yields to move in the opposite direction of the Fed’s guidance, so I will be rooting for falling market rates to continue to derail the Fed’s intended interest rate hikes in 2019 – since the Fed does not like to invert the yield curve.


In This Issue of Marketmail (Click Here to Read)

We all had a wonderful Christmas break with families, but there’s no getting around the mountains of coal Santa left all over Wall Street and Washington DC. Bryan Perry begins Income Mail by lacerating the Fed for their “bait and switch” double-talk and deceptive language following last week’s FOMC meeting. Gary Alexander follows with harsh words for those citing some mythical “global economic slowdown” for causing this latest panic selloff. Ivan Martchev wonders why others are talking about a coming recession with 3.7% (and falling) unemployment and 3% GDP growth. Jason Bodner takes a much closer look at the machinations of ETF traders and finds some new causes for the recent volatility there. Then, I’ll wrap it up with a call for a some more sanity at the Fed and Wall Street in coming weeks.

Income Mail:  

No Way to Sugar Coat How the Fed Blew It 

     By Bryan Perry

The Writing is on “The Wall” (and other charts)

  

Growth Mail:  

WHAT “Global Growth Slowdown”?

     By Gary Alexander

Is the Market Really Fearing a “Great Earnings Slowdown”?

  

Global Mail:

2019 is the Year of a New Economic Expansion Record 

     By Ivan Martchev

Can the Stock Market Go Down in a Good Economy?

 

Sector Spotlight:

What One Word Would Best Describe This Market?

     By Jason Bodner

The Role of ETFs in Creating Selling Panic Loops

 

A Look Ahead:

Treasury Secretary Steve Mnuchin Goes on the Warpath for Fiscal Sanity

     By Louis Navellier

Most Economic Indicators Point Toward Fed Restraint (If They’re Listening)

Friday and Monday Market the Fourth Retest of Market Lows - Just Like Last Spring

Excerpt from Louis Navellier's Marketmail - 12/18/2018

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Let’s start with the good news. The Dow Industrials, the S&P 500 and the NASDAQ Composite all made new intraday lows last Monday. However, many leading NASDAQ stocks quickly rallied on Monday, helping most market averages rally intraday. Subsequently, the stock market opened strong on Tuesday, only to consolidate later. Then, Friday represented the fourth retest of the lows, on light trading volume. 

Interestingly, after the February 5 lows, the stock market also had to retest those lows four times on light trading volume for the Dow Industrials and the S&P 500 (the NASDAQ Composite only retested twice). Just like now, it took about three months – until the end of April – for the retests to be exhausted.

The bottom line is that the stock market is “bouncing along the bottom” and systematically exhausting all the selling pressure. As long as there is no panic selling on high trading volume, we should not worry and use these dips as potential buying opportunities. I should also add that on recent selloffs, there has been relative strength in many leading NASDAQ stocks under the surface, so there is likely quite a bit of “smart buying” going on from bargain hunters, as well as companies buying back their own shares. 

I discussed last week’s many conflicting market dynamics in more detail on my Friday podcast and Monday podcast.


In This Issue of Marketmail (Click Here to Read)

Bryan Perry cites slower growth in Europe and China for causing much of the current market malaise. Both Gary Alexander and Jason Bodner take a fresh look at U.S. market metrics, but they start off with some humor, since market metrics don’t seem to matter to traders these days! I can sympathize, since my column covers how news headlines push the market up and down day to day more than the fundamentals (which don’t change that rapidly). Ivan Martchev wraps up his 2018 predictions on the dollar vs. gold, along with his views on emerging market currencies and Fed policy decisions, and I handicap what might happen tomorrow if the Fed raises rates, but gives us some clear hope that they may be done for now.

Income Mail:  

The Nuts and Bolts of the Current Market Landscape 

     By Bryan Perry

The Global Grinch Stole the U.S. Santa Claus Rally

  

Growth Mail:  

The Keystone Kops are Running Most Major Governments Now

     By Gary Alexander

The Market is Fixated with Politics & Disengaged from the Economy

  

Global Mail:

A Good Year for the Dollar

     By Ivan Martchev

Big Week for the Fed

 

Sector Spotlight:

All Joking Aside, This Market Will Recover

     By Jason Bodner

Believe it or Not, The Tech Sector is Still Positive Year-to-Date

 

A Look Ahead:

The Market Isn’t Paying Much Attention to the Fundamentals These Days

     By Louis Navellier

Sharply Falling Prices Should Put Pressure on the Fed to Leave Rates Alone

The Media Missed the Meaning of Last Week's Market Decline

Excerpt from Louis Navellier's Marketmail - 12/11/2018

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Essentially the stock market likes to “react” first and “think” second. For example, last Monday, the market liked the trade truce with China, but on Tuesday, the financial media said investors had second thoughts about the trade spat with China and triggered a market selloff. But I think they missed what really happened. The catalyst for Tuesday’s market selloff came from Europe. First, British Prime Minister Theresa May suffered a humiliating defeat in the House of Commons and is expected to be similarly rejected by Parliament, so Britain may be getting a new Prime Minister due to the Brexit mess. Second, the worst protests in Paris in 50 years – over an increase in the tax on diesel in a carbon tax revolt – resulted in French President Emmanuel Macron doing a rare about face, postponing higher diesel taxes. 

Both Italy and Germany suffered negative GDP growth in the third quarter. Italian unemployment surged by 139,000 in the past two months and its unemployment has reached 10.6%, up from 10.1% two months ago. So, not only is the British pound weak, but the euro has also been weak, triggering more capital flight into the U.S. dollar, which in turn is pushing U.S. Treasury yields down. These events on Tuesday triggered a “flight to quality” that caused the 10-year Treasury bond yield to finally collapse below the 3% level. Here are the links to my Tuesday and Thursday podcasts explaining last week’s market events.


In This Issue of Marketmail (Click Here to Read)

Bryan Perry writes about the manipulation of this market going on in the “Algo” shops, the silence of the SEC and the possibility that the Uptick Rule could help police the manipulators. He also urges the Fed to do “nothing” next week. Gary Alexander overlooks the current market malaise to address the widespread denial of the good news in global wealth and health – ignored by almost everyone. He’ll give a test to see how well you know some of these facts. Ivan Martchev covers two felonious events uncovered last week to see if they might have an impact on the market to match “real” economic news, like recessions. Jason Bodner looks beneath the red paint in the sector snapshots to see unusual institutional buying eclipsing selling, an advance sign of a market recovery. I’ll cover some of the same territory in my closing remarks: The disconnect between good news and market panics, and the importance of next week’s Fed meeting.

Income Mail:  

Fighting the Fed and the “Algo” Shops

     By Bryan Perry

History is Not on the Side of the Fed

  

Growth Mail:  

Let’s Address “Global Wealth & Health Denial” in 2019

     By Gary Alexander

The Correct Test Answers: See How You Scored

  

Global Mail:

Two Felonies as Economic Events 

     By Ivan Martchev

The Huawei-Cohen 1-2 Punch

 

Sector Spotlight:

Unusual Institutional Buying is Now Outpacing Selling

     By Jason Bodner

Another Sea of Red Hit Most Sectors Last Week

 

A Look Ahead:

Why the Great Disconnect Between Good News & Market Panics?

     By Louis Navellier

All Eyes Are Now on the Fed

As We Expected, Stocks "Melted Up" After the Fed's Dovish Words

Excerpt from Louis Navellier's Marketmail - 12/04/2018

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Source: dailypriceaction.com

Source: dailypriceaction.com

Stocks bounced back last week on improving trading volume as a “melt up” ensued and short sellers ran for cover. The Dow Industrials gained over 1,250 points (+5.16%) on the hope that the Fed may soon tap the brakes on raising key interest rates. The S&P 500 rose 4.85% and the NASDAQ rose 5.64%. Wall Street is now expecting a December Fed rate hike, but maybe just one key interest rate hike in 2019. 

On Wednesday, Fed Chairman Jerome Powell got both bond and stock markets excited by appearing to be more dovish in a speech before the Economic Club of New York. Specifically, Chairman Powell said, “Interest rates are still low by historical standards, and they remain just below the broad range of estimates of the level that would be neutral for the economy … that is, neither speeding up nor slowing down growth.” By saying that rates are “just below neutral,” Powell basically implied that the Fed might be raising rates only once or twice more. In his best Fedspeak, he seemed to be implying that the U.S. economy is close to meeting the Fed’s mandate of promoting maximum employment with price stability.

Over the weekend, all eyes were on President Trump at the G20 meeting in Argentina, where he and Chinese President Xi Jinping met during a long steak dinner to hammer out what was later announced as a 90-day truce to work out the details of a cease fire in the trade war. Trump agreed not to raise tariffs on $200 billion of Chinese goods from 10% to 25% on January 1. China agreed to buy a “very substantial” amount of agricultural, industrial, and energy products, and both sides agreed to open up their markets.

Overall, last week was an encouraging week. I am happy to see the short sellers get squeezed and for the stock market to resume “melting up” on improving trading volume. Despite last week’s strength, financial markets will eventually have to deal with (1) Brexit, (2) a detailed resolution of the trade deal with China, (3) the upcoming FOMC meeting, and (4) a continuing war of words by President Trump toward the Fed.


In This Issue of Marketmail (Click Here to Read)

After the best week in seven years, Bryan Perry still has concerns about the China accord and economic indicators, preferring dividend stocks in 2019. Gary Alexander counters the recent gloom with a closer look at the many other times this bull market has corrected 10% or more. Ivan Martchev may be our most bullish columnist this week, predicting a new high in December or January and no recession before 2020. Jason Bodner notes the return of the growth sectors and the long-awaited return of buyers over sellers, while I cover the escalating war of words by President Trump vs. the Fed Chair over Fed policy decisions.

Income Mail:  

Dividend Stocks Should Shine in 2019 

By Bryan Perry

Bullish Technical Charts for “Stodgy” Income Assets

  

Growth Mail:  

Another 10% Correction Causes Another Wave of Panic

By Gary Alexander

Buy When Sentiment is “In the Dumpster”

  

Global Mail:

Here Come New Highs for U.S. Stocks

By Ivan Martchev

2019 Outlook and Beyond

 

Sector Spotlight:

Growth Sectors Led the Market’s Surge Last Week

By Jason Bodner

The Ratio of Buyers to Sellers Took a Big Leap Up Last Week

 

A Look Ahead:

Trump Blames Powell for Stalling the Housing & Auto Markets

By Louis Navellier

The Consumer Remains the Brightest Spot in the Economy

All Three Major Market Indexes Retest Their October Lows

Excerpt from Louis Navellier's Marketmail - 11/27/2018

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Source: dailypriceaction.com

Source: dailypriceaction.com

The good news is that the Dow Industrials, the S&P 500, and the NASDAQ Composite have ALL successfully retested their lows. The bottom line is that all these retests occurred on relatively light holiday-week trading volume, so I believe that most of the selling pressure has been exhausted. 

I must add that sometimes the stock market likes to retest recent lows multiple times, as the S&P 500 did back in March, April, and May after the early February sell-off. As I mentioned on both my Monday and Tuesday podcasts last week, as soon as the Fed announces that it may postpone raising interest rates, the Dow Industrials may explode by at least 1,000 points quickly. (Here is a link to last Tuesday’s podcast.)

Looking forward, I expect dividend growth stocks to lead the market recovery. I also expect that stocks which can sustain strong sales and earnings momentum will emerge as the market leaders, but the most encouraging thing I’ve seen is all major indexes retesting their lows on light volume this past week.

I hope you had a wonderful Thanksgiving weekend!


In This Issue of Marketmail (Click Here to Read)

After a tough week, our authors take a fresh look at market risks. Bryan Perry takes a new look at the three “speed bumps” he previously reviewed, plus the corporate debt spreads. Gary Alexander sees a bright spot in consumer spending plus corporate earnings and record profits, while Ivan Martchev sees some hope coming out of next weekend’s Buenos Aires G20 summit, if Trump and Xi reach an outline of an accord. Jason Bodner can’t name a new leading sector yet, but he can confirm this market remains in a bullish oversold condition. In the end, I give my view on what kinds of stocks can lead the next recovery.

Income Mail:  

Bulls Facing Three Big Speed Bumps – The Fed, Trade, and Italian Bonds 

           By Bryan Perry

What’s Up with Corporate Debt Spreads?

  

Growth Mail:  

“Black Friday” Turns a “Red” Week Green

           By Gary Alexander

“Peak Earnings Season, Part IV” Soon to Debut on Screens Near You

  

Global Mail:

Reverse Seasonality in Action

           By Ivan Martchev

The China Factor

 

Sector Spotlight:

Nowhere to Hide Among All 11 S&P Sectors

           By Jason Bodner

The Market Remains in (or near) “Oversold” Territory

 

A Look Ahead:

Which Stocks Will Lead us in the Next Recovery?

           By Louis Navellier

The Economy – Especially Housing – Has Slipped Recently

Pre-Thanksgiving is Traditionally a Great Time to Buy Stocks

Excerpt from Louis Navellier's Marketmail - 11/20/2018

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Yesterday, November 19, NASDAQ successfully tested its October 29 lows, so it looks to me like the selling pressure is finally being exhausted. Traditionally the best day to buy is the Tuesday before Thanksgiving, when an early ‘January Effect’ typically commences. If Treasury yields continue to fall, that could take pressure off the Fed to raise rates much further, since the Fed seldom fights market rates. If that trend continues, any dovish comments from Fed officials in the upcoming weeks could spark a big market rally.


In This Issue of Marketmail (Click Here to Read)

In Income Mail, Bryan Perry asks some hard questions about America’s resolve in standing up to China’s many economic and human (and animal) rights violations. In Growth Mail, Gary Alexander has some positive news on earnings and historical market trends over the holiday months. In Global Mail, Ivan Martchev links last week’s NVIDIA earnings call to the sinking fate of bitcoin, then goes on to project bitcoin’s future price to zero. Jason Bodner rehashes the market’s positives, which so many doubters have ignored when asking him to “tell me again why you are so bullish?” Then I’ll return to look at the dramatic 20% decline in oil prices since early October as a potential sign of a slowing global economy.

Income Mail:  

Wall Street’s Whine-and-Cheese Party

     By Bryan Perry

Will America Finally Stand Up to China’s Excesses?

  

Growth Mail:  

2018 Earnings May Double Late-2017 Expectations

     By Gary Alexander

Another Reason for Thanksgiving: Rising Year-End Markets

  

Global Mail:

Victims of the Bitcoin Insanity

     By Ivan Martchev

My Technical Take on Bitcoin

 

Sector Spotlight:

Another Week, Another Nail Biter

     By Jason Bodner

“So, Jason, Tell Me Again – Why Are You So Bullish?”

 

A Look Ahead:

Crude Oil Prices are Falling Fast

     By Louis Navellier

The Fed Weighs a Slowing Global Economy

Monday Delivered the Long-Awaited Test of the October Lows

Excerpt from Louis Navellier's Marketmail - 11/13/2018

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Monday was a holiday throughout much of the land, and Wall Street had relatively low volume, but the market finally tested its October lows Monday, with the Dow falling 602 points. The good news is that we didn’t have the kind of machine selling we had in October. This selloff was much simpler. An Apple supplier issued lower guidance, so sellers shot Apple, but big tech stocks will continue to have strong sales and earnings. Basically, everyone is over-reacting. Many energy and retail stocks were up, after being hit on previous days, because good stocks bounce. We’re still in a “washing machine” cycle. Some of the decline is related to lingering election uncertainty in several recounts, but I believe NVIDIA’s earnings announcement Thursday could boost the tech sector, along with announcements of more share buybacks

Normally, as earnings announcement season winds down, the last few S&P 500 sales and earnings reports tend to show sub-par results. However, the last few corporate third-quarter sales and earnings announcements have gotten stronger. Amazingly, with over 85% of the S&P 500's earnings announced, average sales growth has accelerated to 10.3% and average earnings growth is now running at a stunning +28.9%! Many companies are lowering their sales guidance, but I suspect they are really just trying to lower analyst expectations so that they can surprise us again during the next announcement season.

Naturally, the big news last week was Tuesday's mid-term elections and, for once, the pollsters were correct. The GOP picked up some seats in the Senate (two of which are being contested in recounts), while the Democrats gained 35 to 40 seats in the House of Representatives and some Governorships. 

I'll have more to say about the election later, but other than infrastructure spending and maybe more drug pricing reforms, I don't expect a lot of meaningful progress out of Congress over the next year or two.


In This Issue of Marketmail (Click Here to Read)

The bond market is telling us there is no recession in sight, says Bryan Perry, while the oil price says inflation is no threat, either. Gary Alexander hails “gridlock” returning to Washington, along with free trade after the fall of the Berlin Wall, promoting global growth since 1989. Ivan Martchev sees China’s slow growth as the catalyst in oil’s recent price dip, as Beijing is running out of policy tools to prevent a steep recession there. Jason Bodner sees new sectors leading the emergence from October’s market turbulence, while I will expand on the subjects of political gridlock and the long-term outlook for lower inflation.

Income Mail:  

A Downbeat Bond Market is Heeding Upbeat Fed Rhetoric

           By Bryan Perry

Low Oil Prices Might be the Inflation Hedge the Bull Market Needs

  

Growth Mail:  

The Stock Market Endorses a Return to “Gridlock” in Washington, DC

           By Gary Alexander

The Wall to End All Walls Fell November 10, 1989

  

Global Mail:

Oil Breaking $60 is Likely Due to China

           By Ivan Martchev

Is This China’s Tipping Point?

 

Sector Spotlight:

Rebirth Follows Devastation: Always Has, Always Will

           By Jason Bodner

Some New Sector Leaders Begin to Emerge

 

A Look Ahead:

Markets Like Mid-Term Elections and Gridlock

           By Louis Navellier

Inflation Statistics Wax and Wane but the Trend is Flat

Election Results May Bring Certainty Back to a Nervous Market

Excerpt from Louis Navellier's Marketmail - 11/6/2018

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The S&P 500 gained 2.42% last week in a recovery rally. The good news is that there has been (1) wave after wave of positive third-quarter earnings announcements, (2) more big stock buy-backs, and (3) mergers like Electro Scientific (ESIO) accepting a $30 per share buyout offer from MKS Instruments (MKSI), which was announced in conjunction with ESIO’s better-than-expected sales and earnings announcement. 

Navellier & Associates owns ESIO, and MKSI, in managed accounts and a sub-advised mutual fund. Louis Navellier and his family own ESIO, and MKSI via the sub-advised mutual.

This is likely the first of many acquisitions to be announced in the upcoming weeks, now that many top-quality stocks are trading at bargain prices, with historically low price/earnings ratios. Companies often postpone their dividend increases, stock buy-backs, and acquisition announcements until their quarterly earnings are released; so, as this earnings season winds down, I expect to see more positive news!

I for one am certainly happy that October is over, since it was the worst month since February 2009 for most stock market indices. Fortunately, November is a seasonally strong month. The Dow Industrials have risen an average of 1.35% and 1.87% in the past 50 and 20 years, respectively, according to Bespoke Investment Group, making November the third best month in both time frames. An early “January Effect,” boosting small capitalization stocks, typically commences in November, usually around Thanksgiving,

I also expect to see the stock market celebrate the fact that the mid-term elections will mercifully be over tonight. No matter the outcome, this day removes much of the uncertainty that has been distracting many investors. I live in two swing states, Florida and Nevada, and I have been shocked by the long lines for early voting. Since there appears to be record turnout, we may see some surprising results tonight!


In This Issue of Marketmail (Click Here to Read)

Bryan Perry sees a rise in yields being the biggest impediment to a market rise in the next two months, while Jason Bodner sees the trade resolution as the market’s main concern and biggest key to recovery. Ivan Martchev agrees, with a dollar breakout giving the trade impasse a new urgency. Gary Alexander just returned from New Orleans, where the bears roared once again, but he brings some historical parallels which could offer an election boost. Then I’ll close with some market trading insights and economic data.

Income Mail:  

Bond Yields Rise with a Spike in New Hires

           By Bryan Perry

Rising Yields Pose Biggest Threat to Year-end Rally

  

Growth Mail:  

The New Orleans Bears Growl Yet Again

           By Gary Alexander

The Yin and Yang of Gold and Stocks in the 2016 & 2018 Elections

  

Global Mail:

The U.S. Dollar Index Breaks Out

           By Ivan Martchev

The Trade-Weighted Dollar Is Much Stronger

 

Sector Spotlight:

Market Lows Seem Lower than the Market Highs Seem High

           By Jason Bodner

Trade Resolution is Now the Market’s Main Concern

 

A Look Ahead:

Arbitrage Traders are Targeting Tech Stocks

           By Louis Navellier 

Economic Indicators Turn Positive Just Before Election Week

WAGES SLOW, ANOTHER REASON FED SHOULDN’T HIKE

Written by:  Rich Farr, Chief Market Strategist for Bluestone Capital Management and Jim McGovern, Market Strategist for Bluestone Capital Management
info@bluestonecm.com 

Bluestone Capital Management is the Sub-Advisor to the Cavalier Multi Strategy Fund

 

FAST FACTS ABOUT TODAY’S ECONOMIC DATA:

* Wages slowed a bit in September, and now Atlanta Fed sees Q4 GDP at 2.6%.

* With wages, GDP, and even inflation slowing, how can Fed hike?

* Bolsonaro wins in Brazil.  But the Bovespa may already have that priced in.

* Q3 2018 Earnings are coming in strong, at $162 annual run-rate.

* Therefore, our 2019 $165 Earnings Estimate looks low.  We still like our 3,050 YE target!

U.S. PERSONAL INCOME UP FOR 31ST MONTH IN A ROW:

The Bureau of Economic Analysis reported that Personal Income increased for the 31stconsecutive month, up +$35.7 billion to a record high $17.726 trillion (SAAR) in September.  This is an increase of +0.20% M/M; however, income slowed to +4.43% Y/Y (versus +4.73% Y/Y prior).   Moreover, Disposable Personal Income (Income less Taxes) increased for the 34thconsecutive month, up +$29.2 billion (+0.19% M/M and +4.93% Y/Y vs. +5.25% prior).  Note that Personal Income taxes increased +0.32% M/M and +0.81% Y/Y to $2.08 trillion (+0.97% Y/Y prior).

U.S. PERSONAL SPENDING UP +5% Y/Y:

Personal Spending (PCE) increased for the seventh consecutive month, up +$53.0 billion to a record high $14.124 trillion in September.  Thus, spending increased +0.38% M/M and +5.04% Y/Y (+5.49% Y/Y prior).

PRIVATE WAGES AND SALARIES SLOWED SLIGHTLY TO +5% Y/Y:

In September, wages and salaries increased for the 31st consecutive month, up +0.22% M/M and +4.60% Y/Y (+4.79% Y/Y prior).  Private wages increased +0.20% M/M but slowed to +5.01% Y/Y (+5.26% Y/Y prior) and Government wages increased +0.33% M/M and +2.29% Y/Y (+2.34% Y/Y prior).  Note that Supplements to Wages & Salaries increased +0.22% M/M and +3.26% Y/Y (+3.34% prior).

INCOME BOOSTED BY RENTALS IN SEPTEMBER:

In September, Rental Income increased +0.94% M/M and +5.03% Y/Y (versus +4.93% prior) and Interest & Dividend Income increased +0.14% M/M and slowed to +5.29% Y/Y (versus +5.99% prior), despite the recent FOMC rate hikes.   However, Proprietors’ Income declined -0.82% M/M and slowed to +3.83% Y/Y (+5.21% prior).

SAVINGS RATE FELL TO 6.23% IN SEPTEMBER:

Since Disposable Income lagged Personal Outlays in dollar terms in September, Personal Savings declined for the seventh consecutive month, down -$28.7 billion and the “Savings Rate” fell to 6.23% (versus 6.43% prior).   As we’ve shown in prior notes, the “savings rate” is a plugged number and actually isn’t savings at all.  It is defined as Income minus Spending minus Taxes.  But “Income” isn’t exactly income, as it includes government transfer payments such as Medicare, Medicaid, Unemployment Benefits, and Social Security.  When you factor in that individuals are receiving more in government benefits than they are paying into those programs, it becomes clear that savings isn’t actually savings; rather the government is running up the debt on our behalf.  This debt is essentially an off-balance sheet item.  When we add it back, we find that the true “savings rate” is actually -3.35% (far off from the +6.23% reported number)!

CORE PCE UP +1.97% Y/Y (NOT QUITE 2%) IN SEPTEMBER AND HEADLINE SLOWED:

The BEA also reported that the Fed’s preferred inflation metric (Core PCE Deflator) increased for the 18th consecutive month, up +0.015% M/M in September.  Moreover, Core PCE increased +1.97% Y/Y (versus +1.96% Y/Y prior).  Nonetheless, Core PCE is still within 3 basis points of the Fed’s target of 2%.  Meanwhile, the headline PCE deflator increased +0.12% M/M but slowed to +1.99% Y/Y (+2.22% Y/Y previously), which is the slowest pace since February.

We have to ask the question, with commodities prices down, with CPI having peaked two months ago, with slowing GDP and with headline PCE ticking lower, how can the Fed hike at this point?

Q3 S&P EARNINGS OFF TO RECORD START – TRENDING AT $162!

As of October 26th, 238 of the S&P 500 Index companies have reported Q3 earnings, of which 184 have beaten earnings (77.31%) and only 36 have missed (15.13%) earnings estimates.  Moreover, 59% of companies have also beaten on the top line.  Early on, the earnings beats have been led by Technology (96.43%) and Health Care (82.76%).  On the other hand, only 50% of Energy companies and 55.6% of Materials companies have beaten Q3 estimates.   It is now nearly half way through Q2 earnings season and all signs point to another record quarter.

 EARNINGS SET FOR MORE RECORDS IN Q3 AND BEYOND – OUR 3050 YEAR END TARGET LOOKS ATTAINABLE:

Due to the stellar numbers in Q3, over the few months Wall Street analysts have increased their 2018 Q3 EPS estimates by +$0.34/share to $40.52.  At the current pace, Q3 earnings would be record earnings and up +29.3% Y/Y!  Nonetheless, the street lowered their full year 2018 EPS estimates by -$0.41/share to $157.38 and their 2019 EPS estimates by -$0.64/share to $176.36.  This implies EPS growth of +26.4% Y/Y and +12.1% Y/Y in 2018 and 2019, respectively.  Although our outlook is still below those lofty forecasts, we still see strong EPS growth for 2018 and 2019.  With margin pressures likely having peaked (wages slowed and commodities prices are falling), we think our 3050 year end S&P 500 target looks quite attainable still.

Source: Bloomberg

 DALLAS FED MANUFACTURING INDEX LED HIGHER BY ORDERS AND EMPLOYMENT:

Today, the Dallas Federal Reserve reported that the Current General Business Activity Index improved for the first time in four months, up +1.3 points to +29.4 in the month of October.  This marks the 25th consecutive month of growth in the region.   In the month, there were notable improvements in Current New Orders (+42 points to +18.9), Unfilled Orders (+4.1 points to +5.9), Delivery Time (+3.4 points to +7.5), and Number of Employees (+6.2 points to +23.9).  Furthermore, there were increases in Prices for Raw Materials (+10.0 points to +54.4) and Prices Received for Finished Goods (+3.9 points to +17.5).  However, there were slowdowns in Production, Shipments, Finished Inventories, and Average Workweek.  As for the outlook, manufacturers had a slightly less positive business outlook, as the Forecast fell -2.4 points to +35.6.

Source: Bloomberg

THERE GOES THE RAINFOREST.  BOLSONARO WINS IN BRAZIL:

The Bovespa Index is up meaningfully today and closing in on its all-time high following the much anticipated presidential win by Jair Bolsonaro.  Mr. Bolsonaro brings hope for economic reforms, including privatizations, reduced corruption, anti-crime, and even wants to start mining the rain forest to increase economic growth potential.

From a macro perspective, we like the direct Mr. Bolsonaro is heading, but now comes the execution.  There remain questions about Mr. Bolsonaro’s ability to enact pension reforms, and to turn a country around that faces tremendous debts, slowing GDP, and rising inflation.  There are also questions about Mr. Bolsonaro’s military / autocratic leadership tendencies.  It doesn’t help that Mr. Bolsonaro’s politician son, Eduardo Bolsonaro, threatened recently that they could shut down the Brazilian Supreme Court.

Our take:  With the Bovespa nearing an all-time high, we’ll take a wait and see approach to Bolsonaro.  We tend to think this could be a ‘sell the news’ moment despite the potential for political and economic improvement.   We want to see the execution of free market principals first, and a return to stronger growth, before we would want to jump in to Brazil.

JAPAN RETAIL SALES SLOWED TO +2.1% Y/Y IN SEPTEMBER:

According to the Ministry of Economy, Trade and Industry, Japan’s Retail Sales declined for the first time in four months, down -0.19% M/M on a seasonally-adjusted basis in September (+0.88% prior).  Moreover, retail sales slowed to +2.10% Y/Y (vs. +2.73% Y/Y previously).  Retail sales slowed on a Y/Y basis because Total Commercial Sales slowed to +0.99% Y/Y (+4.16% Y/Y prior) and Wholesale Sales slowed to +0.51% Y/Y (+4.81% Y/Y prior).  On the other hand, Large-Scale Retailers sales increased +1.12% Y/Y (versus +0.61% Y/Y prior).

Source: Bloomberg

AMERICAS:

U.S. GDP:  Our GDP model sees 3%+ Real GDP growth through Q1 2019, but as higher oil and interest rates flow through the system, our model sees slower growth thereafter (Note that the Atlanta Fed’s preliminary estimate for Q4 GDP came in at 2.6% today).   Our model doesn’t factor in the stimulus from the recent tax cut, so the reversal in 2019 could be more pronounced than our model appreciates (it is presumed that 2018 will be better than our model due to the tax cut, whereas the delta for 2019 would be worse than our model predicts).

U.S. Inflation:  U.S. inflation appears to have hit a peak two months ago and with oil prices down and the dollar index up, we believe inflation has peaked (for now).   

U.S. Federal Reserve:  The Fed is signaling that rates will be 100 bps higher by the end of 2019, and with inflation peaking, they’re wrong.   We don’t even think they should hike in December at this point.  We believe the U.S. Dollar will continue to strengthen given interest rate parity and overall relative economic strength in the U.S., and this has now become a headwind for inflation (and potentially growth).  We think a Fed pause is coming faster than the market currently appreciates (but a December hike is still on the table for now).

U.S. Treasuries:  Although recent inflation data has been cooling, the job market remains tight and Real GDP trending is still trending well above +3.0%.  With that in mind, we still believe the yield on the 10-year U.S. Treasury will trend higher.  We expect to see yields approach 3.50% by year end 2018, particularly if the market sniffs out a coming Fed pause (as that’s ultimately reflationary). 

U.S. Equities and Earnings:  S&P 500 operating earnings are rising materially, but the question remains, will the market put a 20 P/E multiple on forward earnings?  We think a 20 forward multiple is aggressive, but 18.5 may not be.   Our SPX target is for an 18.5x P/E on 2019 forward earnings of $165, bringing our 2018 SPX target to 3,050.  We prefer financials given expectations for economic growth and an improving (steepening) yield curve.   We also have a positive bias on the Technology and Health Care sectors.

Argentina:  The macro looks abysmal in Argentina, and they have IMF involvement, but there is a silver lining here in that Q2 GDP was so bad that it might be hard for Q3 to be negative!  Overall, Argentina’s economic condition appears to have weakened in 2018.   Inflation is at a lofty 40.5%, Industrial Production is down -5.6% Y/Y, Consumer Confidence has deteriorated since January, the Economic Activity Index collapsed in May, and Unemployment jumped to 9.6% in Q2 (7.2% in Q4 2017).

Brazil:  See above.

Canada: Canada’s housing market has been weak, as building starts and permits have gone negative, Retail Sales slipped in August, and home prices are slowing (Toronto area is now negative).  Note that Canada’s monthly Real GDP has been in a slowing trend since October (3.5% in October, but now down to 2.4%), while monthly Nominal GDP has slowed from +6.5% in June 2017 to +4.1% Y/Y in Q2 … remember, nominal pays the bills.

Mexico: Overall, Mexico’s macro data looks to be improving, but inflation is also turning up.  GDP is up 2.6% Y/Y, Retail Sales accelerated to +4.2% Y/Y, PMI’s have been steady, and Consumer Confidence jumped in Q3.

Venezuela: Remains uninvestable.

EMEA: 

United Kingdom:  If you look at the GBP, you’d think BREXIT is a major economic problem.  However, when you look at the macro data, you don’t see any meaningful deterioration.  Inflation has been in a slowing trend in 2018, unemployment has been declining, wages have been turning up, and PMI’s have been steady.   Even the big macro risk, housing, hasn’t shown much weakness.  In fact, home prices improved slightly in August on a Y/Y basis.

European Union:  Although Unemployment continues to trend lower and Retail Sales are now up +1.8% Y/Y, Economic Sentiment is turning lower, Industrial Production is down -0.1% Y/Y, and PMI’s have turned back from recent highs, and the political situation has gotten so bad that Merkel isn’t going to run again.  The events in Italy foreshadow possible macro risks for Europe, as monetary accommodation is removed.  We still believe Europe is uninvestible.   

European Central Banks:  The ECB is slowly removing accommodation and has reiterated its claim that bond buying is over in December.  But Mario Draghi hasn’t given a timeline for raising rates and the recent decline in CPI will give them even further pause for doing so

Eastern Europe: As we saw earlier in the year with Italy, nations with high debt levels can rapidly become front-burner macro items.  The same can be said for Eastern Europe, given high Debt/GDP levels, most notably Cyprus (104%), Croatia (88%, up from 66% at the end of 2013), and Slovenia (81%).   Yet, economic data have been robust this year across most of Eastern Europe.

South Africa:  We remain highly negative on South Africa, but we have noticed recent efforts by the ANF to walk back some of the rhetoric.   The ANF is now trying to reengage with foreign capital and wants to liberalize some of the rules around mining investment.   Politics aside, the macro picture is getting bleaker by the day as Business Confidence is rolling over, GDP is negative, Inflation has turned up, Retail Sales are barely positive, and PMI’s are bouncing around the ‘50’ level.  None of this will help unemployment (27.2% in Q2).   In our view, the mere risk of having assets appropriated will grind foreign capital commitments and new business investment to a screeching halt, and more time is going to need to pass in order for foreign investors to feel any degree of confidence.  Our best guess is that more downside exists for South Africa’s economy and we believe the currency and equity market will suffer as a result.

Turkey:  Remains uninvestable.

ASIA / PACIFIC:

Australia:  The Australian data remain mixed but we have serious concerns about the decline in building approvals and new home loans.  So far, the Unemployment Rate appears to be ticking lower (to +5.0% in September), Real GDP accelerated to +3.8% Y/Y in August, Exports are up +15.3% Y/Y, Wages are up +2.1% Y/Y, Retail Sales accelerated to +2.9% Y/Y in July, and Consumer Sentiment has ticked slightly higher recently.  However, consumer credit remains elevated and the value and number of home loan approvals and permits have turned negative, which is a bad sign as home prices have turned negative as well.  We remain neutral on Australia at this time but increased concerns about China could push us into the negative.

China:   It’s officially a trade war and Jack Ma thinks we’ve got 20 more years to go.  We have the under on 20 years, but the over on 1 year as China isn’t even interested in meeting with the Trump Administration at this time (although there is a token Xi/Trump meeting on the calendar).  China claims it’s going to pull out all the stops, is going to ‘encourage’ institutions to buy stocks, and there is talk of cutting taxes.   We doubt any of this will work to plug the large liability problem in China’s banking system.

We continue to believe that trade talks aren’t going to get better for quite some time and China will use every tool in its arsenal, which includes Renminbi depreciation.  It is notable that China is already working to stimulate its banking sector by lowering reserve requirements and encouraging banks to do “debt for equity’ swaps.  Note that PMI’s continue to indicate slow growth, Industrial Production is slowing, and now China may have an inflation problem.

India:  Indian economic activity appears strong, which runs counter to worries about shadow banking issues.  Commercial Credit accelerated to +14.4% Y/Y in October, Industrial production has been strong, M3 money growth has been steady at 10%, and PMI’s still show growth (albeit slower).  We are watching to see if any deterioration happens, but so far the only meaningful deterioration was confined to a drop in exports in September.

Indonesia:  Indonesia had gone four years without raising rates, but now rates have been hiked +125bps since Mid-April.   Indonesia’s GDP and Private Consumption Expenditures are up over +5% Y/Y, Consumer Confidence has been stable, Manufacturing PMI had been stable in the 49-51 range for a year and came in at 51.9 in August, Industrial Production rebounded +9.0% Y/Y.  However, Retail Sales slowed slightly to +2.8% Y/Y and Exports slowed to +4.1%.  If there’s one emerging market that we’d be inclined to be bullish, this would be it, but we’d need to see the free-fall in the currency come to an end first.  

Japan:  Overall, the economic data have been mixed but we are encouraged by Prime Minister Abe’s promise to fix social security, immigration, and workforce participation.   We are slowly becoming positively biased.

Russia: As we stated recently, the sanctions are beginning to have an impact on Russia.  And it is never a good thing when officials talk about their ability to cushion “crashes”.   We find Russia uninvestible at this time.

South Korea:  Overall, the economic data have been mixed.  While the world looks forward to peace on the Korean Peninsula, we are keeping an eye on trade data into China, which increased +20.8% Y/Y in August.   Also, GDP increased +2.8% Y/Y in Q2, Income is up +4.2% Y/Y, Industrial Production increased +0.9% Y/Y, and Retail Sales accelerated to +7.4% Y/Y.  Conversely, the Unemployment Rate increased to 4.2% in August and the Nikkei South Korea Manufacturing PMI has been below ‘50’ for six months in a row.

MACRO TRADE IDEAS:

Source: Bloomberg

GLOBAL CENTRAL BANK SCORECARD:

Source: Bloomberg

WEEK IN REVIEW – BEST & WORST PERFORMERS:

S&P 500 SECTOR PERFORMANCE:

Source: Bloomberg

 

BEST/WORST PERFORMING WORLD BOND MARKETS:

Source: Bloomberg

BEST/WORST PERFORMING GLOBAL STOCK MARKETS:

SOURCE: BLOOMBERG

SOURCE: BLOOMBERG

CURRENCIES PERFORMANCE:

SOURCE: BLOOMBERG

SOURCE: BLOOMBERG

COMMODITIES MARKET PERFORMANCE:

SOURCE: BLOOMBERG

SOURCE: BLOOMBERG

MAJOR GLOBAL STOCK MARKETS:

SOURCE: BLOOMBERG

SOURCE: BLOOMBERG

MAJOR GLOBAL BOND MARKETS:

SOURCE: BLOOMBERG

SOURCE: BLOOMBERG

The October Washout is Mostly Robo-Driven Algorithm-Based Selling

Excerpt from Louis Navellier's Marketmail - 10/30/2018

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The best way to explain this October’s market action is that the “tail has been wagging the dog.” Due to computerized trading, index arbitrage and ETFs are becoming less liquid due to widening discounts and premiums to their net asset value (NAV). My hope is that economic fundamentals and wave after wave of positive earnings announcements will break that spell and disrupt recent computer index arbitrage selling.

Most robo-traders aren’t looking at the fundamentals. They have programmed their computers to sell on key words in various news releases. Thankfully, trading volume was relatively light early last week, but trading volume rose steadily each day. Since Friday’s sell-off had some high trading volume, I saw some “light at the end of the end of the end of the tunnel,” hoping that Friday might be a capitulation day.

I recorded three podcasts last week. (Here is a link to my Friday podcast.) As I have repeatedly said on many of my podcasts, it is very odd for this selling pressure to be occurring during a bullish quarterly earnings announcement season, especially when the average stock in the S&P 500 (so far) has posted 8.3% annual sales growth and 25.3% annual earnings growth. I was especially happy to see how Boeing (BA) and Twitter(TWTR) reacted after posting better-than-expected sales and earnings while providing positive guidance, and I was especially excited about the huge (86.1%) third-quarter earnings surprise ($5.75 per share vs. a consensus estimate of $3.09) for Amazon.com(AMZN). I am not worried that its sales were slightly below some analyst estimates. Amazon remains a great buying opportunity on dips.

Navellier & Associates holds AMZN, BA & TWTR in managed accounts and a sub-advised mutual fund. Louis Navellier & his family own AMZN, BA & TWTR via the sub-advised mutual fund and holds AMZN in a separate account.


In This Issue of Marketmail (Click Here to Read)

I’ll have more on last week’s market mayhem in my closing column. But first, Bryan Perry argues (with President Trump) that the Fed is out of touch with reality in their public statements, while the economic indicators tell a more positive story. Gary Alexander tells the same story, while debating a recent cover article from The Economist about their premature warnings of America’s “Next Recession.” Then, Ivan Martchev updates his junk bond indicator and then compares this October to 1974, 1929, 2008, and most notably 1987. Jason Bodner looks inside the “machine” (literally) to tell us what computers are doing to this market and how human logic will save us in the end. Then I’ll return to amplify what Jason just said.

Income Mail:  

The Stock Market Says Fed Policy is Overshooting Inflation Risks

          By Bryan Perry

The Numbers Still Support a Healthy Stock Market

  

Growth Mail:  

An October to Remember – or Forget?

           By Gary Alexander

The Economist Predicts “The Next Recession” (When None is in Sight)

  

Global Mail:

Junk Bonds Still “A-Okay”

           By Ivan Martchev

The 1987 Comparison

 

Sector Spotlight:

Computers Made This “An October for the Ages”

           By Jason Bodner

This Market is Now Seriously Oversold

 

A Look Ahead:

When Computers Do Their Thing – Beware of Trading with Them

           By Louis Navellier 

The Bond Market is More Orderly Than Stocks Right Now

The Market Passes its First Test of the October 11-12 Lows

Excerpt from Louis Navellier's Marketmail - 10/23/2018

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On Friday, the Russell 2000 essentially retested its October 12th intraday low on light trading volume. The NASDAQ Composite might also retest its October 12th intraday in the upcoming days, but again, as long as trading volume remains light, we should not worry – as long as there is no panic selling. Although the broader stock market may still try to retest its intraday lows, companies like Netflix, which have already announced better-than-expected third-quarter results, are not expected to retest their recent lows.

The selling pressure from index funds during the first few trading days in October is largely to blame for the recent market chaos. Specifically, the arbitrage folks were selling the Russell 2000 and buying the S&P 500, which temporarily caused small capitalization stocks to falter. However, despite Friday’s retest for the Russell 2000, I want to assure investors that small capitalization stocks can also “melt up” in the upcoming weeks as wave after wave of positive third-quarter earnings and sales results are announced.

Special Announcement: Our ETF Portfolio is Rated #1 for 3-5 Years by Morningstar

I am proud that our Navellier Tactical U.S. Equity Sector Plus featuring AlphaDEX portfolio has just been rated the #1 ETF portfolio in the past three years and five years in Morningstar Advisor’s GIPS universe of 470 managed ETF portfolios as of October 16, 2018. The AlphaDEX ETFs that my office utilizes are my favorite Smart Beta ETFs as they have outperformed the capitalization-weighted ETFs.


In This Issue of Marketmail (Click Here to Read)

Bryan Perry says the economy and the Fed are sending mixed signals, so the market seems a bit manic-depressive this October, but clarity should emerge after the elections. Gary Alexander agrees that we have to endure the tension of the next two weeks, especially the fear generated by the press coverage of the market’s inevitable down days. Ivan Martchev has some of the brightest news this week, the relatively small spread between junk bonds and Treasuries, indicating a relatively strong economy. Jason Bodner returns from a doom-and-gloom conference in Bermuda with some tonic for what ails the pessimists – a long check list of what’s going right. Then I’ll conclude with a short wrap-up of the economic outlook.

Income Mail:  

Bigtime Mixed Signals Stoke Market Volatility 

     By Bryan Perry

Mr. Market is Not Diggin’ the Fed’s Forward Plan

  

Growth Mail:  

The Press Loves Market Down Days but Ignores Up Days

     By Gary Alexander

GDP, Stocks, or Earnings Could Tip the Election

  

Global Mail:

Junk Bonds Say It’s Too Early to Fret

     By Ivan Martchev

What are Emerging Markets’ Bonds Saying?

 

Sector Spotlight:

The Left and Right Agree – We’re Doomed!

     By Jason Bodner

October Has Been Ugly for All Sectors (Except Two)

 

A Look Ahead:

President Trump “Jawbones” the Fed About Raising Rates

     By Louis Navellier

The Economic News is Mixed – Arguing for Caution in Raising Rates

October Opens with a Huge Switch from Small-Cap to Big-Cap Stocks

Excerpt from Louis Navellier's Marketmail - 10/09/2018

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We remain in a nervous “mean reversion” market, since many previously-hot small-capitalization stocks consolidated last week (after being strong in the last week of September), while big multinational stocks firmed up. Specifically, Bespoke Investment Group broke down the S&P 1500 by 10 deciles of market capitalization. The 150 largest (top 10%) rose 0.08% last week while the smallest 10% were down 3.74%.

The S&P 500 fell 0.97% last week, but the Nasdaq 100 was off 3.2% and the small-cap Russell 2000 fell 3.8%. Small-cap growth was down -4.58%. Among the sectors, Consumer Discretionary, Technology, and the new Communication Services sector were hit hard, while Energy, Financials, and Utilities rose.

I’ll cover more about the market’s “reversion to the mean” in my closing column this week, or you can hear my analysis of the market’s latest downdraft in a podcast on our home page: https://navellier.com


In This Issue of Marketmail (Click Here to Read)

Bryan Perry opens with the good news on the economic front, along with the dangers and opportunities in the latest rise of 10-year Treasury rates above 3.2%. Then, Gary Alexander looks at Europe’s economic and banking malaise and finds they haven’t truly recovered from the 2008 financial crisis. Ivan Martchev is more concerned over the emerging market currencies, once the dollar resumes its inexorable rise, than he is over the latest U.S. bond moves. Jason Bodner covers the latest sell-off and sector swings along with a look at the media’s false narrative vs. the longer-term realities driving this bull market. Then I’ll return to cover the commodities, notably oil, and the premature release of the likely-lowball monthly job totals.

Income Mail:  

The “Too Good to Be True” Economy (According to Fed Chair Powell)

           By Bryan Perry

The Bond Market Bends on Latest High Yields

  

Growth Mail:  

Europe May Be Entering its Third Stagnation in a Decade

           By Gary Alexander

Why Europe Can’t Seem to Recover from 2008

  

Global Mail:

No Time for a Big Bond Bear

           By Ivan Martchev

U.S. Dollar Rally Soon to Accelerate

 

Sector Spotlight:

An Unexpected Bill Comes Due

           By Jason Bodner

The Three Main Drivers Behind This Choppy Market

 

A Look Ahead:

A “Mean Reversion” Pushes Commodities Up & Stocks Down

           By Louis Navellier

Can’t Anybody Around Here Count Jobs Right?

This Week Launches the Best Quarter of the Market Year

Excerpt from Louis Navellier's Marketmail - 10/02/2018

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According to research by Bespoke Investment Group, October has been the #1 stock market month in the past 20 years, and this year will likely get an added boost from strong quarterly earnings announcements. November is also a strong month (#3 of 12) and I expect the market to surge this year after the uncertainty of the mid-term election is resolved. Thanksgiving is also a seasonally strong time of year, when an early “January effect” typically begins, and finally, due to the highest consumer confidence in 18 years, I am expecting a record holiday shopping season, so it appears that we should have an excellent fourth quarter.

This is what I like to call “lock and load” time, when all investors should be fully invested.

I should add that, according to TrimTabs, $827 billion in stock buybacks have been announced so far this year. Furthermore, if stock buyback activity continues to rise in the fourth quarter, it is likely that we will reach $1 trillion in stock buybacks in 2018. The fact that the S&P 500 has not risen as much as its record earnings has caused P/E ratios to plummet, which encourages even more corporate stock buybacks. 

By reducing share totals, this aggressive stock buyback activity is significantly boosting earnings per share. The chart illustrates that the record stock buyback pace has picked up in second quarter.

To learn more about how the stock market is physically shrinking via stock buybacks and fewer listings, I recommend that you read our latest white paper, Honey, I Shrunk the Stock Market … click this link.


In This Issue of Marketmail (Click Here to Read)

In Income Mail, Bryan Perry opens with a warning about a serious European Sovereign debt meltdown threat coming from Italy this time. Next, Gary Alexander charts the history of stock market surges before and after mid-term elections, along with a tutorial on the media’s past job-market misinterpretations. Ivan Martchev turns his attention to the ongoing (and third in a series of) Argentine currency crises, and how locals and outsiders can play this crisis. Jason Bodner examines the new shuffling of the 11 S&P sectors, involving Telecoms, Infotech and Consumer Discretionary, while I cover the latest moves in crude oil.

Income Mail:  

The Bond Vigilantes and Short Sellers Take Aim at Italy’s Debt

A Tale of Two 10-Year Yields (U.S. vs. Italy)

 by Bryan Perry

  

Growth Mail:  

Mid-Term Election Euphoria Could Lift the Market Dramatically

The “Tragedy” of Americans Working Second Jobs…Demythologized

by Gary Alexander

  

Global Mail:  

Significant Emerging Markets Contagion is Very Much Possible

What to Do in a Currency Crisis

by Ivan Martchev

 

Sector Spotlight:  

Is the New “Hot” Trend Real, or Fake?

Introducing a “New” (Supercharged Old) S&P Sector: Communications Services

by Jason Bodner

 

A Look Ahead:  

Crude Oil Reaches a Four-Year High – What’s Next?

The Fed Raises Rates – and Signals (Maybe) One More Increase

by Louis Navellier

Fundamental Growth Commentary - 10/1/2018

below is a republished weekly commentary; originally published by Louis Navellier, of Navellier & Associates; Sub-Advisor to the Cavalier Fundamental Growth Fund…

Hi everybody,

Our Fundamental Growth stocks, on average, exhibited tremendous relative strength last week and rose an average of 1.44%, while the S&P 500 declined by 0.51%.  Some of our top holdings, like Abiomed (ABMD) and Nvidia (NVDA) were especially strong, as were many of our energy-related companies.  There is no doubt that our Fundamental Growth stocks also benefited from quarter-end window dressing as well as the 90-day smart Beta ETF realignment. 

The Wall Street Journal featured a great article last week about stock buybacks in the S&P 500.  In the first quarter, there was $189 billion in stock buybacks in the S&P 500, which was substantially higher than the previous six quarters, where the biggest quarter for stock buybacks was $137 billion.  The WSJ pointed out that the aggressive stock buyback activity is significantly boosting the underlying earnings per share. 

The attached chart illustrates that the record stock buyback pace picked up in second quarter.  I should add that according to TrimTabs, $827 billion in stock buybacks have been announced so far this year.  Furthermore, if the stock buyback activity continues to rise in third and fourth quarters, it is possible that possible $1 trillion in stock buybacks will occur in 2018.  The fact that the S&P 500 has not risen as much as its underlying earnings has caused price-to-earnings ratios to plummet, which just encourages more aggressive stock buyback activity. 

To learn more about how the stock market is physically shrinking via stock buybacks, I recommend that your read our latest white paper, Honey, I Shrunk The Stock Market … see link:

https://navellier.com/files/7915/3446/2919/ShrunkTheMarket_Aug2018.pdf

There was a lot of important economic news last week.  On Tuesday, The Conference Board announced that consumer confidence soared to 138.4 in September, up from 134.7 in August.  Interestingly, economists were expecting consumer confidence to decline a bit to 132 in September, so this was truly a surprise that may cause some economists to revise their GDP estimates higher.  One of the catalysts behind consumer confidence rising to the highest level in 18-years was optimism about short-term business conditions over the nest six months, plus improving conditions in labor markets as jobless claims hit their lowest level in 49 years.  Since consumer spending accounts for approximately 70% of GDP growth, third quarter GDP is expected to be well over 4% and the upcoming holiday shopping season should be spectacular.

On Thursday, the Commerce Department reported that orders for durable goods soared 4.5% in August, which is the biggest monthly increase since February and substantially higher than economists’ consensus estimate of a 2.2% increase.  July’s durable goods report was revised to a 1.2% decline, up from a 1.7% decline that was previously estimated.  Commercial aircraft orders soared 69% in August, which helped cause overall transportation orders to rise 13%.  Naturally, surging durable goods orders is good news for Boeing (BA) and aviation suppliers like HEICO Corporation (HEI), as well as third quarter GDP estimates, which may now be revised higher by some economists.

One of the primary factors holding back third quarter GDP growth is the trade deficit.  The Commerce Department on Thursday reported that the trade deficit rose 5.3% in July to $75.8 billion as exports declined by 1.6% to $137.9 billion and imports rose by 0.7% to $213.7 billion.  A big drop in soybean exports to China was the primary reason that exports declined as the trade spat with China escalates.

Crude oil prices were soaring last week over concerns that Russian, Saudi Arabian and other crude oil producers may not be able to make up the lost production from Iran and Venezuela.  At an OPEC meeting in Algiers, Russia reiterated that they should adhere to current production quotas, which helped to propel Brent crude oil prices over $80 per barrel.  At the United Nations (UN), President Trump on Tuesday said that OPEC is “ripping off the rest of the world by pushing crude oil prices higher.”  

The U.S. sanctions on Iran will be imposed on November 4th and are expected to cause a temporary global supply crunch.  During his UN speech, President Trump also said “everything about Iran is failing right now” and added that Iran is in the “worst economic trouble of any country in the world.”  President Trump concluded that Iran would eventually want to negotiate a deal with him because the country is basically “failing.”

Further adding to the tension in the crude oil market was that President Trump in his UN speech said that the chaos in Venezuela is “unacceptable,” which raised concern that the U.S. might aggressively intervene in Venezuela.  President Trump also met with Columbia’s President on Tuesday and it is widely viewed that the U.S. is formulating its policy on Venezuela by coordinating any action with Columbia, which is Venezuela’s much more affluent neighbor.  The probability of military intervention in Venezuela is rising, especially since some Venezuelan military leaders (who were also on the U.S. sanction list) reportedly met a few months ago with the Trump Administration, but again, the U.S. apparently wants to coordinate any action with Columbia.

As anticipated, on Wednesday, the Fed removed the word “accommodative” from its Federal Open Market Committee (FOMC) statement.  The Fed signaled that a fourth key interest rate hike in 2018 is likely in December, but it all depends on both inflation and market interest rates.  In the past several days, Treasury bond yields have meandered higher after the bid-to-cover ratios on recent Treasury auctions declined to 2.4 from 2.8 just a month ago.  Typically, the smaller the bid-to-cover ratio, the more likely that Treasury yields will meander higher. 

The FOMC also forecasted that the Personal Consumption Expenditure (PCE) index would remain at a 2.1% rate over the next several months, so the Fed is not forecasting that inflation will accelerate.  I have to add that Fed Chairman Jerome Powell was very calm, transparent and exuded confidence in his Wednesday press conference, which helped to reassure financial markets that the U.S. economy would continue to grow without excessive inflation.

Overall, now that the Fed has painted a picture of steady economic growth in sync with its 2% inflation target, Wall Street can now refocus on booming GDP growth and another round of record earnings announcements.  We remain in a Goldilocks environment of stable interest rates and reasonable stock valuations, so the overall stock market is poised to finish 2018 on a strong note, especially since the seasonably strong time of year is fast approaching.  

According to the attached Bespoke report, October has been a very strong month in the past 20 years and will likely benefit from wave after wave of record quarterly announcements.  November should be an even stronger month and I expect that the stock market will surge after the uncertainty surrounding the mid-term elections are over and rally into Thanksgiving, which is seasonally a very strong time of year when an early “January effect” typically commences.  Finally, due to the highest consumer confidence in 18 years, I am expecting a record holiday shopping season, so it appears that 4+% GDP growth will persist for the remainder of 2018.

 This is what I like to call “lock and load” time, all investors should be fully invested, since I expect a strong year-end rally!


Louie

Source: Bespoke Research  Graphs are for discussion purposes only. All material presented is compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. Information may be incomplete or condensed. This is not to be construed as an offer to buy or sell any financial instruments and should not be relied upon as the sole factor in an investment making decision. The views and opinions expressed are those of Navellier at the time of publication and are subject to change. There is no guarantee that these views will come to pass. As with all investments there are associated inherent risks. Investment in securities involves significant risk and has the potential for partial or complete loss of funds invested. Please obtain and review all financial material carefully before investing. Past performance does not guarantee future results.


Source: Bespoke Research

Graphs are for discussion purposes only. All material presented is compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. Information may be incomplete or condensed. This is not to be construed as an offer to buy or sell any financial instruments and should not be relied upon as the sole factor in an investment making decision. The views and opinions expressed are those of Navellier at the time of publication and are subject to change. There is no guarantee that these views will come to pass. As with all investments there are associated inherent risks. Investment in securities involves significant risk and has the potential for partial or complete loss of funds invested. Please obtain and review all financial material carefully before investing. Past performance does not guarantee future results.

The Market Rose Through Two Painful Historical Anniversaries

Excerpt from Louis Navellier's Marketmail - 09/18/2018

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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?” 

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 of Marketmail (Click Here to Read)

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

There’s No Place Like Home – The USA

 by Bryan Perry

  

Growth Mail:  

The Negativity in the Air is Getting Crazier by the Week

Headlines Tell Us What to Think – And We Mindlessly Obey

by Gary Alexander

  

Global Mail:  

Bitcoin: When Manias End

Update on the Gold/Bitcoin Ratio

by Ivan Martchev

 

Sector Spotlight:  

Change is All Around Us – But Which Direction Next?

Technology Still Holds the Key to Mankind’s Future

by Jason Bodner

 

A Look Ahead:  

Inflation Remains Subdued, Despite Oil’s Price Rise

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

by Louis Navellier

Despite September Fears, the Market's Best Season Approaches

Excerpt from Louis Navellier's Marketmail - 09/11/2018

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The S&P declined each day of the holiday-shortened first week of September, but it only fell 1% in all. That’s nothing to worry about, but the bears were out in full force warning about the potential of a September crash, especially in light of the upcoming 10th anniversary of the 2008 financial panic. We may indeed have a “flash crash” or a normal correction, but I expect we’ll see quarter-ending window-dressing and ETF rebalancing, which typically benefits stocks. At the same time, the Fed will likely raise rates on September 26th and then issue a “dovish” statement, which should boost the market as September ends.

Then, beyond September, we have the year’s strongest quarter to look forward to. October in the past 20 years has been seasonally strong. Furthermore, forecasted third-quarter sales and earnings are expected to remain strong, thanks to 4.4% estimated GDP growth, so “peak earnings momentum” has yet to arrive. I expect wave after wave of strong announcements to propel stocks higher in October. I also expect the market to rally after the mid-term elections in early November, regardless of the results, since most of the political distractions will finally be over. Finally, as Thanksgiving nears, typically an early “January effect” commences as small-to-mid capitalization stocks tend to end the year on a strong note.


In This Issue of Marketmail (Click Here to Read)

In Income Mail, Bryan Perry focuses on the Fed’s favorite yield curve measure, which indicates more shelf-life in this economic recovery and bull market. In Growth Mail, Gary Alexander looks at the added caution evident among most investors as well as “Gen-Z” youth in their savings after the trauma of 2008. Ivan Martchev returns to the precious metals market to examine the “great gold/silver divergence,” as well as the sagging mining stock sector. Jason Bodner’s Sector Spotlight contrasts the yin-yang of weak sectors winning in down weeks while strong sectors still dominate the year-to-date gains. Then, in the end, I’ll return with my answer to the latest doomsday theory, the coming “Great Liquidity Crisis.”

Income Mail:  

Bulls Find New Catalyst to Bankroll More Gains

A Better Interest-Rate Indicator Gives the Bulls a Green Light

 by Bryan Perry

  

Growth Mail:  

The Trauma of 2008 Created More Cautious Investors

Economic and Market Fundamentals are Still Strong

by Gary Alexander

  

Global Mail:  

The Great Gold/Silver Divergence Continues

What Mining Stocks are Telling Us

by Ivan Martchev

 

Sector Spotlight:  

A Week of Worries Assaulted Investors Once Again

Get Prepared Now for a Strong Fourth Quarter

by Jason Bodner

 

A Look Ahead:  

Are We Headed for A "Great Liquidity Crisis"?

Unlike 2008, We're Nowhere Near a Recession

by Louis Navellier

Reflections on What Happened 3 Years Ago and Its Impact on ETF Trading

by: Louis Navellier

Today marks the third year anniversary of an "intraday flash crash" that had devastating consequences. Specifically, on August 24, 2015, approximately 1,278 stocks "gapped down" more than 5% at the opening, so the NYSE stopped trading on those stocks. However, ETFs continued to trade; but without knowing the underlying value of how much the 1,200+ stocks would reopen at, the ETF specialists at the time abruptly dropped their bids on ETFs approximately 35%. The apparent reason the ETF specialists only dropped their bids 35% was back in the May 6, 2010 intraday 5-minute flash crash when all trades that dropped 40% or more were reversed as if they never happened. The ETF specialists knew that they should not cross that 40% threshold, so they just "picked off" everybody 35% intraday instead. The next two charts show the intraday carnage:

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The reason I showed the iShares Select Dividend ETF (DVY) being hit 34.95% intraday on August 24, 2015, is that I wanted to prove that a big, well-respected ETF, with high Morningstar Ratings as well as a nice dividend yield, was not immune to intraday Wall Street specialist shenanigans. Furthermore, a high dividend stock at the time, KKR, plunged 58.82%, apparently fuelled by intraday margin calls from investors that unwisely bought KKR and other high dividend stocks on margin.

The moral of the August 24, 2015 intraday flash crash is that Wall Street is only liquid at a deep discount and that stop loss orders cannot protect you from intraday ETF and stock price anomalies. The aftermath of the August 24, 2015 intraday flash crash triggered lots of interesting articles like the following:

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Ironically, if you go to Morningstar and key in DVY, it shows that currently iShares Select Dividend ETF (DVY) is a well-respected 5-star ETF. Furthermore, DVY's monthly Premium/Discount according to Morningstar is very low. In fact, in August 2015, the average discount was only -0.01%. So this implies that despite the 34.95% intraday drop on August 24, 2015, this price drop must have been an anomaly, since the average discount was only -0.01% during August 2015. 

As a quantitative analyst, the only way I can duplicate Morningstar's monthly Premium/Discount calculations is to calculate volatility based on closing day prices, which effectively mask the 34.95% intraday drop on August 24, 2015. However, when I do "full range" volatility based on all trades of DVY during August 2015, the 34.95% intraday discount reappears. In other words, based on my calculations, Morningstar is not doing its math correctly, since it appears that its monthly Premium/Discount calculations are based on an end of the day closing price, versus all intraday ETF trades during the day.

When you look at only ETF trades at the end of the day, it tends to show a very pretty picture of many ETFs. As an example, our friends at Bespoke recently published a fascinating research article (below) called "Fear the Day." Specifically, Bespoke's research pointed out that if you bought the biggest and most liquid ETF, namely SPY, at the opening and sold it at the close every day since January 1993, between January 1993 to January 2018 you would lose -11.9%. On the other hand, if you bought SPY at the close and covered it at the opening every day since January 1993, between January 1993 to January 2018 you would make 565%! This amazing 576.9% return differential is due to the fact that Bespoke's research proved that more than 100% of SPY's gains since 1993 happen after market hours. 

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So apparently, the moral of the story is that if you want to be a successful ETF investor you have to stop trading ETFs during the day! Well not exactly. If you can successfully buy or sell an ETF at or near its net asset value or what Morningstar calls Intraday Indicative Value, then go ahead and trade during market hours. However, as too many ETF managers have learned, moving big blocks of ETFs during market hours can be problematic, which is why my management company has stopped trading via many large model management platforms that insist on doing the ETF trading themselves, which raises the conflict that the ETF specialists can pick off ETF managers as the following article explained for one unfortunate ETF manager:

At my management company, we are currently proud to be the #1 ETF manager according to Morningstar Advisor out of the 469 GIPS certified managers in the past 3 & 5-years (see next page). However, if we signed up for many popular model management programs that financial advisors utilize, we would not be always be able to effectively execute our ETF trades, so you will not see Navellier & Associates' managed ETF portfolios in many of the big model management programs, since we do not want to lose control of ETF trading. In my opinion, the best model management program is led by Craig Love at Fulcrum EQ in Dallas, because his platform allows big "step out" trades with the ETF firms themselves. Essentially, when we have to move big blocks of ETFs, we have the option of calling the respective ETF firm and they help us move big blocks of ETFs with minimal premiums/discounts.

So the moral of this story is that much of our managed ETF success comes from (1) waiting to trade ETFs during orderly markets with minimal premiums/discounts relative to net asset value, (2) avoiding poor trading platforms that prohibit "step out trading" to more effectively move big ETF blocks, and (3) naturally buying great smart Beta ETFs, especially the AlphaDEX ETFs from First Trust. I should also add that so far in 2018, our ETF turnover has been low, since we remain in a very selective market that is favoring a few key sectors and more domestic small-to-mid capitalization stocks. ETFs that emphasize fundamentally superior stocks and are more equally weighted, like the First Trust AlphaDEX ETFs, remain crucial for our success in the current market environment.

 

Disclosure:

This information is general and does not take into account your individual circumstances, financial situation, or needs, and is not presented as a personalized recommendation to you. This is for informational purposes only and should not be taken as an offer to buy or sell any financial instruments and should not be relied upon as the sole factor in your investment making decisions. Individual strategies discussed may not be suitable for you, and it should not be assumed they were or will be profitable. Investment in securities involves significant risk and has the potential for partial or complete loss of funds invested. All investing is subject to risk, including the loss of your principal.