Excerpt from Louis Navellier's Marketmail - 5/29/2019
The S&P 500 is down about 4% so far in May (through last Friday) mostly due to trade tensions with China, but those tensions were loosened somewhat on Friday after U.S. officials eased some of the trade restrictions on China’s 5G giant, Huawei, granting them a 90-day temporary extension to stock up on U.S. semiconductor orders. Since Googleprovides their Android system, Huawei’s 5G phones will be at a tremendous disadvantage without access to Android’s voice recognition. Clearly, Huawei will be forced to develop its own voice-activated system if the fight over 5G continues and lasts for over 90 days.
This move gives Presidents Trump and Xi time to work out a face-saving solution to the trade war. As I have repeatedly said, both Trump and Xi want to say they “won,” so the new trade deal must benefit both China and the U.S. In the meantime, do not be surprised if China devalues the yuan to offset tariff costs.
In my opinion, however, Thursday’s market decline stems more from European fears than China, as I’ll explain below. There’s also a crisis brewing in Iran, which Bryan Perry examines in more detail below.
Navellier & Associates does not own Google or Huawei in managed accounts and our sub-advised mutual fund. Louis Navellier and his family do not own Google or Huawei in personal accounts.
Most of our authors focus on the positive side of the U.S./China trade talk impasse. The U.S. holds the winning hand and China seems to be shooting itself in the foot. Bryan Perry focuses on the slowing growth rate in China and the opportunity in U.S. defensive blue-chip stocks paying high dividend yields. Gary Alexander disputes the assumption that inflation will return if high tariffs remain in place over time, while Ivan Martchev argues that China seems to use these latest tariffs as cover for a long-term strategy of yuan devaluation. Jason Bodner covers the sectors that have sold-off in the latest “controlled-burn” correction, while I argue that these trade tensions will not hurt the U.S. economy or the market, long-term.
Bryan Perry doesn’t think President Trump will authorize any Mideast War, but he recognizes the risk. More importantly, he chronicles a record quarter of global and domestic dividends and buy-backs. Gary Alexander takes us back a century to a very troubled year, 1919, but a great (+30%) year for stocks. Ivan Martchev settles in for the long-game in the China-U.S. “trade storm,” while describing what seems to be a typical bit of deception in Huawei’s intellectual property (IP) practices. Jason Bodner shares a personal angle on how stocks tend to return to their long-term ascent after normal corrections. Then I’ll examine the unrest in Europe as the main culprit for last Thursday’s market malaise, and a closing note on Tesla.
Income Mail: Perception of Risk of an Iran War Feeds Market Tension
By Bryan Perry
U.S. Leads Global Record Quarter of Rising Dividend Payouts
Growth Mail: A Memorial Day to Remember – 1919
By Gary Alexander
We Don’t Know History, So We Don’t See How Good Things Are Today
Global Mail: The Calm before the Chinese Trade Storm
By Ivan Martchev
An Anecdote on Chinese IP Practices
Sector Spotlight: Remember – Great Stocks Always Go Back Up
By Jason Bodner
A Return to Red Ink Last Week
A Look Ahead: European Unrest Was a Big Cause of Last Thursday’s Sell-off
By Louis Navellier
Analyst Sees Decline of Tesla to $10