Trade War Torpedoes the Market but Better Days Will Return Yet Again

Excerpt from Louis Navellier's Marketmail - 8/6/2019

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I have long argued that the stock market should just close down for August. I know that’s impractical, but maybe now, you’ll agree with me, after the Dow fell over 1,146 points in the first three trading days of August, including a 767 point drop on Monday. NASDAQ did even worse, falling 3.5% Monday.

I’m sure August will continue to be volatile, but I view this volatility as a good buying opportunity for fundamentally sound stocks. Here’s a link to my Monday podcast for more details on what to do now.

As of last Friday, 77% of the companies in the S&P 500 have announced their second-quarter results and, so far, sales growth is running at a 3.6% annual pace, while the blended earnings decline is -1.0% vs. the expected -2.7%, according to FactSet Earnings Insight. So far, of the companies in the S&P 500 that have reported, 61% have beat analyst estimates on sales and a whopping 76% have beaten earnings.

The biggest news last week was that the Federal Open Market Committee (FOMC), as expected, cut key interest rates by 0.25% by Wednesday after an 8-2 vote, with the doves easily overpowering the hawks. The Fed also ended its systematic selling of government securities two months earlier than planned. The FOMC statement cited global developments, a slowdown in business investment, and muted inflation as reasons for its first key interest rate cut in 11 years (since 2008). Ironically, the U.S. dollar strengthened after the FOMC statement, which is deflationary, because it lowers the cost of imported goods.

The market remained near its highs until President Trump dropped a Tariff-Tweet bomb on Thursday – threatening tariffs on $300 billion of Chinese goods starting September 1. The market then overreacted to the President’s bluff, pushing the Treasury yield below the S&P 500’s yield, creating a screaming buy!

In This Issue:

Bryan Perry still sees higher highs coming, especially if the U.S. stands firm in forcing China to end their unfair trade practices by year’s end. Gary Alexander also sees the calendar working in our favor with a strong fourth quarter, adding that U.S. stocks are still the best place for new money now. Ivan Martchev calls for a truce between the White House and Federal Reserve, reminding both fortresses that they have bigger battles (and other foes) to face. Jason Bodner takes us inside our weekly conference call for story ideas and repeats our wish that August would just go away. Then I return with a review of China, Europe, and the latest economic indicators, which continue to identify the U.S. as the oasis in both stocks and bonds.

Income Mail: The Post-FOMC “Halo Effect” for the U.S. Market Faces Key Tests

By Bryan Perry

It’s Still the Economy, Stupid!

Growth Mail: After a Summer Correction, Stocks Usually Explode in the Fall

By Gary Alexander

Stocks (or Advice on Stocks) Make an Ideal Gift for a College Graduate

Global Mail: More on the White House/Federal Reserve Clash

By Jason Bodner

It’s Still Too Early to Call a Recession

Sector Spotlight: A Chilling Market Forecast: “August is Coming”

By Jason Bodner

A Listen-in to our Weekly Friday Morning Conference Call

A Look Ahead: Europe and China are Still Struggling

By Louis Navellier

U.S. Economic News Remains Largely Positive