Download Navellier - Weekly Marketmail

Tuesday, May 28, 2013
In This Issue
Political Distractions Can Be Good for Stocks
Bernanke Tells Congress That QE is Still in Force
Stat of the Week: April Durable Goods Orders Rose 3.3%
Watch What Central Bankers Do, Not Just What They Say
By Louis Navellier
The S&P 500 declined a little (-1.07%) last week as nervous investors misinterpreted central bankers’ words rather than
watching their actions – i.e., their continued pump-priming to boost economic growth. I oftentimes view these occasional
pullbacks as new buying opportunities, especially for some companies that aggressively buy back their existing shares. And
now, after a brief Memorial Day pause, the market will likely continue rising, based mostly on improving second quarter sales
and earnings trends.
Political Distractions Can Be Good for Stocks
Last week, most U.S. stock indexes fell by over 1%, while gold gained 1.6% and crude oil fell by 1.9%. This is a case of
money “sloshing around” from one market to another, which is usually an encouraging sign. In particular, last week’s nervous
financial markets resulted from traders overreacting to headlines – selling stocks before bothering to digest the details of the
news. In addition, trading volume was light on Friday, due to the advent of a major U.S. holiday when traders tend to take off
early in the afternoon.
There was also a media circus going on in Washington, DC, diverting attention away from the economy and stocks. The media
spin on the Benghazi tragedy, the IRS targeting of conservatives, and the Associated Press/Fox News wiretap scandals
suggest that the White House either knew nothing or it was guilty of wrongdoing and/or cover-ups.
The “know nothing” defense and the resulting “outrage” within Congress essentially means that some scapegoats must be
found and sacrificed. The media, which used to love the White House, now seem outraged that reporters were wiretapped by
the Justice Department, so with the news media now on the warpath, some heads will have to roll. Congressional hearings
might last for the next several months.
Ironically, these scandals seem to help the stock market. While the government investigates itself, the U.S. economy can
prosper with potentially less government interference over the next few months.
Chairman Bernanke Tells Congress That QE is Still in Full Force
With chaos reigning in the White House, the most powerful person in government appears to be Fed Chairman Ben Bernanke
who became a bit testy in his Congressional testimony last week. Even though the Fed has carefully laid the groundwork for
more quantitative easing (QE) in the upcoming months, pundits have recently concentrated on the possibility of the Fed
scaling back or ending QE sometime this year.
Fed Chairman Ben Bernanke rattled financial markets last Wednesday when he warned Congress that “a premature tightening
of monetary policy could lead interest rates to rise” and “carry a substantial risk of slowing or ending the economic recovery
and causing inflation to fall further.” In these blunt words, he implied that if the Fed curtails QE prematurely it could hurt the
stock market and sabotage economic growth, potentially resulting in a deflationary spiral. Using an unusually curt tone,
Bernanke also warned that economic growth could come to a grinding halt if the Fed ended its bond buying plan too quickly.
On the same day (Wednesday), in the official release of the minutes of the last Federal Open Market Committee (FOMC)
meeting, we learned that a growing number of FOMC members want to slow the Fed’s asset purchases, but this would not
likely occur for at least 4-5 months, and only then if we see improving economic data. Specifically, many FOMC officials want
to see continued progress in job creation (i.e., over 200,000 new jobs per month) and improvement in other key economic
indicators.
Even though the Fed’s $85 billion-per-month money pump remains in force, the stock market fell last week based on traders’
overreaction to their fear that the party might end sooner than they once thought.
No Fed Chairman wants the economy to blow up on his watch. Since Bernanke’s current term ends next January, I fully expect
he will keep the Fed’s money pump primed through at least the end of 2013.
Stat of the Week: April Durable Goods Orders Rose 3.3%
The Commerce Department announced last Friday that April’s durable goods orders rose 3.3%, much better than economists’
consensus estimate of a 1.5% gain. The biggest increase came from commercial aircraft orders (+18.1%), as Boeing*
received orders for 51 jets. Also, orders for new cars and trucks rose 1.9%, while core capital goods rose 1.2%, a good
indicator of a potentially rising second-quarter GDP.
On Thursday, we got two more pieces of good news. First, we learned that new jobless claims fell from 363,000 in March to
340,000 in April. (The four-week average was also 340,000.) Also, new home sales rose from an upwardly-revised 444,000
annual rate in March to 454,000 in April, well above the consensus estimate of 425,000 and a huge (29%) gain from 352,000
in April 2012. Median prices were up 14.9%, year-over-year, while inventories of new homes remained at a lean 4.1 months’
supply.
Europe started to show some signs of life last week. On Thursday, Markit reported that its PMI for the euro-zone rose to 47.7
in May, a three-month high, up from 46.9 in April. Germany’s PMI rose to 49.9 in May, up from 49.2 in April, while Germany’s
Ifo business-climate index rose from 104.4 to 105.7.
The news from China is not so good. On Wednesday, HSBC said its preliminary Purchasing Managers Index (PMI) for China fell
to a seven-month low of 49.6 in May, down from 50.4 in April. Inventory buildup around the world, especially in the U.S.,
seems to be the primary culprit for the latest decline, but I expect this inventory bottleneck will be short-lived due to
improving U.S. economic growth.
Also on Wednesday, the Bank of Japan sparked a major selloff in Japanese stocks after it merely left Japan’s monetary policy
alone. Specifically, BOJ Governor Haruhiko Kuroda made it clear that Japan’s impressive 3.5% annual GDP growth rate meant
that no additional monetary stimulus would be needed. This simple (and logical) statement caused a 7.3% correction in the
Nikkei index Thursday. That turned out to be an overreaction. The Nikkei rebounded on Friday and is still up by over 40% so
far in 2013.
Marketmail gets updated on Fridays and whenever the DOW closes up or down 300 points or more.
None of the stock information, data and company information presented herein constitutes a recommendation by Navellier or a solicitation of any
offer to buy or sell any securities.
Information presented is general information that does not take into account your individual circumstances, financial situation, or needs, nor does it
present a personalized recommendation to you. Individual stocks presented may not be suitable for you.
Although information has been obtained from and is based upon sources Navellier believes to be reliable, we do not guarantee its accuracy and the
information may be incomplete or condensed. All opinions and estimates constitute Navellier's judgment as of the date of the report and are subject
to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation for the purchase or sale of a
security.
Past performance is no indication of future results.
FEDERAL TAX ADVICE DISCLAIMER: As required by U.S. Treasury Regulations, you are informed that, to the extent this presentation includes any
federal tax advice, the presentation is not intended or written by Navellier to be used, and cannot be used, for the purpose of avoiding federal tax
penalties.
Navellier does not advise on any income tax requirements or issues. Use of any information presented by Navellier is for general information only and
does not represent tax advice either express or implied. You are encouraged to seek professional tax advice for income tax questions and
assistance.
IMPORTANT NEWSLETTER DISCLOSURE: The performance results for investment newsletters that are authored or edited by Louis Navellier, including
Louis Navellier's Quantum Growth, Louis Navellier's Emerging Growth, Louis Navellier's Global Growth, and Louis Navellier's Blue Chip Growth, are
not based on any actual securities trading, portfolio, or accounts, and the newsletters reported performances should be considered mere "paper" or
proforma performance results. Navellier & Associates, Inc., does not have any relation to or affiliation with the owner of these newsletters. The owner
of the newsletters is InvestorPlace Media, LLC and any questions concerning the newsletters, including any newsletter advertising or performance
claims, should be referred to InvestorPlace Media, LLC at (800) 718-8289. Investors evaluating any of Navellier & Associates, Inc.'s, (or its affiliates')
Investment Products must not use any newsletter information, including newsletter performance figures, in their evaluation of any Navellier
Investment Products. Navellier Investment Products include the firm's mutual funds, managed accounts, and hedge funds. InvestorPlace Media, LLC
newsletters do not represent actual funded trades and are not actual funded portfolios. There are material differences between Navellier Investment
Products' portfolios and the InvestorPlace Media, LLC, newsletter portfolios. Newsletter portfolios (1) may contain stocks that are illiquid and difficult
to trade; (2) may contain stock holdings materially different from actual funded Navellier Investment Product portfolios; (3) do not include trading
costs, commissions, or management fees; and, (4) may not reflect prices obtained in an actual funded Navellier Investment Product portfolio. For
these and other reasons, the performances claimed by InvestorPlace Media, LLC newsletter portfolios do not reflect the performance results of
Navellier's actually funded and traded Investment Products. In most cases, Navellier's Investment Products have materially lower performance results
than what InvestorPlace Media, LLC newsletter portfolios claim to have. The InvestorPlace Media, LLC newsletters and advertising materials
typically contain performance claims that significantly overstate the performance results an investor may expect from any Navellier
Investment Product.
Navellier claims compliance with Global Investment Performance Standards (GIPS). To receive a complete list and descriptions of Navellier's
composites and/or a presentation that adheres to the GIPS standards, please contact Tim Hope at (800) 365-8471 or [email protected].
© 2007-2013 Navellier & Associates, Inc. All Rights Reserved. Terms of Use | Privacy Policy | Proxy Voting Policy