A Strong Rebound In The 4th Quarter

Published on

In his Daily Market Notes report to investors, while commenting on a rebound in the 4th quarter, Louis Navellier wrote:

Get Our Icahn eBook!

Get The Full Carl Icahn Series In PDF

Q3 2021 hedge fund letters, conferences and more

The NASDAQ joins the Dow and S&P 500 in setting a new all-time high.  Inflation numbers eased a bit, energy prices softened, bond yields are stable albeit mortgage rates have risen to April highs, but earnings strength continues to dominate what's moving stocks higher.  Ford jumped on a strong beat and reinstated their dividend.

Survey

Amazon and Apple report after the close and should keep the upward trend on track. This is all on top of surprisingly weak 3rd quarter GDP growth reported this morning - only 2% versus 2.6% forecasts and 6.7% in the 2nd quarter.

A Strong Rebound In The 4th Quarter

Consumer spending was worse: It grew only 1.6% compared to the soaring 12% last quarter. These weak numbers, blamed in part by supply constraints, particularly in autos, appear to be viewed as coiling the spring for a strong rebound in the 4th quarter. 

Today, stocks are reflecting forward expectations and 2022 is looking very strong, with hopes for full reopening demand, an end to logistics problems and the implementation of the now downsized tax and spending plan from the Biden administration. If the Fed surprises and chooses to postpone tapering it will only add more octane to the positive trends in the short run.

The Tailwinds Of Inflation

However, a majority of retail investors we surveyed this week believe that inflation will be a significant headwind for the markets by year-end, a notable difference from our survey in August where 24% of investors thought inflation was "transitory." To these investors, I say, "Make hay while the sun shines and stay invested."

Rather than fight inflation, there is the argument that investors should “go with it” and position portfolios to reflect the tailwinds of inflation. The commodities market is in a powerful uptrend at present and much of the global economy is still stuck in first gear, with China showing a slowdown in growth last week amid the supply chain bottlenecks. Further outbreaks in Covid-19 are also making the global recovery very uneven and problematic for several economies that are key suppliers to these raw materials markets.

To this end, income investors seeking yield outside the Treasury, corporate, and other fixed-rate asset markets where price erosion is evident, there are wonderfully high-yielding dividend opportunities in blue-chip integrated energy/commodity stocks and ETFs enjoying higher spot prices, convertible debt that appreciates with the underlying equities it is tied to, as well as Business Development Companies (BDCs) and Senior Loan Funds that hold floating-rate loans, REITs that can raise rents and lease terms quickly, and Covered-Call Funds that are selling volatility back to the market in premier stock holdings.

Some due diligence and a good set of stocks, ETFs, and closed-end fund screening tools will show that generating an inflation-sensitive blended yield of 5% or more is well within the realm of probability for income investors seeking to ride the inflation wave and keep pace with the rising cost of living.

Weekly Jobless Claims Decline

The Labor Department on Thursday reported that weekly jobless claims declined to 281,000 in the latest week.  Continuing claims came in at 2.243 million in the latest week.  Economists were expecting continuing claims to come in at 2.42 million, so this was a massive surprise.  I should also add that weekly jobless claims are now at a post-pandemic low, so in my opinion, the Fed has fulfilled its unemployment mandate and must now focus primarily on its inflation mandate.

Heard & Notable

India is the world leader in real-time payments, with the highest real-time transaction value at $25.5 billion, followed by China and South Korea with $15.7 billion and $6 billion, respectively. In the U.S., payment service Venmo facilitates instant payments but charges a fee, while free regular transfers take one to three business days. Source: Statista