In his podcast addressing the markets today, Louis Navellier offered the following commentary.
China Sputters
China’s exports plunged 12.4% in June, while imports declined 6.8%. This is the biggest decline in exports in three years since after the start of the pandemic. China’s exports to the U.S. declined 24% in June, while its exports to the European Union dropped 13%. Germany has followed the U.S. and is now openly encouraging businesses to look for alternatives to importing from China due to an increase in hostility.
Interestingly, China just passed Japan in vehicle exports as Chinese EV exports soar to Europe and other markets. I should also add that exports from Japan, South Korea and Vietnam all declined in June, since consumers worldwide are importing less goods.
Ready for Write-Offs
Consumers’ higher credit card debt is apparently fueling bank profits after some major banks reported better-than-expected second-quarter earnings on Friday. As an example, J.P. Morgan posted $1.1 billion in bad credit card debt, which is an increase of 66% in the past year, but these increasing loan losses did not impede J.P. Morgan’s earnings that surged 67% in the second quarter.
Interestingly, J.P. Morgan set aside $2.9 billion to cover future loan losses, which is up 163% from a year ago, so it is clear that the banking industry is expecting more credit card write-offs, but high-interest rates make these loan losses tolerable.
President Biden’s approval rating now stands near an all-time low of 41%. Even worse, 54% of Americans disapprove of how President Biden is doing his job. According to the Labor Department, black workers made up about 267,000 of the 300,000 new unemployment cases this spring, so the Biden Administration is losing a key constituency.
Furthermore, the Fed reported that credit card debt officially hit a record high of over $1 trillion, so many households are clearly struggling with inflation.
Strong Sectors
We are effectively in a “rolling recovery” where many Americans are being left behind. Thanks to Baby Boomers with cash to spend, the U.S. economy is still recovering. Specifically, economic growth has picked up due to an improving service sector as well as strong consumer confidence. So all that can go wrong is if the Fed to continues to raise key interest rates, despite ample evidence of inflation cooling.
However, I am more confident than ever that after this week the Fed will decisively hit the “pause button” due to favorable inflation evidence as well as the Labor Department’s lackluster payroll data.
I should also add that my big energy bet has been looking better due to the fact that the inventory of crude oil and refined products have plunged from strong seasonal demand. Furthermore, Iran is acting badly and has been trying to hijack crude oil tankers again, so the U.S. Navy has been trying to thwart Iran in key shipping lanes. Finally, many domestic energy producers have boosted their production, which bodes well for their upcoming quarterly announcements.
The bottom line is I am an optimist. I cannot fathom an escalation to the tragic war in Ukraine, especially after the Wagner Group’s pullout. The U.S. Navy no longer guarantees free trade around the world, so hijacking attempts of crude oil tankers and other commercial ships persist.
The Biden Administration is doubling down on the Trump Administration’s restrictive trade policies with China and is pushing onshoring, which has not yet succeeded. As a result, the Presidential candidate with the best vision for both domestic and foreign policy should break out and help inspire many Americans.
I want to assure you that everything is about to get better. The Fed will no longer be raising key interest rates after this week. The Consumer Price Index (CPI) this week has proven that inflation is cooling off.
Corporate earnings are forecasted to steadily improve for the next four quarters. There are at least four improving industry sectors where I can find strong stocks to buy. Although we are in a rolling recovery, more sectors are now participating.
Coffee Beans: Hit The Road, Jack
When asked how they would describe their enthusiasm for travel in 2023, 32% of Americans and 28% of Canadians indicated that they were really excited to travel. Over 60% of the North American respondents said that inflation had a negative impact on their desire to travel this year. Source: Statista. See the full story here.
