The NASDAQ Market And Chinese ADRs Capitulate

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Commenting on today’s markets and the NASDAQ capitulating, strategist Louis Navellier wrote in a note to investors:

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The Institutional Money Is Chasing Small/Mid-Cap And International ADRs

There is undoubtedly a big stock market leadership change underway as many of the big components of the S&P 500 stumbled a bit recently, as the institutional money is now chasing more of the small-cap, mid-cap and international ADRs.

Some of the decline comes from lack of confidence in Fed policy.  Treasury bond yields are soaring with palpable inflation fears and the stock market is worried about (1) inflation, (2) rising crude oil prices, (3) rising Treasury bond yields, (4) a federal budget deficit recently north of  $28 trillion.

Wall Street sees rising inflation and fears that the Fed is losing control over the yield curve and may not have sufficient funds to control yields via QE alone.

The NASDAQ Market And Many Chinese ADRs Capitulated

The NASDAQ market and many Chinese ADRs “capitulated” early this week.  Volume was light however, which is less of a concern, than high volume declines which indicate panic. Most of the selling pressure in popular NASDAQ names and the Chinese ADRs can be traced to theme ETFs that specialize in disruptive technologies.

With the passage of the stimulus package, the focus will be on the impact on retails sales.  The $600 debit cards that arrived in January helped to boost retail sales 5.3%, so another surge, which is a positive driver for GDP growth, is in the offing.

China announced this week that its exports surged 60.6% to $468.9 billion in the first two months of 2021.  The Chinese exports to the U.S. have soared 87.5% to $80.5 million in January and February.  This is export surge has caused an acute container shortage, driving up shipping rates.  Costco mentioned last week that the container shortage is delaying its inventory replacement by two to four days and that this container bottleneck is expected to persist through March.

China's GDP Forecast

Interestingly, China is forecasting 6% annual GDP growth for 2021, but the U.S. is now forecasted to grow at an 8.3% annual pace in the first quarter.  Since the U.S. is a robust consumer driven market, the U.S. has the potential to possibly keep pace with China’s GDP growth in 2021, especially if the U.S. continues to boost its productivity.

However, higher crude oil prices and other inflationary fears could impede U.S. GDP growth.  Please remember that growth stocks have traditionally prospered in inflationary environments, since typically inflation boosts the underlying sales and earnings for many companies.