Should The Fed Raise Rates 100 Basis Points In September?

Published on

In his podcast addressing the markets today, Louis Navellier offered the following commentary.

If you wish to listen to this commentary, please click here.

100 Basis Points In September?

There are two things weighing on the market which is why it is in a poor mood. First, the 10-year Treasury yield is 3.28%. Now, if rates stay at this level, I think the Fed should just raise rates 100 basis points on September 21st and get it over with because market rates have risen dramatically.

Get The Full Henry Singleton Series in PDF

Get the entire 4-part series on Henry Singleton in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues

Q2 2022 hedge fund letters, conferences and more

 

The Fed is in the process of reducing its balance sheet. The Fed has been manipulating the entire Treasury yield curve. They have allowed rates to rise and this is the consequence of the Fed reducing its balance sheet.

The second thing is Nvidia's warning on Wednesday that it could lose as much as $400 million in quarterly sales after the federal government imposed new licensing requirements on shipments of some of its most advanced chips to China and Russia.

Although Nvidia does not sell its chips to Russia, the U.S. is clearly worried that its chips will end up in Russia via China. Advanced Micro Devices is also being hit by these new export restrictions by the federal government.

AI War

The war over artificial intelligence (AI) chips is now officially underway and unfortunately, the first casualty are the best U.S. chip companies. Let’s hope both Advanced Micro Devices and Nvidia do not move overseas since China has been a big developer of AI devices.

The only thing that's going to get the technology stocks going is a new product cycle. Apple is going to announce its new phone in mid-September and let's just hope it makes a big splash because it would help regenerate the entire technology sector.

We have declining earnings in the third and fourth quarter for the S&P which is caused by the tech sector slowing down and the strong dollar impeding multinationals, among others. The oasis remains anything that's profiting from inflation.

I still think energy stocks remain the best bet because as long as oil prices stay above $80 a barrel, they're going to continue to have record sales and earnings. They have low P/E ratios and they pay big dividends.

Slowing Growth

The Labor Department on Thursday reported that new unemployment claims declined to 232,000 in the latest week, down from a revised 237,000 in the previous week. Continuing unemployment claims rose to 1.438 million in the latest week, up from a revised 1.415 million in the previous week.

I should add that the Labor Department also revised second-quarter productivity on Thursday to a 4.1% annual decline, up from its previous estimate of a 4.6% annual decline. In the past 12 months through the second quarter, the Labor Department is reporting a 2.4% productivity decline, which represents the largest annual productivity decline since the productivity reports commenced in 1948.

The Institute of Supply Management (ISM) on Thursday announced that its manufacturing purchasing manager index (PMI) was unchanged in August at 52.8. The new orders component rose to 51.3 in August (up from 48 in July) and the backlog of orders component rose to 53 in August (up from 51.3 in July).

Unfortunately, the production component declined to 50.4 in August (down from 53.5 in July). Overall, any reading above 50 signals an expansion, but the ISM manufacturing PMI is running at its slowest pace since May 2020 after a 27-month expansion.

Coffee Beans

The “Great Resignation” lost some steam in July, as the seasonally adjusted number of quits declined for the fourth consecutive month, according to the latest JOLTS report. At 4.18 million, the number of Americans leaving their jobs remained historically high, though, while the number of job openings hovered at an equally high level of over 11 million last month. Source: Statista. See the full story here.