In his Daily Market Notes report to investors, while commenting on the dead federal spending plan, Louis Navellier wrote:
Q2 2021 hedge fund letters, conferences and more
Welcome to quarter-end window dressing. For the next couple weeks, professional money managers will be making their portfolios “pretty,” by loading up on companies with strong third quarter forecasted sales and earnings. At the end of September, we should get a free “pop” from equally-weighted ETFs that systematically realign their portfolios every 90 days. So even though September is a seasonally weak month, the second half of September is a good month for our powerful growth stocks.
Dead Federal Spending Plan
There is a lot of positive news helping to boost the stock market. First and foremost, the House of Representative’s $3.5 trillion proposed federal spending plan that included massive tax hikes has died. West Virginia Senator Joe Manchin made is crystal clear that he cannot support this spend bill unless it is cut to $1.5 trillion. This demand by Manchin is forcing the House of Representatives to now pick whether or not it wants to pay for extended childcare, green energy incentives or free community college. As a result, the proposed tax hikes and spending plans are collapsing.
Of all the proposed spending plans, extended childcare is most likely to survive, since approximately 2 million of the 5+ million jobs that have been lost due to the Covid-19 pandemic are attributable to working mothers, who had to take care of their kids when schools closed. Naturally, some of the jobs lost are now permanent due to productivity gains that are not going away. These 5+ million lost jobs also have impacted the Fed, since they are gradually concluding that their low interest rate policies are becoming increasingly ineffective at new job creation.
Raising taxes in the midst of a decelerating economy (the Atlanta Fed is now estimating 3.7% annual third quarter GDP growth) that is also characterized by surging inflation is also political suicide, so it will be interesting if any of the proposed spending plans and related tax increases will get passed. Many Americans are mad and during the anniversary of 911, the Mets and Yankee fans were disrespectful of our current political leadership
Decline In Natural Gas Prices
Normally, natural gas prices decline in the fall as the weather cools. However, due to a big drought that has curtailed hydro-electric production, plus a lack of wind in Europe that has dramatically reduced wind output, natural gas is now in high demand for electricity production. Some utilities have even switched back to burning coal for electricity since natural gas price are so high. Naturally, this was not the plan for the “green agenda” and the Biden Administration’s ban on drilling on federal lands, just forced more natural gas to be flared and needlessly burnt, which is now further contributing to high natural gas prices. Although Biden Administration’s ban on drilling on federal lands has been overturned by a federal judge, the Energy Department remains hostile to fossil fuels, which is contributing to high natural gas prices.
I should also mention that GM remains furious that it has to replace all the batteries in the Bolt EVs, since there was a manufacturing error in some LG Chem batteries. This has effectively ruined the relationship with GM and LG Chem, so the production of the Bolt EV has been suspended. So when the production of third best-selling EV in the U.S. has been suspended, clearly there is a problem with the transition to EVs. Furthermore, the NTSB investigation into Tesla’s automatous driving software is also complicating the transition to EVs. So I for one will be very curious what incentives for continuing the “green agenda” the Biden Administration may pass, since right now, there only seems to be chaos.
