In his podcast addressing the markets today, Louis Navellier offered the following commentary.
Finding Scapegoat
There will be Congressional hearings today about the failure of Silicon Valley Bank and it will be interesting if they will find a scapegoat. An inverted Treasury yield curve is what ultimately caused Silicon Valley Bank to fail, but this bank held much more long-term Treasury bonds than most other banks.
The other culprit that took out Silicon Valley Bank was a spike in Treasury yields in February in the wake of the unexpectedly strong January payroll report, which was grossly exaggerated by seasonal adjustments as the WSJ, MarketWatch, Bain Capital and I have cited.
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In other words, had the Labor Department not exaggerated January payroll growth, Treasury yields might not have spiked and Silicon Valley Bank might still be solvent, so the federal government in the end aided and abetted the stresses that are now impacting the banking system.
The solution to un-stressing the banking system is simple, the Fed has to un-invert the Treasury yield curve with its open market action.
"Domestic" Incentives
Meanwhile, LG Energy Solutions Ltd. announced that it will invest $5.5 billion in building a giant battery manufacturing facility in Arizona. Interestingly, LG will be building the cylindrical batteries that both Lucid Group Inc (NASDAQ:LCID) and Tesla Inc (NASDAQ:TSLA) utilize and manufacture enough batteries for 350,000 vehicles per year.
LG will also be building a separate plant for iron phosphate batteries and is scheduled to begin production in 2026. Toyota and LG are also talking about a potential partnership. Overall, it is apparent that LG is striving to compete with Panasonic for its current business with Lucid, Tesla and Toyota.
Japan and the U.S. reached a trade agreement for the minerals utilized in clean energy technologies. This effectively means that Japan now qualifies for the domestic electric vehicle (EV) subsidies in the Inflation Protection Act.
This trade agreement will not only boost Japanese EV manufacturers but is also designed to attempt to move the EV supply chain away from China, which currently dominates the processing of lithium, cobalt and other battery components.
It will be interesting if Europe follows Japan and tries to get a similar trade agreement with the U.S., since the Inflation Protection Act’s domestic incentives for EV subsidies have irritated France, Germany and other European countries.
Deficit Ceiling
You might be wondering what is the next fear that might envelop the stock market. The federal government’s deficit ceiling is an impending crisis that Congress will debate in the upcoming months and hopefully, we will not embarrass ourselves too much. Another potential glitch is the ongoing Russian invasion of Ukraine.
Although both sides seem to be “reloading” for another clash, they have to wait until the “mud season” is over. French President Emmanuel Macron and other allies are wary of humiliating Russia, so there are some cracks emerging in the NATO alliance.
The U.S. escalation against Iran-backed militias in Syria is another concern, especially now that Iran will soon likely have a nuclear weapon.
In times of uncertainty, our best defense remains a strong offense. I expect now that springtime is here, the national mood will improve, which is just another reason that April is a seasonally strong month.
Now that the Fed and interest rate fears have diminished, all that is left is for inflation fears to continue to cool off. Wholesale prices were actually negative in February, so there is definitely hope on the inflation front.
I expect that the breadth and power of the stock market will gradually improve as more evidence of an economic recovery emerges. A good example is that new home sales have risen for three consecutive months and mortgage rates have fallen for six consecutive weeks.
Although home sales are still down year over year, there are “green shoots” appearing. Instead of a 15% stock market, where the best A-rated stocks have been performing the best, I am hoping that as the stock market’s breadth and power expands, we will soon be in an 18% market, where we will finally have more A-rated winners.
Coffee Beans
Sniffing other people's body odor may be able to help treat social anxiety, according to new research. Patients who completed a mindfulness session while exposed to body odors saw a 39% reduction in social anxiety, while without body odor there was a 17% reduction in anxiety scores.
However, researchers said more work is needed to confirm the link. Source: Sky News. See the full story here.
