In hisDaily Market Notes report to investors, while commenting on the rise in durable goods orders, Louis Navellier wrote:
Q1 2021 hedge fund letters, conferences and more
Durable Goods Orders Rise
The Commerce Department announced that durable goods orders rose 0.5% by $1.4 billion to $256.3 billion in March. Economists were expecting a 2.3% surge in durable goods orders in March, but supply chain disruptions continue to disrupt manufacturing.
Tesla’s first quarter announcement after the close will likely be big news. I will be looking at how much Tesla is making via electric vehicle (EV) tax credits now that it has more worldwide competition. In 2020, Tesla received $1.58 billion in EV tax credits, but only made $721 million, so the company actually did not make money making EVs in 2021. However, Tesla is becoming increasingly efficient, so if it can make money on its EV manufacturing without incorporating its EV tax credits, then this will be big news that Tesla can compete with the efficiency of legacy auto manufacturers, like Ford, GM and VW Group (includes Audi & Porsche EVs).
The first quarter sales and earnings momentum are expected to represent “peak” momentum, so I expect the overall stock market will become more selective in the upcoming months.
The primary reason that the U.S. cannot fully return to normal is that companies like Docusign and Zoom Video Communications helped to boost worker productivity, so it makes no sense to make all workers return to the office, when they are more productive from their home offices. The consulting firm, McKinsey & Company, recently advised Morgan Stanley that most of its workers must return to their offices full time. However, a survey by Flexjobs reported that 58% of 2,100 workers surveyed said that they would look for a new job if they could not continue to work remotely. As a result, labor shortages are now emerging and wage inflation is expected to emerge in the upcoming months.
Inflation Is Brewing
Inflation is clearly brewing, due to for homes, workers, vehicles and other high demand goods. The inventory of vehicles for sale remains super tight due to the semiconductor chip shortage, which recently caused Ford to curtail production at five more assembly plants, including its popular F-150 pickup truck. The worldwide shortage of shipping containers and bottlenecks at many ports continues to expose problems associated with the global supply chain. Longer-term, the U.S. will undoubtedly strive to find more suppliers in North America, since these supply bottlenecks are proving to be very expensive for most auto manufacturers!
Global growth is picking up as the rebound in both China and the U.S. is helping to lift other economies. Furthermore, the pace of Covid-19 vaccinations in the eurozone are picking up. Purchasing manager indices (PMIs) are now positive in Australia, Japan and the eurozone, which bodes well for overall GDP growth. The only major drag on global GDP growth remains India, which is being hindered by a record number of new Covid-19 cases.
Tax Showdown
The Fed’s main priority was to fix unemployment and spark inflation to stimulate both business and consumer spending. From what I can tell, the Fed is very close to meeting its objectives, but remains committed to keeping key short-term interest rates at or near zero through 2023. The truth of the matter is the Fed can never raise key short-term interest rates much, otherwise it risks blowing up the federal government’s budget deficit, which is expected to cross above $30 trillion soon. So we will likely remain in an ultralow interest rate environment for the rest of our lifetimes!
The only "glitch" that might squelch much of this economic optimism is the fact that the Biden Administration proposed raising both corporate and capital gain taxes. However, Senator Joe Manchin of West Virginia rejected the Biden Administration’s proposal to raise corporate taxes from 21% to 28% (25% is still possible) and I suspect will also reject the Biden Administration’s proposal to raise maximum long-term capital gain taxes from 23.8% (20% plus the 3.8% Obamacare tax) to 43.4%.
As we enter the “bumpy” summer months, investor anxieties naturally rise. June and July are seasonally strong months, but August and the first two weeks of September can be tough. An investor’s best defense remains a strong offense of fundamentally superior stocks.
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