In hisDaily Market Notes report to investors, while commenting on unemployment claims, Louis Navellier wrote:
Q3 2021 hedge fund letters, conferences and more
Consolidation Phase
There seems to be a hesitancy in the market as we get to the end of the earnings season despite the overall very strong results in general. This week, retailers posted very strong results and eased concerns that Christmas will be weak due to poor inventory due to logistics issues. Now that there are no more serious positive earnings announcements to look forward to, the market appears to be in a short-term consolidation phase.
Near term concerns are that banks are rolling back their estimates of when the Fed will start to raise overnight interest rates in 2022, Fed comments about seeing broader-based inflation trends, the possibility of a change in the Fed chairman by the Biden administration, and fears about a seasonal spike in Covid cases. The Dow is now "Red" for November on these concerns and yet tech is showing strength, both a bit of a surprise in the month that tapering of QE by the Fed was announced.
Expectations were that interest rates would rise and punish growth stocks more than value stocks from a compression of P/E multiples. Most likely now is a consolidation phase, with a bias to companies with strong cash flows, and then a sprint by growth names into year-end with a follow-through into traditionally risk-on January. Buy any dip in the next two weeks and be positioned for a bullish couple of months to follow.
Retail Sales Surge
The Commerce Department reported on Tuesday that retail sales surged 1.7% in October and have surged 14.8% in the past 12 months. Although consumer prices based on the CPI have risen 6.2% in the past year, there is no doubt that consumer spending is robust, which bodes well for the holiday shopping season. Sales at online retailers surged 4% in October and electronics & appliance sales rose an impressive 3.8%. Not surprisingly, gasoline sales rose 3.9% in October due to higher prices at the pump. Restaurant and bar sales were flat in October, but have risen 29.3% in the past 12 months. Retail sales have now risen for three straight months, which is a good sign as we head into the holiday shopping season.
Black Friday will provide a good preview of holiday sales. Already, I am getting “Black Friday” special offers from Bose and other retailers, which is a good sign. Black Friday and Cyber Monday are fueled more by the “Clicks” versus “Bricks” retail trade war. Our friends from Bespoke Investment Group have a chart that shows that Clicks now account for 14.37% of all retail sales, while Bricks account for only 11.38%. This chart also shows that Clicks are steadily growing, so I expect in the wake of the October retail sales report that both Black Friday and Cyber Monday will post record holiday sales.
Unemployment Claims
The Labor Department on Thursday reported that new claims for unemployment were essentially unchanged in the latest week after coming in at 268,000. Continuing unemployment claims were much more encouraging and came in at 2.08 million in the latest week. As soon as continuing unemployment claims “crack” the 2 million level, it will likely be big news and help convince the Fed that they have fulfilled their Congressional unemployment mandate.
Even though more than 4 million jobs have disappeared since the beginning of the pandemic, it appears that many workers decided to retire early, since the labor force participation rate has declined. As soon as the Fed decides that it has done enough to stimulate job creation, then it can turn its attention to fighting inflation, which is its other Congressional mandate.
Heard & Notable
U.S. drug overdose deaths surpassed 100,000 for the first time in the twelve months ending April 2021, jumping nearly 40 percent since 2019. The pandemic has been identified as a major contributor to the latest surge in overdose deaths. Source: Statista
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