In his podcast addressing the markets today, Louis Navellier offered the following commentary.
If you wish to listen to this commentary, please click here.
Treasury Fears
I realize that the stock market is a lot like NASA’s new moon rocket, which failed to launch this week. What has launched recently are Treasury yields and fears are mounting that the Fed’s balance sheet reduction will send Treasury bill, note and bond yields significantly higher.
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The recent green energy initiatives passed by Congress, plus the student loan relief announced by President Biden are expected to put tremendous pressure on the U.S. budget deficit, which in turn will put more upward pressure on Treasury yields.
I have been arguing that a strong U.S. dollar is expected to continue to attract more foreign buying pressure, but unfortunately, until we can analyze the bid-to-cover ratios at the next Treasury auctions, whether or not that foreign buying pressure can offset surging U.S. federal government spending is uncertain at the present time.
Interestingly, Treasury Secretary Janet Yellen was reportedly not in favor of the student loan relief, perhaps because it would apparently mess up her pending Treasury auctions that now have to be increased in the upcoming months.
Russian Chaos
The other wild card impacting the markets is Vladimir Putin since energy markets remain elevated as most of Europe strives to break away from Russian crude oil and natural gas. Putin recently replaced his long-time ally defense minister, Sergei Shoigu, over frustration with the Ukrainian invasion. Furthermore, six of Putin’s close associates have been shot or blown up, so Putin’s inner circle is becoming increasingly isolated since Moscow is no longer safe.
Whether or not these assassinations are emanating from within Russia or from Ukrainian special forces as the Russian media has claimed is uncertain. As a result, there is a growing possibility that there could be a regime change in Russia that could disrupt the crude oil and natural gas markets.
In the event that there is a ceasefire between Russia and Ukraine, post-Putin, the stock market could explode 40% to the upside. However, as long as Putin remains in power, the Ukrainian invasion is expected to persist in a long drawn-out war and Putin will continue to use energy as a weapon to punish the West.
Russia is shutting down its Nord Stream 1 natural gas pipeline on Wednesday for maintenance and will provide Europe with a preview of how it must learn to cope without Russian natural gas.
Some European officials are saying that they have secured enough natural gas to avoid rationing this winter, but are struggling to replace Russian natural gas for 2023 and beyond, despite LNG imports from Canada, Qatar and the U.S. Europe’s other alternatives are a new natural gas terminal in Estonia from Norway and the extension of a natural gas pipeline from Spain.
Europe's Power Crisis
Regardless of where Europe gets its natural gas, the net result will be much higher utility bills. Since Europe has an elderly population, these high utility bills are causing massive social problems as a growing number of folks cannot pay their utility bills.
The European Union (EU) on Monday said that is preparing to intervene near-term to dampen soaring electricity costs. European Commission President, Ursula von der Leyen, is expected to provide details on how the EU will intervene to help consumers with high natural gas and electricity costs.
The EU is expected to impose a price cap system like Spain is utilizing. The only problem with price caps is that it could cause shortages in the future, so Europe's power crisis is expected to persist for the foreseeable future.
The best news this week was that the Conference Board announced on Tuesday that its consumer confidence index surged to 103.2 in August, up from 95.3 in July. The present situation component rose to 145.3 in August (up from 139.7 in July) for the first increase since March and the expectations component surged to 75.1 in August (up from 65.6 in July).
This is the first increase in consumer confidence after three straight monthly declines. Based on Best Buy’s better-than-expected results this week and surging consumer confidence, there is now growing hope that retail sales will be outpacing inflation in the upcoming months.
Coffee Beans
While Tennis has been grabbing a lot of headlines in the run-up to the U.S. Open, it no longer captures the imagination of U.S. sports fans, with only a following of 15.5% according to a survey. Football is the most popular sport in the U.S. with 74.5% of Americans following the sport, next comes basketball with 56.6%, baseball with 50.5%, and boxing with 23.4%. Source: Statista. See the full story here.
