The latest market forecast from Louis Navellier … what’s in store for the fourth quarter … one sector to consider if you’re putting new money to work today
Coming into September, legendary investor, Louis Navellier, told subscribers to expect selling pressure.
We’ve gotten it.
As I write Monday morning, all three major indices are down more than 4% on the month. The Nasdaq leads the losses, off roughly 4.5%.
Today’s specific selling pressure comes courtesy of China. The Chinese property company, Evergrande, is struggling to meet its debt payments. With more than $300M owed to creditors, the default risk has investors concerned about a domino effect taking down other indebted developers, leading to a systemic shock to the Chinese economy.
But September weakness wasn’t Louis’ only prediction.
He also said this selling pressure would impact the markets throughout the first half of September. But as we finished up the month, strength would return.
So, as we begin the last full week of September, has Louis’ forecast changed?
Let’s jump right into his Platinum Growth Club Flash Alert from last week:
Things should really settle and down and we should meander higher (starting this week) …
Everyone will be waiting for the FOMC announcement at 2 p.m. Eastern on Wednesday. I’m expecting a dovish statement. We had a very good consumer price index report (last Tuesday). That takes a little pressure off the Fed.
And (last Thursday) we had a very good retail sales report. They were expecting a decline, but we got a significant increase. So, consumers are still spending. We’ll probably get an upward GDP revision because of that.
Don’t be surprised if the market surges Wednesday if we have a dovish FOMC statement as I’m anticipating. Now, when I say “dovish,” they’ll probably admit they’re going to taper, but maybe not taper as much as everybody thought.
***It’s not just a dovish Fed that Louis believes is about to kick the market back into growth-mode
Louis is also looking for a strong third quarter earnings season, beginning in mid-October.
For more on this, let’s turn to FactSet. They’re the go-to earnings data analytics company used by the pros.
Analysts and companies have been much more optimistic than normal in their estimate revisions and earnings outlooks for the third quarter to date. As a result, expected earnings for the S&P 500 for the third quarter are higher today compared to the start of the quarter.
The index is now expected to report the third-highest (year-over-year) growth in earnings since Q3 2010 for Q3 (2021). Analysts also project earnings growth of more than 20% for the fourth quarter of 2021.
These above-average growth rates are due to a combination of higher earnings for 2021 and an easier comparison to weaker earnings in 2020 due to the negative impact of COVID-19 on numerous industries.
In terms of estimate revisions for companies in the S&P 500, analysts have increased earnings estimates in aggregate for Q3 2021…
More S&P 500 companies have issued positive EPS guidance for Q3 2021 than average as well. At this point in time, 102 companies in the index have issued EPS guidance for Q3 2021, Of these 102 companies, 47 have issued negative EPS guidance and 55 have issued positive EPS guidance. The percentage of companies issuing positive EPS guidance is 54% (55 out of 102), which is well above the 5-year average of 39%.
Given this strength, if you’re looking to add any cash to your positions, Louis believes this week is a good time to begin putting new money into the market.
Although it’s hard to put money into a falling market like we’re seeing today, the reality is you would be taking advantage of lower prices.
***One more tailwind behind stocks – seasonality
From the great Mark Twain:
This is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August, and February.
Twain’s humor aside, October is actually a strong month for stocks. From Louis’ Platinum Growth Club September Live Chat last week:
This chart shows you the September seasonality in the last 100 years, 50 years and 20 years. And clearly, as you can see, September is a weak month.
But look at October. It’s actually pretty strong. And in the last 20 years, it’s been even better.
Now that shocks a lot of people because they still remember October ’87, but obviously that was a while ago and we are going to have good earnings.
So, I think we’ve got a lot to look forward to. So, this is the pause that refreshes.
This is definitely the time to invest, if you want to invest. There’s no doubt about it.
If we expand our horizon to evaluating the entire fourth quarter, things get even better.
From ETF Database:
Over the last decade, the S&P 500 Index has averaged a 4% gain in the final three months of the year according to an analysis of Kensho, a market data analysis platform. The S&P 500 had traded up 80% of the time.
In addition, the Dow Jones Industrial Average had added 5% in fourth quarters over the past 10 years, trading positive 80% of the time.
So, September has been bumpy, true to form. And clearly, as today’s losses illustrate, we’re not out of the woods yet. But there are reasons to be optimistic as we look toward the fourth quarter.
***If you’re looking to put new money to work, Louis has an idea for you
We’ve profiled this sector many times here in the Digest. It’s what we call an “inevitable” trend. In other words, it is inevitable that this sector will experience massive grow in coming years, rewarding investors. That’s just an unfortunate reflection of the state of cybercrime in our world.
Last week, Louis updated his Growth Investor subscribers on Apple’s latest breach. This hack is especially dangerous because you don’t have to actually click on an infected link in an incoming email or text to be victimized.
You don’t have to do anything except receive a text and you could still get infected by some of the latest, ultra-sophisticated spyware known as “zero-click exploits.” They can leave your phone, computer or smartwatch completely compromised by unscrupulous hackers, without you ever knowing.
Such a flaw was recently found on Apple Inc. (AAPL) devices’ iMessage application by investigators at The Citizen Lab, a cybersecurity research center at the University of Toronto, which published a report about the exploit Monday.
After providing more detail about Apple’s response, Louis turns toward the related investment opportunity – cybersecurity stocks. And there’s one in particular he likes…
CrowdStrike Holdings, Inc. (CRWD).
Back to Louis:
The company is in the lucrative cloud security business—and its business has been booming since the global COVID-19 pandemic.
Specifically, CrowdStrike offers real-time endpoint security, threat intelligence and cloud workload protection, helping prevent cyberattacks on and off an enterprise’s network.
We first put Crowdstrike on your radar back in our June 8 Digest. Its’s climbed 19% since then, despite September’s overall market losses. But given the inevitable nature of this sector combined with Crowdstrike’s fundamental strength, we anticipate far greater gains in the years ahead.
Here’s Louis’ bottom-line:
Wrapping up, September is shaping up to be a bloody one for investors. But if Louis is right, look for stocks to find footing later this week. Then we have earnings strength and seasonality to help us enjoy a strong fourth quarter.
We’ll keep you updated here in the Digest.
Have a good evening,