10-1-24: America’s Global Advantage Will Likely Continue – No Matter Who Wins in November

by Louis Navellier

October 1, 2024

No matter who wins in November, what makes American great is that we are blessed to be both food and energy independence, and Americans typically have more disposable income than most people in other countries. Furthermore, our 50 states are competitive with each other and act as economic laboratories, so many Americans and businesses tend to gravitate to pro-business states, like Florida, Texas or Tennessee.

Another factor in America’s favor is demographics, since unlike most nations in Asia and Europe, we are expanding our population while other nations are characterized by shrinking population. American growth is particularly strong in pro-family regions like the Mountain West and South, as well as through robust immigration. In addition to the U.S., some of the few other big countries that are growing are Brazil and India, as the population of the rest of the world is stagnating due to falling birthrates. The U.S. also does a better job of assimilating its immigrants than other countries. Add up all these factors and the U.S. is the premier economic growth engine of the entire world and will likely remain so for the foreseeable future.

The higher cost of green energy is getting a lot of push back from both businesses and consumers in America, but it’s nothing like what we’re seeing in Europe, since higher electricity costs are destroying manufacturing in Germany and other Euro-zone nations. Last Tuesday, Ifo Institute’s business-climate index slipped to 85.4 in September, down from 86.6 in August. This is the fourth straight month in which Germany’s business sentiment has declined. The Ifo manufacturing component is now at its lowest level since June 2020, as manufacturers continue to struggle with high electricity costs due to the EU’s green transition. This contributes to the rise of Germany’s AfD opposition party due to disagreements on green energy policies and immigration, so Chancellor Olaf Scholz is increasingly becoming a lame duck.

This trend is true for most of the rest of the world, too. The latest S&P Global PMI survey for September came in at 48.9, down from 51.0 in August. Since any reading below 50 signals a contraction, euro-zone GDP may have contracted in the third quarter. The PMI survey noted that Germany was especially soft.

Any alleged economic growth in China may turn out to be just a big lie. The Wall Street Journal reported that a prominent economist, Zhu Hengpeng – the deputy director of the Institute of Economics at the state-run Chinese Academy of Social Sciences for the past decade – was put under investigation, detained and removed from his posts. Zhu made the fatal error of criticizing Xi Jinpeng’s oversight of the Chinese economy on WeChat. The Communist Party in China is increasingly suppressing any negative economic news, especially negative economic commentary. As a result, Zhu Hengpeng may never be seen again.

In the meantime, the People’s Bank of China unveiled a broad package of monetary stimulus measures to revive domestic economic growth. Specifically, China’s central bank cut key short-term interest rates and lowered bank reserve requirements. The People’s Bank of China also introduced a package to shore up the nation’s troubled property sector, including lowering borrowing costs on as much as $5.3 trillion in mortgages and easing rules for second-home purchases. All of these stimulative measures may be a case of “too little, too late,” since deflationary forces are spreading in China, especially in its property markets.

The simple fact of the matter is that China’s population declined by 2.08 million people in 2023 and its population will continue to shrink each year, making any future economic growth increasingly difficult.

Is There an “October Surprise” in the Works?

With just five weeks remaining until the election, it will be interesting to see if there is an “October surprise” that influences the Presidential election, such as a major escalation in the wars in Ukraine or the Middle East. In the wake of the exploding pagers and radios, Israel has escalated its attacks on Hezbollah missile targets and hit hundreds of targets in southern Lebanon. The leader of Hezbollah has been killed, as were other Hezbollah commanders and some Iranian Republican Guards that were advising Hezbollah.

The next phase may be a ground invasion of southern Lebanon to destroy the missiles hidden in homes. In the meantime, an Iranian retaliation is possible. Due to the growing unrest in the Middle East, the U.S. announced last week it was deploying more troops to the region to supplement the 40,000 existing troops.

Ukraine’s President Zelensky visited a munitions plant in Pennsylvania and submitted his “plan for victory” to President Biden. The Biden Administration is preparing a new $375 million aid package for Ukraine. Candidate Trump also met with Zelensky at Trump Tower on Friday and made it clear that he intends to end the war through diplomacy. The war-weary Zelensky did not disagree with Trump.

There may be seven “swing states,” but I remain convinced that whichever Presidential candidate wins Pennsylvania will win the electoral college and become our next President. The Biden Administration’s January ban on LNG expansion infuriated Western Pennsylvania, which has approximately 250,000 jobs related to fracking and processing natural gas for LNG exports. Although Kamala Harris says she is now in favor of fracking, the candidate that is the most sincere and believable is expected to win Pennsylvania.

Inflation is also a hot election topic. On Friday, the Fed’s favorite inflation indicator, the Personal Consumption Expenditure (PCE) index reported a small 0.1% rise in August, in-line with the consensus estimate. In the past 12 months, the PCE has risen 2.2%. The core PCE, excluding food and energy, rose 0.1% in August and 2.7% in the past 12 months. Real consumer spending rose only 0.1% in August. Treasury yields declined after the tame PCE report – a good sign that inflation concerns have diminished.

The other economic indicators were muted last week. First, on Tuesday, the Conference Board announced that its Consumer Confidence index plunged to 98.7 in September, down from 105.6 in August. The present situation component dropped to 124.3 in September, down sharply from 134 in August, and the expectations component also slipped to 81.7 in September, down from 86.3 in August. This consumer confidence report is bad news for Kamala Harris and good for Donald Trump, so I expect the candidates to talk more about the economy in the last few weeks leading up to the November Presidential election.

Speaking of sputtering consumer confidence, the Commerce Department on Wednesday announced that new home sales declined 4.7% to 716,000 in August, compared to a revised 751,000 in July. This was below economists’ estimates and disappointing after new home sales rose 10.3% in July. However, in the past 12 months, new home sales were still up 9.8% compared to a year ago. Mortgage refinancing is suddenly running at the fastest pace in the past couple of years, after mortgage rates declined for eight straight weeks. As a result of lower rates, the housing market is beginning to recover, but it will take several months to see sustained improvement, since consumer confidence has been so badly shaken.

On Thursday, the Commerce Department announced that August durable goods orders were unchanged, which is better than the economists’ consensus estimate of a 3% decline after a revised 9.9% surge in July. Transportation orders declined 0.8% in August, with core durable goods orders (excluding transportation and defense) rising 0.2% in August after declining 0.2% in July. Shipments of durable goods rose 0.1% in August. There was not much to get excited about, as the U.S. manufacturing sector remains stagnant.

The stock market was not too concerned with these reports, as the S&P 500 and Dow each hit new all-time highs on Thursday and Friday! I wouldn’t be too concerned, either, as our fundamentally superior stocks represent the market leadership for the market going into the best-performing quarter, historically. October is a seasonally strong month and November is even stronger. The holiday season and election results should put Americans back in a good mood, and that’s when consumer spending tends to perk up.