Why This Money Manager Is Keeping His Money In The Markets For Q3 - Taiwan Semiconductor (NYSE:TSM)

As we progress into the latter half of the summer, we inch closer to September and the market uncertainty that tends to come with it.

On average, September is the worst month in terms of global market performance.

Money manager Louis Navellier addressed some concerns that may be on investors’ minds going into the third quarter on Monday.

Topics included supply chain bottlenecks, inflation, decreasing Treasury Bond yields and the COVID-19 Delta variant.

Navellier On Supply Chain Bottlenecks

Supply chain bottlenecks are expected to persist through the third quarter, said Navellier.

Taiwan Semiconductor TSM estimates that chip production will catch up to demand by the end of the third quarter.

Shipping bottlenecks still exist at port locations, suggesting that logistics companies will likely do well through September.

Navellier On Inflation

“Supply shortages and port bottlenecks are inflationary,” said Navellier. Though some of the commodity prices surges in the first half of 2021 have moderated, the producer price index (PPI) still grew at a 7.3% annualized rate in June, he said.

As noted before, the majority of that PPI increase was attributable to higher service costs, which historically do not fall back, indicating that we may see some permanent inflation, said the money manager.

Though high consumer demand and supply constraints fuel inflation, the robust economic activity indicates another growing quarter in US GDP, said Navellier.

Navellier On Treasury Yields

Despite inflation looking less “transitory” than the Fed claims, the 10-year Treasury bond yield continues to fall, suggesting that the Fed may follow the European Central Bank (ECB) and other industrialized nations in adopting Modern Monetary Theory (MMT), said Navellier.

MMT is the idea that negative interest rates can combat inflation; however, they also run the risk of normalizing accelerating inflation, he said.

Since much of the world is adopting negative interest rates, foreign money is flocking to the U.S., which is pushing U.S. bond yields lower, said Navellier.

Over the next 12 months, the 10-year may fall below 1%, and Navellier said he expects to see negative U.S. interest rates in his lifetime.

Further, the Biden administration is looking to increase social and infrastructure spending, which could support the case for negative interest rates, as budget deficits “no longer matter under MMT,” said Navellier.

Navellier On The Delta Variant

The Delta variant is a genuine concern some people have due to its reported increase in transmissibility. COVID-19-related hospital rates may be on the rise again, yet the death toll is not increasing at the same rate — likely attributable to growing herd immunity following antibodies from vaccinations and previous infections, said Navellier.

As scary as the variant may be, it seems highly unlikely that Americans will submit to another round of economic closures and lockdowns, said the Nevada-based money manager.

Navellier’s Key Takeaways Into Q3

The third quarter may bring along some seasonal market volatility, as usual, said Navellier.

Many European and American bankers tend to vacation in August, which could cause some “air pockets” to materialize in the markets, he said.

The money manager noted that he plans to stay invested in the markets, primarily in large-cap growth and defensive stocks.

The U.S. remains an “oasis” on the global stage as one of the only industrialized nations to still have positive interest rates and one that is likely to remain open through the course of the Delta variant, said Navellier.

Related Link: Best Consumer Defensive Stocks

About Navellier: Navellier is the chairman and co-founder of Reno, Nevada-based Navellier & Associates, which manages $2.5 billion in assets. He also writes four growth investment-focused newsletters and often provides market outlook and analysis on Bloomberg, Fox News and CNBC.

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