Why Investor Louis Navellier Is Concerned About Bond Vigilantes

Since Federal Reserve Chair Jerome Powell’s press conference on Wednesday, the yield on the 10-year Treasury Note has added 10 basis points, rising to around 1.75% early Thursday morning. Rising yields were “spooking” some investors ahead of Powell’s press conference, according to growth investor Louis Navellier.

In his Market Commentary for Wednesday, Navellier noted that despite inflation fears, Tuesday’s auction of 20-year notes was “healthy,” with a bid-to-cover ratio of 2.51 with “plenty of institutional buying pressure.” Navellier also wrote prior to Powell’s Wednesday announcement that the Fed would leave interest rates alone for now, as “some bond vigilantes think the Fed does not have enough money for its quantitative easing to fully control the Treasury yield curve.”

Navellier sees rising interest rates as the result of rising import prices, rising export prices and a surprise 3% plunge in February retail sales. Import prices rose 1.3% in February, while export prices jumped by 1.6% last month following a 2.5% increase in January. According to Navellier, “In the past 12 months, export prices have risen 5.2% (highest since June 2018), so inflation is brewing, which is naturally putting upward pressure on Treasury bond yields.”

Last month’s big freeze in Texas disrupted the global supply chain and is “expected to impact auto manufacturing, furniture and all the consumer products that use plastic.” Plastics production in the chemical plants of east Texas and western Louisiana was temporarily shut down due to the cold weather and “prices for polypropylene and polyvinyl chloride (PVC) have more than doubled this year.” That, says Navellier, could adversely affect housing starts, because new home construction uses a lot of PVC pipe.

Navellier also commented on a crash in Detroit last week of a Tesla Model Y and a tractor-trailer rig. The National Highway Traffic Safety Administration (NHTSA) has sent a special investigative team to examine the crash. The crash was apparently not due to the Tesla’s self-driving Autopilot feature.

A second crash in Lansing, Michigan, happened in the early morning hours Wednesday, when a Model Y crashed into a parked police car. In that crash, the Autopilot system reportedly was engaged.

In his commentary, Navellier noted:

Tesla has expanded its testing of its new “full self-driving” software to approximately 2,000 of its customers.  However, some drivers had their access revoked to the latest full self-driving software because they “did not [pay] sufficient attention to the road.”  After the Michigan semi-trailer crash last week, Elon Musk tweeted “FSD Beta has now been expanded” and added “No accidents to date.” FSD stands for Full Service Driving.

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