Louis Navellier, Chairman and Founder of Navellier & Associates breaks down why 2021 will be a great year for earnings and what investors should look for going forward.

Video Transcript

SEANA SMITH: We want to bring in Louis Navellier, chairman and founder of Navellier and Associates. Louis, when you take a look at what we just heard from Fed Chair Jay Powell, yes, we were expecting him to say that he expects inflation to be transitory in nature, something that he has said many times in the past. He was consistent with that messaging. Do you agree with it?

LOUIS NAVELLIER: Oh, yeah. He's going to let inflation get well over 2%. The Fed follows the personal consumption expenditure index. That's not widely followed, but when that gets over 2, as long as it doesn't get over 2.4, he's not going to taper. And of course, we're a little uncertain of the Fed's unemployment goal, too. And we don't know if it's 4, 3 and 1/2. We'll have to see. But we're already getting some acute labor shortages in the economy developing. So that'll be interesting. But we're going to have some big inflation numbers here. And as long as we can stay under 2.4, I think they'll keep their quantitative easing where it is right now.

ADAM SHAPIRO: Well, and as he pointed out, it's the expectation of inflation that they fear the most because that's when people start driving prices even higher. But what does this mean for an investor? I mean, the S&P 500 is positive today. It doesn't seem as if mainstream investors are either happy or upset by what they've heard today.

LOUIS NAVELLIER: I really don't think the interest rates are impacting the market at all. I think what it is, is guidance. This is peak first quarter sales and earnings momentum. And the companies that are going to slow down a bit run the risk of getting spanked a little, kind of like [INAUDIBLE] energy. But I think overall, you know, we're going to have very easy year over year comparisons. It's going to be a great year for earnings. So I'm not too worried about it. And most of these stocks that dip are probably good buys near term.

SEANA SMITH: Another thing that the market is closely watching-- you mentioned this in your note-- is potential tax changes and what that could mean here for investors. How big of a worry do you see this potentially being over the next several months?

LOUIS NAVELLIER: I'm actually not worried about it at all. But Senator Joe Manchin is the swing vote. So he's already interfered with the proposed corporate tax increase. I think the main thing on capital gains, they have to keep it the same as the dividend rate. I do not want to see capital gains go higher than the dividend rate. So as long as they move those two rates in sync with each other, it's fine. In the meantime, you have all this infighting over the SALT deductions. You know, a lot of people in Joe Biden's party want to-- are getting upset that a lot of very wealthy people want those SALT deductions increased dramatically because it causes some blue state exodus. So the infighting is unreal. Nothing's going to happen right away. And in the end, Joe Manchin is going to determine what our taxes are going to be.

ADAM SHAPIRO: What do you think he's going to do? Do you think he'll ever budge on the corporate tax increase? Because investors are going to pay attention to that, whatever he does do.

LOUIS NAVELLIER: Well, right now, on corporate taxes, we're at 25. As long as it's 25 or less, no one will get upset, OK? Of course, Yellen's negotiating the global corporate tax. That's a whole different subject. And she's being very successful with that. On capital gains and dividends, we do not want the base rate to go over 28. Right now, it's 20 plus 3.8% above a quarter million. So if they can keep that-- if they can keep it at 28 or less, it'll be great.

Letting it go to a max of income rates is unheard of. That will not pass. So I think that was a wishlist that they'll use for political talking points next year in the election. And by the way, the election is going to be key with the Fed, too. The Fed likes to keep their mouth shut as we go into elections. So the Fed is going to mention tapering and stuff. They're not going to do it before the midterms. So I think the Fed is going to be quiet for a long, long time.

SEANA SMITH: Louis, what do you like in this environment? With all that in mind, what are you favoring?

LOUIS NAVELLIER: I'm favoring the stocks that are actually going to sustain strong sales earnings momentum. You know, we're in a seasonally strong period for the market. And June and July are decent months seasonally. But the market usually gets more narrow. The market's like a race. So, you know, if you look at a marathon, you know, there's some exhausted people at the 12-mile mark. At the 20-mile mark, it really thinned out.

So this market's going to get more thin, more narrow. And I just want to concentrate on the leaders. But I call this market nirvana. Other people call it Goldilocks. I mean, this is as good as it gets as far as sales and earnings go. And the guidance, by and large, has been very, very positive. So it's just, Wall Street is very picky. It's very spoiled. And but things that get hit on guidance will probably bounce right back.