Topley’s Top Ten – December 5, 2019

1.Goldman Recession Indicator.

After delivering three interest-rate cuts this year, the Federal Reserve seemed to indicate that it “would need to see a really significant move up in inflation that’s persistent before we even consider raising rates to address inflation concerns.” As a result of this, the bank expects fund rates to remain unchanged in 2020.

Earlier this year, the bank’s economists put the risk of a US recession within the next 12 months at one in three. Now it’s cut the chances to one in five.

“The current expansion is now the longest in US business cycle records dating to the 1850s, and some recession fears may simply reflect an instinctive sense that its time is nearly up,” the economists said.

“This has not been an unreasonable thought historically, as the two usual late-cycle risks-inflationary overheating and financial imbalances-often did grow over time. But so far both risks look limited,” they added.

Low recession risk, faster growth, and unemployment at a 70-year low — here are Goldman Sachs’ predictions for the US economy in 2020–Yusuf Khan

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Topley’s Top Ten – December 2, 2019

1.When You’re Born Will Affect Returns….Two 30 Year Comparisons.

When you’re born has a huge impact on lifetime investment returns. Genetics play a role in our health, and when we’re born has a big effect on our portfolio. An investor born in 1902 that invested 100% in U.S. stocks (VTI) from 1932 to 1962 earned 10.2% per year – turning $100,000 into an inflation-adjusted $1.8 million.

Shifting the investment window to 1965 to 1995 results in only earning $343,000. We can’t control when we’re born, so it’s important to focus on what we can control: saving more money, reducing fees, and increasing diversification.

Source: Page 27 of The Four Pillars of Investing

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Topley’s Top Ten – November 26, 2019

1.New All-Time Highs in Equities Still Led by Large Cap.

When we examine these areas of the broader market by way of the aggregated S&P 1500 Index, we find that a total of 237 stocks (about 16%) within the index have moved to new all-time highs since October 1st. As shown in the chart below, we can see that some areas of the market are participating more in this rally than others. Large caps have led the way, not only by performance but also by headcount, accounting for 116 of the 237 stocks (48.9%) moving to new highs. Mid-caps are next in line with 94 stocks (39.6%), followed by small caps with 27 stocks (11.4%).

From Nasdaq Dorsey Wright

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Topley’s Top Ten – November 25, 2019

1.M2 Money Supply Growing at 10.4% Clip Over Last 3 Months.

“Jason DeSana Trennert, who runs Strategas Securities, notes that the M2 money measure—cash, checking, savings deposits, small certificates of deposit, and money-market funds—has been growing at a rapid 10.4% annual clip over the past three months.

Supporting that growth has been the rapid expansion of the Federal Reserve’s balance sheet, which has climbed at a 31% yearly rate over that span. While the Fed says its monthly buying of $60 billion of Treasury bills doesn’t represent quantitative easing—the central bank’s past rounds of securities purchases to stimulate the economy—Trennert calls it a “distinction without difference for owners of risk assets,” such as stocks. The expansion has been international, adds Evercore ISI, which points out that the balance sheets of the European Central Bank and the Bank of Japan also are headed higher.”

M2 money supply monthly chart

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