Category Archives: Daily Top Ten

Topley’s Top Ten – January 21, 2019

1.China posts slowest economic growth since 1990

LINGLINGWEI
BEIJING– China’s economic expansion languished to its slowest pace in nearly three decades last year, as a bruising trade fight with the U.S. exacerbated weakness in the world’s second-largest economy.

The 6.6% growth rate for 2018 reported Monday is the slowest annual pace that China has recorded since 1990. The economic downturn, which has been sharper than Beijing expected, deepened in the final months of 2018, with fourth quarter growth rising 6.4% from a year earlier.

Adding to the gloom was the trade conflict with Washington. The uncertain outlook for Chinese exporters caused companies to delay investing and hiring and in some cases even to resort to layoffs–a practice that is often discouraged by China’s stability-obsessed Communist Party rulers. The official jobless rate ticked up to 4.9% last month from 4.8% in November.

In the southern technology and export-manufacturing center of Shenzhen, for instance, many private makers of electronics, textiles and auto parts furloughed workers more than two months before the Lunar New Year holiday, which begins in February, according to business owners and local officials. The neighboring city of Guangzhou saw growth slump to 6.5% last year–well short of the 7.5% annual target set by the city government–as trade tensions hit the city’s manufacturing sector hard.

Some economists and investors have said China’s economy is far more anemic than the government’s 6.6% rate of expansion for 2018. They note the government’s move on Friday, just ahead of Monday’s data release, to cut the 2017 growth rate to

“The economy faces downward pressure,” said Ning Jizhe, head of the National Bureau of Statics, at a news conference Monday. In particular, Mr. Ning pointed to “complicated and severe external environment.”

Write to Lingling Wei at lingling.wei@wsj.com

EEM-Emerging Markets ETF traded to 200day twice and held on long-term weekly chart.

www.stockcharts.com

China 30% of Fund

https://www.ishares.com/us/products/239637/ishares-msci-emerging-markets-etf

  Continue reading

Topley’s Top Ten – January 18, 2019

1.Performance Based on Valuations Since Dec. 24th Lows.

Bespoke

The first chart below shows the performance of S&P 500 stocks based on their valuations as of 12/24 with the most attractively valued (lowest P/E ratios) stocks to the left and the most expensive (highest P/E ratios) on the right.  The best performing decile by far was the one containing the stocks with the highest P/E ratios, and for the most part, performance steadily declined as you moved left towards the more attractively valued stocks.  The second chart shows performance since the lows based on stocks grouped according to how they performed during the market decline.  Here, the best-performing stocks were the ones that were originally down the most, while the worst performing stocks were the ones that held up the best during the decline.

In both cases, these performance results make perfect sense.  During market sell-offs, as investors become more risk averse it is typical to see stocks with the most aggressive valuations sell-off the hardest while more reasonably priced stocks hold up better.  However, when the market turns around and investors become less risk-averse, they flock to the more aggressive high growth/high valuation stocks.  Likewise, when the market shifts its tone from a defensive posture (during a sell-off) to a more offensive tone (rally) it is only natural that the stocks that held up the best during the defensive phase (like Utilities) underperform during the next more aggressive phase.  Anything else would be contrary to the norm.

Start a two-week free trial to Bespoke Premium to see today’s full Morning Lineup report. You’ll receive it in your inbox each morning an hour before the open to get your trading day started.

https://www.bespokepremium.com/think-big-blog/

Continue reading

Topley’s Top Ten (Short Version) – January 15, 2019

Click Here for Quarterly letter

1.Aggregate S&P Total Return 12 Months Post-Shutdown.

Renmac Research

Without much certainty of a potential end to the political gridlock, we look to factors such as the aggregate S&P 500 index total return 12 months post-shutdown. To receive updates from our Washington Policy Analyst Steve Pavlick & the full team, connect here: http://qoo.ly/uj4xx

https://www.linkedin.com/company/renaissance-macro-research/

Continue reading

Topley’s Top Ten – January 14, 2019

1.Quarterly Letter.

As Springsteen Takes Off on Broadway, Investors Got Blinded By the Light

January 9, 2019

Matt Topley
4th Quarter, 2018

 “She Got Down But She Never Got Tight She’s Gonna Make It Through the Night”

Blinded by the Light

Blinded by the light
Revved up like a deuce
Another runner in the night

She got down but she never got tight
She’s gonna make it through the night

Songwriters: Bruce Springsteen
Blinded by the Light lyrics © Downtown Music Publishing

Springsteen’s off-Broadway

I recently watched Springsteen’s fabulous Broadway performance on Netflix, having seen The Boss over 20 times myself, it still was unreal to hear him tell personal stories around growing up and his career.  As I watched one of the most volatile stock market year ends in history, I couldn’t help but apply investors psyche to a Springsteen song.  Most investors got Blinded by the Light, it was just too easy, buy FANG stocks, buy S&P index, buy anything.  After 2017 being one of the least volatile years in market history including no drawdown of S&P over 3% versus historical annual average drawdown of 14%, the market sent a giant wake-up call that investing is always emotional including an all-time record almost 3% Christmas Eve smack down.  Here’s the good news, it seems she (market) is going to make it through the night as she always does, it’s not 2008 or anything close, we have some wood to chop in the short-term but valuations are reverting to mean.

2018 was a historic year for financial markets in more ways than one-first time in 27 years that stocks and bonds were both negative in the same year, worse stock market December since 1931, over 90% of investable assets were negative in 2018, and no asset class returned over 5% for the first time since 1974.

A Record Share of Asset Classes Posted a Negative Return in 2018

Investors felt pain this year across the board as diversified portfolios were nowhere to hide, in fact some well diversified holdings returned less than the S&P due to exposure to bonds, commodities, international stocks and U.S. small cap stocks.  Three of these groups were down more than the S&P and most bonds were flat to negative.  The tradtional 60/40 model was negative for the year with returns coming in 13% below historic median, if you’re 60/40 was global returns were even lower.  Target Date funds are popular and growing especially in 401k plans, see below as they are posting first negative returns in 10 years.

Read Full Letter
Continue reading