Topley’s Top 10 – September 26, 2023

1. Small Cap Underperformance

Micro-Cap ETF Breaking to New Lows.

Russell 2000 Small Cap Turned Back Down.

2. Small Cap Volatility …Small Cap Vol Index at Lows?

Not sure of reason for low volatility in small caps…No one cares?

3-4. Earlier this Year Pundits were Predicting Dollar Crash….Yuan, Yen, and Euro Straight Down vs. U.S. Dollar

Chinese Yuan to Dollar Straight Down

Japanese Yen to Dollar about to make new lows

Euro to Dollar straight down

5. History of October Stock Returns

Nasdaq Dorsey Wright The histogram below is another visual that helps us wrap our hands around October’s past behavior. It categorizes each October’s return into a performance bracket, allowing us not only to see that there have been more up Octobers than down Octobers, but also the degree to which they have been up or down. If we look at the extremes, notice that only five Octobers since 1950 (including 2018) have experienced a decline worse than -5%. The most common experience in October has been a gain in the range of 2.5% – 5%.

6. TLT 20-Year Treasury $89 Tick will Break to New Lows

7. Europe Stagflation?

Torsten Slok Apollo Consensus expectations show that the market is expecting Europe to be in stagflation in 2023 and in 2024, see charts below.

The classic textbook response to stagflation by the central bank is to keep interest rates high until inflation is under control, and then wait for growth to eventually restart.

This is also what we should be expecting from the ECB. The implication for markets is high short rates and low growth in earnings.

8. These are the most overvalued housing markets in the world, according to UBS-Miami and L.A. Only Two U.S. Cities on “Overvalued” List

Marketwatch By Aarthi Swaminathan

9. Last 20 Years…Philly Highest of Major Cities for Growth Rate of Citizens with Bachelor’s Degree

Philly Inquirer by Lizzy McLellan Ravitch’s%20Degree,that%20of%20the%20surrounding%20area

10. U.S. Sends Drone Ships to Western Pacific in First Deployment Near China

WSJ Autonomous vessels could aid Navy in tracking China’s fleet and provide attack options

By Alastair Gale YOKOSUKA, Japan—Two prototype U.S. drone ships have arrived in Japan for their first deployment in the western Pacific, testing surveillance and attack capabilities that the Navy might find useful against China’s larger fleet.

U.S. Navy Cmdr. Jeremiah Daley said unmanned surface vessels that operate autonomously could substitute for larger ships such as destroyers in groups hunting enemy targets. “For example, one destroyer and two USVs could replace three destroyers. It’s a force multiplier,” he said. 

Daley spoke Thursday on board the unmanned surface vessel Ranger, a 190-foot-long ship originally designed for the oil industry that resembles a flatbed truck. It sat docked at the port of Yokosuka, near Tokyo, home to the U.S. Seventh Fleet. 

While the Ranger doesn’t currently carry missiles, it can carry and launch missiles in modules loaded onto its flatbed rear section.