Topley’s Top Ten – July 16th, 2019

Author

Matt Topley
July 16, 2019

1.Libor Rolls Over with World Rates After Getting Above 2.5%

$200 trillion in loans based off libor…95% derivatives

Libor 6 Month Chart

Libor 5 Year Chart

2.Global Debt $246 Trillion 320% of GDP.

Zerohedge

Global Debt Hits $246 Trillion,320% Of GDP, As Developing Debt Hits All Time High by Tyler Durden

3.FED Has Never Cut Rates With Unemployment Below 4%.

Since the Fed started specifically targeting the FedFunds Rate in 1982… 1) It has cut rates w/ the S&P 500 at an all-timehigh 7 times, last in Jan 1996. 2) It has never cut rates w/ the UnemploymentRate below 4%. Lowest unemployment rate w/ a rate cut was 4.2% in Jan 2001.

4:16 AM – 11 Jul 2019

Rate cut with stock market at all-time highs? It’s beendone before — but here’s what’s different

William Watts

4.NYSE Composite Still Has Not Hit New Highs

The S&P and Large Cap Growth Leading But Full Market Has Not Caught Up Yet.

What is the NYSE Composite Index

The NYSEComposite Index is an index that measures the performance of all stocks listedon the New York Stock Exchange. The NYSE CompositeIndex includes more than 1,900 stocks, of which over 1,500 are U.S. companies.Its breadth, therefore, makes it a much better indicator of market performancethan narrow indexes that have far fewer components. The weights of the indexconstituents are calculated on the basis of their free-float market capitalization. The index itself iscalculated on the basis of price return and total return, which includes dividends.

5.A Look at the Past 18 Months For Market.

Liz Ann Sonders

The past 18months or so have kept stock market riders on the roller coaster. Eachsuccessive high in the S&P 500 has been slightly higher than the priorhigh, but with limited headway made overall, as you can see in the chart below.The latest new high for the S&P, as well as for the Dow Jones IndustrialAverage (Dow), crossed another pair of round number thresholds—3000 and 27,000,respectively (the NASDAQ crossed 8,000 last month). As for the limited headway,the S&P is less than 5% above its January 2018 high.

Source:Charles Schwab, Bloomberg, as of July 12, 2019.

The storyfor smaller cap stocks is decidedly less compelling. Since peaking at the endof August last year, each successive peak in the Russell 2000 has been lower,as you can see in the chart below. It remains about 10% below its August 2018peak. Although we may be getting close to a compelling valuation discount bysmall caps relative to large caps, for now we are sticking with therecommendation to overweight large caps at the expense of small caps.

Source:Charles Schwab, Bloomberg, as of July 12, 2019.

Round Here: Bulls Celebrate Round Numbers for U.S. Indexes

6.Earnings Season Kicks Off This Week.

Source: FactSet, AvalonInvestment & Advisory as of July 15, 2019FactSet, Avalon Investment & Advisoryas of July 15, 2019

Chart of the Week: Second quarter earningsseason for the S&P 500 kicks off in earnest with 57 companies scheduled toreport. Consensus is already expecting a second consecutive year-over-yeardecline in quarterly earnings with 1Q earnings finishing at -0.3% (see chart).Weakness in the global economy seems to be the primary culprit for the expecteddecline. Companies with greater non-U.S. sales have considerably lowerexpectations than those with a majority in domestic sales. This week brings aheavy dose of financial companies with the big banks reporting, but theschedule also includes other sectors including some big technology names likeEBAY, IBM and MSFT. Despite the low expectations, this reporting period is notnecessarily a headwind to stocks. Avalon expects 2Q earnings to beatexpectations and may even squeak out a positive growth rate. In addition,stocks are clearly keying in on the probable “insurance” cuts from the FederalReserve and the future outlook, so company guidance will also be key. Avalonstill expects about 5% earnings growth for 2019 versus the consensus at 2.7%.This positive expectation relies on some improvement in the global economy inthe second half of 2019 and stabilization in the trade war.

Bill Stone Avalon Advisors

7.Mutual Funds Seeing Heavy Outflows as the S&P Hits New Highs.

Mutual Fund Flush

You won’t be disappointed!  In last week’s Bespoke Report,we looked at various measures of investor sentiment including flows into andout of equity mutual funds.  The table below provides a summary of mutualfund flows through the latest reporting period last week showing actual flowson the left and how those flows rank relative to history on the right.  Withthe stock market breaking out of its range to new all-time highs, you wouldexpect flows into equity mutual funds to be surging, and while there has been asurge in mutual fund flows, the direction has been out of as opposed to intostocks.In the latest week, equity mutual funds saw nearly $17 billion in outflows,bringing the four-week total of outflows to just under $44 bln. On a percentilebasis, those total outflows rank below the 2nd percentile relative to all priorone-week periods in the last decade and below the 3rd percentile relative toall other four-week periods.  Not only has there been an exodus out ofequity mutual funds, but the declines have been broad-based across domestic andglobal funds.The fact that outflows have been so large just as the S&P 500 is hittingnew all-time highs is unique, to say the least.  The chart below shows therolling four-week total of fund flows going back to the start of 2007.  Duringthat time, there have only been eight other periods where the magnitude ofoutflows from equity mutual funds has been more than $40 billion (as it isnow).  If you look at the dates of each of those occurrences, more oftenthan not they were during periods of elevated volatility during a marketdecline rather than in unison with an all-time high in the equity market.

8.Amazon Prime Day Sales. +75% in 4 Years.

From Nasdaq Dorsey Wright

9.A major new study suggests it’s possible to avoid developing dementia — 5 ways to reduce your risk

 The study was published Monday by scientists atthe University of Exeter and presented at the Alzheimer’s AssociationInternational Conference 2019 in Los Angeles

Participants with high genetic risk and anunfavorable lifestyle were almost three times more likely to develop dementiaversus those with a low genetic risk and favorable lifestyle.

Living a healthylifestyle could help you reduce your risk of dementia, even if you have agenetic risk of the disease, a new study published in the peer-reviewed healthjournal JAMA found. The study analyzed data from 196,383 adults of Europeanancestry aged 60 and older. Of that sample, the researchers identified 1,769cases of dementia over a follow-up period of eight years.

The risk of dementia was 32% lower in people with a high geneticrisk if they had followed a healthy lifestyle, compared to those with anunhealthy lifestyle.

Here’s what they found: Participants withhigh genetic risk and an unfavorable lifestyle were almost three times morelikely to develop dementia versus those with a low genetic risk and favorablelifestyle. However, the risk of dementia was 32% lower in people with a highgenetic risk if they had followed a healthy lifestyle, compared to those withan unhealthy lifestyle.

“This research deliversa really important message that undermines a fatalistic view of dementia,” saidco-lead author David Llewellyn, an associate professor at the University ofExeter Medical School and fellow at the Alan Turing Institute. “Some peoplebelieve it’s inevitable they’ll develop dementia because of their genetics.”This research, however, says that may not be the case.

Here’s what to avoid: The study, whichwas published Monday by scientists at the University of Exeter and presented atthe Alzheimer’s Association International Conference 2019 in Los Angeles,looked at four main signs of a healthy versus unhealthy lifestyle. Those whowere more likely to develop dementia reported eating an unhealthier diet higherin fat and sugar and salt, did not engage in regular physical activity, smokedcigarettes and consumed alcohol.

Drinking at least one artificially sweetened beverage daily wasassociated with almost three times the risk of developing stroke or dementia.

A 2017 study found afifth item worth avoiding: Artificial sweeteners. “Drinking at least oneartificially sweetened beverage daily was associated with almost three timesthe risk of developing stroke or dementia compared to those who drankartificially sweetened beverages less than once a week,” according to thestudy, published in the American Heart Association journal “Stroke.”

Beware of the medicine cabinet: Researchersalso found a statistically significant association between dementia andexposure to anticholinergic drugs, especially antidepressants, anti-psychoticdrugs, anti-Parkinson drugs, anti-epilepsy drugs and bladder antimuscarinics,which are used to treat urinary incontinence, according to another studyin JAMA Internal Medicine.

Separate research published last month analyzeddata from 284,343 patients in England aged 55 and up. They found “nearly a 50%increased odds of dementia” linked with exposure to more than 1,095 daily doses ofanticholinergics over 10 years, “equivalent to three years’daily use of a single strong anticholinergic medication at the minimumeffective dose recommended for older people.”

“We found greaterincreases in risk associated with people diagnosed with dementia before the ageof 80, which indicates that anticholinergic drugs should be prescribed withcaution in middle-aged and older people,” the researchers wrote.Anticholinergic drugs block a neurotransmitter called acetylcholine in thenervous system.

One 2013 New England Journal of Medicine study foundthat the yearly dementia-attributable societal cost per person in 2010 was$41,689 to $56,290, depending on the calculation. Costs included nursing homecare, out-of-pocket spending, home care and Medicare. A separate invitedcommentary also published this week in JAMA Internal Medicine praised the rigorof the new findings, but cautioned that more evidence was needed.

(Meera Jagannathan contributed to this story.)

10.6 Signs You’re Adaptable Enough to Succeed

Top leaders pivot like life is onefantastic salsa dance, so make change your friend.

By WandaThibodeauxCopywriter, TakingDictation.com@WandaThibodeaux

Fewthings in life are constant, except perhaps paradoxically, the need forchange. And it is the ability toadapt, to modify what you do or think on the fly and over time, thatarguably defines which leaders win the game and which ones get benched. Thismakes it critical to know the signs that youare adaptable enough.

1. You’re able to toss old data in favor of new information.

Peoplewho lack adaptability learn specific sets of knowledge and often become expertsin applying that knowledge well. But when they are presented with somethingthat challenges or dramatically builds on what they have learned, they rejectit. If you can let go of what you’ve accepted before and rewrite your actionsand beliefs according to new knowledge, this is a huge clue that you’re notstuck.

2. You don’t finish everything you start.

The“quitters never win, winners never quit” mentality is incrediblystrong in business. But it’s rare to make a decision having 100 percent of theinformation you actually need–the best you usually can do is to use whateverdata you’ve acquired until the moment where making a call isn’t optionalanymore. Adaptable people know this and recognize that it’s going to lead tosome failure. They do their absolute best but aren’t willing to waste theirenergy to save an already sinking ship. And if a better opportunity comesalong, they’re totally willing to hand current projects off or sacrifice.

3. You don’t shy away from hypothetical scenarios.

It’sabsolutely natural–and often even advisable–to turn to previous knowledge andexperiences to problem solve. But if you’re asked a “what if” questionand draw an absolute blank, it can be a signal that your attachment to previousmethods or data is so strong that you can’t abandon it to imagine yourself insituations you’ve never been in. You might not yet have the ability todetermine pros and cons of circumstances that haven’t happened to you.

4. You argue with civility.

Adaptablepeople will defend what they currently believe. But they also know they don’tknow everything. They will ask questions and hear people out to determinewhether their current data sets still are worth preserving, and they don’t getangry with others for introducing new concepts. And if they do lose a debate,they leave it with respect and even ask the winner to teach them.

5. You can give a lot of updates.

Peoplewith low adaptability don’t have much to say when catching up with old friendsand colleagues, because they aren’t doing or achieving anything new to talkabout. Your adaptability is probably high if you can share progress often oryou’re surprising others with new accomplishments, pursuits or captivatingstories.

6. You surround yourself with explorers.

Peopletend to hang around others who have similar beliefs, interests and behaviors.So adaptable people are the ones whose friends and colleagues are alwayssearching, taking new opportunities and sharing the latest tidbit they’ve takenin. These individuals enjoy variety in their hobbies and daily schedule.

Andif you score low after assessing yourself with these points? The good news is,like many other traits, adaptability is something you can learn to embrace. Itall starts with just making teeny changes–for example, trying a new food,finding a new friend or reading a different genre of book–a little at a time.As your confidence grows, the changes you make can get bigger and morefrequent. And if you can learn to pivot with purpose as you become moreadaptable, you’ll be a force to reckon with.

PUBLISHED ON: JUL16, 2019

The opinions expressed here by Inc.comcolumnists are their own, not those of Inc.com.