Topley’s Top Ten – October 22, 2019

Author

Matt Topley
October 22, 2019

1.Emerging Markets Earnings Estimates Increasing.

The earnings outlook in the U.S. isdarkening, but the view from developing markets is perking up. The ratio ofearnings estimates between the S&P 500 and the MSCI Emerging Markets is atthe lowest since early August. Optimism of an end to the trade waris sending EM stocks and currencies toward their second monthly advance.

2.PIMCO Growth Outlook.

Emerging Markets Growth 5x Developed.

3.Watching South Korea Market as Indicator for Exports/End of Trade War

EWJ-S Korea ETF.

Market rallying but still  below highs

4.2019 Returns All Due to P/E Expansion as the FED Lowered Interest Rates.

Mirror image

It’s notjust the difference in earnings growth rates between this year and last yearthat’s distinctive. It’s also what happened to P/E multiples each year. Inessence this year has been the mirror image of last year; as you can see in thechart below.

2019 Mirror  Imageof 2018

Source:Charles Schwab, I/B/E/S data from Refinitiv, as of 10/21/19.

Whereas 2018was a gangbusters year for earnings, P/E multiples contracted. On the otherhand, 2019 has so far brought only marginal earnings growth, yet P/E multipleshave expanded. Why you ask? It largely has to do with the macro/monetaryenvironment. Last year, the Federal Reserve was raising interest rates, andfinancial conditions were tightening (especially in the fourth quarter). Thatis typically a recipe for lower multiples for the simple reason that earningsare less valuable when interest rates are rising and financial conditions aretightening. In addition, the stock market tends to discount forward earnings;and it was glaringly clear that 2019 was going to be a weak year relative to2018.

Fast-forwardto this year: the Fed went into pause mode in January and began cutting ratesin July; alongside generally-looser financial conditions (especially in thefirst half). Additionally, the stock market is discounting an expected reboundin earnings in 2020. That has been a recipe for upward pressure on multiples.The rub is that unless there is a trade truce or some sort of deal; and ifcapital spending continues to weaken, 2020’s earnings estimates are likely toohigh.

It’s Late: So Says the Profits Spread and Leading IndicatorsBy Liz Ann Sonders

5.Corporate Debt Surpasses Government Debt Growth Rate.

Asinvestors search for yield, corporate bonds are viewed as the darlings of thedebt market, principally due to higher yields offered. As the demand forcorporates grows, the spread in yields between corporates and U.S. Treasurieshas narrowed, a further sign of the strength of the corporate bond market, thusencouraging more companies to issue debt. The rise in corporate debt issupplied mainly by investment-grade corporations i.e. from corporations withexcellent credit ratings. High yielding debt (so-called junk bonds) is not asresponsible for the burst in corporate debt as is often portrayed in the media. Well-heeled corporations have turned to corporate debt, rather than issuingadditional equity, to meet their business needs.What lies behind the surge innew corporate debt?

Chart 2: U.S. Corporate Bonds–Annual Issuance and O/S Amounts ($mill)

Guestpost by Norman Mogil

6.Money Pours into Low Vol/Min Vol ETFs

Not sure that investors knew what min vol was 5 years ago

ETF.COM

However, thecurrent ETF industry flows leader has been iShares Edge MSCI MinimumVolatility (USMV), which pulled in $13 billion. USMVhas just $36 billion in assets, but demand has accelerated in the past fiveyears. At the end of 2014, USMV had $3.6 billion in assets and was smaller thanlow-risk peer Invesco S&P 500 Low Volatility (SPLV). However, SPLV’s asset basehas risen only to a current $8.5 billion, despite $3 billion of inflows in2019.

Where the ETF Money Flowed in2019

Fixed income and lower-riskequities have been the darlings of ETF inflows so far this year.–Todd Rosenbluth | Oct 21, 2019

7.Wage Growth For Prime Age Workers Hits Multi-Year High.

Source: @markets; Read fullarticle

8.All ten countries with the youngest population are in Africa

Here we take a look at the top 10countries with the youngest population in the world. They all happen to beAfrican nations, where the total fertility rate is much higher than in developednations. For instance, the TFR in Niger is 7.2 compared to just 1.1 in SouthKorea and 1.2 in Singapore. According to the United Nations’ 2019 Revision of WorldPopulation Prospects, close to half of the world’s youngpopulation is in Sub-Saharan Africa.

A young demographic represents bothchallenges and opportunities for African nations. If the youth get properhealthcare, education and an environment that promotes growth, they could taketheir countries to new heights. But lack of education and healthcare could turnthem into a burden, increasing the risk of poverty, high unemployment, and lowproductivity, says the World Economic Forum.

These are the countries with theyoungest population, according to the United Nations’ 2019 Revision of WorldPopulation Prospects.

10- Zambia, 17.6 years

Zambia is estimated to have apopulation of 17.86 million. The median age of the country’s total populationis 17.6 years, making it one of the youngest countries. About 60.5% of Zambia’stotal population lives below the poverty line. Poverty and the lack ofhealthcare and education make it difficult for Zambia to reap the benefits ofits young demographics.

9- Mozambique, 17.6 years

Mozambique is one of the world’s poorest countries witha per-capita income of just $486 in 2018. The country’s growth has been hurt bycorruption scandals, poor infrastructure, and lack of basic services such ashealthcare. The total fertility rate in the country is 5.5 births per woman.Though Mozambique has mandated all children to attend elementary school,poverty forces most children to work with their parents for a living.

8- Burundi, 17.3 years

The median age of Burundi’s 11.5million population is 17.3 years. Burundi is one of the world’s poorestcountries. The East African nation has witnessed civil wars, genocides, andethnic cleansing since its independence in 1962. The country remains heavilydependent on foreign aid. Its population is growing at an annual rate of 2.5%,more than twice the average global population growth rate.

7- Democratic Republic ofCongo, 17 years

The Democratic Republic of Congo,which has a population of 86.7 million, has the median age of just 17 years. At6.3 births per woman, it has the third-highest fertility rate in the world.Civil wars, militias, and political unrests have hindered the youngergeneration from learning and growing. But things are only expected to improvein the future.

6- Angola, 16.7 years

Angola is doing its best to reap itsdemographic dividend. It is one of the world’s fastest growing economies,though life expectancy and living standards remain low. Angola’s 31.8 millionpopulation has a median age of just 16.7 years. Its total fertility rate is 6.2births per woman.

5- Uganda, 16.7 years

The median age of Uganda’s totalpopulation is 16.7 years. The country witnessed rapid economic growth between1990 and 2010. Foreign investment has started picking up, which could helpcreate jobs and alleviate poverty in the near future. Uganda has a populationof 44.2 million. The country also hosts more than one million refugees from itsneighboring nations.

4- Somalia, 16.7 years

The median age of Somalia’s populationis the same as that of Angola and Uganda. The East African nation has apopulation of 15.4 million and the total fertility rate of 6.3 births perwoman. Most of the children in Somalia live in conflict zones, which meansschools, hospitals, and even children have become targets of armed conflicts.Somalia still has a healthy informal economy despite civil wars and conflicts.

3- Chad, 16.6 years

Chad has the third youngest populationin the world with a median age of just 16.6 years. It has the second-highestfertility rate in the world: 6.4 births per woman. Education remains one of thebiggest challenges in this country of 15.9 million people. More than half thepopulation is illiterate and most parents don’t send their children to school.It could be due to poverty because more than 50% children aged 5 to 14 areengaged in child labor to make ends meet.

2- Mali, 16.3 years

Mali is another African country beingheld back by civil wars and armed conflicts. The median age of its 19.6 millionpopulation is just 16.3 years. Mali has made public education free of chargeand compulsory for children between ages 7 and 16. But school enrollment ispretty low due to extreme poverty. A large number of parents are unable toafford the cost of books, uniforms, and supplies.

1- Niger, 15.2 years

This landlocked country in West Africahas the youngest population in the world. It also has the highest birthrate inthe world at 7.3 children per woman. The Population Reference Bureau expectsNiger’s population to nearly triple by 2050 due to the explosive growth rate.Its population has grown from just 3.6 million in 1960 to an estimated 23.3million in 2019. The growth is a major concern for the government.

Top10 Countries With The Youngest Population In The World

POSTEDBY: VIKAS SHUKLA SEPTEMBER 3, 2019

9.Hilton promotes wellness with fitness-focused guestroom

by Newsroom | 

May 31, 2017 10:15am

Hilton has created a new guestroomdesign with a fully integrated fitness experience.

Wellness is moving beyond the fitness center. Hilton‘snew Five Feet to Fitness guestroom concept will let guests use more than elevendifferent fitness equipment and accessory options in their hotel rooms.

The new room category makes it easy for guests tomaintain their routines while staying in Hilton hotels. 

“A guestroom that combines a sleep and fullyintegrated fitness experience delivers an impressive new dimension ofconvenience and personalization–an industry first,” Ryan Crabbe, seniordirector, global wellness at Hilton, said in a statement. “Five Feet to Fitnesshas been thoughtfully engineered to serve as a guest’s personal wellness stage,complete with sports performance materials and best-in-class gym accessories.Guests will quickly realize we have gone much further than simply placing apiece of equipment in a room.”

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The new room type includes an indoor bike fromBritish cycling company Wattbike that can be used for either longer “indoor-cycling”type exercise sessions or focused interval-training workouts. A Gym Raxfunctional training station provides equipment for strength, core, suspensionand High Intensity Interval Training (HIIT)-style workouts to guests.

At the heart of the concept is the Fitness Kiosk, atouch screen display in the Gym Rax system where guests can view equipmenttutorials and follow guided workout routines. As part of a partnership withAktiv Solutions, Hilton has created more than 200 customized fitness videos incategories ranging from Cardio, Cycling, Endurance, Strength, HIIT, Yoga,Stretch and Recovery.

Five Feet to Fitness also offers a meditation chair,blackout shades, Biofreeze to ease muscle tension, and a range of protein andhydration beverage options.

HiltonFive Feet to Fitness Fitness Kiosk

“The variety of activity the room enables ismotivating,” Crabbe said. “One morning, a guest can decide to roll out of bedfor quick guided stretch and yoga poses. Then, later that evening, he or shemay return from a stressful day and take a brisk bike ride while catching up ona favorite show or the day’s business news. The room is made to suit the variedand evolving wellness habits of our guests.

“We know that no matter how determined people areabout making healthy decisions while at home, the ability to replicate thosechoices are often not as accessible as they should be while traveling,” Crabbecontinued. “We’re creating choice and control for guests to drive their ownfitness experience.” 

Hilton’s Five Feet to Fitness is currently availableat Parc 55 San Francisco – a Hilton Hotel and Hilton McLean Tysons Corner andis coming soon to markets including Atlanta, Austin, Chicago, Las Vegas, NewYork and San Diego.

Read More On

10.AreMonkeys More Cognitively Flexible Than Humans?

Why DoHumans Resist Change?

A newstudy finds that monkeys are more cognitively flexible than we are.

Do yousometimes insist on doing things “your way,” or the “old way” even whenpresented with a shortcut that would help you more quickly achieve your goal?That’s a common form of cognitive bias, a likely unconscious process that involves clinging toa belief system even when we are presented witha more efficient solution. You may ask: “So, what?” What difference does itmake if you take an old approach to solve a problem, as long as it works? Theproblem, researchers say, is that old ways don’t always work best, becausesticking with what we already know to be true, with what is familiar andembedded in our memories, can sometimes result in biased, distorted, or irrational decision-making. 

Monkeys,on the other hand, are much more open to switching to more efficient strategiesto achieve their goals, outperforming humans when it comes to tests ofcognitive flexibility, according to a behavioral study from Georgia StateUniversity, published in a September 2019 issues of Nature’s ScientificReports. The study, which included 60 humans, 7 rhesus macaques, and 22capuchin monkeys, tested the theory that our working memory and rote learning influences whether westick to previously learned behaviors rather than develop or learn new and moreefficient strategies to resolve a problem or reach a goal. 

Both thehuman and primate participants were taught strategies to achieve simple goalsand receive a reward, which took the form of recognition of achievement for thehumans and banana pellets for the primates. They were then shown a shortcutthat would help them reach their goal and receive their rewards sooner. Themacaques and capuchins were significantly more likely to adopt new and moreefficient shortcuts to attaining their goals than humans. When the benefits ofusing a simpler, more direct approach became apparent, however, humans weremore likely to get on board.

Even whenhumans decided to use a shortcut, however, it took them much longer to acceptand use the new strategy than the monkeys, and a significant number—almostone-third of participants—still resisted and used the old approach. Previousstudies have shown that, given a choice, other primates, such as chimpanzeesand baboons, are also more willing than humans to use shortcuts than humans.

Often,there is a good reason to stick to the tried and true. And while a newer oralternative approach to a problem may be more efficient, to the individual,learning and using that approach may not appear to be. We may not accept thatthe familiar rules no longer provide the best solution or that a new strategycould work better. We know there’s more than one way to achieve a goal, and wechoose to use that which is most familiar and most comfortable, regardless ofits efficiency. 

Then whydoes it matter if we stay set in our ways? According to these researchers,depending on rote learning, and failing to think “outside the box” to seek outand use new approaches can, in some situations, mean using outdated, biased,and inefficient strategies that prevent us from making the best or even themost adequate decisions in many areas of our lives, such as health care and finances.