Source: BCA Research as of 7/31/2020

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• The dominance of FAANGM stocks over the past 10 years is the latest in a long line of recurring manias that tend to crop up each decade. The 1960's was the Nifty 50 era dominated by Blue Chip stocks like Disney. Stagflation in the 1970's saw Gold and precious metals skyrocket. Japanese Banks dominated the 1980's before entering a Lost Decade(s). This ushered in the Tech Bubble in the 1990's and Chinese consumption drove commodity prices into mania territory in the 2000's. That leads us to today, where New Economy stocks are up nearly 20x since the start of the last decade.
• In each of the above mentioned manias, when returns for the asset bubble reached 10x-20x for the decade, the ensuing 5-10 years were not pleasant. In fact, these asset classes ended up falling around -40% over the next 5-10 years after the mania was unwound.
• We cannot say when this current mania will end or what will cause its unwinding. History suggests we are close to an upper band when prior bubbles deflated. If we are indeed at the start of a new economic cycle (see last week's Chart of Interest 09/09/20) then the market should broaden out from the FAANGM's, where long-term forward returns may be hard to come by, and rotate into areas that offer better return potential. We continue to think Value and International are poised to benefit from this rotation.

This publication has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy, or investment product. Past performance does not provide any guarantee of future performance, and one should not rely on performance as an indication of future performance. Commentary may contain subjective judgements and assumptions subject to change without notice. There can be no assurance that developments will transpire as forecast. Information contained herein has been obtained from sources believed to be reliable but not guaranteed. No part of this publication may be reproduced in any form, or referred to in any other publication, without express written permission of Todd Asset Management LLC. © 2020

Source: ISI as of 8/25/2020

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• Incoming data continues to point to a sharp recovery, further solidifying that April was in fact the low of the cycle. If April was the low, then we are at the very beginning of a new economic cycle. And as Ed Hyman (ISI) reminds us in the chart above, cycles on average last 8 years and see the S&P increase +250%.
• It's always difficult to envision longer-term growth prospects when you are only a few months removed from the depths of a recession, let alone a mini-Depression as some have labeled 2020. However, the chart above offers a great perspective given where we are in the economic cycle.
• We continue to believe that we are in the middle of a longer-term secular bull market. (See link below for our White Paper) Like the great bull markets of the 1950's-60's and 1980's-90's, sharp cyclical bear markets are common occurrences. We would expect performance to broaden out in the second leg of this bull market as International markets break out and US markets become less driven by the Top 10 largest names.
  The Case for the S&P Doubling and a Global Bull Market

This publication has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy, or investment product. Past performance does not provide any guarantee of future performance, and one should not rely on performance as an indication of future performance. Commentary may contain subjective judgements and assumptions subject to change without notice. There can be no assurance that developments will transpire as forecast. Information contained herein has been obtained from sources believed to be reliable but not guaranteed. No part of this publication may be reproduced in any form, or referred to in any other publication, without express written permission of Todd Asset Management LLC. © 2020

Source: Bloomberg, US Treasury and Todd Asset Management as of 8/28/2020
US Twin Deficits = US Federal Budget Deficit + Current Account Balance. These series are shown as a percent of US Nominal GDP and led by 2 yrs.

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• The Covid-19 Pandemic has been unprecedented in many respects, as has the response from policy makers to stabilize the economy. As a result deficit spending has exploded to the widest level since WWII, accounting for more than -17% of US GDP.
• Historically, rising deficits have led to a much weaker Dollar. With the Dollar trading at multi-year lows, we believe headwinds continue to pile up (i.e. lower interest rates in US, global economic recovery, etc.) that can push the Dollar much lower over the coming years.
• A bear market for the Dollar would also have implications on several other familiar trades that have become historically stretched. A weakening Dollar has typically coincided with Value outperforming Growth and International markets outperforming the US. Leadership changes tend to occur around recessionary bear markets and the weakening Dollar may be indicating a rotation from Growth to Value and US to International is on the way.

This publication has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy, or investment product. Past performance does not provide any guarantee of future performance, and one should not rely on performance as an indication of future performance. Commentary may contain subjective judgements and assumptions subject to change without notice. There can be no assurance that developments will transpire as forecast. Information contained herein has been obtained from sources believed to be reliable but not guaranteed. No part of this publication may be reproduced in any form, or referred to in any other publication, without express written permission of Todd Asset Management LLC. © 2020

Source: BCA Research as of 6/16/2020

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• Several months back (03/31/20) we put out a Chart of Interest highlighting China's growth trajectory as they are at the forefront of the COVID-19 pandemic where economic activity is about 2 months ahead of the rest of the world. Our base case at the time was for an estimated "V" shaped economic event with an intense recession.
• The chart above on China's Infrastructure spending is a strong indication of actual economic activity that points to a "V" shaped recovery unfolding as a result of historic global stimulus. Policy support helped activity in China bottom in February and looks to have helped activity in most of the rest of the world bottom in April.
• Policy support has been larger and more quickly deployed than expected. As lockdown restrictions continue to ease, we are encouraged by recent global economic data releases. If a recovery is indeed underway, as equity markets suggest, we could be at the beginning of a new bull market that lasts years.

This publication has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy, or investment product. Past performance does not provide any guarantee of future performance, and one should not rely on performance as an indication of future performance. Commentary may contain subjective judgements and assumptions subject to change without notice. There can be no assurance that developments will transpire as forecast. Information contained herein has been obtained from sources believed to be reliable but not guaranteed. No part of this publication may be reproduced in any form, or referred to in any other publication, without express written permission of Todd Asset Management LLC. © 2020

Source: Bloomberg, FTSE Russell, S&P, Strategas and Todd Asset Management as of 5/28/2020.
The top panel shows the relative price performance of the Russell 1000 Value divided by the Russell 1000 Growth. The series is indexed to 1 on 12/31/1992. The bottom panel takes the 5 largest names in the S&P 500 each month and sums the weights. Current top 5: Microsoft, Apple, Amazon, Facebook and Alphabet.

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• Much has been written about the outperformance of Growth over Value and the dominance of a handful of mega-cap Tech names (FANGMAs). Given that we are observing historically extreme readings on both of these dynamics (see above), we wonder whether a rotation could be in store.
• The last time we saw these levels of concentration in the S&P 500 was back in the Tech Bubble. This just so happened to coincide with a recession, bear market and rotation from the Growth market that dominated the 1990's to Value. Recessionary bear markets have typically resolved with leadership changes (i.e. Growth vs. Value, US vs. International, Defensive vs. Cyclical, etc.).
• The global economy is opening back up as lockdowns are lifted which is helping investors gain comfort that the worst of the recession may be behind us. If we continue to see this recovery unfold, improved visibility could drive a rotation into Cyclicals and Value. This could also lead to International outperformance over US, which has historically coincided with Value/Growth cycles.

This publication has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy, or investment product. Past performance does not provide any guarantee of future performance, and one should not rely on performance as an indication of future performance. Commentary may contain subjective judgements and assumptions subject to change without notice. There can be no assurance that developments will transpire as forecast. Information contained herein has been obtained from sources believed to be reliable but not guaranteed. No part of this publication may be reproduced in any form, or referred to in any other publication, without express written permission of Todd Asset Management LLC. © 2020

*Broad market defined as equal-weighted performance of Contravisory universe of stocks
Source: Contravisory Investment Management

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• For the month of March, 2020, the number of new 52 week lows reached an extreme we have not experienced before. Those monthly averages since the 1970s are represented by the chart in red above. Over 25% of stocks made new 52 week lows during the month.
• Going back over the past 46 years, when the percentage of stocks making 52-week lows on the NYSE reaches an extreme, the subsequent 12-month performance of the stock market is impressive. Right now, this chart is reaching all-time highs.
• If history is a guide, market performance over the next year should be better than current sentiment would indicate. Over the study period, there are 10 instances where new lows exceeded 10% of NYSE issues, with the average 1 year gain of an equal weighted NYSE universe (highlighted in the box above) following the peak of over 22%.

This publication has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy, or investment product. Past performance does not provide any guarantee of future performance, and one should not rely on performance as an indication of future performance. Commentary may contain subjective judgements and assumptions subject to change without notice. There can be no assurance that developments will transpire as forecast. Information contained herein has been obtained from sources believed to be reliable but not guaranteed. No part of this publication may be reproduced in any form, or referred to in any other publication, without express written permission of Todd Asset Management LLC. © 2020

Source: Evercore ISI

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• The Global COVID-19 Pandemic is an unprecedented event in our lifetime. A significant recession is underway with the first 2 quarters of 2020 expected to experience some of the worst real GDP numbers since the Great Depression.
• China's population and economy are at the forefront of the COVID-19 Pandemic with its trajectory providing a glimpse in to what we can expect from the Euro and US economies.
• The chart above, from Evercore ISI, presents TAM's current base case for not only China but also Global GDP. After the economy collapsed in January/February (China is about 2 months ahead of US), we are viewing a modest improvement in March.
• COVID-19 Pandemic economic effects have been offset by a record setting amount of global monetary and fiscal stimulus. Policymakers around the world have shown a willingness to do "whatever it takes".
• As the chart reflects, our base case is currently estimating a 'V' shaped economic event with an intense deep recession in the first half of 2020, followed by a sharp global recovery beginning in the third quarter.

This publication has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy, or investment product. Past performance does not provide any guarantee of future performance, and one should not rely on performance as an indication of future performance. Commentary may contain subjective judgements and assumptions subject to change without notice. There can be no assurance that developments will transpire as forecast. Information contained herein has been obtained from sources believed to be reliable but not guaranteed. No part of this publication may be reproduced in any form, or referred to in any other publication, without express written permission of Todd Asset Management LLC. © 2020

Source: Bloomberg, S&P and Todd Asset Management as of 1/31/2020
Top 10 list was screened monthly to capture the 10 largest names in the S&P 500 based on their market cap. The "Forgotten 490" consists of the remaining names in the S&P 500 that were not in the top 10. Current Top 10 include: Apple, Microsoft, Amazon, Alphabet (A and C class shares), Facebook, Berkshire Hathaway, JPMorgan Chase, Johnson & Johnson and Visa.

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• The largest ten stocks almost doubled the market performance over the past five years. Their average gain over the past five years is 140%, compared to the S&P return of about 75%. This is the largest spread we've seen since the Tech Bubble.
• This group mostly consists of the largest Growth names, which compared to Value is at an extreme on relative performance. We suspect ETFs and Algorithms have contributed to a very crowded trade.
• The broader market (i.e. the "Forgotten 490") is not nearly as strong as the headline index would suggest.

The indexes used in the chart are unmanaged, and not available for direct investment; it include reinvestment of dividends; it does not reflect management fees or transaction costs: S&P 500 Index is a widely recognized index of market activity based on the aggregate performance of a selected portfolio of publicly traded common stocks.

This publication has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy, or investment product. Past performance does not provide any guarantee of future performance, and one should not rely on performance as an indication of future performance. Commentary may contain subjective judgements and assumptions subject to change without notice. There can be no assurance that developments will transpire as forecast. Information contained herein has been obtained from sources believed to be reliable but not guaranteed. No part of this publication may be reproduced in any form, or referred to in any other publication, without express written permission of Todd Asset Management LLC. © 2020

Source: Bloomberg, MSCI, S&P and Todd Asset Management as of 11/30/2019
Series is indexed to 1 on 12/31/1971. The S&P 500 Index is used to represent US equities. In order to show a longer period of time the MSCI ACWI ex-US index was blended with the MSCI EAFE to represent International equities. The ACWI ex-US inception is 12/31/2987, so prior to this point the EAFE was used. Since the MSCI ACWI ex-US contains both Developed and Emerging Market countries, we chose to use this index once data became available.

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• If reversion to the mean is the strongest force in the universe, relative performance between US and International stocks indicate that a tipping point could be near.
• International markets are more cyclically oriented and would be larger beneficiaries of reaccelerating global growth, whereas US markets have been driven by larger Technology exposure (FAANG) over the past 10 years.
• Potential catalysts for a reversal would include: reaccelerating global growth, valuation dispersion and a weaker US dollar.

This publication has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy, or investment product. Past performance does not provide any guarantee of future performance, and one should not rely on performance as an indication of future performance. Commentary may contain subjective judgements and assumptions subject to change without notice. There can be no assurance that developments will transpire as forecast. Information contained herein has been obtained from sources believed to be reliable but not guaranteed. No part of this publication may be reproduced in any form, or referred to in any other publication, without express written permission of Todd Asset Management LLC. © 2019

Source: Robert Shiller, Sidney Homer, Bloomberg and Todd Asset Management as of 7/31/2019

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• When compared with prior periods of low rates, 30 years in the 19th century and 35 years in the last century, the current experience seems short.
• Rates stayed below 4% for 30 years between 1880-1910 and again 35 years between 1925-1960.
• Rates fell below 4% in 2007 and could say at these low levels for another 20-25 years through 2035-2040.
• In today's low interest rate environment, investors may look to equities for increased income. This is why we launched the Global Intrinsic Equity Income (GIVEI) strategy in 2011.

This publication has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy, or investment product. Past performance does not provide any guarantee of future performance, and one should not rely on performance as an indication of future performance. Commentary may contain subjective judgements and assumptions subject to change without notice. There can be no assurance that developments will transpire as forecast. Information contained herein has been obtained from sources believed to be reliable but not guaranteed. No part of this publication may be reproduced in any form, or referred to in any other publication, without express written permission of Todd Asset Management LLC. © 2019

Source: BofA Merrill Lynch Global Investment Strategy, Global Financial Data, John Mauldin as of June 6, 2019

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• Merrill Lynch recently wrote a piece in June highlighting the incredible run over the past 10 years that the S & P 500 (+215%) has had versus the Euro Stoxx 50 (+41%).
• Since 1950 the difference in performance between the US and Europe had typically remained within 1 standard deviation. Around 2015 this disparity blew out to a 4 standard deviation event, reaching the most extreme level seen in at least 70 years.
• This relative underperformance has led many investors to question their allocations to European equities, while others are seeing an opportunity at these valuation levels despite compressed earnings.
• With this chart being at such an extreme that we have not witnessed before, within our International Intrinsic Value strategy our process has led us to become overweight Europe with the expectation of a likely reversion to the mean.

This publication has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy, or investment product. Past performance does not provide any guarantee of future performance, and one should not rely on performance as an indication of future performance. Commentary may contain subjective judgements and assumptions subject to change without notice. There can be no assurance that developments will transpire as forecast. Information contained herein has been obtained from sources believed to be reliable but not guaranteed. No part of this publication may be reproduced in any form, or referred to in any other publication, without express written permission of Todd Asset Management LLC. © 2019

The indexes used in the chart are unmanaged, and not available for direct investment; they include reinvestment of dividends; they do not reflect management fees or transaction costs: S&P 500 Index is a widely recognized index of market activity based on the aggregate performance of a selected portfolio of publicly traded common stocks. Euro Stoxx 50 Index, Europe's leading blue-chip index for the Eurozone, provides a blue-chip representation of supersector leaders in the region. The index covers 50 stocks from 11 Eurozone countries: Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain.

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• Recent market volatility has felt like an "echo" of 2015-16 with many of the same concerns causing heightened fears of deep recession.
• Slowing global growth, monetary tightening, commodity weakness and uncertainty over Brexit led to a fear trade that saw Defensive leadership in both episodes. This leadership change occurred despite the fact that defensive sectors were expensive, both relative to history and vs. Cyclical sectors.
• Like 2016, we think coming resolutions to many of these concerns should set up 2019 to be better than investors initially feared as trade deals likely get struck, monetary policy becomes unrestrictive, fiscal policy initiatives kick in, a Brexit outcome unfolds and US Dollar tailwinds abate.
• Our fundamentally oriented discipline continues to highlight more Cyclical and economically sensitive parts of the market, which are more attractively valued with better earnings growth profiles than their Defensive counterparts. These areas led after the 2016 trough as fears subsided and growth recovered. We think we are set up for a similar "echo" recovery over the coming quarters.

The index used in the chart is unmanaged, and not available for direct investment; they include reinvestment of dividends; they do not reflect management fees or transaction costs: MSCI ACWI ex-U.S. Index is a float-adjusted market capitalization index that is designed to measure the combined equity market performance of developed and emerging market countries excluding the United States. The ACWI ex-U.S. includes both developed and emerging markets. For investors who benchmark their U.S. and international stocks separately, this index provides a way to monitor international exposure apart from U.S. investments.

The MSCI information may only be used for your internal use, may not be reproduced or redisseminated in any form and may not be used as a basis for or a component of any financial instruments or products or indices. None of the MSCI information is intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such. Historical data and analysis should not be taken as an indication or guarantee of any future performance analysis, forecast or prediction. The MSCI information is provided on an "as is" basis and the user of this information assumes the entire risk of any use made of this information. MSCI, each of its affiliates and each other person involved in or related to compiling, computing or creating any MSCI information (collectively, the "MSCI Parties") expressly disclaims all warranties (including, without limitation, any warranties of originality, accuracy, completeness, timeliness, non-infringement, merchantability and fitness for a particular purpose) with respect to this information. Without limiting any of the foregoing, in no event shall any MSCI Party have any liability for any direct, indirect, special, incidental, punitive, consequential (including, without limitation, lost profits) or any other damages. (www.msci.com).

This publication has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy, or investment product. Past performance does not provide any guarantee of future performance, and one should not rely on performance as an indication of future performance. Commentary may contain subjective judgements and assumptions subject to change without notice. There can be no assurance that developments will transpire as forecast. Information contained herein has been obtained from sources believed to be reliable but not guaranteed. No part of this publication may be reproduced in any form, or referred to in any other publication, without express written permission of Todd Asset Management LLC. © 2019

Source: ISI

Cyclical spending includes: Investment in equipment and intellectual property products, residential housing, commercial real estate, consumer durables, and business inventories.

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• Late cycle fears have created a great deal of uncertainty and volatility over the past 3 years. In this context, investors have been quick to price in a recession believing any of a number of risks (Fed tightening, Trade wars, Brexit, etc.) would cause an end to a business cycle that is now over 10 years old.
• We believe we are much earlier in the cycle than consensus believes and have noted a number of factors that support this outlook. The chart above shows cyclical spending is nowhere near levels that preceded every recession over the past 50 years. It is difficult to get a large downturn in inventory or spending without excess. Historically, this excess has led to a recession only when cyclical spending has reached over 28% of GDP. Currently this measure is at 25%, indicating we are not late in the cycle.
• Our discipline continues to highlight Cyclicals, which are more attractively valued with better earnings growth profiles than their Defensive counterparts. Continued business and consumer spending, which has been suppressed since the Great Recession in 2008, should support more cyclically oriented companies and further extend this business cycle.

This publication has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy, or investment product. Past performance does not provide any guarantee of future performance, and one should not rely on performance as an indication of future performance. Commentary may contain subjective judgements and assumptions subject to change without notice. There can be no assurance that developments will transpire as forecast. Information contained herein has been obtained from sources believed to be reliable but not guaranteed. No part of this publication may be reproduced in any form, or referred to in any other publication, without express written permission of Todd Asset Management LLC. © 2019

Source: Bloomberg, MSCI, S&P and Todd Asset Management. Data as of 1/31/2019.

Credit Impulse measures the 12mo percent change in social financing as a percent of nominal GDP. This series is then led by 9 months.

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• Credit impulse measures new credit issued as a percentage of GDP, a variation of liquidity in the Chinese economy.
• After several years of contracting credit growth led by a deleveraging campaign in China, we are seeing a shift emerge as stimulative measures are implemented.
• Importantly, trends in China's credit impulse tend to lead Emerging Market earnings growth. If history is a guide, this suggests that we should see activity recover in the second half of 2019.
• While we continue to think that a US/China trade agreement in the coming months will support international stocks and earnings in general (and Emerging Markets in particular), a return to expansionary credit impulse further strengthens our conviction in a continued recovery as the year progresses.

This publication has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy, or investment product. Past performance does not provide any guarantee of future performance, and one should not rely on performance as an indication of future performance. Commentary may contain subjective judgements and assumptions subject to change without notice. There can be no assurance that developments will transpire as forecast. Information contained herein has been obtained from sources believed to be reliable but not guaranteed. No part of this publication may be reproduced in any form, or referred to in any other publication, without express written permission of Todd Asset Management LLC. © 2019

MSCI Emerging Markets Index captures large and mid cap representation across 24 Emerging Markets (EM) countries. With 1,125 constituents, the index covers approximately 85% of the free float-adjusted market capitalization in each country. EM countries include: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Pakistan, Peru, Philippines, Poland, Qatar, Russia, South Africa, Taiwan, Thailand, Turkey and United Arab Emirates. S&P® 500 Index is a widely recognized index of market activity based on the aggregate performance of a selected portfolio of publicly traded common US stocks.

The MSCI information may only be used for your internal use, may not be reproduced or redisseminated in any form and may not be used as a basis for or a component of any financial instruments or products or indices. None of the MSCI information is intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such. Historical data and analysis should not be taken as an indication or guarantee of any future performance analysis, forecast or prediction. The MSCI information is provided on an "as is" basis and the user of this information assumes the entire risk of any use made of this information. MSCI, each of its affiliates and each other person involved in or related to compiling, computing or creating any MSCI information (collectively, the "MSCI Parties") expressly disclaims all warranties (including, without limitation, any warranties of originality, accuracy, completeness, timeliness, non-infringement, merchantability and fitness for a particular purpose) with respect to this information. Without limiting any of the foregoing, in no event shall any MSCI Party have any liability for any direct, indirect, special, incidental, punitive, consequential (including, without limitation, lost profits) or any other damages. (www.msci.com).

This publication has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy, or investment product. Past performance does not provide any guarantee of future performance, and one should not rely on performance as an indication of future performance. Commentary may contain subjective judgements and assumptions subject to change without notice. There can be no assurance that developments will transpire as forecast. Information contained herein has been obtained from sources believed to be reliable but not guaranteed. No part of this publication may be reproduced in any form, or referred to in any other publication, without express written permission of Todd Asset Management LLC. © 2019