2019 WB 3246 FSInsight WhyTheConstructiveOutlookfor2019isfueledbyDemographics

2019 Strategy
Demographics a company
helping US de-couple
Ain’t catching me
‘late cycle’
Thomas J. Lee, CFA AC

Head of Research
inquiry@fsinsight.com
twitter: @fundstrat
Sept. 3, 2019
For Reg AC certification and other important disclosures, see Disclosures, Slide 2.
Disclosures
For important disclosures and rating histories regarding sectors or companies that are the subject of this report, please con tact us or visit FS Insight website at www.FSInsight.com.
Analyst Certification (Reg AC)
Thomas J. Lee, the research analyst denoted by an “AC” on the cover of this report, hereby certifies that all of the views expressed in this report accurately reflect his personal views, which have not been
influenced by considerations of the firm’s business or client relationships.
Neither I, nor a member of my household is an officer, director, or advisory board member of the issuer(s) or has another significant affiliation with the issuer(s) that is/are the subject of this research
report. There is a possibility that we will from time to time have long or short positions in, and buy or sell, the securities or derivatives, if any, referred to in this research
Conflicts of Interest
This research contains the views, opinions and recommendations of FS Insight. As of the time of writing and publication of this presentation, FS Insight does not know of, or have reason to know of any
material conflicts of interest at the time of the publication of this presentation. The Company has no contractual relationship, nor have we received any compensation from any of the companies listed in
this research report.
Analyst Industry/Sector Views
Positive (+): The analyst expects the performance of his industry/sector coverage universe over the next 6-18 months to be attractive vs. the relevant broad market benchmark, being the S&P 500 for
North America.
Neutral (N): The analyst expects the performance of his or her industry/sector coverage universe over the next 6-18 months to be in line with the relevant broad market benchmark, being the S&P 500 for
North America.
Negative (-): The analyst expects his or her industry coverage universe over the next 6-18 months to underperform vs. the relevant broad market benchmark, being the S&P 500 for North America.
General Disclosures
FS Insight is an independent research company and is not a registered investment advisor and is not acting as a broker dealer under any federal or state securities laws. FS Insight is a member of IRC
Securities’ Research Prime Services Platform. IRC Securities is a FINRA registered broker-dealer that is focused on supporting the independent research industry. Certain personnel of FS Insight (i.e.
Research Analysts) are registered representatives of IRC Securities, a FINRA member firm registered as a broker-dealer with the Securities and Exchange Commission and certain state securities regulators.
As registered representatives and independent contractors of IRC Securities, such personnel may receive commissions paid to or shared with IRC Securities for transactions placed by FS Insight clients
directly with IRC Securities or with securities firms that may share commissions with IRC Securities in accordance with applicable SEC and FINRA requirements. IRC Securities does not distribute the
research of FS Insight, which is available to select institutional clients that have engaged FS Insight.
As registered representatives of IRC Securities our analysts must follow IRC Securities’ Written Supervisory Procedures. Notable compliance policies include (1) prohibition of insider trading or the
facilitation thereof, (2) maintaining client confidentiality, (3) archival of electronic communications, and (4) appropriate use of electronic communications, amongst other compliance related policies.
FS Insight does not have the same conflicts that traditional sell-side research organizations have because FS Insight (1) does not conduct any investment banking activities, (2) does not manage any
investment funds.
information is available upon request. Information has been obtained from sources believed to be reliable but FS Insight does not warrant its completeness or accuracy except with respect to any
disclosures relative to FS Insight and the analyst's involvement (if any) with any of the subject companies of the research. All pricing is as of the market close for the securities discussed, unless otherwise
stated. Opinions and estimates constitute our judgment as of the date of this material and are subject to change without notice. Past performance is not indicative of future results. This material is not
intended as an offer or solicitation for the purchase or sale of any financial instrument. The opinions and recommendations herein do not take into account individual client circumstances, risk tolerance,
objectives, or needs and are not intended as recommendations of particular securities, financial instruments or strategies. The recipient of this report must make its own independent decision regarding
any securities or financial instruments mentioned herein. Except in circumstances where FS Insight expressly agrees otherwise in writing, FS Insight is not acting as a municipal advisor and the opinions or
views contained herein are not intended to be, and do not constitute, advice, including within the meaning of Section 15B of the Securities Exchange Act of 1934. All research reports are disseminated and
available to all clients simultaneously through electronic publication to our internal client website, fsinsight.com. Not all research content is redistributed to our clients or made available to third-party
aggregators or the media. Please contact FS Insight sales representative or visit www.FSInsight.com, if you would like to receive any of our research publications.
Copyright 2019 FS Insight LLC. All rights reserved. No part of this material may be reprinted, sold or redistributed without the prior written consent of FS Insight LLC.
Sept. 3, 2019 Slide 2

Disclosure
This material is provided for information only and is not an offer to sell or the
solicitation of an offer to buy any financial instrument or asset class
This material does not and is not intended to take into account the particular financial
conditions, investment objectives or requirements of individual customers. Before
acting on this material, you should consider whether it is suitable for your particular
circumstances and, as necessary, seek professional advice.
Neither the presenter Thomas Lee or FS Insights is registered with FINRA or the SEC.
FS Insights is not affiliated with Interactive Brokers LLC, or any other FINRA broker-
dealer.
The information provided in this presentation is believed to be accurate, but the

accuracy and completeness of the information is not guaranteed.
Past performance is not indicative of future results.

Executive Summary
• World is scary, US stocks ready for bounce
• US equities are de-coupling from RoW
• Labor shortages benefit US competitiveness
• Demographics destiny: Millennials
• Recommended Investment Strategies

Overwhelmingly Bear case… but the Fed is a “Trump” card
Bear case:
Global economy late cycle
HYBRID
Inverted curve Hawk-
dove Fed
Plague of negative rate bonds (30%)
Trump ‘unpredictable’
Fed mixed credibility
Brexit
Crashing global PMIs
Earnings recession
DB ‘tip of iceberg’
No bullets left

PMIs WEAK: PMIs around the world are very weak
Composite PMI Source 8/18 9/18 10/18 11/18 12/18 1/19 2/19 3/19 4/19 5/19 6/19 7/19 8/19
Global Markit 53.4 52.8 53.0 53.1 52.7 52.1 52.6 52.8 52.2 51.2 51.2 51.7
Developed Markets Markit 54.0 53.3 53.6 53.3 52.7 52.3 52.9 52.7 52.0 51.1 51.3 51.7
Emerging Markets Markit 51.8 51.6 51.3 52.6 52.5 51.6 51.7 52.9 52.4 51.3 50.9 51.5
"Diffusion" Total 85% 85% 81% 70% 63% 63% 74% 67% 81% 67% 59% 70% 53%
(% above 50) Developed 92% 83% 83% 83% 83% 67% 75% 83% 83% 83% 75% 92% 83%
Emerging 86% 100% 86% 43% 43% 57% 57% 43% 71% 57% 43% 43% 20%
Commodity 75% 75% 75% 75% 75% 63% 88% 75% 88% 63% 50% 63% 50%
USA ISM 59.0 60.7 59.7 60.2 57.6 56.7 59.1 56.0 55.2 56.4 54.7 53.4
Canada* Markit 56.9 53.9 52.7 53.5 51.4 49.6 51.4 50.5 50.6 52.0 52.1 52.0 49.5
Eurozone Markit 54.5 54.1 53.1 52.7 51.1 51.0 51.9 51.6 51.5 51.8 52.2 51.5 51.8
Germany Markit 55.6 55.0 53.4 52.3 51.6 52.1 52.8 51.4 52.2 52.6 52.6 50.9 51.4
France Markit 54.9 54.0 54.1 54.2 48.7 48.2 50.4 48.9 50.1 51.2 52.7 51.9 52.7
Italy Markit 51.7 52.4 49.3 49.3 50.0 48.8 49.6 51.5 49.5 49.9 50.1 51.0
Spain Markit 53.0 52.5 53.7 53.9 53.4 54.5 53.5 55.4 52.9 52.1 52.1 51.7
UK Markit 54.2 54.1 52.1 50.8 51.4 50.3 51.5 50.0 50.9 50.9 49.7 50.7
Japan Markit 52.0 50.7 52.5 52.4 52.0 50.9 50.7 50.4 50.8 50.7 50.8 50.6 51.7
Australia* Australian Ind. Group
55.9 57.1 54.7 50.8 50.0 52.5 54.0 51.0 54.8 52.7 49.4 51.3 53.1
Singapore Markit 51.1 49.6 52.6 53.8 52.7 50.1 49.8 51.8 53.3 52.1 50.6 51.0
Hong Kong Markit 48.5 47.9 48.6 47.1 48 48.2 48.4 48 48.4 46.9 47.9 43.8
Mexico* Markit 50.7 51.7 50.7 49.7 49.7 50.9 52.6 49.8 50.1 50.0 49.2 49.8 49.0
China Markit 52.0 52.1 50.5 51.9 52.2 50.9 50.7 52.9 52.7 51.5 50.6 50.9
Taiwan* Markit 53.0 50.8 48.7 48.4 47.7 47.5 46.3 49.0 48.2 48.4 45.5 48.1 47.9
South Korea* Markit 49.9 51.3 51.0 48.6 49.8 48.3 47.2 48.8 50.2 48.4 47.5 47.3 49.0
Vietnam* Markit 53.7 51.5 53.9 56.5 53.8 51.9 51.2 51.9 52.5 52.0 52.5 52.6 51.4
Poland* Markit 51.4 50.5 50.4 49.5 47.6 48.2 47.6 48.7 49.0 48.8 48.4 47.4 48.8
India Markit 51.9 51.6 53.0 54.5 53.6 53.6 53.8 52.7 51.7 51.7 50.8 53.9
Brazil Markit 47.8 47.3 50.5 51.6 52.4 52.3 52.6 53.1 50.6 48.4 49.0 51.6
Source: Fundstrat, Bloomberg
Nigeria Markit 56.1 56.3 54.4 55.5 55.0 54.0 53.3 53.6 55.5 52.9 54.8 54.6
South Africa Markit 47.2 48.0 46.9 48.2 49.0 49.6 50.2 48.8 50.3 49.3 49.7 48.4
Indonesia* Markit 51.9 50.7 50.5 50.4 51.2 49.9 50.1 51.2 50.4 51.6 50.6 49.6 49.0
Russia Markit 52.1 53.5 55.8 55.0 53.9 53.6 54.1 54.6 53.0 51.5 49.2 50.2
NEGATIVE RATES: Plague of negative yielding debt soaring…

MOMENTUM TRADE: Falling rates have created massive upside in bonds
The decline in interest rates has created massive upside for bonds, particularly longer term (long duration) bonds.
• The 30-yr and longer bonds of governments have soared 30%-plus since rates began falling. This is the
reason we believe momentum trading is driving the shift into bonds. This is not solely about deflation/ risk-
off, it is a massive momentum trade.
Figure: Price changes since September 2018

Japan and Germany
Massive upside Massive upside
+30% +60% Massive upside
Japan 40-yr bond

(due 2057)
+32%
US 30-yr bond
Germany 60-yr bond (due 2048)
(due 2078)
US 10-yr bond
(due 2028)
+14%
Japan 10-yr bond
(due 2028) Germany 10-yr bond
-1% (due 2028)

+10%
Nikkei 225
+1%
S&P 500
Germany -8%
-15% DAX
Source: Fundstrat, Bloomberg, Factset

REASON #1 ZERO US RATES: The US 10-year could fall to zero TINA
Less influenced by the Fed, the 10-year US Treasury yield is a good indicator of the economy’s health. Recently, the yield
on 10-year US Treasury has fallen to 1.58%, the lowest level since September 2016.
• However, compared with other developed economies, the yield on 10-year US Treasury is still relatively high,
reflecting US economy is still strong. We have previously pointed out that the US is the safe haven and
massively outperforming the rest of world.
Figure: 10-year Government Bond Yield (%)

Sorted lowest to highest
7.47
7.24 7.26
Why won’t bond buyers start 6.63
buying US Treasuries,
pushing further lower rates? 3.61
3.01
2.05
1.76
1.51 1.58 1.65
1.14 1.15 1.23
0.90
0.45
0.14 0.17
-0.08
-0.39 -0.38 -0.37 -0.32 -0.32 -0.24
-0.65 -0.60 -0.53
-1.03
Portugal
Netherlands
Sweden
Greece
Switzerland
Ireland
Singapore
Russia
Brazil
Germany
Denmark
Austria
Spain
Mexico
France
Canada
Japan
India
Australia
South Korea
Italy
Finland
Belgium
United Kingdom
Hong Kong
Poland
United States
China
Indonesia

REASON #3 ZERO RATES US: Momentum trade, juice in long-term bonds…
If indeed, investors believe US rates are going to fall, the rational investor will be buying long-term bonds (see below).
• There is more juice in long-term bonds if interest rates fall. This means, long-term bonds see more buying
pressure (momentum), which makes the curve even more inverted.
Figure: Upside potential for bonds if interest rates keep falling

US Treasury 2-year vs. 10-year vs. 30-years; log scale
If markets believe US rates could go to zero, there is a

rush to buy long-term (duration) bonds, which have
more upside… US 30-yr bond
…but this causes curve to invert. 651
+55%
385
Calculated Price as % of Par
US 10-yr bond
US 2-yr note
+15%
235
194 186
+3% 135
161
133
148
166
118 123 120

110 114 107 108 113
100 98 100 101 102 103 105 98
94 95
80
67
Yield to Maturity Yield to Maturity Yield to Maturity

US YIELD CURVE: Entire rate structure of US govt bonds < FF
We believe the Fed does need to cut interest rates, even more than 50bp (consensus) because of the term structure.
• Only a 75bp cut would bring Fed Funds below any of the existing rates today (5-year is lowest at 1.5%).
Figure: US yield curve 1M to 30Y and correlation against Fed Funds Effective Rate since 2012
As of 8/1/2019
Fed funds
2.00-2.25
With a 75bp cut, the

term structure of
interest rates would
normalize…
Fed funds
1.25-1.50

POINT #1: Focus on recession risk overly sensitive, 4X > than ’05-’08 period
In order to appreciate the "over sensitivity" to recession risk, we compared the search volumes of key words “inverted
yield curve” and “recession” today to 2005-2008 period.
• The search for "recession" did not not surface until January 2008. In other words, "recession" fears didn’t
surface until a full 25 months AFTER SEARCHES FOR YIELD CURVE INVERSION PEAKED. By contrast, both
"inverted yield curve" and "recession" are going ballistic now.
Figure: Past 16 years: Google Search Trends for “Inverted Yield Curve” and “Recession”
2004 to Now
4X search volume!!!!
Dec 2005
inverted yield curve

Search term
25 months
Jan 2008 Matches Jan 2008
recession
Search term
Source: Fundstrat, Google Trends

DON’T FIGHT THE FED: When economy mid-cycle and Fed cut… BLAST OFF
Timing of the Fed cut is key. When the Fed cuts and the US economy is in expansion, the first Fed cut drives positive
equity returns.
• As shown below, the S&P 500 has seen gains 100% of the time when the Fed cuts and the US is not in
recession. 100% of the time.
Fed cut + recession: Fed cut + Expansion:

July ‘74, April ‘80, June ‘81, Jan ‘71, Oct ‘84, Oct ‘87,
Jan ‘01 and Sept ‘07 July ‘89, July ’95, Sept ‘98
% return % return
(avg) Win-ratio (avg) Win-ratio
3M -8.0% 20% 3M 9.7% 100%

6M -4.1 20 6M 13.5 100
9M -4.6 20 9M 15.7 100
12M -0.9 40 12M 16.5 100

Positive LEIs when Fed cuts is positive; implies S&P 500 at 3450
Average 6M gain of 14.4% if LEI is positive when Fed cuts
• The gain ranged from 22.3% to 10.4% for the 5 instances
• This implies S&P 500 at 3450 in 6M, with a range of 3300-3700
Figure: 6-month forward returns and implied S&P level

Based on LEI level at first cut of easing cycles
Fed cut + LEI Positive Fed cut + LEI Negative

6-Month Forward Return Average
27.2%
22.3%
Average
15.5% 14.4% 14.4%
12.0% 11.9%
10.4% 8.9%
Average
(1.9%) (1.9%)
(7.9%) (8.2%)
Implied S&P Level Average
(15.2%) (16.1%)
3832
3685
Average
3481 3376 3371 3448 3448
3328 3282
Average
2956 2956
2775 2765
2554 2529
Sep '98 Oct '87 Jul '95 Jul '89 Oct '84 Average Apr '80 Jan '71 Jun '81 Jan '01 Sep '07 Jul '74 Average
LEI YoY
3M Avg(%) 3.1 4.2 4.1 1.4 8.3 4.2 (7.0) (3.3) (0.4) (1.7) (1.2) (7.4) (3.5)

VIX TERM STRUCTURE INVERSION: 6M average gain of 8.9%
The VIX term structure inverting is often a sign of an imminent low. The exceptions are January 2016 and October 2018,
when markets still had a 2-4 weeks of further downside.
• Even in those two cases, the further downside was 3%-4%, and while that seems huge, recoveries were rapid.
Figure: VIX term structure (4M-1M) and the S&P 500
Since 2014
Days Days Days Days Days Days Days

to low: to low: to low: to low: to low: to low: to low:
0 0 1 34 3 18 6

DOWN 3% IN 1-DAY: 6M average gain of 15.3%
It is a positive sign when stocks fall 3% in a day and the VIX term structure is inverted.
• Of the 24 instances, when stocks fall 3% in a day, positive returns seen 87% of the time with average gain of 8%.
Figure: Equity declines of 3% and VIX term structure

Since 2009
1 Month 3 Months 6 Months Vix 4M -
1 Day forward forward forward 1M Term
S&P Level Change return return return Spot Vix Structure 30%.
1 3/5/2009 682.55 (4.3%) 23.4% 38.1% 47.0% 50.17 (7.15)
2 3/30/2009 787.53 (3.5%) 10.9% 17.7% 35.0% 45.54 (4.55)
3 4/20/2009 832.39 (4.3%) 8.5% 14.3% 31.9% 39.18 (1.35) 25%.
4 6/22/2009 893.04 (3.1%) 6.8% 19.2% 24.7% 31.17 (0.20) 23%
5 2/4/2010 1063.11 (3.1%) 7.1% 6.1% 5.9% 26.08 0.45
20%.
6 5/6/2010 1128.15 (3.2%) (5.6%) (0.2%) 8.2% 32.80 0.10
7 5/20/2010 1071.59 (3.9%) 4.3% 0.4% 11.7% 45.79 (1.65)
8 6/4/2010 1064.88 (3.4%) (4.0%) 3.7% 15.0% 35.48 (0.70) 15%.
9 6/29/2010 1041.24 (3.1%) 5.8% 10.2% 20.9% 34.13 1.25
10 8/4/2011 1200.07 (4.8%) (2.2%) 5.1% 10.5% 31.66 (2.90)
11%
1 Month forward return

11 8/8/2011 1119.46 (6.7%) 7.1% 12.7% 20.1% 48.00 (8.90) 10%. 10%
12 8/10/2011 1120.76 (4.4%) 3.0% 9.7% 20.5% 42.99 (8.60) 8% 9%
7% 7% 7%7%7%
13 8/18/2011 1140.65 (4.5%) 6.6% 6.6% 19.1% 42.67 (5.60) 6%
5%.
14 9/22/2011 1129.56 (3.2%) 9.6% 11.0% 23.3% 41.35 (4.75) 4%
15 11/9/2011 1229.10 (3.7%) 2.1% 9.8% 10.2% 36.16 (3.50) 3% 3% 2% 2%
16 8/21/2015 1970.89 (3.2%) (0.7%) 6.0% (2.7%) 28.03 (1.63) 0%. 0%-1%
17 8/24/2015 1893.21 (3.9%) 2.4% 10.2% 2.8% 40.74 (4.43) -1%
-2%
18 6/24/2016 2037.41 (3.6%) 6.8% 6.2% 11.1% 25.76 (0.65)
-4%
19 2/5/2018 2648.94 (4.1%) 2.9% 0.9% 7.6% 37.32 (12.28) (5%)
-6%
20 2/8/2018 2581.00 (3.8%) 8.0% 5.5% 10.6% 33.46 (8.25)
21 10/10/2018 2785.68 (3.3%) (0.2%) (7.2%) 3.7% 22.96 (2.20) -9%
(10%)
22 10/24/2018 2656.10 (3.1%) (0.9%) (0.7%) 10.2% 25.23 (1.25)
23 12/4/2018 2700.06 (3.2%) (9.3%) 3.3% 3.8% 20.74 (0.25)
24 8/5/2019 2844.74 (3.0%) 24.59 (2.70) (15%)
(14) (12) (10) (8) (6) (4) (2) 0 2
Vix 4M - 1M Term Structure
Average (3.8%) 4.0% 8.2% 15.3% 35.08 (3.40)

Median (3.5%) 4.3% 6.2% 11.1% 34.81 (2.45) S&P 500 sees strong 3M + 6M returns
Win Ratio 69.6% 87.0% 95.7% following 3% declines + inverted VIX

AAII BULLS – BEARS < -26: Avg 6M gain of 9.3%
We have looked at the forward 6-month returns of the S&P 500 under different combinations of AAII and PMIs.
• When AAII is this weak, we can see that comparative returns are better than when AAII sentiment is > -26.
• Moreover, when we factor in the level of US PMIs, forward equity returns are considerably better (+10.5% 6M)
and a win-ratio of 75%. This suggests that risk/reward for equities is quite attractive currently.
Figure: Comparative 6M returns of S&P 500 based upon AAII and upon PMI levels
Since 1987
Market AAII PMIs

% bulls-bears Average: 4.0%
> -26 Win ratio: 73%
(n=1,585)
S&P 500 6M Average: 4.2% Current:
(1987-now) Win ratio: 73%
(weeks=1,641) AAII -26.5% US PMIs Average: 9.1%
<= 51 Win ratio: 73%
(n=48)
% bulls-bears Average: 9.3%
Current:
<= -26 Win ratio: 73%
(n=56) PMI = 51.2
US PMIs Average: 10.5%
> 51 Win ratio: 75%
(n=8)

Executive Summary

Beneficiaries of a US recession…
Figure: Beneficiaries of a US recession or rising economic gloom
Per Fundstrat
1. Short Sellers Obvious
2. Democratic Candidates Economy is THE swing factor.
3. Trump Haters Obvious
4. Bond Holders Falling rates = massive upside to bond price
5. China A recession forces Trump to capitulate.
6. Media turmoil sells Ads baby!!!
7. Europe Misery loves company + Schadenfreude
8. Private Equity $2 trillion of dry powder
9. Federal Reserve??? To Be Determined

Despite Armageddon prognostications, S&P 500 up 17% YTD
Figure: S&P 500
YTD
+17% YTD

S&P 500 — The Bull market “takes a licking but keeps on ticking”

Overwhelming Bear case… but the Fed is a “Trump” card
Bull case:
US de-coupling structural reasons
US mid-cycle
Millennials
Sentiment so bad, its bullish
Don’t fight the Fed
Inflation picking up

S&P 500 pulling away from Global equities for some time…
The S&P 500 continues its relentless outperformance against global equities in 2019—our assessment since start of year.
• The big picture drivers continue to be: strong US franchises (Technology, Healthcare, in particular); plus,
supportive White House/ government policy and lastly, supportive central bank policies (easing financial
conditions).
Figure: S&P 500 vs MSCI World Index

Since 1970
2005 to now…

STRUCTURAL: Yield curve ISM bottoms 2H19, soar through 2020…
The long-term yield curve (10M change of 30Y-10Y yield spread) signaled 16M ago a downturn in ISM PMI was coming.
• Since our April 2017 study, the long-term yield curve seems to be doing a pretty good job of predicting ISM.
• And it currently suggests the ISM will fall towards 50 by 3Q19 but then soar to new highs in 2020. This move
upwards, in our view, is explaining the outperformance of Cyclical stocks.
Figure: Long-term yield curve 10M change (advanced 16-months) and ISM Manufacturing
Past 6 years
51.7 June
51.2 July
48.0 (Fall 2019)

BIZ MIX: US stock market higher share of “High-value” sectors
• The S&P 500 has a higher mix of ‘high-margined” or “high-value” sectors such as Technology and Healthcare
Figure: Global Equity Indices Sector Weight

As of 9/3/19
Technology
Others 5.0%
27.4%
United States Europe
(S&P 500) 34% Industrials Healthcare 18% (STOXX 600)
13.3% 13.0%
27% Energy + Materials Financials

15.5%
14.0%
Others Technology Discretionary

28.2% 20.8% 11.8%
Japan China
Healthcare (TOPIX) (SHCOMP) 10%
12.9%
Technology 20% Technology
5.8% Healthcare
Industrials 11.5%
4.5%
8.9% Healthcare Others
Financials Others 8.4% 17.2%
12.4% 24.1%
Discretionary
Energy + Materials 10.1% Financials Industrials
6.6% 9.9% 14.1% Financials
37.0%
16% Industrials
Discretionary
19.3% Energy + Materials
20.1% 15.5%
Energy + Materials Discretionary

27% 6.6%
30% 6.0%

Demographics explain why US is pulling away….
US is pulling away from the rest of the World in terms of population growth.
• Over the next 20 years, the US population will have grown by 43 million, while other G7 and other countries
have shrunk or stagnated (at best).
Figure: Total Population Growth — 2019 to 2039

Per UN DESA
Population Population Delta

Population CAGR (in mm) Population CAGR (in mm)
1999 - 2019 2019 2019 - 2039 2019 - 2039
US 0.8% 329.1 0.6% 43.3
Europe 0.1% 743.1 -0.1% -13.1
Germany 0.1% 82.4 -0.1% -1.2
Japan -0.0% 126.9 -0.5% -11.0
China 0.5% 1,420.1 0.0% 1.2
Russia -0.1% 143.9 -0.3% -7.7

INVESTMENT: US private investment same as third world nations…
Investment spending levels in the US are depressed and best evidenced when compared to other nations. We previously
showed these spending levels as a time series (see earlier slide).
• At 17% for gross fixed investment spend as % GDP, US is about the same as Italy, Venezuela, Afghanistan.
Basically, third world nation levels of spending.
Figure: Gross fixed investment as % GDP

Since CIA World Factbook, 2017 estimates
35
50
China: 42.7
Korea*: 31.1
Gross Fixed Investment as % of GDP (2017 est.)
30 Turkey: 29.8
India: 28.5
G7
25 Iraq: 25.3 Sweden: 24.9
Japan: 24.0
Canada: 23.0 Switzerland: 24.5
G7 France: 22.5 G7
Mexico: 22.3 Russia: 21.6 Taiwan: 21.1
Spain: 20.6 Hong Kong: 21.8
20 EU: 19.8 Saudi Arabia: 20.0
3rd world 3rd world 3rd world Germany: 20.4
Argentina: 17.7 Netherlands: 17.8

Venezuela: 17.7 UK: 17.2
Afghanistan: 17.7
Brazil: 15.6
Italy: 17.5
Australia: 16.9 US: 17.2
15
Thailand: 14.3
Greece: 12.5
Zimbabwe: 12.6
10
0 10,000 20,000 30,000 40,000 50,000 60,000
GDP Per Capita ($) (PPP) (2017 est.)
Source: Fundstrat, Bloomberg, Factset. CIA World Factbook

KEY MID-CYCLE SIGN: Not happened yet, Investment spending >27%
Private Investment peaking is logically the peak of the business cycle—when private sector has over-invested.
• This ratio (past 50 years) is 27% and needs to rollover before we see a recession. At 24.4%, ratio is quite low.
Figure: Private Investment (sum of capex + durables + residential investment) as % GDP is still below 27%
Since 1970
rollover rollover
rollover rollover
>27% >27% rollover >27% >27%
>27% Private inv. % GDP
= 27%
+260bp
$520 billion
24.4%
Source: Fundstrat

MEAN REVERSION ONLY: +280bp upside to investment as % GDP
There are 5 components for private investment spending (shown below), (i) Capex; (ii) IP spend; (iii) Non-res building; (iv)
Res. Construction; and (v) consumer durables purchases
• Just “mean reversion” to 50-yr averages implies 280bp upside to investment spend, or $560 billion in capex.
Figure: Comparative components of private investment spending (as % GDP)

Since 1970
Capex Non-Residential Investment Residential Investment
(% GDP) (% GDP) (% GDP)
50-yr avg:
50-yr avg:
6.5%
50-yr avg: 4.5%
+60bp 3.4% +80bp
5.9% 3.7%
+50bp
2.9%
Intellectual Property Consumer Durables

(% GDP) (% GDP)
4.3%
MEAN REVERSION ONLY: 50-yr avg:
+280bp = $560 billion capex 8.3%
50-yr avg:
2.9% +90bp
7.2%

ECONOMIC-ANXIETY: Why is the US the only inverted 10Y-2Y?
The most curious thing about the 10Y-2Y inversion is that the US is the only country (besides Hong Kong) with an
inverted curve. Sure, Canada and Mexico, but their rate structure follows the US.
• This lends credence to the arguments that non-economic/non-fundamental factors can be causing the US
inversion.
Figure: 10Y less 2Y in various countries. Spread

As of 8/21/19
10Y - 2Y 30Y - 10Y
United States 0.00% 0.49%
US-centric Canada -0.18% 0.23%
Mexico -0.29% 0.46%
China 0.36% 0.60%

Hong Kong -0.52%
Japan 0.07% 0.44%
China-related Australia 0.18% 0.62%
South Korea 0.08% 0.01%
Singapore 0.13% 0.23%
India 0.76% 0.42%
Shouldn’t cyclical
regions like Asia and
Germany 0.22% 0.54%
France 0.40% 0.87% Europe have inverted
United Kingdom 0.00% 0.57%
10Y-2Y curves if
Spain 0.68% 0.89%
Switzerland 0.15% 0.43% fundamental drivers
Denmark
Netherlands
0.23%
0.33%
0.23%
0.39%
are causing the US
Eurozone
Finland 0.38% 0.49% inversion?
Sweden 0.36% 0.44%
Ireland 0.41% 0.86%
Portugal 0.75% 0.88%
Italy 1.33% 1.07%
Greece 1.18% 0.77%
Russia -0.39%

POINT #2: Only 1 of 5 10Y2Y inversion is due to drop in yields, like ’19 Panic
We below compared the 5 initial inversion instances with current inversion. Historically, the 10Y-2Y curve inverts because
Fed is raising front end rates and this raises front end faster than long-end and we get an inversion
• In other words, the yield curve is not some magic 'divining rod' -- it historically inverts because the Central
Bank wants that, to slow an overheated economy.
Figure: US Treasury Interest Rate Curves

Inversion day and 1 month ago
8.8 Aug 18, 1978 Inversion 12 Sep 12, 1980 Inversion 9.3 Dec 13, 1988 Inversion
8.6 11.5 9.1
8.4 11 8.9
8.2 2Y rise 10Y fall 8.7
10.5
8 + 8.5
10
7.8 Flat long end 8.3 2Y and 10Y rise
9.5 2Y and 10Y rise +
7.6 8.1
9 + Flat / inverted
7.4 7.9
8.5
Flat / inverted long end
7.2 7.7
long end
7 8 7.5
3M 6M 1Y 2Y 5Y 10Y 30Y 3M 6M 1Y 2Y 5Y 10Y 30Y 3M 6M 1Y 2Y 5Y 10Y 30Y
Both 1998 similar to today Current...

6 May 26, 1998 Inversion 4.7 Dec 27, 2005 Inversion 2.8
Aug 14, 2019 Inversion
2.6
5.8 2.4
4.5
2.2
5.6 2
2Y and 10Y fall 4.3 1.8
5.4 2Y rise 10Y fall 1.6
+
+ 1.4 2Y and 10Y fall
Steep long end 4.1
5.2 Steep long end 1.2
+
1
Steep long end
5 3.9 0.8
3M 6M 1Y 2Y 5Y 10Y 30Y 3M 6M 1Y 2Y 5Y 10Y 30Y 3M 6M 1Y 2Y 5Y 10Y 30Y
Source: Fundstrat, Bloomberg, FRED

S&P 500 new ALL-TIME HIGHS 5 of 5 times post 10Y-2Y INVERSION
The S&P 500 has managed new all-time highs 5 of 5 times we saw the first inversion of the 10Y-2Y (2Y only since 1976).
• 5 of 5 times, the equity markets staged further gains, with an average further gain of 23%, but averaged 33% in
the past 3 instances.
Figure: Time from first inversion of 10Y-2Y until the equity market peaks and the cumulative S&P 500 gain
Since 1976
+40% +25%
+33%

PANIC NOW? Last 3 times, gains continued for 17-20 months…
The S&P 500 has managed further gains 5 of 5 times we saw the first inversion of the 10Y-2Y (2Y trade only since 1976).
• 5 of 5 times, the equity markets staged further gains, with an average further gain of 23%, but averaged 33% in
the past 3 instances.
Figure: Time from first inversion of 10Y-2Y until the equity market peaks and the cumulative S&P 500 gain
Since 1976
Months after inversion

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37
S&P 500 further gain
14 months +6% In past 3 instances,

August 18, 1978 Recession start
further gains
3 mos +12% average 33%...
September 12, 1980 Recession start
18 months +33%
December 13, 1988 Recession start
Recession
22 months +40% start
May 26, 1998
22 months +25%
December 27, 2005 Recession start

Executive Summary

LABOR: Global excess supply of labor is gone, first time since 1973
Global labor supply is falling into a deficit. This is shown below and is most acute in high income countries (4.9% labor)
• The decline in labor is widespread (except Africa and India, basically) and total shortfall is 43 million workers.
Figure: Spread between total population growth and workforce growth (age 16-64)
Per UN DESA
2018 2028 Delta CAGR

Workforce Workforce Workforce Workforce % current
Total (16-64) Total (16-64) Total (16-64) Total (16-64) Shortage workforce
World 7,632,819 4,983,447 8,407,900 5,446,592 775,081 463,145 1.0% 0.9% (42,903) (0.9%)
World ex-Africa 6,344,899 4,264,461 6,778,314 4,501,749 433,416 237,288 0.7% 0.5% (78,025) (1.8%)
High-income countries 1,197,191 783,527 1,242,592 775,187 45,401 (8,340) 0.4% (0.1%) (38,054) (4.9%)
Mid/Low-income countries 6,435,628 4,199,919 7,165,308 4,671,404 729,680 471,485 1.1% 1.1% (4,849) (0.1%)
2.5%
WORKER: Forecast by United Nations
2.0% Population age 16-64
Shortage of labor:
1.5% DEMAND: 2018-2054
1.0%
Total World
population
0.5%
1960
1962
1964
1966
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
2022
2024
2026
2028
2030
2032
2034
2036
2038
2040
2042
2044
2046
2048
2050
2052
2054
0.0%
Labor (0.6%)
surplus
(0.4%)
(0.2%)
0.0%
0.2%
Labor
0.4%
First time since 1973
shortage
0.6%
Source: Fundstrat
labor shortfall…

LABOR: From Tigers to China to India (until 2046) and Africa
China and the Four Asian Tigers (Hong Kong, Korea, Singapore and Taiwan) entered labor shortage recently.
• In the chronology below is the progress of labor supply. The Tigers were the first, followed by China joining in
the 2000s, and now we're seeing a shift in India. India's labor surplus will start to diminish in 2019, but won't
enter labor shortage until 2046. Africa will maintain its labor surplus through the forecasted period.
Per UN DESA
Tigers era of “cheap labor”
covered 1968-2000 Forecast by United Nations
Labor surplus
Asian Tigers Labor shortage China stepped in but its labor

supply swung in 2016…
Labor surplus
China Labor shortage
India retains labor

surplus until 2046
Labor surplus
India Labor shortage
Africa maintains
Labor surplus
labor surplus
Africa Labor shortage
Source: Fundstrat

LABOR SHORTAGE: From Japan to Europe and US to Korea
With ~1/3* of its population aged 65 or above, Japan has been in labor shortage since late ’90s. Europe and US, the
major developed regions, have been short of labor since 2013 and 2014, respectively. Korea, one of the Asian Tigers that
used to provide abundant labor force, also entered labor shortage in 2018.
• In the chronology below is the progress of labor supply. With both aging population and low birth rates, the
labor condition in Japan, Europe and Korea will persist through the forecasted period. US is relatively better,
but still will maintain labor shortage until 2043.
Per UN DESA
Labor surplus Forecast by United Nations

Japan has been short
1998 of labor since 1998
Japan Labor shortage
Labor surplus Europe entered labor

2013
shortage in 2013
Europe Labor shortage
Following Europe, US entered

Labor surplus labor shortage in 2014, and will
2014 not be recovered until 2043
US Labor shortage
Labor surplus South Korea entered labor

2018 shortage in 2018
Korea Labor shortage

1961
1964
1967
1970
1973
1976
1979
1982
1985
1988
1991
1994
1997
2000
2003
2006
2009
2012
2015
2018
2021
2024
2027
2030
2033
2036
2039
2042
2045
2048
2051
2054
Source: Fundstra
* Japan Statistical Yearbook

AUTOMATION: Labor Shortage drives demand for ‘automation’
‘Demand for automation drive by necessity’

AUTOMATION: Overweight Technology and Cyclicals
We have compared the performance of US Technology stocks (vs S&P 500) and indicated periods of labor shortage.
• The outperformance of Technology during periods of labor shortage is substantial—and we believe the
forecasted 2015-2047 to benefit Technology stocks.
Figure: Comparative relative performance of US Technology stocks during periods of US labor shortage
Since 1930-now
Labor Shortage of labor: Shortage of labor: Shortage of labor:
shortage 1948-1967 1991-1999 2015-2047
T. Pop CAGR less WA Pop CAGR
'10 '15 '20 '25 '30 '35 '40 '45 '50 '55 '60 '65 '70 '75 '80 '85 '90 '95 '00 '05 '10 '15 '20 '25 '30 '35 '40 '45 '50 '55 '60
1.4% Labor Labor Labor
0.7% shortage shortage shortage
Labor
surplus
0.0%
-0.7%
-1.4%
Tech goes
parabolic
Technology
Price Ratio vs
S&P 500 (left
Tech goes
scale) parabolic
Tech goes
parabolic
Source: Fundstrat
'30 '35 '40 '45 '50 '55 '60 '65 '70 '75 '80 '85 '90 '95 '00 '05 '10 '15 '20 '25

Executive Summary

DEMOGRAPHICS: Explains business cycles better than people realize…
Millennials are significant for two reasons: sheer size, both in the US and the rest of the world, and relatively young age.
• First, they are the largest single generation ever (larger than Boomers) at a population of 2.5 billion globally.
• Second, at an average age of 26.5, they are just entering their prime income years.
Figure: Total US Population divided by age groups

2017. Data provided by the DESA UN Data sets.
Years of Average
Generation… birth age At peak (year)
Greatest Generation 1910 1927 92.9 43.2 1930
Silent Generation 1928 1945 78.5 44.1 1974
Baby Boomers 1946 1964 61.3 79.5 1999
GenX 1965 1980 44.5 65.8 2018
Millennials 1981 2000 26.5 95.8 2038
Generation Z 2001 2018 8.3 96.2 2060
Source: Fundstrat. Peak population figures above include immigration. **Reduced immigration will lead to a smaller overall size of GenZ.

DEMOGRAPHICS: Major market turning points with each generation’s peak
Notably, equity markets tend to peak with each generation’s peak. Notice this below.
• GenX is reaching the peak size of the cohort in 2018.
Figure: Dow Jones Industrials Average

Since 1900
Greatest Generation Silent Generation Boomer GenX Millennial

Peak 1930 Peak 1974 Peak 1999 Peak 2018 Peak 2038
>20%
30,000
decline?
>30%
decline
Dow Jones Industrial Average (log scale)
3,000
35%
decline
89%
decline
300
30
1900 1905 1910 1915 1920 1925 1930 1935 1940 1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040

Long-term bull markets see peak acceleration to 500% 10-yr returns
Long-term bull markets last 20-42 years and peak returns accelerate to cumulative gain 500%…
• The current bull market has risen for 10 years and if the history plays out, S&P 500 could reach
19,000 YE 2029 vs. 3,000 now.
Figure: 10-year rolling returns of the US equities
Since 1881
25X P/E
25X P/E Implied
30X P/E
S&P 500 10Y Rolling Total Return S&P 500 To achieve 19,349 by '29
600% 6/1959 YE 2029 EPS P/E Ending
10/1929 9/2000
Bubble 500% 19,349 GAGR CAGR P/E
10 15 9 CAGR 20%
15% 4% 26x
yr years yr
400%
12% 7% 34x
12,642
300% Today CAGR 15%
10% 9% 41x
200%
8% 11% 49x
6,747
100% CAGR 8%
5% 14% 65x
Generational
Buy 0%
4/1897 9/1974 2/2009
8/1939
(100%)
1881
1886
1891
1896
1901
1906
1911
1916
1921
1926
1931
1936
1941
1946
1951
1956
1961
1966
1971
1976
1981
1986
1991
1996
2001
2006
2011
2016
2021
2026
2031
10 10-15
42 years 20 years 26 years
yrs. yrs.
Source: Fundstrat, Bloomberg.

STOCK: Like housing, equity markets also follow moves in adults age 28-48
We overlay the # of adults in “prime leverage age” (age 30-48) against the 10-year rolling total return of S&P 500 below.
Figure: Prime Leverage years: # adults age 30-48 Implied

Since 1935 per the US Census Bureau
S&P 500
600%
S&P 500 10Y Rolling Total Return YE 2029
Bubble 500% 19,349
CAGR 20%
400% Today
300% 12,642
CAGR 15%
200%
100%
6,747
Generational CAGR 8%
Buy 0%
(100%)
Greatest generation: age 28-48 Silent generation: age 28-48 Boomers: age 28-48 Millennials: age 28-48 GenZ: age 28-48
20.0
Stagflation
15.0
Pre-conditions
Financial
crisis
5-yr % change
10.0
5.0
5-yr % change adults
age 30-48
0.0
-5.0
1935
1937
1939
1941
1943
1945
1947
1949
1951
1953
1955
1957
1959
1961
1963
1965
1967
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
2017
2019
2021
2023
2025
2027
2029
Primary debt leverage (age 30-48) -- 5-yr % chg historical
Source: Fundstrat, Bloomberg, BEA, National Association of Realtors, US Census Bureau
Primary debt leverage (age 30-48) -- 5-yr % chg US Census forecast

Millennials average age is 26.5… still early in life cycle
The oldest millennials are 36 but the average age is 26.5. As shown below, this means the peak of millennials are driving the
automobile market but just beginning to impact the housing market. And early in the investing market.
• As the following slides show, millennials are now the most important cohort to follow for several key segments.
Figure: Life cycle of Millennial spending and income

Survey of Consumer Finance for 2017 “real income” levels (born between 1981-2000)
Millennials
Age 30-60
Average Age Prime Income
today years
$55,000
$50,440 $51,324
Age 25-45 $49,556 $48,932
$50,000 Home
purchasing
$45,000
$40,456
Average annual earnings
$40,000
Age 21-35
$35,000 Automobile
+ Drinking age
$30,000
$27,924
$25,000
$20,000
$21,684
$15,000 $15,080
$10,000
10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 55 58 61 64 67
Age of Millennial
2001 2004 2007 2010 2013 2016 2019 2022 2025 2028 2031 2034 2037 2040 2043 2046 2049 2052 2055 2058
Source: Fundstrat, Bloomberg, Census Bureau

Source: Fundstrat, Bloomberg, Updata

Millennials maturing autos, peak homebuying and early prime income
To highlight the life cycle of various generations, we have highlighted population distribution and shown the various generations
and their respective distribution. Additionally, we shaded the various life cycle behaviors (auto buying, etc.).
• Millennials are now dominating Automobile purchasing, entering homebuying and beginning to generate prime
income.
Figure: Composition of Generations by age group

Census bureau
2017 Boomers
2017 GenX
2017 Millennials
2017 GenerationZ
2017
Age 0 ~ 4 20.2 20.2

Age 5 ~ 9 20.3 20.3
Age 10 ~ 14 20.7 20.7
Age 15 ~ 19 21.1 12.8 12.6
1st time Car Age 20 ~ 24 22.2 22.2
buyer (21-35) Age 25 ~ 29 23.5 23.5
Age 30 ~ 34 22.0 22.0
1st time
homebuyer Age 35 ~ 39 21.3 12.6 8.7
(25-49) Age 40 ~ 44 19.7 19.7
Age 45 ~ 49 21.0 21.0
Prime income Age 50 ~ 54 21.4 8.9 12.6
(30-64) Age 55 ~ 59 22.1 22.1
Age 60 ~ 64 20.1 20.1
Retirement years Age 65 ~ 69 16.9 16.9
(65+) Age 70 ~ 74 12.9 5.8
Age 75 ~ 79 8.8
Age 80 ~ 84 6.0
Age 85 ~ 89 3.9
Peak per capita Age 90 ~ 94 1.9
Healthcare costs
Age 95 ~ 99 0.6
(75+)
Age 100 ~ 104
Source: Fundstrat, Bloomberg, Census bureau

Source: Fundstrat, Bloomberg, Updata

LEVERAGE: Household debt peaks between ages 28-53, or 2019 to 2039…
• Millennials are about to become prime consumers of leverage. The Urban institute shows that leverage peaks
between age 28-53. For Millennials, this is between 2019-2039.
Figure: Median debt balance by Age Group

US data. From Urban Institute.
Age 28-48 peak years…
Millennial
average age
26.5
Millennials 2009 2014 2019 2024 2029 2034 2039 2044 2049 2054 2059
Median age 18.0 23.0 27.0 32.0 37.0 42.0 47.0 52.0 57.0 62.0 67.0
Millennials hit this between
2019-2039...
Source: Fundstrat, Bloomberg. https://www.urban.org

DEMOGRAPHICS: US adults age 30-48 inflecting up and surging
The number of adults in “prime leverage age” (age 30-48) is below, based on data from the US Census Bureau.
• This figure fell from 2001-2008 (is GFC not a surprise?) and as shown below, set to accelerate 2018 to 2026.
Figure: Prime Leverage years: # adults age 30-48

2019
Generation… Birth years
Greatest Generation 1910 1927
Silent Generation 1928 1945

20.0
Baby Boomers 1946 1964
GenX 1965 1980

15.0
Millennials 1981 2000
Generation Z 2001 2018

10.0
5-yr % change
5.0
0.0

age 30-48
-5.0
1935
1937
1939
1941
1943
1945
1947
1949
1951
1953
1955
1957
1959
1961
1963
1965
1967
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
2017
2019
2021
2023
2025
2027
2029
Primary debt leverage (age 30-48) -- 5-yr % chg historical Primary debt leverage (age 30-48) -- 5-yr % chg US Census forecast
Source: Fundstrat, Bloomberg, BEA, National Association of Realtors, US Census Bureau

Millennials Credit card spending growing faster than GenX or Boomers…
Credit card spending growth by age cohort is shown below. What is being measured is the year over year aggregate
spending on Chase Credit cards.
• Millennials spending growth is far outstripping any other cohort. In fact, Boomers, Silent Generation and
Greatest Generation are actually seeing declines.
Figure: Chase credit card spending growth based upon age cohort.
Per Chase Bank
10.0%
25-34 35-44 45-54 55-64 65+ National
8.0%
~Millennials
6.0%
4.0%
~GenX
2.0%
~Boomers
0.0%
~Greatest Gen
-2.0%
-4.0% ~Silent Gen
-6.0%

HOUSING: Home values follow moves in adults age 28-48
We overlay the # of adults in “prime leverage age” (age 30-48) against the historical housing value as % of GDP below.
Figure: Prime Leverage years: # adults age 30-48

'44 '49 '54 '59 '64 '69 '74 '79 '84 '89 '94 '99 '04 '09 '14 '19 '24
Generation… Birth years
Housing Value as % of GDP
225 Greatest Generation
Silent Generation
1910 1927
1928 1945
2019
205 Baby Boomers 1946 1964
GenX 1965 1980
185 Millennials 1981 2000
Housing
Generation Z 2001 2018 bubble
165
145
Greatest125
generation: age 28-48 Silent generation: age 28-48 Boomers: age 28-48 GenX: age 28-48 Millennials: age 28-48 GenZ: age 28-48
20.0
Stagflation
15.0
Pre-conditions
Financial
crisis
5-yr % change
10.0
5.0
age 30-48
0.0
-5.0
1935
1937
1939
1941
1943
1945
1947
1949
1951
1953
1955
1957
1959
1961
1963
1965
1967
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
2017
2019
2021
2023
2025
2027
2029
Primary debt leverage (age 30-48) -- 5-yr % chg historical Primary debt leverage (age 30-48) -- 5-yr % chg US Census forecast
Source: Fundstrat, Bloomberg, BEA, National Association of Realtors, US Census Bureau Housing value before 1965 was estimated by using residential capital cost valuation published by Bureau of the Census

Executive Summary

CONTINUATION OF WORKING TRADES:
US (vs RoW) + Asset Light + Large-cap + Cyclicals
The 4 pillars of working strategy since 2009, we believe, keep working with the Fed cut, primarily because we see
TINA driving asset flows into the US. Hence, these strategies continue to outperform.
Figure: We see these trades continuing to work

Since base dates noted
S&P 500 Asset light Large-cap Cyclicals
beating beating beating beating
RoW Asset heavy Small-cap Defensives
Fed Fed Fed

Cuts Cuts Cuts
Fed
Cuts

ASSET LIGHT: Since 2015, Asset light crushed asset heavy stocks
We can create a proxy for asset light and asset heavy based on Assets/$1mm of EBIT. And the price performance of top
and bottom 5% is shown below.
• Since 2015, as investors see permanency in falling rates, they have started to heavily favor asset light stocks.
Figure: Relative performance (vs S&P 500) – Asset heavy vs Asset light stocks
Since 2009. Asset light is lowest 5% of S&P 500 stocks Assets/EBIT and Asset heavy is highest 5% of Assets/ EBIT
In a world of falling
rates, world in love
with Asset light …
+93%
Asset
Asset
light
heavy
-24%

ASSET LIGHT: As interest rates fell, corporations became asset light…
Below we show the relationship between fixed assets needed to generate $1 million of corporate profit (in 2012 dollars),
and the US 10-year Treasury yield.
• As interest rates soared from 1965-1982, US corporates became “Asset Heavy” using more assets to generate
$1 million in REAL profit. Similarly, as interest rates plunged, corporations became ”asset light.”
Figure: Real Fixed Assets per million 2012$ of corporate profits (3 year moving average) vs 10 Year Treasury Yield
Since 1945
Fixed Assets / Corp Profits Chained 2012$, 3YMavg US 10Y Treasury, right axis
25 16%
23
14%
21
12%
19
10%
17
15 8%
13
6%
11
4%
9
2%
7
5 0%
Source: Fundstrat, Bloomberg, BEA

MID-CYCLE: Semis hit new highs... seems to quash the late-cycle view
Semis NEVER rally in late cycle and NEVER make new highs in late cycle - Semis saw failures in 2001 and 2007, in
terms of both absolute price and relative to the S&P 500.
• Semis’ new highs seem to disprove the late-cycle view. If we are in late cycle, Semis should be rolling over
now. But what we see is prices at new highs and strong ‘relative performance’ vs. S&P 500.
Figure: SOX index and SOX index relative to S&P 500 (lower)
1996 – 2009; Past 24 months;
1996-2009 Past 24 months
Source: Fundstrat, Bloomberg, FactSet

Gold ready to make new “inflation-adjusted” highs, on Fed cuts.
Inflation-adjusted gold should benefit from further Fed cuts, as lower rates makes USD less fundamentally strong.
• Thus, the recent rise in gold is consistent with expected weakening of the fundamentals of USD (lower rates).
Plus, Gold is likely seen as a good hedge against the surging risks implied by doubling of negative yielding
debt.
Figure: Gold divided by CPI – inflation adjusted gold price
Since 1970
Prior highs
Fed
Cuts
Gold could make further

gains on Fed cuts…

BIG PICTURE: Healthcare has crowded out private investment spending
In the larger picture, Healthcare’s rising costs, evidenced in its rise as % GDP has crowded out private investment
spending. Since 1980, Healthcare’s share has doubled (as % GDP) while investment spend has fallen. This makes
sense—Healthcare has crowded out private investment dollar (available to be spent on private investment spend).
Figure: Healthcare as % GDP and “private investment spend” as % GDP

Since 1980. The ratios are indexed to 100=1980.
Healthcare spending has

arguably crowded out
private investment
spending..

Recent Healthcare sell-off sends relative price back to 2012 levels…
The recent sell-off in Healthcare is severe enough to push Healthcare’s relative price back to 2012 levels.
• One longer term concern for Healthcare is the recent sell-off has reversed the relative price of Healthcare (to
S&P 500) back to 2012 levels. In other words, reversing 7-years of relative gains and also affirms that
Healthcare has underperformed the broader market since 2015.
Figure: Relative price ratio of Healthcare to S&P 500

Since 1990
5-years
underperformance
Price ratio back to

2012 levels…
Healthcare relative
performance has not
worked essentially since
2015…

STRATEGY: Increase “win-rate” of stock picks…
Shaquille: Rick Barry:

(career success) (career success)
52% 90%

STRATEGY: Granny Shots represents the “best of the best” from Thematics
The granny shots represent the best of the best from the thematic portfolios.
• This is derived from looking at stocks which appear in multiple themes. As listed on the following pages, no
stock appears in 6 of 6 thematics, but several appear in 4 or 5 of 6.
Figure: Granny Shots are the “best of the best”

Stocks which appear in multiple themes.
Tactical (6M-12M)
Granny # overlaps
“layups” Tickers
# stocks Shots 5 GOOG
Style tilt 22 4 AAPL
Seasonality 13 3 FB, NKE, TSLA
FANG 7 BKNG
2 ADP, AMGN, AMP,
AMZN, AXP, BF/B,
Thematic (3Y-5Y) CLX, CSCO, GRMN,
MA, MNST, NVDA,
# stocks Rick Barry career free throw percentage
was eye-popping 90%, incredible PG, PM, PYPL,
Millennials 28 considering Shaquille O’Neal’s only
52%. ROK, V, XLNX
Automation/ AI 48
His secret? The unorthodox style of
Asset intensity 26 underhanded throws, which is
considered “not macho” enough for
most players.

GRANNY SHOTS: Beat S&P 500 6 out of the 8 months since inception…
The relative performance of Granny Shots is below and as highlighted, has beaten the S&P 500 by 320bp YTD.
• Granny Shots, which are the “best of the best” for our thematic portfolios (and rebalanced every quarter) has
beaten the S&P 500 by 320bp YTD. May was tough month, but since has bounced.
Figure: Granny Shots Portfolio Performance

Monthly; As of 8/30/19
YTD
(return since 1/10/19) Granny Shots Monthly Performance (%) Relative to S&P 500
4
3.2
S&P 500 12.7
3
2.1 1.9
2 1.6 1.7
Granny
15.9
Shots 1 0.6
0.3
Style
11.9
Tilt 0
Seasonality 9.8 -1 -0.5
Beating the S&P

FANG
in 7.7 -2
odd years
Millennials 11.4 -3 500 by 320bp YTD

AI /
11.3 -4
Automation
-4.1
Asset Intensity 13.9 -5
YTD Jan Feb Mar Apr May Jun Jul Aug
(Since 1/10) (Since 1/10)

Rick Barry career free throw percentage was eye-popping 90%,
incredible considering Shaquille O’Neal’s only 52%.
His secret? The unorthodox style of underhanded throws, which is

GRANNY SHOTS: Best bets in 2019 considered “not cool” enough for most players.
We recommend investors our granny shots, comprised of 24 stocks.

• These stocks are recommended across at least two of our investment strategies for 2019, which makes them
likely to benefit from multiple themes and secular tailwinds.
Figure: Granny shots – recommended across at least two investment strategies for 2019
Per Fundstrat
Company information Fundamentals & Valuation Theme Membership
FANG in odd years

Value / Growth Tilt
Analyst Ratings
AI / Automation
Strategy Count
3m avg
Seasonality
Millennials
daily YTD perf FC Mean Mean Short 2019E
Inflation
Current Mkt cap liquidity (relative to (5=Buy implied Dividend Issuer interest % sales 2019E EPS P/E
Ticker Company name Price ($ mm) ($ mm) S&P 500) 1=Sell) (1) upside (2) Yield Rating of float growth (3) growth (3) ('19E) ROE
1 GOOG Alphabet Inc-Cl C $1,168.39 $810,534 $1,696.3 -3.1% 4.73 18% 0.0% AA+ 0.9% 19% 12% 23.9x 20% • • • • • 5
2 AAPL Apple Inc $205.70 $929,595 $5,238.0 14.5% 3.76 7% 1.6% AA+ 1.1% -3% -2% 17.7x 53% • • • • 4
3 BKNG Booking Holdings Inc $1,941.78 $82,549 $619.7 -3.2% 4.06 8% -- A- 2.8% 4% 10% 19.0x 53% • • • 3
4 FB Facebook Inc-Class A $182.39 $520,350 $3,113.2 23.2% 4.59 27% -- — 1.1% 26% -13% 27.8x 20% • • • 3
5 NKE Nike Inc -Cl B $84.67 $132,668 $514.0 -1.7% 4.26 11% 1.1% AA- 0.7% 8% 16% 29.3x 43% • • • 3
6 TSLA Tesla Inc $225.01 $40,305 $1,925.1 -48.3% 2.74 17% -- B- 29.6% 15% -186% nm -14% • • • 3
7 ADP Automatic Data Processing $167.21 $72,560 $319.1 11.6% 3.67 5% 1.9% AA 0.9% 6% 20% 30.7x 45% • • 2
8 AMGN Amgen Inc $205.52 $123,251 $582.5 -10.4% 3.77 4% 5.3% A *- 1.6% -4% -1% 14.4x 62% • • 2
9 AMP Ameriprise Financial Inc $127.20 $16,647 $136.1 5.9% 4.54 31% -- A 1.7% -6% 12% 7.9x 33% • • 2
10 AMZN Amazon.Com Inc $1,789.84 $885,355 $6,636.5 3.2% 4.89 27% -- AA- 0.8% 20% 19% 75.0x 27% • • 2
11 AXP American Express Co $117.60 $97,570 $388.7 7.4% 3.78 12% 1.4% BBB+ 1.0% 8% 1% 14.7x 31% • • 2
12 BF/B Brown-Forman Corp-Class B $59.44 $28,160 $72.8 9.0% 2.90 -7% 1.2% A- 3.8% 5% 4% 33.2x 54% • • 2
13 CLX Clorox Company $162.35 $20,414 $144.4 -10.6% 2.67 -7% 2.5% A- 6.6% 1% 1% 25.7x 128% • • 2
14 CSCO Cisco Systems Inc $46.50 $199,054 $1,144.4 -8.6% 4.00 16% 3.1% AA- 0.9% 5% 19% 15.0x 30% • • 2
15 GRMN Garmin Ltd $81.21 $15,438 $86.8 12.3% 2.80 -6% -- — 2.7% 8% 7% 20.6x 19% • • 2
16 MA Mastercard Inc - A $280.11 $284,188 $907.1 32.5% 4.79 9% 0.5% A+ 0.7% 13% 17% 36.7x 131% • • 2
17 MNST Monster Beverage Corp $57.64 $31,407 $179.1 1.2% 3.80 15% -- — 3.1% 10% 13% 28.2x 28% • • 2
18 NVDA Nvidia Corp $164.17 $99,980 $1,623.8 7.0% 4.18 9% 0.4% BBB+u 1.7% -8% -19% 30.5x 29% • • 2
19 PG Procter & Gamble Co/The $121.36 $303,720 $858.5 16.1% 3.83 1% 2.5% AA- 0.8% 1% 7% 26.8x 8% • • 2
20 PM Philip Morris International $72.66 $113,047 $483.5 -7.1% 4.30 33% 6.5% A 0.6% 1% 2% 13.9x — • • 2
21 PYPL Paypal Holdings Inc $106.75 $125,610 $710.5 11.0% 4.46 20% -- BBB+ 1.1% 15% 30% 33.9x 16% • • 2
22 ROK Rockwell Automation Inc $148.23 $17,344 $147.5 -17.4% 3.17 13% 2.7% A 2.0% -0% 7% 17.1x 79% • • 2
23 V Visa Inc-Class A Shares $179.20 $355,518 $1,186.1 19.9% 4.68 11% 0.6% AA- 1.6% 11% 17% 33.2x 41% • • 2
24 XLNX Xilinx Inc $100.40 $25,362 $354.4 1.9% 3.73 29% 1.5% NR 2.6% 12% 7% 27.1x 38% • • 2
Average $222,109 $1,211.2 2.8% 3.92 13% 2.0% 2.9% 7% 0% 26.2x 42%
Median $106,513 $601.1 4.6% 3.91 12% 1.5% 1.4% 7% 7% 26.8x 33%
% of stocks positive 56% 78% 70% 70% 85%

STRATEGY: Granny Shots represents the “best of the best” from Thematics
The granny shots represent the best of the best from the thematic portfolios.
• We have performed two reconstitutions and rebalances since we launched it on January 10th. Below we show
the details of constituent changes during these rebalances.
Figure: Granny Shots constituents before and after rebalance

Additions highlighted in Blue; Deletions highlighted in Red;
2Q19 3Q19
Granny Shots Portfolio Current
Rebalance Rebalance
As of inception on 1/10 (Effective on 3/10) (Effective on 7/12) Granny Shots Portfolio
GOOG DE Additions Additions GOOG CLX

KLAC DIS AAPL CSCO
MNST FB QCOM ADP BKNG GRMN
NKE GRMN VAR CLX FB MA
TSLA LOW EBAY MA NKE MNST
AAPL MKSI MO PG TSLA NVDA
AMGN NVDA V ADP PG
AMP PM AMGN PM
Deletions Deletions
AMZN PSX AMP PYPL
AXP PYPL AMZN ROK
DE LOW PSX
BF.B ROK AXP V
MKSI EBAY MO
BKNG XLNX BF.B XLNX
KLAC VAR
CSCO
QCOM DIS
Source: Fundstrat

AUTOMATION: Labor Shortage drives demand for ‘automation’
‘Demand for automation drive by necessity’

AUTOMATION: Overweight Technology and Cyclicals
We have compared the performance of US Technology stocks (vs S&P 500) and indicated periods of labor shortage.
• The outperformance of Technology during periods of labor shortage is substantial—and we believe the
forecasted 2015-2047 to benefit Technology stocks.
Figure: Comparative relative performance of US Technology stocks during periods of US labor shortage
Since 1930-now
Labor Shortage of labor: Shortage of labor: Shortage of labor:
shortage 1948-1967 1991-1999 2015-2047
T. Pop CAGR less WA Pop CAGR
'10 '15 '20 '25 '30 '35 '40 '45 '50 '55 '60 '65 '70 '75 '80 '85 '90 '95 '00 '05 '10 '15 '20 '25 '30 '35 '40 '45 '50 '55 '60
1.4% Labor Labor Labor
0.7% shortage shortage shortage
Labor
surplus
0.0%
-0.7%
-1.4%
Tech goes
parabolic
Technology
Price Ratio vs
S&P 500 (left
Tech goes
scale) parabolic
Tech goes
parabolic
Source: Fundstrat
'30 '35 '40 '45 '50 '55 '60 '65 '70 '75 '80 '85 '90 '95 '00 '05 '10 '15 '20 '25

Strategy Style Tilt Seasonality FANG Millennials AI/ Automation Asset Intensity
AUTOMATION/ AI: Identifying suppliers and beneficiaries

We have established criteria to identify both suppliers of AI/automation and companies leveraged by adoption of AI and/or
automation technology.
• The screening criteria is shown below and does rely heavily on qualitative factors.
Figure: Automation/ AI stock list criteria
Per Fundstrat
Factor type Criteria Rationale
Suppliers AI High exposure to AI and AI-related products

Provides components needed to implement AI
Automation Producer of autonomous or robotic equipment

Supplier of components for autonomous or robotics
Beneficiaries Qualitative Current business will leverage AI/ Automation

Labor skills required are more likely to be automated
Labor demographics more easily substituted by AI/ automation
Leverage labor efficiency Market cap per employee lower than 3-yrs ago
Employee hiring outpaced Sales + EPS growth
Operating leverage EBIT margins declining compared to 3-years ago
Quantitative DQM Quantitative Model Ranked Quintile 1
Source: Fundstrat
Fundstrat, Bloomberg, FactSet
* Cash to Net Income ratio is calculated by using the sum of Cash, Cash Equivalents, LT Investment (unrestricted) divided by Net Income

AUTOMATION PART I: The suppliers

We identified 48 stock ideas from our quant model that are related to the adoption of AI and/or automation technology
• The 31 stocks listed below are the producers or the suppliers of AI and/or automation products which have
high exposure to the adoption of AI and/or automation technology.
Figure: AI/ Automation Stock list
Company information Fundamentals & Valuation
Per Fundstrat
Analyst Ratings
3m avg YTD perf FC Mean Mean Short 2019E

Current Mkt cap daily liquidity (relative to (5=Buy implied Dividend Issuer interest % sales 2019E EPS P/E
(1) (2) (3) (3)
Ticker Company name Price ($ mm) ($ mm) S&P 500) 1=Sell) upside Yield Rating of float growth growth ('19E) ROE
Auto Parts & Equipment 1 APTV Aptiv Plc $83.68 $21,576 $122.7 15.5% 4.26 6% 1.1% BBB 3.3% 2% -5% 16.8x 29%
2 GNTX Gentex Corp $27.10 $6,926 $38.0 13.6% 2.78 -19% -- — 3.3% 3% 3% 16.2x 23%
3 SRI Stoneridge Inc $33.59 $964 $6.9 15.8% 4.60 4% -- BB 7.7% -2% -20% 21.0x 18%
Automobile Manufacturers 4 TSLA* Tesla Inc $264.88 $47,179 $2,514.7 -40.9% 2.69 -2% -- B- 31.4% 17% -113% nm -14%
Consumer Electronics 5 GRMN Garmin Ltd $79.49 $15,091 $86.1 5.1% 2.80 -5% -- — 2.8% 6% 1% 21.4x 17%
Aerospace & Defense 6 CW Curtiss-Wright Corp $129.96 $5,559 $32.9 6.8% 4.25 7% 0.5% — 2.2% 5% 12% 18.3x 18%
7 MOG/A Moog Inc-Class A $96.01 $3,351 $12.0 3.5% 4.50 9% -- BB+ 1.3% — — #N/A 13%
8 TDY Teledyne Technologies Inc $299.64 $10,858 $51.7 24.3% 4.20 -7% -- — 1.3% 7% 7% 31.0x 16%
Agricultural & Farm Machinery 9 DE Deere & Co $167.18 $52,995 $324.9 -8.4% 4.17 -0% -- A 2.0% 5% 9% 16.3x 30%
Electrical Components & Equipm 10 AME Ametek Inc $89.98 $20,501 $101.5 12.5% 4.75 4% 0.6% BBB+ 1.0% 8% 11% 22.1x 18%
11 EMR Emerson Electric Co $67.26 $41,367 $198.3 -7.9% 4.00 10% 2.9% A 1.1% 8% 5% 18.5x 27%
12 RBC Regal Beloit Corp $82.88 $3,549 $18.0 -2.1% 3.60 6% 1.4% — 2.1% -4% 4% 13.2x 11%
13 ROK Rockwell Automation Inc $168.88 $19,989 $148.9 -8.2% 3.00 1% 2.4% A 2.9% 2% 9% 19.2x 59%
Industrial Conglomerates 14 ROP Roper Technologies Inc $374.64 $38,903 $160.5 20.1% 4.20 1% -- BBB+ 1.5% 4% 10% 28.8x 14%
Industrial Machinery 15 LECO Lincoln Electric Holdings $89.87 $5,644 $30.0 -6.5% 3.67 4% 2.2% NR 4.0% 2% 4% 17.9x 35%
16 PH Parker Hannifin Corp $178.25 $22,867 $161.3 -0.9% 3.26 -1% 1.9% A *- 2.3% 0% 12% 15.3x 24%
Application Software 17 ADSK Autodesk Inc $173.51 $38,106 $272.5 14.5% 4.48 6% -- BBB 1.8% 28% 180% 61.3x —
18 SNPS Synopsys Inc $137.62 $20,629 $144.9 42.9% 4.40 -2% -- — 1.3% 7% 11% 31.6x 17%
Communications Equipment 19 CSCO Cisco Systems Inc $57.23 $244,986 $1,202.5 11.6% 4.06 1% 2.6% AA- 0.9% 5% 18% 18.6x 32%
Electronic Equipment & Instrum 20 FLIR Flir Systems Inc $52.04 $7,047 $42.6 -0.9% 4.78 14% 1.3% BBB 1.4% 9% 6% 22.1x 15%
21 ZBRA Zebra Technologies Corp-Cl A $187.94 $10,144 $140.6 -2.4% 4.20 22% -- BB 4.3% 7% 14% 15.0x 35%
Semiconductor Equipment 22 MKSI Mks Instruments Inc $89.54 $4,867 $42.2 18.1% 4.88 19% 0.9% BB+ 3.6% -5% -36% 17.8x 17%
Semiconductors 23 AVGO Broadcom Inc $303.77 $120,923 $848.0 -1.0% 4.34 1% 3.6% BBB- 1.6% 9% 3% 14.1x 13%
24 NVDA Nvidia Corp $178.66 $108,804 $1,806.2 13.4% 4.07 0% 0.4% BBB+u 2.0% -6% -20% 33.7x 38%
25 QCOM Qualcomm Inc $75.87 $92,235 $1,269.5 12.9% 3.97 12% 3.6% A- 2.3% -10% 3% 19.9x 18%
26 XLNX Xilinx Inc $132.14 $33,169 $489.6 34.7% 3.70 -3% 1.1% NR 3.0% 13% 8% 35.2x 38%
Technology Hardware, Storage & 27 AAPL Apple Inc $208.67 $960,106 $5,178.5 11.8% 3.77 1% 1.5% AA+ 1.0% -3% -4% 18.3x 49%
28 IMMR Immersion Corporation $7.67 $242 $3.3 -34.8% 4.33 56% -- — 11.0% -65% -114% nm -27%
Health Care Equipment 29 ISRG Intuitive Surgical Inc $543.04 $62,587 $375.2 -7.1% 4.16 5% -- — 1.8% 17% 10% 44.8x 18%
30 VAR Varian Medical Systems Inc $133.81 $12,169 $69.7 -2.4% 3.40 8% -- — 2.0% 10% 5% 28.8x 21%
Interactive Media & Services 31 GOOG Alphabet Inc-Cl C $1,137.81 $790,537 $1,766.1 -10.6% 4.73 16% 0.0% AA+ 0.9% 17% 6% 24.6x 16%
Average $91,093 $569.7 4.6% 4.00 6% 1.7% 3.5% 3% 1% 23.6x 21%

Median $20,629 $144.9 5.1% 4.17 4% 1.4% 2.0% 5% 6% 19.5x 18%
Source: Fundstrat, Factset, Bloomberg,
* TSLA is not DQM Quintile 1, but we believe it%isofanstocks positive
important producer of autonomous equipment (the Tesla Autopilot) 55% 74% 77% 77% 93%

AUTOMATION PART II: The beneficiaries

We identified 48 stock ideas from our quant model that are related to the adoption of AI and/or automation technology
• The 17 stocks listed below could benefit from AI and/or automation technology. All of them have increasing
market cap and positive earnings growth, however, have deteriorating net income per employee and
weakening EBIT margin over the past 3 years.
Per Fundstrat
Company information Fundamentals & Valuation
Analyst Ratings
3m avg YTD perf FC Mean Mean Short 2019E

Current Mkt cap daily liquidity (relative to (5=Buy implied Dividend Issuer interest % sales 2019E EPS P/E
Ticker Company name Price ($ mm) ($ mm) S&P 500) 1=Sell) (1) upside (2) Yield Rating of float growth (3) growth (3) ('19E) ROE
Apparel, Accessories & Luxury 1 CPRI Capri Holdings Ltd $36.71 $5,541 $98.8 -23.6% 3.85 41% -- BBB- 4.6% 15% -1% 7.5x 24%
Automotive Retail 2 AAP Advance Auto Parts Inc $158.50 $11,370 $176.0 -19.8% 4.22 18% 0.2% BBB- 5.0% 2% 15% 19.4x 12%
Department Stores 3 KSS Kohls Corp $51.62 $8,364 $251.0 -42.6% 3.75 23% 5.6% BBB 12.3% 1% -6% 9.8x 15%
Distributors 4 GPC Genuine Parts Co $97.30 $14,213 $79.2 -19.1% 3.31 5% -- — 2.6% 5% 1% 17.0x 22%
General Merchandise Stores 5 DG Dollar General Corp $139.15 $35,946 $225.2 8.3% 4.27 -0% 0.9% BBB 1.5% 7% 8% 21.5x 25%
6 TGT Target Corp $89.09 $45,644 $422.3 14.3% 3.86 -0% 2.9% A 4.1% 3% 10% 15.0x 27%
Home Furnishings 7 BSET Bassett Furniture Inds $12.63 $131 $0.5 -57.4% 3.00 66% 4.1% — 0.7% 0% -29% 23.2x 3%
8 ETH Ethan Allen Interiors Inc $20.77 $552 $5.7 4.0% 3.00 -1% 3.9% NR 10.8% -1% 19% 12.9x 10%
Home Improvement Retail 9 LOW Lowe'S Cos Inc $102.80 $80,484 $500.8 -9.1% 4.39 10% 2.2% BBB+ 1.5% 2% 9% 18.4x 53%
Internet & Direct Marketing Re 10 AMZN Amazon.Com Inc $2,000.81 $985,062 $7,406.3 12.8% 4.85 13% -- AA- 0.8% 18% 35% 73.6x 30%
Restaurants 11 DENN Denny'S Corp $21.70 $1,308 $8.0 13.4% 4.00 -0% -- NR 3.5% -10% -1% 32.3x —
Specialty Stores 12 TSCO Tractor Supply Company $112.49 $13,571 $124.0 14.4% 3.86 1% 1.2% — 2.8% 7% 10% 23.6x 38%
Electrical Components & Equipm 13 POWL Powell Industries Inc $37.63 $435 $1.4 30.0% 4.00 12% -- — 1.3% 12% 151% nm 0%
Industrial Conglomerates 14 CSL Carlisle Cos Inc $139.73 $7,973 $51.7 18.6% 4.00 8% -- BBB 3.6% 8% 30% 17.3x 16%
Industrial Machinery 15 DOV Dover Corp $97.71 $14,211 $93.7 17.3% 3.82 8% 2.1% BBB+ 3.1% -11% 3% 19.7x 21%
Research & Consulting Services 16 HURN Huron Consulting Group Inc $55.00 $1,259 $3.6 -13.3% 5.00 6% -- — 0.7% 9% -3% 26.4x 4%
Hypermarkets & Super Centers 17 COST Costco Wholesale Corp $280.83 $123,506 $424.8 17.4% 4.13 -6% 0.9% A+ 1.1% 10% 16% 41.1x 27%
Average $79,386 $580.8 -2.0% 3.96 12% 2.4% 3.5% 5% 16% 23.7x 20%
Median $11,370 $98.8 8.3% 4.00 8% 2.1% 2.8% 5% 9% 19.5x 21%
% of stocks positive 59% 71% 82% 71% 100%
Source: Fundstrat, Factset, Bloomberg,

DEMOGRAPHICS: Looking at the world through the eyes of a millennial…
Figure: What did each generation look like in their 20s

Fundstrat and public information
1980 1990 2000 2010 2020
Baby Boomers
Tom Hanks: age 26.5

Boomer avg: 26.5
Generation X
L. Decaprio: age 26.5

GenX avg: 26.5
Millennials
J. Bieber: age 26.5

Millennial avg: 26.5

“Generational” Bets paid off for Boomers and for GenX
BOOMER SPEND VS PARENTS: GenX FANG:

Consumer Stocks was right vector Internet
Figure: Comparative performance of Top 7 Consumer stocks Figure: Comparative performance of FANG
1980 to 2000 1997 to now
# internet users
(millions)
60X # internet users
(millions)
Top 7 consumer Top 7 Consumer ’80-‘00
163,840.0
stocks were: 117,159% or 70 4,157
81,920.0 1,171X 163,840.0 FANG ’97-now
Walmart, Circuit City,
Hasbro, Home Depot, 156,706% or
40,960.0 Gap, Limited Brands 81,920.0
1,567X
and Dillards.
40,960.0
20,480.0
20,480.0
10,240.0
10,240.0
5,120.0
S&P 500 ’80-‘00 5,120.0
2,560.0 1,615% or
2,560.0
16.2X
1,280.0
1,280.0 S&P 500 ’97-now
640.0
3,605% or
640.0
Basket 100 consumer stocks: 3.6X
320.0 320.0
93% could go to ZERO, Basket 100 internet stocks:
160.0 still at 12X return 160.0
96% could go to ZERO,
80.0
80.0 still at 16X return
40.0
Sep '01
Sep '06
Sep '11
Sep '16
Mar '99
Mar '04
Mar '09
Mar '14
Dec '97
Dec '02
Dec '07
Dec '12
Dec '17
Jun '00
Jun '05
Jun '10
Jun '15

Millennials don’t trust banks….
Source: Fundstrat, Facebook IQ
Source: Fundstrat, First Data
Source: Fundstrat, First Data
Source: Fundstrat, Facebook IQ, First Data

MILLENNIALS: Identify where transform vs accelerate growth…

• The screening criteria for our Millennial stock list is shown below.
Figure: Criteria for Millennial stock list

Per Fundstrat
Macro: Millennials transform industry or accelerate growth

Transformation Acceleration
CAGR CAGR
Millennial 2016-2026 Millennial %
2016-2026
Category Millennials % growth Category Millennials growth
Mortgage interest and charges 163.4% 93% Personal services 90.1% 68%
Kids Apparel 110.9% 87% Other household expenses 129.0% 49%
Other apparel products and services 155.4% 86% Water and other public services 131.3% 52%
Footwear 148.2% 85% Other household products 121.1% 48%
Millennial Stock List
Apparel and services 130.7% 77% Electricity 115.3% 50%
Vehicle finance charges 106.3% 68% Laundry and cleaning supplies 122.7% 53%
Other entertainment supplies, equipment, and services 124.6% 67% Cereals and bakery products 122.2% 57%
Furniture 116.4% 67% Shelter 105.4% 54%
Toys, hobbies, and playground equipment 98.6% 66% Major appliances 141.3% 57%
Cellular phone service 105.2% 63% Personal care products and services 119.4% 55%
Gasoline and motor oil 107.6% 59% Food at home 120.0% 57%
Household furnishings and equipment 126.9% 59% Miscellaneous household equipment 133.3% 57%
Tobacco products and smoking supplies 102.1% 58%
Vehicle purchases (net outlay) 95.4% 56%
Vehicle rental, leases, licenses, and other charges 102.5% 55%
Maintenance and repairs 115.5% 55%
Pets 125.4% 54%
Alcoholic beverages 98.6% 52%
Vehicle insurance 118.7% 51%
Small appliances, miscellaneous housewares 101.3% 50%
Qualitative: Company higher exposure to Millennials
Quantitative Stock Selection: DQM quintile 1

MILLENNIALS: Stocks levered to transformation and/or growth

We identified 28 stock ideas from our Quant Model (DQM) that will benefit from the growth of Millennials’ spending.
• 20 ideas are from the industries where spending by Millennials will outpace the spending of Boomers. 8 ideas
are from the industries where Millennials’ spending will accelerate expenditure growth.
Figure: 28 ideas Company information Fundamentals & Valuation
Per Fundstrat Analyst Ratings
3m avg
daily YTD perf FC Mean Mean Short 2019E
Current Mkt cap liquidity (relative to (5=Buy implied Dividend Issuer interest % sales 2019E EPS P/E
(1) (2)
Ticker Company name Price ($ mm) ($ mm) S&P 500) 1=Sell) upside Yield Rating of float growth (3) growth (3) ('19E) ROE
Industries that will be transformed by Millennials

Apparel, Accessories & Luxury 1 COLM Columbia Sportswear Co $105.21 $7,186 $31.7 4.7% 4.43 15% 0.9% — 3.4% 9% 14% 23.1x 18%
2 TPR Tapestry Inc $30.80 $8,936 $146.2 -29.2% 4.48 41% 4.5% BBB- 3.5% 31% 22% 11.7x 21%
Auto Parts & Equipment 3 BWA Borgwarner Inc $42.48 $8,805 $65.2 1.8% 4.40 12% 1.7% BBB+ 3.1% 7% 15% 9.5x 18%
Automobile Manufacturers 4 TSLA * Tesla Inc $264.88 $47,179 $2,514.7 -40.9% 2.69 -2% -- B- 31.4% 83% 85% nm -14%
Automotive Retail 5 ORLY O'Reilly Automotive Inc $396.50 $30,408 $239.8 -5.3% 3.96 3% -- BBB 1.8% 6% 39% 24.6x 506%
Footwear 6 NKE Nike Inc -Cl B $86.70 $135,849 $560.9 -3.5% 4.26 8% 1.1% AA- 0.7% 7% 3% 34.8x 43%
Specialty Stores 7 ULTA Ulta Beauty Inc $352.94 $20,632 $254.7 23.7% 4.73 6% -- — 5.0% 14% 22% 32.3x 37%
Technology Hardware, Storage & 8 AAPL Apple Inc $208.67 $960,106 $5,178.5 11.8% 3.77 1% 1.5% AA+ 1.0% 16% 29% 17.5x 49%
Data Processing & Outsourced S 9 PYPL Paypal Holdings Inc $121.30 $142,770 $626.8 23.8% 4.41 4% -- BBB+ 1.4% 18% 27% 50.1x 16%
10 SQ * Square Inc - A $80.43 $34,019 $598.3 22.9% 3.79 1% -- — 10.1% 61% 74% nm -5%
Consumer Finance 11 AXP American Express Co $127.95 $106,157 $383.3 13.8% 3.78 3% 1.3% BBB+ 0.9% 21% 35% 16.2x 31%
Diversified Banks 12 JPM Jpmorgan Chase & Co $116.83 $378,993 $1,240.3 -0.8% 3.87 2% 3.1% A- 0.7% 8% 31% 13.0x 14%
Property & Casualty Insurance 13 ALL Allstate Corp $102.08 $34,004 $159.6 3.1% 3.76 6% 1.9% A- 1.5% 6% 16% 12.6x 11%
Brewers 14 TAP Molson Coors Brewing Co -B $56.65 $12,360 $89.8 -19.6% 3.48 13% 4.1% BBB- 4.6% -2% 13% 11.2x 7%
Distillers & Vintners 15 BF/B Brown-Forman Corp-Class B $55.38 $26,258 $70.1 -4.1% 2.90 -2% 1.2% A- 4.3% 2% 17% 32.0x 56%
Tobacco 16 PM Philip Morris International $85.02 $132,278 $386.3 6.9% 4.33 14% 5.5% A 0.8% 3% 8% 16.7x —
Interactive Media & Services 17 GOOG Alphabet Inc-Cl C $1,137.81 $790,537 $1,766.1 -10.6% 4.73 16% 0.0% AA+ 0.9% 53% 22% 26.0x 16%
18 FB Facebook Inc-Class A $204.66 $583,885 $3,263.4 35.7% 4.58 11% -- — 1.1% 37% 23% 27.0x 20%
Movies & Entertainment 19 DIS Walt Disney Co/The $141.29 $254,279 $1,303.4 8.4% 4.31 10% 1.3% A 0.9% 8% 24% 20.0x 20%
Wireless Telecommunication Ser 20 TMUS T-Mobile Us Inc $80.61 $68,865 $390.5 6.3% 4.62 3% -- BB+ *- 3.7% 7% 24% 24.0x 13%
Industries where their consumer spending will be accelerated by Millennials

Consumer Electronics 1 GRMN Garmin Ltd $79.49 $15,091 $86.1 5.1% 2.80 -5% -- — 2.8% 8% 26% 21.5x 17%
Homebuilding 2 TOL Toll Brothers Inc $35.28 $5,076 $56.1 -13.3% 3.17 12% 1.2% BB+ 3.9% 23% 53% 7.3x 16%
Environmental & Facilities Ser 3 WM Waste Management Inc $115.80 $49,178 $179.2 9.7% 4.50 2% 1.8% A- 0.8% 3% 30% 27.6x 30%
Household Products 4 PG Procter & Gamble Co/The $112.60 $282,438 $753.1 2.0% 3.83 -1% 2.7% AA- 0.8% 3% 8% 26.7x 20%
Packaged Foods & Meats 5 GIS General Mills Inc $52.84 $31,808 $217.3 15.2% 3.30 2% 3.8% BBB 2.8% 7% 4% 16.4x 27%
Personal Products 6 EL Estee Lauder Companies-Cl A $189.45 $68,557 $242.8 25.2% 4.36 -2% 0.9% A+ 3.0% 16% 30% 42.0x 39%
Soft Drinks 7 MNST Monster Beverage Corp $64.74 $35,191 $184.6 11.1% 3.80 5% -- — 2.7% 13% 22% 35.8x 27%
Multi-Utilities 8 ED Consolidated Edison Inc $86.53 $28,806 $163.8 -7.3% 2.33 1% 3.4% A- 2.0% 3% 5% 20.0x 8%
Average $153,559 $755.5 3.5% 3.91 6% 2.2% 3.6% 17% 26% 23.1x 39%
Source: Fundstrat, FactSet, Bloomberg, Median $41,185 $248.8 4.9% 3.91 4% 1.7% 2.4% 8% 23% 22.3x 20%
* stocks are not ranked in DQM quintile 1, but we believe they are highly exposed to growth of millennial population

ASSET LIGHT: We believe market close to “jumping the shark” on asset light
Warren Buffett, from Berkshire Hathaway
2018 + 2019 annual shareholder meeting…
But you now have the four largest companies, by market value, in
the United States — a $30 trillion market — you have four
companies that essentially don’t need any net tangible assets…
…And that is really due to the fact that this has become somewhat,
you could call it an asset-light economy.

Multi-decade tailwinds for “Growth” and “asset-light” businesses
1980 2019 Delta
Inflation 10.0% 2.0% 800bp

Drivers
of Asset Interest rates —cost of capital 16.0% 2.4% 1,360bp
light… Cumulative excess supply: 611 million

prime age workforce* (27.5%)
Cumulative 15-yr CAGR

S&P 500 151.8% 6.4%
Growth vs Value S&P 500 Growth 211.8% 7.9% 11,380bp

Drove S&P 500 Value 98.0% 4.7%
multi-
decade Asset Heavy vs
S&P 500 Financials 7.3% 0.5%
20,010bp
returns… Asset Light S&P 500 Healthcare 207.4% 7.8%
* Excess labor supply is calculated since 1973, the first time labor shortfall

ASSET LIGHT: Since 2015, Asset light crushed asset heavy stocks
We can create a proxy for asset light and asset heavy based on Assets/$1mm of EBIT. And the price performance of top
and bottom 5% is shown below.
• Since 2015, as investors see permanency in falling rates, they have started to heavily favor asset light stocks.
Figure: Relative performance (vs S&P 500) – Asset heavy vs Asset light stocks
Since 2009. Asset light is lowest 5% of S&P 500 stocks Assets/EBIT and Asset heavy is highest 5% of Assets/ EBIT
In a world of falling
rates, world in love
with Asset light …
+93%
Asset
Asset
light
heavy
-24%

VALUE-Style Investing: Rising interest rates + Inflation good for Value…
• During the 43 year rise of interest rates (1943-1981), Value stocks outperformed most years.
• Rising rates equates to higher nominal returns (either from inflation or real growth) and this
in turn leads to faster EPS growth—hence, rising rates favor Value stocks which
outperform when nominal growth is faster.
Figure: Interest rates and the comparative returns of Value vs Growth

Since 1926
Falling Interest Rates: Growth leads Rising Interest Rates: Value beats
1981 to today 1938-1981
Value Value less Growth US 10Y Value less Growth US 10Y
Leads 16.0 16.0
Value less 1,280.0
1,000.0 Growth
8.0 8.0
Price Index (Value less Growth)

Price Index (Value less Growth)
640.0
US 10yr
UST 10Y
UST 10Y
320.0
4.0 4.0
160.0
2.0 2.0
80.0
Growth Value less
Leads US 10yr
Growth
500.0 1.0 40.0 1.0
Dec '81 Mar '88 Jun '94 Sep '00 Dec '06 Mar '13 Jun '19 Sep '25 Jan '26 Apr '32 Jul '38 Oct '44 Jan '51 Apr '57 Jul '63 Oct '69 Jan '76 Apr '82

Key moment: Globally, Value vs Growth retraced 40 years of progress…
Arguably, Value versus Growth is facing a more important juncture globally. MSCI Value stocks (price ratio vs MSCI
World) has touched a level that has marked major turning points for Value vs Growth.
• Again, this highlights whether this is a key moment in Value stocks worldwide—it is very telling to us and we
believe now is the time to be OW Value.
Figure: MSCI World Growth and Value relative price performance (vs MSCI World) past 45 years
Since 1974
Value
Key moment…
Key moment…
Growth

ASSET INTENSITY: Asset “heavy” beats Asset “light” business models….
Figure: Comparative benefit of Asset heavy/ Value stocks in inflation rising environments
Per Fundstrat
Balance Sheet Inflation leads to… Income statement
Asset: Revenues:
Asset Hard assets Rise in assets… Higher revs (inflation)
“heavy” Resources
PP&E
Interest income (cash)
Cash Expenses:
Inventory Inventory holding gains… Flat (asset FIFO, first in/ first out)
Margin:
Liabilities: Rising
Long-term debt Debt liabilities flat… Plus: gains from inventory holding
Pension deficit Pension deficit falls.. Plus: pension gains
Risk/ Debt leverage:

Falling debt leverage
Falling pension obligations
Asset: Revenues:
Asset Intangibles/ R&D No benefit Higher revs (inflation)
“light” Expenses:
Liabilities: Margin pressure labor and assets (inflation)
Labor costs Rise in labor costs..
Low leverage Margin:
Flat
Risk/ Debt leverage:

No change

ASSET INTENSITY: Equity markets already recognize this…

Comparing inflation risk premia influences how Financials (asset heavy) trades versus Healthcare (asset light)
illustrates that equity markets are good at detecting this inflation risk.
Figure: Inflation risk explains Financials (asset heavy) vs Healthcare (asset light)
Since 2009
Asset
Inflation Heavy
Risk LEAD
RISING
MARKET REFLECTS:
INFLATION RISK MEASURE:
Financials (asset heavy)
Inflation breakevens less CPI
vs Healthcare (asset light)
Asset
Inflation Light
Risk LEAD
FALLING

ASSET INTENSITY: Stock selection criteria

As noted on the prior slides, we believe inflation, particularly wage inflation, will shift favor asset intensive businesses.
• The screening criteria below identifies stocks which benefit from rising overall inflation on both the balance
sheet, income statement but we also layered in qualitative criteria.
Figure: Asset Intensity stock list criteria

Per Fundstrat
Factor type Criteria Rationale
Balance Sheet Asset boost from inflation High Asset to Sales ratio
High Inventory to Sales ratio
High Inventory to Assets ratio
De-leveraging Higher Assets to Equity ratio

Higher Pension deficit to Equity Market Cap
Income Statement Low wage inflation exposure Low # employees per $1 million of EBIT
Cash balance leverage High cash + Investment to Equity Market Cap
Quality Metrics Sales outpaces Asset Growth Sales Growth exceeds Asset Growth past 5-years
DQM Quant Model Ranked DQM Quintile 1


ASSET INTENSITY: Stocks positively levered to asset inflation vs wages

We identified 26 stock ideas from our Fundstrat Doctor Quant Model (DQM) that will benefit from the rising inflation.
• The benefits will mainly come from appreciation in assets (asset intensive), gains from held inventory, falling
pension deficit and less exposure to wage inflation.
Figure: Asset Intensity stock list
Per Fundstrat Company information Determinant Ratio Fundamentals & Valuation
Pension # of Sales
YTD perf Assets Inventories Inventories Assets Deficit Employee growth less Cash* to
Current Mkt cap (relative to to to to to as of per $1m Assets Net Dividend Issuer 2019E EPS P/E
Ticker Company name Price ($ mm) S&P 500) Sales Assets Sales Equity Mkt Cap EBIT growth Income Yield Rating growth (3) ('19E)
Internet & Direct Marketing Re 1 BKNG Booking Holdings Inc $1,919.25 $83,087 -9.0% 1.6x -- -- 2.6x -- 4.6 25.5% 348% -- A- 9% 19.0x
2 EBAY Ebay Inc $41.03 $34,414 25.7% 2.1x -- -- 4.3x -- 4.8 16.9% 317% 1.4% BBB+ 19% 14.9x
Communications Equipment 3 CSCO Cisco Systems Inc $57.23 $244,986 11.6% 2.0x 1.7% 3.4% 2.5x -- 4.7 26.8% 308% 2.6% AA- 18% 18.6x
Data Processing & Outsourced S4 PYPL Paypal Holdings Inc $121.30 $142,770 23.8% 3.0x -- -- 3.1x -- 6.4 8.9% 272% -- BBB+ 29% 38.9x
Electronic Components 5 DLB Dolby Laboratories Inc-Cl A $66.16 $6,725 -13.5% 2.4x 1.0% 2.3% 1.2x -- 7.1 (5.0% ) 738% -- — 139% 24.3x
Semiconductor Equipment 6 KLAC Kla Corp $142.65 $23,055 39.0% 1.3x 17.9% 24.1% 3.5x 0.5% 4.0 6.3% 206% 2.1% BBB 5% 17.0x
Semiconductors 7 XLNX Xilinx Inc $132.14 $33,169 34.7% 1.8x 6.1% 11.0% 1.8x -- 4.6 15.8% 1.1% NR 11% 34.2x
Systems Software 8 MSFT Microsoft Corp $140.72 $1,075,523 18.1% 2.2x 0.7% 1.7% 2.8x -- 3.4 8.1% 414% 1.4% AAA 22% 29.6x
9 ORCL Oracle Corp $58.11 $193,844 8.3% 2.8x -- -- 4.5x 0.4% 7.9 22.7% 307% 1.6% A+ 10% 15.0x
Technology Hardware, Storage & 10 AAPL Apple Inc $208.67 $960,106 11.8% 1.4x 1.3% 1.9% 3.2x -- 1.9 20.2% 408% 1.5% AA+ -4% 18.3x
Gold 11 RGLD Royal Gold Inc $118.56 $7,768 18.0% 5.9x 0.3% 1.7% 1.2x -- 0.1 14.8% 37660% -- — -10% 75.2x
Oil & Gas Refining & Marketing 12 PSX Phillips 66 $102.42 $46,453 -1.6% 0.5x 6.5% 3.2% 2.0x 1.2% 2.3 22.3% 74% 3.5% BBB+ -34% 13.2x
Asset Management & Custody Ban 13 AMP Ameriprise Financial Inc $151.47 $20,282 24.7% -- -- 1.6% 5.6 -- A 12% 9.4x
Consumer Finance 14 AXP American Express Co $127.95 $106,157 13.8% 4.9x -- -- 9.0x -- 5.1 (5.8% ) 612% 1.3% BBB+ 1% 16.0x
Investment Banking & Brokerage15 LPLA Lpl Financial Holdings Inc $87.40 $7,292 22.6% 1.1x -- -- 5.8x -- 5.9 19.4% 410% -- — 32% 12.4x
16 AMTD Td Ameritrade Holding Corp $52.45 $29,021 -13.3% -- -- -- 3.4 2.5% A 20% 13.0x
Distillers & Vintners 17 BF/B Brown-Forman Corp-Class B $55.38 $26,258 -4.1% 1.6x 28.5% 44.3% 3.5x 0.8% 4.4 1.8% 35% 1.2% A- — nm
Tobacco 18 PM Philip Morris International $85.02 $132,278 6.9% 1.3x 21.9% 28.2% 3.7x 2.9% 6.8 14.6% 39% 5.5% A 2% 16.4x
Biotechnology 19 AMGN Amgen Inc $175.77 $107,208 -30.2% 2.8x 4.4% 12.6% 5.3x -- 1.8 19.5% 315% 5.7% A -3% 12.6x
20 ENTA Enanta Pharmaceuticals Inc $81.82 $1,609 -4.9% 2.2x -- -- 1.1x -- 1.5 25.0% 584% -- — -32% 34.3x
Pharmaceuticals 21 NKTR Nektar Therapeutics $32.12 $5,599 -22.7% 1.8x 1.8% 3.2% 1.3x -- 0.9 (33.3% ) 281% -- — -181% nm
Interactive Media & Services 22 GOOGL Alphabet Inc-Cl A $1,139.73 $790,537 -11.4% 1.7x 0.5% 0.8% 1.3x -- 3.6 4.2% 414% 0.0% AA+ 6% 24.7x
Electric Utilities 23 EIX Edison International $71.02 $23,139 4.6% 4.5x 0.5% 2.2% 4.5x 3.0% 5.4 (4.7% ) 328% 3.5% BBB *- 13% 15.2x
24 EXC Exelon Corp $45.48 $44,113 -19.6% 3.5x 1.4% 5.0% 3.6x 9.2% 6.5 (1.4% ) 490% 3.2% BBB+ 1% 14.5x
Multi-Utilities 25 BKH Black Hills Corp $78.28 $4,726 4.2% 4.0x 1.7% 6.7% 3.0x 2.6% 7.3 (0.2% ) 29% 2.7% BBB+ -1% 22.3x
26 D Dominion Energy Inc $75.18 $60,322 -15.2% 5.9x 1.8% 10.6% 3.5x 2.8% 4.5 4.8% 211% 4.9% BBB+ 3% 17.9x
Average $161,940 4.7% 2.6x 5.8% 9.6% 3.3x 2.5% 4.4 9.5% 1947.9% 2.5% 4% 22.0x
Median $39,264 5.8% 2.1x 1.7% 3.4% 3.1x 2.1% 4.6 11.7% 316.9% 2.3% 6% 17.4x
% of stocks positive 58% 72%

AUTOMATION: Descriptions of AI/ Automation suppliers

Below is the descriptions of the AI/ automation suppliers and component suppliers

Per Fundstrat
Ticker Company Name Company Description
APTV Aptiv Plc Aptiv PLC manufactures and distributes vehicle components such as connector wires, safety restraint systems, pin headers, and underwater towed arrays.
GNTX Gentex Corp Gentex Corporation designs, manufactures, and markets products that use electro-optic technology. The Company's product lines include automatic-dimming rearview mirrors.
SRI Stoneridge Inc Stoneridge, Inc. designs and manufactures engineered electrical and electronic components, modules, and systems.
TSLA Tesla Inc Tesla Inc. designs, manufactures, and sells high-performance electric vehicles and electric vehicle powertrain components.
GRMN Garmin Ltd Garmin Ltd. designs, develops, manufactures, and markets hand-held, portable, and fixed mount GPS-enabled products and other navigation, communications, and information
CW Curtiss-Wright Corp products.
Curtiss-Wright Corporation designs, manufactures, and overhauls precision components and systems.
MOG/A Moog Inc-Class A Moog Inc. manufactures precision motion control components and systems.
TDY Teledyne Tech. Inc Teledyne Technologies Inc. provides electronic subsystems and instrumentation such as digital imaging products and software, monitoring instrumentation.
DE Deere & Co Deere & Company manufactures and distributes a range of agricultural, construction, forestry, and commercial and consumer equipment.
AME Ametek Inc AMETEK, Inc. is a global manufacturer of electronic instruments and electromechanical devices and a supplier of electrical interconnects, specialty metals, technical motors and
EMR Emerson Electric Co systems.
Emerson Electric Co. designs and manufactures electronic and electrical equipment, software, systems, and services.
RBC Regal Beloit Corp Regal Beloit Corporation designs, manufactures, and sells electric motors and controls such as gearboxes, automotive transmissions, rotary cutting tools, automatic transfer switches.
ROK Rockwell Automation Inc Rockwell Automation, Inc. produces industrial automation products such as control systems, motor control devices, sensors, and industrial control panels.
ROP Roper Technologies Inc Roper Technologies, Inc. manufactures and distributes industrial controls, fluid handling, pumps, medical and scientific devices, analytical instrumentation products, RFID
LECO Lincoln Electric Holdings communication technology.
Lincoln Electric Holdings, Inc. designs and manufactures welding and cutting products such as arc welding power sources, wire feeding systems, robotic welding packages.
PH Parker Hannifin Corp Parker-Hannifin Corporation manufactures motion control products, including fluid power systems, electromechanical controls, and related components.
ADSK Autodesk Inc Autodesk, Inc. supplies PC software and multimedia tools that are used across industries for architectural/mechanical design and visualization applications.
SNPS Synopsys Inc Synopsys, Inc. supplies electronic design automation solutions to the global electronics market.
CSCO Cisco Systems Inc Cisco Systems designs, manufactures, and sells IP-based networking and other products related to the communications and IT industry and provide services associated with it.
FLIR Flir Systems Inc FLIR Systems, Inc. designs, manufactures, and markets thermal imaging and broadcast camera systems for a variety of applications.
ZBRA Zebra Tech. Corp Zebra Technologies Corporation designs and manufactures advanced data capture devices, such as laser, 2D and RFID scanners and readers, and specialty printers.
MKSI Mks Instruments Inc MKS Instruments, Inc. develops, manufactures, and supplies instruments and components used to control and analyze gases in semiconductor.
AVGO Broadcom Inc Broadcom Inc. designs, develops, and markets digital and analog semiconductors.
NVDA Nvidia Corp NVIDIA Corporation designs, develops, and markets three dimensional (3D) graphics processors and related software.
QCOM Qualcomm Inc QUALCOMM Incorporated manufactures digital wireless communications equipment.
XLNX Xilinx Inc Xilinx, Inc. designs, develops, and markets complete programmable logic solutions.
IMMR Immersion Corp. Immersion Corporation offers touch feedback technology solutions in mobile devices, automotive touchscreen and touchpads, medical training equipment, gaming consoles.
ISRG Intuitive Surgical Inc Intuitive Surgical, Inc. design, manufactures, and markets surgical systems.
VAR Varian Med. Sys. Inc Varian Medical Systems, Inc. designs, manufactures, sells, and services medical equipment.
GOOG Alphabet Inc-Cl C Alphabet Inc. through its subsidiaries, provides web-based search, advertisements, maps, software applications, mobile operating systems, consumer content, enterprise solutions.

2019 WB 3246 FSInsight WhyTheConstructiveOutlookfor2019isfueledbyDemographics

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

2019 WB 3246 FSInsight WhyTheConstructiveOutlookfor2019isfueledbyDemographics

Uploaded by

Copyright:

Available Formats

2019 Strategy

Thomas J. Lee, CFA AC

Sept. 3, 2019 Slide 2

The information provided in this presentation is believed to be accurate, but the

Past performance is not indicative of future results.

• World is scary, US stocks ready for bounce

• US equities are de-coupling from RoW

• Labor shortages benefit US competitiveness

• Demographics destiny: Millennials

• Recommended Investment Strategies

Sept. 3, 2019 Slide 3

Sept. 3, 2019 Slide 4

Sept. 3, 2019 Slide 6

Figure: Price changes since September 2018

+30% +60% Massive upside

Japan 40-yr bond

-1% (due 2028)

Source: Fundstrat, Bloomberg, Factset

Sept. 3, 2019 Slide 7

Figure: 10-year Government Bond Yield (%)

Why won’t bond buyers start 6.63

Sept. 3, 2019 Slide 8

Figure: Upside potential for bonds if interest rates keep falling

If markets believe US rates could go to zero, there is a

…but this causes curve to invert. 651

118 123 120

Yield to Maturity Yield to Maturity Yield to Maturity

Source: Fundstrat, Bloomberg, Factset

Sept. 3, 2019 Slide 9

With a 75bp cut, the

Source: Fundstrat, Bloomberg, Factset

Sept. 3, 2019 Slide 10

inverted yield curve

Source: Fundstrat, Google Trends

Sept. 3, 2019 Slide 11

Fed cut + recession: Fed cut + Expansion:

3M -8.0% 20% 3M 9.7% 100%

Sept. 3, 2019 Slide 12

Figure: 6-month forward returns and implied S&P level

Fed cut + LEI Positive Fed cut + LEI Negative

Sept. 3, 2019 Slide 13

Days Days Days Days Days Days Days

Sept. 3, 2019 Slide 14

Figure: Equity declines of 3% and VIX term structure

1 Month forward return

Average (3.8%) 4.0% 8.2% 15.3% 35.08 (3.40)

Sept. 3, 2019 Slide 15

Market AAII PMIs

Sept. 3, 2019 Slide 16

• World is scary, US stocks ready for bounce

• US equities are de-coupling from RoW

• Labor shortages benefit US competitiveness

• Demographics destiny: Millennials

• Recommended Investment Strategies

Sept. 3, 2019 Slide 17

1. Short Sellers Obvious

2. Democratic Candidates Economy is THE swing factor.

3. Trump Haters Obvious

4. Bond Holders Falling rates = massive upside to bond price

5. China A recession forces Trump to capitulate.

6. Media turmoil sells Ads baby!!!

7. Europe Misery loves company + Schadenfreude

8. Private Equity $2 trillion of dry powder

9. Federal Reserve??? To Be Determined