Symbol: LPTY.HK

Recent global economic data continues to be weak as evidenced by declining GDP projections from the
Organisation for Economic Co-Operation and Development (OECD). The intergovernmental organization
released its updated 2019 world economic growth forecast on March 6, cutting its global GDP estimates to 3.3%
from 3.5% in November 2018. Specifically, OECD cut its U.S. projection from 2.7% to 2.6%.
We believe investors have responded to this slower global growth outlook by increasing exposure to companies
with stronger secular growth profiles as opposed to cyclical ones. If we examine the leading O’Neil Industry
Groups over the last month, we see many of them are in the long-term growth areas of Technology and Health
Care, including Software, Semiconductors, Computer Networking, Telecom, and Medical Services. Indeed,
Technology, with 22 stocks, and Health Care, with six stocks, represent a combined 48% of the U.S. Focus List.
In addition, the lack of inflation in the U.S. means investors might be more willing to pay a higher multiple for
growth. The U.S. Labor Department’s figures released on March 12 showed only a 1.5% increase in CPI for the
last 12 months through February. This was the slowest rate of increase since September 2016 and a
deceleration from January’s +1.6% pace.
With the current S&P 500 P/E at 16.8x 2019 and 15.1x 2020 based on consensus Wall Street earnings
estimates, the U.S. stock market is not overly expensive, and is close to its five-year average of 16.4x. As a result,
we believe growth stocks can experience a multiple premium and possible P/E expansion in the current
environment.
The U.S. market has been moved back to a Confirmed Uptrend. The S&P 500 and Nasdaq cleared above a
longer-term range of resistance on Friday. The next level of resistance is ~2,864 on the S&P 500 and ~7,873
on the Nasdaq, where both indices originally broke below their respective 50-DMA last October 2018.
Distribution stands at five days on the S&P 500 and four on the Nasdaq, with one additional day expiring on the
S&P 500 at next Thursday’s close.
Seven sectors are now trading above their respective 200-DMA after the strong rally this week. Technology
continues to lead with multiple industry groups including Software and Semiconductors back under
accumulation. Health Care has also come under recent accumulation after finding strong support at its 50-DMA
this week.
Leading ideas are acting very strong. Extended leadership continues to hit higher highs each day, showing few
signs of technical weakness, while new potential leaders continue to emerge from consolidation. We recommend
buying quality ideas at exact pivot points, while also locking in partial gains in ideas that have rallied 20–25% or
more from an ideal pivot.