economic and market outlook - fiduciary trust company · 2016-10-11 · equity market total...

AUSTIN V. SHAPARD

PRESIDENT AND CHIEF EXECUTIVE OFFICER

TODD H. ECKLER

CHIEF MARKETINGOFFICER

FIDUCIARY-TRUST.COM

PETER C. ANDERSEN

CHIEF INVESTMENT OFFICER

© 2016 Fiduciary Trust Company

Fourth Quarter 2016Economic and Market Outlook

October 11, 2016

•

© 2016 Fiduciary Trust Company 2

The opinions expressed in this presentation are as of the date issued and subject to change at any time. The materials discuss general market conditions

and trends and should not be construed as investment advice.

Any reference to specific securities are for illustrative purposes only and are not intended to be, and should not be interpreted as, recommendations to

purchase or sell such securities.

Nothing contained herein is intended to constitute legal, tax or accounting advice and clients should discuss any proposed arrangement or transaction

with their legal or tax advisors.

This presentation is incomplete without the accompanying oral commentary.

Disclosures


-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

A strong third quarter in equitiesEquity Market Total Returns

Emerging Markets

Asia Ex-Japan

United StatesAsia Developed

Eurozone

4/1/20161/1/2016 7/1/2016 9/30/2016

Note: Returns based on the following indices: MSCI Emerging Markets Index USD, MSCI All Country Asia ex-Japan Index USD, S&P 500 Index (U.S.), MSCI Pacific Index USD, MSCI EMU Index USD (Eurozone)Source: Morningstar, Fiduciary Trust

Q3 YTD16.0%

12.6%

7.8%5.3%

0.0%

9.0%

10.1%

3.9%8.5%

7.8%


40.00

45.00

50.00

55.00

60.00

65.00

70.00

Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul

ManufacturingNon-Manufacturing

Manufacturing somewhat weak;Services expanding, but the outlook is declining

Institute for Supply Management Index

Note: An index score greater than 50 indicates expansion, less than 50 indicates contractionSource: Institute for Supply Management, Ycharts, Fiduciary Trust

2014 2015 2016

EXPAN

DIN

GC

ON

TRAC

TING


0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

1975

1976

1977

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

Household income posting significant gains

Median U.S. Household Income (constant 2015 dollars)

Note: To calculate Constant 2015 dollars, figures for 1975-2014 were adjusted for inflation.Source: U.S. Census, Fiduciary Trust

2015 Income Growth: 5.2%2015 Income: $56,5161999 Income (peak): $57,909


Global GDP growth trends are mixedEuropean Union GDP Annual Growth Rate (%) China GDP Annual Growth Rate (%)

U.S. GDP Annual Growth Rate (%)Japan GDP Annual Growth Rate (%)

Source: Trading Economics, Fiduciary Trust


The Fed has continued to delay rate increases

Fed Funds Rate Projections

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

3.50%

FOMC Mar.'15 FOMC Jun.'15 FOMC Sep.'15 FOMC Dec.'15 FOMC Mar.'16 FOMC Jun.'16 FOMC Sep.'16 Market Implied

For Years Ending: December 2016 December 2017 December 2018

Note: FOMC refers to the Federal Reserve Open Market Committee; Market Implied rate based on futures contracts as of 9/21/2016Source: Bloomberg, Fiduciary Trust


0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

2014 2015 2016E 2017E 2018E

United States Global Developed Emerging Markets

Slow developed market growth expected to continue

Gross Domestic Product Growth

Note: Global Developed includes the United States; figures for 2016 – 18 are forecastsSource: International Monetary Fund World Economic Outlook, October 2016, Fiduciary Trust


Earnings “recession” slated to end in Q4

Source: FactSet, Thomson Reuters, Fiduciary Trust

S&P 500 Earnings per Share Growth

-10%

-5%

0%

5%

10%

15%

20%

25%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3Est.

Q4Est.2011 2012 2013 2014 2015 2016


U.S. equity valuations near historical averages

Note: Ending date of September 30, 2016Source: FactSet, Federal Reserve, Robert Shiller, J.P. Morgan Asset Management


Global equity valuations near historical levels

* Valuations refer to price/earnings for Europe, U.S. and Japan, and price/book for emerging markets; ending date of September 30, 2016.Source: J.P. Morgan Asset Management, FactSet, MSCI, Standard & Poor’s


0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

3.50%Sept 30. 2016Sept. 30 2015Sept. 30 2014

Yield curve pivoting around two to three-year maturities

U.S. Treasuries Yield Curves

Source: Bloomberg, Fiduciary Trust

6M 1Y 3Y 5Y 10Y 20Y 30YMaturity


After spiking in early 2016, spreads have narrowed

0

100

200

300

400

500

600

700

800

900

1000

U.S. Corporate Interest Rate Spreads over Treasuries (bps)

High Yield

BBB-Rated

AAA-Rated

A-RatedAA-Rated

Note: September 30, 2016 end date; spreads are option-adjustedSource: BofA Merrill Lynch, Federal Reserve Bank of St. Louis, Fiduciary Trust


Markets typically better when incumbent party winsDow Industrials: Election Year Cycle

(Incumbent Party Wins vs. Loses)

Note: Current case based on 2016; other lines are average cycle patterns based on daily data from 1900 - 2012Source: Ned Davis Research, Dow Jones, Fiduciary Trust

IncumbentParty Wins

IncumbentParty Loses


• U.S. economy stable and likely to continue growing slowly

• Slower European growth as it works through Brexit and sovereign debt challenges

• Emerging market growth to continue to outpace developed countries, but at a lower rate than recent years

• Numerous uncertainties likely to increase market volatility– Brexit impact, corporate earnings, central bank moves, election outcome

• Relatively low interest rates to persist for some time

• Long-term inflationary and market risks if global central banks continue large and expanding balance sheets for too long

Outlook Summary


Our Investment Objectives

Preserve and Grow Purchasing Power

Avoid Permanent Loss of Capital

Pursue Tax Efficiency (for taxable clients)


Our Investment Beliefs

Asset allocation is the primary driver of long-term returns

Diversification enables superior risk and return results

Capital market efficiencies vary

Long-term horizons generally produce better results

Creates roles for active and passive strategies

AUSTIN V. SHAPARD


TODD H. ECKLER


FIDUCIARY-TRUST.COM

PETER C. ANDERSEN



Questions & Answers

For more information about Fiduciary Trust, contact your officeror Randy Kinard at [email protected] or 617-574-3432

To submit questions via GoToWebinar

Type question in the Q&A box (typically on bottomright of your screen)

mailto:[email protected]

AUSTIN V. SHAPARD


TODD H. ECKLER


FIDUCIARY-TRUST.COM

PETER C. ANDERSEN



Fourth Quarter 2016Economic and Market Outlook

October 11, 2016

•

economic and market outlook - fiduciary trust company · 2016-10-11 · equity market total...

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