wealth and investment management title slide jun 8 – 10, 2015 global market outlook
TRANSCRIPT
Wealth and Investment Management
Title Slide
JUN 8 – 10, 2015
www.bermudacaptive.bm
Global Market Outlook
Wealth and Investment Management
Markets and the Global Economy
Barclays Research, Economics and Strategy
June 2015
Henk Potts
Performance of our asset classes
3
Source: FactSet, Datastream, Barclays; graph based on asset class indices as published in Compass February 2013.
Alternative Trading Strategies*
Real Estate
Commodities
Emerging Markets Equities
Developed Markets Equities
High Yield and Emerging Markets Bonds
Investment Grade Bonds
Developed Government Bonds
Cash & Short-maturity Bonds
2.6%
0.8%
-3.2%
5.7%
5.1%
1.8%
1.1%
0.6%
0.0%
-0.6%
15.0%
-17.0%
-2.2%
4.9%
1.3%
7.6%
8.1%
0.1%
2014 2015 (through end of May)
US forecasts in a nutshell
4
% y-o-y except where stated
2013 2014E 2015F 2016F
GDP2.2 2.4 2.4 2.5
CPI1.5 1.6 0.3 1.9
Official interest rate (%)
0-0.25 0-0.25 0.5-0.75
NA
Future forecasts are not a reliable indicator of future performance
US Interest rates have been close to zero since Dec 2008
5
Data source: Datastream, Barclays
Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-150
1
2
3
4
5
6
FED Target Rate 25 year average
Yield (%)
The slow normalisation of US policy will start in Sept 2015
6
Data source: Datastream, Barclays
Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-160
1
2
3
4
5
6
Forward curve 25 year average
US Libor forward curve implied by swap rates (%)
Source: Bloomberg, Datastream, Barclays
More than 200k new jobs each monthThe unemployment rate has steadily declined
US labour market has rapidly recovered
7
Jan-04 Jan-06 Jan-08 Jan-10 Jan-12 Jan-144
5
6
7
8
9
10
US Unemployment ...
Unemployment (%)
Apr-12 Apr-13 Apr-14 Apr-150
50
100
150
200
250
300
350
400
450
Month-on-Month Change
Change in Nonfarm Payrolls (000s)
Source: Datastream, Bloomberg, Barclays
And debt affordability remains high
Strong equity performance is driving higher net worth
Consumer confidence
Consumer confidence near multi-year highs
8
Dec-05 Dec-07 Dec-09 Dec-11 Dec-1320
30
40
50
60
70
80
90
100
110
120
Conference Board
U. of Michigan
Index Value
Dec-99 Dec-03 Dec-07 Dec-110
500
1000
1500
2000
0
20
40
60
80
100
S&P 500 Index (lhs)Household Net Worth (rhs)
Index Value Trillions, USD
9
10
11
12
13
14
Household debt service ra-tio (% disposable income)
Average
Ratio
US Housing Market recovery has cooled
9
Source: Datastream, Barclays
-20
-15
-10
-5
0
5
10
15
20
US S&P/Case-Shiller home price index 20 city composite (...
Year-on-Year Change (%)
The US Deficit is decreasing rapidly
10
Data source: Datastream, Barclays
-4
-2
0
2
4
6
8
10
12
US
US Government Deficit as % of GDP (1 year moving average)
Restructuring Europe is slow, but markets remain calm
11
Data source: Datastream, Barclays
0
5
10
15
20
25
30
35
40
45
Spain
Italy
Ireland
Greece
Portugal
10 year Government Bonds, Spread vs. Ger-many(%)
The European Crisis isn't over….still plenty of risk in 2015
12
Data source: Eurostat, Datastream, Barclays
Germany Austria Ireland France Italy Portugal Spain Greece0
5
10
15
20
25
30
Unemployment Rate
Percent (%)
Greek government debt
13
Source: Datastream, Barclays
Dec-90 Dec-93 Dec-96 Dec-99 Dec-02 Dec-05 Dec-08 Dec-11 Dec-1450
60
70
80
90
100
110
120
130
140
150
160
170
180
Greece Euro zone
Gross Government Debt as % of GDP
Inflation in the Euro area turned negative in Dec
14
Data source: Datastream, Barclays
Dec-9
9
Dec-0
3
Dec-0
7
Dec-1
1
Dec-1
5
Dec-1
9
Dec-2
3
Dec-2
7
Dec-3
1
Dec-3
5
Dec-3
9
Dec-4
3
Dec-4
7
Dec-5
1
Dec-5
5
Dec-5
9
Dec-6
3
Dec-6
7
Dec-7
1
Dec-7
5
Dec-7
9
Dec-8
3
Dec-8
7
Dec-9
1
Dec-9
5
Dec-9
9
Dec-0
3
Dec-0
7
Dec-1
1-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5CPI inflation (% y-o-y)
The ECB’s QE program dwarfs the programs of all other central banks
15
Source: Gavekal, Barclays
Fed QE3 Fed QE2 BoE QE2 BoJ 2013 BoE QE1 BoJ 2014 ECB QE0.0
0.5
1.0
1.5
2.0
2.5
3.0Ratio of central banks' government bond purchase to net supply of gvt bonds
Euro-area forecasts in a nutshell
16
% y-o-y except where stated
2013 2014E2015
F 2016F
GDP -0.4 0.9 1.4 1.7
CPI 1.4 0.4 0.2 1.1
Official interest rate (%) 0.25 0.05 0.05 NA
Future forecasts are not a reliable indicator of future performance
UK forecasts in a nutshell
17
% y-o-y except where stated
2013 2014E 2015F 2016F
GDP 1.7 2.8 2.2 2.1
CPI 2.6 1.5 0.2 1.6
Official interest rate (%) 0.5 0.5 0.5 NA
Future forecasts are not a reliable indicator of future performance
Implied interest rate United Kingdom
18
Data source: Datastream, Barclays
Jun-15 Dec-15 Jun-16 Dec-16 Jun-17 Dec-17 Jun-18 Dec-180.0
1.0
2.0
3.0
4.0
5.0
6.0
Implied 3-month rate United Kingdom
25 year average
Percent
Japan - Real GDP and Inflation
19
Data source: Datastream, Barclays
-10
-8
-6
-4
-2
0
2
4
6
Inflation Real GDP
Change Y-o-Y (%)
Chinese GDP growth has slowed, but remains at a respectable level
20
Source: Datastream, Barclays
-4
-2
0
2
4
6
8
10
12
14
16
World
Real GDP Growth Y-o-Y (%)
GDP growth in India
21
Source: Oxford Economics, Datastream, Barclays
0
2
4
6
8
10
12
14
India
Real GDP Growth Y-o-Y (%)
Long term asset class performance
22
Data source: Barclays Equity Gilt Study
18991900190119021903190419051906190719081909191019111912191319141915191619171918191919201921192219231924192519261927192819291930193119321933193419351936193719381939194019411942194319441945194619471948194919501951195219531954195519561957195819591960196119621963196419651966196719681969197019711972197319741975197619771978197919801981198219831984198519861987198819891990199119921993199419951996199719981999200020012002200320042005200620072008200920102011201220132014 10.00
100.00
1,000.00
10,000.00
100,000.00
1,000,000.00
10,000,000.00
Equity Gilts T-Bills
UK Indexed Performance (1899=100)
US Equities - S&P 500
23
Data source: Datastream, Barclays
Nov-08 Nov-09 Nov-10 Nov-11 Nov-12 Nov-13 Nov-14600
800
1000
1200
1400
1600
1800
2000
S&P 500 Price index
Price index
Expected earnings growth
24
Data source: IBES, Datastream, Barclays
2015 F 2016 F0
2
4
6
8
10
12
14
16
18
S&P 500 Euro Stoxx
Earnings Growth (%)
S&P 500 Trailing Price/Earnings Ratio with Historical Median
25
Data source: Datastream, Barclays
Jan-68 Jan-73 Jan-78 Jan-83 Jan-88 Jan-93 Jan-98 Jan-03 Jan-08 Jan-130
5
10
15
20
25
30
S&P 500 trailing P...
Bargains
Undervalued
Median
Overvalued
Very Overval-ued
S&P 500 and Eurofirst 300
26
Data source: Datastream, Barclays
Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-1590
140
190
240
290
S&P 500 Eurofirst 300
Performance index (USD, Mar-09=100)
Equity performance 2015 year-to-date by region
27
Source: FactSet, Barclays
USA
Developed
Emerging
United Kingdom
Europe ex UK
Japan
0.0% 5.0% 10.0% 15.0% 20.0%
3.4%
7.3%
8.1%
8.1%
15.1%
19.6%
Net return year-to-date in local currency(%)
S&P 500 and Euro STOXX - Forward Price/Earnings ratio
28
Source: Datastream, Barclays
Nov-99 Nov-01 Nov-03 Nov-05 Nov-07 Nov-09 Nov-11 Nov-135
10
15
20
25
30
S&P 500 Euro STOXX
Forward Price/Earnings ratio (x)
S&P 500 and Euro STOXX - Trailing Dividend Yield
29
Source: Datastream, Bloomberg, Barclays
Jun-99 Jun-01 Jun-03 Jun-05 Jun-07 Jun-09 Jun-11 Jun-131.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
5.5
S&P 500 Euro STOXX
Trailing Dividend Yield (%)
Selected equity markets
Source: Datastream, Barclays
Developed Markets Equities have outperformed Emerging Markets Equities in the years after the financial crisis
30
US Large and SMID cap companies have had the highest returns since end of 2012
Dec-12 Mar-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-1582
91
100
109
118
127
136
145
154S&P 500 Index
Russell 2500 Index
Euro Stoxx 50 Index
Nikkei 225 Index
MSCI EM Index
Price Indices (USD, Dec-12=100)
Forward PE - Developed and Emerging Markets
31
Data source: MSCI, Barclays
Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Dec-149
10
11
12
13
14
15
16
17
Developed Markets
Forward PE (x)
Government bond yields: selected markets
32
Data source: FactSet, Barclays
Series10.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
± one standard deviation Current
Nominal Yield Level (%)
Bond represented by respective Barclays indices. Source: FactSet, Barclays
High Yield nominal yieldsInvestment Grade Bonds nominal yield
Investment Grade and High Yield Bond yields
33
Investment grade credit is still expensive and vulnerable to rising issuance: we are tactically underweight
Expensive, but less interest rate risk. The majority of the recent changes in spreads has been driven by moves within the energy space. We remain tactically underweight
Jan-73 Jan-83 Jan-93 Jan-03 Jan-132
4
6
8
10
12
14
16 Investment Grade
10-year moving av-erage
± one standard de-viation
Nominal Yield Level (%)
Jan-87 Jan-92 Jan-97 Jan-02 Jan-07 Jan-125
7
9
11
13
15
17
19
21 High Yield10-year moving av-erage± one standard de-viation
Nominal Yield Level (%)
Oil price - Brent Crude Oil
34
Source: Datastream, Barclays
Dec-08 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-1535
45
55
65
75
85
95
105
115
125
135
Brent Crud...
US Dollar/Barrel
Commodity prices
35
Data source: Datastream, Barclays
Apr-04 Apr-05 Apr-06 Apr-07 Apr-08 Apr-09 Apr-10 Apr-11 Apr-12 Apr-13 Apr-14 Apr-15150
200
250
300
350
400
450
500
550
Bloomberg Commodity Index
Spot Price
Gold has slumped
36
Source: Datastream, BarclaysPast performance is not a guide to future performance
1100
1200
1300
1400
1500
1600
1700
1800
Gold
USD/Troy Ounce
Divergence in growth rate and policy suggests the dollar will continue to strengthen
37
Data source: Datastream, Barclays
Dec-13 Mar-14 Jul-14 Oct-14 Jan-15 Apr-1585.0
90.0
95.0
100.0
105.0
USD trade wei...
Trade weighted index
FX Forecasts
38
Spot Price Performance Forecasts Forecasts vs Forward Spot at forecast Cross Spot 1 Week YTD 5Yr Ann. Q2 15 Q3 15 Q1 16 Q2 15 Q3 15 Q1 16
EUR/ USD 1.09 -0.9 -9.9 -2.4 1.05 1.00 0.95 -3.8% -8.5% -13.5% 1.10 USD/ JPY 125 3.3 4.2 6.6 121 121 118 -2.7% -2.5% -4.5% 120 GBP/ USD 1.52 -1.9 -2.6 0.7 1.48 1.43 1.40 -2.6% -5.9% -7.8% 1.55 USD/ CHF 0.95 1.1 -4.0 -3.7 1.03 1.07 1.11 9.3% 14.0% 19.4% 0.96 USD/ CAD 1.25 1.6 7.8 3.5 1.28 1.30 1.36 1.9% 3.4% 8.1% 1.25 AUD/ USD 0.76 -2.6 -7.3 -2.0 0.77 0.73 0.72 1.6% -3.2% -3.8% 0.79 NZD/ USD 0.71 -2.7 -9.0 0.9 0.73 0.70 0.67 3.6% 0.1% -2.8% 0.76
EUR/ JPY 136 1.5 -6.2 4.0 127 121 112 -6.4% -10.8% -17.4% 131 EUR/ GBP 0.72 1.4 -7.7 -3.0 0.71 0.70 0.68 -1.1% -2.7% -5.9% 0.71 EUR/ CHF 1.03 -1.0 -14.2 -6.2 1.08 1.07 1.05 5.0% 4.3% 2.9% 1.05 EUR/ SEK 9.36 1.3 -1.2 -0.4 9.50 9.30 8.90 1.6% -0.5% -4.7% 9.31 EUR/ NOK 8.69 3.3 -4.2 1.9 9.00 8.90 8.70 3.1% 1.7% -1.2% 8.60
GBP/ JPY 189 0.5 1.1 7.1 179 173 165 -5.3% -8.3% -12.0% 186 GBP/ AUD 2.00 1.0 4.7 2.7 1.92 1.96 1.94 -4.3% -2.7% -4.4% 1.96 GBP/ NZD 2.14 0.9 7.5 -0.1 2.03 2.04 2.09 -5.9% -6.1% -5.1% 2.04 GBP/ CAD 1.91 0.5 5.5 4.4 1.89 1.86 1.90 -1.0% -2.6% -0.6% 1.94 GBP/ CHF 1.44 -1.4 -7.1 -3.2 1.52 1.53 1.55 6.1% 7.3% 9.8% 1.49
Latest forecasts dated 21st May 2015. These forecasts represent our current views of the FX rates shown. These views may change in the future and may not accurately reflect actual future FX rate movements. All data as cob 1st June 2015 unless stated otherwise.
Selected US equity performance statistics since 1925
39
Source: Barclays Equity Gilt Study 2015, Barclays; All investments can fall in value. You may lose capital. Please note that past performance is not a guide to future performance.
Number of consecutive years
2 3 4 5 10 18
Outperform cash 66 68 63 67 68 72
Underperform cash 22 19 23 18 12 0
Total number of years
88 87 86 85 80 72
Probability of equity outperformance
75% 78% 73% 79% 85% 100%
Outperform bonds 61 58 57 59 63 66
Underperform bonds
27 29 29 26 17 6
Total number of years
88 87 86 85 80 72
Probability of equity outperformance
69% 67% 66% 69% 79% 92%
40
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This document has been issued and approved by Barclays Bank PLC. Although information in this document has been obtained from sources believed to be reliable, we do not represent or warrant its accuracy, and such information may be incomplete or condensed. This document does not constitute a prospectus, offer, invitation or solicitation to buy or sell securities and is not intended to provide the sole basis for any evaluation of the securities or any other instrument, which may be discussed in it. All estimates and opinions included in this document constitute our judgement as of the date of the document and may be subject to change without notice. This document is not a personal recommendation and you should consider whether you can rely upon any opinion or statement contained in this document without seeking further advice tailored for your own circumstances. This document is confidential and is being submitted to selected recipients only. It may not be reproduced or disclosed (in whole or in part) to any other person without our prior written permission. Law or regulation in certain countries may restrict the manner of distribution of this document and persons who come into possession of this document are required to inform themselves of and observe such restrictions. We or our affiliates may have acted upon or have made use of material in this document prior to its publication. You should seek advice concerning any impact this investment may have on your personal tax position from your own tax adviser.
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