Post on 20-Jan-2016
OCTOBER 2015
THE TRAVEL CONVENTIONGREECE
A STORM WARNING?
THE NEWS FEARS
• China slowdown
• Emerging Market effects
• US Interest rates
• Eurozone
• Greece
• Immigration
• UK Deficit & Growth
THE SHIPPING FORECAST
A KEY MOMENTOF ECONOMIC CHANGE
5
HOW BAD IS IT?
SOURCE BLOOMBERG.
UNPRECEDENTED STIMULI
• Low Rates
• Infrastructure Spending
• Quantitative Easing
• Commodity Price falls
OLD NEWS………………..
• China Slowdown• US growth still not at pre-recession trend• Rate hikes will prompt slowdown?• Eurozone future• Greece• Ukraine• ISIS• China Sea Sores
BIG IMBALANCES
• Government debt and deficits
• Consumer debt
• Trade balances
• Income distribution
AFTER THE “NOUGHTIES”-THE TINY TEENS• Low Growth
• Low Inflation
• Low Interest Rates
• Low Returns
Now make some Money!
OIL PRICESOil price move is still happening!
59% fall
22% fall
COMMODITIES - ROLLING 5 YEARS
BALTIC DRY, COPPER, GOLD, BRENT CRUDE (WTI)
01/11 01/12 01/13 01/14 01/154,0004,000
5,0005,000
6,0006,000
7,0007,000
8,0008,000
9,0009,000
10,00010,000
11,00011,000
5281.00
Copper - Spot Price - LME (US$/MT)High: 9986.00 Low: 5063.75 Last: 5281.00
Recession Periods - United States Recession Periods - United Kingdom
UNEMPLOYMENT IS FALLING
GREEN – EUROPEAN, RED - UNITED STATES, YELLOW - UNITED KINGDOM
'01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '1533
44
55
66
77
88
99
1010
1111
1212
1313Unemployment Rates
Unemployment Rate, U-3 - Percent, Sa - United States - Percent, Sa - United StatesUnemployment Rate Claimant Count, Percent - United KingdomHarmonized Unemployment Rate, Both Sexes, All Ages, Sa - Euro Area (18 Countries)
CONSUMER CONFIDENCE & Savings
US, EUROZONE, UK AND JAPAN CONSUMER CONFIDENCE - 30 YEARS. GREY AREAS MARK RECESSIONS – EZ MEASUREMENT AGAINST GERMANY.GREEN – US AND UK HOUSEHOLD SAVINGS RATIO’S
01/85 01/88 01/91 01/94 01/97 01/00 01/03 01/06 01/09 01/12 01/15-40
-35
-30
-25
-20
-15
-10
-5
0
5
-6.90
©FactSet Research SystemsSource: FactSet
Eurozone Consumer ConfidenceHigh on 5/31/2000 2.40
Avg: -12.49
Low on 3/31/2009 -34.60
Consumer Survey - Consumer Confidence Indicator, Balance, Sa - Euro Area -16.40
01/85 01/87 01/89 01/91 01/93 01/95 01/97 01/99 01/01 01/03 01/05 01/07 01/09 01/11 01/13 01/150
20
40
60
80
100
120
140
160
14.5
15.0
15.5
16.0
16.5
17.0
17.5
18.0
18.5
15.27
101.54
©FactSet Research SystemsSource: FactSet
US Consumer ConfidenceConsumer Confidence Index, 1985=100, Sa, Index - United States 102.00Banking & Credit, Household Debt Service & Financial Obligations Ratios, For, Sa, Percent - United States 16.42
01/86 01/88 01/90 01/92 01/94 01/96 01/98 01/00 01/02 01/04 01/06 01/08 01/10 01/12 01/14-40
-35
-30
-25
-20
-15
-10
-5
0
5
10
2
4
6
8
10
12
14
16
18Consumer Survey - Consumer Confidence Indicator, Balance, Sa - United Kingdom UK - Households Saving Ratio (%, sa)Recession Periods - United Kingdom
RATES – LOWER FOR LONGER
LHS – BASE RATESRHS 10 YEAR TREASURY YIELDS, US (RED) JAPAN (GREEN), UK ORANGE, GERMANY (PINK) CANADA (BLUE) GLOBAL YIELDS GRADUALLY INCREASING.
'86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '150
2
4
6
8
10
12
14
16Lower for Longer
Japan Eurozone UK United States 01/96 01/99 01/02 01/05 01/08 01/11 01/140.0%0.0%
1.0%1.0%
2.0%2.0%
3.0%3.0%
4.0%4.0%
5.0%5.0%
6.0%6.0%
7.0%7.0%
8.0%8.0%
9.0%9.0%
JP: 0.38%
GY: 0.73%
CA: 1.49%
UK: 1.85%
US: 2.22%
Global 10Y Treasury YieldsUSA Japan UK GermanyCanada
UK & US INTEREST RATE EXPECTATIONS
US BASE RATES (GREEN) EXPECETED TO BE AT 2% IN SEPTEMBER 2018SOURCE BLOOMBERG
UK BASE RATES (ORANGE) EXPECTED TO BE AT 2% IN SEPTEMBER 2019
FX – GBP V US$, EURO AND JPY – 12M
WITH OVERSEAS MARKETS FAVOURED CURRENCY MANAGEMENT KEY.
Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep85
90
95
100
105
110
115
94.74
104.13
108.59
U.S. Dollar per British Pounds Daily1.55 0.00 -0.12% VWAP: High: 100.19 Low: 89.67 Chg: -5.26%
(INDEX) U.S. Dollar per British Pounds - Price (INDEX) Japanese Yen per British Pounds - Price(INDEX) Euro per British Pounds - Price
WHICH COMPANIES ARE GROWING PROFITS?
GDP GROWTH STILL POSITIVE
AVERAGE GLOBAL GROWTH CLOSE TO STATIC BUT CHANGES IN REGIONAL GROWTH RATES NOTABLE.
'08 '09 '10 '11 '12 '13 '14 '15-8.0%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
3.1%
0.0%
5.4%
4.2%
3.4% 3.4%3.4%
3.3%
GDP Still Growing
US UK Eurozone Japan EM World
USA – Higher Pressure
Rates Change?
Corporate Earnings still
rising!Iran/Cuba
Housing improving,
unemployment falling
Economic growth uninspiring
Fracking mad
US DEFICIT REDUCTION
GASOLINE PRICE FALL • Gas at the pumps
have fallen over 20% in the last 6 months
• The American motorist is $800 a year better off which is equivalent to a 2% pay rise.
• However yet to see spending. Americans are saving rather than consuming.
US Average Gasoline Price
2.25
2.50
2.75
3.00
3.25
3.50
3.75
4.00
4.25
O J A J O J A J O J A J O J A J O J A J2010 2011 2012 2013 2014 2015
THE WORLD BENEFITSCountries who export to the US
Country % of exports to US
China 16.7%
Japan 17.8%
South Korea 10.7%
Germany 7.9%
France 6.9%
UK 10.5%
REGIONAL STORMS
EU LEVEL PLAYING FIELD.....
EUROZONE
The Future of the Euro
“Grexit”?
Widespread economic
pickup
Company earnings rising at double
digit rates
QE = Growth?
Further financial integration
Immigration & Borders
THE SOUFFLE RISES – at last!
SOURCE: TWITTER - @MARK_WILLEM5
GOOD COMPANIESEuropean Earnings (pink) finally coming through!
WHITE MID CAP UKMAUVE EUROORANGE US
WEAK CURRENCY HELPS EXPORTSEuro over 10% weaker than start of 2014!
WATCH IT SHORTY!
SOURCE: NEWEUROPE.EU/EPA
“GREAT ECONOMY -PITY ABOUT THE POLITICIANS”
36
UK
Jobs & growth vs Income Tax
Fixing the banking system
Tax reform?
2 UnionsNo Power or
Transport strategy
World’s5th - 8th -10th
?
KRANKIES – THE LOVECHILD?
SOURCE: NEWEUROPE.EU/EPA
KEYS TO ECONOMIC CONFIDENCEINEXPERIENCED POLITICIANS
INEXPERIENCED CIVIL SERVICE
CYNICAL MEDIA
HOBBLED BANKING
HOW HAS THE UK FARED?
SOURCE: GOOGLE IMAGES
The UK exports services such as:•Finance•Accounting•Legal•Tourism•University education
-7
-5
-3
-1
1
3
5
1998 2000 2002 2004 2006 2008 2010 2012 2014
Trade in Goods as % of GDP Trade in Services as % of GDP Trade Balance
UK trade balance
Real wages ticking up
RHS - GREEN – WAGE INFLATION V RED UK CONSUMER PRICE INFLATION
LIVING STANDARDS STARTING TO PICK UP AT LAST?
'06 '07 '08 '09 '10 '11 '12 '13 '14 '15-1
0
1
2
3
4
5
6
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0Real Wages Positive
UK - CPI All Items (YoY%, sa) Lmsb Awe, Regular Pay We Growth Yoy 3 Months Average, Sa, Percent - United Kingdom
GOVERNMENT DEFICIT
SOURCE: ONS
UK Govt’ forecast to borrow £70bn in 2015/2016
SOURCE: BANK OF ENGLAND
THE LONG AND WINDING ROAD
INFLATION LIKELY TO STAY LOW IN THE MID-TERM
UK PMIs
SOURCE:
45.0
47.5
50.0
52.5
55.0
57.5
60.0
62.5
65.0
S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A2012 2013 2014 2015
Construction Markit/CIPS UK Manufacturing PMI SA Markit/CIPS UK Services PMI Business Activity SA
-40.0%
-20.0%
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
Ch
ang
e in
Pri
ce
Change in Yield
30Yr 10Yr 3Yr
PRICE SENSITIVITY - BONDS1% fall in yields:
30yr = +20%10yr = +9%3 Yr = +3% 1% rise in yields:
30yr = -13%10yr = -8%3 Yr = -3%
UK POSITIVE ISSUES• “Re-shoring” – Noodles & Antler
• Record Car production
• Steel – 40 year peak
• Non EU exports now higher than EU
• Rice Cookers to Asia!
• Financial/Professional trade exports £55bn
• Over half million business start ups 550,000
• New Financing structures
• Record Employment
NOW - SOME RADICAL COMMON SENSE• Tax Reform
• NI & SME
• Stamp Duty – transactions & property
• Sugar & Fat Tax
• Pension Reform• Auto E
• Education
• Investment Reform• New Funding schemes
• Housing Free & Leasehold
• Infrastructure
EAST – Monsoons & Typhoons
JAPAN
Islands Dispute
Abe - nomics Yen Weakness
Debt 220%+ of GDP
Trade Turnaround
Nappy Sales
THE CHINA SEA -SORES
FEEL THE LOVE…….
BROKEN BRICS?
ChinaChange of Life
BrazilWeaker Exports
South AfricaPolitical issues
RussiaRule of law?
IndiaPost election
TurkeyOn the Cusp
MSCI Asia Ex Japan
ChinaSouth Korea
TaiwanBrazil
South AfricaIndia
MexicoRussia
MalaysiaIndonesiaThailandTurkeyPolandChile
PhilippinesHong KongSingapore
...FAVOUR Commodity IMPORTERS
SOURCE: ISHARES/7IM
54
MSCI Emerging Markets
ChinaSouth Korea
TaiwanBrazil
South AfricaIndia
MexicoRussia
MalaysiaIndonesiaThailandTurkeyPolandChile
Philippines
HOW BAD IS THE CHINA SLOWDOWN?
Solid growth in crude petroleum import volumes
Retail sales growth running >10%
Slowdown in industrial
production rate of growth
Wage growth running around
10% p.a.
THE NEW LEADERSHIP
THE NEW LEADERSHIP
JOINING THE “RESERVE” GANG
SOURCE: GaveKal
Chinese Currency is a big part of the Reserve once it punches its weight
RIDING THE ROLLERCOASTERShanghai Index (white) vs MSCI World (yellow) YTD
CHINA’S WORKING AGE POPULATION
SOURCE: UNITED NATIONS
KEY RISKS to the VIEW
EUROZONE GREEN/K SHOOTS
CHINA CHANGE of LIFE
UK SULLEN GROWTH & NERVES
US DEBT, DEFICIT & DEMAND
REBUILDING INVESTMENTCONFIDENCE
KEY WORD FOR ECONOMY - CONFIDENCE
POWER OF COMPOUNDING
Today’s value of £100 invested at the end of 69 years
SOURCE: BARCLAYS CAPITAL
1 – without reinvesting income
Nominal Equities £9,148
2 – gross income reinvested
Nominal Equities £179,265
CHOOSING NEXT YEAR’S TOP Asset Class COULD YOU?
SOURCE: BLOOMBERG, THOMSON REUTERSAS AT 1 JANUARY 2015
IT WORKS!
SOURCE: BLOOMBERG, THOMSON REUTERSAS AT 1 JANUARY 2015
SOURCE: 7IM/IBBOTSONAS AT 30TH JUNE 2015
7IM BALANCED FUNDASSET ALLOCATION CHANGES
Jun-
10
Dec-1
0
Jun-
11
Dec-1
1
Jun-
12
Dec-1
2
Jun-
13
Dec-1
3
Jun-
14
Dec-1
4
Jun-
150%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100% Cash & Money Markets
Currency Funds
CTAs
Hedge Funds & Other Strategies
Infrastructure
Property & Related Equity
Private Equity
Timber
Commodites & Related Equity
Emerging Market Bonds
Global Covertibles
Global High Yield
Global Corporate Bonds
Sterling Corporate Bonds
Index-linked Gilts
Global Index Linked Bonds
Short Term Gilts
Gilts (and Government-Related)
Global Government Bonds
Global Themes
Frontier Markets Equity
Emerging Markets Equity
Far East Equity
Japan Equity
European Equity
North American Equity
UK Small Cap Equity
UK Equity
FTSE 100
FTSE 100 TOTAL RETURN
N.B. Expected Maximum and Minimum Return ranges are based on 90% confidence level
SOURCE: FE ANALYTICS7IM / IBBOTSON STUDY 2015
Expected Maximum Return Expected Minimum Return
THEORY: BALANCED
Average Expected Return
N.B. Expected Maximum and Minimum Return ranges are based on 90% confidence level
SOURCE: FE ANALYTICS7IM / IBBOTSON STUDY 2015
Expected Maximum Return Expected Minimum Return Actual Compound Return
REALITY: BALANCED
Average Expected Return
All data refers to C Class Accumulation Units As at 30 th June 2015
REWARDING YOUR OWNHARD WORK
YOUR OWN PLANNING
Accountants
Lawyers
Insurance
Mortgage Providers
Banks
Trustees
Investment
ClientYour Family
FinancialPlanning
FORWARD FINANCIAL HEADLIGHTSCash flow – income and expenditure Now Long term future
SO WHAT DO YOU DO?Think broader family assets and liabilities
• Managing family assets
Improve Investment Discipline
• Reducing Costs
• Better than average Returns
• Reducing Risks
• Lower Volatility
• Regular financial planning
FAMILY BALANCE SHEET
House
Car
Pension
Life assurance
ISAs
Shares & National Savings
Cash
Mortgage
Credit Cards
Loans
ASSETS LIABILITIES
NET BALANCE £
THE Forecast? Fine, Clear & Sunny
THE ALTERNATIVE? Washed Up!
OCTOBER 2015
THE TRAVEL CONVENTIONGREECE
TWITTER @USTEWART WWW.7IM.CO.UK
THANKYOU