2012 Market Outlook
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Transcript of 2012 Market Outlook
2012 Market Outlook
Jon Erickson, CFASenior Vice President, ResearchFirst Trust Advisors LP
U.S. Sector Returns – 2011
Returns represent the S&P 500 GICS Sectors for the period 12/31/10 through 12/31/11. Returns are for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index. Past performance is no guarantee of future results.
-20.00%
-15.00%
-10.00%
-5.00%
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
U.S. Sector Returns – YTD 2012
Returns represent the S&P 500 GICS Sectors for the period 12/31/11 through 5/10/12. Returns are for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index. Past performance is no guarantee of future results.
U.S. Style Returns – 2011
Returns for the period 12/31/10 through 12/31/11. Returns are for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index. Past performance is no guarantee of future results.
-3.00%
-2.00%
-1.00%
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
S&P 500Value
S&P 500 S&P 500Growth
S&P 400Value
S&P 400 S&P 400Growth
S&P 600Value
S&P 600 S&P 600Growth
U.S. Style Returns – YTD 2012
Returns for the period 12/31/11 through 5/10/12. Returns are for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index. Past performance is no guarantee of future results.
Country Returns – 2011
Returns are represented by MSCI Country Indexes for the period 12/31/10 through 12/31/11. Returns are for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index. Past performance is no guarantee of future results.
-40.00%
-35.00%
-30.00%
-25.00%
-20.00%
-15.00%
-10.00%
-5.00%
0.00%
5.00%
Country Returns – YTD 2012
Returns are represented by MSCI Country Indexes for the period 12/31/11 through 5/10/12. Returns are for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index. Past performance is no guarantee of future results.
Germany $184BBritain $188BFrance $60B
$16B
$22B
$18B
Ireland$867B
$0.8BGreece$236B
German
y $23
8B $28B
$31B$30B
Spain $1.1 Trillion $86B
Germany $190B
France $511B
Britain $77B
Amount owed between countries as of December 31, 2010 in billions of dollars
Italy $1.5 Trillion
Portugal $286B
$0.7B
$8.5B $6.9B
$6.7B$9.7B
$0.1B
$5.2B
$5.4B
$46B
$47B
France $45BGermany $47B
Britain $24B
$0.8
B$1
.3B
Fran
ce
$75B
Ger
man
y $
45B
Brit
ain
$15
B
Britain
$114
B
Fran
ce $2
20B
Europe’s Web of Debt
Source: New York Times
Debt vs. GDP
Source: IMF
As of 12/31/2010
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
$14,000
$16,000
Japan Greece Italy UnitedStates
France Canada Germany UnitedKingdom
India Brazil Spain Australia China Russia
Japan Greece Italy United States France Canada Germany United
Kingdom India Brazil Spain Australia China Russia
GDP 5458.872 305.415 2055.114 14657.8 2582.527 1574.051 3315.643 2247.455 1537.966 2090.314 1409.946 1235.539 5878.257 1465.079DEBT 12024.93 433.7614 2445.766 13419.47 2175.667 1322.928 2652.329 1735.984 1109.973 1380.974 847.5763 275.5935 1041.112 144.6146
%Debt/GDP 220.28% 142.02% 119.01% 91.55% 84.25% 84.05% 79.99% 77.24% 72.17% 66.07% 60.11% 22.31% 17.71% 9.87%
Federal Receipts vs. Outlays 12-Month Moving Total
1.6
1.8
2.0
2.2
2.4
2.6
2.8
3.0
3.2
3.4
3.6
3.8
2000 2002 2004 2006 2008 2010 2012
Federal OutlaysFederal Receipts
trillions
Source: Treasury Department. Data from January 2000 through November 2011.
16
18
20
22
24
26
1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015
Government Spending as a % of GDPDow Jones Industrial Average (Log Scale)
percent index
1,250
7,500
5,000
2,500
10,000
12,50015,000
500
Government Spending as a % of GDP vs. Dow
?
Source: OMB, WSJ. Data from January 1965 through February 2012. Returns are for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index. Past performance is no guarantee of future results.
Housing Starts (Thousands, Annual Rate)
400
800
1200
1600
2000
2400
04 05 06 07 08 09 10 11
Normal = 1.6 Million
Home Building Must “Boom” to Normalize
Source: Census Bureau. Data from January 2004 through November 2011.
Household Financial Obligations RatioRecurring Monthly Payments as a Percent of After-Tax Income
14
15
16
17
18
19
20
80 85 90 95 00 05 10
Consumer Obligations Low Versus Income
Source: Federal Reserve Board. Data from First Quarter 1980 through Third Quarter 2011.
S&P 500 Index
1527.46
3/24/2000
815.28
9/30/2002
676.53
3/9/2009
1552.50
7/13/2007
1357.99
5/10/2012
Returns are for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index. Past performance is no guarantee of future results.
Returns are for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index. Past performance is no guarantee of future results.
S&P 500 Index
Theoretical 8% compounded growth
S&P 500 10 Year Rolling Return
Returns are for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index. Past performance is no guarantee of future results.
10 Year US Treasury vs. Earnings Yield
Returns are for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index. Past performance is no guarantee of future results.
Valuation Comparison of S&P 500 Current Compared to 20 Year Average
Price/ SalesPrice/ Cash FlowPrice/ Book
Cur
rent
20 Y
ears
Cur
rent
20 Y
ears
20 Y
ears
Cur
rent
Data obtained from the Compustat database. Data as of 2-28-2012. Comparisons are for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index. Past performance is no guarantee of future results.
Bond and Stock Inflows
Source: ICI, FT Advisors
-300
-200
-100
0
100
200
300
400
500
1996 1998 2000 2002 2004 2006 2008 2010 2012
Net Equity Fund Flows Rolling 12 MonthNet Bond Fund Flows Rolling 12 Month
billions, USD
These slides were prepared by First Trust Advisors L.P. (FTA) and reflect the current opinion of FTA. It is based on sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. The information does not constitute a solicitation or an offer to buy or sell any security.Investing involves risks, including the risk of loss.An investment in common stocks involves risks such as an economic recession and the possible deterioration of either the financial condition of the issuers of equity securities or the general condition of the stock market. An investment in small-cap companies or mid-cap companies is subject to additional risks as the share prices of small-cap and mid-cap companies are often more volatile than those of larger companies due to various factors, including limited trading volumes, products, financial resources, management inexperience, and less publicly available information. An investment concentrated in common stocks of issuers from a specific industry sector is more risky than a broadly diversified portfolio.An investment in foreign securities is subject to additional risks, such as currency fluctuations, political risk, the lack of adequate financial information, withholding taxes, and exchange control restrictions impacting foreign issuers. Risks associated with investing in foreign securities may be more pronounced in emerging markets, where the securities markets are substantially smaller, less developed, less liquid, less regulated, and more volatile than the U.S. and developed foreign markets. An investment in U.S. Treasury securities involves certain risks including changes in interest rates, economic recession, deterioration of the U.S. Treasury market or investor’s perception thereof, and possible downgrades by credit rating agencies.
Certain Considerations
• Questions & Answers
• Thank you!
Q & A