Presented by Matt Parsons & Julia Lindberg 525 N 9 th St, Cottage Grove, Oregon 97424 100 W 13 th...
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Transcript of Presented by Matt Parsons & Julia Lindberg 525 N 9 th St, Cottage Grove, Oregon 97424 100 W 13 th...
Commonwealth Financial Network® does not provide legal or tax advice. You should consult a legal or tax professional regarding your individual situation.
Securities and advisory services offered through Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser.
Presented by Matt Parsons & Julia Lindberg525 N 9th St, Cottage Grove, Oregon 97424
100 W 13th Ave, Suite 205, Eugene, Oregon 97401(541) 942-7300
Fourth-Quarter 2012Market Overview
Economic Summary: Fourth-Quarter 2012
• Milestones– Barack Obama wins reelection.– Consumer optimism in the U.S. rises to a 5-year high.– Citigroup CEO Vikram Pandit abruptly resigns.– Germany’s lawmakers respond favorably to the European Central
Bank’s (ECB) bond-buying program.– Hurricane Sandy hits Northeast U.S. – A fiscal cliff patchwork deal is announced at the 11th hour.
Certain sections of this commentary contain forward-looking statements based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Past performance is not indicative of future results.
Economic Summary: Fourth-Quarter 2012 continued
• Milestones continued– China introduces its next leadership team.– Oil production in the U.S. rises to a 15-year high.– The European Union breaks its deadlock and gives the ECB power over
eurozone banks.– The Federal Reserve links rate hikes to an unemployment rate of
6.5 percent.– The MSCI EAFE and Emerging Market indices outperform domestic
large-cap equities.
Certain sections of this commentary contain forward-looking statements based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Past performance is not indicative of future results.
Economic Themes
• Equity/fixed income• Housing• Credit and banking• Employment• Consumer behavior• Business and manufacturing activity
Certain sections of this commentary contain forward-looking statements that are based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Past performance is not indicative of future results.
S&P 500 Index and Dow Jones Industrial Average: Fourth-Quarter 2012
Indices are unmanaged and cannot be invested in directly. Past performance is no guarantee of future results.
Stock Price Averages: Dow Jones 30 Industrials, NYSE
Standard & Poor's 500 Stock Price Index
OCTSEPAUGJULJUN11
MAYAPRMARFEBJANDECNOVSources: Dow Jones, Wall Street Journal /Haver Analytics
13000
12500
12000
11500
11000
10500
1425
1350
1275
1200
1125
1050
Stock Price Averages: Dow Jones 30 Industrials, NYSE
Standard & Poor's 500 Stock Price Index
DECNOVOCTSEPAUGJULJUN12
MAYAPRMARFEBJANDECSources: Dow Jones, Wall Street Journal /Haver Analytics
14000
13500
13000
12500
12000
11500
1500
1425
1350
1275
1200
1125
2012: Equity Returns by Style
Indices are unmanaged and cannot be invested in directly. Past performance is no guarantee of future results.
Value Blend Growth
Large 17.5 16.0 15.3
Mid 18.5 17.3 15.8
Small 18.1 16.3 14.6Large
GrowthLarge Blend
Large Value
Mid Growth
Mid Blend
Mid Value
Small Growth
Small Blend
Small Value
15.89 15.62 15.73
18.16 17.44 17.00
21.01 20.48 20.17
Three-Year Volatility in Returns
Source: Commonwealth Asset Management/Bloomberg
2012: Fixed Income Returns by Style
Indices are unmanaged and cannot be invested in directly. Past performance is no guarantee of future results.
2008 2009 2010 2011 2012U.S.
Treasury13.74
High-Yield57.51
High-Yield15.19
U.S. Treasury
9.81
Emerging Markets
18.62
Mortgage8.3
Emerging Markets
28.78
Emerging Markets
12.24Corpo-rates
8.15High-Yield
15.59
U.S. Core5.24
Corpo-rates18.68
Corpo-rates9.00
Emerging Markets
8.02
Foreign Sovereign
13.97
Foreign Sovereign–0.35%
Foreign Sovereign
11.64U.S. Core
6.54U.S. Core
7.84Corpo-rates
9.82
Corpo-rates–4.94
U.S. Core5.93
U.S. Treasury
5.87Mortgage
6.14U.S. Core
4.21
Emerging Markets-–1.66
Mortgage5.76
Mortgage5.67
Foreign Sovereign
4.78Mortgage
2.59
High-Yield–26.39
U.S. Treasury
-–3.57
Foreign Sovereign
4.05High-Yield
4.38U.S.
Treasury1.99
6.85 7.136.48
3.97
2.421.73
3.68
Three-Year Volatilityin Returns
Source: Commonwealth Asset Management/Bloomberg
Fixed Income
Past performance is no guarantee of future results.
High Yield Spread
BOA ML HY Master - 10-year US Treasury
12111009080706050403Source: Haver Analytics
24
20
16
12
8
4
0
24
20
16
12
8
4
0
Fixed Income continued
Past performance is no guarantee of future results.
Corporate Spread
ML Corporate Master 10-15 yr) - (10-year US Treasury)
1211100908Source: Haver Analytics
6.00
5.25
4.50
3.75
3.00
2.25
1.50
6.00
5.25
4.50
3.75
3.00
2.25
1.50
Fixed Income continued
Past performance is no guarantee of future results.
Announcement
(AAA Corporate) - (BB Corporate)
1211100908Source: Haver Analytics
12
10
8
6
4
2
12
10
8
6
4
2
Housing: Prices and Supply
CoreLogic National House Price Index [+6]% Change - Year to Year NSA, Jan-00=100
1-family homes sold/1-family homes for sale
12111009080706050403Source: Haver Analytics
20
10
0
-10
-20
3.5
3.0
2.5
2.0
1.5
1.0
0.5
r = 0.93
Housing: Housing Affordability
Composite Housing Affordability Index
Median Inc=Qualifying Inc=100
1005009590858075Source: National Association of Realtors /Haver Analytics
240
200
160
120
80
40
240
200
160
120
80
40
Credit and Banking
TED Spread
(3-mo LIBOR minus 3-mo t-bill)
1211100908070605Source: Haver Analytics
5
4
3
2
1
0
5
4
3
2
1
0
Credit and Banking continued
Household Financial Obligation Ratio
SA, %
10050095908580Source: Federal Reserve Board /Haver Analytics
19
18
17
16
15
19
18
17
16
15
Credit and Banking continued
Conference Board: Consumer Confidence Present SituationSA, 1985=100
Personal Saving RateSA, %
12111009080706050403Sources: CB, BEA /Haver
140
120
100
80
60
40
20
7
6
5
4
3
2
1
r =-0.76
Credit and Banking continued
Break-Adjusted Nonrevolving Consumer Credit Outstanding
% Change - Year to Year EOP, SA, Bil.$
100500959085Source: Federal Reserve Board/Haver Analytics
20
15
10
5
0
-5
-10
20
15
10
5
0
-5
-10
Employment
Source: Commonwealth Asset Management/Bloomberg
Strong!
Employment continued
Civilian Unemployment Rate: 16 yr +
SA, %
10050095Source: Bureau of Labor Statistics /Haver Analytics
10
8
6
4
2
10
8
6
4
2
Employment continued
Average Weekly Hours: Total Private Industries
SA, Hrs
1211100908Source: Bureau of Labor Statistics /Haver Analytics
34.8
34.6
34.4
34.2
34.0
33.8
34.8
34.6
34.4
34.2
34.0
33.8
Business and Manufacturing Activity
Real Gross Domestic ProductSAAR, %Chg
ISM Mfg: PMI Composite IndexSA, 50+ = Econ Expand
121110090807060504Sources: BEA, ISM /Haver
8
4
0
-4
-8
-12
67.5
60.0
52.5
45.0
37.5
30.0
Business and Manufacturing Activity continued
Strong move!
Real Gross Domestic ProductSAAR, %Chg
ISM Nonmanufacturing: NMI Composite IndexSA, 50+=Increasing
121110090807060504Sources: BEA, ISM /Haver
8
4
0
-4
-8
-12
65
60
55
50
45
40
35
Business and Manufacturing Activity continued
Capacity Utilization: Industry
SA, Percent of Capacity
1211100908070605040302Source: Federal Reserve Board /Haver Analytics
84
80
76
72
68
64
84
80
76
72
68
64
Business and Manufacturing Activity continued
InflationY/Y %Change
Capacity Utilization: MiningSA, Percent of Capacity
131211100908070605040302010099Sources: BLS, FRB /Haver
6
4
2
0
-2
-4
96
92
88
84
80
76
r = 0.62
Gross Domestic Product% Change - Year to Year SAAR, Bil.$
Labor Index(Proprietary)% Change - Year to Year
100500959085Source: Haver Analytics
16
12
8
4
0
-4
-8
16
12
8
4
0
-4
-8
Business and Manufacturing Activity continued
Equities: Utilities P/E divided by Technology P/E
Source: Commonwealth Asset Management/Bloomberg
Conclusions
• Job growth was strong in the fourth quarter, with unemployment at 7.8 percent.
• Inflation is not a large concern, for now.• The ISM moved back into positive territory.• Dividend sectors, especially utilities, remain
relatively expensive.• Decreased savings and credit expansion could create a tailwind
for the economy.• Housing could create a sizeable tailwind for GDP.• Europe initiated backdrop for more stability, though structural
issues remain.
Looking Forward . . .
• Key themes to monitor– Employment improvement necessary for sustained recovery– Earnings season for fourth quarter (beat or miss estimates?)– Impact of quantitative easing on housing market – The end of quantitative easing?– European recovery: Is it sustainable?– Direction of ISM and Labor indices over coming months
Looking Forward . . . continued
• More key themes to monitor– Debt ceiling debate in the first quarter– Housing market recovery and translation to GDP– China’s manufacturing resurgence– Italian elections in February– German elections in September/October
Disclosure
Investing involves risks, including loss of principal amount invested due to market fluctuations. All indices are unmanaged, and investors cannot invest directly in an index. Past performance is not indicative of future results. The S&P 500 Index is a broad-based measurement of changes in stock market conditions based on the average performance of 500 widely held common stocks. The Dow Jones Industrial Average is a price-weighted average of 30 actively traded blue-chip stocks. The Bank of America Merrill Lynch US Corporate Index tracks the performance of U.S. dollar-denominated investment-grade corporate debt publicly issued in the U.S. domestic market. The Merrill Lynch Municipal Master Index tracks the performance of U.S. dollar-denominated investment-grade tax-exempt debt publicly issued by U.S. states and territories, and their political subdivisions, in the U.S. domestic market. The Bank of America/Merrill Lynch High Yield Master II Index tracks the performance of U.S. dollar-denominated below-investment-grade corporate debt publicly issued in the U.S. domestic market. International investing involves special risks such as currency fluctuation and political instability. The commodities industries can be significantly affected by commodity prices, world events, import controls, worldwide competition, government regulations, and economic conditions.