Webinar Q2 2019 19.07.30 v4 FINAL...Bonds of many European countries are yielding negative returns...
Transcript of Webinar Q2 2019 19.07.30 v4 FINAL...Bonds of many European countries are yielding negative returns...
WELCOME
Quarterly Webinar
2019 Mid-Year UpdateMarket & Plan Performance
July 30, 2019
David BaskinPresident and Founder, Baskin Wealth Management (BWM)
TODAY’S SPEAKERS
Stephanie BergerDirector of Marketing and Communications, RPB
G. Leonard TeitelbaumChair, RPB Board of Trustees
Opening Remarks
Market Update
Plan Performance
Next Steps
AGENDA
OPENING REMARKS
2019 MID-YEAR MARKET UPDATE
Q2 2019 Overall Market PerformanceMacro Equity Fixed Income Real Assets
USDollar VIX US
10-YrS&P500
MSCIEAFE
MSCIEM
USAgg.
High Yield
DollarEMD Oil Gold REITS
-1.2% 1.4% -0.4% 4.3% 3.7% 0.6% 3.1% 2.5% 4.1% -3.3% 9.0% 1.7%
Global equities rallied during Q2—with the US leading the way—as the market perceived a dovish monetary policy stance from the US Federal Reserve Bank (the Fed) and other central banks
Market expectations for several interest rate cuts from the Fed intensified based on low inflation data, a weaker global economic growth outlook, and uncertain US-China trade relations
Global bond yields continued to declined, with longer duration bonds shifting materially lower, reflecting concerns over the global growth outlook
Real assets performed well with higher gold prices but lower oil prices
Q2 2019 Market Details – Interest Rates
CentralBanks
CurrentRate
CPIYOY Notes from the Quarter
FederalReserve
2.25% -2.50% 1.8%
The Fed held its benchmark interest rate at 2.25% - 2.50% in March and June; signaled possible cuts later this year.
EuropeanCentralBank
0.0% 1.2%The ECB maintained current benchmark interest rate and plans to boost commercial lending
Bank ofJapan -0.1% 0.7%
The BoJ will continue its ultra-easy QE* program with inflation remaining well below target
*Quantitative Easing – a monetary policy in which a central bank purchases government securities or other securities from the market in order to increase the money supply and encourage lending and investment.
Bonds of many European countries are yielding negative returns
Source: FactSet
Q2 2019 Market Details – Fixed Income
Developed MarketGovt. Bond Yields 6-Month 1-Year 2-Year 3-Year 5-Year 7-Year 10-Year 15-Year 30-Year
Germany -0.58% -0.69% -0.76% -0.76% -0.66% -0.57% -0.33% -0.12% 0.27%Austria -0.76% -0.73% -0.68% -0.63% -0.48% -0.25% -0.05% - 0.67%Finland -0.62% -0.64% -0.66% -0.66% -0.53% -0.39% -0.03% - 0.54%France -0.54% -0.62% -0.69% -0.68% -0.51% -0.31% -0.01% 0.36% 0.94%Japan -0.18% -0.21% -0.22% -0.23% -0.25% -0.25% -0.16% 0.05% 0.37%Netherlands - -0.67% -0.67% -0.72% -0.65% -0.42% -0.16% -0.01% 0.29%Switzerland - -0.85% -0.88% -0.89% -0.86% -0.72% -0.54% - 0.00%Belgium - -0.58% -0.68% -0.64% -0.40% -0.24% 0.07% 0.41% 1.03%Portugal -0.54% -0.50% -0.43% -0.31% -0.17% 0.22% 0.47% - 1.36%Denmark - - -0.75% -0.68% -0.64% - -0.26% - -Sweden -0.40% - -0.63% - -0.53% -0.39% 0.02% - -Spain - - -0.43% -0.40% -0.16% 0.07% 0.39% - 1.38%Italy -0.08% -0.06% 0.21% 0.80% 1.34% 1.54% 2.08% 2.53% 3.07%Australia - 1.04% 0.97% 0.95% 1.00% 1.15% 1.32% 1.44% 1.92%Canada 1.69% 1.70% 1.47% - 1.39% 1.41% 1.46% - 1.68%Hong Kong 1.81% 1.63% 1.57% 1.48% 1.39% 1.40% 1.43% - -New Zealand 1.63% - 1.18% - 1.26% 1.25% 1.57% - -Norway 1.26% - 1.23% - 1.24% 1.31% 1.43% - -Singapore 1.66% 1.64% 1.61% 1.67% 1.76% 1.89% 2.00% - 2.58%United Kingdom 0.75% 0.70% 0.67% 0.60% 0.62% 0.68% 0.83% 1.18% 1.46%United States 2.10% 1.94% 1.73% 1.69% 1.75% 1.87% 2.00% - 2.53%
Best first half for stocks since 1997; second half could be more muted
Source: FactSet
-40%
-30%
-20%
-10%
0%
10%
20%
30%
1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019
S&P 500 Cumulative Returns
First Half
Q2 2019 Market Details – Equities
2019 Asset Quilt – Diversification Matters
LegendAlerian MLP TR USDMaster Limited Partnerships Index
BBg Barc US Agg Bond TR USDDiversified US Investment Grade Bond Index
BBgBarc US Corporate High Yield TR USDHigh Yield Bonds Index
FTSE NAREIT Equity REITs TR USDReal Estate Investment Trust Index
FTSE Treasury Bill 3 Mon USDShort Term Gov't Debt Index
MSCI EAFE NR USDDeveloped Market International Stock Index
MSCI EM NR USDEmerging Markets Stock Index
Russell 3000 TR USDUS Stock Market Index
US Late Market Business Cycle DynamicsTrends in key indicators show the US economy has transitioned from mid- to late-cycle
US Late Market Business Cycle DynamicsBut, not all of the key indicators suggest a US recession is imminent
Key Indicator Expected Late Cycle Behavior Current Trend*
Fed Funds Rates Rising Stable
Yield Curve Flattening Flattening
Economic Growth Moderating Moderating
Output Gap Near/Above Potential Rising
Inflation Rising Falling
Unemployment Falling/Bottoming Falling
Equities Peaking Rising
Credit Yield Spreads Stable/Rising FallingSource: NEPC; trend represents changes over the previous two quarters
Late-cycle does not have to mean end of cycle; positive economic data may support continued US economic expansion and further equity gains
However, a late cycle typically dampens relative performance and there may be greater need to seek portfolio balance
Volatility may increase based on expected versus actual interest rate cuts, as well as uncertainty about US-China trade policy
Tier 1 funds are designed to protect you in down markets
Market Summary
2019 MID-YEAR PLAN UPDATE
2019 Year-To-Date Tier 1 Investment ReturnsJanuary 1, 2019 through June 30, 2019; Tier 1 returns are net of investment management fees
**50/50 MSCI ACWI (IMI)/Bloomberg Barclays Global Agg through March 31, 2015; 60/40 MSCI ACWI (IMI)/Bloomberg Barclays Global Agg through September 30, 2016; 60/40 MSCI ACWI (IMI)/Bloomberg Barclays U.S. Agg through September 30, 2017; 55/45 MSCI ACWI (IMI)/Bloomberg Barclays U.S. Agg thereafter.***Barclays Global Aggregate January 1, 2013 through September 30, 2016, Barclays US Aggregate thereafter.
.
15.9% 16.1%
11.9% 11.7%
7.1%6.1%
1.1% 1.2%
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
16.00%
18.00%
CapitalAppreciation
Fund
MSCI ACWIIMI Net USD
Appreciationand Income
Fund
55% MSCIACWI
IMI(Net)/45%BLM BC USAgg Blend
IncomeFocused Fund
BloombergBarclays USAggregate
Fund
CapitalPreservation
Fund
FTSE T-Bill 3Months TR
Tier 1 Funds – An Overview
m Capital Appreciation Fund
Income Focused Fund
Appreciation & Income Fund
Capital Preservation Fund
Objective Growth Income Balance of growth and income
Stability of principal
Primarilyinvests in:
Equities:
• US stocks
• International developed stocks
• Emerging markets stocks
Fixed Income:
• US bonds
• Unconstrained fixed Income
• Capital Appreciation Fund 55%
• Income Focused Fund 45%
• Insurance-wrapped bonds
• Cash and cash equivalents
To diversify, also invests in:
• US bonds• Real assets
• US stocks• Real assets
(Diversifiers included as part of each fund)
Diversified funds with less volatility than the broad market index
For more details about fund holdings, visit rpb.org/factsheets
Standard Deviation – Volatility (lower is less risky) Since Inception: January 1, 2013 through June 30, 2019
*50/50 MSCI ACWI (IMI)/Bloomberg Barclays Global Agg through March 31, 2015; 60/40 MSCI ACWI (IMI)/Bloomberg Barclays Global Agg through September 30, 2016; 60/40 MSCI ACWI (IMI)/Bloomberg Barclays U.S. Agg through September 30, 2017; 55/45 MSCI ACWI (IMI)/Bloomberg Barclays U.S. Agg thereafter.**Barclays Global Aggregate January 1, 2013 through September 30, 2016, Barclays US Aggregate thereafter.
.
10.4%
11.4%
6.8% 6.9%
3.1%
3.9%
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
CapitalAppreciation Fund
MSCI ACWI IMINet USD
Appreciation andIncome Fund
55% MSCI ACWIIMI(Net)/45% BLMBC US Agg Blend
Income FocusedFund
BBgBarc USAggregate Blend
TR
2019 Year-to-Date Tier 2 Investment ReturnsJanuary 1, 2019 through June 30, 2019; Tier 2 returns are net of investment management fees
18.5%18.5%19.6% 19.5%
13.9%13.8%12.3%12.2%
19.4%17.1%
6.1% 6.1%
10.0%9.9%
3.3%3.6% 3.5%3.6%
17.7%16.2%
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
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Know which funds you’re invested in:Log in to InfoExpress
Click on ‘My Balance’
Does your investment allocation meet your risk tolerance, time horizon, objectives?
If not, adjust your allocations accordingly
For financial counseling, call LifeWorks: 800-533-5690
Next Steps
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