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Assessment and Forecast for the Global Capital Markets

Assessment and Forecast for the Global Capital Markets. May 1, 2013.

herrod-merritt
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Assessment and Forecast for the Global Capital Markets

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  1. Assessment and Forecast for the Global Capital Markets May 1, 2013

  2. The information provided herein has been prepared solely for informational purposes and is not an offer to buy or sell or a solicitation of an offer to buy or sell the securities or instruments mentioned or to participate in any particular trading strategy. This information is based on or derived from information generally available to the public from sources believed to be reliable. No representation or warranty can be given with respect to the accuracy or completeness of the information, or with respect to the terms of any future offer or transactions conforming to the terms hereof. Any statements made represent the view of the author and do not necessarily represent the view of VCU or the VCU School of Business. This report does not provide individually tailored investment advice. It has been prepared without regard to the circumstances and objectives of those who receive it. It is recommended that investors independently evaluate particular investments and strategies and seek a financial adviser's advice. The appropriateness of an investment or strategy will depend on an investor's circumstances and objectives. The value of and income from your investments may vary because of changes in interest rates or foreign exchange rates, securities prices or market indexes, operational or financial conditions of companies or other factors. Past performance is not necessarily a guide to future performance. Estimates of future performance are based on assumptions that may not be realized. Legal And Compliance

  3. Topics • The Macro Backdrop • The Policy Response • This Years Possible ‘Game Changer’ • Forecast for 2013 • Q&A

  4. The Global Economy • Global Debt levels are at all time highs and Sovereign • debt and deficits continue to grow • US Growth has stalled at around 2% • China is slowing • Europe is heading into recession

  5. Global Growth Slowing

  6. Dropping Like A Ton of BRIC’s

  7. Brazil Decelerating

  8. India Moderating

  9. China Slowing

  10. No Help From Europe

  11. When “PIGS” Can’t Fly

  12. Portugal In Recession

  13. Italy in Recession

  14. Greece in Recession

  15. Spain In Recession

  16. No Problem, Core Europe is Still Strong

  17. Core Europe Feeling the Decay

  18. France: Joining the Club

  19. Germany Feeling the Drag

  20. USA: Winner, By a Nose

  21. US: No ‘V’ Shaped recovery ?

  22. A Lost Decade in Japan

  23. Macro Summary: C Minus at Best • Europe In Recession • BRIC’s Slowing • US Growth Tenuous • Massive Debt Overhang • Conclusion: Buy Stocks (Huh??)

  24. A Brief Sidebar

  25. The Wealth Effect

  26. Housing: Signs of Life

  27. Consumers More Confident

  28. The Deleveraging Myth

  29. 2008 2009 2012

  30. The Pause That Refreshes Source: FED

  31. Low Rates Drive Increased Borrowing

  32. Wealth: Now You See it, Now You don’t

  33. You Are Here

  34. Summary: • Consumption drives economic growth • Consumers have not deleveraged • Consumer spending may be unsustainable • Wealth Effect may be fleeting • Conclusion: Buy Stocks

  35. Bull Case For US Stocks Based on Fundamentals : In a nutshell • The US economy has stabilized and is growing again • Corporate profits are strong and growing • Corporate balance sheets are cash rich • Dividend Yields are attractive

  36. Shiller CAPE Still Not Cheap

  37. Are Margins Sustainable?

  38. Cost Pressures Rising

  39. Summary: • Equity valuations are not terribly cheap • Sluggish economy translates into anemic Revenue growth • Profit Margins may be peaking • Earning may even decline on a YOY basis • The Stock Market is at an all time high • Conclusion: Buy Stocks

  40. A Different Take on Things

  41. Paradigm Shift: The Rise of the Monetary Authority Superpowers FED BOE ECB BOJ IMF BOC World Bank EMF

  42. What are the Central Banks thinking? • The Global Economy is ‘Too Big To Fail’ • Lessons learned from the US financial crisis • The US experience was not a leverage problem, • it was a liquidity problem • Act faster, act ‘bigger’

  43. Keep Rowing, Keep Printing

  44. What The Central Banks Are Saying • Fed Announces QE-Infinity - Indefinite Bond Buying to Spur Growth • Volatility Slumps as ECB Announces New QE • Bank of Japan Announces Unlimited Easing, 2% Inflation Target • Bank of England To Increase Quantitative Easing (QE) This Week

  45. FED Balance Sheet

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