What to Expect in the Year Ahead - Presentation: Mike PeQueen, HighTower Advisors - Private Wealth Management Summit 2014

Economic OutlookEconomic Outlook forfor

2014 and BeyondMike PeQueen CFA CFP

2014 and BeyondMike PeQueen, CFA, CFP

HighTower Las Vegas2360 Corporate Circle, Suite 160

Henderson, NV 89074(702)567-5100

Global Macro ThemesChina Slower Growth & ReformUS Energy BoomUS Energy BoomUS Recovery ContinuesEurope Fragile RecoveryEurope Fragile RecoveryJapan Reflation ExperimentE i M k t U d PEmerging Markets Under PressureStronger Dollar

2

As the World Turns

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Real GDP GrowthReal GDP Growth2013 A 2014 E 2015 E2013 A 2014 E 2015 E

ChinaUS

7.61 7

7.52 6

7.23 0US

BrazilCanada

1.72.51.7

2.62.52.3

3.02.92.5

UKGermanyJ

1.40.5

2.31.7

2.31.75

JapanEuro AreaSpain

1.9-0.41 3

1.551.0

0 45

1.21.41 1Spain

GreeceSource: Bloomberg

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-1.3-4.0

0.45-0.35

1.11.4

2014 Y E d F t2014 Year End Forecasts

Current YE2014US 10 Year T-Note 2 7% 4 0%US 10 Year T NoteUS Unemployment

2.7%7.3%

4.0%7.0%

Euro – US DollarUS Dollar – Japanese Yen

1.3498

1.25108US Dollar Japanese Yen

British Pound – US DollarUS Dollar – Swiss Franc

981.610 92

1081.561.04

5

US Dollar Swiss FrancSource: BAML RIC Report

0.92 1.04

China

Slower GrowthSlower GrowthMarket – Oriented Reforms

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US E BUS Energy Boom

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King DollarKing Dollar

Abe’s Weak Yen PolicyWh t It T k P li E+ Whatever-It-Takes Policy Europe

+ EM Slower Growth Era+ US Energy Boom+ 2014 Fed Tapering+ 2014 Fed Tapering

Stronger US Dollar8

US Macro ThemesUS Macro Themes

Energy BoomFed Tapering p gImproving EmploymentHousing Recoveryg yConsumer Deleveraging Almost CompleteState / Local Government SpendingLow InflationMid-Term ElectionsI i B d t D fi it

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Improving Budget DeficitCorporate Financial Actions

US E BUS Energy Boom

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US Natural Gas Production

11

12

Employment Improvement

13

H i RHousing Recovery

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Deleveraging Over?Deleveraging Over?Household debt as a % of total assets

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Source: US Federal Reserve

H h ld d bt i tHousehold debt service costs

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Source: US Federal Reserve

US Household Net Worth

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Source: US Federal Reserve

US Household balance sheet

Assets $83.7 trillion Liabilities $13.4 trillion

Real Estate $20.7 trillionFinancial $57.7 trillionDurable goods $4.9 trillion

Mortgage debt $9.4 trillionConsumer credit $2.8 trillionOther $1.2 trilliong

Other $.04 trillion

Net worth $70.3 trillion

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Source: US Federal Reserve Q1-2013

Municipal Revenue

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Source: Lord Abbett

Low Inflation

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Health Care Costs

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China’s Impact on US InflationChina’s Slower Growth =

Lower Commodity Prices =Lower Commodity Prices =Lower US Inflation =

Stronger US Purchasing Power =Stronger US Economy =g y

22

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US B d t D fi itUS Budget Deficit

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Corporate Financial ActionsHigh Cash Level

+ Low Growth+ Low Growth+ Shareholder Activism

M&ABuybacksyDividend Increases

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R d fi i Ri kRedefining RiskCDS 5-Year Spreads

Exxon 10 Germany 23UK 28

Merck 10

Disney 13

UK 28US 31Switzerland 34Disney 13

Johnson & Johnson 17Japan 54France 58S i 182Google 22

Wal-Mart 22

Spain 182Italy 205Greece 736

Source: Bloomberg

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Greece 736

Great Rotation 2nd InningMutual Fund Flows June – Sept 2013 ($B)p ($ )

Domestic International Bond Money MarketEquity

y(1.6) 36.9 (117.3) 75.0

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Our ViewUS DollarUS StocksUS StocksGoldCommoditiesBondsEmerging Markets Equities

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How Are Family Offices Allocated?Allocated?

Equities 25%Equities 25%Fixed Income 17%Less Liquid / Alternatives 19%C h 39%Cash 39%

100%

Average Expected Return 8%More likely 4.4%

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Source: Citi Private Bank

The Dollar Rises

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“If we are in a bubble, it’s the weirdest bubble I have ever seen, where

everybody hates everything.”everybody hates everything.

- Mark Andreesen

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Asset Allocation Inflection PointInflection Point

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Thank YouMik P Q CFA CFPMike PeQueen, CFA, CFP

Managing Director, Partner2360 Corporate Circle, Suite 160

Henderson, NV 89074(702)567-5100

www.hightowerlasvegas.comMPeQueen@HighTowerAdvisors.com