Brian Belski Chief Investment Strategist, BMO Capital Markets 25 years in the investment industry • Including BMO, Merrill Lynch, Oppenheimer, Piper Jaffray Appears regularly on multiple national financial news networks Named the most accurate strategist on Wall Street according to a 2004 poll conducted by USA Today His forecast for the US stock market in 2012 was within one point while his 2014 forecast missed by less than 9 points
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Brian Belski - Amazon S3 · 01.10.2018 · Source: BMO Investment Strategy Group, Bloomberg, FactSet. Yield Curve Fears Are a Bit Premature Flattening Yield Curve Trend Has Largely
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Brian Belski Chief Investment Strategist, BMO Capital Markets
25 years in the investment industry• Including BMO, Merrill Lynch, Oppenheimer, Piper Jaffray
Appears regularly on multiple national financial news networks
Named the most accurate strategist on Wall Street according to a 2004 poll conducted by USA Today
His forecast for the US stock market in 2012 was within one point while his 2014 forecast missed by less than 9 points
MARKET WEIGHT • Consumer Discretionary • Energy • Health Care • Information Technology
UNDERWEIGHT • Consumer Staples • Real Estate • Utilities
Overweight Analysis > Underweight Rhetoric S&P 500 Targets: Best Case: 3,250; $170 Base Case: 2,950; $158 Bear Case: 2,200; $140
Overview: We remain steadfast and consistent in our call that has been in place since 2009 that US stocks are in the midst of a 20- to 25-year bull market …
• Given the hatred, distrust, discord, and fear associated with equity investing, Corporate America, and especially anything to do with financial services, this remains the most doubted and hated bull market IN HISTORY = investors are so afraid to be wrong, they DO NOT want to be right.
• Reluctance to believe in the underlying fundamental trend has now become commonplace, with the vast majority of headlines being dominated by viewpoints focused on forecasting the end of this bull market and the start of a recession.
• Fundamental Realities = earnings growth is strong and stable; cash flow is steady; valuation should stagnate; interest rates remain near historic lows; GDP growth is positive – irrespective of actual federal policy changes.
• Increased Volatility = Investors should focus on fundamentals and stock picking rather than market rhetoric.
Styles/Themes = Large Cap > Small Cap; Value > Growth; Dividend Growth and High Quality Overall
Sector Opinions
Rinse and Repeat – Lack of Fundamental Change Equates
to Another Year of Price Gains for S&P 500 in 2018
2018 S&P 500 Target Scenarios
Scenario Scenario Scenario Scenario
Bull Case 3,250 $170
Corporate reinvestment and consumer spending accelerates: EPS growth surprises to the upside vs. current expectations
offsetting higher interest rates valuation impact Risk premiums drop sharply Revision trends accelerate to the upside
Base Case 2,950 $158
Steady as she goes, with bumps in between: Risk premiums remain largely static and path of interest rates
grinds higher, but slower than expected EPS growth matches current optimistic expectations providing a
layer of support Policy questions/debate persist creating periods of elevated
volatility surrounding the rhetoric
Bear Case 2,200 $140
Fundamental momentum stalls leading to market consolidation: Rhetoric wins and nothing gets done in DC Strong growth rebound does not materialize + higher interest
rates = double whammy of earnings disappointment and multiple contraction
Source: BMO Capital Markets Investment Strategy Group, Bloomberg.
US Charts
Earnings Growth is Strong
11.3%
7.0%
0%
2%
4%
6%
8%
10%
12%
10%+ EPS Gr All other
Calendar Year S&P 500 EPS Growth
S&P 500 Average Calendar Year Return annual data beginning 1950
Investment Strategy Portfolios: US Equity PLUS portfolio
Large Cap Canadian PLUS Portfolio
US Large Cap Disciplined Value Portfolio
North American Dividend Growth Portfolio
US Strategy Portfolios: US Tactical Equity Portfolio
US Dividend Growth Portfolio
Canadian Strategy Portfolios: Large Cap Canadian Portfolio
Canadian Anything But the Big 3 Portfolio
Recent Investment Strategy Publications
US Strategy Commentary September 27, 2018: Realizing Our Base Case
September 21, 2018: Overweight the Communication Services Sector
September 10, 2018: Mapping Out S&P GICS Sector Changes
August 22, 2018: Defensive Rotation No Obstacle Yet
August 22, 2018: Perspective on the Bull Market Anniversary (Snapshot)
August 2, 2018: The Myth of Narrow Market Breadth (Snapshot)
July 11, 2018: Negative Speculation Obscuring Positive Realities
June 28, 2018: Six Considerations for the Next Six Months (Snapshot)
June 20, 2018: Ease the Tension With Quality
June 14, 2018: Rhetoric Overshadowing Market Realities (Snapshot)
May 31, 2018: European Woes Providing a Financials Buying Opportunity
May 17, 2018: Weakness in Industrials Likely a Fad, Not a Trend (Snapshot)
May 10, 2018: Energy Ignition Lacks Fundamental Legitimacy
May 4, 2018: Peak Earnings Banter Is More Pique Than Substance
April 19, 2018: End of the Bull Market Discussions Becoming Ubiquitous (Snapshot)
April 12, 2018: Five Investing Topics to Consider (Snapshot)
March 22, 2018: Not a Tech Wreck, Just a Reality Check
March 8, 2018: Remaining Patient With Consumer Discretionary
Special Reports November 17, 2017: 2018 Market Outlook
US Strategy Monthly September 6, 2018: US Chartbook
September 6, 2018: US Factor Profiles
Canadian Strategy Monthly September 6, 2018: Canadian Chartbook
September 6, 2018: Canadian Factor Profiles
Canadian Strategy Snapshots September 27, 2018: Achieving Our Base Case
September 21, 2018: Market Weight the Communication Services Sector
September 10, 2018: Implications of GICS Sector Reclassification on S&P/TSX
August 30, 2018: NAFTA Watch – Common Sense Prevails
August 22, 2018: Emerging Market Doldrums and the TSX
Portfolio Strategy October 1, 2018: Top 15 Fundamental Lists/Changes
October 1, 2018: BMO Research Model Portfolios
October 1, 2018: Investment Strategy Portfolios
October 1, 2018: US Strategy Portfolios
July 6, 2018: Investment Strategy Portfolios - 2Q Review
BMO Investment Strategy Group
Brian G. Belski Chief Investment Strategist US, Canadian & Portfolio Strategy 212.885.4151 416.359.5761 [email protected]
Brian, Chief Investment Strategist and leader of the Investment Strategy Group, provides strategic investment and portfolio management advice to both institutional and private clients. Brian’s group produces several investment strategy publications on a regular basis, with particular focus on both the U.S. and Canadian equity markets. In his more than 28 years in the investment industry, Brian has held various senior strategy and research roles, including positions at Oppenheimer & Company, Merrill Lynch, and Piper Jaffray. Brian is frequently quoted in the financial press, including regular appearances on CNBC, Bloomberg, and BNN, and is renowned for his accuracy as a strategist. Brian holds a B.Sc. degree from St. Cloud State University and splits his time between the BMO offices in New York and Toronto.
Nick Roccanova, CFA Sr. Investment Strategist US & Portfolio Strategy 212.885.4179 [email protected]
Nick is the senior US Investment Strategist and is responsible for all facets of developing and providing research and analysis within the Investment Strategy Group. His analysis focuses on traditional macroeconomic and fundamental methods, but he has also developed expertise in econometric and quantitative modeling. In his nearly 20 years in the investment industry, Nick has held various senior research roles, including positions at Merrill Lynch and Oppenheimer & Company. He has been a Senior Investment Strategist advising institutional and private clients since 2004. Nick holds B.S. and MBA degrees from St. John’s University and is a CFA charterholder.
Ryan Bohren, CFA Investment Strategist Canadian & Portfolio Strategy 416.359.4993 [email protected]
Ryan is the Canadian Investment Strategist, provides strategic and analytical support within the Investment Strategy Group, with a focus on Canadian equity markets. Ryan has over 10-years of investment industry experience, including various research roles at TD Securities, Connor Clark and Lunn Investment Management and Merrill Lynch. He is a CFA charterholder and has a master’s in financial economics from the University of Toronto.
BMO Target Performance History
Year Initial Estimate Revised Estimate Actual Close % From Target
1425 1426 0.1%
(April 23, 2012)
1575 1800 1848 2.7%
(December 1, 2012) (September 12, 2013)
1900 2050 2059 0.4%
(December 1, 2013) (September 14, 2014)
2250 2044 -9.2%
(December 1, 2014)
2100 2250 2239 -0.5%
(November 25, 2015) (September 22, 2016)
2350 2600 2674 2.8%
(November 15, 2016) (September 6, 2017)
Year Initial Estimate Revised Estimate Actual Close % From Target