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The Great Disconnect2016
Commissions, fees and expenses may be associated with mutual fund investments. Read the prospectus before investing. Mutual funds are not guaranteed, values change frequently and past performance may not be repeated. Written and published by Investors Group as a general source of information only. Not intended as a solicitation to buy or sell specific investments, or to provide tax, legal or investment advice. Seek advice on your specific circumstances from an Investors Group Consultant. Investment products and services are offered through Investors Group Financial Services Inc. (in Québec, a Financial Services firm) and Investors Group Securities Inc. (in Québec, a firm in Financial Planning). Investors Group Securities Inc. is a member of the Canadian Investor Protection Fund.
March 9, 2009 – The Bottom Was In
Cash Flows Out of Equities into Bonds Unabated
Source: ICI (excludes MMKT) – Net new cash flow is the dollar value of new sales minus redemptions combined with net exchanges. Note: Data for funds that invest primarily in other mutual funds were excluded from the series. Components many not add to the total because of rounding.
As They Relentlessly Focus On Macro Economic Risks
No **** Way
But Investor Confidence Continues To Decline
On A Constant Fear Of The Next Crisis
> “George Soros says U.S. Banks ‘basically insolvent’”– Reuters, April 6th, 2009> “Fed to buy $600 billion in bonds to aid economy” – Toledo Blade, March 11th, 2010> “Debt crisis unsettles European economy” – The Washington Post, February 9th, 2010> “Fears grow over length of U.S. job crisis” – Economic Times, December 3rd, 2010> “Obama: Raise debt ceiling or risk global recession” – Bloomberg, April 15 th, 2011> “United States of America [Credit] Rating Lowered to ‘AA+’ due to Political Risks, Rising
Debt Burden” – Standard & Poor’s, August 5th, 2011> “Occupy Wall Street: Civil society’s awakening” – LA Times, November 22nd, 2011> “U.S. approaches ‘fiscal cliff’ and world watches from the sidelines” – The Washington
Post, November 2nd, 2012> “Five years after Lehman, Americans still angry at Wall Street” – Reuters, September 15 th,
2013
The Great Disconnect
Total Return from March 9, 2009
*MSCI World133.4%
Source: Bloomberg, In Canadian Dollars to December 31, 2015
S&PTSX110.0%
S&P500272.2%
*MSCI Europe105.6%
(*MSCI World / Europe Price only)
The Hedge Fund Disconnect
Source: arborresearch.com
The Most Hated Bull Market in HistoryChart 1: Sell Side Consensus Indicator (as of 29 February 2016)
Source: BofA Merrill Lynch Global Research US Equity & Quant StrategyNote: Buy and Sell signals are based on rolling 15-year +/- 1 standard deviations from the rolling 15-year mean. A reading above the red line indicates a Sell signal and a reading below the green line indicates a Buy signal.
Essentially The Macro Market Flux Capacitor Failed
The Fallacy of Forecasts
-1%
How That Contributed To The Wealth Effect
So Why Have Global Markets Performed So Well
Corporate Profits Have Exploded Since 200919
29-3
2
1933
-37
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-50
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-80
1980
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1983
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1989
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1991
-00
2000
-02
2002
-07
2007
-09
2009
+
-100%
-50%
0%
50%
100%
150%
200%
-+75%
+198%
-+49%
+92%
-+29%
+238%
-+18%
+58%
-+22%
+19%
-+12%
+94%
-+13%
+78%
-+16%
+100%
-+19%
+103%
-+23%
+179%
-+22%
+109%
-+46%
+130%
S&P 500 EPS Cycles
Median EPS increase over 11 expansions: +100% Average EPS increase over11 expansions : +115%
“World oil production can probably keep going up for another six or eight years. But, sometime in the 1980’s it can’t go up much more. Demand will overtake production.”
Nationally Televised Speech, April 18, 1977
And Today We Have Too Much – Drill Baby Drill!
Source: arborresearch.com
The Oil Price Collapse in Perspective
19
This Chart Could Well Determine The Future Price of Oil
If I Had A Million Dollars ... I’d Be Rich (Wouldn’t I?)
The Stock/Bond Valuation Disconnect
U.S. 10 Yr Bond – S&P 500 CDN 10 Yr Bond – S&P TSX