Economic Outlook Economic Outlook for for 2014 and Beyond Mike PeQueen CFA CFP 2014 and Beyond Mike PeQueen, CFA, CFP HighTower Las Vegas 2360 Corporate Circle, Suite 160 Henderson, NV 89074 (702)567-5100
Nov 28, 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
3
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
4
-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
6
US E BUS Energy Boom
7
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
9
Improving Budget DeficitCorporate Financial Actions
US E BUS Energy Boom
10
US Natural Gas Production
11
12
Employment Improvement
13
H i RHousing Recovery
14
Deleveraging Over?Deleveraging Over?Household debt as a % of total assets
15
Source: US Federal Reserve
H h ld d bt i tHousehold debt service costs
16
Source: US Federal Reserve
US Household Net Worth
17
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 $70.3 trillion
18
Source: US Federal Reserve Q1-2013
Municipal Revenue
19
Source: Lord Abbett
Low Inflation
20
Health Care Costs
21
China’s Impact on US InflationChina’s Slower Growth =
Lower Commodity Prices =Lower Commodity Prices =Lower US Inflation =
Stronger US Purchasing Power =Stronger US Economy =g y
22
23
US B d t D fi itUS Budget Deficit
24
Corporate Financial ActionsHigh Cash Level
+ Low Growth+ Low Growth+ Shareholder Activism
M&ABuybacksyDividend Increases
25
R d fi i Ri kRedefining RiskCDS 5-Year Spreads
Exxon 10 Germany 23UK 28
Merck 10
Disney 13
UK 28US 31Switzerland 34Disney 13
Johnson & Johnson 17Japan 54France 58S i 182Google 22
Wal-Mart 22
Spain 182Italy 205Greece 736
Source: Bloomberg
26
Greece 736
Great Rotation 2nd InningMutual Fund Flows June – Sept 2013 ($B)p ($ )
Domestic International Bond Money MarketEquity
y(1.6) 36.9 (117.3) 75.0
27
Our ViewUS DollarUS StocksUS StocksGoldCommoditiesBondsEmerging Markets Equities
28
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%
29
Source: Citi Private Bank
The Dollar Rises
30
“If we are in a bubble, it’s the weirdest bubble I have ever seen, where
everybody hates everything.”everybody hates everything.
- Mark Andreesen
31
Asset Allocation Inflection PointInflection Point
32
Thank YouMik P Q CFA CFPMike PeQueen, CFA, CFP
Managing Director, Partner2360 Corporate Circle, Suite 160
Henderson, NV 89074(702)567-5100