[PPT] - Beating the odds Opportunities in demanding times May 2020 Agenda PowerPoint Presentation

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Beating the odds

Opportunities in demanding times

May 2020

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Agenda

WHERE ARE WE IN THE ECONOMIC CYCLE? INVESTMENT OPPORTUNITIES

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PROTECTION | INDEPENDENCE | TRANSPARENCY | INNOVATION | FLEXIBILITY

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Where are we in the Cycle?

The Economy Cycle

Anaemic economic growth, Trade War, Brexit, global manufacturing deceleration… Lower uncertainty regarding Brexit, US-China Phase One Trade Deal, supportive monetary policies, global manufacturing recovery…

Extended Economic Cycle 2019

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PROTECTION | INDEPENDENCE | TRANSPARENCY | INNOVATION | FLEXIBILITY

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The Economy Cycle

Anaemic economic growth, Trade War, Brexit, global manufacturing deceleration… Lower uncertainty regarding Brexit, US-China Phase One Trade Deal, supportive monetary policies, global manufacturing recovery…

Extended Economic Cycle

Exogenous recession due to lockdown measures

Recession 2019

Where are we in the Cycle?

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PROTECTION | INDEPENDENCE | TRANSPARENCY | INNOVATION | FLEXIBILITY

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The Economy Cycle

Anaemic economic growth, Trade War, Brexit, global manufacturing deceleration… Lower uncertainty regarding Brexit, US-China Phase One Trade Deal, supportive monetary policies, global manufacturing recovery…

Extended Economic Cycle

Exogenous recession due to lockdown measures

Recession 2019 Now

Swift and massive response by Central Banks and Governments

Where are we in the Cycle?

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PROTECTION | INDEPENDENCE | TRANSPARENCY | INNOVATION | FLEXIBILITY

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The Economy Cycle

Anaemic economic growth, Trade War, Brexit, global manufacturing deceleration… Gradual economic reopening. Beginning of a new growth cycle. High Government Debt. Low interest rates. Lower uncertainty regarding Brexit, US-China Phase One Trade Deal, supportive monetary policies, global manufacturing recovery…

Extended Economic Cycle New Economic Cycle

Exogenous recession due to lockdown measures

Recession 2019 Now

Swift and massive response by Central Banks and Governments

Where are we in the Cycle?

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Agenda

WHERE ARE WE IN THE ECONOMIC CYCLE? INVESTMENT OPPORTUNITIES

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PROTECTION | INDEPENDENCE | TRANSPARENCY | INNOVATION | FLEXIBILITY

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Investment Opportunities

Stick to Equities

We are at the beginning of a new economic cycle
Announced fiscal stimulus will compensate the direct impact of containment and spill over effects
Central Banks will make sure that liquidity is adequate and credit continues to flow
This is not a “L” shaped recovery
Equities are cheaper than most other asset classes
Some short-term volatility is possible due to incoming earnings releases and macro data

Contribution to the change in global government debt (% of GDP)

US Corporate Profits around recessions

Source: IMF WEO April 2020, JP Morgan

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PROTECTION | INDEPENDENCE | TRANSPARENCY | INNOVATION | FLEXIBILITY

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Investment Opportunities

Stick to Equities

We are at the beginning of a new economic cycle
Announced fiscal stimulus will compensate the direct impact of containment and spill over effects
Central Banks will make sure that liquidity is adequate and credit continues to flow
This is not a “L” shaped recovery
Equities are cheaper than most other asset classes
Some short-term volatility is possible due to incoming earnings releases and macro data

Risks:

New waves of Covid-19 infections
Below-trend economic growth in Europe if EU fails to step up fiscal stimulus in a coordinated way
Full-blown US-China trade war

Contribution to the change in global government debt (% of GDP)

US Corporate Profits around recessions

Source: IMF WEO April 2020, JP Morgan

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PROTECTION | INDEPENDENCE | TRANSPARENCY | INNOVATION | FLEXIBILITY

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Sector composition favours US Equities

Sector United States Euro Area United Kingdom Japan Emerging Markets

Information Technology 23.0 9.9 1.0 11.6 15.9 Health Care 14.0 7.5 11.4 9.8 2.8 Financials 13.0 16.8 20.1 10.6 24.6 Consumer Discretionary 9.9 14.4 6.7 18.7 13.4 Communication Services 10.5 5.0 5.4 8.3 11.3 Industrials 9.3 15.4 10.2 21.1 5.3 Consumer Staples 7.0 10.4 16.3 8.0 6.5 Energy 4.2 5.0 15.8 0.8 7.6 Utilities 3.2 6.3 3.3 1.6 2.7 Materials 2.7 7.2 8.6 5.3 7.1 Real Estate 3.2 2.0 1.2 4.1 2.9 Source: MSCI Indices

Investment Opportunities

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PROTECTION | INDEPENDENCE | TRANSPARENCY | INNOVATION | FLEXIBILITY

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Sector composition favours US Equities

Risks:

Stronger economic recovery should favour more cyclical sectors
Increased regulation in Communications and Healthcare

Sector United States Euro Area United Kingdom Japan Emerging Markets

Information Technology 23.0 9.9 1.0 11.6 15.9 Health Care 14.0 7.5 11.4 9.8 2.8 Financials 13.0 16.8 20.1 10.6 24.6 Consumer Discretionary 9.9 14.4 6.7 18.7 13.4 Communication Services 10.5 5.0 5.4 8.3 11.3 Industrials 9.3 15.4 10.2 21.1 5.3 Consumer Staples 7.0 10.4 16.3 8.0 6.5 Energy 4.2 5.0 15.8 0.8 7.6 Utilities 3.2 6.3 3.3 1.6 2.7 Materials 2.7 7.2 8.6 5.3 7.1 Real Estate 3.2 2.0 1.2 4.1 2.9 Source: MSCI Indices

Investment Opportunities

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PROTECTION | INDEPENDENCE | TRANSPARENCY | INNOVATION | FLEXIBILITY

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Spreads widened
Attractive yield pick-up over government bonds
Universe with a relatively high credit quality
Central banks are purchasing Investment Grade Corporate Bonds to avoid a liquidity crunch
Economic recovery will contribute to improve underlying corporate profitability and cash-flow generation

Source: Bloomberg Barclays Indices

100 200 300

(bps)

European Investment Grade Corporates Spread

50 100 150 200 250 300 350 400

(bps)

US Investment Grade Corporates Spread

Investment Opportunities

Investment Grade

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PROTECTION | INDEPENDENCE | TRANSPARENCY | INNOVATION | FLEXIBILITY

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Spreads widened
Attractive yield pick-up over government bonds
Universe with a relatively high credit quality
Central banks are purchasing Investment Grade Corporate Bonds to avoid a liquidity crunch
Economic recovery will contribute to improve underlying corporate profitability and cash-flow generation

Source: Bloomberg Barclays Indices

100 200 300

(bps)

European Investment Grade Corporates Spread

50 100 150 200 250 300 350 400

(bps)

US Investment Grade Corporates Spread

Investment Opportunities

Risks:

Covid-19 reinfection compromise the reopening of economies
New European sovereign debt crisis

Investment Grade

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PROTECTION | INDEPENDENCE | TRANSPARENCY | INNOVATION | FLEXIBILITY

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Gold

Significant expansion in Central Banks’ balance sheets
High fiscal deficits and elevated levels of Government Debt
“Financial Repression” – Central Banks to keep real interest rates low or even negative
Public support for protectionist policies will continue to increase
“Security of Supply” will weigh on Global Trade
Low opportunity cost
Gold to perform well if macro deteriorates further or if inflation picks up due to supply constrains

Central Bank Purchases

Source: Citigroup, Capital Economics

Investment Opportunities

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PROTECTION | INDEPENDENCE | TRANSPARENCY | INNOVATION | FLEXIBILITY

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Gold

Risks:

Ongoing economic weakness and low oil prices are deflationary in the short-term
Stronger than expected economic recovery lead to an increase in real interest rates
Significant expansion in Central Banks’ balance sheets
High fiscal deficits and elevated levels of Government Debt
“Financial Repression” – Central Banks to keep real interest rates low or even negative
Public support for protectionist policies will continue to increase
“Security of Supply” will weigh on Global Trade
Low opportunity cost
Gold to perform well if macro deteriorates further or if inflation picks up due to supply constrains

Central Bank Purchases

Source: Citigroup, Capital Economics

Investment Opportunities

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Nothing in this presentation is deemed to be an offer, solicitation, or recommendation to buy or sell any product or service and should not be considered to constitute investment advice. The investment is subject to normal market fluctuations and there can be no assurance that an investment will return its value or that appreciation will occur. Investment does involve risk and the value

f investments can go down as well as up. The investor may not receive back in total the original amount invested. Past

performance is not a guide to future performance.

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Millennium Banque Privée

Investment Advisory Services Tel: +41 22 318 92 40 communication@millenniumbp.ch