CII STUDENT PRESENTATION NOVEMBER 2016 TWITTER @USTEWART - - PowerPoint PPT Presentation

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CII STUDENT PRESENTATION NOVEMBER 2016 TWITTER @USTEWART - - PowerPoint PPT Presentation

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CII STUDENT PRESENTATION NOVEMBER 2016 TWITTER @USTEWART WWW.7IM.CO.UK MAKING MONEY IN A MAD WORLD 2 GREXIT BREXIT TREXIT OR JUST SHOW ME THE EXIT 3 4 A Hard BREXIT? 5 A changing landscape 6 Unexpected Outcomes The Vote

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NOVEMBER 2016 TWITTER @USTEWART WWW.7IM.CO.UK

CII STUDENT PRESENTATION

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MAKING MONEY IN A MAD WORLD

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GREXIT BREXIT TREXIT OR JUST SHOW ME THE EXIT

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A Hard BREXIT?

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A changing landscape

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Unexpected Outcomes

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  • The Vote
  • New Prime Minister
  • Euro Triumvirate
  • Laboured Labour
  • Markets Reactions
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And more to come?

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  • President Trump or Clinton
  • A New Merkel
  • End of Hollandaise?
  • UK Election?
  • & What is Brexit?
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REFERENDUM BECOMES A NEVERENDUM?

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A KEY MOMENT OF POLITICS & ECONOMICS

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A RECAP

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Sterling - US Dollar

12 SOURCE: BLOOMBERG 16/06/2016 – 18/10//2016
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Sterling - US Dollar (since 1971)

13 SOURCE: BLOOMBERG 4/1/1971 – 18/10/2016
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FTSE 100 vs FTSE 250

SOURCE: BLOOMBERG 16/6/2016 – 18/10/2016 14
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FTSE 100 vs FTSE 250

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It’s all about where you make your money: Revenue exposure

SOURCE: FACTSET
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The considered media view

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More stimulants…rates & QE?

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RISING RATES – RISING FEARS?

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Geo political scares

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An unexpected bear?

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Unprecedented stimuli

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  • Low Rates
  • Infrastructure Spending
  • Quantitative Easing
  • Commodity Price falls
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GDP growth still positive

SOURCE: FACTSET 22

Average global growth close to static but changes in regional growth rates notable.

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SLIDE 23 SOURCE: FACTSET 23

Oil ‘Stimulus’ Still to Come?

Big falls in the oil price have always been followed by periods of higher GDP growth in G7 economies So far, consumers have saved much of the oil windfall. This may change…

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Commodities – rolling 5 years

SOURCE: FACTSET. Copper, Gold, Crude Oil (WTI) 24
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Unemployment is falling

SOURCE: FACTSET 25

GREEN – EUROPEAN, RED - UNITED STATES, BLUE - UNITED KINGDOM

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Purchasing Managers Index US/EU

SOURCE: FACTSET 26

Purchasing managers surveys indicate a growing economy.

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USA – higher pressure?

Rates Change? Corporate Earnings Trump vs Clinton & Congress Housing improving, unemployment falling Economic growth Frackers Fracked

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US wage growth is rising

SOURCE: FACTSET. 29
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US house prices are strong

SOURCE: FACTSET 30
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US manufacturing rebound

SOURCE: FACTSET 31

Recent surge in New Orders components is consistent with decent pick up in YoY manufacturing growth in US

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The world benefits

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Countries who export to the US

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Regional storms

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Eurozone

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The Future of the Euro ? & BREXIT? German & Italian Banks Company earnings rising at double digit rates QE = Growth? Further financial integration Immigration & Borders

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Eurozone recovery

SOURCE: FACTSET 35

Recovery in credit demand is continuing in Europe – bodes well for GDP growth?

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“Truth in engineering”

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EZ survey data – holding up

SOURCE: FACTSET 37
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Watch it Shorty!

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P-Russia

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Russia

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  • Year 2 Recession
  • Budget pain
  • Central Bank Reserves
  • Sanctions Effects?
  • Government spending
  • Geo-politics
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China

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  • Industrial production up (6.2% vs. 5.9% consensus)
  • Consumer spending up 10.6% vs. 9.9% expectations
  • ‘Rust belt’ benefitting from improvements in commodity prices
  • Foreign capital reserves beating consensus
  • Government spending also up, funded by debt
  • Decline in private fixed investment
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Chinese demand

SOURCE: GENERAL ADMINISTRATION OF CUSTOMS, CHINA 43
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The China sea-sores

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China in transition

SOURCE: FACTSET 45

Services matter more than manufacturing and construction… and are growing far faster.

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Purchasing Managers Index

SOURCE: FACTSET 46

Purchasing managers surveys indicate a growing economy.

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SLIDE 47 47
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Japan

SOURCE: GOOGLE IMAGES
  • Shinzo Abe claims victory
  • A vote for Abenomics?
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Japan

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Islands Dispute Abe-nomics Corporate Cash & Yen Weakness Debt 220%+ of GDP Back In Recession Nappy Sales

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Broken brics?

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China Change of Life Brazil Weaker Exports South Africa Political issues Russia Economics post Election India Post election Turkey On the Cusp

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MSCI Asia Ex Japan China South Korea Taiwan Brazil South Africa India Mexico Russia Malaysia Indonesia Thailand Turkey Poland Chile Philippines Hong Kong Singapore

...Favour commodity importers

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MSCI Emerging Markets China South Korea Taiwan Brazil South Africa India Mexico Russia Malaysia Indonesia Thailand Turkey Poland Chile Philippines

SOURCE: ISHARES / 7IM
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Under new ‘Nannygment’

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UK

Jobs & growth vs Inflation? Fixing the Financing system Investment & Personal Tax Reform? The 2 Unions No Power or Transport strategy World’s 6th - 8th -10th ?

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Post referendum issues

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  • Confidence
  • Inward Investment 15 vs 16
  • Debt Funding
  • Spending Corporate/Personal
  • Political Leadership
  • Prime Minister
  • Government / Opposition
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Brexit key economic issues

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  • Currency £ volatility
  • Trading Agreements Single Market access
  • Employment
  • Immigration EU/Non EU
  • Employment Rights
  • 2017 Growth Outlook (BoE slashed)
  • Inflation
  • Budget Collar Loosens
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UK – 2015 pulling power

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UK No1 in Europe UK 3rd Globally UK top for HQs 20% Increase UK Manufacturing Leads 1,065 Projects 42,000 new jobs

UK ECONOMY

INWARD INVESTMENT

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Krankies – The love child

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PMI UK x 3

SOURCE: FACTSET 59
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Jobs, wages, confidence, sales

SOURCE: FACTSET 60
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The long and winding road

SOURCE: BANK OF ENGLAND 61

Inflation likely to stay low in the mid-term

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Government deficit

SOURCE: FACTSET 62
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Understanding our debt

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  • Annual Government Income: £716
  • Money Spent:

£784

  • Debt Interest:

£36 (47)

  • Debt:

£1,752,000,000,000

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Key risks to the view

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  • Eurozone Green/K shoots
  • China change of life
  • UK Brexit nerves
  • US debt, deficit & demand
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The symbiotic relationship

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Inflation?

SOURCE: FACTSET 66

Headline was in line with expectations

  • But core rose above consensus
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Considered view

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Someone Changed The Rules!

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  • Pensions - Your Problem
  • Annuities - Your Problem
  • Health & Age Care – Your Problem

& Then Low Interest rates When Safe becomes Risky - Government Bonds

Your Life Span

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REBUILDING INVESTMENT CONFIDENCE

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Key word for economy - confidence

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Power of compounding

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Today’s value of £100 invested at the end of the of 69 years

1 – without reinvesting income

Nominal Equities £9,148

2 – gross income reinvested

Nominal Equities £179,265

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Being out of the market

RETURNS OF THE FTSE100 OVER THE LAST 20 YEARS AND THE EFFECT OF BEING OUT OF THE MARKET PERFORMANCE OF A £10,000 INVESTMENT BETWEEN 2 JANUARY 1996 & 31 DECEMBER 2015 AND THE CONSEQUENCE OF MISSING THE BEST TRADING DAYS OUT OF THE 5,056 DAYS EXAMINED

SOURCE – BLOOMBERG. DATA BASED ON 20-YEAR ANNUALISED RETURNS FROM FTSE100 TOTAL RETURN INDEX 72
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EXPECTED RETURNS

  • EXPECTED OUTCOMES
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Choosing next year’s top asset class Could you?

SOURCE: BLOOMBERG, THOMSON Reuters as at 1 JANUARY 2015
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SLIDE 75 SOURCE: BLOOMBERG, THOMSON Reuters as at 1 JANUARY 2015 75

It works!

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SLIDE 76 SOURCE: BLOOMBERG, THOMSON REUTERS AS AT 1 JANUARY 2016 THE VALUE OF INVESTMENTS MAY FLUCTUATE IN PRICE OR VALUE AND YOU MAY GET BACK LESS THAN THE AMOUNT ORIGINALLY INVESTED. PAST PERFORMANCE IS NOT A GUIDE TO THE FUTURE. 76

It works!

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All data refers to C Class Accumulation Units As at 30 September 2016

  • 20
  • 15
  • 10
  • 5

5 10 15 20 25 30 35 40 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Returns Annual Performance

MORNINGSTAR STUDY 2016

Average Expected Return Expected Minimum Return Expected Maximum Return

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All data refers to C Class Accumulation Units As at 30 September 2016

6.7 16.9 5.5 2.7

  • 10.0

14.5 11.1

  • 5.2

9.0 11.9 6.3 0.7

  • 20
  • 15
  • 10
  • 5

5 10 15 20 25 30 35 40 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Returns Annual Performance

MORNINGSTAR STUDY 2016

Average Expected Return Expected Minimum Return Expected Maximum Return

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All data refers to C Class Accumulation Units As at 30 September 2016

  • 20
  • 15
  • 10
  • 5

5 10 15 20 25 30 35 40 1 2 3 4 5 6 7 8 9 10 11 12

Returns Years Invested

MORNINGSTAR STUDY 2016

Average Expected Return Expected Minimum Return Expected Maximum Return

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SLIDE 80

All data refers to C Class Accumulation Units As at 30 September 2016

  • 20
  • 15
  • 10
  • 5

5 10 15 20 25 30 35 40 1 2 3 4 5 6 7 8 9 10 11 12

Returns Years Invested

MORNINGSTAR STUDY 2016

Expected Minimum Return Expected Maximum Return Actual Compound Return Average Expected Return

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Smart passive innovation FTSE100

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S&P 500 total return

Source: YCHARTS 82
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Managing the real costs

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£1,665,177 £1,458,879 £1,320,346 £1,138,477 £1,034,059 £500,000 £700,000 £900,000 £1,100,000 £1,300,000 £1,500,000 £1,700,000 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 At 0% cost At 0.7% cost At 7IM indicative cost At 2.0% cost At 2.5% cost Compound effect of charges upon an investment of £500,000 growing at 5% p.a. gross over 20 years

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Pressing down on charges

SOURCE: 2008-2010 LIPPER UK FUND OF FUNDS ‘INCLUSIVE’ TOTAL EXPENSE RATIO ANALYSIS REPORTS. 2011, 2012, 2013 & 2014 ONGOING CHARGE FIGURES FROM CAPITA FUND ACCOUNTS DATA. 2015 ONGOING CHARGE FIGURES FROM NORTHERN TRUST. N.B. LIPPER AND CAPITA ARE BOTH INDUSTRY STANDARDS BUT HAVE DIFFERENT METHODOLOGIES
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PLANNING YOUR YOUR FUTURE NEEDS

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Your own planning

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Accountants Muckle Insurance Mortgage Providers Banks Trustees Investment Your Family Financial Planner

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Forward financial headlights

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Cash flow – income and expenditure

  • Now
  • Long term future
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GAMING SOFTWARE – MY FUTURE

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So what do you do?

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Think broader family assets and liabilities

  • Managing family assets

Improve Investment Discipline

  • Reducing costs
  • Better than average returns
  • Reducing risks
  • Lower volatility
  • Regular financial planning
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Family balance sheet

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House Car Pension Life assurance ISAs Shares & National Savings Cash Mortgage Credit Cards Loans

ASSETS LIABILITIES NET BALANCE £

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The Alternative For Many…..

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THANK YOU