Markets, He Wrote On Behalf of The MRA/GTA Client Appreciation - - PowerPoint PPT Presentation

By: Anirban Basu

Sage Policy Group, Inc.

October 13th, 2017

Markets, He Wrote

On Behalf of The MRA/GTA Client Appreciation Breakfast

Macro P.I.

(Just How Hairy is the Global Situation?)

Photo: Flixter.com

0.7% 2.1% 1.2% 2.6% 6.7% 6.8% 6.5% 1.8% 4.5% 2.6% 4.6% 2.2% 2.2% 3.0% 1.7% 1.5% 3.1% 1.5% 2.1% 1.6% 2.1% 2.2%

• 6.0% -4.0% -2.0% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0%

Brazil Mexico Latin America & the Caribbean Middle East, North Africa, Afghanistan, & Pakistan India (3) China Emerging & Developing Asia Russia Emerging & Developing Europe Sub-Saharan Africa Emerging Market & Developing Economies United States Australia Canada United Kingdom Japan Spain Italy Germany France Euro Area Advanced Economies

Annual % Change

Estimated Growth in Output by Select Global Areas

2017 Projected

Source: International Monetary Fund: World Economic Outlook Database, October 2017

2017 Proj. Global Output Growth: 3.6%

2016 Growth (Estimate) World: 3.2% Euro Area: 1.8% United States: 1.5% Japan: 1.0%

International Population Dynamics, 16 Largest Nations

Nation Population (Millions) % Change 2017 2050 Net Change

Nigeria 190.9 410.6 219.8 115.1% Ethiopia 105.0 190.9 85.9 81.9% Egypt 97.6 153.4 55.9 57.3% Pakistan 197.0 306.9 109.9 55.8% Philippines 104.9 151.3 46.4 44.2% Mexico 129.2 164.3 35.1 27.2% India 1,339.2 1,659.0 319.8 23.9% Bangladesh 164.7 201.9 37.3 22.6% Indonesia 264.0 321.6 57.6 21.8% United States 324.5 389.6 65.1 20.1% Vietnam 95.5 114.6 19.1 20.0% Brazil 209.3 232.7 23.4 11.2% China 1,409.5 1,364.5 ‐45.1 ‐3.2% Germany 82.1 79.2 ‐2.9 ‐3.5% Russian Federation 144.0 132.7 ‐11.3 ‐7.8% Japan 127.5 108.8 ‐18.7 ‐14.7% World 7.6 billion 9.8 billion 2.2 billion 29.4%

Source: United Nations, Department of Economic and Social Affairs (DESA)/Population Division. World Population Prospects: The 2017 Revision.

*For statistical purposes, the data for China do not include Hong Kong and Macao, Special Administrative Regions (SAR) of China, and Taiwan Province of China.

Top 15 Bottom 15

Rank*

Country

Fertility Rate

Rank*

Country

Fertility Rate

1 Niger 7.29 187 Malta 1.42 2 Somalia 6.37 188 Italy 1.37 3

• Dem. Rep. of the Congo

6.20 188 Slovak Republic 1.37 4 Mali 6.15 190 Mauritius 1.36 5 Chad 6.05 191 Cyprus 1.35 6 Burundi 5.78 192 Bosnia and Herzegovina 1.35 7 Angola 5.77 193 Poland 1.32 8 Uganda 5.68 193 Spain 1.32 9 Timor‐Leste 5.62 195 Greece 1.30 10 Nigeria 5.59 196 Macao SAR, China 1.28 11 Gambia, The 5.49 197 Moldova 1.25 12 Burkina Faso 5.44 198 Singapore 1.24 13 Mozambique 5.31 199 Korea, Rep. 1.24 14 Tanzania 5.08 200 Portugal 1.23 15 Benin 5.05 201 Hong Kong SAR, China 1.20

Niamey Vice

(Fertility Rates by Country, 2015)

Source: World Bank, World Development Indicators

*Rank among 201 countries for which data are available for the most recent year (2015) **Total fertility rate represents the number of children that would be born to a woman if she were to live to the end of her childbearing years and bear children in accordance with age‐specific fertility rates of the specified year.

Global Debt to Exacerbate Slow Growth?

Sources: 1. International Monetary Fund. October 2016. “World Economic Outlook: Subdued Demand: Symptoms and Remedies.”

• 2. International Monetary Fund (IMF). October 2016. “Fiscal Monitor: Debt—Use It Wisely.”
• According to the IMF, global debt reached an all‐time high

in 2015;

• At $152 trillion, global gross debt of the nonfinancial sector

now represents 225% of global GDP;

• About 2/3 of this debt is in the private sector;
• Current low nominal‐growth environment is making

adjustment difficult, setting the stage for a “vicious feedback loop” in which lower growth hampers deleveraging and the debt overhang exacerbates the slowdown.2

Note: The nonfinancial sector comprises the general government, nonfinancial firms, and households. Gross debt represents the unconsolidated liabilities of the three.

Global Debt Reaches All Time Highs (IIF)

Sources: 1. Institute of International Finance (IFF), Global Debt Monitor. 2. Business Insider. 3. The Telegraph. 4. Reuters.

• According to the International Institute of Finance (IIF),

global debt has reached an all‐time high in 2016;

• At $215 trillion, global debt—including household,

government, and corporate—now represents 325% of global GDP;

• Last year the IMF warned of risks to the global economy:
• “sheer size of debt could set the stage for an unprecedented

private deleveraging process that could thwart the fragile economic recovery”

$0 $20 $40 $60 $80 $100 $120 $140 Sep‐01 Jan‐02 May‐02 Sep‐02 Jan‐03 May‐03 Sep‐03 Jan‐04 May‐04 Sep‐04 Jan‐05 May‐05 Sep‐05 Jan‐06 May‐06 Sep‐06 Jan‐07 May‐07 Sep‐07 Jan‐08 May‐08 Sep‐08 Jan‐09 May‐09 Sep‐09 Jan‐10 May‐10 Sep‐10 Jan‐11 May‐11 Sep‐11 Jan‐12 May‐12 Sep‐12 Jan‐13 May‐13 Sep‐13 Jan‐14 May‐14 Sep‐14 Jan‐15 May‐15 Sep‐15 Jan‐16 May‐16 Sep‐16 Jan‐17 May‐17 Sep‐17 $/Barrel

September 2017: $49.88 /Barrel

NYMEX Crude Oil Future Prices in U.S. Dollars

September 2001 through September 2017

*Month of September = average of daily prices from 9/1‐9/29

Source: U.S. Energy Information Administration

US$ Nominal Base metals include aluminum, copper, lead, nickel, tin and zinc. Precious metals include gold, platinum, and silver.

Base Metals Iron Ore Precious Metals 25 45 65 85 105 125 145 165 Sep‐07 Jan‐08 May‐08 Sep‐08 Jan‐09 May‐09 Sep‐09 Jan‐10 May‐10 Sep‐10 Jan‐11 May‐11 Sep‐11 Jan‐12 May‐12 Sep‐12 Jan‐13 May‐13 Sep‐13 Jan‐14 May‐14 Sep‐14 Jan‐15 May‐15 Sep‐15 Jan‐16 May‐16 Sep‐16 Jan‐17 May‐17 Sep‐17

2010=100

Metal Price Indices

September 2007 through September 2017

Source: The World Bank

1,000 2,000 3,000 4,000 5,000 Oct‐09 Feb‐10 Jun‐10 Oct‐10 Feb‐11 Jun‐11 Oct‐11 Feb‐12 Jun‐12 Oct‐12 Feb‐13 Jun‐13 Oct‐13 Feb‐14 Jun‐14 Oct‐14 Feb‐15 Jun‐15 Oct‐15 Feb‐16 Jun‐16 Oct‐16 Feb‐17 Jun‐17 Oct‐17

• Jan. 4, 1985: 1,000

October 6th 1,405

The Baltic Dry Index (BDI) is a measure of the price of shipping major raw materials such as metals, grains, and fossil fuels by sea. The BDI is a composite of 3 sub‐indices, each covering a different carrier size: Capesize, Panamax, and Supramax.

Baltic Dry Index

October 2009 through October 2017

Source: Quandl.com

USA CSI

Photo: AMCNetworks.com

(Commercial Situation Investigation)

Gross Domestic Product

1990Q2 through 2017Q2*

Source: Bureau of Economic Analysis

‐10% ‐8% ‐6% ‐4% ‐2% 0% 2% 4% 6% 8% 1990Q2 1991Q1 1991Q4 1992Q3 1993Q2 1994Q1 1994Q4 1995Q3 1996Q2 1997Q1 1997Q4 1998Q3 1999Q2 2000Q1 2000Q4 2001Q3 2002Q2 2003Q1 2003Q4 2004Q3 2005Q2 2006Q1 2006Q4 2007Q3 2008Q2 2009Q1 2009Q4 2010Q3 2011Q2 2012Q1 2012Q4 2013Q3 2014Q2 2015Q1 2015Q4 2016Q3 2017Q2

% Change from Preceding Period (SAAR)

2017Q2: +3.1%

*3rd(final) Estimate

Contributions to GDP Growth by Component

2016Q3 – 2017Q2*

Source: Bureau of Economic Analysis

‐3.0 ‐2.0 ‐1.0 0.0 1.0 2.0 3.0 Personal Consumption Government Spending Net Exports Gross Investment 1.92 0.09 0.36 0.40 1.99 0.03 ‐1.61 1.34 1.32 ‐0.11 0.22 ‐0.20 2.24 ‐0.03 0.21 0.64 SAAR (%)

2016Q3 2016Q4 2017Q1 2017Q2 2.8 1.8 1.2 3.1

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 GDP

Percent Change from Preceding Period (SAAR)

2017Q2: +3.1%

*3rd(final) Estimate

Net Change in U.S. Jobs, BLS

September 2002 through September 2017

Source: U.S. Bureau of Labor Statistics

‐1000 ‐800 ‐600 ‐400 ‐200 200 400 600 Sep‐02 Jan‐03 May‐03 Sep‐03 Jan‐04 May‐04 Sep‐04 Jan‐05 May‐05 Sep‐05 Jan‐06 May‐06 Sep‐06 Jan‐07 May‐07 Sep‐07 Jan‐08 May‐08 Sep‐08 Jan‐09 May‐09 Sep‐09 Jan‐10 May‐10 Sep‐10 Jan‐11 May‐11 Sep‐11 Jan‐12 May‐12 Sep‐12 Jan‐13 May‐13 Sep‐13 Jan‐14 May‐14 Sep‐14 Jan‐15 May‐15 Sep‐15 Jan‐16 May‐16 Sep‐16 Jan‐17 May‐17 Sep‐17 Thousands

September 2017: ‐33K

National Nonfarm Employment, by Industry Sector,

September 2016 v. September 2017

Source: U.S. Bureau of Labor Statistics

• 79

21 53 60 83 117 149 184 189 472 528

• 100

100 200 300 400 500 600

Information Government Other Services Mining and Logging Trade, Transportation, and Utilities Manufacturing Financial Activities Construction Leisure and Hospitality Education and Health Services Professional and Business Services

Thousands, SA

All told 1,777K jobs gained

U.S. Employment to Population Ratio

September 2000 – September 2017

Source: U.S. Bureau of Labor Statistics

Note: Civilian employment‐population ratio, population 16 years and

• ver, seasonally adjusted (SA).

58.0 59.0 60.0 61.0 62.0 63.0 64.0 65.0 Sep‐00 Mar‐01 Sep‐01 Mar‐02 Sep‐02 Mar‐03 Sep‐03 Mar‐04 Sep‐04 Mar‐05 Sep‐05 Mar‐06 Sep‐06 Mar‐07 Sep‐07 Mar‐08 Sep‐08 Mar‐09 Sep‐09 Mar‐10 Sep‐10 Mar‐11 Sep‐11 Mar‐12 Sep‐12 Mar‐13 Sep‐13 Mar‐14 Sep‐14 Mar‐15 Sep‐15 Mar‐16 Sep‐16 Mar‐17 Sep‐17

September 2017: 60.4%

• 1,000
• 600

100 3,100 3,400 4,600 5,700 7,800 15,700 24,800

• 5,000

5,000 10,000 15,000 20,000 25,000

Information Financial Activities Manufacturing Other Services Leisure and Hospitality Trade, Transportation, and Utilities Government Mining, Logging, and Construction Education and Health Services Professional and Business Services

Maryland Nonfarm Employment

by Industry Sector Groups (SA)

August 2016 v. August 2017 Absolute Change

Source: U.S. Bureau of Labor Statistics

MD Total: +63.6K; +2.3% US Total (SA): +2,059K; +1.4%

*According to the Local Area Unemployment Statistics (LAUS) series MD added 78,132 jobs between August 2016 and August 2017.

RANK STATE % RANK STATE % RANK STATE % 1 NEVADA 3.0 18 CALIFORNIA 1.6 35 INDIANA 1.0 2 GEORGIA 2.7 18 KENTUCKY 1.6 35 OHIO 1.0 3 FLORIDA 2.6 18 MASSACHUSETTS 1.6 35 PENNSYLVANIA 1.0 3 UTAH 2.6 18 MONTANA 1.6 38 NEW JERSEY 0.9 5 TEXAS 2.5 18 NORTH CAROLINA 1.6 39 SOUTH DAKOTA 0.8 6 MARYLAND 2.3 23 MINNESOTA 1.5 40 DELAWARE 0.6 6 OREGON 2.3 23 VIRGINIA 1.5 40 HAWAII 0.6 8 IDAHO 2.2 25 ALABAMA 1.4 40 MISSISSIPPI 0.6 9 NEW HAMPSHIRE 2.1 25 MICHIGAN 1.4 40 VERMONT 0.6 9 WASHINGTON 2.1 25 NEW YORK 1.4 40 WISCONSIN 0.6 11 ARKANSAS 1.9 28 ARIZONA 1.3 45 CONNECTICUT 0.4 11 RHODE ISLAND 1.9 28 NEBRASKA 1.3 45 ILLINOIS 0.4 13 COLORADO 1.8 28 NORTH DAKOTA 1.3 45 MAINE 0.4 13 MISSOURI 1.8 31 LOUISIANA 1.2 48 ALASKA 0.1 13 TENNESSEE 1.8 31 OKLAHOMA 1.2 48 WEST VIRGINIA 0.1 16 DISTRICT OF COLUMBIA 1.7 33 IOWA 1.1 50 KANSAS

• 0.6

16 SOUTH CAROLINA 1.7 33 NEW MEXICO 1.1 51 WYOMING

• 0.9

Employment Growth, U.S. States (SA)

August 2016 v. August 2017 Percent Change

Source: U.S. Bureau of Labor Statistics

U.S. Year‐over‐year Percent Change Aug: +1.4% Sept: +1.2%

• 5,600
• 1,900
• 800
• 200

300 1,300 1,600 2,800 7,700 13,900

• 8,000
• 5,000
• 2,000

1,000 4,000 7,000 10,000 13,000 16,000

Trade, Transportation, and Utilities Financial Activities Manufacturing Information Other Services Mining, Logging, and Construction Leisure and Hospitality Government Professional and Business Services Education and Health Services

Baltimore-Columbia-Towson MSA Nonfarm Employment, by Industry Sector Groups (NSA)

August 2016 v. August 2017 Absolute Change

Source: U.S. Bureau of Labor Statistics

Baltimore MSA Total: +19.1K; +1.4% MD Total (SA): +63.6K; +2.3% US Total (SA): +2,059K; +1.4%

Washington, DC-Arlington-Alexandria MSA Nonfarm Employment

by Industry Sector Groups (NSA)

August 2016 v. August 2017 Absolute Change

Source: U.S. Bureau of Labor Statistics

• 3,300
• 200

500 3,300 4,200 5,800 6,700 14,400 16,500 19,700

• 5,000

5,000 10,000 15,000 20,000

Information Financial Activities Manufacturing Other Services Government Mining, Logging, and Construction Trade, Transportation, and Utilities Leisure and Hospitality Professional and Business Services Education and Health Services

DC MSA Total: +67.6K; +2.1% US Total (SA): +2,059K; +1.4%

Rank MSA % Rank MSA % 1 Orlando-Kissimmee-Sanford, FL MSA 3.3 1 3 W ashington-Arlington-Alexandria, DC- VA-MD-W V MSA 2 .1 2 Atlanta-Sandy Springs-Roswell, GA MSA 3.2 14 Denver-Aurora-Lakewood, CO MSA 2.0 3 Tampa-St. Petersburg-Clearwater, FL MSA 3.1 15 Houston-The Woodlands-Sugar Land, TX MSA 1.8 4 Dallas-Fort Worth-Arlington, TX MSA 2.8 15 Philadelphia-Camden-Wilmington, PA-NJ- DE-MD MSA 1.8 5 Seattle-Tacoma-Bellevue, WA MSA 2.7 15 Phoenix-Mesa-Scottsdale, AZ MSA 1.8 6 Charlotte-Concord-Gastonia, NC-SC MSA 2.6 18 San Francisco-Oakland-Hayward, CA MSA 1.7 7 Portland-Vancouver-Hillsboro, OR-WA MSA 2.5 19 New York-Newark-Jersey City, NY-NJ-PA MSA 1.5 7 Riverside-San Bernardino-Ontario, CA MSA 2.5 2 0 Baltim ore-Colum bia-Tow son, MD MSA 1 .4 9 Miami-Fort Lauderdale-West Palm Beach, FL MSA 2.4 21 San Diego-Carlsbad, CA MSA 1.3 10 Boston-Cambridge-Nashua, MA-NH Metro NECTA 2.3 22

• St. Louis, MO-IL MSA

1.1 10 Detroit-Warren-Dearborn, MI MSA 2.3 23 Los Angeles-Long Beach-Anaheim, CA MSA 0.6 10 Minneapolis-St. Paul-Bloomington, MN-WI MSA 2.3 24 Chicago-Naperville-Elgin, IL-IN-WI MSA 0.5

Employment Growth, 24 Largest Metros (NSA)

August 2016 v. August 2017 Percent Change

Source: U.S. Bureau of Labor Statistics, Current Employment Statistics (CES) Survey

Rank MSA UR Rank MSA UR 1 Denver-Aurora-Lakewood, CO MSA 2.2 10 Seattle-Tacoma-Bellevue, WA MSA 4.2 2 Minneapolis-St. Paul-Bloomington, MN-WI MSA 3.4 14 Phoenix-Mesa-Scottsdale, AZ MSA 4.3 3 Boston-Cambridge-Nashua, MA-NH Metro NECTA 3.5 15 Detroit-Warren-Dearborn, MI MSA 4.4 4 W ashington-Arlington-Alexandria, DC- VA-MD-W V MSA 3 .7 16 Miami-Fort Lauderdale-West Palm Beach, FL MSA 4.5 5 Orlando-Kissimmee-Sanford, FL MSA 3.8 17 Atlanta-Sandy Springs-Roswell, GA MSA 4.6 6 Dallas-Fort Worth-Arlington, TX MSA 3.9 18 San Diego-Carlsbad, CA MSA 4.7 6 San Francisco-Oakland-Hayward, CA MSA 3.9 19 New York-Newark-Jersey City, NY-NJ-PA MSA 4.8 8 Tampa-St. Petersburg-Clearwater, FL MSA 4.0 20 Los Angeles-Long Beach-Anaheim, CA MSA 5.1 9

• St. Louis, MO-IL MSA (1)

4.1 20 Philadelphia-Camden-Wilmington, PA-NJ- DE-MD MSA 5.1 1 0 Baltim ore-Colum bia-Tow son, MD MSA 4 .2 22 Houston-The Woodlands-Sugar Land, TX MSA 5.2 10 Charlotte-Concord-Gastonia, NC-SC MSA 4.2 23 Chicago-Naperville-Elgin, IL-IN-WI MSA 5.3 10 Portland-Vancouver-Hillsboro, OR-WA MSA 4.2 24 Riverside-San Bernardino-Ontario, CA MSA 6.2

Unemployment Rates, 24 Largest Metros (NSA)

August 2017

Source: U.S. Bureau of Labor Statistics

• 1. Area boundaries do not reflect official OMB definitions.

U.S. Unemployment Rate Aug: 4.4% Sept: 4.2%

21 Jump Street

(And Other Addresses

• f Interest)

Photo: TheMoveDatabase.org

15-Year & 30-Year Fixed Mortgage Rates

October 1995 through October 2017*

Source: Freddie Mac

*Week ending 10/12/2017

3.21% 3.91%

1% 2% 3% 4% 5% 6% 7% 8% 9% 10%

Oct‐95 Apr‐96 Oct‐96 Apr‐97 Oct‐97 Apr‐98 Oct‐98 Apr‐99 Oct‐99 Apr‐00 Oct‐00 Apr‐01 Oct‐01 Apr‐02 Oct‐02 Apr‐03 Oct‐03 Apr‐04 Oct‐04 Apr‐05 Oct‐05 Apr‐06 Oct‐06 Apr‐07 Oct‐07 Apr‐08 Oct‐08 Apr‐09 Oct‐09 Apr‐10 Oct‐10 Apr‐11 Oct‐11 Apr‐12 Oct‐12 Apr‐13 Oct‐13 Apr‐14 Oct‐14 Apr‐15 Oct‐15 Apr‐16 Oct‐16 Apr‐17 Oct‐17

Rate

15‐yr 30‐yr

*NSA: not seasonally adjusted

U.S. Homeownership (NSA)

1980Q2-2017Q2

Source: U.S. Census Bureau

58% 60% 62% 64% 66% 68% 70% 1980Q2 1981Q2 1982Q2 1983Q2 1984Q2 1985Q2 1986Q2 1987Q2 1988Q2 1989Q2 1990Q2 1991Q2 1992Q2 1993Q2 1994Q2 1995Q2 1996Q2 1997Q2 1998Q2 1999Q2 2000Q2 2001Q2 2002Q2 2003Q2 2004Q2 2005Q2 2006Q2 2007Q2 2008Q2 2009Q2 2010Q2 2011Q2 2012Q2 2013Q2 2014Q2 2015Q2 2016Q2 2017Q2 2017Q2: 63.7%

$0 $10 $20 $30 $40 $50 $60 $70

Aug‐93 Aug‐94 Aug‐95 Aug‐96 Aug‐97 Aug‐98 Aug‐99 Aug‐00 Aug‐01 Aug‐02 Aug‐03 Aug‐04 Aug‐05 Aug‐06 Aug‐07 Aug‐08 Aug‐09 Aug‐10 Aug‐11 Aug‐12 Aug‐13 Aug‐14 Aug‐15 Aug‐16 Aug‐17

$ Billions (SAAR)

U.S. Private New Multifamily Construction

August 1993 through August 2017

Source: U.S. Census Bureau

S&P/Case-Shiller Home Price Indices for Select Metros

July 2017, 12-Month Percentage Change

Source: Standard & Poor’s

0% 1% 2% 3% 4% 5% 6% 7% 8%

3.3% 3.3% 3.9% 5.1% 5.3% 5.8% 6.1% 6.7% 6.8% 7.2% 7.3% 7.3% 7.4% 12‐Month % Change

U.S. Single-Family Housing Starts

August 1999 through August 2017

Source: U.S. Census Bureau

200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000 Aug‐99 Feb‐00 Aug‐00 Feb‐01 Aug‐01 Feb‐02 Aug‐02 Feb‐03 Aug‐03 Feb‐04 Aug‐04 Feb‐05 Aug‐05 Feb‐06 Aug‐06 Feb‐07 Aug‐07 Feb‐08 Aug‐08 Feb‐09 Aug‐09 Feb‐10 Aug‐10 Feb‐11 Aug‐11 Feb‐12 Aug‐12 Feb‐13 Aug‐13 Feb‐14 Aug‐14 Feb‐15 Aug‐15 Feb‐16 Aug‐16 Feb‐17 Aug‐17 Thousands, SAAR

August 2017: 851K

Maryland Median Home Sale Prices

September 2005 through September 2017

‐20% ‐15% ‐10% ‐5% 0% 5% 10% 15% 20% 25% 30% Sep‐05 Mar‐06 Sep‐06 Mar‐07 Sep‐07 Mar‐08 Sep‐08 Mar‐09 Sep‐09 Mar‐10 Sep‐10 Mar‐11 Sep‐11 Mar‐12 Sep‐12 Mar‐13 Sep‐13 Mar‐14 Sep‐14 Mar‐15 Sep‐15 Mar‐16 Sep‐16 Mar‐17 Sep‐17 Year‐over‐year % change

Trend Line

September 2017: $277,746 (+4.4% YOY)

Source: Maryland Association of Realtors (MAR)

Architecture Billings Index

August 2008 through August 2017

Source: The American Institute of Architects

30.0 35.0 40.0 45.0 50.0 55.0 60.0 Aug‐08 Nov‐08 Feb‐09 May‐09 Aug‐09 Nov‐09 Feb‐10 May‐10 Aug‐10 Nov‐10 Feb‐11 May‐11 Aug‐11 Nov‐11 Feb‐12 May‐12 Aug‐12 Nov‐12 Feb‐13 May‐13 Aug‐13 Nov‐13 Feb‐14 May‐14 Aug‐14 Nov‐14 Feb‐15 May‐15 Aug‐15 Nov‐15 Feb‐16 May‐16 Aug‐16 Nov‐16 Feb‐17 May‐17 Aug‐17

August 2017: 53.7

National Nonresidential Construction Spending by Subsector August 2014 v. August 2017

Source: U.S. Census Bureau

‐23.7% ‐20.9% ‐16.8% ‐10.3% ‐8.4% ‐4.5% ‐3.3% 1.7% 4.4% 5.5% 5.9% 32.1% 36.7% 37.9% 52.5% 70.2% ‐40% ‐30% ‐20% ‐10% 0% 10% 20% 30% 40% 50% 60% 70% 80% Sewage and waste disposal Conservation and development Water supply Public safety Power Religious Highway and street Transportation Manufacturing Health care Educational Commercial Communication Amusement and recreation Office Lodging 3‐year % Change Total Nonresidential Construction: +$57.16B; +9.0%

$0 $10 $20 $30 $40 $50 $60

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Billions of $US

Foreign investment increases 85.1% in 2015

Cross‐border investment remained elevated in 2016: Although down relative to a record 2015, offshore investment levels still exceeded the pre‐2015 high in 2007.

Note: Among transactions larger than $5.0 million

Commercial/Multifamily Offshore Investment Sales Volumes Reach New Heights in 2015/16

Source: Jones Lang LaSalle; Real Capital Analytics

14.9%

0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016YTD Foreign Participation as a % of Total Office Volume

1.1% 1.1% 1.4% 1.6% 1.9% 2.1% 2.8% 4.8% 4.8% 5.6% 6.8% 7.1% 8.4% 45.5%

0% 10% 20% 30% 40% 50%

San Diego Philadelphia Austin Atlanta Chicago Northern New Jersey Miami Seattle‐Bellevue Los Angeles Dallas‐Fort Worth Washington, DC Boston San Francisco New York Foreign Office Investment by Destination Market (as a % of Total, 2016YTD)

Note: Among transactions larger than $5.0 million; includes all office markets which received > 1.0% of offshore capital.

Primary markets continue to capture the lion’s share of inbound capital, receiving 78.2% of this capital YTD.

Foreign Office Investment Activity, as of 2016Q3

Source: Jones Lang LaSalle; Real Capital Analytics

Inputs to Construction PPI (NSA)

September 2001 – September 2017

Source: U.S. Bureau of Labor Statistics

‐10% ‐5% 0% 5% 10% 15% Sep‐01 Jan‐02 May‐02 Sep‐02 Jan‐03 May‐03 Sep‐03 Jan‐04 May‐04 Sep‐04 Jan‐05 May‐05 Sep‐05 Jan‐06 May‐06 Sep‐06 Jan‐07 May‐07 Sep‐07 Jan‐08 May‐08 Sep‐08 Jan‐09 May‐09 Sep‐09 Jan‐10 May‐10 Sep‐10 Jan‐11 May‐11 Sep‐11 Jan‐12 May‐12 Sep‐12 Jan‐13 May‐13 Sep‐13 Jan‐14 May‐14 Sep‐14 Jan‐15 May‐15 Sep‐15 Jan‐16 May‐16 Sep‐16 Jan‐17 May‐17 Sep‐17 12‐month % Change

• Sept. 2016 v. Sept. 2017:

+4.5%

Construction Materials PPI (NSA)

12-month % Change as of September 2017

Source: U.S. Bureau of Labor Statistics

‐10% ‐5% 0% 5% 10% 15%

Natural Gas Prepared Asphalt & Tar Roofing/Siding Products Fabricated Structural Metal Products Plumbing Fixtures and Fittings Concrete Products Crude Energy Materials Steel Mill Products Nonferrous Wire and Cable Softwood Lumber Iron and Steel Crude Petroleum

‐3.7% 0.6% 1.8% 1.9% 2.9% 5.8% 7.8% 9.7% 11.6% 12.7% 13.9% 12‐month % Change

Down to “The Wire”

Photo: RecapGuide.com

Sales Growth by Type of Business

August 2016 v. August 2017*

Source: U.S. Census Bureau

‐3.5% ‐1.4% 0.5% 0.6% 1.5% 2.1% 2.3% 2.5% 5.2% 5.4% 6.4% 7.5% 8.4% ‐5% ‐2% 1% 4% 7% 10% Electronics & Appliance Stores Sporting Goods, Hobby, Book & Music Stores Health & Personal Care Stores Clothing & Clothing Accessories Stores Motor Vehicle & Parts Dealers Food & Beverage Stores Food Services & Drinking Places General Merchandise Stores Miscellaneous Store Retailers Furniture & Home Furn. Stores Gasoline Stations Building Material & Garden Supplies Dealers Internet, etc. Retailers 12‐month % change

*August 2017 advanced estimate

Total Retail Sales: +3.2% YOY

U.S. Saving Rate, August 2005 – August 2017

(Savings as Percentage of Personal Disposable Income)

Source: Bureau of Economic Analysis

0.0 2.0 4.0 6.0 8.0 10.0 12.0

Aug‐05 Dec‐05 Apr‐06 Aug‐06 Dec‐06 Apr‐07 Aug‐07 Dec‐07 Apr‐08 Aug‐08 Dec‐08 Apr‐09 Aug‐09 Dec‐09 Apr‐10 Aug‐10 Dec‐10 Apr‐11 Aug‐11 Dec‐11 Apr‐12 Aug‐12 Dec‐12 Apr‐13 Aug‐13 Dec‐13 Apr‐14 Aug‐14 Dec‐14 Apr‐15 Aug‐15 Dec‐15 Apr‐16 Aug‐16 Dec‐16 Apr‐17 Aug‐17

Savings Rate (%) August 2017: 3.6%

U.S. Gross Private Domestic Investment (SAAR)

% Change from Previous Quarter, 2000Q2 – 2017Q2*

Source: Bureau of Economic Analysis

‐40.0 ‐30.0 ‐20.0 ‐10.0 0.0 10.0 20.0 30.0 40.0 2000Q2 2000Q4 2001Q2 2001Q4 2002Q2 2002Q4 2003Q2 2003Q4 2004Q2 2004Q4 2005Q2 2005Q4 2006Q2 2006Q4 2007Q2 2007Q4 2008Q2 2008Q4 2009Q2 2009Q4 2010Q2 2010Q4 2011Q2 2011Q4 2012Q2 2012Q4 2013Q2 2013Q4 2014Q2 2014Q4 2015Q2 2015Q4 2016Q2 2016Q4 2017Q2

2017Q2: +3.9%

*3rd(final) Estimate

Conference Board Leading Economic Indicators Index

August 2007 through August 2017

Source: Conference Board

‐1.5% ‐1.0% ‐0.5% 0.0% 0.5% 1.0% 1.5% Aug‐07 Feb‐08 Aug‐08 Feb‐09 Aug‐09 Feb‐10 Aug‐10 Feb‐11 Aug‐11 Feb‐12 Aug‐12 Feb‐13 Aug‐13 Feb‐14 Aug‐14 Feb‐15 Aug‐15 Feb‐16 Aug‐16 Feb‐17 Aug‐17

One‐month Percent Change

August 2017: 128.8 where 2010: 100

The Closer

Photo: Google

• There are indications of mini‐bubbles

forming in commercial real estate, particularly in office, lodging and multifamily segments;

• There are also longer‐term structural

considerations, including the national debt and pending insolvencies of Medicare and Social Security – the longer‐term outlook may be deteriorating even as the short‐run improves;

• Momentum should see us through 2017, but

tighter monetary policy combined with a heavy dose of political intrigue could render 2018 different from an asset price perspective. By this time in 2019/20, the world economy could be in a far different place and likely will be.

*Kyra Sedgwick as Brenda Leigh Johnson

• Global economy remains weak,

and correspondingly . . . ;

• Global money has continued to

pour into America in search of yield and safety, including into commercial real estate – that was particularly true in 2015,

• nly a bit less true in 2016;
• Inflationary pressures are on

the rise – so, too, are interest rates – eventually ‐‐ that could begin to squeeze asset prices in 2017/18, triggering negative wealth effects and sentiment in the process – would really hurt Maryland;

Thank You

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