Q2 Investm ent Review & Outlook July 19, 20 18 Russ Allen, CIO
Disclosures Important Disclosures: This information is for discussion purposes only and is being furnished on July 19, 2018. This information is not to be re-transmitted in whole or in part without the prior consent of Berman Capital Advisors. While all the information prepared in this presentation is believed to be accurate, Berman Capital Advisors makes no express warranty as to its completeness or accuracy nor can it accept responsibility for errors appearing in the presentation. No information provided herein shall constitute, or be construed as, an offer to sell or a solicitation of an offer to acquire any security, investment product or service, nor shall any such security, product or service be offered or sold in any jurisdiction where such an offer or solicitation is prohibited by law or registration. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product will be profitable or be suitable for your portfolio or individual situation. Please contact Berman Capital Advisors to discuss your individual situation. Berman Capital Advisors / 2
Presentation Outline I. Summary of Q2 and YTD Performance II. Macroeconomic Overview III. Investment Outlook IV. Conclusion Berman Capital Advisors / 3
Summary of Q2 and YTD Performance Berman Capital Advisors / 4
Summary Outlook Economic growth is slowing in spots but global growth is good overall. The outlook • for profits is still quite strong, and valuations have partially reset. U.S. markets have been the only game in town recently, but we expect that to • normalize. In the intermediate term cheaper foreign markets with good prospects have more room to run. In the near term, the outlook for interest rate sensitive bonds is slightly better, but we • think investors are very complacent regarding the long-term inflation outlook. The high absolute levels of corporate debt are troubling although the outlook for defaults is good. The outcome of trade disputes is the biggest issue on the market’s mind, and • justifiably so. We think that works out too, but there are real risks from a full blown trade war. Emerging Markets are more likely than not to get back in gear, as dollar denominated • debt concerns are overblown. Berman Capital Advisors / 5
Major Asset Class Performance Total Return Stocks eased ahead in the second • Index 2018 YTD Q2 2018 quarter, although volatility was S&P 500 2.6% 3.4% elevated. Russell 1000 Growth 7.3% 5.8% Russell 1000 Value -1.7% 1.2% U.S. markets were clear leaders. • Russell Midcap 2.3% 2.8% Emerging markets suffered in the Russell Small Cap 7.7% 7.8% quarter. Growth outperformed MSCI EAFE (International) -2.4% -0.8% Value and Small-cap MSCI Europe -2.7% -0.9% outperformed Large. MSCI Emerging Markets -6.5% -7.7% MSCI Japan -1.8% -2.1% Bonds had slightly negative • US Aggregate Bond -1.6% -0.2% returns. High yield outperformed. High Yield Bonds 0.2% 1.0% Gold -4.2% -5.5% Oil rose again as the effort to limit Crude Oil 22.7% 14.2% • supply and takeaway constraints Source: Factset Research Note: Int'l market returns reported in U.S. Dollars, not local currency in Texas impacted prices. Berman Capital Advisors / 6
S&P Performance = Tech Stocks Berman Capital Advisors / 7
Macroeconomic Overview Berman Capital Advisors / 8
Good News: GDP Recovery Berman Capital Advisors / 9
Good News: Home Price Recovery Berman Capital Advisors / 10
Good News: Consumer De-leveraging Berman Capital Advisors / 11
Bad News: Government Debt Path Source: Congressional Budget Office, JP Morgan Berman Capital Advisors / 12
Oil Still Lower than at Start of Crisis Source: Chicago Mercantile Exchange, JP Morgan Berman Capital Advisors / 13
Interest Rates Rising But Are Still Low Berman Capital Advisors / 14
Unemployment can Fall Further Berman Capital Advisors / 15
Wage Growth Higher, Not Too High (Yet) Berman Capital Advisors / 16
Europe Growth Slowing Berman Capital Advisors / 17
Investment Outlook Berman Capital Advisors / 18
U.S. Equity Valuation Perspective Berman Capital Advisors / 19
Another Look at Stock Valuation Berman Capital Advisors / 20
Earnings – Still Trending Positive Berman Capital Advisors / 21
Don’t Fight The Tape? Berman Capital Advisors / 22
Global Equity Valuation Perspective Source: Star Capital Berman Capital Advisors / 23
Fixed Income Risk / Reward Berman Capital Advisors / 24
Implications of Flat Yield Curve Berman Capital Advisors / 25
Investment Grade Credit Deterioration Despite very • good times ratings are drifting lower. Corporations • have increased leverage through the cycle. Berman Capital Advisors / 26
China in Two Charts (1) Government debt is rising quickly Berman Capital Advisors / 27
China in Two Charts (2) But the government is now slowing credit growth Berman Capital Advisors / 28
Trade War Risk • A trade war hurts everyone. Most likely this is a public negotiation. • Presently the risk is more to sentiment than the real economy, but that could change. • There are political reasons for Trump to pressure China, but also for China to resist. • China’s economy is likely less trade dependent than it appears: − China has already made great progress in rebalancing toward domestic consumption. − America is starting this fight without allies. − Most electronics exports from China are owned by multinationals.
Some Guesswork on Negative Scenarios Source: MSCI
USD & Emerging Market Concerns The biggest countries have very little dollar debt Berman Capital Advisors / 31
Conclusion • The current environment favors equities, although some caution flags have appeared. • Uncertainty regarding trade has provided relief from inflation concerns, but this is likely temporary. • We believe investors should favor shorter duration securities. • Because prices for assets everywhere are high, we favor smaller funds and more niche strategies especially in less liquid investments. Berman Capital Advisors / 32
Thank You
Recommend
More recommend
