Quarterly Participant Webinar Outlook 2018 November 8, 2017 What - - PowerPoint PPT Presentation

▶
quarterly participant webinar
SMART_READER_LITE
LIVE PREVIEW

Quarterly Participant Webinar Outlook 2018 November 8, 2017 What - - PowerPoint PPT Presentation

Mar 14, 2023 176 likes •386 views

WELCOME Quarterly Participant Webinar Outlook 2018 November 8, 2017 What Well Cover Today Opening Remarks: Len Teitelbaum How Our Plan and the Markets Performed: David Baskin Outlook 2018: Chris Moore and David Baskin What does this mean

slide-1
SLIDE 1

Quarterly Participant Webinar

Outlook 2018

November 8, 2017

WELCOME

slide-2
SLIDE 2

What We’ll Cover Today

Opening Remarks: Len Teitelbaum How Our Plan and the Markets Performed: David Baskin Outlook 2018: Chris Moore and David Baskin What does this mean for you? Q&A

2

slide-3
SLIDE 3

MARKET & PLAN PERFORMANCE UPDATE

3

slide-4
SLIDE 4

4

2017 Q3 Key Themes

  • Strengthening Global Economy led to strong

equity performance

  • Fading Optimism in US Policy Changes causing

relative underperformance of US assets and the US Dollar

  • Technology and Internet Strength led value

stocks to underperform

  • Slightly Disappointing Inflation Data resulted in

mixed commodity performance and rally in interest rates

  • Continued Central Bank Policy Tightening with

continued interest rate hikes and exit of QE

slide-5
SLIDE 5

5

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 YTD

Description

MLP 47.9% MLP 44.4% Core Bonds 10.3% EM 55.8% REITs 31.5% EM 34.0% REITs 35.9% EM 39.4% Core Bonds 5.2% EM 78.5% MLP 35.9% MLP 13.9% EM 18.2% US Equities 33.6% REITs 30.4% REITs 2.5% MLP 18.3% EM 27.8%

Emerging Market Stock Index

REITs 26.8% REITs 12.8% REITs 3.6% MLP 41.6% EM 25.6% EAFE 13.5% EM 32.2% MLP 12.4% High Yield

  • 26.2%

MLP 76.4% REITs 28.5% REITs 8.7% REITs 17.8% MLP 27.6% US Equities 12.6% Core Bonds 0.5% High Yield 17.1% EAFE 20.0%

Developed Market International Stock Index

Core Bonds 11.6% Core Bonds 8.4% MLP 0.2% EAFE 38.6% EAFE 20.2% REITs 12.1% MLP 27.6% EAFE 11.2% MLP

  • 36.8%

High Yield 58.2% EM 18.9% Core Bonds 7.8% EAFE 17.3% EAFE 22.8% Core Bonds 6.0% US Equities 0.5% US Equities 12.7% US Equities 13.9%

US Large and Small Stock Index

High Yield

  • 5.9%

High Yield 5.3% High Yield

  • 1.4%

REITs 36.8% MLP 15.9% US Equities 6.1% EAFE 26.3% Core Bonds 7.0% US Equities

  • 37.3%

EAFE 31.8% US Equities 16.9% High Yield 5.0% US Equities 16.4% High Yield 7.4% MLP 4.8% EAFE

  • 0.8%

EM 11.2% High Yield 7.0%

High Yield Bonds (Non-Investment Grade Bonds) Index

US Equities

  • 7.5%

EM

  • 2.6%

EM

  • 6.2%

US Equities 31.1% US Equities 11.9% MLP 5.2% US Equities 15.7% US Equities 5.1% REITs

  • 38.0%

REITs 28.6% High Yield 15.1% US Equities 1.0% High Yield 15.8% REITs 2.5% High Yield 2.5% High Yield

  • 4.5%

REITs 8.6% REITs 3.6%

Real Estate Investment Trust Index

EAFE

  • 14.2%

US Equities

  • 11.5%

EAFE

  • 15.9%

High Yield 29.0% High Yield 11.1% High Yield 2.7% High Yield 11.9% High Yield 1.9% EAFE

  • 43.4%

US Equities 28.3% EAFE 7.8% EAFE

  • 12.1%

MLP 4.8% Core Bonds

  • 2.0%

EM

  • 2.2%

EM

  • 14.9%

Core Bonds 2.7% Core Bonds 3.1%

Diversified US Investment Grade Bond Index

EM

  • 30.8%

EAFE

  • 21.4%

US Equities

  • 21.5%

Core Bonds 4.1% Core Bonds 4.3% Core Bonds 2.4% Core Bonds 4.3% REITs

  • 16.8%

EM

  • 53.3%

Core Bonds 5.9% Core Bonds 6.5% EM

  • 18.4%

Core Bonds 4.2% EM

  • 2.6%

EAFE

  • 4.9%

MLP

  • 32.6%

EAFE 1.0% MLP

  • 5.6%

Master Limited Partnerships (Pipelines) Index

Best Performing Worst Performing

Asset Class Performance Comparison

slide-6
SLIDE 6

6

RPB Fund Management Based on 2017 Themes

  • Decreased US Equity Allocation in Capital

Appreciation Fund: Raised cash for opportunistic re-allocation on potential equity market pull-back

  • Added US Value Tilt: Increased exposure to US

value equity index on valuation difference in Capital Appreciations and Appreciation & Income Funds

  • Rebalanced Appreciation & Income Fund to

55/45: Modestly increasing defensive position

  • MLP’s: Maintained overweight based on yields

and ‘toll road’ revenue model

  • Emerging Market Equities: Maintained
  • verweight based on valuations and strong earnings
slide-7
SLIDE 7

7

RPB Trailing 12-Months Investment Returns

October 1, 2016 through September 30, 2017

17.22% 18.73% 11.14% 10.94% 2.56% 0.07% 1.03% 0.50% 0.00% 2.00% 4.00% 6.00% 8.00% 10.00% 12.00% 14.00% 16.00% 18.00% 20.00%

*As of September 30, 2017, net of investment management fee. **Barclays Global Aggregate January 1, 2013 through September 30, 2016, Barclays US Aggregate thereafter.

slide-8
SLIDE 8

9.27% 10.08% 6.22% 6.46% 3.06% 4.14% 0.00% 2.00% 4.00% 6.00% 8.00% 10.00% 12.00%

Capital Appreciation Fund MSCI ACWI IMI Appreciation & Income Fund 60% MSCI ACWI IMI/40% Fixed Income Composite* Income Focused Fund Fixed Income Composite*

Standard Deviation

8

Since Inception Volatility – Lower is Less Risky

January 1, 2013 through September 30, 2017

*Barclays Global Aggregate January 1, 2013 through September 30, 2016, Barclays US Aggregate thereafter.

slide-9
SLIDE 9

14.23% 14.24% 10.60% 10.59% 21.01% 20.65% 23.60% 23.18% 3.49% 3.61% 3.14% 3.14% 4.95% 5.11% 0.61% 0.67% 1.48% 1.58%

0.00% 5.00% 10.00% 15.00% 20.00% 25.00%

9

RPB Year-to-Date Tier II Investment Returns

*January 1, 2017 through September 30, 2017

*Net of investment management fees.

slide-10
SLIDE 10

ECONOMIC & MARKET OUTLOOK 2018

10

slide-11
SLIDE 11

11

Key Themes 2018

  • Continued question of policy impacts on market returns

– Trump Administration: Potential tax/health care reform

  • Central Banks

– Global tightening – New Fed Chairman – Jerome Powell – likely to maintain status quo

  • Geopolitical risks (i.e., North Korea)
  • Certain factors already priced into the market
  • Timing of when, or if, inflation and volatility return
  • Past performance not indicative of future results
slide-12
SLIDE 12

12

What Tax Reform May Look Like

Individuals

  • Mix of decreasing tax rates and brackets versus eliminating deductions
  • Elimination of Alternative Minimum Tax and Estate Tax

Corporates

  • Lower corporate tax rate from 35% to 20%
  • Tax repatriation of foreign profits at 12%
  • Additional mix of deductions (interest expense) and incentives (capital expenditure)

Estimated cost of $1.5 to $2 trillion

slide-13
SLIDE 13

13

4.9% 1.5% 1.8%

  • 4%
  • 2%

0% 2% 4% 6% 8% 10% 1980 1985 1990 1995 2000 2005 2010 2015 2020

Real GDP Growth (YoY)

Emerging Developed (G7) US

Economic Growth Expectations

  • Future expectation of ‘long and low’ growth cycle
  • With lower growth and full valuations, long-run future asset returns are expected to be

lower than historical averages

slide-14
SLIDE 14

14

4.2% 2.2% 0.5%

  • 4.0%
  • 2.0%

0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% Sep-97 Sep-99 Sep-01 Sep-03 Sep-05 Sep-07 Sep-09 Sep-11 Sep-13 Sep-15 Sep-17

Labor Market Strength vs. Inflation

Unemployment Rate

Source: Bloomberg.

CPI 10-Year Real Yield

Does Labor Market Strength Impact Inflation?

  • Historically, at current levels of low unemployment, inflation (CPI) has been much

stronger

slide-15
SLIDE 15

15

4.7% 0.3%

  • 2.0%

0.0% 2.0% 4.0% 6.0% 8.0% 10.0% Sep-97 Sep-99 Sep-01 Sep-03 Sep-05 Sep-07 Sep-09 Sep-11 Sep-13 Sep-15 Sep-17

S&P 500 Earnings Yield vs. 10-Year Real Yield

S&P 500 Earnings Yield

Source: Bloomberg.

10-Year Real Yield

The Equity Risk Premium

  • The extra return equity investors get from assuming more risk is higher than at most

times in past 20 years

slide-16
SLIDE 16

16

  • This economic cycle is one of the longest on record
  • Current cycle near historical expansion end points

Prior Expansion Peak Economic Cycle Duration (Quarters) 4Q 1948 19 3Q 1953 16 3Q 1957 11 2Q 1960 38 4Q 1969 16 4Q 1973 25 1Q 1980 6 3Q 1981 36 3Q 1990 42 1Q 2001 27 4Q 2007 39 Average Duration 25

Markets: Beginning of the end?

current cycle duration since prior peak

slide-17
SLIDE 17

17

  • Stock markets have been strong and also abnormally calm
  • Potential catalysts for return to normal volatility?

2% 68% 1%

Median, 20%

0% 10% 20% 30% 40% 50% 60% 70% 80%

S&P 500: Percentage of Trading Days with Price Swings >1.5%

* 2017 through 10/13.

Potential Return to Normal Volatility

slide-18
SLIDE 18

18

Asset Class Expectations

  • Smooth annual return over time; actual experience is bumpier
  • Market timers typically sell too late and buy too late; few achieve

the return from ‘buy and hold’

  • A well-diversified portfolio with international exposure and

variety of asset classes can smooth out some of the bumps

VALUE OF A $1,000 INVESTMENT IN S&P 500 OVER 20 YEAR 7.5% compounded rate of return per year

slide-19
SLIDE 19

19

  • Lower expectation of stock market appreciation going forward
  • Long and low global interest rate environment
  • Upside surprise is possible – requires change in status quo
  • Focus on your time horizon, risk tolerance, and lifestyle

– May be time to rebalance based on moves in the market – Reassess holistic financial plan as you age

  • The markets cannot correct for low contribution rates or

living beyond one’s means

What Does This Mean For You?

slide-20
SLIDE 20

Q&A

20