RenMac 2020 Outlook Call ll 12/19/2019 1 Overall Less policy - - PowerPoint PPT Presentation

12/19/2019 1

RenMac 2020 Outlook Call ll

12/19/2019 2

• Less policy risk in 2020 than

2019.

• Trump needs strong economy.
• Lawmakers are risk-averse.
• Shortened-legislative calendar.
• Trade will continue to be a

headwind but should be less of a drag than 2019.

Overall

12/19/2019 3

• House set to pass USMCA

before adjourning.

• Senate set to pass next year

after impeachment.

• Mexico has already ratified.
• Canada expected to approve in

late January.

• Provides greater certainty and

removes threat of tariffs.

North America

12/19/2019 4

• Phase one signing in January.
• First time Trump reduced

tariffs.

• Phase two negotiations not

expected to start soon.

• Resolving easy issues leaves

difficult ones remaining.

• In Trump’s political interest to

remove more tariffs closer to election.

• Non-tariff measures will

continue regardless.

Chin ina

12/19/2019 5

• WTO Airbus Ruling.
• Digital Services Tax.
• 301 could replace 232.
• G7 Meeting in June 2020.
• UK can legally leave EU

1/31/20.

• Johnson says UK will formally

leave EU by 12/31/20.

• Hard Brexit would mean larger

scale deal with U.S.

Europe

12/19/2019 6

• Biden currently well

positioned.

• Multiple winners in early

contests increases odds of brokered convention.

• Longer Democratic Primary

benefits Trump.

• Good economy likely to result

in Trump being re-elected.

• Hard for Dems to flip Senate.

20 2020

12/19/2019 7

GDP Growth

Consensus sees sub 2% growth as far as the eye can see Bloomberg News Consensus GDP estimates (QoQ % SAAR)

Source: Renaissance Macro Research, Bloomberg

1.7 1.9 1.8 1.8 1.9 1.9 1.65 1.70 1.75 1.80 1.85 1.90 1.95 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021

12/19/2019 8

Consumer Sp Spending

12/19/2019 9

Consumer Sp Spending

12/19/2019 10

Sa Saving Rate

Will the saving rate ever drop?

Source: Renaissance Macro Research, Haver Analytics

450 500 550 600 650 700 750 2 4 6 8 10 85 90 95 00 05 10 15 20 Personal Saving Rate (LHS) Household Net Worth to Income (inverted, RHS)

12/19/2019 11

Housing

12/19/2019 12

Housing

Permits point to construction upturn (% change, year-over-year)

Source: Renaissance Macro Research, Haver Analytics

• 60%
• 40%
• 20%

0% 20% 40% 60% 96 98 00 02 04 06 08 10 12 14 16 18 Private Construction: Residential: New Housing Units New Pvt Housing Units Authorized by Building Permit

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Housing

Owner occupied housing rising more rapidly (% change, year-over-year)

Source: Renaissance Macro Research, Haver Analytics

• 4%
• 2%

0% 2% 4% 6% 66 71 76 81 86 91 96 01 06 11 16

Total Owner Occupied Housing Units Total Renter Occupied Housing Units

12/19/2019 14

In Inventories

Inventories are running below final demand (billions $)

Source: Renaissance Macro Research, Haver Analytics

• 60
• 10

40 90 140 10 11 12 13 14 15 16 17 18 19 Real Change in Real Pvt Inventories Change consistent with final demand

12/19/2019 15

In Inventories

12/19/2019 16

Fix ixed In Investments

Hard to see this repeating in 2020 Private fixed investment (two quarter % SAAR)

Source: Renaissance Macro Research, Haver Analytics

• 75%
• 50%
• 25%

0% 25% 50% 75% 100% 125% 150% 175% 08 10 12 14 16 18 Aircraft Mining Exploration/Shafts/Wells

12/19/2019 17

Fin inancial Condit itions

Follow financial conditions for investment outlook

Source: Renaissance Macro Research, Haver Analytics

50 75 100 125 150 175 6.0 6.5 7.0 7.5 8.0 8.5 9.0 9.5 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18

Equipment & Software investment, % of GDP (LHS) Nonfinancial corporate, mkt value/net worth % (lead 2 quarters, RHS)

12/19/2019 18

Macro / / M Market Attr trib ibutio ion

• 600
• 500
• 400
• 300
• 200
• 100

100 200 300 400 Jan-18 Mar-18 May-18 Jul-18 Sep-18 Nov-18 Jan-19 Mar-19 May-19 Jul-19 Sep-19 Nov-19

SP500 Index 1-day Chg Attribution (Rolling Sum) (Jan-18 till Current) Earnings & Eco Data Federal Reserve Washington DC

12/19/2019 19

Glo lobal

12/19/2019 20

Employment

12/19/2019 21

Employment - Wages

12/19/2019 22

Employment

Strong labor market draws in workers Labor Force Participation Rate

*Holds distribution of population fixed to December 2007 Source: Renaissance Macro Research, Haver Analytics

62.0 63.0 64.0 65.0 66.0 67.0 07 08 09 10 11 12 13 14 15 16 17 18 19 Actual Age-Adjusted*

12/19/2019 23

In Inflation

12/19/2019 24

In Inflation

Core services responsible for much of the slowing Core PCE price index (% change, year-over-year)

Source: Renaissance Macro Research, Haver Analytics

• 4
• 2

2 4 6 8 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15 17 19 Core services less healthcare Core goods

12/19/2019 25

Unemployment and In Infla lation

12/19/2019 26

Market Ele lection Year Path: Beware Q2

12/19/2019 27

Market More Im Important Than Fed

12/19/2019 28

Market Cycle le Clo lock Su Support rtive

12/19/2019 29

Credit t Sp Spreads at t New Cycle Lo Lows

12/19/2019 30

Weakening Yen = = Glo lobal Li Liquidit ity

12/19/2019 31

Doll llar r Weakening, g, Not Broken

12/19/2019 32

Beta Working = = Ris isk Se Seeking

12/19/2019 33

Copper Fir irming / / Breaking Downtrend

12/19/2019 34

Cru rude St Stabiliz izing / / Breaking Downtrend

12/19/2019 35

EM Breaking Out

12/19/2019 36

Gold ld Consolidating in in an Uptrend

12/19/2019 37

10 10yr Yie ields Consolidating in in Downtrend

12/19/2019 38

Valu luations O.K .K., , But Yie ields Im Important

12/19/2019 39

Tactical Se Sentim iment Uncomfort rtable

12/19/2019 40

Where’s the Value Today?

12/19/2019 41

Opportunities in in Fin ins/Mats/Disc

Momentum/Trend Rolling Alpha

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