Morgan Stanley. March 2016

Transcription

1 Morgan Stanley Left to right: Gary Velek, John Shadden, Mike Van Dyke, Andrew Mittendorf Monthly Investment Perspectives The Shadden Group at Morgan Stanley March 2016 Enclosed is our latest Monthly Investment Perspectives. Below is a link to Morgan Stanley Chief Investment Officer Mike Wilson's Global Investment Committee monthly investment webcast where he discussed his outlook on current market conditions. This is an abbreviated version of the full presentation including chapters for customized viewing using the menu icon highlighted below. (You will be prompted to enter your address to access the webcast.) Monthly Perspectives Mike Wilson March 9, 2016 Monthly Perspectives - Mike Wilson webcast We hope you find the video interesting. Please do not hesitate to contact us at (800) if you have any questions. THE SHADDEN GROUP AT MORGAN STANLEY John T. Shadden, CIMA Managing Director Private Wealth Advisor Senior Institutional Consultant Mike Van Dyke, CIMA, CFP, ChFC, CLU Vice President Financial Advisor Senior Investment Management Consultant Gary R. Velek, CIMA, CFP Vice President Financial Advisor Senior Manager MORGAN STANLEY PRIVATE WEALTH MANAGEMENT 6700 E. Pacific Coast Highway, Ste. 110 Long Beach, CA Toll Free (800) Fax (562) Website: CRC #

2 THE SHADDEN GROUP Morgan Stanley WEALTH MANAGEMENT The Correction Appears To Be Over As of March 8, 2016 Asset markets re priced risks significantly in January and February and showed signs of capitulation for a correction that began almost a year ago. Many investors are now out of position, which could fuel further upside potential for equities, credit and other assets levered to global growth. Our global rebalancing thesis has withstood a confluence of challenges: China s unpredictable devaluation path and its signal about growth; oil s relentless decline and impact on financial conditions and banks; and investor doubt about the effectiveness of monetary policy from here. Global fundamental factors have deteriorated, but not as much as financial markets have priced. We highlight economic growth/data in the US, commodity prices, industrial company earnings revisions and other leading indicators that suggest global growth is stable and might accelerate from here. What are the key variables to monitor from here: China currency and balance sheet stabilization (already happening). Central banks remain vigilant on financial conditions (ECB, BOJ and FED upcoming meetings in March) Economic data stabilizes and improves from here (US and China better, Europe and Japan weaker) Leadership from cyclical/value sectors, yield curve steepening, commodity/credit stabilization Source: Morgan Stanley Wealth Management GIC. Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy. Please refer to important information, disclosures and qualifications at the end of this material. This slide sourced from Market Performance section. Page 2

3 Asset Class Returns: s Mitigate Risk As of February 29, Yrs 10 Yrs YTD ('06 '15) Ann. ('06 '15) Vol. 43.7% 40.2% 13.6% 82.9% 35.9% 13.9% 29.8% 32.4% 14.7% 1.8% 5.7% 8.7% 18.7% 32.1% 16.2% 11.7% 76.4% 20.2% 13.6% 19.6% 27.6% 13.7% 1.4% 2.6% 7.3% 18.6% 26.7% 15.8% 15.5% 13.7% 10.5% 10.4% 6.6% 5.6% 12.7% 11.6% 5.2% 2.4% 11.2% 9.7% 10.8% 21.4% 10.3% 7.9% 25.7% 26.9% 7.6% 7.0% 35.6% 36.9% 59.4% 41.3% 33.9% 26.5% 25.9% 23.6% 18.9% 11.5% 20.0% 16.8% 15.1% % 11.8% 9.8% 7.0% 9.2% 7.8% 6.0% 3.1% 2.1% 2.1% 4.3% 5.7% 19.1% 18.2% 18.0% 16.0% 12.0% 7.0% MLPs² 24.0% 15.1% 8.8% 7.3% 2.2% 0.7% 1.9% 2.0% 12.3% 6.2% 6.0% 4.7% 3.6% 3.4% 0.0% 0.9% 0.5% 0.4% 1.4% 1.9% 2.0% 2.7% 3.6% 2.6% 2.1% 1.2% 0.8% 3.1% 3.3% 3.8% 4.3% 7.3% 6.7% 5.3% 5.2% 4.3% 3.9% 3.8% 18.0% 17.8% 15.2% 15.0% 11.3% 10.0% 8.8% 7.9% 4.3% 2.1% 0.4% N/A 6.5% 5.5% 3.2% 4.7% 37.0% 43.4% 48.9% 53.6% 11.4% 5.9% 3.7% 6.5% 6.4% 6.3% 4.2% 8.1% 12.2% 13.3% 19.2% 4.2% 0.5% 1.1% 1.8% 5.6% 8.3% 8.6% 9.5% 1.4% 3.0% 4.5% 17.0% 4.4% 13.5% 24.7% 32.6% 5.1% 6.9% 8.8% 11.5% 3.2% 0.1% 0.2% 6.4% 7.1% 6.3% 6.0% Source: FactSet, Morgan Stanley Wealth Management GIC; Indices used: Barclays Capital US Aggregate for US Bonds. Citi 3M Treasury Bill for cash, Barclays US Aggregate for US Bonds, Barclays Global Majors ex US for DM Int l Bonds, Barclays US TIPS for Inflation linked securities, Barclays Global for global high yield, JP Morgan EMBI for EM Bonds, S&P 500 for US Stocks, MSCI EAFE IMI for Int l Stocks, MSCI EM IMI for Emerging Market Stocks, FTSE EPRA/NAREIT Global for, Bloomberg Commodity Index for commodities, HFRX Macro/CTA Index for, Alerian MLP Index for MLPs, and HFRX Global hedge Funds for hedged strategies. portfolio is comprised of 25% S&P 500, 10% Russell 2000, 15% MSCI EAFE, 5% MSCI EME, 25% Barclays US Aggregate, 5% 3 mo. T Bills, 5% HFRX Global Hedge Funds, 5% Bloomberg Commodity Index, and 5% FTSE EPRA/NAREIT Global Index. MLP data begins on January 1, Standard deviation (volatility) is a measure of the dispersion of a set of data from its mean. Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy. Please refer to important information, disclosures and qualifications at the end of this material. This slide sourced from Market Performance section. Page 3 3.2%

4 Asset Class Performance Heat Map As of February 26, 2016 Asset Class Annualized Returns (%) Yield Valuation Volatility (%) Cash YTD 1 Yr Yr* 5 Yr* 10 Yr* 20 Yr* Avg Correlation to Global Equities 30 Days 20 Yrs.* 30 Days 20 Yrs.* 90 Day US Treasury Bills Global Equities Dividend Yield P/E Avg. P/E** US Large Cap Growth US Large Cap Value US Mid Cap Growth US Mid Cap Value US Small Cap Growth US Small Cap Value Europe Equity Japan Equity Asia Pacific ex Japan Equity Emerging Markets***** Global Fixed Income Spread Avg. Spread** Short Term Fixed Income US Fixed Income International Fixed Income Inflation Protected Securities Emerging Markets Fixed Income Cheap Moderate Expensive Low Volatility High Volatility Low Correlation High Correlation Alternative Investments Dividend Yield Master Limited Partnerships*** Commodities ex Prec. Metals Precious Metals ****** **** S&P Russell MSCI EAFE MSCI AC World Source: Bloomberg, Morgan Stanley Wealth Management GIC. *January 31, **20 year average as of January 31, ***Volatility and Correlation: June 30, 2006 Present. ****Volatility and Correlation: February 28, 1998 Present. strategies consist of hedge funds and managed futures. *****Values calculated using USD. ******Volatility and Correlation: Jan 31, 1998 Present. Cheap = Below 0.5 standard deviation; Moderate = Between +0.5 standard deviation and 0.5 standard deviation; Expensive = Above +.5 std dev. Standard deviation (volatility) is a measure of the dispersion of a set of data from its mean. Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy. Please refer to important information, disclosures and qualifications at the end of this material. Page 4

5 Asset Class Performance Americas As of 2/26/ Day 1 Day WTD MTD QTD YTD 1 Year Market Cap & Style 2/26/ Day 1 Day WTD MTD QTD YTD 1 Year Market Breadth Advances Declines Unchanged DJ Industrial Average 16, % 1.6% 1.5% 4.0% 4.0% 6.3% Russell , % 1.8% 0.7% 4.7% 4.7% 6.8% AMEX S&P 500 1, % 1.6% 0.7% 4.3% 4.3% 5.7% Russell 1000 Growth % 1.8% 0.7% 4.9% 4.9% 4.7% NASDAQ 1, NASDAQ Composite 4, % 1.9% 0.3% 8.1% 8.1% 6.8% Russell 1000 Value % 1.7% 0.8% 4.4% 4.4% 9.0% NYSE 1, CBOE Market Volatility (VIX) % 3.5% 1.9% 8.8% 8.8% 42.4% S&P 500 1, % 1.6% 0.7% 4.3% 4.3% 5.7% NYSE Composite 9, % 1.5% 0.2% 4.7% 4.7% 10.8% S&P 500 Growth 1, % 1.7% 0.0% 5.0% 5.0% 4.2% US LIBOR Rates 2/26/ Day (Net) 1 Day (% Chg) AMEX Composite 2, % 1.2% 0.9% 2.1% 2.1% 14.1% S&P 500 Value % 1.5% 1.3% 3.6% 3.6% 7.6% 1 Month % S&P/TSX Composite 9, % 1.9% 3.7% 1.0% 1.0% 20.0% Russell Mid Cap 1, % 2.7% 1.7% 5.0% 5.0% 11.0% 3 Month % Mexico IPC 2, % 0.9% 0.4% 4.1% 4.1% 18.1% Russell Mid Cap Growth % 2.9% 2.1% 5.6% 5.6% 10.7% 6 Month % Brazil Bovespa 10, % 1.4% 3.1% 4.9% 4.9% 42.1% Russell Mid Cap Value 1, % 2.5% 1.2% 4.4% 4.4% 11.4% 9 Month Russell , % 2.7% 0.3% 8.5% 8.5% 15.1% 1 Year % Europe As of 2/26/ Day 1 Day WTD MTD QTD YTD 1 Year Russell 2000 Growth % 3.0% 0.2% 11.0% 11.0% 16.7% FTSE 100 8, % 0.8% 1.6% 7.4% 7.4% 17.6% Russell 2000 Value 1, % 2.4% 0.8% 6.0% 6.0% 13.5% US Bank Rates 2/26/ Day (Net) 1 Day (% Chg) STOXX 50 3, % 0.2% 3.0% 9.6% 9.6% 17.3% Russell , % 1.9% 0.7% 5.0% 5.0% 7.5% Discount Rate 1 France CAC 40 4, % 0.3% 1.5% 6.3% 6.3% 11.4% Russell 3000 Growth % 1.9% 0.6% 5.4% 5.4% 5.7% Prime Rate 3.5 Germany DAX 10, % 0.5% 2.2% 11.3% 11.3% 18.0% Russell 3000 Value 1, % 1.8% 0.8% 4.6% 4.6% 9.3% Federal Funds 0.52 Spain IBEX 35 9, % 0.0% 4.4% 11.5% 11.5% 24.1% Netherlands AEX % 0.7% 0.9% 3.4% 3.4% 11.8% S&P 500 Sectors 2/26/ Day 1 Day WTD MTD QTD YTD 1 Year FX Rates As o 2/26/ Day (Net) 1 Day (% Chg) OMX Stockholm % 0.2% 1.3% 6.7% 6.7% 17.5% S&P 500 1, % 1.6% 0.7% 4.3% 4.3% 5.7% US Dollar Spot Rate (DXY % Switzerland SMI 7, % 0.1% 2.3% 10.7% 10.7% 13.6% Discretionary % 2.9% 0.9% 4.3% 4.3% 0.0% Euro/$ % Energy % 0.4% 0.7% 3.7% 3.7% 23.6% British Pound/$ % Asia As of 2/26/ Day 1 Day WTD MTD QTD YTD 1 Year Financials % 1.5% 1.9% 10.6% 10.6% 11.1% Swiss Franc/$ % Japan Nikkei % 0.2% 1.8% 9.8% 9.8% 8.0% Health Care % 2.0% 1.1% 6.6% 6.6% 5.9% Japanese Yen/$ % Hang Seng Hong Kong 2, % 0.4% 1.5% 11.9% 11.9% 19.7% Industrials % 2.3% 4.7% 1.3% 1.3% 5.9% Australian Dollar/$ % China Shenzhen Composite % 6.4% 3.4% 25.4% 25.4% 3.5% Info Tech % 1.5% 0.6% 5.4% 5.4% 4.2% Canadian Dollar/$ % ASX All Ordinaries 3, % 1.1% 0.9% 8.9% 8.9% 18.6% Materials % 3.2% 8.3% 3.2% 3.2% 16.5% Hong Kong Dollar/$ % India S&P BSE SENSEX % 2.8% 8.2% 14.7% 14.7% 26.7% Staples % 0.4% 0.5% 1.2% 1.2% 5.1% Singapore Dollar/$ % Korea KOSPI % 0.7% 2.1% 7.3% 7.3% 13.6% Telecom % 1.2% 3.2% 10.2% 10.2% 8.3% Chinese Renminbi/$ % FTSE Bursa Malaysia KLCI % 0.5% 1.6% 0.7% 0.7% 19.6% Utilities % 0.1% 1.7% 6.7% 6.7% 5.9% Indian Rupee/$ % Mexican Peso/$ % Other As of 2/26/ Day 1 Day WTD MTD QTD YTD 1 Year MSCI Indices 2/26/ Day 1 Day WTD MTD QTD YTD 1 Year Russian Ruble/$ % DJ Equity All REIT % 2.2% 0.6% 4.1% 4.1% 6.7% MSCI EAFE 1, % 0.2% 1.8% 8.9% 8.9% 14.4% Brazilian Real/$ % CRB Index % 0.4% 0.0% 2.3% 2.3% 8.6% MSCI EM % 0.1% 0.2% 6.7% 6.7% 23.5% DJ UBS Commodity % 0.5% 2.3% 3.9% 3.9% 26.1% MSCI WORLD 1, % 1.1% 0.2% 6.2% 6.2% 10.1% DJ UBS Precious Metals % 1.8% 7.7% 12.8% 12.8% 3.1% MSCI ACWI % 1.0% 0.2% 6.2% 6.2% 11.5% DJ UBS Ex Precious Metals % 1.0% 4.1% 7.0% 7.0% 30.0% MSCI ACWI xusa % 0.2% 1.2% 7.9% 7.9% 16.8% HFRI Fund of Funds 5, % 3.0% 3.3% MSCI USA 1, % 1.7% 0.6% 6.5% BarclayHedge BTop50 9, % 2.8% 2.8% 2.1% MSCI BRIC % 0.1% 1.7% 11.5% 11.5% 27.2% Alerian MLP Index % 3.8% 1.8% 12.7% 12.7% 40.0% MSCI EUROPE % 0.1% 2.1% 8.4% 8.4% 15.2% MSCI PACIFIC 2, % 0.3% 1.6% 9.9% 9.9% 12.8% Commodities As of 2/26/ Day 1 Day WTD MTD QTD YTD 1 Year MSCI PACIFIC x JAPAN 1, % 0.2% 0.4% 8.4% 8.4% 19.0% Gold London AM Fixing $1, % 0.8% 10.6% 15.9% 15.9% 0.9% MSCI JAPAN % 0.1% 2.7% 10.3% 10.3% 9.4% Gold London PM Fixing $1, % 0.4% 10.3% 15.7% 15.7% 1.5% MSCI BRAZIL % 1.8% 3.3% 4.2% 4.2% 41.1% Gold Spot $1, % 0.3% 9.3% 15.2% 15.2% 1.1% MSCI RUSSIA % 4.1% 0.0% 0.8% 0.8% 15.1% Gold Futures $1, % 0.8% 9.3% 15.1% 15.1% 0.9% MSCI INDIA % 2.3% 7.2% 13.5% 13.5% 25.3% Silver Futures $ % 4.4% 3.1% 6.4% 6.4% 11.4% MSCI CHINA % 0.6% 1.2% 13.8% 13.8% 24.9% Crude Oil Futures (WTI) $ % 10.6% 2.5% 11.5% 11.5% 31.9% MSCI MEXICO 5, % 1.4% 0.0% 3.3% 3.3% 18.3% Brent Crude Oil Futures $ % 6.3% 1.0% 5.8% 5.8% 41.5% MSCI FRONTIER MARKET % 1.3% 4.1% 3.0% 3.0% 16.2% Copper Futures $ % 2.0% 2.5% 0.8% 0.8% 22.0% Natural Gas Futures $ % 0.7% 22.1% 23.4% 23.4% 33.6% Palladium Futures $ % 3.4% 3.3% 14.2% 14.2% 40.5% Platinum Futures $ % 3.2% 4.7% 2.6% 2.6% 22.0% Source: Bloomberg, FactSet, Morgan Stanley Wealth Management GIC Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy. Please refer to important information, disclosures and qualifications at the end of this material. Page 5

6 THE SHADDEN GROUP Morgan Stanley WEALTH MANAGEMENT Bottom Line: Our Recommendations As of March 8, 2016 The correction that started last summer is likely over, but markets may need to consolidate for a few more weeks/months until we have clarity on China currency/economic stability, oil s ultimate bottom, the US corporate earnings trough and central bank support for growth especially from the Fed. We continue to recommend equities over fixed income given our constructive 12 month view that is based on avoidance of economic recession, strong central bank/policy support around the world and lower risk of financial contagion in the global banking system than what is feared and getting priced. We also favor alternatives like hedged strategies as a way to mitigate the higher volatility we believe will continue % downside to global equities in our bear case scenario of recession (20% probability). 15%+ upside in our base case scenario (60 70% probability). We prefer a barbell of positioning within equity portfolios consider large cap value stocks and growth stocks trading at reasonable valuations. High momentum (high growth/high valuation) and bond proxy equities remain areas most at risk. We think Japan still in relatively new secular bull market skepticism is still high/valuations low. The broadening out to domestically oriented sectors supports that view. Abe should respond to weakness. Significant stress remains in emerging markets, but that should begin to improve this year. Europe is tied to EM via its exports and banking system but has strong long term valuation support. Near term risks center on German/British politics and banking stability. Draghi/ECB get it and are on the job. Within fixed income, we recommend US only positioning with some exposure to high yield and TIPS as inflation expectations should recover later this year amid better growth and stabilizing oil prices. Source: Morgan Stanley Wealth Management GIC. Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy. Please refer to important information, disclosures and qualifications at the end of this material. This slide sourced from Market Performance section. Page 6