MACRO CHART BOOK Q2, 2016

Transcription

1 Adaptive Investing MACRO CHART BOOK Q2, 2016 Upside Participation Downside Management For Investment Advisors and Institutions Only

2 Content Summary US Economy Market Snapshot Asset Class Performance Equity Market Fixed Income Market International For Institutions and Investment Advisers Only 2

3 Summary US Economy (Page 4-12) US economy grew at 2.1% YOY in Q1. Job markets continued improving and unemployment dropped to 4.9% though the labor force participation rate stayed around 30-year low. Wage growth was moderate. Both the headline CPI inflation rate and core CPI inched up by 0.1%. Given the global uncertainties, especially from Brexit, the Fed monetary policy remained very accommodative. The Fed s balanced sheet stayed close to the record level. Manufacturing sector was improving, consumer confidence remained high and housing sector continued recovering. Corporate profits declined for four consecutive quarters from the recent peak. Market Snapshot (Page 13-16) The results from Brexit referendum shocked the markets, but the global equity markets ended the second quarter with a positive tone. The British Pound collapsed to 30-year low after the referendum. US dollar strengthened against major currencies. Oil price rebounded to around $50/barrel and gold climbed to over $1,350 /oz. US government bond yields reached new low. Asset Class Performance (Page 17) In the second quarter, most of the asset classes generated positive returns. On the YTD basis as of the end of second quarter, the US and EM equities rose while developed markets equities struggled with negative returns. Gold was the best performer among all major assets, gaining 24.7%. High quality fixed income assets as well as long-term Treasuries gained significantly. Hedge fund returned 1.4% in aggregate so far this year. The financial sector(-3.1%) and small cap growth (-1.3%) lagged, while the utilities (23.1%) and energy (14.7%) ed the sector performance. Equity Market (Page 18) US equity valuation was not cheap by historical standard. The current PE rate of S&P 500 Index moved higher to 24.9, which was well above the historical average of 16. The Cyclically Adjusted PE Ratio (CAPE), coined by Professor Shiller from Yale, was Fixed Income Market (Page 19) Credit spreads tightened significantly from the recent highs. US HY bonds was traded at 544bps, and BBB at 198 bps. Market Risk (Page 20) Financial and market risks were muted as both the St. Louis Fed Financial Distress Index and VIX remained at moderate levels. International (Page 21-24) Global economic growth moderate, especially China has slowed down significantly to 6.7%. Inflation rates across the globe are muted as well. The Eurozone inflation was 0.1% and eased some deflation concerns. Central banks policies continued to be ultra-loose. The Fed may delay its rate hike given the global uncertainties from Brexit. For Institutions and Investment Advisers Only 3

4 Moderate Economic Growth Avg. GDP Growth ( ) : 3.2% Avg. GDP Growth in Current Expansion ( ) :2.1% 2.1% YOY in Q1 Data Sources: Tradingeconomics.com; Federal Reserve Bank, St. Louis For Institutions and Investment Advisers Only 4

5 Unemployment rate fell to 4.9% Labor force participation slid to 62.6% 62.6% 4.9% Data Sources: Trading Economics For Institutions and Investment Advisers Only 5

6 Nonfarm payrolls jumped to 287K in June But wage growth is still moderate Nonfarm Payrolls 287K Wage Growth 4.60% Data Sources: Trading Economics For Institutions and Investment Advisers Only 6

7 Headline Inflation is well below 2% target But core inflation rate is moving higher Core Inflation Rate 2.3% Headline Inflation Rate 1.0% Data Sources: Trading Economics For Institutions and Investment Advisers Only 7

8 Fed kept its benchmark rate at 0.5% Central bank balance sheet near all-time high 4,436,090.00MM 0.5% Data Sources: Trading Economics For Institutions and Investment Advisers Only 8

9 Manufacture sector continued improving; Service sector kept expanding Manufacturing PMI 51.3 Non- Manufacturing PMI 56.5 Data Sources: Tradingeconomics.com For Institutions and Investment Advisers Only 9

10 Capacity utilization and corporate profits Came down from recent peaks 1,410.7 Billion 75.4% Data Sources: Trading Economics For Institutions and Investment Advisers Only 10

11 Consumer confidence remains high Household leverage inched up after ten-year low For Institutions and Investment Advisers Only 11

12 House price continued to recover Home ownership rate stayed at ten-year low Data Sources: Trading Economics For Institutions and Investment Advisers Only 12

13 Market Snapshot Equity Dow Jones 18,559 Shanghai Composite 3,037 Nikkei 225 Index 16,723 German Dax 30 Index 9,981 Source: Tradingeconomics.com. Data as of 7/19/2016. For Institutions and Investment Advisers Only 13

14 Market Snapshot Currency US Dollar Index Euro 1.10 Chinese Yuan 6.71 British Pound 1.31 Source: Tradingeconomics.com. Data as of 7/19/2016. For Institutions and Investment Advisers Only 14

15 Market Snapshot Commodity WTI Crude Oil $44.6/barrel Gold $1,332/oz. Copper $2.26/lb. Corn $343/bu. Data Sources: Trading Economics Source: Tradingeconomics.com. Data as of 7/19/2016. For Institutions and Investment Advisers Only 15

16 Market Snapshot Fixed Income US Ten-Year Treasury 1.55% Chinese Ten-Year Government 2.84% German Ten-Year Bund -0.03% Japanese Ten-Year Government -0.22% Source: Tradingeconomics.com. Data as of 7/19/2016. For Institutions and Investment Advisers Only 16

17 Asset Class/Sector Performance (as of June 30, 2016) Asset Class ETF YTD US Large Cap SPY 15.8% 5.1% -36.8% 26.3% 15.1% 1.9% 16.0% 32.3% 13.5% 1.2% 3.8% US Small Cap IWM 18.3% -1.8% -34.1% 28.5% 26.9% -4.4% 16.7% 38.7% 5.0% -4.4% 2.4% International Equity EFA 25.8% 10.0% -41.0% 27.0% 8.2% -12.2% 18.8% 21.4% -6.2% -1.0% -3.0% EM Equtiy VWO 29.3% 37.3% -52.5% 76.3% 19.5% -18.7% 19.2% -5.0% 0.0% -15.8% 8.4% US REITs VNQ 35.3% -16.5% -37.0% 30.1% 28.4% 8.6% 17.6% 2.3% 30.4% 2.4% 12.2% Infrastructure MLP MLPI 33.8% 10.4% -39.1% 83.6% 33.5% 15.8% 3.4% 27.1% 7.7% -30.3% 11.5% GOLD GLD 22.5% 30.5% 4.9% 24.0% 29.3% 9.6% 6.6% -28.3% -2.2% -10.7% 24.7% Commodity DJP 1.7% 14.9% -37.4% 20.1% 16.2% -14.0% -2.1% -11.1% -18.6% -33.0% 8.2% High Yield Bond JNK 11.4% 1.5% -24.7% 37.5% 14.2% 5.1% 12.8% 5.9% 0.8% -6.8% 8.1% Broad Bond AGG 3.9% 6.6% 7.9% 3.0% 6.4% 7.7% 3.8% -2.0% 6.0% 0.5% 5.3% TIPs TIP 0.3% 11.9% -0.5% 8.9% 6.1% 13.3% 6.1% -8.5% 3.6% -1.8% 6.4% Treasuries IEF 2.5% 10.4% 17.9% -6.6% 9.4% 15.7% 3.7% -6.1% 9.1% 1.5% 7.8% Long Term Treasuries TLT 0.7% 10.3% 34.0% -21.8% 9.0% 34.0% 2.4% -13.4% 27.3% -1.8% 16.3% Short Term Treasuries SHV 4.8% 5.1% 2.8% 0.2% 0.1% 0.1% 0.0% 0.0% 0.0% 0.0% 0.3% Hedge Fund HFRI Weighted Index 12.9% 10.0% -19.0% 20.0% 10.2% -5.2% 6.4% 9.1% 3.0% -1.1% 1.4% Sectors ETF YTD Materials XLB 18.3% 22.1% -44.0% 48.1% 20.6% -10.9% 14.7% 26.0% 7.2% -8.6% 7.6% Energy XLE 18.1% 36.9% -39.0% 21.8% 21.8% 2.9% 5.2% 26.2% -8.7% -21.4% 14.7% Financial XLF 18.9% -19.2% -54.9% 17.6% 11.9% -17.2% 28.4% 35.5% 15.0% -1.8% -3.1% Industrial XLI 13.5% 13.5% -38.7% 22.0% 27.8% -1.1% 14.9% 40.5% 10.4% -4.3% 6.8% Technoligy XLK 12.1% 15.5% -41.5% 51.3% 11.4% 2.6% 15.3% 26.2% 17.9% 5.6% 2.3% Consumer Staple XLP 14.4% 12.7% -15.0% 14.3% 13.8% 14.1% 10.7% 26.3% 15.7% 6.9% 10.5% Utilities XLU 20.9% 18.4% -28.9% 11.7% 5.3% 19.7% 1.0% 13.0% 28.8% -4.9% 23.1% Healthcare XLV 7.1% 7.1% -23.3% 19.5% 3.3% 12.4% 17.4% 41.4% 25.1% 6.8% 0.3% Consumer Discretionary XLY 18.4% -13.7% -32.9% 40.5% 27.5% 6.0% 23.6% 42.7% 9.5% 9.9% 0.6% Large Cap Value IVE 20.7% 1.5% -38.8% 20.9% 15.0% -0.7% 17.6% 31.6% 12.2% -3.3% 6.2% Large Cap Growth IVW 10.9% 8.8% -34.8% 31.2% 14.9% 4.4% 14.4% 32.5% 14.6% 5.4% 1.5% Mid Cap Value IWS 20.0% -1.6% -38.0% 33.2% 24.5% -1.5% 18.3% 33.2% 14.4% -5.0% 8.8% Mid Cap Growth IWP 10.5% 11.3% -44.6% 46.5% 26.0% -1.9% 15.6% 35.5% 11.7% -0.5% 1.8% Small Cap Value IWN 23.5% -10.3% -28.7% 20.5% 24.7% -5.8% 18.1% 34.4% 4.1% -7.9% 6.3% Small Cap Growth IWO 13.2% 6.8% -38.5% 34.6% 29.4% -3.0% 14.8% 43.3% 5.9% -1.4% -1.3% Sources: Yahoo, Bloomberg, Julex Capital For Institutions and Investment Advisers Only 17

18 High PE Multiples S&P 500 Index Current PE Ratio Average 15.6 S&P 500 Index Cyclically adjusted PE Ratio (Shiller PE) Average 16.7 Sources: Multpl.com For Institutions and Investment Advisers Only 18

19 Credit spreads had reached recent peaks and Continue tightening 5.44% 1.98% 0.80% Data Sources: Federal Reserve Bank, St. Louis For Institutions and Investment Advisers Only 19

20 Financial risks are muted Financial Stress = VIX = 14.6% Data Sources: Federal Reserve Bank, St. Louis For Institutions and Investment Advisers Only 20

21 Global Economic Growth Data Sources: Trading Economics For Institutions and Investment Advisers Only 21

22 Global Inflation Data Sources: Trading Economics For Institutions and Investment Advisers Only 22

23 Global Unemployment Rate Data Sources: Trading Economics For Institutions and Investment Advisers Only 23

24 Central Bank Interest Rates Data Sources: Trading Economics For Institutions and Investment Advisers Only 24

25 Disclosures This information in this presentation is for the purpose of information exchange. This is not a solicitation or offer to buy or sell any security. You must do your own due diligence and consult a professional investment advisor before making any investment decisions. All information posted is believed to come from reliable sources. We do not warrant the accuracy or completeness of information made available and therefore will not be liable for any losses incurred. For Institutions and Investment Advisers Only 25