Economic Forecast 2018

Transcription

1 Economic Forecast 2018

2 Economic Outlook 2018 Featured Speaker: Daniel Morgan Senior Portfolio Manager This report has been prepared from sources and data believed to be reliable but is not guaranteed to or by Synovus Trust Company, N.A. Past performance is not a guarantee of future results. This document is not an offer to sell or a solicitation of an offer to buy securities. It is provided for informational purposes only and should not be considered investment advice. Synovus Trust Company, N.A., its affiliates and its officers, directors, and employees may from time to time acquire, hold, or sell securities, mutual funds, or asset classes that may be referenced herein. It is intended for illustrative purposes only and is furnished without responsibility for completeness or accuracy. Opinions expressed are subject to change without notice. This report should not be construed as a recommendation to purchase, hold or sell assets with a particular sector. Trust services for Synovus are provided by Synovus Trust Company, N.A., Investment products and services are not FDIC insured, are not guaranteed by Synovus Bank, and involve investment risk, including possible loss of principal amount invested.

3 About Synovus Trust Synovus Trust Company, N.A. provides trust, estate and investment services through 11 offices and approximately 150 employees in Alabama, Georgia, Florida and South Carolina As of November 30 th, 2017, total assets were over $13.01 billion Synovus Family Asset Management named one of Top 50 Family Offices (Bloomberg Markets Magazine) Our company expanded from Columbus Bank & Trust Company, a division of Synovus Bank, in 1995 and acquired a national charter in 2002 Our history of service and expertise dates back to the inception of Synovus in 1888 About Synovus: Synovus (NYSE: SNV) is a financial services company with $26 billion in assets based in Columbus, Georgia. Synovus bank divisions provide commercial and retail banking, investment and mortgage services to customers in Georgia, Alabama, South Carolina, Florida and Tennessee. About Synovus Bank: Synovus Bank is a Georgia-chartered, FDIC-insured bank. Synovus Bank, together with its affiliates, provides commercial and retail banking, investment, and mortgage services to customers through 30 locally branded divisions, 277 offices, and 417 ATMs in Georgia, Alabama, South Carolina, Florida, and Tennessee. 2

4 3

5 To be ignorant of what occurred before you were born is to remain always a child. For what is the worth of human life, unless it is woven into the life of our ancestors by the records of history? Cicero, 55 B.C. 4

6 Can Economic Growth Actually Accelerate this Late in the Cycle? 5

7 Today s Economy and Financial Markets Economy 4Q17 Real GDP +2.6% 4Q17 Personal Consumption +3.8% 4Q17 Core PCE QoQ +1.9% 4Q2017 Business Investment +11.4% Oil per Barrel $66.40 Unemployment Rate 4.1% Underemployment Rate 8.1% Non-farm Payrolls 200,000 U.S. GDP The U.S. economy grew below President s Trump 3% target as a widening trade deficit and rising inventories offset strength in consumer spending (+3.8%) and business investment (+11.4%). Inflation picked up (+1.9%), which will help keep the Federal Reserve on track to raise interest rates in coming months. Federal Reserve Policy Fed has increased ST rates 3x in 2017, and has guided for future increases in The Fed has set a Cap to Roll off $10 Billion ($6 Bill UST; $4 Bill in MBS) per month (with a maximum of $30 Bill a month) from its massive $4.9 Billion of debt securities held on the B/S. Stock Market This Nine Year Bull Market is Long-in-the-Tooth S&P 500 Index is trading at 23x trailing earnings on a Projected 15% Earnings Growth Rate. 6

8 United States 18, , ,745.3 China 11, , ,212.2 Japan 4, , ,610.7 Germany 3, , ,725.6 United Kingdom 2, , ,098.0 France 2, , ,895.6 India 2, , ,171.0 Brazil 1, , ,254.3 Italy 1, , ,123.7 Canada 1, , ,640.4 Russia 1, , ,976.7 Source: International Monetary Fund

9 8

10 One of the Longest Economic Expansions in Duration with the Lowest Growth 2.1% 8.5 Years 9

11 Is the Fed s Move to Normalize Interest Rates Warranted based on the Velocity of this Economic Recovery? 10

12 Fed s Dual Mandate: UE Below 5% & PCE Near 2% Target Source: Bureau of Labor Statistics, Bureau of Economic Analysis, Bloomberg. 11

13 12

14 13

15 14

16 Is the Stock Market Overvalued and can this Bull Market Continue? 15

17 16

18 S&P 500 Earnings Growth 15.0% 12.9% 10.0% 9.4% 10.8%10.6%10.7%11.9% 11.1% 7.3% 5.0% 2.3% 3.7% 0.6% 0.0% -1.2% -0.9% -5.0% -4.3% -3.2% -10.0% -8.0% 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17E 1Q18E 2Q18E 3Q18E 4Q18E Source: Standard & Poors 17

19 18

20 19

21 How will President Trump s Proposals Impact Future GDP Growth? 20

22 Markets Like Trump s Proposals! Lower Corporate Tax Rate to 21% is a Game Changer For Every 1% Reduction in Tax Rate = An additional $1.34 in S&P 500 Earnings Estimating a 0.5% to 0.9% boost to total GDP for 2018/2019 One-time Repatriation Tax 10% Repatriation Tax on $2.5- $3.0 Trill in Profits held Abroad Would Boost CAPEX Stocks would get a lift as Companies Increase Dividends and Share Repurchase $1.0 Trill Infrastructure Spending Would Create roughly 881,000 infrastructure-related Jobs in the first two years For every dollar spent on Infrastructure could add as much as $1.20 to GDP Trade Policies Regarding Mexico & China Trump has called for tariffs of 45% for China and 35% for Mexico China Exports $400 Bill per Annum to U.S. with a $11 Trill/Year Economy Reduced Regulation Reduction in Regulations should boost Business Investment Lift restrictions on Domestic Energy Reserves DJIA is Up Over 5000 Points Since Trump Won the Election!! 21

23 Which S&P Sector gets the Biggest Boost from a Corporate Tax Reduction? 22

24 Trump's Tax Repatriation Could Propel These Stocks 23

25 So What can Go Wrong? 24

26 25

27 26

28 Interest Cost of $360 Bill is Projected to Double by

29 Five Key Calls for Global GDP Accelerates U.S. +2.8% Europe +2.3% China +6.4% Japan +1.3% Global +3.8% 2. Federal Reserve will Raise Interest Rates Causing the Yield Curve to Flatten In 2018, the Federal Reserve will forge ahead by raising rates two-to-four times. Fed s Actions will Flatten the Yield Curve resulting Fed Funds of 2% to 2.5% resulting in a 10-YR UST yield of 2.75 to 3%. Fed s $4.5 Trill Balance Sheet Reduction ($10-$30 Bill a month) will be Glacial. 3. Economy will Shift Gears Driven by Tax Reform and Growth in Fixed Investment Unemployment Rate remains low at 4.1%, yet Wage Growth remains stubborn (+2.5%). Inflation Remains Below Fed Mandate with the PCE Index & CPI at 1.9% & 2.2%. 4. Stock Market Shrugs off Fed Action Fueled by Stronger S&P 500 Profits Market is propelled by Stronger Profits, Tax Cuts and Increased M&A Activity. S&P Corporate Profits are expected to grow to $150 a share, a 15% YoY Growth Rate. Based on a P/E Multiple of 20x EPS, this brings the year-end S&P 500 target to Concerns about a Cyclical Downturn to Build later in the Year This aging global business expansion finally falls victim to tighter monetary policy dampening overall spending. 28

30 Why Synovus Trust Company, N.A. Our experienced trust and estate specialists, money managers, certified financial planners and other financial professionals share one goal: tailoring a comprehensive solution that is truly right for you. We listen closely to your concerns and design solutions tailored to your individual circumstances. We provide one source for estate planning advice, ongoing administrative services and attentive management of your assets. Fee-based advice: manage your portfolio based on your objectives and market conditions, not commissions. Extensive Experience working with Institutional Clients, including: Charitable Foundations, Corporate/ERISA, Educational Institutions, Insurance Companies, Hospitals, Public/Government and Union/Taft-Hartley Organizations. 29

31 Disclosure Information contained herein was obtained from sources believed to be reliable; however we cannot guarantee its accuracy or completeness. The information, analysis and opinions expressed herein are for general and educational purposes only, and do not constitute investment, legal or professional advice. Statements of future expectations, estimates, projections, and other forward-looking statements are based upon available information. Actual results, performance, or events may differ materially from those expressed or implied in such statements. In addition to the normal risks associated with investing, narrowly focused investments, investments in smaller companies and international investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles or from economic or political instability in other nations. Emerging markets involve heighten risks related to the same factors, in addition to those associated with their relatively small size and lesser liquidity. Indices are not managed and are provided for illustrative purposes only. Clients cannot invest directly in indices. Index performance returns do not reflect any management fees, transaction costs, or expenses. Past performance does not guarantee future results. Trust services for Synovus are provided through Synovus Trust Company, N.A. Investment products and services are not FDIC insured, are not deposits of or other obligations of Synovus Bank, are not guaranteed by Synovus Bank, and involve investment risk, including possible loss of principal invested. Past performance is not a guarantee of future results. This is not a solicitation to buy or sell any securities or mutual fund nor should it be construed as investment advice. Standard & Poor s Index (S&P 500)-A market capitalization weighted equity index maintained by Standard and Poors that seeks to be a benchmark of the large Cap U.S. stock market. The index covers 400 industrial, 40 utility, 20 transportation, and 40 financial companies of the US markets (mostly NYSE issues). These 500 companies are spread across 10 economic sectors: Technology, Financials, Health Care, Energy, Consumer Discretionary, Consumer Staples, Industrials, Materials, Utilities, and Telecommunications. Russell 3000 Index-A market capitalization weighted equity index maintained by the Russell Investment Group that seeks to be a benchmark of the entire U.S. stock market. More specifically, this index encompasses the 3,000 largest U.S.-traded stocks, in which the underlying companies are all incorporated in the U.S. The index is further divided by market capitalization and investment style. Russell 1000 Value, Russell 1000 Growth, Russell Mid Cap Value, Russell Mid Cap Growth, Russell 2000 Value, and Russell 2000 Growth. MSCI EAFE Index-An index created by Morgan Stanley Capital International (MSCI) that serves as a benchmark of the performance in major international equity markets as represented by 21 major MSCI indexes from Europe, Australia and Southeast Asia. The index is further divided into 4 major regions: the U.K., Europe ex-u.k., Japan, Pacific ex-japan. MSCI Emerging Markets Index-An index created by Morgan Stanley Capital International (MSCI) that is designed to measure equity market performance in global emerging markets. The Emerging Markets Index is a float-adjusted market capitalization index that consists of indices in 21 emerging economies: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Morocco, Peru, Philippines, Poland, Russia, South Africa, Taiwan, Thailand, and Turkey. Barclays Capital Aggregate Bond Index-An index maintained by Barclay s Capital that includes all publicly issued, non-convertible domestic debt of the US Government and all its agencies, all investment-grade corporate debt and all mortgage-backed securities. The minimum maturity is one year, but there is no maximum maturity. The bonds must have at least $250 million par amount outstanding. 30