Transcript The Principal Title Page

City of Hallandale Beach
3rd Quarter 2011 DB Plan Update
December 14, 2011
1
Economy and Market Review
Recap 3rd Quarter 2011
• Risk aversion was pronounced and broadly apparent across global financial markets in the
third quarter of 2011 where an ugly combination of weakening economic indicators and
heightened public policy uncertainty roiled markets.
• In the U.S., the S&P 500 Index declined nearly 14% in the third quarter
• The broad international market (as measured by the MSCI All Country World (ex-U.S.) Index)
was down 19.9% for the quarter
–
International developed markets (as measured by the MSCI EAFE Index) were down19.0%
–
International emerging markets (as measured by the MSCI Emerging Markets Index) fell 22.6%
• Yields on U.S. government bonds dropped steadily during the quarter
–
The 10-year Treasury yield finished at 1.92% (down 124 basis points)
–
The 2-year Treasury yield finished at 0.24% (down 22 basis points)
2
Economy and Market Review
Recap 3rd Quarter 2011
• At the end of the third quarter, sentiment in the United States was lousy but the absence of
confidence had not yet seeped into the real economy
–
Initial unemployment claims were essentially flat over the summer
–
Housing was stabilizing at a low level of sales and starts, but prices had turned either flat or were rising
–
Vehicle sales were holding up
–
Consumer spending growth was lackluster but appeared to be growing an inflation-adjusted 1.1% for the
quarter
• Confidence in the U.S. federal government’s ability to deal with a slowing economy was low
–
The new regulatory initiatives from the financial regulation and health care bills were already a large burden
for business
–
The new jobs plan contained long-term and significant tax increases as a trade-off for small, temporary tax
incentives for business to hire…worse than no change
• European Union sentiment remained lousy as well but current business wasn’t so bad
–
Spreads on Portugal, Ireland, Italy, Greece and Spain sovereign debt to German bonds had narrowed
–
Ireland seemed to be through the worst of the crisis
–
The European Central Bank (ECB) remained committed to provide unlimited liquidity for Eurozone banks
3
Economy and Market Review
Outlook for the Future
• In our opinion, based on current inflation and growth projections, we expect interest rates at the
end of calendar year 2011 to be as follows:
–
A Federal Funds Rate target of 0% to 0.25%
–
A 10-year Treasury Rate of 2.50%
–
A 2-year Treasury Rate of 0.30%
• Core inflation was around 1.0% for year-end 2010; our projection has ticked up slightly for
year-end 2011 from the second quarter to 1.6% and remains at 1.8% for 2012
• Based on developments during the quarter we have lowered our expectations for economic
growth to around 1.7% in 2011 and around 1.8% in 2012
4
Economy and Market Review
Outlook for the Future
• Even though we have lowered our forecasts for U.S. economic growth through 2012 the following
impetus would lead to expansion
–
Modest consumer spending of 1% to 1.5%
–
Strong capital spending at the rate of last year
–
Moderate export growth
–
An end to the headwind from shrinking state and local spending
• We expect some resolution to the European debt crisis to be found, albeit probably at the last
possible minute
–
The ECB will be the backstop for distressed debt
–
An orderly default of Greek debt will occur
–
The European Union will stay together
–
The euro will survive
• We expect China to maintain growth in the 8% to 9% range for the immediate future
• While third quarter growth in Japan was strong, the rebound appears to be slowing into the fourth
quarter
5
Economy and Market Review
Disclosures
©2011 Principal Financial Services, Inc.
No part of this presentation may be reproduced or used in any form or by any means, electronic or mechanical, including
photocopying or recording, or by any information storage and retrieval system, without prior written permission from the
Principal Financial Group®.
Information provided by Principal Global Investors, a member of the Principal Financial Group.
The information in this document has been derived from sources believed to be accurate as of September 2011.
Information derived from sources other than Principal Global Investors or its affiliates is believed to be reliable; however,
we do not independently verify or guarantee its accuracy or validity.
The information in this document contains general information only on investment matters and should not be considered
as a comprehensive statement on any matter and should not be relied upon as such. The general information it contains
does not take account of any investor's investment objectives, particular needs or financial situation, nor should it be
relied upon in any way as forecast or guarantee of future events regarding a particular investment or the markets in
general. All expressions of opinion and predictions in this document are subject to change without notice.
Subject to any contrary provisions of applicable law, no company in the Principal Financial Group nor any of their
employees or directors gives any warranty of reliability or accuracy nor accepts any responsibility arising in any other
way (including by reason of negligence) for errors or omissions in this document.
All figures shown in this document are in U.S. dollars unless otherwise noted.
6
Economy and Market Review
Disclosures
Standard & Poor's 500 Index is a market capitalization-weighted index of 500 widely held stocks often used as a proxy
for the stock market.
The MSCI ACWI (All Country World (ex.U.S.) Index) Index is a free float-adjusted market capitalization weighted index
that is designed to measure the equity market performance of developed and emerging markets.
MSCI - EAFE Index NDTR D is listed for foreign stock funds (EAFE refers to Europe, Australia, and Far East). Widely
accepted as a benchmark for International stock performance, the EAFE Index is an aggregate of 21 individual country
indexes.
MSCI - Emerging Markets NDTR D Index measures equity market performance in the global emerging markets. It
consists of 26 emerging market countries in Europe, Latin America and the Pacific Basin.
Indices are unmanaged and do not take into account fees, expenses and transaction costs. Indices are not available for
direct investment.
Insurance products and plan administrative services are provided by Principal Life Insurance Company. Principal Life and
Principal Global Investors are members of the Principal Financial Group, Des Moines, IA 50392.
t11101403az
PQ 4927
7
General Employee Plan –
Target Allocation By Asset Class
General Employee Plan –
Target Allocation By Investment Option
9
General Employee Plan –
Target Allocation By Investment Option
10
General Employee Plan –
Asset Allocation By Asset Class
General Employee Plan –
Asset Allocation By Investment Option
12
General Employee Plan –
Asset Allocation By Investment Option
13
General Employee Plan
International Exposure
14
Investment Option by Style Box
15
Investment Option by Style Box
16
General Employee Plan
Performance – 9/30/2011
17
General Employee Plan
Performance – 9/30/2011
18
Professional/Management Plan –
Target Allocation By Asset Class
Professional/Management Plan –
Target Allocation By Investment Option
20
Professional/Management Plan –
Target Allocation By Investment Option
21
Professional/Management Plan –
Asset Allocation By Asset Class
Professional/Management Plan –
Asset Allocation By Investment Option
23
Professional/Management Plan –
Asset Allocation By Investment Option
24
Professional/Management Plan
International Exposure
25
Investment Option by Style Box
26
Investment Option by Style Box
27
Professional/Management Plan
Performance – 9/30/2011
28
Professional/Management Plan
Performance – 9/30/2011
29