Transcript HENK POTTS (BARCLAYS) – Global Market Outlook

Markets and the Global Economy
Henk Potts
Barclays Research, Economics and Strategy
June 2016
Wealth and Investment Management
Performance of our asset classes
0.1%
Cash & Short-maturity Bonds
0.2%
1.4%
Developed Government Bonds
4.3%
-0.2%
Investment Grade Bonds
2015
4.6%
2016 (through end of May)
High Yield and Emerging Markets Bonds
-4.3%
6.4%
-0.9%
Developed Markets Equities
1.8%
-14.9%
Emerging Markets Equities
Commodities
2.3%
-24.7%
8.8%
-0.8%
Real Estate
5.1%
-3.6%
Alternative Trading Strategies*
-1.0%
Source: FactSet, Datastream, Barclays; graph based on asset class indices as published in Compass February 2013.
All investments can fall in value. You may lose capital. Please note that past performance is not a guide to future performance.
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Equity performance 2016 year-to-date by region
Net return year-to-date in local currency(%)
USA
3.0%
Emerging
1.8%
United Kingdom
1.8%
Developed
0.6%
Europe ex UK
Japan
-12.0%
-3.3%
-10.7%
-10.0%
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
Data source: FactSet, Barclays; through end of May
All investments can fall in value. You may lose capital. Please note that past performance is not a guide to future performance.
3
US recovery has been more volatile than expected
Data source: Datastream, Barclays
All investments can fall in value. You may lose capital. Please note that past performance is not a guide to future performance.
4
US Interest rates were close to zero from Dec 2008 until Dec 2015
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Yield (%)
5
FED Target Rate
25 year average
4
3
2
1
0
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12
Jan-13
Jan-14
Jan-15
Jan-16
Data source: Datastream, Barclays
All investments can fall in value. You may lose capital. Please note that past performance is not a guide to future performance.
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The slow normalisation of policy started in 2015
6
US Libor forward curve implied by swap rates (%)
5
4
3
Forward curve
2
1
0
Jun-16
Dec-16
Jun-17
Dec-17
Jun-18
Dec-18
Data source: Datastream, Barclays
All investments can fall in value. You may lose capital. Please note that past performance is not a guide to future performance.
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US labour market has rapidly recovered
The unemployment rate has steadily declined
Source: Bloomberg, Datastream, Barclays
All investments can fall in value. You may lose capital. Please note that past performance is not a guide to future performance.
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US Retail Sales
109 US retail sales and food services (index, Jan-14=100)
108
107
106
Nominal
105
104
103
102
101
100
99
Jan-14
Apr-14
Jul-14
Oct-14
Jan-15
Apr-15
Jul-15
Oct-15
Jan-16
Apr-16
Data source: Datastream, Barclays
All investments can fall in value. You may lose capital. Please note that past performance is not a guide to future performance.
8
US Housing Market recovery remains robust
Data source: Datastream, Barclays
All investments can fall in value. You may lose capital. Please note that past performance is not a guide to future performance.
9
The US Deficit is decreasing rapidly
Data source: Datastream, Barclays
All investments can fall in value. You may lose capital. Please note that past performance is not a guide to future performance.
10
US forecasts in a nutshell
% y-o-y except where stated
GDP
CPI
Official interest rate (%)
2014
2015
2016F
2017F
2.4
2.4
1.8
2.4
1.6
0.1
1.5
2.6
0-0.25
0.25-0.5
0.5-0.75
1.5-1.75
Future forecasts are not a reliable indicator of future performance
All investments can fall in value. You may lose capital. Please note that past performance is not a guide to future performance.
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US elections and equity performance
Average US equity annual total return since 1873 by party membership of the US president
Democrat
Republican
10%
5%
0%
First year after election
Four years following election
Source: Robert Shiller, Bloomberg, FactSet, Barclays. Based on annual Robert Shiller equity data until 1936, switched to Bloomberg S&P 500 data from 1937 onwards.
Data ends with 2012 full four year election periods and 2013 for first years after election.
All investments can fall in value. You may lose capital. Please note that past performance is not a guide to future performance.
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Euro zone real GDP growth
6
Year on year growth
(%)
4
2
0
-2
Real…
-4
-6
Mar-98
Mar-01
Mar-04
Mar-07
Mar-10
Mar-13
Data source: Datastream, Barclays
All investments can fall in value. You may lose capital. Please note that past performance is not a guide to future performance.
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Euro Area consumer prices turned negative once again in Feb
Data source: Datastream, Barclays
All investments can fall in value. You may lose capital. Please note that past performance is not a guide to future performance.
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Not your usual QE
3.0
Ratio of central banks' government bond purchase to net supply of gvt bonds
2.5
2.0
1.5
1.0
0.5
0.0
Fed QE3
Fed QE2
BoE QE2
BoJ 2013
BoE QE1
BoJ 2014
ECB QE
Source: Gavekal, Barclays
All investments can fall in value. You may lose capital. Please note that past performance is not a guide to future performance.
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Euro-area forecasts in a nutshell
% y-o-y except where stated
2014
2015E
2016F
2017F
GDP
0.9
1.5
1.6
1.7
CPI
0.4
0.0
0.0
1.0
Official interest rate (%)
0.05
0.05
NA
NA
Future forecasts are not a reliable indicator of future performance
All investments can fall in value. You may lose capital. Please note that past performance is not a guide to future performance.
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UK forecasts in a nutshell
% y-o-y except where stated
2014
2015E
2016F
2017F
GDP
2.9
2.3
1.5
1.9
CPI
1.5
0.0
0.6
1.5
Official interest rate (%)
0.5
0.5
0.5
NA
Future forecasts are not a reliable indicator of future performance
All investments can fall in value. You may lose capital. Please note that past performance is not a guide to future performance.
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Markets are nervous about a Brexist
Data source: Datastream, Barclays
All investments can fall in value. You may lose capital. Please note that past performance is not a guide to future performance.
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Chinese GDP growth has slowed, but recent data shows signs of
stability
Source: Datastream, Barclays
All investments can fall in value. You may lose capital. Please note that past performance is not a guide to future performance.
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Long term asset class performance
10,000,000
UK Indexed Performance (1899=100)
1,000,000
100,000
10,000
1,000
Equity
100
Gilts
T-Bills
10
1899
1913
1927
1941
1955
1969
1983
1997
2011
Data source: Barclays Equity Gilt Study
All investments can fall in value. You may lose capital. Please note that past performance is not a guide to future performance.
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Selected US equity performance statistics since 1925
Number of consecutive years
2
3
4
5
10
18
Outperform cash
67
69
64
68
69
73
Underperform cash
22
19
23
18
12
0
Total number of years
89
88
87
86
81
73
75%
78%
74%
79%
85%
100%
Outperform bonds
61
59
58
60
64
66
Underperform bonds
28
29
29
26
17
7
Total number of years
89
88
87
86
81
73
69%
67%
67%
70%
79%
90%
Probability of equity
outperformance
Probability of equity
outperformance
Source: Barclays Equity Gilt Study 2016, Barclays; All investments can fall in value. You may lose capital. Please note that past performance is not a guide to future performance.
All investments can fall in value. You may lose capital. Please note that past performance is not a guide to future performance.
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US Equities - S&P 500
Data source: Datastream, Barclays
All investments can fall in value. You may lose capital. Please note that past performance is not a guide to future performance.
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Expected earnings growth
14
Earnings Growth (%)
12
10
S&P 500
Euro Stoxx
8
6
4
2
0
2016 F
2017 F
Data source: IBES, Datastream, Barclays
All investments can fall in value. You may lose capital. Please note that past performance is not a guide to future performance.
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S&P 500 Trailing Price/Earnings Ratio with Historical Median
30
Very Overvalued
25
Overvalued
20
Median
15
Undervalued
10
Bargains
5
S&P 500 trailing P/E Ratio
0
Jan-68
Jan-73
Jan-78
Jan-83
Jan-88
Jan-93
Jan-98
Jan-03
Jan-08
Jan-13
Data source: Datastream, Barclays
All investments can fall in value. You may lose capital. Please note that past performance is not a guide to future performance.
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S&P 500 and Eurofirst 300
Performance index (USD, Dec-14=100)
110
105
100
95
S&P 500
90
85
Dec-14
Eurofirst 300
Mar-15
Jun-15
Sep-15
Dec-15
Mar-16
Data source: Datastream, Barclays
All investments can fall in value. You may lose capital. Please note that past performance is not a guide to future performance.
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Government bond yields: selected markets
Data source: FactSet, Barclays
All investments can fall in value. You may lose capital. Please note that past performance is not a guide to future performance.
26
Structural changes suggests the oil price will remain lower for longer
Data source: Datastream, Barclays
All investments can fall in value. You may lose capital. Please note that past performance is not a guide to future performance.
27
Divergence in growth rate and policy suggests the dollar will strengthen
Data source: Datastream, Barclays
All investments can fall in value. You may lose capital. Please note that past performance is not a guide to future performance.
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Disclaimer
This document has been issued and approved by Barclays Bank PLC. Although information in this document has been obtained from sources believed to be reliable, we do not
represent or warrant its accuracy, and such information may be incomplete or condensed. This document does not constitute a prospectus, offer, invitation or solicitation to buy
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All investments can fall in value. You may lose capital. Please note that past performance is not a guide to future performance.
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