Transcript Lazard Asset Management Presentation TEMPLATE

Assessing the Strength of the US
Economy
Ronald Temple, CFA
Managing Director, Portfolio Manager/Analyst
September 2015
This presentation and all research and materials enclosed are property of Lazard Asset Management LLC. © 2015Lazard Asset Management LLC
Information and opinions presented have been obtained or derived from sources believed by Lazard to be reliable. Lazard makes no representation as to their accuracy or completeness. All opinions
expressed herein are as of the date of this presentation and are subject to change.
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The securities and/or information referenced should not be considered a recommendation or solicitation to purchase or sell these securities. It should not be assumed that any of the referenced
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Global Growth Expectations in 2015 Are Mixed
2014 GDP in $ Trillion and Expected Growth
UK: $3.0
15E: 2.6%
16E: 2.4%
Russia: $1.9
15E: -3.7%
16E: 0.5%
US: $17.4
15E: 2.3%
16E: 2.7%
Japan: $4.6
15E: 0.8%
16E: 1.4%
Euro Zone: $13.4
15E: 1.5%
16E: 1.7%
China: $10.4
15E: 6.9%
16E: 6.7%
India: $2.1
15E: 7.4%
16E: 7.6%
Brazil: $2.4
15E: -1.8%
16E: 0.2%
Estimates as of 10 September 2015
Data for 2014 GDP are in current price USD trillion and are from the April 2015 IMF World Economic Outlook database. 2014 data for China and Russia are IMF staff estimates.
Estimated or forecasted data are not a promise or guarantee of future results and are subject to change.
Source: Bloomberg, IMF, Haver Analytics
1 Lazard Asset Management
How Strong Is the US Economic Recovery?
Positive Factors
Negative Factors
• Energy price declines
• Excess labor supply
• Employment growth accelerating
• Middle class recession
• Credit score healing
• Deleveraging incomplete
• Inflation expectations controlled
• Public debt unsustainably high
• Consumer balance sheets healing
• Higher interest rates could crimp recovery
• Public sector finances improving
• Large corporations earning record profits
Opinions as of September 2015 and are subject to change.
2 Lazard Asset Management
The US Private Sector Has Deleveraged Substantially…
US Private Sector Debt/GDP
(%)
350
287.7% of
GDP
300
250
230.4%
of GDP
224.9%
of GDP
200
79.7%
150
100
76.3%
50
0
1920 1926 1932 1938 1944 1950 1956 1962 1968 1974 1980 1986 1992 1998 2004 2010
Financial Debt/GDP
Consumer Debt/GDP
68.8%
Corporate Debt/GDP
As of March 2015
GDP data prior to 1929 does not consider the comprehensive revision by the Bureau of Economic Analysis, which revised GDP numbers in July 2013. All data reflect rounding. GDP data
updated as of 24 June 2015.
Source: US Federal Reserve, US Bureau of Economic Analysis, Morgan Stanley, US Treasury Department, Haver Analytics
3 Lazard Asset Management
… But Public Sector Debt Has Increased
US Private + Public Sector Debt/GDP
(%)
400
350
300
355.2% of
GDP
315.6%
of GDP
294.6%
of GDP
90.7%
250
200
79.7%
150
100
76.3%
50
0
1920 1926 1932 1938 1944 1950 1956 1962 1968 1974 1980 1986 1992 1998 2004 2010
Government Debt/GDP
Financial Debt/GDP
Consumer Debt/GDP
68.8%
Corporate Debt/GDP
As of March 2015
GDP data prior to 1929 does not consider the comprehensive revision by the Bureau of Economic Analysis, which revised GDP numbers in July 2013. All data reflect rounding. GDP data
updated as of 24 June 2015.
Source: US Federal Reserve, US Bureau of Economic Analysis, Morgan Stanley, US Treasury Department, Haver Analytics
4 Lazard Asset Management
Deleveraging in the US by Debt Category
2009 Q1
($ trillion)
(% of GDP)
($ trillion)
Change in % of
GDP
(percentage
points)
118.7
17.1
79.7
14.1
-39.0
95.2
13.7
76.3
13.5
-18.9
73.8
10.6
68.8
12.2
-4.9
287.7
41.4
224.9
39.8
-62.8
67.5
9.7
90.7
16.0
23.3
355.2
51.1
315.6
55.8
-39.6
—
14.4
-
17.7
(% of GDP)
Financial
Consumer
Corporate
Total Non-government Debt
Government
Total Debt
GDP
As of March 2015
All data reflect rounding. GDP data updated as of 24 June 2015.
Source: US Federal Reserve, Haver Analytics, Bureau of Economic Analysis, Haver Analytics
2015 Q1
5 Lazard Asset Management
Federal Debt-to-GDP Is Declining
(%)
30
20
17.9 17.1
18.2 18.1 18.2 17.9 17.7 17.7 17.6 17.7 17.8 17.8 17.9
16.7 17.5
15.2
15.0
14.6 14.6
10
0
-1.1
-3.1
-10
-20
-9.8 -8.7 -8.4
-19.1 -20.2
-30
-6.8
-2.4 -3.0 -2.4 -2.4 -3.1 -3.3 -3.5 -3.9 -3.8 -3.6 -3.9
-4.1 -2.8
-20.8 -20.3 -20.6 -21.1 -20.6 -20.4 -20.8 -21.0 -21.2 -21.6 -21.6 -21.4 -21.9
-22.0
-23.4
-23.4
-24.4
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
GDP
($ Trln)
14.3
14.8
14.4
Revenues
14.8
15.4
16.1
16.6
Outlays
17.3
17.8
18.6
19.5
20.4
21.2
22.2
23.1
24.1
25.1
26.2
27.3
Surplus/(Deficit)
As of August 2015
All fiscal years ending 30 September. Lazard estimates incorporate CBO alternative scenarios in which US troops are drawn down to 30,000 by 2017 in Afghanistan and approximately 60 tax
provisions are extended through the entire period. The total deficit reduction from troop reductions is $532 billion over 10 years. The total deficit increase from tax extensions is $1.169 trillion.
Congressional Budget Office August 2015 baseline projections. Projections and estimated data are not a promise or guarantee of future results and are subject to change.
Source: August 2015 Baseline From Updated Budget Projections: 2015 to 2025, Congressional Budget Office, Lazard estimates
6 Lazard Asset Management
US Household Net Worth Is 25% Above the Pre-crisis Record
Household Net Worth
($ Billions)
90,000
$84.9 trillion
80,000
+$30.0
trillion
70,000
60,000
50,000
40,000
30,000
20,000
10,000
0
1992
1994
As of March 2015
Source: Haver Analytics, Federal Reserve
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
7 Lazard Asset Management
Financial Assets Have Contributed 81% of the Wealth Increase
Household Financial Assets
($ Billions)
80,000
$69.4 trillion
70,000
60,000
+$24.3
trillion
50,000
40,000
30,000
20,000
10,000
0
1992
1994
As of March 2015
Source: Haver Analytics, Federal Reserve
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
8 Lazard Asset Management
Home Values Up $4.3 Trillion; Mortgage Debt Down $1.3 Trillion
Household Equity in Residential Real Estate
($ Billions)
14,000
$11.7 trillion
12,000
10,000
+$5.6
trillion
8,000
6,000
4,000
2,000
0
1992
1994
As of March 2015
Source: Haver Analytics, Federal Reserve
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
9 Lazard Asset Management
US House Prices Have Recovered 65% of the Crisis Decline
S&P/Case-Shiller 20-City Composite Home Price Index
Index, January 2000 = 100
220
206.52
200
-12%
180
180.88
160
140
134.07
120
100
2000
2002
2004
2006
As of 25 August 2015
Data are not-seasonally adjusted, latest index reading comprises home transactions from April 2015 to June 2015.
Source: Standard & Poor’s, Haver Analytics
2008
2010
2012
2014
10 Lazard Asset Management
US House Prices Continue to Recover, Albeit at Moderate Pace
S&P/Case-Shiller 20-City Composite Home Price Index
Change from Prior Year (%)
20
15
10
+5.0%
5
0
-5
-10
-15
-20
-25
2001
2003
2005
2007
As of 25 August 2015
Data are not-seasonally adjusted, latest index reading comprises home transactions from April 2015 to June 2015.
Source: Standard & Poor’s, Haver Analytics
2009
2011
2013
2015
11 Lazard Asset Management
The Housing Recovery Varies by City
Portion of Price Decline Recouped to Date – 100% Equates to the Pre-crisis Peak*
(%)
120
96.2
100
64.2
61.4
60
40
36.9
41.4
44.3
40.2
98.9
84.5
78.5
80
94.3
92.4
68.3
61.7
44.0
64.6
56.0
52.6
38.6
20
0
-20
-40
-60
-61.7
-55.9
-23.7 -20.2 -20.1
-27.1
-30.8
-35.1 -33.9 -32.9
-41.9 -39.5 -39.1 -38.2
-42.3
-46.1
-51.2 -49.3 -48.0
-80
% Recovered
% Decline from Max to Min
As of 25 August 2015
Data are not-seasonally adjusted, latest index reading comprises home transactions from April 2015 to June 2015.
* Dallas and Denver are the only two markets that have fully recovered, but neither market enjoyed a boom or a bust. Dallas home prices declined 11.2% from peak to trough and have since
recovered 276.8% of that decline. Likewise, Denver prices fell 14.3% from the peak and have since recouped 248.5% of this decline.
Source: Standard & Poor’s, Haver Analytics
12 Lazard Asset Management
Housing Comprises 60% of Middle Class Assets
2013
11%
2%
25%
14%
15%
23%
Financial Assets
Business Assets
Residential Assets
Other Assets
13%
40%
45%
2%
16%
62%
42%
5%
60%
25%
< 25 Percentile
25-74.9 Percentile
75-89.9 Percentile
90-100 Percentile
Average Total Assets ($)
35,710
180,150
667,900
4,264,500
Average Debt ($)
49,070
73,362
121,728
239,740
2013 Avg Net Worth ($)
-13,360
106,788
546,173
4,024,761
2007 Avg Net Worth ($)
-2,186
142,892
588,623
3,985,832
As of 2013
Opinions as of September 2015 and are subject to change.
Source: Federal Reserve “Survey of Consumer Finances”
13 Lazard Asset Management
Median Real Household Income Is Lower than in 1989
Median Inflation-Adjusted Household Income
($)
58,000
57,000
56,000
55,000
54,000
53,000
52,000
51,000
50,000
49,000
48,000
1989
1991
As of September 2014
Income in 2013 CPI-U-RS adjusted dollars.
Source: US Census Bureau, Haver Analytics
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
14 Lazard Asset Management
Employment Growth Is Strong
Private Non-Farm Payroll, Job Gain/Loss
(Thousands)
400
200
0
-200
13.1 million jobs created
-400
-600
8.8 million jobs lost
-800
-1000
2004
2005
2006
As of August 2015
Source: Bureau of Labor Statistics, Haver Analytics
2007
2008
2009
2010
2011
2012
2013
2014
2015
15 Lazard Asset Management
There Are 5.7 Million Vacant Jobs in the US
Job Openings Rate
Quits Rate
(%)
(%)
3.0
4.5
4.0
2.5
3.5
2.0
3.0
2.5
1.5
2.0
1.5
1.0
1.0
0.5
0.5
0.0
0.0
Recession
Pre-Recession Average
As of July 2015
Source: Bureau of Labor Statistics, Haver Analytics
Job Openings Rate
Recession
Quits Rate
Pre-Recession Average
16 Lazard Asset Management
The Labor Force Is < 50% of the Population
Sizing the Groups that Compose Employment Data
Population
321.4
Institutionalized & Under 16
70.3
Civilian Non-Institutionalized
Over 16
251.1
Not in the Labor Force
94.0
Includes:
24.0 mn disabled
Civilian Labor Force
69.7 mn w/out disability*
157.1
Unemployed
8.0
Employed
149.0
0
50
100
150
200
250
300
350
(million)
As of August 2015
* All figures above are seasonally adjusted except for the composition of individuals not in the labor force and the number of workers who are marginally attached to the labor force which
are seasonally unadjusted figures.
Source: Bureau of Labor Statistics, Haver Analytics
17 Lazard Asset Management
The Unemployment Rate Is Below the Long-Term Average
Unemployment Rate
(%)
12
10
Long-Term
Average: 5.8%
8
6
5.1%
4
2
0
1948
1954
1960
As of August 2015
Source: Bureau of Labor Statistics, Haver Analytics
1966
1972
1978
1984
1990
1996
2002
2008
2014
18 Lazard Asset Management
Underemployment Remains Above Historical Levels
U6 Unemployment: Unemployed, Marginally Attached, and Part-Time for Economic Reasons
(%)
18
15
Pre-Crisis Average: 8.9%
12
10.3%
9
6
3
0
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
While the unemployment rate has normalized, the underemployment rate has not.
As of August 2015
Source: Bureau of Labor Statistics, Haver Analytics
19 Lazard Asset Management
Labor Force Participation Has Declined Substantially
Labor Force Participation Rate
(%)
68
64
62.6%
60
56
1948
1954
1960
1966
1972
As of August 2015
Source: Bureau of Labor Statistics, US Census Bureau, Haver Analytics, Lazard
1978
1984
1990
1996
2002
2008
2014
20 Lazard Asset Management
The Employment-to-Population Ratio Also Has Declined
Employment-to-Population Ratio
(%)
66
63.4%, Dec 2006
62
10.3
million
jobs
59.4%,
current
58
54
1948
1954
1960
1966
1972
As of August 2015
Source: Bureau of Labor Statistics, US Census Bureau, Haver Analytics, Lazard
1978
1984
1990
1996
2002
2008
2014
21 Lazard Asset Management
Aging Explains 40% of the Decline in Employment-to-Population
Civilian Employment by Age Group
Change December 2009 to August 2015 (million)
Employment
Labor Force
Population
16 to 19
+0.2
-0.5
-0.4
20 to 24
+1.9
+1.0
+1.3
25 to 34
+2.9
+1.4
+2.3
35 to 44
+0.6
-1.1
-0.9
45 to 54
-0.8
-2.3
-1.8
55 and Over
+6.1
+5.4
+13.7
+10.9
+3.9
+14.2
Total
As of August 2015
Figures may not sum due to rounding.
Source: Bureau of Labor Statistics, Haver Analytics
22 Lazard Asset Management
The US Is 2.2–4.8 Million Jobs Away from Full Employment
Sizing the Jobs Gap
August 2015 Civilian Non-Institutional Population (million)
251.1
August 2015 Civilian Employment (million)
149.0
August 2015 E/P Ratio (%)
59.4
December 2006 Peak E/P Ratio (%)
63.4
August 2015 Implied Employment at Peak E/P Ratio (million)
Jobs Gap (million)
159.3
10.3
Explained by:
Aging (million)
4.4
Disabilities (million)
1.1
Unexplained Jobs Gap (million)
4.8
Unexplained jobs gap if full employment E/P ratio is lower than December 2006’s
Base Scenario, 62.9% E/P Ratio (million)
3.5
Low Scenario, 62.4% E/P Ratio (million)
2.2
As of August 2015
Numbers may not sum due to rounding. Estimated or forecasted data are not a promise or guarantee of future results and are subject to change.
Source: Bureau of Labor Statistics, Social Security Administration, Haver Analytics, Lazard analysis
23 Lazard Asset Management
Job Growth Has Been Strongest for High and Low Paying Roles
May 2014 Median Wage by Occupation, $/year
2008-2014 % Change in Employment
Management
Management
Computer/math
Computer/math
Legal
Legal
Engineers/architects
Engineers/architects
Business/finance
Business/finance
Health practitioners
Health practitioners
Scientists
Scientists
Teachers
Teachers
Arts/entertainment
Arts/entertainment
Installation/repair
Installation/repair
Construction/extraction
Construction/extraction
Community service
Community service
Protective service
Protective service
Admin support
Admin support
Production
Production
Transportation
Transportation
Health support
Health support
Sales
Sales
Building maintenance
Building maintenance
Personal care
Personal care
Farming/fishing/forestry
Farming/fishing/forestry
Food preparation
Food preparation
Overall: $30,400
0
30,000
60,000
90,000
-20%
-10%
0%
10%
20%
As of March 2015
Source: Bureau of Labor Statistics, Haver Analytics
Wages are straight-time, gross pay exclusive of premium pay. Incentive pay such as commissions, production bonuses and tips are included. Overtime pay, nonproduction bonuses and
employer cost for supplementary benefits are excluded
24 Lazard Asset Management
Middle Income Job Growth Has Been Weaker
2014 % of Employment by Occupation
Y/Y % Change in Employment by Wage Group
5%
Management
+8.7% since 2008
Computer/math
Legal
0%
Engineers/architects
Business/finance
Health practitioners
-5%
2000 2002 2004 2006 2008 2010 2012 2014
Scientists
Teachers
Arts/entertainment
5%
Installation/repair
-4.5% since 2008
Construction/extraction
Community service
0%
Protective service
Admin support
Production
-5%
2000 2002 2004 2006 2008 2010 2012 2014
Transportation
Health support
5%
Sales
+7.6% since 2008
Building maintenance
Personal care
Farming/fishing/forestry
0%
Food preparation
0%
5%
10%
15%
20%
-5%
2000 2002 2004 2006 2008 2010 2012 2014
As of March 2015
Source: Bureau of Labor Statistics, Haver Analytics
Wages are straight-time, gross pay exclusive of premium pay. Incentive pay such as commissions, production bonuses and tips are included. Overtime pay, nonproduction bonuses and
employer cost for supplementary benefits are excluded
25 Lazard Asset Management
Employment Costs Remain Well Controlled
Employment Cost Index (ECI)
YOY Change (%)
6.0
4.5
3.0
2.0%
1.5
0.0
1999
2001
ECI data as of June 2015
Source: Bureau of Labor Statistics, Haver Analytics
2003
2005
2007
2009
2011
2013
2015
26 Lazard Asset Management
Inflationary Pressures Remain Very Weak
CPI Is the Most Popular Measure, While PCE Is Closely Watched by the Fed
YOY Change (%)
4.5
CPI (Less Food and Energy)
PCE (Core)
3.0
1.8%
1.5
1.2%
0.0
1999
2001
PCE and CPI data as of July 2015
Source: Bureau of Economic Analysis, Haver Analytics
2003
2005
2007
2009
2011
2013
2015
27 Lazard Asset Management
The US Energy Revolution Is a Structural Game Changer
Non-OPEC Change in Crude Oil and Liquid Fuels Supply
(MMbbl/d)
6
5
4
3
2
1
0
-1
2009
2010
2011
2012
2013
2014
As of 7 April 2015.
Includes production of crude oil (including lease condensates), natural gas plant liquids, other liquids, and refinery processing gains, alcohol.
Source: US DOE/EIA
28 Lazard Asset Management
The US Is Now a Top Producer of Liquid Fuels
Total Petroleum and Other Liquids Production, 2014
(MMbbl/d)
14
12
10
8
6
4
2
0
As of 2014
Source: US DOE/EIA
29 Lazard Asset Management
Lower Gas Prices Are Lifting US Consumer Sentiment
Year-on-Year Cumulative Gasoline Savings in 2015
($/gallon)
($/household)
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
0
-100
3.00
-$64
2.50
-$127
-200
-300
-$187
2.00
-$258
-$315
-$364
-400
1.50
-$413
-$466
-500
1.00
-$527
-600
-$590
-$639
-700
0.50
-$671
-800
0.00
Savings per Household, LHS
US Average Retail Price of Gas All Grades, RHS
As of August 2015
Calculations based on mid\-2014 total consumer units and the year-on-year change in retail price times consumption, adjusted by the share of household consumption in overall
consumption,. Dashes indicate calculations based on US DOE/EIA projections. Estimated or forecasted data are not a promise or guarantee of future results and are subject to change
Source: US DOE/EIA, Bureau of Labor Statistics
30 Lazard Asset Management
Oil & Gas Jobs Are a Small Portion of Total Employment
Oil & Gas Jobs by Sub-Sector*
(Thousands)
2,500
1.4%
2,000
1.2%
1.3%
Jan-2005
Jan-2010
1,500
1,000
500
0
Gas Stations
Refining, Wholesalers, Dealers, and Pipeline Transportation
Sub-sector employment as of January 2015.
* Numbers above bars indicate oil & gas jobs as % of total nonfarm payrolls.
Source: Bureau of Labor Statistics, Haver Analytics
Jan-2015
Total O&G
31 Lazard Asset Management
Employment in Oil & Gas States Has Been Resilient
Top 10 States, Upstream Oil & Gas Jobs as Share of Total Jobs
(%)
8
6
4
2
0
North
Dakota
Wyoming
Alaska
Oklahoma
New
Mexico
Louisiana
Texas
Colorado
West
Virginia
Montana
US Total
Change in Total Jobs, July 2015
YTD change (%)
2.0
1.0
0.0
-1.0
-2.0
-3.0
-4.0
North
Dakota
Wyoming
Alaska
Oklahoma
Shares of state employment as of June 2014. Change in employment as of July 2015.
Change in employment data is seasonally adjusted.
Source: Bureau of Labor Statistics, Haver Analytics
New
Mexico
Louisiana
Texas
Colorado
West
Virgina
Montana Rest of US
32 Lazard Asset Management
Oil & Gas Capex Will Decline Meaningfully
Oil & Gas Fixed Asset Investment
($B, nominal)
250
9.7%
200
9.4%
150
100
4.7%
50
0
2003
2008
2013
Pipeline Transportation
Petroleum / Coal Production
Support for Mining
Oil & Gas Extraction
As of 2013
* Numbers above bars indicate oil & gas fixed asset investment as % of total private, non-residential fixed asset investment
Source: Bureau of Economic Analysis, Haver Analytics
33 Lazard Asset Management
Base Case View on the US Economy
 US growth has been constrained by:
• De-leveraging
• Widening inequality
• Re-regulation
 The recovery might be at a turning point driven by:
• Stronger job growth
• Lower energy prices
• Credit healing
 Base case implications:
• Several more years of moderate growth and low inflation in the US.
• US rates might rise later and less than investors expect.
• Equities are likely to remain more attractive than fixed income.
Opinions as of September 2015 and are subject to change.
34 Lazard Asset Management
Fed Funds Futures Imply <1.4% Rates at the End of 2017
Fed Funds Rate Implied by Fed Funds Futures
(%)
1.6
1.4
1.2
1.0
0.8
0.6
0.4
0.2
0.0
Sep-2015
Jan-2016
As of 10 September 2015
Source: Bloomberg, Chicago Board of Trade
May-2016
Sep-2016
Jan-2017
May-2017
Sep-2017
35 Lazard Asset Management
Regional Valuations
Forward
P/E1
Forward P/E
10 Year Median
Difference
China
9.2
11.6
-2.4
Eurozone
14.9
12.7
2.2
Emerging Markets
11.5
11.4
0.1
Japan
14.3
15.4
-1.1
US
16.7
16.1
0.6
As of 31 August 2015
1 Forward Price/Earnings is defined as Price/Earnings NTM.
China represented by the MSCI China, Eurozone by the MSCI EMU, Emerging markets by the MSCI Emerging Markets Index, Japan by the MSCI Japan, and the United States by the S&P 500.
The figures above represent expected returns. Expected returns do not represent a promise or guarantee of future results and are subject to change.
36
Source: JPMorgan, Bloomberg, Lazard
Lazard Asset Management
Index Compositions
% of Index
S&P 500
MSCI Europe
MSCI Japan
Consumer Discretionary
12.9
11.5
21.4
Consumer Staples
9.7
13.8
7.4
Energy
7.3
6.7
0.9
Financials
16.6
23.2
19.6
Health Care
15.2
14.1
7.8
Industrials
9.9
11.2
18.6
Information Technology
20.0
3.4
10.4
Materials
2.9
7.0
5.6
Telecom Services
2.4
5.1
5.7
Utilities
3.0
3.9
2.7
As of 31 August 2015
Source: Lazard, MSCI, I/B/E/S Consensus
37 Lazard Asset Management
The US Market Versus Prior Peaks
3/27/2000
10/11/2007
08/31/2015
1527.46
1576.09
1972.18
Trailing EPS
52.84
84.63
113.02
Trailing P/E
28.90
18.60
17.45
FCF Yield (%)
2.57
2.26
5.30
Net Debt/EBITDA
4.09
4.51
1.89
206.59
217.11
108.43
10-Year Treasury (%)
6.18
4.64
2.22
Moody's Baa Bond Yield Index (%)
8.32
6.56
5.19
S&P 500 Index Price
Total Debt/ Total Equity
As of 31 August 2015
Source: Bloomberg
38 Lazard Asset Management
Implications for Investing
We believe:
 We are navigating uncharted economic and monetary policies, making history less instructive.
 Markets and macroeconomics are two very different subjects.
 Valuation is always a factor in investing.
Investors typically need:
 Capital appreciation
 Income generation
 Inflation protection
Opinions as of September 2015 and are subject to change.
39 Lazard Asset Management
TAB
Biographies
Ronald Temple, CFA
Managing Director, Co-Head of Multi Asset and Head of US Equity
Lazard Asset Management LLC (New York)
Ronald Temple is a Managing Director and Co-Head of Multi Asset and Head of US
Equity, responsible for oversight of the firm's multi asset and US equity strategies. He
is also a Portfolio Manager/Analyst on various US and global equity teams. He joined
Lazard in 2001 with ten years of global experience including fixed-income derivative
trading, risk management, corporate finance and corporate strategy in roles at
Deutsche Bank AG, Bank of America NT & SA and Fleet Financial Group in
London, New York, Singapore, San Francisco, and Boston. Ron has an MPP from
Harvard University and graduated magna cum laude with a BA in Economics &
Public Policy from Duke University. He is a member of the Council on Foreign
Relations, the Economic Club of New York, the Financial Accounting Standards
Advisory Council, Duke University’s Graduate School Board of Visitors and the New
York Society of Security Analysts (NYSSA). Ron also served as a trustee of the Link
Community School in Newark, New Jersey from 2006-2014, and served as a member
of the Trinity Board of Visitors at Duke University from 2006-2012.
41 Lazard Asset Management
Disclosures
This presentation and all research and materials enclosed are property of Lazard Asset Management LLC © 2014 Lazard Asset Management LLC.
Information and opinions presented have been obtained or derived from sources believed by Lazard to be reliable. Lazard makes no representation as to their
accuracy or completeness. This presentation is for informational purposes only. It is not intended to, and does not constitute, an offer to enter into any contract
or investment agreement in respect of any product offered by Lazard Asset Management and shall not be considered as an offer or solicitation with respect to any
product, security or service in any jurisdiction or in any circumstances in which such offer or solicitation is unlawful or unauthorized or otherwise restricted or
prohibited. All opinions expressed herein are as of the date of this presentation and are subject to change.
An investment in bonds carries risk. If interest rates rise, bond prices usually decline. The longer a bond’s maturity, the greater the impact a change in interest rates
can have on its price. If you do not hold a bond until maturity, you may experience a gain or loss when you sell. Bonds also carry the risk of default, which is the
risk that the issuer is unable to make further income and principal payments.
Equity securities will fluctuate in price; the value of your investment will thus fluctuate, and this may result in a loss. Securities in certain non-domestic countries
may be less liquid, more volatile, and less subject to governmental supervision than in one’s home market. The values of these securities may be affected by
changes in currency rates, application of a country’s specific tax laws, changes in government administration, and economic and monetary policy. Emerging market
securities carry special risks, such as less developed or less efficient trading markets, a lack of company information, and differing auditing and legal standards. The
securities markets of emerging market countries can be extremely volatile; performance can also be influenced by political, social, and economic factors affecting
companies in emerging market countries.
The securities and/or information referenced should not be considered a recommendation or solicitation to purchase or sell these securities. It should not be
assumed that any of the referenced securities were or will prove to be profitable, or that the investment decisions we make in the future will be profitable or equal
to the investment performance of securities referenced herein.
Certain information included herein is derived by Lazard in part from an MSCI index or indices (the “Index Data”). However, MSCI has not reviewed this product
or report, and does not endorse or express any opinion regarding this product or report or any analysis or other information contained herein or the author or
source of any such information or analysis. MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to
any Index Data or data derived therefrom. The MSCI Index Data may not be further redistributed or used as a basis for other indices or any securities or financial
products.
This material is for informational purposes only. It is not intended to, and does not constitute financial advice, fund management services, an offer of financial
products or to enter into any contract or investment agreement in respect of any product offered by Lazard Asset Management and shall not be considered as an
offer or solicitation with respect to any product, security, or service in any jurisdiction or in any circumstances in which such offer or solicitation is unlawful or
unauthorized or otherwise restricted or prohibited.
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42 States:
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