Transcript Bonds

Industrial Alliance Group
Webinar
Economic and
Financial Risks
François Lalande
Vice-President, Investments
Portfolio Management
Quebec City, May 18, 2010
A PARTNER YOU CAN TRUST.
10 YEARS ON THE TSX!
1
Economic Conditions: From Recession to
Rebound
Real GDP(%)
12
10.0
10
8.8
8.7
8
5.7
6
4
3.1
5.5
3.1
1.9
2
1.0
0
-0.2
-2
-4
-2.4
-2.6
-4.1
-6
-5.2
United
States Zone
Euro Euro
Zone
États-Unis
Japan
Japon
2009
2
Source: IMF, IAIM
Canada
Canada
China
Chine
Prévision
pour 2010
2010 forecast
India
Inde
Brazil
Brésil
V-Shaped Recovery?
3
Source: BMO AM charts 2010-04-13
Market Recovery
Index
Bottom
Date
2010-05-12
Gains
7,567
March 9, 2009
12,001
58.6%
677
March 9, 2009
1,156
70.8%
6,547
March 9, 2009
10,748
64.2%
390
March 9, 2009
683
75.4%
FTSE 100 INDEX
3,512
March 3, 2009
5,383
53.3%
NIKKEI 225
7,055
March 10, 2009
10,394
47.3%
CAC 40 INDEX
2,519
March 9, 2009
3,734
48.2%
DAX INDEX
3,666
March 6, 2009
6,183
68.7%
S&P/ASX 200 INDEX
3,146
March 6, 2009
4,573
45.4%
S&P/TSX COMPOSITE INDEX
S&P 500 INDEX
DOW JONES INDUS. AVG
RUSSELL 3000 INDEX
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Risk Premiums: Back to Where We Started
Moody's BBB - UST long term
6.2
5.7
5.2
4.7
4.2
3.7
3.2
2.7
2.2
5
Apr/
10
Oct/
09
Apr/
09
Oct/
08
Apr/
08
Oct/
07
1.2
Apr/
07
1.7
Performance of Various Asset Classes
(1 year to April 30, 2010)
Total Return
80 %
$ Local
$ CA
71.6%
70 %
54.9%
60 %
50 %
33.6%
40 %
30.1%
32.9%
31.2%
30 %
16.1%
20 %
10 %
0.3%
5.0%
0%
Money Market
Bonds
High Yield BondsCanadian EquityCanadian Equity Global Equity
(DEX 91 day) (DEX Universe) (DEX High Yield)
(TSX 60)
small cap.
(MSCI World)
(BMO Nesbitt
Burns)
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Global Equity
small cap.
(MSCI World
small cap.)
Performance of Various Asset Classes
(YTD as of April 30, 2010)
Total Return
12 %
11.6%
$ Local
11.8%
$ CA
10 %
8.1%
8%
6.3%
4.9%
6%
4.1%
4%
1.2%
2%
0.1%
0%
-0.2%
-2 %
Money Market
Bonds
High Yield BondsCanadian EquityCanadian Equity Global Equity
(DEX 91 day) (DEX Universe) (DEX High Yield) (TSX 60)
small cap.
(MSCI World)
(BMO Nesbitt
Burns)
7
Global Equity
small cap.
(MSCI World
small cap.)
Risks
Euro Zone (PIIGS)
United States
Exit Strategies
8
Risks: Euro Zone
2009 Government Deficit vs. Government Debt
(as % of GDP)
 Common
currency =
devaluation is impossible
200
Japan
180
160
 Fiscal
rigor = slow
economic growth
140
Government
Debt
(% GDP)
Greece
120
Italy
100
 Difficult
economic
conditions for a number of
years
Canada France
80
Germany
60
Portugal
Maastricht
criteria
40
-2
-3
-4
-5
-6
-7
-8
-9
-10
United States
United
Kingdom
Spain
-11
Government Deficit (% GDP)
 "Too
9
Big To Fail"
Source: Morgan Stanley, IMF, IAIM
-12
-13
-14
Risks: United States - Employment
400
Non-Farm Payrolls
200
0
-200
-400
-600
-800
-1000
2008-01-01
10
2008-07-01
2009-01-01
2009-07-01
2010-01-01
Risks: Exit Strategies
 Federal
11
Reserve’s Mandate: Full employment
Risks: Exit Strategies
Reserve’s Mandate: Price stability and moderate longterm rates
 Federal
12
Risks: Exit Strategies (Canada)
13
Risks: Exit Strategies (Canada)
14
Risks: Exit Strategies (Canada)
15
BMO Capital Markets
Market Perspectives - Bonds
 Bond
•
•
16
Market:
Destiny linked to target interest rate and inflation perspectives
Combination of floating rate notes and long-term bonds
Market Perspectives - Equity
 Stock
•
•
17
Markets:
Destiny linked to earnings
Optimism linked to accomodating policies
Our asset allocation
TARGET
Short term
Bonds
Canadian equity
Global equity
Reasons for our positioning:
Short term: Short-term rates are practically at zero; reserves for opportunities
Bonds: Limited potential tending toward zero; refuge asset when risks become significant
Stocks: Positive economic signs; expansionary conditions maintained
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Questions
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Thank you !
DISCLAIMER:
The views expressed in this presentation are based on current market
conditions and are subject to change without notice. They are not intended to
provide specific investment advice. Any forward looking statements in this
document are not guarantees of performance. They involve numerous risks,
uncertainties and assumptions. Although these assumptions are made upon
what we believe to be reasonable, there can be no assurance that actual results
will not differ materially from our expectations.
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