303 Broadway Suite 1200 Cincinnati, OH 45202 (888) 244.8167 (513) 361.7600 fax (513) 361.7605...
-
Upload
annabella-kennedy -
Category
Documents
-
view
216 -
download
0
Transcript of 303 Broadway Suite 1200 Cincinnati, OH 45202 (888) 244.8167 (513) 361.7600 fax (513) 361.7605...
![Page 1: 303 Broadway Suite 1200 Cincinnati, OH 45202 (888) 244.8167 (513) 361.7600 fax (513) 361.7605 FortWashington.com 2014 Midyear Update Nick Sargen Chief.](https://reader035.fdocuments.us/reader035/viewer/2022062407/56649e185503460f94b043a3/html5/thumbnails/1.jpg)
303 Broadway • Suite 1200 • Cincinnati, OH 45202 • (888) 244.8167 • (513) 361.7600 • fax (513) 361.7605 • FortWashington.com
2014 Midyear UpdateNick SargenChief Economist
![Page 2: 303 Broadway Suite 1200 Cincinnati, OH 45202 (888) 244.8167 (513) 361.7600 fax (513) 361.7605 FortWashington.com 2014 Midyear Update Nick Sargen Chief.](https://reader035.fdocuments.us/reader035/viewer/2022062407/56649e185503460f94b043a3/html5/thumbnails/2.jpg)
Introducing the Stanford Colts!
![Page 3: 303 Broadway Suite 1200 Cincinnati, OH 45202 (888) 244.8167 (513) 361.7600 fax (513) 361.7605 FortWashington.com 2014 Midyear Update Nick Sargen Chief.](https://reader035.fdocuments.us/reader035/viewer/2022062407/56649e185503460f94b043a3/html5/thumbnails/3.jpg)
Investment Results (annual total returns in %)
*Includes dividends except for Emerging Markets, which is price change Source: Bloomberg
2013 2014 1st HalfEquities*
S&P 500 32.4 7.1EAFE ($) 22.8 4.8
EM($) -2.6 6.1Bonds
Treasuries -2.8 2.7Corporates -2.0 5.7High Yield 7.4 5.6EMBI ($) -5.2 8.7
For Internal Use Only 3
![Page 4: 303 Broadway Suite 1200 Cincinnati, OH 45202 (888) 244.8167 (513) 361.7600 fax (513) 361.7605 FortWashington.com 2014 Midyear Update Nick Sargen Chief.](https://reader035.fdocuments.us/reader035/viewer/2022062407/56649e185503460f94b043a3/html5/thumbnails/4.jpg)
4
What was Priced into Markets?
♦ 2014: A Breakout Year for U.S.
♦ Improved Performances (Diminished Risks) Abroad
♦ Fed ends QE, but refrains from tightening
![Page 5: 303 Broadway Suite 1200 Cincinnati, OH 45202 (888) 244.8167 (513) 361.7600 fax (513) 361.7605 FortWashington.com 2014 Midyear Update Nick Sargen Chief.](https://reader035.fdocuments.us/reader035/viewer/2022062407/56649e185503460f94b043a3/html5/thumbnails/5.jpg)
5
Source: Barron’s
![Page 6: 303 Broadway Suite 1200 Cincinnati, OH 45202 (888) 244.8167 (513) 361.7600 fax (513) 361.7605 FortWashington.com 2014 Midyear Update Nick Sargen Chief.](https://reader035.fdocuments.us/reader035/viewer/2022062407/56649e185503460f94b043a3/html5/thumbnails/6.jpg)
6
Treasury Yield Curve
Source: Bloomberg
0YR 1YR 2YR 5YR 7YR 10YR 30YR
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
12/31/2013 7/31/2014
![Page 7: 303 Broadway Suite 1200 Cincinnati, OH 45202 (888) 244.8167 (513) 361.7600 fax (513) 361.7605 FortWashington.com 2014 Midyear Update Nick Sargen Chief.](https://reader035.fdocuments.us/reader035/viewer/2022062407/56649e185503460f94b043a3/html5/thumbnails/7.jpg)
7
Federal Funds Futures Expectations
Jul-1
4
Aug-1
4
Sep-1
4
Oct-1
4
Nov-1
4
Dec-1
4
Jan-
15
Feb-1
5
Mar
-15
Apr-1
5
May
-15
Jun-
15
Jul-1
5
Aug-1
5
Sep-1
5
Oct-1
5
Nov-1
5
Dec-1
5
Jan-
16
Feb-1
6
Mar
-16
Apr-1
6
May
-16
Jun-
160.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
4/30/2014 7/5/2013 7/31/2014
Source: Bloomberg
![Page 8: 303 Broadway Suite 1200 Cincinnati, OH 45202 (888) 244.8167 (513) 361.7600 fax (513) 361.7605 FortWashington.com 2014 Midyear Update Nick Sargen Chief.](https://reader035.fdocuments.us/reader035/viewer/2022062407/56649e185503460f94b043a3/html5/thumbnails/8.jpg)
The Fed’s Twin Objective: Inflation and Unemployment
Source: BLS, BEA
Dec-99
Jul-00
Feb-01
Sep-01
Apr-02
Nov-02
Jun-03
Jan-04
Aug-04
Mar-05
Oct-05
May-06
Dec-06
Jul-07
Feb-08
Sep-08
Apr-09
Nov-09
Jun-10
Jan-11
Aug-11
Mar-12
Oct-12
May-13
Dec-13
0.0
2.0
4.0
6.0
8.0
10.0
12.0
0.0
0.5
1.0
1.5
2.0
2.5
3.0
Unemployment Rate (Right) Core PCE YoY (Left)
%
8
![Page 9: 303 Broadway Suite 1200 Cincinnati, OH 45202 (888) 244.8167 (513) 361.7600 fax (513) 361.7605 FortWashington.com 2014 Midyear Update Nick Sargen Chief.](https://reader035.fdocuments.us/reader035/viewer/2022062407/56649e185503460f94b043a3/html5/thumbnails/9.jpg)
Inflation Expectations
Source: Bloomberg
9
Jul-0
5
Oct-0
5
Jan-
06
Apr-0
6
Jul-0
6
Nov-0
6
Feb-0
7
May
-07
Aug-0
7
Dec-0
7
Mar
-08
Jun-
08
Sep-0
8
Dec-0
8
Apr-0
9
Jul-0
9
Oct-0
9
Jan-
10
May
-10
Aug-1
0
Nov-1
0
Feb-1
1
May
-11
Sep-1
1
Dec-1
1
Mar
-12
Jun-
12
Oct-1
2
Jan-
13
Apr-1
3
Jul-1
3
Oct-1
3
Feb-1
4
May
-14
1.75
1.95
2.15
2.35
2.55
2.75
2.95
3.15
3.35
3.55
3.75
5 Year Forward 5 Year Inflation Expectations
![Page 10: 303 Broadway Suite 1200 Cincinnati, OH 45202 (888) 244.8167 (513) 361.7600 fax (513) 361.7605 FortWashington.com 2014 Midyear Update Nick Sargen Chief.](https://reader035.fdocuments.us/reader035/viewer/2022062407/56649e185503460f94b043a3/html5/thumbnails/10.jpg)
10
Two Views of the Economy: Real GDP Growth vs. Nonfarm Payrolls Growth
Dec-9
9
Jun-
00
Dec-0
0
Jun-
01
Dec-0
1
Jun-
02
Dec-0
2
Jun-
03
Dec-0
3
Jun-
04
Dec-0
4
Jun-
05
Dec-0
5
Jun-
06
Dec-0
6
Jun-
07
Dec-0
7
Jun-
08
Dec-0
8
Jun-
09
Dec-0
9
Jun-
10
Dec-1
0
Jun-
11
Dec-1
1
Jun-
12
Dec-1
2
Jun-
13
Dec-1
3
Jun-
14
-10.0%
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
-2.0%
-1.5%
-1.0%
-0.5%
0.0%
0.5%
1.0%
Real GDP QoQ % (left) NFP QoQ % (right)
Source: BEA
![Page 11: 303 Broadway Suite 1200 Cincinnati, OH 45202 (888) 244.8167 (513) 361.7600 fax (513) 361.7605 FortWashington.com 2014 Midyear Update Nick Sargen Chief.](https://reader035.fdocuments.us/reader035/viewer/2022062407/56649e185503460f94b043a3/html5/thumbnails/11.jpg)
11
Read GDP Growth and Fiscal Drag
Source: BEA
12/1
/200
8
3/1/
2009
6/1/
2009
9/1/
2009
12/1
/200
9
3/1/
2010
6/1/
2010
9/1/
2010
12/1
/201
0
3/1/
2011
6/1/
2011
9/1/
2011
12/1
/201
1
3/1/
2012
6/1/
2012
9/1/
2012
12/1
/201
2
3/1/
2013
6/1/
2013
9/1/
2013
12/1
/201
3
3/1/
2014
6/1/
2014
90.0%
95.0%
100.0%
105.0%
110.0%
115.0%
Real GDP ex Govt Govt Spending
![Page 12: 303 Broadway Suite 1200 Cincinnati, OH 45202 (888) 244.8167 (513) 361.7600 fax (513) 361.7605 FortWashington.com 2014 Midyear Update Nick Sargen Chief.](https://reader035.fdocuments.us/reader035/viewer/2022062407/56649e185503460f94b043a3/html5/thumbnails/12.jpg)
Business Surveys Have Improved RecentlyD
ec-9
9Ju
n-00
Dec
-00
Jun-
01D
ec-0
1Ju
n-02
Dec
-02
Jun-
03D
ec-0
3Ju
n-04
Dec
-04
Jun-
05D
ec-0
5Ju
n-06
Dec
-06
Jun-
07D
ec-0
7Ju
n-08
Dec
-08
Jun-
09D
ec-0
9Ju
n-10
Dec
-10
Jun-
11D
ec-1
1Ju
n-12
Dec
-12
Jun-
13D
ec-1
3Ju
n-14
25
30
35
40
45
50
55
60
65
ISM Manufacturing and Services
ISM Manuf ISM Non-Manuf
Source: ISM, Bloomberg
For Internal Use Only 12
![Page 13: 303 Broadway Suite 1200 Cincinnati, OH 45202 (888) 244.8167 (513) 361.7600 fax (513) 361.7605 FortWashington.com 2014 Midyear Update Nick Sargen Chief.](https://reader035.fdocuments.us/reader035/viewer/2022062407/56649e185503460f94b043a3/html5/thumbnails/13.jpg)
13
Global Surveys Point to Moderate Economic GrowthD
ec-0
7F
eb-0
8A
pr-0
8Ju
n-08
Aug
-08
Oct
-08
Dec
-08
Feb
-09
Apr
-09
Jun-
09A
ug-0
9O
ct-0
9D
ec-0
9F
eb-1
0A
pr-1
0Ju
n-10
Aug
-10
Oct
-10
Dec
-10
Feb
-11
Apr
-11
Jun-
11A
ug-1
1O
ct-1
1D
ec-1
1F
eb-1
2A
pr-1
2Ju
n-12
Aug
-12
Oct
-12
Dec
-12
Feb
-13
Apr
-13
Jun-
13A
ug-1
3O
ct-1
3D
ec-1
3F
eb-1
4A
pr-1
4Ju
n-14
30
35
40
45
50
55
60
65
JP Morgan Global Manufacturing PMI JP Morgan Global Services PMISource: JP Morgan, Bloomberg
%
![Page 14: 303 Broadway Suite 1200 Cincinnati, OH 45202 (888) 244.8167 (513) 361.7600 fax (513) 361.7605 FortWashington.com 2014 Midyear Update Nick Sargen Chief.](https://reader035.fdocuments.us/reader035/viewer/2022062407/56649e185503460f94b043a3/html5/thumbnails/14.jpg)
14
Tensions in the Euro-zone have Lessened….
Jul-1
0
Aug-1
0
Sep-1
0
Oct-1
0
Dec-1
0
Jan-
11
Feb-1
1
Apr-1
1
May
-11
Jun-
11
Aug-1
1
Sep-1
1
Oct-1
1
Dec-1
1
Jan-
12
Feb-1
2
Apr-1
2
May
-12
Jun-
12
Jul-1
2
Sep-1
2
Oct-1
2
Nov-1
2
Jan-
13
Feb-1
3
Mar
-13
May
-13
Jun-
13
Jul-1
3
Sep-1
3
Oct-1
3
Nov-1
3
Jan-
14
Feb-1
4
Mar
-14
May
-14
Jun-
14
Jul-1
4
0
1
2
3
4
5
6
7
8
10Y Italy 10Y Spain 10Y Germany
Source: Bloomberg
%
Government Yields
![Page 15: 303 Broadway Suite 1200 Cincinnati, OH 45202 (888) 244.8167 (513) 361.7600 fax (513) 361.7605 FortWashington.com 2014 Midyear Update Nick Sargen Chief.](https://reader035.fdocuments.us/reader035/viewer/2022062407/56649e185503460f94b043a3/html5/thumbnails/15.jpg)
Oil Prices Have Been Steady Despite Increased Tensions
Source: Bloomberg
Sep-9
9Feb
-00
Jul-0
0Dec
-00
May
-01
Oct-0
1M
ar-0
2Aug
-02
Jan-
03Ju
n-03
Nov-0
3Apr
-04
Sep-0
4Feb
-05
Jul-0
5Dec
-05
May
-06
Oct-0
6M
ar-0
7Aug
-07
Jan-
08Ju
n-08
Nov-0
8Apr
-09
Sep-0
9Feb
-10
Jul-1
0Dec
-10
May
-11
Oct-1
1M
ar-1
2Aug
-12
Jan-
13Ju
n-13
Nov-1
3Apr
-14
$0
$20
$40
$60
$80
$100
$120
$140
$160
Brent Crude $Px
For Internal Use Only 15
![Page 16: 303 Broadway Suite 1200 Cincinnati, OH 45202 (888) 244.8167 (513) 361.7600 fax (513) 361.7605 FortWashington.com 2014 Midyear Update Nick Sargen Chief.](https://reader035.fdocuments.us/reader035/viewer/2022062407/56649e185503460f94b043a3/html5/thumbnails/16.jpg)
16
Has China Mortgaged its Future?
♦ China withstood the Great Recession remarkably well
♦ But it deployed a tidal wave of credit
♦ Economic growth of 7% - 8% is likely to slow over time
♦ China’s leaders are embarking on a new set of policy reforms
♦ But internal political tensions are increasing
For Internal Use Only
![Page 17: 303 Broadway Suite 1200 Cincinnati, OH 45202 (888) 244.8167 (513) 361.7600 fax (513) 361.7605 FortWashington.com 2014 Midyear Update Nick Sargen Chief.](https://reader035.fdocuments.us/reader035/viewer/2022062407/56649e185503460f94b043a3/html5/thumbnails/17.jpg)
Where are we in the Economic Cycle?
Recession Recovery
Late Cycle(inflation)
PB
PB
PS PS
Expansion
17
![Page 18: 303 Broadway Suite 1200 Cincinnati, OH 45202 (888) 244.8167 (513) 361.7600 fax (513) 361.7605 FortWashington.com 2014 Midyear Update Nick Sargen Chief.](https://reader035.fdocuments.us/reader035/viewer/2022062407/56649e185503460f94b043a3/html5/thumbnails/18.jpg)
18
Share of Labor Income vs. Corporate Profits
Source: Bureau of Economic Analysis
1948
1951
1954
1957
1960
1963
1966
1969
1972
1975
1978
1981
1984
1987
1990
1993
1996
1999
2002
2005
2008
2011
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
49.0%
50.0%
51.0%
52.0%
53.0%
54.0%
55.0%
56.0%
57.0%
58.0%
59.0%
Corp Profit % GDP (Left) Labor % of GDP (Right)
![Page 19: 303 Broadway Suite 1200 Cincinnati, OH 45202 (888) 244.8167 (513) 361.7600 fax (513) 361.7605 FortWashington.com 2014 Midyear Update Nick Sargen Chief.](https://reader035.fdocuments.us/reader035/viewer/2022062407/56649e185503460f94b043a3/html5/thumbnails/19.jpg)
19
Portfolio Positioning
♦ Maintain a tilt in favor of stocks over bonds
♦ Stocks are no longer cheap; however, the market is not frothy
♦ Stronger growth would bring the Fed into play sooner
♦ Weaker growth would imply earnings disappointment