INVESTMENT MANAGEMENT, LLCpiedmonteconomics.club/w2/admin/Raj - Presentation... · The Year Ahead...
Transcript of INVESTMENT MANAGEMENT, LLCpiedmonteconomics.club/w2/admin/Raj - Presentation... · The Year Ahead...
What can we expect in the year ahead?
Raj Gupta
February 13, 2019
SEACRESTINVESTMENT MANAGEMENT, LLC
➢ 2018, a Year to be Remembered…
➢ Demographics and Their Impact on Investment Returns
➢ Developed and Emerging Nation Indebtedness
➢ The Year Ahead
➢ Summary and Q&A
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SEACRESTINVESTMENT MANAGEMENT, LLC
Agenda
➢ 2018, a Year to be Remembered…
➢ Demographics and Their Impact on Investment Returns
➢ Developed and Emerging Nation Indebtedness
➢ The Year Ahead
➢ Summary and Q&A
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2018 Review
2018 Ups and Downs:
Global Risks and Uncertainties
Fed Hikes
High Levels of Volatility
Low Total Returns
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2018 Review - Global Risks and Uncertainties
Other Headline Themes in 2018:
➢ International Trade Tension
➢ Geopolitical Unrest in the Korean Peninsula
➢ Brexit: should we stay or should we go…?
➢ Fears of an Impending Global Growth Slowdown
➢ US business investment decelerated in the second half of 2018
➢ US Housing became an early casualty of rising interest rates
➢ China slowdown
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2018 Review – Fed Hikes
Fed Hikes 4 times in 2018:
Rates started at 1.50% and ended at 2.50%
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2018 Review - Volatility
DJ Positive Historical Record from 2018:
8th highest daily percentage change on December 26th: 4.98%
Largest daily point gains for the Dow Jones:
Source: Yahoo Finance
Largest daily point drops for the Dow Jones:
Source: Yahoo Finance
DJ Negative Records from 2018:
8th lowest daily percentage change on February 5th: - 4.60%
9th lowest daily percentage change on February 8th: - 4.15%
Worst Christmas Eve trading day in History: - 2.67%
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2018 Review – Total Returns
Asset Class Performance December Q4 and YTD 2018 – Total Return %
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➢ETF ASHR China-28.44%
➢ETF USO Oil-19.57%
➢ETF SHY 1-3Y T-Bond1.46%
➢ 2018, a Year to be Remembered…
➢ Demographics and Their Impact on Investment Returns
➢ Developed and Emerging Nation Indebtedness
➢ The Year Ahead
➢ Summary and Q&A
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Demographics
➢ Projected to increase from:
7.35B (2015) to 9.73B (2050): 32% increase9.73B (2050) to 11.21B (2100): 15% increase
➢ Current population growth is slower than 10 years ago
➢ Old-Age Dependency Ratio (population aged 65+ per 100 population aged 15-64)
✓ Developed Nations = 26.74
✓ Developing Countries = 9.69
Source: CS, SeaCrest
Population in the World and Regions:
Cumulative Projected Population Growth Old-age dependency ratio
Source: CS, SeaCrest
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Demographics
➢ General trends are towards:
✓ longer lives
✓ lower fertility rates
✓ higher median ages
✓ higher old-age dependency ratios
Source: CS, SeaCrest
Core Demographics – Selected Countries Ranking
# 1 # 2
Population size China India
Old-dependency ratio Japan Italy
Median age Japan Germany
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Demographics
➢ 86% of the world’s population
➢ 77% of the world’s land mass
➢ 39% of the world’s GDP
➢ 21% of stock market capitalization
➢ 5% of the world’s bond markets
Source: Population – World Bank, 12/2016. GDP – IMF, 10/2017. Market Cap – IMF, 04/2018
Emerging Nations of the world account for:
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Population Pyramid: Developing Nation Advantages
➢ Mexico: 27.3% of population under 14 years old
➢ Japan: 13.0% of population under 14 years old
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Fertility Rate vs. Per Capita GDP (2007)
➢ Fertility rate drops as income per capita increases
➢ Replacement level is hit at an income per head of $4,000 - $10,000 a year
➢ Globalization has resulted in an increase of women in the workforce
Size of circle is proportional to country's population
Source: The Economist, www.gapminder.org
Demographics
“the fertility rate of
half the world is
now 2.1 or less—
the magic number
that is consistent
with a stable
population”
The Economist,
October 29, 2009
As of December
2015, the average
global fertility rate
was about 2.5
The United Nations
Department of
Economic and Social
Affairs
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Pensions Funds under significant pressure
➢ U.S. multinationals are contributing to a $78 trillion gap in pension funding
within a group of 20 countries that belong to the Organization for Economic
Cooperation and Development
Source: Citigroup, Bloomberg, SeaCrest
Demographics
➢ 2018, a Year to be Remembered…
➢ Demographics and Their Impact on Investment Returns
➢ Developed and Emerging Nation Indebtedness
➢ The Year Ahead
➢ Summary and Q&A
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Developed and Emerging Nation Indebtedness
World Government Debt as a % of GDP
US leads the World with
roughly $22 trillion
Greece is at a level of
approximately 178%
Japan has the highest
debt-to-GDP ratio, at
239%
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Developed and Emerging Nation Indebtedness
General government gross debt as a percentage of GDP
✓ Debt in excess of 90% associated with mean growth of 1.7%
✓ Debt between 30% - 90% associated with mean growth of 3.0%
✓ Debt below 30% associated with mean growth of 3.7%
Source: OECD National Accounts Statistics; Eurostat Government finance statistics. IMF Economic Outlook. April 2017.
SEACRESTINVESTMENT MANAGEMENT, LLC
Developed and Emerging Nation Indebtedness
Government Debt, Growth, and Inflation: 1946 - 2009
Advanced Economies
Source: Growth in Time of Debt, Reinhart and Rogoff (2010)
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Developing Economies
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Developed and Emerging Nation Indebtedness
Source: IMF, Bloomberg
% annual GDP growth
gross debt as % of GDP
GDP growth moving average
90% Debt / GDP
Lost Decades: The Japanese Experience
➢ Gross Debt as % of GDP and Annual GDP Growth Rate
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IMF projections of gross debt as a share of GDP
Source: IMF Fiscal Monitor. April 2018.
Developed and Emerging Nation Indebtedness
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US historical gross federal debt as a percentage of GDP
Source: Advisor Perspectives, dshort.com. 2017.
Developed and Emerging Nation Indebtedness
➢ 2018, a Year to be Remembered…
➢ Demographics and Their Impact on Investment Returns
➢ Developed and Emerging Nation Indebtedness
➢ The Year Ahead
➢ Summary and Q&A
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Low Interest Rates
Nominal Yields on Government Bonds
➢ Current State of Interest Rates
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Low Interest Rates
Normalization
➢ In Sep 2018, global stock of negative-yielding bonds hits low
➢ Just to see the level rise back to well over $8.0 trillion
Source: Bloomberg as of Jan 2019
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Low Interest Rates
How to save under Negative Interest Rate Policy - NIRP conditions?
➢ What would you do if the interest rate(s) on saving account(s) fell
below 0%, for example, to -0.5%, so that you would receive less
money in the future than you originally saved.
Source: VoxEU.org
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Stocks and Bonds
Dividends as a Bigger Part of Company Profits
➢ Investors are clamoring more for dividends as a result of low rates
➢ Are stocks being treated as an alternative to bonds?
➢ Between 2012 – 2015:
US companies acquired $1.7 trillion of their own stocks
➢ Announced buybacks for 2018 hit $1.1 trillion
Source: Wall Street Journal
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Stocks and Bonds
What to expect in 2019…?
➢ International Trade – China and USA
➢ Korean Peninsula
➢ Global Recessionary Risk
➢ India Elections
➢ Washington Grid Lock
➢ Brexit
➢ Venezuela: end game?
➢ 2018, a Year to be Remembered…
➢ Demographics and Their Impact on Investment Returns
➢ Developed and Emerging Nation Indebtedness
➢ The Year Ahead
➢ Summary and Q&A
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Agenda
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Questions & Answers
Organization
SeaCrest Investment Management, LLC is an SEC registered investment advisor specializing in the
management of fixed-income portfolios for institutional and private clients. SeaCrest is an employee-
owned Firm with offices in New York, Michigan and South Dakota.
SeaCrest Wealth Management, LLC (SWM) is an SEC registered investment advisor providing
wealth management guidance and solutions based on a thorough understanding of each client’s
goals. SWM has offices in Arizona, California, Illinois, Florida, Kansas, Kentucky, Maine, Michigan,
Missouri, New Hampshire, New Jersey, New York, Ohio, Oregon, South Carolina and South Dakota.
Disclaimer
This is not an offer to purchase or sell securities. Not for distribution to the general public. There is no
assurance that an investment will achieve its objective. Investments are subject to market risk, which
is the possibility that the market values of securities owned by the investment will decline and that the
value of the investment may therefore be less than what you paid for them. Accordingly, you can lose
money. Investments in foreign markets entail special risks such as currency, political, economic, and
market risks. The risks of investing in emerging market countries are greater than the risks generally
associated with foreign investments.
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Our Location
3010 Westchester Ave, Suite 307
Purchase, NY 10577
914-502-1900 Phone
914-251-1312 Facsimile
www.seacrestim.com