julius bär investment opportunities outlook 2014
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Transcript of julius bär investment opportunities outlook 2014
InsightsInvestment opportunitiesOutlook 2014
Julius Baer Research / Publication date: 27 November 2013Please find important legal information at the end of this publication.
ImprintPublication date
Current prices
Editorial
Content
Overview
Outlook 2014
Next Generation
Economics
Currencies
Bonds
Equities
Commodities
Rating Target Price ISIN
Spot 3m 12m
Spot 3m 12m
Rating Issuers
Value 12m
Price 12m
2012 2013E 2014E 2012 2013E 2014E
2012 2013E 2014E 2012 2013E 2014E
Asset class Focus on ... Avoid ...
Outlook 2014
Recoupling
Growth stampede and savings glut
Long cycles coming to an end
Just when economists and investors have become used to changes in growth patterns, the harbingers of a new era are on their way
What has changed?
Recoupling
Chart 1: Recoupling – shrinking growth differential
More balanced, but watch out for currency crises
Especially for those econ-omies with extreme current account imbalances, curren-cy crises are on the cards in 2014
What happened to inflation fears? Chart 2: External imbalances in selected emerging and advanced economies
Chart 3: Global output gap*
Chart 4: Equity risk premium – in favour of equities vs. bonds
Chart 5: Global equities – no bargain, but not expensive either
Outlook 2014
Solid growth, tame inflation: Good for stocks?
After all the years of owning bonds and gold as a preferred asset mix, the pain trade in 2014 may yet again be buying shares
Going against the grain
Where are the opportunities?
Thematic opportunities
Currencies:
Equities:
Bonds:
healthcare sector:
Some biotechnology compa-nies have made tremen - dous progress with ‘orphan drugs’, i.e. treatment of rare diseases
Chart 6: M&A trend will be continued in 2014
Next Generation
E-commerce and its impact on the logistics industry
New technology applications and changing shopping behaviour are key drivers of e-commerce
The internet evolution
Changing shopping patterns
E-substitution and logistics
Chart 1: Global mobile commerce, 2011–2017E
The dynamics of e-sub- stitution bring fundamental changes to the logistics industry
Strong B2C parcel volumes
Chart 2: UPS’s domestic volume mix shifts from B2B to B2C
Chart 3: Annual parcel volume growth vs. annual global real GDP growth, 2007–2012
Economics
Global recovery is becoming more synchronised
Convergence on the map
Disinflation allows lavish monetary policy to continue
Chart 1: Surging cyclical synchronicity indicator*
Chart 2: Deflation index** still positive for the USA and Europe
A benign inflation backdrop allows a continuation of lavish monetary policy
Currencies
Dollar support from yield advantage close to peak
Peaking US yield advantage
A broadening global eco-nomic recovery will at least cap any further widen-ing of the USD-EUR yield differential
Chart 1: USD-EUR yield differential
Chart 2: USD is richly valued
Emerging market currency stress
Bonds
Anxiously waiting for the central banks’ first move
Ample liquidity provision
Liquidity provision will remain generous in the shorter term
Yield curve to steepen
Chart 1: In the short term, central bank liquidity provision will keep rising
Chart 2: US yield curve could steepen even more in 2014
Controlling the risk
Euro yield convergence
Chart 3: Banking union will foster more convergence among EU banks
Chart 4: Convertible bonds were the most profitable segment in 2013
The European banking union will lead to more yield convergence in 2014
Convertibles stay in demand
Equities
No year-end rally but constructive markets into 2014
No year-end rally expected
No correction expected
Chart 1: S&P 500 seasonal patterns
Chart 2: Total return decomposition
Outlook 2014
Equity markets in 2014 are driven rather by earn-ings, not P/E expansion
WPP
Stock data
Price target: GBp 1500 Closing price: GBp 1355
Financials 2011 2012 2013E 2014E
Performance 1m 3m 12m
amazon.com
Stock data
Price target: USD 395 Closing price: USD 376.64
Financials 2011 2012 2013E 2014E
Performance 1m 3m 12m
Nobel Biocare
Stock data
Price target: CHF 10 Closing price: CHF 13.45
Financials 2011 2012 2013E 2014E
Performance 1m 3m 12m
Commodities
Year three of the fading supercycle
Themes for 2014 Chart 1: North American crude oil production
Chart 2: Chinese gold demand
We see increasing signs of slowing Chinese gold investment demand
Unnoticed Canadian oil boom
Important legal informationThis publication has been produced by Bank Julius Baer & Co. Ltd., Zurich, which is authorised and regulated by the Swiss Financial Market Supervisory Authority (FINMA). The information and opinions expressed in this publication were produced as of the date of writing and are subject to change without notice.
IMPRINT
Christian Gattiker, Head of ResearchBritta Simon, Equity Research,David A. Meier, Economist, David Kohl, Head of Currency Research,Christoph Riniker, Head of Strategy Research, Markus Allenspach, Head of Fixed Income Research, Bruno Winiger, Equity Research, Lilian Montero, Equity Research,Patrik Lang, Head of Equity Research, Norbert Rücker, Head of Commodity Research,
APPENDIXAnalyst certification
Please refer to the following link for more information on the research methodology used by Julius Baer analysts:
Price information
Disclosure
Equity ResearchFrequently used abbreviations
Abbr. Description Abbr. Description Abbr. Description
Equity rating allocation as of 25/11/2013
Equity rating change history as of 25/11/2013
Company Rating History
Rating system for global equity research (stock rating)
Strategy research
Fixed income researchRating system for Fixed Income
Fixed income research maintains an issuer list with the following four risk categories
Credit rating definitionIn
vest
men
t gr
ade
Moody’s S&P Fitch/IBCA Credit rating definition
Non
-inve
stm
ent
grad
e
DISCLAIMERGeneral:
Suitability:
Information/forecasts referred to:
Risk:
Past performance is not a reliable indicator of future re-sults. Performance forecasts are not a reliable indicator of future performance. The Julius Baer fixed-income ratings apply exclusive-ly to bonds of the specific issuer ranked senior unsecured or higher. They are therefore not valid for debentures junior to the men-tioned ranking unless mentioned explicitly.
Miscellaneous:
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