Date post: | 01-Jan-2016 |
Category: |
Documents |
Upload: | maile-greene |
View: | 12 times |
Download: | 0 times |
Global Market Overview/Tactical Asset Allocation Basics
Denver, CO September 29, 2010
Global Major Trend Index: Currently Positive…Suggests Global Markets Can Move Higher
• INTRINSIC VALUE - 21 Indicators.....current net reading of +89Global Markets Considered To Be Undervalued.
• ECONOMIC-INTEREST RATES- INFLATION - 15 Indicators, net reading of -12Deflation, Slower Growth, Rising Government Deficits.
• ATTITUDINAL - 22 Indicators, net reading of -64Mixed Signals Of Optimism/Pessimism
• MOMENTUM-BREADTH-DIVERGENCE - 41 Indicators, net reading of +186Technical work is decisively positive.
• TOTAL = 99 indicators, calculated weekly.....current net reading of +199.Ratio of positive to negative points = 1.30 (0.95 to 1.05 is Neutral)
Global Equity Valuations (Ex-US): Room For Multiple Expansion
1970 1980 1990 2000 2010
10
15
20
25
30
35Median Developed Country Ex U.S. -P/E on 5-Yr. Normalized EPS(Based on 20-quarter moving avg. of 12-Mo. Trailing EPS)
© 2010 The Leuthold Group
Median = 18.1x
10.2xAugust 31, 2010
Feb09 =
7.8x
May07 =30.2x
Jul82 =7.5x
Foreign markets have 40-50%
upside to their 1990 and 2002 valuation lows, and about 80% upside to their
long-term valuation median.
Emerging Market Equity Valuations: Room For Multiple Expansion
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
8
10
12
14
16
18
20
22
24
26
28
30
32
34MSCI Emerging MarketsP/E on 5-Yr. Normalized EPS(Based on 20-quarter moving avg. of 12-Mo. Trailing EPS)
© 2010 The Leuthold Group
10-Yr. Median = 18.6x
March 6, 2009
8.8x
October 26, 2007
30.9x
September 21, 2001
11.1x
September 17, 2010
17.2x
Global Equity Valuations: Comparatively Cheap To U.S.
1970 1980 1990 2000 2010
60
70
80
90
100
110
120
130
140
150
160
170
180USA/Rest Of World Normalized "Ratio Of Ratios"(Ratio of MSCI USA P/E to MSCI Median Country P/E; P/Es based on 5-Yr. Normalized EPS)
© 2010 The Leuthold Group
141%July 30, 2010
Nov07 =82%
Above 140% =U.S stocks expensive vs.
rest of world
1975-To-Date Median = 107%
Below 85% =U.S stocks cheap vs.
rest of world
U.S. Equity Valuations: Not As Much Room For Multiple Expansion
0
5
10
15
20
25
30
35
40
1926 1931 1936 1941 1946 1951 1956 1961 1966 1971 1976 1981 1986 1991 1996 2001 2006 2011
MEDIAN 16.4x
S&P 500Quarterly Average
Normalized P/E Ratios1926 To Date338 Quarters
© The Leuthold Group 2010 S&P 500: P/E Ratios…Normalized1926 To Date
Global Equity Valuations They've Fallen And Can't Get Up:
100
90
80
40
50
60
70
30
20
10
0
MAY 31, 2007 JULY 31, 2010
P/E Percentile Ranks By Country(P/E based on 5-Yr. Normalized EPS;
percentiles based on period from 1975 to date)
AustraliaIrelandSweden
NorwayGreece
Hong KongSwizterland
PortugalGermanyNetherlands
U.K.
Belgium
SingaporeCanadaDenmark
New Zealand Spain
U.S.
France
Finland
Italy
Japan
Austria
© 2010 The Leuthold Group
Australia
Ireland
Sweden
Norway
Greece
Hong Kong
Swizterland
Germany
Netherlands
U.K.
Belgium
Singapore
CanadaDenmark
New Zealand
Spain
U.S.
France
Finland
Japan
AustriaItaly
Portugal
Above 70 = Expensive
1975-To-Date Median
Below 30 = Cheap
The Long Term Performance Impact Of Valuations:
16.6%15.3%
14.4%12.8%
10.0% 10.0%8.2% 8.5% 8.2%
4.4%
0%
5%
10%
15%
20%
25%
1st 2nd 3rd 4th 5th 6th 7th 8th 9th 10th
MEDIAN TEN YEAR ANNUAL COMPOUND TOTAL RETURNSFROM HISTORIC P/E DECILES
1926 TO DATE
Ten Years Out
DECILESStocks Cheap Stocks Expensive©The Leuthold Group 2010
Now
Money Flows: Contrarian Indicator
-$20.0
-$15.0
-$10.0
-$5.0
$0.0
$5.0
$10.0
$15.0
$20.0
$25.0
$30.0
$35.0
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Foreign Focus Equity Funds4-Mo. Avg. Net Cash Flow (1987 to Date)
Source: ICI, The Leuthold Group
MSCI EAFE IndexMonth End
©The Leuthold Group 2010Billions
800
1600
1400
1200
1000
900
1800
2000
2400
700
A Lead On The Global Economy
OECD + 6 Major Non-Member Composite Leading Indicator Peaks
90
92
94
96
98
100
102
104
106
108
110D
ec-7
0
Dec
-72
Dec
-74
Dec
-76
Dec
-78
Dec
-80
Dec
-82
Dec
-84
Dec
-86
Dec
-88
Dec
-90
Dec
-92
Dec
-94
Dec
-96
Dec
-98
Dec
-00
Dec
-02
Dec
-04
Dec
-06
Dec
-08
Dec
-10
© The Leuthold Group 2010
Global Stock Bond Performance
MSCI ACWI/Barclays Global Aggregate Index Ratio Around OECD+6 CLI Peaks
80
85
90
95
100
105
-11M
-10M -9M
-8M
-7M
-6M
-5M
-4M
-3M
-2M
-1M 0M 1M 2M 3M 4M 5M 6M 7M 8M 9M 10M
11M
12M
Global Stk/Bnd MedianPatternCurrent Global Stk/Bnd Perf.
© The Leuthold Group 2010
CLI Peaks
Global Stock Bond Performance
MSCI ACWI/Barclays Global Aggregate Ratio vs. OECD + 6 Major Non-Member CLI
91
93
95
97
99
101
103
105
107
Jan-
86Ja
n-87
Jan-
88Ja
n-89
Jan-
90Ja
n-91
Jan-
92Ja
n-93
Jan-
94
Jan-
95Ja
n-96
Jan-
97Ja
n-98
Jan-
99Ja
n-00
Jan-
01Ja
n-02
Jan-
03Ja
n-04
Jan-
05Ja
n-06
Jan-
07Ja
n-08
Jan-
09Ja
n-10
0.5
1
1.5
2
OECD+6 CLI
MSCI AC World Index/BarclayGlobal Agg. Index
© The Leuthold Group 2010
Dividend Payers Outperform After CLI Peaks
Payout Yield Perf. Around OECD+6 Leading Indicator Peak
95
100
105
110
115
120
-11M
-10M -9M
-8M
-7M
-6M
-5M
-4M
-3M
-2M
-1M 0M 1M 2M 3M 4M 5M 6M 7M 8M 9M 10M
11M
12M
Payout Yld Perf. MedianPatternCurrent Payout Yld Perf.
© The Leuthold Group 2010
CLI Peaks
Global Asset Allocation Structure Global MTI Went Positive Mid-September
68% GLOBAL EQUITIES: Increased (Net Exposure 60%)
8% EQUITY HEDGE: No Planned Change
15% INCOME: No Planned Change (Net Exposure 13%)
4% Global Government Bonds: Now made up of Brazilian and Australian government bonds, as well as Emerging Country Fixed Income ETFs.
4% Corporate Bond Funds: The two funds are now up 5.8% YTD.
4% High Yield Bonds: Yield spread is now considered neutral.
2% Treasury Inflation Protection Bonds (TIPS): Inflation is expected to pick up, and this holding should help in that environment.
1% Convertible Bonds: Focus is only on Foreign Convertible securities.
2% FIXED INCOME HEDGE: No Planned Change
The Fixed Income Hedge was established in September 2009 and is made up of a short holding in U.S. T-bonds.
4% REAL ESTATE INVESTMENT TRUSTS: No Planned Change
Position made up of mortgage REITs, along with a global real estate fund.
4% PHYSICAL METALS: Increased
An additional 1% of assets was committed here in early September due to our concern about inflation implications. Gold is now 3.1% of assets and Silver is 0.9%.
27% CASH EQUIVALENTS: Increased
Global Equity Portfolio StructureAugust Q2 Q1 Q4 Q3 Q2 Q1
2010 2010 2010 2009 2009 2009 2009Developed 68.3% 76.5% 69.3% 66.5% 66.3% 64.4% 82.1%Emerging 31.7% 23.5% 30.7% 33.5% 33.7% 35.6% 17.9%
Countries
United States 33.1%Japan 8.3%South Korea 7.4%China 5.2%Taiwan 4.5%Sweden 4.2%Canada 4.0%Brazil 3.6%Germany 3.4%Mexico 3.3%Hong Kong 3.2%United Kingdom 3.2%France 2.9%Singapore 2.9%Turkey 2.7%South Africa 1.6%Philippines 1.2%Malaysia 1.1%Russia 1.0%Portugal 0.9%Israel 0.9%Finland 0.5%Netherlands 0.5%Belgium 0.4%
Global Equities Portfolio Details
Characteristics Current Aug Avg August Avg August
Portfolio Portfolio Portfolio MSCI MSCI
Portfolio MSCI Sectors Weight Weight Performance Weight Performance
Mkt Cap (Mil.) Consumer Discretionary 28.0% 27.4% -0.3% 9.5% -3.1%Med 3,255 6,213 Materials 18.3% 15.1% 7.5% 8.4% -1.8%Wtd Avg 9,264 56,294 Industrials 18.2% 23.2% -2.4% 10.5% -5.1%
Div Yld 2.12 2.57 Information Technology 10.3% 7.3% -6.4% 11.8% -6.9%P/E Health Care 8.1% 8.4% -3.8% 8.6% 0.3%
Wtd Avg 12.91 39.50 Financials 7.1% 8.1% -5.3% 21.5% -5.8%Wtd Med 11.73 14.87 Consumer Staples 6.1% 6.1% -0.5% 9.9% -0.6%
FY1 P/E 11.33 12.83 Utilities 3.7% 3.8% -2.1% 4.3% 0.1%P / Cash Flow 6.65 8.88 Energy - 0.5% 3.1% 10.7% -3.9%P / Book 1.65 2.01 Telecommunication Services - - - 4.9% 0.7%P / Sales 0.89 1.50Sales Growth 4.67 4.62Est LTG Rate 10.80 9.88ROA 6.35 5.83ROE 13.52 12.89Oper Marg 9.81 14.79Net Marg 6.79 9.12LT D/C 29.82 30.40Beta 0.98 1.00% Domestic 33% 42%# of Holdings 114 2411
S&P 500 Technical Similarities With The Past
60
70
80
90
100
110
120
130
140
150
160
Fe
b-7
2
Au
g-7
2
Fe
b-7
3
Au
g-7
3
Fe
b-7
4
Au
g-7
4
Fe
b-7
5
Au
g-7
5
Fe
b-7
6
Au
g-7
6
Fe
b-7
7
Au
g-7
7
Fe
b-7
8
Au
g-7
8
Fe
b-7
9
Au
g-7
9
Fe
b-8
0
Au
g-8
0
Fe
b-8
1
Au
g-8
1
Fe
b-8
2
Au
g-8
2
400
600
800
1,000
1,200
1,400
1,600
Tracking The S&P 500: Technical Similarities With The Past
©The Leuthold Group 2010
1972-1982
Today
1974 Low
2009 Low
Possible Market Trajectory Based On 1974-1982
Mid Term Exams
90
95
100
105
110
115
120
-200
-190
-180
-170
-160
-150
-140
-130
-120
-110
-100 -9
0
-80
-70
-60
-50
-40
-30
-20
-10 0 10 20 30 40 50 60 70 80 90 100
110
120
130
140
150
160
170
180
190
200
Days Prior To Election Days After Election
S&P 500 Market Action: Before And After Mid-Term Elections
(1942 To Date)
©The Leuthold Group 2010
Election Day Indexed To 100
S&P 500 Performance S&P 500 Performance200 Days Leading Up To 200 Days Following
Mid-Term Elections Mid-Term Elections1942 15.6% 30.5%1946 -15.3% 3.9%1950 12.4% 13.0%1954 23.7% 31.8%1958 25.1% 14.7%1962 -14.6% 22.6%1966 -14.0% 15.3%1970 -6.4% 16.6%1974 -22.2% 10.6%1978 5.2% 15.7%1982 18.6% 20.2%1986 19.6% 36.0%1990 -6.0% 25.6%1994 -1.3% 19.7%1998 13.5% 20.3%2002 -18.2% 8.5%2006 9.2% 6.1%
Average 2.6% 18.3%
Std Deviation 15.4% 8.7%# Positive 9 17
# Negative 8 0
Mid Term Exams
Net Seats Lost By President's Party In Mid-Term Elections(1942 To Date Average)
President's Approval Rating: Senate HouseUnder 50% -5 -36Over 50% -3 -18
Presidential Approval Rating vs. Mid-Term Changes In Congressional Majority (1942 To Date Average)
When Majority Power: Presidential Approval RatingChanges 51%
Doesn't Change 54%
Mid-Term Pre-Election Post-Election PresidentialPresident's Election Results Senate House Senate House Change Approval
President Party Senate House Majority Majority Majority Majority In Power? Rating *1942 FDR D D -8 D -45 D D D D No 701946 Truman D D -12 D -54 D D R R Yes 331950 Truman D D -5 D -28 D D D D No 391954 Eisenhower R R -2 R -18 R R D D Yes 611958 Eisenhower R R -12 R -48 D D D D No 571962 Kennedy D D +2 D -4 D D D D No 611966 Johnson D D -3 D -48 D D D D No 441970 Nixon R R +1 R -12 D D D D No 581974 Ford R R -4 R -48 D D D D No 541978 Carter D D -3 D -15 D D D D No 491982 Reagan R 0 R -26 R D R D No 421986 Reagan R R -8 R -5 R D D D Yes 631990 Bush Sr. R R -1 R -8 D D D D No 581994 Clinton D D -8 D -54 D D R R Yes 461998 Clinton D 0 D +5 R R R R No 662002 Bush Jr. R R +2 R +8 D R R R Yes 632006 Bush Jr. R R -6 R -30 R R D D Yes 382010 Obama D -- -- D D -- -- --
Average -4 -25* Final Gallup Poll Prior To Mid Term Election
Asset Allocation Principles
We believe the most important investment decision is proper asset class selection and a highly disciplined, unemotional method of evaluating risk/reward potential is necessary for successful asset allo-cation.
We adjust the exposure to each asset class to reflect our view of
the potential opportunity and risk offered within that category. Flexibility is central to the creation of an asset allocation portfolio
that is dependable in a variety of market conditions. We possess the flexibility and discipline to invest where there is value and to sell when there is undue risk.
Benenefits of Disciplined Tactical Asset Allocation
$-
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
$70,000
$80,000
$90,000
$100,000
$110,000
$120,000
$130,000
$140,000
Dec-8
7
Dec-8
8
Dec-8
9
Dec-9
0
Dec-9
1
Dec-9
2
Dec-9
3
Dec-9
4
Dec-9
5
Dec-9
6
Dec-9
7
Dec-9
8
Dec-9
9
Dec-0
0
Dec-0
1
Dec-0
2
Dec-0
3
Dec-0
4
Dec-0
5
Dec-0
6
Dec-0
7
Dec-0
8
Dec-0
9
Dec-1
0
Core Investment Portfolio
S&P 500
Lipper Flex
Tactical Asset Allocation Basics
-5%
0%
5%
10%
15%
20%
25%
30%19
26
1929
1932
1935
1938
1941
1944
1947
1950
1953
1956
1959
1962
1965
1968
1971
1974
1977
1980
1983
1986
1989
1992
1995
1998
2001
2004
2007
2010
Stock/Bond Performance Differential *20 Year Trailing Total Return ACR
* S&P 500 Vs. 10 Year Treasuries
>0% Stocks Outperform Bonds
<0% Bonds Outperform Stocks©The Leuthold Group 2010
10
25
50
100
250
500
10001500
S&P 500 CompositePrice Index
Tactical Asset Allocation Basics
-5%
0%
5%
10%
15%
20%
25%
30%19
26
1929
1932
1935
1938
1941
1944
1947
1950
1953
1956
1959
1962
1965
1968
1971
1974
1977
1980
1983
1986
1989
1992
1995
1998
2001
2004
2007
2010
Stock/Bond Performance Differential *20 Year Trailing Total Return ACR
* S&P 500 Vs. 10 Year Treasuries
>0% Stocks Outperform Bonds
<0% Bonds Outperform Stocks©The Leuthold Group 2010
Five Years Later.... S&P 500 TR: +33.8% (ACR)10 Year T-Note TR: +4.6% (ACR)
Five Years Later.... S&P 500 TR: +23.1 (ACR)10 Year T-Note TR: +1.6% (ACR)
10
25
50
100
250
500
10001500
S&P 500 CompositePrice Index
Tactical Asset Allocation Basics
0%
2%
4%
6%
8%
10%
12%19
26
1929
1932
1935
1938
1941
1944
1947
1950
1953
1956
1959
1962
1965
1968
1971
1974
1977
1980
1983
1986
1989
1992
1995
1998
2001
2004
2007
2010
Stock/Bond Performance Differential *40 Year Trailing Total Return ACR
* S&P 500 Vs. 10 Year Treasuries
>0% Stocks Outperform Bonds
©The Leuthold Group 2010
Q1-2009All-Time Low