Presentation on theme: "Presented by: Douglas Coté, CFA Chief Market Strategist ING Investment Management U.S. ING Global Perspectives Markets. Insights. Opportunities. 3Q2012."— Presentation transcript:
Presented by: Douglas Coté, CFA Chief Market Strategist ING Investment Management U.S. ING Global Perspectives Markets. Insights. Opportunities. 3Q2012 for the period ended 9/30/2012
Disclosure This presentation has been prepared by ING Investment Management for informational purposes. Nothing contained herein should be construed as (i) an offer to sell or solicitation of an offer to buy any security or (ii) a recommendation as to the advisability of investing in, purchasing or selling any security. Any opinions expressed herein reflect our judgment and are subject to change. Certain of the statements contained herein are statements of future expectations and other forward-looking statements that are based on managements current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. Actual results, performance or events may differ materially from those in such statements due to, without limitation, (1) general economic conditions, (2) performance of financial markets, (3) interest rate levels, (4) increasing levels of loan defaults (5) changes in laws and regulations and (6) changes in the policies of governments and/or regulatory authorities. The opinions, views and information expressed in this commentary regarding holdings are subject to change without notice. The information provided regarding holdings is not a recommendation to buy or sell any security. Past performance is no guarantee of future results. All of the data contained herein is as of 9/30/2012 ING Global Perspectives Markets. Insights. Opportunities.
The Folly of Gaming Diversification Global Perspectives on the Markets Tectonic Shifts Impacting Global Growth ING Global Perspectives Markets. Insights. Opportunities. = Global Perspectives Monthly Book page number
The Folly of Gaming Diversification ING Global Perspectives Markets. Insights. Opportunities.
4 Implementing an Effective Diversified Strategy Effective Diversification Global broad asset class expands opportunity Intelligent risk taking with a focus on compensated risks Adding high return assets to increase return and potentially decrease risk Folly of Gaming Diversification Investors try to outsmart markets Investors abandon diversified positions to sidestep impending risks or crowd into area of strong returns Reactionary in nature and directionally wrong Source: ING Investment Management
Capital Market Returns Capital market returns vary widely over time, making asset allocation decisions difficult and successful market timing virtually impossible. 5 Note: For illustration only. Past performance is not a guarantee of future results. Investors cannot invest directly in an index. Source: FactSet, ING Investment Management. Retirement 81
Global Perspectives Model Allocation Returns for a globally diversified strategy over the last 10 years refute the notion of a lost decade. 6 Overview The Global Perspectives Model includes 10 asset classes, equally weighted: S&P500, S&P400 Midcap, S&P600 Smallcap, MSCI U.S. REIT Index, FTSE NA REIT Index, MSCI EAFE Index, MSCI BRIC Index, Barclays Capital (BC) U.S. Corporate Bonds, BC U.S. Treasury Bonds, BC Global Aggregate Bonds, BC U.S. High Yield Bonds. Returns are annualized for periods longer than 1 year. Source: FactSet, FTSE NAREIT, ING U.S. Investment Management. No Lost Decade 5
Global Perspectives on the Market ING Global Perspectives Markets. Insights. Opportunities.
8 Global Perspectives on the Markets Fundamentals: primary driver of markets –Advancing Corporate Profits –Broadening Manufacturing –Consumer Strength Underestimated –Developing Economies Drive Global Growth Global Risks: secondary driver unless a breach occurs –European Debt Crisis –U.S. Debt and Growth Crisis –China Hard Landing –Commodities Bubble 8 Overview
Advancing Corporate Earnings 9 Source: Factset, ING Investment Management Since 1999 the markets price return is negative, but earnings have grown 250% from $39 to $97 in 2011 and are on track to reach $105 by the end of 2012. $105 per share forecasted 15
10 Advancing Corporate Earnings Accelerating and positive earnings drive markets up, and decelerating and negative earnings drive markets down, albeit with a reporting lag. Source: Standard & Poors, First Call, FactSet, ING Investment Management 2012 S&P 500 Earnings Forecast: $105 2012 S&P 500 Price Forecast: 1425 14
Broadening Manufacturing U.S. factory activity slipped into contraction territory based on economic uncertainties in the euro zone and China and fears of the effects of the fiscal cliff here at home. 11 51.5 Source: Institute of Supply Management, Federal Reserve, FactSet Expansionary (>50) Contractionary (<50) Economy Non Manufacturing 551 Manufacturing U.S. Institute for Supply Management Global Manufacturing 44.0 48.4 52
Consumer Strength Underestimated Retail sales, personal consumption and personal incomes are at all time highs despite high unemployment. The consumer makes up 70% of the U.S. economy. 12 Source: FactSet $ billions Personal Income Personal Consumption Expenditures Retail Sales Consumer Trends 48
13 S&P Case-Shiller Home Price Index Home values are still 31% below 2006 levels but the 20 City Composite Index has shown recent upticks and signs of a sustainable recovery with the first year over year price increase in two years. Source: Factset, S&P Case-Shiller, Bloomberg Economy Index Level 142 % 1 YR change 207 58
Unemployment Rate High unemployment may reluctantly recover as growth resumes; recent reports are somewhat mixed. 14 Source: Bureau of Labor Statistics, FactSet Economy Unemployment Rate Initial Unemployment Claims 000s Recessions 55
15 Developing Economies - World GDP and Emerging Market Importance Despite the great recession, world GDP continued to rise due to growth in emerging markets. Source: The World Bank Group * China, India, Russia, Brazil, Mexico, Korea, Indonesia and Taiwan World GDP 43
16 Developing Economies Shanghai, China 1990 (Catherine Rampell photo)
18 Global Risks European Debt Crisis PIIGS countries debt as a % of GDP is unsustainable. Source: International Monetary Fund (IMF) as of 2011 45
19 Source: Factset Global Risks U.S. Debt The total federal public debt outstanding exceeds 95% of GDP (excluding Social Security and Medicare), a level that triggered the U.S. downgrade by S&P. The current U.S. deficit is over $1.4 trillion more than 9% of GDP. > 9.4% of GDP > 95% of GDP % of GDP Debt Deficit $ Debt U.S. Government DebtDeficit Levels 61
20 Global Risks U.S. Growth The economy has surged after each of the past 2%+ falls in GDP (Y/Y) since 1948. The U.S. has recovered the output level it lost in the recession and has now reached new highs. Expansions historically last about five years. Source: Bloomberg Breakdown Consumption: 71% Government: 20% Investment: 12% Exports: 12% Imports:(15%) 56
21 Global Risks China Hard Landing Chinas declining industrial and electricity production as well as stalled export growth raises fears about the likelihood of a hard landing from its enviable recent growth. China GDP growth is now reported to be 7.9%. Source: Factset International Y/Y % change Export Growth Industrial Production Electricity Production
Tectonic Shifts Trade New trade routes between Asian and Latin American countries the intra-emerging market trade are re-shaping the economic landscape 22 Source: FactSet Exports (right axis) Imports (right axis) Trade Deficit (left axis) Highest Export Level - JUN $185 Bil $USD billions Recessions U.S. Trade 67
23 Tectonic Shifts Technology Technological innovation is unpredictable and unstoppable, exerting a powerful influence over every sector of the market
Horn River Montney Colorado Group Gammon Bakken Laramide Thrust Belt Mowry Green River Baxter Mancos McClure Monterey Gothic Hovenweep Lewis Mancos Pierre Palo Duro Barnett Eagle Ford Woodford Fayetteville Barnett/ Woodford Laramide Thrust Belt Ouachita Thrust Belt Haynesville Bossier Floyd/ Conasauga/ Neal Ohio Marcellus Appalachian Thrust Belt Utica Horton Bluff Antrim New Albany Excello/Mulkey Mobrara Cane Creek Shale Gas Basins Devonian/Mississippian Shale Fairway Structural Deformation of Crust Chattanooga Sources of Energy in U.S. Manufacturing Natural Gas: 27% Electricity:13% Liquefied Petroleum:11% Coal: 8% Fuel Oil: 2% Other :39% Tectonic Shift Energy The abundance of natural gas in North America, as well as the ability to extract oil from shale, is changing the global energy landscape. Note: Oil Prices are West Texas Intermediate light crude spot price (NYMEX). Source: Advanced Resources, SPE/Holditch Nov 2002 Hill 1999, Cain, 1994 Hart Publishing, 2008 modified from Ziff Energy Group Source: U.S. Dept of Energy, FactSet Source: Census Bureau, http://upload.wikimedia.org/wikipedia/commons/b/b4/Plate_tectonics_map.gif Economy 24 64
25 Global Perspectives on 2012 This forecast of future expectations is based on managements' current views and involves known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied.
G L O B A L P E R S P E C T I V E S The Folly of Gaming Diversification Global Perspectives on the Markets Tectonic Shifts Impacting Global Growth Executive Summary
Thank You ING Global Perspectives Markets. Insights. Opportunities.
28 Barclays Capital U.S. Aggregate Bond Index is composed of U.S. securities in Treasury, Government-Related, Corporate, and Securitized sectors that are of investment-grade quality or better, have at least one year to maturity, and have an outstanding par value of at least $250 million. Barclays Capital U.S. Corporate High-Yield Bond Index tracks the performance of non-investment grade U.S. dollar-denominated, fixed rate, taxable corporate bonds including those for which the middle rating of Moodys, Fitch, and S&P is Ba1/BB+/BB+ or below, and excluding Emerging Markets debt. Barclays Capital Global Aggregate Bond Index measures a wide spectrum of global government, government-related, agencies, corporate and securitized fixed-income investments, all with maturities greater than one year. The Credit Suisse/Tremont Hedge Fund Index is an asset- weighted hedge fund index covering over 5000 funds with at least US$50 million under management, a 12-month track record, and audited financial statements. It is calculated net of performance fees and expenses. CS/Tremont sub-indexes track hedge fund strategies according to the methods by which fund managers seek investment opportunities such as by asset class and/or use of leverage. Dow Jones Industrial Average is a price-weighted average computed from the stock prices of 30 large, widely held public companies in the U.S., adjusted to reflect stock splits and dividends. FTSE NAREIT US Real Estate Index presents comprehensive REIT performance across the U.S. economy, including all commercial investment and property sectors. FTSE EPRA/NAREIT Global Real Estate Index is designed to represent general trends in eligible real estate equities worldwide. Index Definitions The Chicago Board Options Exchange Volatility Index (CBOE VIX) is a measure of the implied volatility of S&P 500 index options. It is one measure of the market's expectation of volatility over the next 30 day period. JPMorgan Emerging Markets Bond Index Plus (EMBI+) tracks total returns for actively traded emerging markets debt instruments including U.S.-dollar denominated Brady bonds, Eurobonds, and traded loans issued by sovereign entities. MSCI EAFE Index is a free float-adjusted market capitalization weighted index designed to measure the developed markets equity performance, excluding the U.S. & Canada, for 21 countries. MSCI Europe Index is a free float-adjusted market capitalization weighted index designed to measure equity performance of the developed markets in Europe consisting of 16 country indices. MSCI Pacific Index is a free float-adjusted market capitalization weighted index designed to measure developed markets equity performance of the in the Pacific region consisting of 5 countries. MSCI Emerging Markets Index is a free float-adjusted market capitalization index that measures emerging market equity performance of 22 countries. The Municipal Bond Index is a bond index that includes investment-grade, tax-exempt, and fixed-rate bonds with long-term maturities (greater than two years) selected from issues larger than $50 million. NASDAQ Composite Index is a market capitalization weighted index of the performance of domestic and international common stocks listed on The NASDAQ Stock Market including over 2,800 securities.
29 Index Definitions The NCREIF (National Council of Real Estate Investment Fiduciaries) Property Index (NPI) is a market value-weighted index of total rates of return for a large pool of commercial real estate properties acquired in the private market for investment purposes. For properties with leverage, returns are reported as if there were no leverage. Russell 3000 Index measures the performance of the largest 3000 U.S. companies representing approximately 98% of the investible U.S. equity market. Russell 1000 Index measures the performance of the large-cap segment of the U.S. equity market and includes approximately 1000 of the largest securities based on market capitalization and representing approximately 92% of the U.S. market. Russell 1000 Growth Index measures the large-cap growth segment of the U.S. equity market including Russell 1000 companies with higher price-to-book ratios and forecasted growth. Russell 1000 Value Index measures the large-cap value segment of the U.S. equity market including Russell 1000 companies with lower price-to-book ratios and lower expected growth. Russell Midcap Index measures the performance of mid-cap stocks in the U.S. equity market including 800 of the smallest securities in the Russell 1000® Index, based on market capitalization. Russell Midcap Growth Index measures the performance of the mid-cap growth segment of the U.S. equity market including Russell Midcap Index companies with higher price-to-book ratios and forecasted growth. Russell Midcap Value Index measures the performance of the mid-cap growth segment of the U.S. equity market including Russell Midcap Index companies with lower price-to-book ratios and forecasted growth. Russell 2000 Index measures the performance of the small-cap segment of the U.S. equity market including approximately 2000 of the smallest securities based on market capitalization. Russell 2000 Growth Index measures the performance of small- cap growth stocks in the U.S. equity market including Russell 2000 companies with higher price-to-value ratios and forecasted growth. Russell 2000 Value Index measures the performance of small-cap growth stocks in the U.S. equity market including Russell 2000 companies with lower price-to-value ratios and forecasted growth. S&P 500 Index is a widely regarded as the best single gauge of the U.S. equities market, including 500 leading companies in major industries of the U.S. economy. S&P/LSTA (Loan Syndications and Trading Association) Leveraged Loan Index (LLI) is a total return market value index that tracks fully funded, senior secured, first lien term loans syndicated in the U.S., as well as dollar-denominated overseas loans, including 90-95% of the institutional universe. The S&P GICS (Global Industry Classification Standard) sectors were developed by MSCI and Standard & Poors to provide standardized industry definitions consisting (in the U.S.) of 10 sectors, 24 industry groups, and 68 industries. Thomson VentureXpert TM is a database provided by Thomson Venture Economics, a leading provider of industry data about venture capital and private equity firms, which is regarded as the industry-standard source for comprehensive information on venture funds, private firms, venture-backed companies and limited partners, as well as analytics for fund statistics and performance. U.S. Treasury Index is a component of the Barclays Capital U.S. Aggregate Index.
30 Important Disclosures All indexes are unmanaged and an individual cannot invest directly in an index. Index returns do not include fees or expenses. Past performance is no guarantee of future results The views and judgments expressed are those of ING Global Perspectives. They are subject to change at any time. These views do not necessarily reflect the opinions of any other firm. All investing involves risks of fluctuating prices and the uncertainties of rates of return and yield inherent in investing. All security transactions involve substantial risk of loss. You should consult your tax, legal, accounting or other advisors about the matters discussed herein. As indicated on each page, some information was obtained from outside sources and is believed to be reliable, but ING does not guarantee its completeness or accuracy. Diversification does not guarantee against a loss and there is no guarantee that a diversified portfolio will outperform a non-diversified portfolio. PRINCIPAL RISKS: All investing involves risks of fluctuating prices and the uncertainties of rates of return and yield inherent in investing. Mutual funds are subject to market risk. Foreign Investing does pose special risks including currency fluctuation, economic and political risks not found in investments that are solely domestic. Please keep in mind, using diversification or asset allocation as part of your investment strategy neither assures nor guarantees better performance and cannot protect against loss in declining markets. Global Perspectives Market Models are tactically managed to a strategy. There is no guarantee that intended results or forecasts will be realized. Past performance is no guarantee of future results. Your clients should consider the investment objectives, risks, charges and expenses of the Fund carefully before investing. For a free copy of the Funds prospectus, which contains this and other information, visit us at www.inginvestment.com or call ING Investment Management at 1-800-992-0180. Please instruct your clients to read the prospectus carefully before investing. www.inginvestment.com
This presentation has been prepared by ING Investment Management for informational purposes. Certain information may be received from sources ING Investment Management considers reliable; ING Investment Management does not represent that such information is accurate or complete. Nothing contained herein should be construed as (i) an offer to sell or solicitation of an offer to buy any security or (ii) a recommendation as to the advisability of investing in, purchasing or selling any security. Any opinions expressed herein reflect our judgment and are subject to change without notice. Certain of the statements contained herein are statements of future expectations and other forward-looking statements that are based on managements current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. Actual results, performance or events may differ materially from those in such statements due to, without limitation, (1) general economic conditions, (2) performance of financial markets, (3) interest rate levels, (4) increasing levels of loan defaults (5) changes in laws and regulations and (6) changes in the policies of governments and/or regulatory authorities. The information provided regarding holdings is not a recommendation to buy or sell any security. Fund holdings are fluid and are subject to daily change based on market conditions and other factors. ING assumes no obligation to update any forward-looking information contained in this document. ING Investment Management is not soliciting or recommending any action based on any information in this document. Past performance is no guarantee of future results. CA:3706 31