Presentation on theme: "1 global investment management Investor implications for global deleveraging Glyn Owen 20 th September 2012."— Presentation transcript:
1 global investment management Investor implications for global deleveraging Glyn Owen 20 th September 2012
2 global investment management Central government debt burden 1900 to 2011 - advanced and emerging economies Source: Reinhart (2010), Reinhart and Rogoff (2009 and 2011), sources cited therein and the authors %
3 global investment management Total debt to GDP for developed economies 1990 - 2012 Source: Deutsche Bank, Haver. September 2012.
4 global investment management Debt composition varies widely Source: Bloomberg, September 2012.
5 global investment management US fiscal deficit as % of GDP 1791 -2011 Source : Deutsche bank, GFD. September 2012.
6 global investment management Budget deficits larger in the US than in peripheral Europe Source: Deutsche bank. September 2012. Greece, Ireland, Italy, Portugal and Spain: GDP- weighted fiscal balance US Budget deficit as a % of GDP %
7 global investment management Deleveraging: where are we in the cycle? Note: Debt refers to external marketable debt and excludes internal debts, e.g. interbank debts Source: FRB, Haver Analytics, DB Global Markets Research
8 global investment management US real GDP post-war experience: not a normal cycle... Source: Nedgroup Capital. September 2012.
9 global investment management The UK recovery is weaker than in the great depression Source: Deutsche Bank. September 2012. %
10 global investment management Short term interest rates over past 10 years Source: MGIM, Bloomberg. September 2012 US, UK, Japan and Europe %
11 global investment management The world is not normal: UK base rate 1694 to today Source: Deutsche Bank, GFD. September 2012.
12 global investment management The world is not normal: Swiss government bond yields Source: Bloomberg, MGIM. September 2012.
13 global investment management The world is not normal: 10 year government bond yields Source: Bloomberg, MGIM. September 2012.
14 global investment management The world is not normal: US 10 year yield since 1790 Source: Deutsche Bank, GFD, Bloomberg Finance LLp. September 2012.
15 global investment management Quantitative easing: Bank of England balance sheet as a % of GDP Source: Deutsche bank. September 2012.,
16 global investment management Tail risk of extreme events are not insignificant US fiscal cliff Chinese recession Eurozone disintegration Journey into the unknown – monetary easing
17 global investment management Fiscal cliff: will need to be tackled after November Source: Bloomberg, September 2012 US budget deficits
18 global investment management US economic momentum is reasonable – but unemployment remains high US labour market Source: Bloomberg, September 2012
19 global investment management US construction: the only way is up? Source: Bloomberg, September 2012
20 global investment management China is landing Source: Bloomberg, September 2012 GDP and industrial production
21 global investment management Major macro indicators continue to disappoint Source: Bloomberg, September 2012. Chinese money supply (% yoy) Chinese PMI: new orders Level
22 global investment management Chinas slowing growth: structural or cyclical? Source: Factset. September 2012. China Real GDP y/y % change %
23 global investment management The European crisis is not simply debt Source: IMF, 2012 estimates. Budget deficit to GDP Current account balance -2.2% -2.4% 5.2% -0.8% -1.9% -4.6% -1.7% -8.0% 1.0% -8.5% -4.2% -4.5% -2.1% -6.0% -7.4% -7.2%
24 global investment management Unit labour costs since the launch of the euro Source: Bloomberg, September 2012
25 global investment management Currencies vs. the Deutschemark Source: Bloomberg, September 2012
26 global investment management German Labour reform accelerated growth- can Italy? Source: Bloomberg, September 2012
27 global investment management The European stress / intervention cycle Dont underestimate the political will to preserve the Eurozone Inflate, stagnate or default Austerity / growth European bail out of banks Issue of Eurobonds ECB – LTRO / OMT / rate cut Fiscal union
28 global investment management Source: JPMorgan, September 2012 Clear slowdown in global growth
29 global investment management Equity market valuations Source: Bloomberg, Statistics to 06/09/2012. September 2012 *current year estimate
30 global investment management MSCI World P/E ratio since 1995 Source: Bloomberg, September 2012
31 global investment management Investment conclusion New normal is now the consensus Deleveraging and rebalancing set to continue for years US – growth risk in 2013 China – structural slowdown underway Europe – stress / intervention cycle to continue Policy risks are high Further monetary loosening is certain Crisis presents an extraordinary valuation opportunity
32 global investment management Implications for portfolio construction Subdued growthlow return expectations Continued deleveraging and tight credit financial strength is critical High tail riskshigh volatility Cyclical move down in commodities has further to run Deflation protection in safe haven bonds Income generating assets important safe dividend equities corporate bonds emerging market bonds Focus on: Diversification by asset class Quality defensive equities Inflation not todays problem – but might be the end game Exploit tactical opportunities Focus on: Diversification by asset class Quality defensive equities Inflation not todays problem – but might be the end game Exploit tactical opportunities
33 global investment management Introduction to Harmony portfolios Risk profiled core solutions: Balanced and Growth Multi-asset, multi-manager, multi-currency Diversified between local and global investments, asset class, currency, manager and style Dynamic tactical asset allocation Available in five currency / regional bases: USD, GBP, EUR, AUD and Asian The Harmony range uses no derivatives, structured products or CDOs Managed by Momentum Global Investment Management in London
34 global investment management Harmony Balanced Fund strategic allocation Source: MGIM, September 2012
35 global investment management Harmony Growth Fund strategic allocation Source: MGIM, September 2012
36 global investment management Harmony US Dollar Balanced September 2012. Past performance is not indicative of future returns.. *30/06/2005 to 30/12/2005
37 global investment management Harmony US Dollar Growth September 2012. Past performance is not indicative of future returns.. *30/06/2005 to 30/12/2005
38 global investment management Harmony performance vs. cash, bonds and equities Source: MGIM, Lipper, September 2012. Past performance is not indicative of future returns..