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PB Americas The Investment Landscape – February 2011 Private Banking Americas Investment Strategy & Advisory Group The Investment Landscape February 2011.

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Presentation on theme: "PB Americas The Investment Landscape – February 2011 Private Banking Americas Investment Strategy & Advisory Group The Investment Landscape February 2011."— Presentation transcript:

1 PB Americas The Investment Landscape – February 2011 Private Banking Americas Investment Strategy & Advisory Group The Investment Landscape February 2011

2 The Investment Landscape – February 2011 This document is not complete without attached Important Legal Information. Table of Contents Executive Summary Guideline Allocations CIO Webcast Key Focus: – 2011 Watchlist - Payrolls – Earnings Global Markets Recap Market and Economic Outlook

3 The Investment Landscape – February 2011 This document is not complete without attached Important Legal Information. Executive Summary

4 The Investment Landscape – February 2011 This document is not complete without attached Important Legal Information. Executive Summary

5 PB Americas The Investment Landscape – February 2011 Guideline Allocations & Tactical Overweights

6 The Investment Landscape – February 2011 This document is not complete without attached Important Legal Information. Guideline Allocations Source: Credit Suisse Investment Strategy & Advisory

7 The Investment Landscape – February 2011 This document is not complete without attached Important Legal Information. CIO Webcast – Key Focus: Payrolls & Earnings CLICK TO PLAY

8 PB Americas The Investment Landscape – February 2011 Key Focus: 2011 Watchlist - Payrolls

9 The Investment Landscape – February 2011 This document is not complete without attached Important Legal Information. Payrolls The recession technically ended over a year ago, GDP growth has resumed in earnest, job growth remains sluggish 1.2 million private sector jobs added since Mar-10, a constructive sign, but still a long way from the 8 million+ lost due to the recession As innovation transforms economies, some of the jobs lost will never be replaced, but new sources of jobs are emerging Policy Investors remain concerned about municipal bonds, but fears are likely overdone Population With innovation and improvement in healthcare, people are living longer – this impacts spending patterns Key Focus: 2011 Watchlist - Payrolls Source: Credit Suisse Investment Strategy & Advisory

10 The Investment Landscape – February 2011 This document is not complete without attached Important Legal Information. US growth has returned to pre-recession levels, jobs have not Real GDP (In Trillions) vs. Nonfarm Payrolls (In Millions) Source: Bloomberg 2011 Watchlist - PAYROLLS

11 The Investment Landscape – February 2011 This document is not complete without attached Important Legal Information. Improvement in jobs is key to sustainable improvement. Private sector jobs have grown 11 straight months, more are needed. Monthly Change In Private Nonfarm Payrolls (In Thousands) Source: Bloomberg 2011 Watchlist - PAYROLLS

12 The Investment Landscape – February 2011 This document is not complete without attached Important Legal Information. Source: Bureau of Labor Statistics Innovation and digitalization have devastated some industries US Music & Book Store Employees (Annual Avg In Thousands) 2011 Watchlist - PAYROLLS

13 The Investment Landscape – February 2011 This document is not complete without attached Important Legal Information. Source: Bureau of Labor Statistics Innovation has also created new industries, with new companies creating new types of jobs. # of Employees (Founding Year in Parentheses) 2011 Watchlist - PAYROLLS

14 The Investment Landscape – February 2011 This document is not complete without attached Important Legal Information. The healthcare sector is the 3 rd -largest employer in the US, up from 5 th largest in Healthcare Jobs As % of Total Nonfarm Payrolls Source: Bureau of Labor Statistics 2011 Watchlist - PAYROLLS

15 The Investment Landscape – February 2011 This document is not complete without attached Important Legal Information. Corporate cash is at record levels – new hiring is one potential use S&P 500 Co. Cash Levels (In $ Billions) Source: Standard & Poors *S&P 500 ex-Financials, through Q3, latest data available 2011 Watchlist - PAYROLLS

16 The Investment Landscape – February 2011 This document is not complete without attached Important Legal Information. As the economy gains steam, growth in hiring and consumer spending should bolster state finances Share of State Revenues (In %) Source: US Census *Includes: tobacco, gas, & property taxes, etc Watchlist - POLICY

17 The Investment Landscape – February 2011 This document is not complete without attached Important Legal Information. Source: Census.gov Life expectancy has been increasing over the past several decades; impact ranges from consumption patterns to social policy needs US Life Expectancy (In Years) 2011 Watchlist - POPULATION

18 PB Americas The Investment Landscape – February 2011 Key Focus: Earnings

19 The Investment Landscape – February 2011 This document is not complete without attached Important Legal Information. Regional differentiation shows earnings expectations in US and Emerging Asia rising, Europe is under stress Q4-10 is the 8 th consecutive quarter of above average earnings upside surprises in the US The technology and healthcare sectors have seen the largest share of companies beat earnings forecasts, utilities had the most disappointments Earnings positive surprises have not just come from difficult to sustain cost cuts, 70% of companies have beaten sales forecasts as well Key Focus: Earnings Source: Credit Suisse Investment Strategy & Advisory

20 The Investment Landscape – February 2011 This document is not complete without attached Important Legal Information. Source: Credit Suisse Quantitative Research, IBES Q4 earnings forecasts rising steadily as more companies report S&P 500 Q4-10 EPS Forecast (Y-o-Y % Growth a/o date listed) Key Focus - EARNINGS

21 The Investment Landscape – February 2011 This document is not complete without attached Important Legal Information. Source: Credit Suisse Quantitative Research, IBES The last 8 quarters have seen strong upside earnings surprises S&P 500 Quarterly EPS Reports (% of Cos Beating Forecast) Key Focus - EARNINGS Avg: 60%

22 The Investment Landscape – February 2011 This document is not complete without attached Important Legal Information. Source: Credit Suisse Quantitative Research, IBES Earnings strength is broad based; technology leads upside surprises S&P 500 Q4-10 Earnings Reports vs. Forecast Key Focus - EARNINGS

23 The Investment Landscape – February 2011 This document is not complete without attached Important Legal Information. Source: Credit Suisse Quantitative Research, IBES Earnings beats not just due to cost cutting, sales are impressive also S&P 500 Q4-10 Revenue Reports vs. Forecast Key Focus - EARNINGS

24 The Investment Landscape – February 2011 This document is not complete without attached Important Legal Information. Source: Credit Suisse Quantitative Research, IBES Analysts raising 2011 EPS forecast, now $96 (+15% vs. 2010) S&P EPS Forecast (as of date listed) Key Focus - EARNINGS

25 The Investment Landscape – February 2011 This document is not complete without attached Important Legal Information. Source: Datastream, IBES On top of a strong 2010, expected EPS in 11 is rising in Emerging Asia MSCI EM ASIA 2011 EPS Forecast (In $) Key Focus - EARNINGS

26 The Investment Landscape – February 2011 This document is not complete without attached Important Legal Information. Source: Datastream, IBES Earnings growth expectations in Europe have fallen steadily DJ EuroStoxx 2011 EPS Forecast (Year-over-Year % Growth) Key Focus - EARNINGS

27 PB Americas The Investment Landscape – February 2011 Global Markets Recap

28 The Investment Landscape – February 2011 This document is not complete without attached Important Legal Information. Equities Despite regional unrest across the Middle East led by Egypt and Tunisia Jan saw gains in developed markets (S&P %, MSCI EAFE +1.6% MTD) in large part due to positive beginning of Q42010 earnings season. Continued upside earnings revisions provided further evidence of a sustained recovery with more surprises expected. EM struggled under the burden of regional unrest, withdrawals of capital in the wake of profit taking (MSCI EM -2.1%). S&P 500 sectors were mixed in Jan. Energy (+7.3% MTD) due to market fears of potential shortages due to Middle East unrest. Industrials and IT (+4.2% respectively) Telecomm (-3.8% MTD) saw losses due margin and pricing pressure. Size saw large cap outperform small cap while style mixed. Russell 1000 Growth (+2.5% MTD); Russell 2000 Value (+0.1% MTD). Currency Dollar strength in first month of the year with exception EUR (+2.3%), GBP (2.6%) and Mexican peso (1.8%) in light of stronger US economic data. Global Markets Recap

29 The Investment Landscape – February 2011 This document is not complete without attached Important Legal Information. Global Markets Recap Interest Rates & Fixed Income Steepening of US yield curve tapered off slightly in January (+10 bps vs. +36 bps in prior month) as positive economic data continues to lift longer yields. 10Yr: US Tsy +8bps, Eurozone +20bps, UK +26bps, Japan +9bps. US indices performance mixed in January. Longer term bonds and IG posted negative returns. US HY continued to benefit from improving economic data and still relatively anchored rates on the shorter end of curve. Euro inflation-linked saw positive returns as inflation remained over the 2% benchmark Commodities Oil (+0.9% MTD) remained in focus at month-end as concern that civil uprising contagion could significantly affect the oil supply from producing nations in the event of a populist revolt. Gold safety trade seeming to unwind. (-6.0% MTD). Volatility VIX Volatility Index remains subdued, closing at at end of Jan, despite unrest in the Middle East and record Euro Debt maturities.

30 The Investment Landscape – February 2011 This document is not complete without attached Important Legal Information. GLOBAL MARKETS Total Return Through 1/31/11 Source: Thomson Reuters DataStream

31 The Investment Landscape – February 2011 This document is not complete without attached Important Legal Information. GLOBAL EQUITY MARKETS YTD Price change in local currency (MTD through 1/31/11) Source: Thomson Reuters Datastream

32 The Investment Landscape – February 2011 This document is not complete without attached Important Legal Information. GLOBAL SECTORS (S&P 1200 Global) Price change in USD (YTD Through 1/31/2011) Source: Thomson Reuters Datastream

33 The Investment Landscape – February 2011 This document is not complete without attached Important Legal Information. US EQUITY RETURNS (Size & Style) Total Return Through 1/31/2011 Source: Thomson Reuters Datastream, Bloomberg

34 The Investment Landscape – February 2011 This document is not complete without attached Important Legal Information. US SECTORS (S&P 500) Price Change Through 1/31/2011 Source: Thomson Reuters Datastream

35 The Investment Landscape – February 2011 This document is not complete without attached Important Legal Information. CURRENCY % Change As of 1/31/2011 Source: Thomson Reuters Datastream

36 The Investment Landscape – February 2011 This document is not complete without attached Important Legal Information. GLOBAL INTEREST RATES 10Y Govt Bond Yield (12/31/10& 1/31/11) Source: Thomson Reuters Datastream

37 The Investment Landscape – February 2011 This document is not complete without attached Important Legal Information. US FIXED INCOME & RATES As of 1/31/2011 Source: Thomson Reuters Datastream

38 The Investment Landscape – February 2011 This document is not complete without attached Important Legal Information. CREDIT Spread to 10-Yr Treasury As of 1/31/11(Basis Points) Source: Thomson Reuters Datastream

39 The Investment Landscape – February 2011 This document is not complete without attached Important Legal Information. US FIXED INCOME YTD Total Return YTD through 1/31/11 Source: Bloomberg, Thomson Reuters Datastream

40 The Investment Landscape – February 2011 This document is not complete without attached Important Legal Information. NON-US FIXED INCOME YTD Total Return YTD through 1/31/2011(In Local Currency) Source: Bloomberg, Thomson Reuters Datastream

41 The Investment Landscape – February 2011 This document is not complete without attached Important Legal Information. COMMODITIES % Change As of 1/31/2011 (Spot Price) Source: Thomson Reuters Datastream

42 The Investment Landscape – February 2011 This document is not complete without attached Important Legal Information. HEDGE FUNDS & PRIVATE EQUITY Source: Dow Jones Credit Suisse Hedge Fund Index, Cambridge Associates, Thomson Reuters Datastream

43 The Investment Landscape – February 2011 This document is not complete without attached Important Legal Information. CBOE Volatility Index (VIX) Source: Thomson Reuters Datastream

44 PB Americas The Investment Landscape – February 2011 Looking Ahead – 2010 Market & Economic Outlook

45 The Investment Landscape – February 2011 This document is not complete without attached Important Legal Information. Market & Economic Outlook Summary Global markets remain mixed, with developed nations showing positive performance likely driven by strong corporate earnings and further upside surprises in economic data. Inflation in emerging markets amidst global food shortages will continue to be a focal point as investors weigh relative valuations against developed nations. All eyes remain on the Middle East, particularly Egypt, as more regional turmoil is expected and possible contagion of regional uprisings exist. Q4 earnings season has aided domestic equity markets, with approx. 70% of S&P 500 companies reporting to the upside. EU, particularly Spain and Portugal, expected to be preoccupied with large debt burdens coming due during 1H11, potentially resulting in near-term volatility for the region. EM focus shifting towards Brazil and Latam as Chinese market investment becoming more specialized. In US, remain focused on larger companies and their ability to deploy record amounts of cash from balance sheets. Maintain overweights in technology (corporate IT upgrade cycle – servers, software), consumer staples (focus on global, esp. EM exposure) and materials (commodity exposure). Source: Credit Suisse Investment Strategy & Advisory

46 The Investment Landscape – February 2011 This document is not complete without attached Important Legal Information. Market & Economic Outlook Summary Some rise in yields still expected in 2011, yet valuations have become more reasonable. Short/medium term bonds still preferred to longer ones. Possibility of tightening in UK (Q2) and Euro Area (Q4) remain. Preference for fixed income with low duration & some credit risk. Selective EM exposure (high carry and currency appreciation). Middle East tension likely to be contained on region as linkages to EM Asia and EM Latam limited. Credit selection remains key. USD could benefit from flare ups in Euro Area as member economies work out details of the European stability fund. EM Asian currencies expected to benefit from rising interest rates. Commodity space continues to have upside, though selection is crucial. Agriculture, especially corn, has room to grow due to continued demand from ethanol producers. Base metals, namely copper, will remain in demand from emerging markets as infrastructure building remains a key focus. Precious metals will remain volatile as rates begin to rise. Opportunity cost of gold safety trade beginning to be more pronounced in light of rising rates and other opportunities. Source: Credit Suisse Investment Strategy & Advisory

47 The Investment Landscape – February 2011 This document is not complete without attached Important Legal Information. GLOBAL ECONOMIC OUTLOOK Real GDP Growth Source: Credit Suisse Investment Strategy & Advisory, Credit Suisse Economics

48 The Investment Landscape – February 2011 This document is not complete without attached Important Legal Information. GLOBAL EQUITIES OUTLOOK Source: Credit Suisse Investment Strategy & Advisory

49 The Investment Landscape – February 2011 This document is not complete without attached Important Legal Information. Global Equities Snapshot (As of 1/31/11) Source: I/B/E/S, Thomson Reuters Datastream, Bloomberg

50 The Investment Landscape – February 2011 This document is not complete without attached Important Legal Information. EQUITY INDEX FORECASTS Source: Credit Suisse estimates

51 The Investment Landscape – February 2011 This document is not complete without attached Important Legal Information. S&P 500 SECTOR OUTLOOK Source: Credit Suisse estimates

52 The Investment Landscape – February 2011 This document is not complete without attached Important Legal Information. S&P 500 Sector Snapshot (As of 1/31/11) Source: I/B/E/S, Thomson Reuters Datastream

53 The Investment Landscape – February 2011 This document is not complete without attached Important Legal Information. HEDGE FUND & PRIVATE EQUITY OUTLOOK Through December 2010 (most recent data available) Source: Credit Suisse estimates

54 The Investment Landscape – February 2011 This document is not complete without attached Important Legal Information. POLICY RATE OUTLOOK Government Policy Rates (%) Source: Credit Suisse estimates

55 The Investment Landscape – February 2011 This document is not complete without attached Important Legal Information. INTEREST RATE OUTLOOK 10-Yr Government Bond Yield Source: Bloomberg, Credit Suisse estimates

56 The Investment Landscape – February 2011 This document is not complete without attached Important Legal Information. FIXED INCOME OUTLOOK Source: Credit Suisse estimates

57 The Investment Landscape – February 2011 This document is not complete without attached Important Legal Information. FIXED INCOME OUTLOOK Preferred Maturities (In Years) Source: Credit Suisse estimates

58 The Investment Landscape – February 2011 This document is not complete without attached Important Legal Information. CURRENCY OUTLOOK Source: Credit Suisse estimates

59 The Investment Landscape – February 2011 This document is not complete without attached Important Legal Information. CURRENCY FORECASTS Source: Credit Suisse estimates

60 The Investment Landscape – February 2011 This document is not complete without attached Important Legal Information. COMMODITIES OUTLOOK Source: Credit Suisse

61 The Investment Landscape – February 2011 This document is not complete without attached Important Legal Information. COMMODITIES FORECASTS Source: Thomson Reuters Datastream, Credit Suisse estimates

62 The Investment Landscape – February 2011 This document is not complete without attached Important Legal Information. Important Legal Information This information is not intended to be a recommendation or opinion regarding the equity securities of the referenced companies. This material may not be used or relied upon for any purpose other than as specifically contemplated by a written agreement with Credit Suisse Securities (USA) LLC (CSSU). This material has been prepared by the Chief Investment Officer of the Private Banking USA business of CSSU and not by the CSSU research department. It is provided for informational purposes, is intended for your use only and does not constitute an invitation or offer to subscribe for or purchase any of the products or services mentioned. The material is not intended to provide a sufficient basis on which to make an investment decision. It is intended only to provide observations and views of the Chief Investment Officer, which may be different from, or inconsistent with, the observations and views of CSSU research department analysts, CSSU traders or sales personnel, or the proprietary positions of CSSU. Observations and views expressed herein may be changed by the Chief Investment Officer at any time without notice. Past performance is not an indication or guarantee of future performance, and no representation or warranty, expressed or implied is made regarding future performance. The material set forth above has been obtained from or based upon sources believed to be reliable but CSSU does not represent or warrant its accuracy or completeness and is not responsible for losses or damages arising out of errors, omissions or changes in market factors. This material does not purport to contain all of the information that an interested party may desire and, in fact, provides only a limited view of a particular market. CSSU may, from time to time, participate or invest in transactions with issuers of securities that participate in the markets referred to herein, perform services for or solicit business from such issuers, and/or have a position or effect transactions in the securities or derivatives thereof. The material does not constitute objective research under FSA rules. The most recent CSSU research on any company mentioned is available to online subscribers at CSSU does not provide legal or tax advice. Consult your personal accounting, legal, and tax advisor with respect to any legal or tax implications.www.credit-suisse.com/pbclientview The Private Banking USA business in CSSU is a regulated broker dealer and investment advisor. It is not a chartered bank, trust company or depository institution. It is not authorized to accept deposits or provide corporate trust services and it is not licensed or regulated by any state or federal banking authority. Internal Revenue Service Circular 230 Disclosure: As provided for in Treasury regulations, advice (if any) relating to federal taxes that is contained in this communication (including attachments) is not intended or written to be used, and cannot be used, for the purpose of (1) avoiding penalties under the Internal Revenue Code or (2) promoting, marketing or recommending to another party any plan or arrangement addressed herein. ©2010 Credit Suisse Securities (USA) LLC. All rights reserved.

63 PB Americas The Investment Landscape – February 2011 Private Banking Americas Investment Strategy & Advisory Group The Investment Landscape


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