Bob Doll / www.youtube.com. Así va la quiniela de Bob Doll para 2015: cuatro aciertos, cuatro interrogantes y dos predicciones incorrectas
At the beginning of this year Bob Doll, Senior Portfolio manager and Chief Equity Strategist at Nuveen Asset Management described 2015 as the year when investors transition from disbelief to belief, or from skepticism to optimism. Sir John Templeton coined the phrase, “Bull markets are born on pessimism, grow on skepticism, mature on optimism and die on euphoria.” Nuveen believes we are entering the “optimism” phase. As Doll points out, 2015 is on track to be another decent year for U.S. equities as we experience:
Solid momentum in U.S. economic growth with low inflation,
A pickup in consumer spending based on job growth, confidence and a positive wealth effect,
Solid earnings growth,
Stimulus from low commodity prices and financing costs and
A still-good liquidity environment aided by stimulus from non-U.S. central banks.
Midway through the year, these statements largely hold true. These are the predictions Bob Doll made at the beginning of the year, and how they are faring:
U.S. GDP grows 3% for the first time since 2005 (X) Although Bob Doll believes the U.S. will grow 3% for the rest of the year, the weak first quarter will make it difficult for the year as a whole to average 3%.
Core inflation remains contained, but wage growth begins to increase (✔)U.S. inflation appears to be bottoming as it moves from very low to low levels
The Federal Reserve raises interest rates, as short-term rates rise more than long- term rates (?) Both short- and long-term U.S. bond yields have started to rise in anticipation of Fed rate hikes,1 which Nuveen expects will begin in September.
The European Central Bank institutes a large-scale quantitative easing program (✔) This happened in January, and the effects are being felt in Europe, where growth is improving to some degree.
The U.S. contributes more to global GDP growth than China for the first time since 2006 (✔)As a result of U.S. growth improving and China’s growth slowing, this one is heading in the right direction.
U.S. equities enjoy another good yet volatile year, as corporate earnings and the U.S. dollar rise (?) This is the seventh year of the bull market in the United States. The S&P 500 Index has never risen for seven consecutive calendar years,yet Doll highlights this is a distinct possibility in 2015, even if only by a modest amount.
The technology, health care and telecom sectors outperform utilities, energy and materials (✔) If we were scoring these predictions in degree of correctness, this would be at the top of the list. As of last week’s market close, these favored sectors in the U.S. are up an average of 6.6% for the year while the other three are down 3.7%.
Oil prices fall further before ending the year higher than where they began (?) Oil fell earlier in the year before experiencing a recovery. If the year ended today, this one would be proven correct
U.S. equity mutual funds show their first significant inflows since 2004 (x) Equity mutual fund flows have actually been negative so far this year as investors have been moving out of U.S. stocks.Nuveen expects investor confidence will pick up and that flows will increase, but they acknowledge they will likely be on the wrong side of this prediction
The Republican and Democratic presidential nominations remain wide open (?)The list of Republican candidates is longer than virtually anyone predicted. While Hillary Clinton remains the Democratic front runner, her candidacy is not without its difficulties.
Looking Ahead
While U.S. equities are no longer table-poundingly cheap, Doll beleives that they offer better value than other financial assets and should outperform cash, bonds, inflation and commodities. Even though equities are likely to advance further, the pace of gains is likely to be slower than what investors experienced during the first six years of this bull market. Nuveen believes U.S. equities are likely to produce average annual returns somewhere in the mid-to-high single digit range. Within the U.S. equity market, they prefer mid-cycle cyclicals, companies that can generate positive free cash flow and those with higher levels of domestic earnings.
All market prices are as on 6/26/15 according to Morningstar Direct, Bloomberg and FactSet
UBS has confirmed that William Kennedy will succeed to Andreas Schlatter as global head of Distribution for its global asset management business after Reuters has revealed a UBS internal memo.
Kennedy will take up his new duties in mid-September and will be based in Zürich. He will report to Ulrich Koerner, president of UBS Global Asset Management.
“With his strong client focus, his thorough knowledge of products and his wide network across units, William Kennedy is the ideal candidate to lead the further transformation of our global distribution organisation,” said the memo which was reported by Reuters and signed by Koerner and UBS Wealth Management president Juerg Zeltner.
Prior to this, Kennedy was head of Investment Products and Services at UBS AG.
UBS Global Asset Management had €616bn in assets under management as at 31 March 2015.
Dagong Europe has published a commentary entitled Luxury Industry: Grow Big or Stay Niche – Upcoming Season Trends. The commentary gives an overview of the main trends and developments in the luxury industry, examining the drivers in its future development. It also considers the comparative positioning, strategies and market approaches of the main luxury players, focusing on the strengths and weaknesses of the changing Chinese market.
“The global luxury market grew +3.3% in 2014, the lowest since 2009, underpinned by the subdued European economy, the recent US recovery and changing consumer habits in the Asia-Pacific region”, says Richard Miratsky, Head of the Corporates Analytical Team.
“While the luxury sector is dominated, in terms of revenues, by the three major European brand-aggregators, the niche approach of smaller players has proven successful in the super-premium segment. Although very different, both strategies are effective in the current market conditions, if strong brand identity is supported by extraordinary customer experience, excellent service, effective media communication and wise geographic store location – the key drivers of success in luxury”, concludes Mr Miratsky.
“Future developments in China’s rapidly slowing luxury market are a major concern for the main players. In 2014 luxury market revenues in China reached EUR 16.8Bn, up by 4.3% year-on-year” adds Marta Bevilacqua, Director of the Corporates Analytical Team. “European players will have to manage the Euro depreciation that is encouraging the Chinese habit of travel-for-luxury shopping and undermining the sector’s margins; and the anti-bribery campaign which has constrained the historically high volumes of absolute-luxury gift-giving”, concludes Ms Bevilacqua.
Dagong Europe expects the European majors to employ new strategies to refocus on personal luxury, relying not only on brands but on quality, and implementing new value propositions to encompass the affordable luxury segment.
Main findings:
Luxury sector to sustain mild growth in the medium term, despite the subdued world economy. Emerging markets, led by China, should support industry growth at lower-than-before averages, but volatile macro patterns and political interference poses significant uncertainties.
Although size carries weight in the luxury industry, smaller players can defend their niches. Large groups can build on their extensive knowledge and experience in creating and maintaining a strong multi-brand environment. Significant synergies and economies of scale in logistics, marketing, sales channel development and back-office functions can also be achieved. For smaller players, niche strategy has been effective only where product quality and brand perception have justified extra-premium prices.
Two crucial attributes emerging behind success in the luxury sector: the combining of history and innovation. Successful brands are able to blend the past, evoking the brand attributes and distinctive style, with new technologies, enhanced services, alternative retail channels and new customer experiences.
Although the mega-mergers of the past are unlikely to re-occur, we expect a substantial number of smaller deals in the coming years. The luxury sector is quite fertile ground in terms of deals and M&A transactions, with the majority of deals closed in Europe. 202 acquisitions took place globally in 2000-14.
SMEs operating in the luxury sector have been historically reluctant to tap the financial markets. The root causes are historical family ownership of luxury companies that have grown on brand recognition, linked to iconic founders and a view that long-established brand unicity is compromised by ownership dilution. Instead, bank debt, equity injections and strong cash flows have historically been the standard funding sources for investment.
Considering the qualitative and quantitative factors, our peer group of European major companies is generally well-positioned within the mid-to-low investment grade range. Although intrinsically different, LVMH and Hermès both position strongly among luxury peers due to their strong financial profiles and successful, divergent strategies. We see Prada as the weaker peer due to its need to streamline the business model and strategy.
www.syzgroup.com. SYZ adquiere la filial de banca privada de Royal Bank of Canada en Suiza
The Swiss banking group SYZ has signed an agreement to acquire Royal Bank of Canada (Suisse) SA. With approximately CHF 10 billion in assets under management, the Swiss private banking subsidiary of RBC is chiefly active in Latin America, Africa and the Middle East. These are complementary markets for SYZ Group, which will manage nearly CHF 40 billion in assets. This acquisition allows SYZ to extend its international footprint to raise its profitability and to deliver significant synergies.
With the acquisition of Royal Bank of Canada (Suisse) SA, the assets under management of the private banking business of SYZ Group will double, reaching nearly CHF 22 billion and making it one of the top 20 largest private banks in Switzerland. In total, including its Asset Management and Wealth Management divisions, the Group will manage nearly CHF 40 billion in assets under management.
“This acquisition will enable Banque SYZ to access new markets in Latin America, Africa and Middle East, where strong entrepreneurship, one of our founding values, is expanding. It also represents a major step forward in terms of the Group’s growth strategy. I am delighted to welcome these new teams to our organization and I firmly believe that we will benefit enormously from their many skills.” stated Eric Syz, CEO of the Group.
This transaction is still subject to the approval of the Swiss regulatory authorities.
Patricia Carral, SVP, y Mary Oliva, presidente de International Wealth Protection / Foto cedida. International Wealth Protection anuncia la incorporación de Patricia Carral, reconocida líder en planificación patrimonial
International Wealth Protection announced that Patricia Carral has joined the firm as Senior Vice President to support their exponential growth and demand for unparalleled wealth protection strategies.
Ms. Carral has been servicing Latin America’s high net worth clients for over 15 years. She was an integral member of HSBC’s International Private Bank and most recently served as Head of Private Clients – Latin America for Amicorp in Miami. She is a sought after industry expert given her experience in assisting ultra-high net worth families throughout the hemisphere with their generational wealth planning needs. Patricia, an active Trust and Estate Practitioner and a Board Member of STEP Miami Branch, has been a key participant in numerous wealth planning transactions that have involved global financial institutions, local and international accountancy and consulting firms, law practitioners and family offices. She specializes in identifying and creating the most sophisticated and suitable fiduciary solutions for the optimization of wealth preservation and transfer.
“I am honored to have Patricia join our team, her vast fiduciary experience will benefit our clients as the wealth planning and protection landscape is continuously evolving in Latin America and demands comprehensive leading edge strategies. International Wealth Protection represents the next generation of insurance based solutions and truly being able to provide clients with a holistic platform accomplishes this”, said Mary Oliva, President of International Wealth Protection.
“My decision to join International Wealth Protection stems from the realization that insurance based solutions play an integral role in developing a solid estate plan for our multinational clients. The immediate liquidity provided by insurance and its favorable tax treatment in most jurisdictions allows them to enjoy, grow and protect their wealth, for many generations to come”, said Patricia Carral.
Investors’ appetite for China’s stock market is quickly unwinding. Since the peak almost one month ago the Shanghai Composite Index lost a third of its value. Just like there were no fundamental economic reasons that could explain the earlier steep increase in stock market prices, the current crash has not been triggered by worries about an imminent hard landing. While we would certainly not dismiss this risk as futile and also think growth will slow down faster than consensus estimates, the impact on economic activity looks set to remain fairly modest.
Since the start of the equity rally last summer until its recent peak almost one month ago, Chinese stock prices more than doubled. This sharp upward move always looked suspicious given that economic activity continued its downward growth trend. Looking forward, economic growth in China will continue to decrease from current levels. The fast rise in income levels seen over the past decades (limiting the country’s future catch-up potential), the rebalancing of the economy towards consumption away from investment and China’s rapidly ageing population will all play an important role in this.
Admittedly, this does by no means imply that equity prices should have moved in the same negative direction. First of all, it can be argued that China’s stock market was far from expensive one year ago. Indeed, traditional valuation measures including the price/earnings ratio or the market capitalization of listed firms relative to GDP both suggested in fact the Chinese stock market had become fairly cheap. Moreover, despite slower growth, the rebalancing of the economy is a positive evolution and one that makes future growth more sustainable.
At the same time, however, there were also several reasons to be sceptical, certainly in times when Chinese policymakers are experiencing difficulties in trying to make sure that growth doesn’t slow too abruptly. Importantly, it cannot be denied that a lot of (official state) media attention has been given to the attractiveness of China’s stock market while policymakers were putting further rebalancing measures in place. In other words, Chinese leaders have interpreted rising stock market prices as evidence that their strategy was playing out fine and have not refrained from underlining this. Moreover, the fact that the housing market was struggling at the same time has also helped to drain savings into China’s stock market. All this in combination with the prospect of more capital account openness (including bigger representation of Chinese stocks in global equity indices) has fuelled a speculative stock market bubble.
Since its peak mid-June, the Shanghai Composite Index has fallen by around 32%. Year to date, however, the index increased more than 8%. Over the last 12 months, meanwhile, equity prices are still up more than 70%. The big challenge and difficulty of course is to see what comes next. Authorities are now taking measures to support the equity market. What’s also obvious is that this is proving very difficult, especially when at least a significant part of the money invested is debt-financed. All in all, for reasons explained here, the impact on overall economic activity should remain fairly limited at this point. That said, recent turbulence once again underlines how difficult it is for Chinese leaders to deal with the huge imbalances stemming from the unsustainable credit boom witnessed after the 2008-2009 crisis.
After a weekend of long and often very bad-tempered discussions within the Eurogroup, the leaders of the eurozone have finally agreed to offer Greece a third bailout, with the European Commission confirming that Greece will benefit from c.€86 billion of financing over the next three years.
Assuming the steps required in the coming days are met, the immediate bankruptcy of the Greek government has been avoided, and the country will remain within the eurozone. However, the terms of the deal look to be very tough, and the deal will be seen as a humiliation by many Greeks. Given that the ruling Syriza party was elected on an anti-austerity mandate, and that voters rejected a much weaker reform package in the referendum, political upheaval in Greece may now follow. Moreover, there is no debt forgiveness or debt write-offs for Greece, meaning that total Greek debt-to-GDP levels will remain unsustainably high.
The key points of the deal are as follows:
Greece will receive some €86bn in bailout funds.
Before legal negotiations can take place, the Greek parliament must approve a range of significant reforms affecting VAT and the tax base, pensions and other areas of the economy. The EU would like the reforms to be approved by the Greek parliament this Wednesday (15 July). This unusual approach is a response to the complete breakdown of trust between the Greek government and their European partners.
Certain eurozone national parliaments (most pertinently Germany) will then need to give the go ahead before formal negotiations can begin over the specifics of the new bailout program. This could, in theory, be done by the end of the week, although this may prove to be easier said than done.
A €50bn asset fund will be created, chiefly to make sure that privatization commitments are kept. This will be run by Greece but supervised by Europe. Half of this fund will be used to recapitalize the Greek banks.
The European Stability Mechanism (ESM) will provide an immediate €10bn to recapitalize Greek banks, which are close to collapse.
A ‘haircut’ or reduction of Greek debts will not be offered – i.e. there will be no ‘debt forgiveness’ which the German chancellor Angela Merkel has said is ‘out of the question’. Greece’s debts might be restructured to make repayment a little easier (e.g. by extending maturity), but only after Greece has introduced all of its promised reforms.
What happens if the bailout is not approved by the Greek parliament?
Prior to the deal being announced, the Eurogroup had warned Greece that its failure to enact reforms would result in the suspension of Greece’s membership of the euro. In the event of suspension, the exact length of the ‘time out’ was not specified, but comments from the German finance ministry suggest it could have been as long as five years. However, this triggered further tension between the eurozone member states, with France’s President Hollande saying that a temporary exit from the euro area was not an option, and that the issue at stake was not simply whether Greece stayed in or out of the euro but ‘our conception of Europe’. President Hollande was supported by the Italian PM Matteo Renzi, while Germany continued to emphasise its refusal to do a deal ‘at any price’.
Wider implications
The key focus in the short term will surround the navigation of the immediate hurdles (Greek parliamentary approval, then German parliamentary approval) and how long the banking sector can continue to provide cash to Greek citizens while emergency loans from the ECB remain frozen. All of these situations are urgent and any hold-up would increase significantly the risk of a messy Grexit scenario. In the bigger picture, in agreeing to support this bailout process, Alexis Tsipras has effectively reneged on all of his party’s pre-election commitments and handed sovereignty for domestic policy to Europe. This comes at a time when the economic situation is likely to deteriorate further in part thanks to the newly-prescribed austerity that he was so vehemently against. Against this backdrop, while the short-run risks of Grexit have declined, the risk that the Greek population begin to question the merits of euro membership must surely be increasing.
The implication for markets has been unclear through much of this saga, as investors have found it difficult to assess the direct costs or benefits of the different scenarios. Following months of indecision and reasons to be cautious, it is perhaps unsurprising to see a stark positive reaction to what is a ‘deal’ full of pitfalls and contradictions. The bigger picture message is perhaps for citizens of Europe who might want to re-negotiate the status quo with the establishment. From a position of weakness before, Greece’s economy now lies in tatters once again, facing the prospect of more austerity and outside control. For sure, Tsipras’ management of the situation could be called into question, but any budding protest parties elsewhere will think twice before taking on the elite.
Opinion column by Martin Harvey, Fund Manager at Columbia Threadneedle
. Mark Mobius dejará de ser el portfolio manager de referencia del Templeton Emerging Markets Investment Trust a partir del 1 de octubre
Mark Mobius will be replaced by Carlos Hardenberg as lead portfolio manager of the Templeton Emerging Markets investment trust on October 1st.
Mobius, executive chairman of Templeton Emerging Markets Group, has been leading the trust since its launch in June 1989. He will remain a portfolio manager on the team, the trust explained in a statement.
Hardenberg will relocate to London. Having joined the firm in 2002, he is senior vice president and managing director of Templeton Emerging Markets group.
Hardenberg will be supported by Chetan Sehgal, director of the small cap strategy, who will remain a senior research analyst. Mobius will continue to lead the 52 person Templeton Emerging Markets group and will remain “fully engaged in the team’s research and investment activities.”
Peter Smith, chairman of Temit, said : “Under the Templeton Emerging Markets Group, Temit has grown to be the largest emerging market investment trust in the AIC Investment Trust – Global Emerging Markets sector, with assets under management of £1.9bn.
“We believe that the appointment of Carlos Hardenberg as lead portfolio manager, supported by Mark Mobius and Chetan Sehgal, will provide renewed focus for the next stage in the company’s development.”
Research from Standard Life Investments suggests that the biggest threat to the global economy is currently China. In the latest edition of Global Outlook, Standard Life Investments investigates what is driving China’s growth slow-down and looks beyond simple GDP figures.
Jeremy Lawson, Chief Economist, Standard Life Investments, said:“China is seeing its slowest rate of economic growth since the financial crisis, along with rapidly declining commodity prices, falling export trade and a dramatic deterioration in nominal activity. However, the epicentres of China’s economic problems are the industrial and property sectors.
“Growth of industrial output has declined from 14% in 2011 to around 6% in 2015, whilst industrial electricity consumption is in outright decline. China’s trade with the outside world is falling, and real estate investment – the primary engine of growth until last year – is going through a prolonged slump.
“The main components of activity preventing a deeper downturn are: private spending on financial services, government-led spending on transport infrastructure, retail sales and services-led electricity consumption. This suggests that China has begun the rebalancing towards a more sustainable, consumption-led growth model – although it’s too early to claim success.
“A hard landing in China would obviously be a large negative shock for the global economy, representing as it does 12% of global GDP and 18% of global manufacturing exports. Some countries stand to lose the most from any failure of China to stabilise growth. On the commodities front, countries like Australia, Brazil, Canada, Chile and Peru stand out. In manufacturing – Hong Kong, Korea, Malaysia, Singapore and Taiwan are most exposed. Whilst developed economies like Germany export a sizable amount of capital goods to China.
“There is good news – our research shows that most of the emerging markets are in a much better position to withstand external shocks than they were in the 1990, thanks to improved fiscal and monetary frameworks.
“Overall, the government has stepped up the pace of structural reforms – liberalising the financial system, cracking down on corruption and loosening fiscal policy, albeit in a targeted way. As a result we expect there to be modest success in boosting GDP although the longer-term glide path is towards slower growth.”
CC-BY-SA-2.0, FlickrFoto: Koshirokun, Flickr, Creative Commons. Las mayores oportunidades para el negocio de wealth management están en EE.UU.
The global wealth management industry had a solid business year in 2014 in terms of financial results for the operating model. In spite of financial market uncertainties and currency volatility most lead players experienced overall growth in client volumes. However, the latest KPI growth rates came off the higher ratios in the previous reporting year. The financial year also heralded a landmark breakthrough for two operators – UBS and Morgan Stanley – as their assets under management (AUM) figures surged beyond USD2 trillion (Figure 1).
According to The Global Private Banking Benchmark 2015 released from Scorpio Partnership, AUM for the over 200 industry players annually assessed moved upward by an average 3.4% and operating profits also improved by an average of 3.3%. However, these solid figures are tempered by continued pressure on the operating efficiency measured by cost-income ratios. In the latest report the industry average rose 90 basis points to 84.4% (Figure 2).
“This is a complex moment in the history of our industry. The operating model is facing major growing pains to accomodate the expectations of financial groups for wealth management divisions to deliver sustained high margin results. The good news is client volumes and demand for wealth services are strengthening for many. But the bad news is the industry is still tackling major compression factors in terms of costs versus income. Some are not moving quickly enough with rates of growth slowing,” said Sebastian Dovey, managing partner of Scorpio Partnership.
Based on analysis of reported financials from over 200 wealth management business lines across the globe, this year’s worldwide ranking saw few changes among the top cohort. Aside from UBS and Morgan Stanley breaking through the USD2trn barrier, the majority of the market leaders remained in stasis.
A number of firms – mostly headquartered in Europe – have been adversely affected by the currency performance of the Euro. The most notable step change was posted for BMO Financial Group based on an effective acquisition strategy during the year in review. Meanwhile, based on growth projections it is likely that Bank of America Merrill Lynch will pass the USD2trn hurdle in the coming 12 months.
“Looking ahead, in the intensively competitive market it will be the details that make the margin of difference. The winners will be those that pay the most detailed attention to the optimised commercialisation of the client journey and benchmarking this among peers. Aside from the annual benchmarking, our unique collation of HNW and UHNW client satisfaction ratings of firms identifies who is leading in this context,” added Scorpio Partnership’s Dovey.
Market share of wealth assets dominated by a select few
Now in its 14th year, the influential annual Scorpio Partnership Private Banking Benchmark, estimates that the global industry now manages USD20.6 trillion in investable assets on behalf of high net worth investors. Amid this total industry AUM data point, the market share concentration among the largest houses is significant. The top 10 global operators in AUM terms collectively manage 47.1% of the market (Figure 3). UBS holds a 9.9% industry share.
The US operators continue to dominate the market share ratios driven largely by their domestic franchises. According to various industry estimates the US remains the largest market of opportunity for HNW business. Equally, the scale of the market opportunity is also reflected in the strong growth in AUM posted by US operators. The 10 leading firms are registering an average AUM growth ratio of 7.1% – over twice the global average (Figure 4).
