julius bär investment opportunities outlook 2014


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julius bär investment opportunities outlook 2014

  1. 1. Insights Investment opportunities Outlook 2014 Julius Baer Research / Publication date: 27 November 2013 Please find important legal information at the end of this publication.
  2. 2. Imprint Publication date Current prices
  3. 3. Editorial Content
  4. 4. Overview Outlook 2014 Next Generation Economics Currencies Bonds Equities Commodities
  5. 5. 2012 2013E 2014E 2012 2013E 2014E Spot 3m Asset class 12m Spot 3m Focus on ... Rating Target 2012 2013E 2014E Value 12m 2012 2013E 2014E Price Avoid ... Price ISIN Rating Issuers 12m 12m
  6. 6. Outlook 2014 Recoupling Growth stampede and savings glut Recoupling Just when economists and investors have become used to changes in growth patterns, the harbingers of a new era are on their way What has changed? Long cycles coming to an end Chart 1: Recoupling – shrinking growth differential
  7. 7. More balanced, but watch out for currency crises What happened to inflation fears? Chart 2: External imbalances in selected emerging and advanced economies Chart 3: Global output gap* Especially for those economies with extreme current account imbalances, currency crises are on the cards in 2014
  8. 8. Outlook 2014 Chart 4: Equity risk premium – in favour of equities vs. bonds Solid growth, tame inflation: Good for stocks? Chart 5: Global equities – no bargain, but not expensive either After all the years of owning bonds and gold as a preferred asset mix, the pain trade in 2014 may yet again be buying shares Going against the grain Where are the opportunities?
  9. 9. Chart 6: M&A trend will be continued in 2014 Thematic opportunities Currencies: Some biotechnology companies have made tremen dous progress with ‘orphan drugs’, i.e. treatment of rare diseases Equities: Bonds: healthcare sector:
  10. 10. Next Generation E-commerce and its impact on the logistics industry Changing shopping patterns Chart 1: Global mobile commerce, 2011–2017E New technology applications and changing shopping behaviour are key drivers of e-commerce E-substitution and logistics The internet evolution
  11. 11. Chart 2: UPS’s domestic volume mix shifts from B2B to B2C The dynamics of e-substitution bring fundamental changes to the logistics industry Strong B2C parcel volumes Chart 3: Annual parcel volume growth vs. annual global real GDP growth, 2007–2012
  12. 12. Economics Global recovery is becoming more synchronised Chart 1: Surging cyclical synchronicity indicator* Convergence on the map A benign inflation backdrop allows a continuation of lavish monetary policy Chart 2: Deflation index** still positive for the USA and Europe Disinflation allows lavish monetary policy to continue
  13. 13. Currencies Dollar support from yield advantage close to peak Peaking US yield advantage Emerging market currency stress Chart 1: USD-EUR yield differential Chart 2: USD is richly valued A broadening global economic recovery will at least cap any further widening of the USD-EUR yield differential
  14. 14. Bonds Anxiously waiting for the central banks’ first move Chart 1: In the short term, central bank liquidity provision will keep rising Ample liquidity provision Controlling the risk Chart 2: US yield curve could steepen even more in 2014 Liquidity provision will remain generous in the shorter term Yield curve to steepen Euro yield convergence
  15. 15. Convertibles stay in demand Chart 3: Banking union will foster more convergence among EU banks The European banking union will lead to more yield convergence in 2014 Chart 4: Convertible bonds were the most profitable segment in 2013
  16. 16. Equities No year-end rally but constructive markets into 2014 Chart 1: S&P 500 seasonal patterns No year-end rally expected Outlook 2014 Equity markets in 2014 are driven rather by earnings, not P/E expansion Chart 2: Total return decomposition No correction expected
  17. 17. amazon.com Nobel Biocare WPP Stock data Stock data Stock data Price target: USD 395 Financials Performance 2011 Closing price: USD 376.64 2012 2013E 2014E 1m 3m 12m Price target: CHF 10 Closing price: CHF 13.45 Price target: GBp 1500 Closing price: GBp 1355 Financials 2012 2013E 2014E Financials 2012 2013E 2014E 1m 3m 12m 1m 3m 12m Performance 2011 Performance 2011
  18. 18. Commodities Year three of the fading supercycle Chart 1: North American crude oil production Themes for 2014 We see increasing signs of slowing Chinese gold investment demand Unnoticed Canadian oil boom Chart 2: Chinese gold demand
  19. 19. Important legal information This publication has been produced by Bank Julius Baer & Co. Ltd., Zurich, which is authorised and regulated by the Swiss Financial Market Supervisory Authority (FINMA). The information and opinions expressed in this publication were produced as of the date of writing and are subject to change without notice. IMPRINT Christian Gattiker, Head of Research Britta Simon, Equity Research, David A. Meier, Economist, David Kohl, Head of Currency Research, Christoph Riniker, Head of Strategy Research, Markus Allenspach, Head of Fixed Income Research, Bruno Winiger, Equity Research, Lilian Montero, Equity Research, Patrik Lang, Head of Equity Research, Norbert Rücker, Head of Commodity Research, APPENDIX Analyst certification Please refer to the following link for more information on the research methodology used by Julius Baer analysts: Price information Disclosure Equity Research Frequently used abbreviations Abbr. Description Equity rating allocation as of 25/11/2013 Abbr. Description Abbr. Description
  20. 20. Equity rating change history as of 25/11/2013 Company Rating History Rating system for global equity research (stock rating) Strategy research Fixed income research Rating system for Fixed Income Fixed income research maintains an issuer list with the following four risk categories
  21. 21. Credit rating definition S&P Fitch/IBCA Non-investment grade Investment grade Moody’s DISCLAIMER General: Suitability: Information/forecasts referred to: Credit rating definition
  22. 22. Risk: Past performance is not a reliable indicator of future results. Performance forecasts are not a reliable indicator of future performance. The Julius Baer fixed-income ratings apply exclusively to bonds of the specific issuer ranked senior unsecured or higher. They are therefore not valid for debentures junior to the mentioned ranking unless mentioned explicitly. Miscellaneous: Important distribution information Chile: Dubai International Financial Centre: Germany: Hong Kong: Israel: Luxembourg: Monaco:
  23. 23. Panama: Singapore: Spain: Switzerland: The Bahamas: United Arab Emirates: United Kingdom: Uruguay: United States: