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Market Outlook and Key Themes
WWW.FMPARTNERS.COM
January 2013

2. Topics
• What are current market/ economic conditions?
• What are current investment themes?
• What is the market outlook for 2013?
• What are drivers of growth?
• Are equities fairly valued?
• What are the risk in fixed income?
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3. Current Economic Conditions
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4. Current Economic Conditions
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5. Current Economic Conditions
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6. Investment Themes (3 to 5 years)
Theme Rationale Implementation Strategy
 Continued Government Intervention  Maintain diversified exposure across global
markets
 Global Deficits/Increasing Sovereign Debt
 Include hedging strategies to manage overall
Global Fiscal Concerns  Political Uncertainty/Election Pressures portfolio volatility
 US Regulatory Environment  Ensure exposure to countries with stronger
balance sheets and improving economic
 Chinese Economic Policy conditions
 GDP Growth in Developed Markets to Remain
Below Long-term Averages  Maintain and/or enhance exposure to faster
growing regions such as emerging markets
Divergent Growth Expectations  High US Unemployment across asset classes
(Developed vs. Emerging)
 Weak Housing Markets  Maintain allocations to specialist managers in
emerging markets
 Austerity Measures Around the Globe
 Maintain diversified global fixed income
Credit Dislocation  Constrained Credit Environment exposure with focus on real yields
(Rate Environment)  Global Deleveraging  Complement core fixed income with
opportunistic fixed income strategies
 Lagging Effects of Government Stimulus
 Ensure adequate inflation protection by
Inflationary Environment  Tax Policy allocating to real assets (commodities, real
estate)
 Volatile Commodity Prices
 Focus on macro factors – rising correlations  Consider increasing exposure to equity markets
via higher beta strategies
Risk Premium  Disconnect between pricing and fundamental
(Equity Valuations) values  Add higher net exposure approaches in
long/short and equity oriented strategies across
 Increasing risk premiums asset classes
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7. 2013 Market Outlook Summary
S&P 2013 10 Year
Year End GDP Growth Treasury Yield
Barclays 1660 1.40% 2.00%
Putnam 1490 2.25% 2.20%
BlackRock 1545 2.00% 2.25%
Goldman 1575 1.80% 2.20%
JP Morgan 1580 2.00% 2.00%
Morgan Stanley 1434 1.40% 2.24%
Prudential 1600 2.50% 2.30%
BAC / Merrill 1600 1.50% 2.00%
Average 1561 1.86% 2.15%
High 1660 2.50% 2.30%
Low 1434 1.40% 2.00%
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8. Investment Outlook – Goldman Sachs
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9. Drivers of Growth
• Continued US Housing Recovery
• Employment
• US Manufacturing
• US Domestic Energy
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10. Housing
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11. Housing
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12. Employment
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13. U.S. Manufacturing
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14. U.S. Manufacturing
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15. Domestic Energy
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16. Domestic Energy
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17. Equity Market - Valuation
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18. Equity Market - Valuation
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19. Equity Market - Valuation
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20. Equity Market Update - Valuation
9.90%
Merck 4.05%
(Pharm/medtech)
2.16%
10.50%
Microsoft 2.61%
(Software & Services)
1.87%
7.00%
Time Warner 2.71%
(Media)
3.16%
7.20%
United Technologies 2.84% 2012 Estimated FreeCashflow Yield
(Industrial Cyclical) Current Dividend Yield
2.38% 10 Year Debt Yield to Maturity
0% 2% 4% 6% 8% 10% 12%
Source: J.P. Morgan Asset Management; Bloomberg. The securities highlighted above have been selected based on their significance and are shown for illustrative purposes only. Data as of July 4, 2012.
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21. Fixed Income
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22. Fixed Income
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23. Fixed Income Market Update – Muni Bonds
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24. Fixed Income
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25. Where Do We Go From Here?
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