Baird Quarterly Market Review - Q3 2011

901 views

Published on

Baird Quarterly Market Review - Q3 2011

Published in: Economy & Finance, Business
0 Comments
1 Like
Statistics
Notes
  • Be the first to comment

No Downloads
Views
Total views
901
On SlideShare
0
From Embeds
0
Number of Embeds
1
Actions
Shares
0
Downloads
7
Comments
0
Likes
1
Embeds 0
No embeds

No notes for slide

Baird Quarterly Market Review - Q3 2011

  1. 1. QQ3 2011 Baird Market Review d kBaird Private Wealth ManagementB i d P i t W lth M g tWealth Management | Capital Markets – Investment Banking | Private Equity | Asset ManagementChicago Frankfurt London Milwaukee Shanghaiwww.rwbaird.com b i d
  2. 2. About B i d Ab t Baird Arizona A i Iowa I Ohio Ohi Wisconsin Wi i Phoenix Cedar Rapids Akron Eau Claire Scottsdale Davenport Cincinnati Fox ValleyA Great Place to Work Sioux City Cleveland Green BaySince 2004, Baird h bSi 2004 B i d has been recognized annually as i d ll California West Des Moines Columbus Janesvilleone of the FORTUNE 100 Best Companies to Work Grass V ll y G Valley Dayton D yt La Crosse L CFor®.For® We ranked No. 14 for 2011. No 2011 Roseville Maryland Madison Sacramento Baltimore Oregon MilwaukeeMost Trusted Research Sa San Francisco a c sco Easton asto Portland o ta d North S o e o t ShoreIn 2011, for the i thI 2011 f th ninth consecutive year, small-cap ti ll Oconomowocand mid-cap institutional fund managers ranked mid cap Colorado C l d Michigan Mi hig Pennsylvania P yl i Racine R iBaird as their highest quality most trusted source quality, Boulder Birmingham Philadelphia Sheboyganof research.1 f h Denver Grand Rapids Waukesha Holland South Carolina WausauOwnershipO hi Florida Kalamazoo Charleston West BendFounded in 1919 and headquartered in Milwaukee, Naples N l Traverse Cit T CityWI,WI Baird is employee owned and fully employee-owned Orlando West Bloomfield South Dakotaindependent. d p d Palm Harbor Sioux Falls Sarasota MinnesotaGlobal Reach Tampa Edina TennesseeBaird has more than 2,600 employees and over Winter P k Wi t Park Minnetonka Mi t k Nashville N h ill100 offices in the United States, Europe and Asia. States Asia Georgia Missouri Texas Atlanta North Point Kansas City y Dallas Fort Worth Illinois Illi i Nebraska N b k Houston H t Chicago Omaha Peoria Utah Rockford North Carolina Salt Lake City y Winnetka Charlotte Raleigh R l i h Virginia Vi i i Indiana Winston Salem Winston-Salem Lynchburg Indianapolis Reston Mishawaka h k1G Greenwich ih A i t U S Equity Investors – S ll/Mid C p Funds, Ap il 2011 Surveys conducted with 98 U S small-cap and mid-cap fund Associates U.S. E it I t Small/Mid-Cap F d April 2011. S d t d ith U.S. ll p d id p f d Robert W Baird & Co W. Co.managers. Rankings based on top 10 research f g g p firms in survey. Greenwich Associates is the leading consulting f in the institutional and sell-side research y g g firmmarket.market Baird Market Review 2
  3. 3. Highlights from the Q3 2011 Baird Market ReviewHi hli ht f th B i dM k tR iEconomy and Market • Quality: High quality stocks outperformed Fixed Income low quality stocks, on average. (Page 15) stocks average• At a Glance: The global stock markets were • Taxable Bonds: In a flight to quality dec ded y egat e decidedly negative in Q3 due to increased c eased • S t Sector: Th There was a clear preference for l f f e environment Treasury bo ds were t e top o e t easu y bonds e e the concerns about the health of various defensive sectors with Utilities, Consumer performing bond segment. Overall, taxable segment Overall economies. (P g 6) i ( (Page ) Staples and Telecomm outperforming outperforming. bond t b d returns were strong with th exception t g ith the pti Economically-sensitive sectors were hit hard y of High Yield (Page 25) Yield.• Economic Growth: Q1 GDP f g i h Q figures were in Q3 (Page 17) Q3. revised lower and Q2’s release showing Q2 s • Municipal Bonds: Municipals bonds 1.0% 1 0% annualized growth was fairly li d th f i l • Active Fund Management: The average continued to perform very well i Q3 lik l ti dt f ll in Q3, likely lackluster. (Page 7) mutual f d once again h d mixed success. t l fund g i had i d due to limited supply and increased demand. Small Cap and Large Value appear to be On a tax equivalent basis municipals tax-equivalent basis,• Employment: Unemployment remains areas of strength while Large Growth and outperformed taxable b d by a wide p f d bl bonds by d stubbornly high despite government efforts International were difficult areas to add margin. margin (Page 25) to create j jobs. (Page 8) ( g ) value. value (Page 19) • Maturity and Credit Quality: Higher yields• Volatility: Q3 was marked by large swings and t t l return occurred with l d total t d ith longer-dated d t d in stock prices as volatility surged, largely a surged International Equity bonds, both in the taxable and municipal result of uncertainty i E l f i y in Europe and other p d h markets. markets Higher quality taxable bonds factors. factors (Page 9) • Market Cap and Style: Most international outperformed, while that trend is less clear p , markets underperformed the U.S.US• Commodities: Oil retreated to its lowest with municipal bonds (Page 26) bonds. Furthermore, an appreciation of the dollar levels i 2011 gold fi i h d the quarter with l l in 2011; ld finished th t ith led to even lower results for U.S. investors U S investors. • Yield Curve: Yields fell across maturities as a positive return but experienced a ( (Page (P g 21) ) demand f U S T d d for U.S. Treasuries i i increased. R t d Rates substantial drop in September. (Page 10) September on a 10-year Treasury are now at all-time 10 year all time • Developed versus Emerging Markets: In p g g lows. lows Spreads of major bond types widened an environment where less risky assetsDomestic Equity outperformed, Emerging Markets l t f d E i M k t lagged d relative to last qua te , with t e most e at e ast quarter, t the ost pronounced move occurring in High Yield Yield.• Market Cap and Style: Large Cap Developed Countries, on average. (Page 22) ( (Page (P g 27/28) ) significantly outperformed Small Cap. Large i ifi tl t f dS ll C L • Country: European countries were under Growth was the best performing U.S. equity great stress, pushing stock markets stress asset class (Page 13) class. considerably lower. Conversely, the y y, conservativeness often associated with Japan h l d it t be a relative J helped to b l ti outperformer. (Page 23)Opinions and factors are subject to change See important disclosures and definitions included with this publication. change. publication Robert W Baird & Co W. Co. Baird Market Review 3
  4. 4. Table of Contents 1 | Economy & M k t E y Market 2 | Domestic Equity 3 | International Equity 4 | Fixed Income Fi d I Robert W Baird & Co W. Co. Baird Market Review | Table of Contents 4
  5. 5. EconomyEconom & Market
  6. 6. The Markets at a Glance… Glance Last Qtr YTD Asset Class Return (%) Return (%) Benchmark U.S. Stocks Large Cap Value g p ( (16.2) ) ( (11.2) ) Russell 1000® Value Large Cap Growth g p ( (13.1) ) ( (7.2) ) Russell 1000® Growth Mid Cap (18.9) (12.3) Russell Midcap® Small C S ll Cap (21.9) (21 9) (17.0) (17 0) Russell 2000® R ll International Stocks Developed Markets (19.0) (19 0) (14.6) (14 6) MSCI EAFE (Gross) Bonds Short Term Short-Term Taxable 0.3 03 1.3 13 BarCap 1-3 Yr Govt/Credit 1 3 Intermediate Term Intermediate-Term Taxable 2.4 4.9 BarCap Intermed. Govt/Credit Short Term Tax-Exempt Short-Term Tax Exempt 0.5 1.9 BarCap 1 3 Yr Municipal 1-3 Intermediate-Term Tax-Exempt p 2.0 5.4 BarCap 5 Yr Municipal p p Cash Cash/Cash Equivalents 0.0 00 0.0 00 Citi 3 Month T-bills T bills Satellite High Yield (6.3) (1.7) BoA ML High Yield Master II Real E t t R l Estate (15.3) (15 3) (6.8) (6 8) DJ US REIT Commodities C diti (11.3) (11 3) (13.6) (13 6) DJ UBS C Commodity dit Emerging Markets (22.5) (22 5) (21.7) (21 7) MSCI Emerging Mkts (Gross)Source: Morningstar Direct. See important disclosures in appendix Direct appendix. Robert W Baird & Co W. Co. Baird Market Review | Economy & Market 6
  7. 7. Inflation d I fl ti and GDP Growth Gr th Historic CPI Level (Last 20 Years) 6 4 rai ng 1-Year I %) Tr lin 1 Ye r CPI (%) 2 0 Current: 3.8% 3 8% Average: 2 5% 2.5% -2 2 -4 4 Consumer Price Index Aug-91 A 91 Aug-93 A 93 Aug-95 A 95 Aug-97 A 97 Aug-99 A 99 Aug-01 A 01 Aug-03 A 03 Aug-05 A 05 Aug-07 A 07 Aug-09 A 09 Aug-11 A 11 (CPI) Measuring the change in the CPI provides an estimate for GDP Growth (Last 20 Years) inflation. The CPI tracks the 9 price of a basket of consumer goods and services. High inflation or deflation 6 (negative inflation) can be signs of economic worry. o GDP G ow h (%) DP Growth (% 3 Gross Domestic Product 0 ( (GDP) ) GDP is a basic measure of -3 3 U.S. economic output. p Quarterly GDP, annualized Q l GDP li d Alternatively, Alternatively it can be thought of as the final value g -6 6 of all goods and services p produced within the U.S. -9 Positive GDP growth signals Dec 1 Dec 2 Dec 3 Dec 4 Dec 5 Dec 6 Dec 7 Dec 8 Dec 9 Dec 0 Dec 1 Dec 2 Dec 3 Dec 4 Dec 5 Dec 6 Dec 7 Dec 8 Dec 9 Dec 0 J un 1 J un 2 J un 3 J un 4 J un 5 J un 6 J un 7 J un 8 J un 9 J un 0 J un 1 J un 2 J un 3 J un 4 J un 5 J un 6 J un 7 J un 8 J un 9 J un 0 J un 1 an expanding economy. p g y D c-9 D c-9 D c-9 D c-9 D c-9 D c-9 D c-9 D c-9 D c-9 D c-0 D c-0 D c-0 D c-0 D c-0 D c-0 D c-0 D c-0 D c-0 D c-0 D c-1 n-9 n-9 n-9 n-9 n-9 n-9 n-9 n-9 n-9 n-0 n-0 n-0 n-0 n-0 n-0 n-0 n-0 n-0 n-0 n-1 n-1Source: Factset; Baird Analysis. GDP figures lag one quarter, CPI figures lag one month See important disclosures and Analysis quarter month. Robert W Baird & Co W. Co.definitions included with this p f publication. Baird Market Review | Economy & Market 7
  8. 8. U.S. Empl m t U S Employment Historic Unemployment Rate (Last 30 Years) 12 nempl ym t R te %) Unem loyment Rat (%) 9 Current: 9.1% 9 1% Average: 6 3% 6.3% 6 3 0 Monthly Jobs Gained/Lost (Last 10 Years) 600 Unemployment Rate Calculated monthly by the hang e n No farm P yro ls ( 0s)Cha ge in Nonf rm Pay oll (0 00 ) 400 Bureau of Labor Statistics, 200 the unemployment rate is a nemplo ment ate gauge of the health of the 0 U.S. labor U S l b market. Hi h k t High unemployment can stifle the -200 200 growth of th economy th f the -400 400 Monthly Jobs Gained/Lost Based on changes in monthly g y -600 nonfarm payroll this payroll, indicator shows whether -800 companies have been adding or reducing employees. g p y Source: BLS; Baird Analysis BLS data will lag one month and are subject to revision Employment figures are seasonally Analysis. revision. Robert W Baird & Co W. Co. adjusted. See important disclosures and definitions included with this p j p f publication. Baird Market Review | Economy & Market 8
  9. 9. Market Volatility (as f M rk t V l tilit ( of 9/30/11) Historic VIX Level (Last 10 Years) 80 60 Current: 43 0 43.0 Average: 21 8 21.8VI LevelVIX ev 40 20 0 VIX (CBOE Volatility Index) Sep-01 p Sep-02 p Sep-03 p Sep-04 p Sep-05 p Sep-06 p Sep-07 p Sep-08 p Sep-09 p Sep-10 p Sep-11 p The VIX measures the implied Q Quarterly S&P 500 Trading Volatility ( y g y (Last 10 Years) ) volatility of S&P 500 future options. Simply put, it 100% 00% measures the expected volatility of the S&P 500 Index 80% over the next 30 days The days.Pe cen of Trad ng D ys di g Days +/ +/- 1% or greater move higher the index, the higher +/- 2% or g / greater move the e pected volatility. It is expected olatilit 60% also commonly referred to as the “fear i d th “f index.”” erc nt f 40% S&P Trading Volatility Rather than focus on implied p volatility, volatility this measures actual 20% trading volatility. Trading days g y g y where the S&P 500 Index closes up/down more than 1% p/ 0% or 2% are reported on a Q3 001 Q 20 1 Q4 001 Q 20 1 Q1 002 Q 20 2 Q2 002 Q 20 2 Q3 002 Q 20 2 Q4 002 Q 20 2 Q1 003 Q 20 3 Q2 003 Q 20 3 Q3 003 Q 20 3 Q4 003 Q 20 3 Q1 004 Q 20 4 Q2 004 Q 20 4 Q3 004 Q 20 4 Q4 004 Q 20 4 Q1 005 Q 20 5 Q2 005 Q 20 5 Q3 005 Q 20 5 Q4 005 Q 20 5 Q1 006 Q 20 6 Q2 006 Q 20 6 Q3 006 Q 20 6 Q4 006 Q 20 6 Q1 007 Q 20 7 Q2 007 Q 20 7 Q3 007 Q 20 7 Q4 007 Q 20 7 Q1 008 Q 20 8 Q2 008 Q 20 8 Q3 008 Q 20 8 Q4 008 Q 20 8 Q1 009 Q 20 9 Q2 009 Q 20 9 Q3 009 Q 20 9 Q4 009 Q 20 9 Q1 010 Q 20 0 Q2 010 Q 20 0 Q3 010 Q 20 0 Q4 010 Q 20 0 Q1 011 Q 20 1 Q2 011 Q 20 1 Q3 011 Q 20 1 q quarterly basis. ySource: Yahoo! Finance; Baird Analysis. See important disclosures and definitions included with this publication. Analysis publication Robert W Baird & Co W. Co. Baird Market Review | Economy & Market 9
  10. 10. Commodity Prices (as f C mm dit Pri ( of 9/30/11) Oil Prices (Last 10 Years) Oil Prices (This Year) $160 $ $120 $ 20 $140 W I Crude il P ice $/b bl) WTI C ud Oi Pri es ($ bb ) Current: $79 C t $ $110W I Cru e O P es $/b bl) Average: $ $61WTI C ude Oi l Pri ce ($ bb $ $120 $100 $100 $80 $60 $90 $40 $80 $20 $- $ $70 Gold Prices (Last 10 Years) Gold Prices (This Year) $ , $2,000 $1,900 $1 900 $ , $1,800 $ , $1,800 Lond on M Go d Fix $/ z)L nd n PM Go d Fix $/ z) Current: $1 620 $1,620 Lo do PM Gold F x ($ /ozLondon PM Gold F x ($ oz $ , $1,600 Average: $715 A $1,400 $1,700 $1 700 $1,200 $1,000 $ 000 $1,600 $1 600 $800 $1,500 $1 500 $600 $400 $ , $1,400 $200 $0 $1,300 $1 300 Source: U S Dept of Energy; London PM Gold Fix Index; Baird Analysis. See important disclosures and definitions included U.S. Analysis Robert W Baird & Co W. Co. with this p publication. Baird Market Review | Economy & Market 10
  11. 11. Mutual F d d M t l Fund and ETF Fl Flows ( of 8/31/11) (as f Annual Mutual Fund and ETF Flows ($millions) Year-to-Date Fl Y t D t Flows Calendar Year Flows ($M) ($ ) ($M) Total Assets Quarter- Year-to- 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 ($B) to Date to-Date DateMoney Market y $ , $2,551 ( , (32,666) ) ( (147,562) , ) ( (457,104) , ) ( (361,888) , ) 576,020 , 332,296 , 214,437 , 108,960 , ( , (92,043) ) ( (357,087) , ) ( , (40,415) ) 356,758 ,Municipal Bond p $ $485 ( (860) ) ( , (22,511) ) 13,518 , 76,387 , 11,494 , 11,242 , 17,147 , 6,725 , ( , (8,509) ) ( , (5,172) ) 14,278 , 7,784 ,Taxable Bond $2,164 4,718 111,161 248,461 345,891 54,716 113,862 50,126 36,760 19,667 45,489 109,831 62,670BalancedB l d $768 (3,782) (3 782) 20,430 20 430 14,203 14 203 4,013 4 013 (19,975) (19 975) 46,291 46 291 28,810 28 810 49,852 49 852 63,725 63 725 48,235 48 235 19,692 19 692 12,753 12 753U.S. StockU S St k $3,793 $3 793 (33,692) (33 692) (560) (28,463) (28 463) (21,399) (21 399) 17,703 17 703 50,254 50 254 52,966 52 966 77,418 77 418 149,859 149 859 136,241 136 241 59,049 59 049 82,462 82 462InternationalInte national Stock $1,516 $1 516 (9,726) (9 726) 19,910 19 910 82,983 82 983 58,260 58 260 (51,104) (51 104) 183,007 183 007 169,178 169 178 133,812 133 812 83,442 83 442 35,611 35 611 9,593 9 593 (10,308) (10 308)Alternative $161 5,867 5 867 21,679 21 679 26,921 26 921 32,574 32 574 23,447 23 447 14,852 14 852 13,806 13 806 5,299 5 299 5,963 5 963 4,527 4 527 2,594 2 594 635Commodities $179 3,786 3 786 8,796 8 796 25,070 25 070 36,070 36 070 12,066 12 066 6,677 6 677 8,809 8 809 8,018 8 018 6,248 6 248 1,393 1 393 73 1 Annual Fund Flows The Th examination of annual i ti f l Biggest % Gainers/Losers by Asset Class mutual fund and ETF flows shows Top 10 In-Flows op 0 o s Trailing 1-Year a g ea Top 10 Out-Flows op 0 Out o s Trailing 1-Year a g ea the investment pattern of the th i t t tt f th (as ( a % of assets) f t ) Growth R t G th Rate (as ( a % of assets) f t ) Growth R t G th Rate average investor by broad asset class. For example, i 2008 l F l inBank Loan 69.3% 69 3% Europe Stock -16.2% -16 2% investors exited stocks when theJapan Stock p k 63.0% Trading-Leveraged Equity d g g d q y -13.8% markets f ll I 2009 large k t fell. In 2009, lEmerging Markets Bond 58.7% 58 7% China Region -12 0% 12.0% amounts of capital went to fixedCurrencyC 53.4% 53 4% Money Market Tax F M M k T Free -11.3% 11 3% income, but littl fl i b t little flowed b k t d back toMultialternative 44.0% 44 0% Aggressive Allocation -10 3% 10.3%Commodities B d B k tC diti Broad Basket 39.5% 39 5% Muni N ti M i National L l Long -9.9% 9 9% stocks. stocksMiscellaneous Sector 31.0% 31 0% Long Government -9 6% 9.6% Gainers/Losers /World BondW ld B d 29.0% 29 0% Muni Single St t Interm M i Si l State I t -9.6% 9 6% These tables depict individualNatural Res 29.0% 29 0% Muni Single State Long -9 4% 9.4% asset classes that have exhibitedConvertiblesC tibl 26.9% 26 9% High Yield Muni Hi h Yi ld M i -8.9% 8 9% the greatest positive or negative pe ce tage change percentage c a ge in assets assets. Source: Morningstar Direct; Baird Analysis. Asset classes with less than $10 billion invested were excluded from the analysis. Analysis analysis Robert W Baird & Co W. Co. See important disclosures and definitions included with this p p f publication. Baird Market Review | Economy & Market 11
  12. 12. Domestic Eq it Equity
  13. 13. Domestic A t Cl Performance ( of 9/30/11) D ti Asset Class P f (as f ) Latest Q Quarter Return ( ) By Market Cap (%) y p Year to Date Return ( ) By Market Cap (%) y p 0 0 -5 5 -5 5 -10 -10Re urn (%) Re urn (%) -8 7 8.7 etu n (% etu n (% -12.3 12 3 -15 15 -13.9 13 9 -15 15 -17.0 -20 20 -18.9 -20 20 -21.9 -25 -25 Large Cap Mid Cap Small Cap Large Cap Mid Cap Small Cap Latest Quarter Return (%) By Style Year to Date Return (%) By Style 0 0 -5 5 -5 5 -7.2 -7 2 -10 10 -10 10 et rn %)Re ur (%) et rn %) Re ur (%) -11.2 -11 6 11.6 -13.1 13 1 -13.0 13 0 -15 15 -15 15 -15.6 15 6 -16 2 16.2 -20 20 -18 5 18.5 -20 20 -18 5 18.5 -19.3 -21.5 -22.2 22 2 -25 -25 Large Large Mid Mid Small Small Large Large Mid Mid Small Small Value Growth Value Growth Value Growth Value Growth Value Growth Value GrowthSource: Vestek; Russell indices; Standard & Poors; Baird Analysis. Asset classes are represented by the f k; d ; d d ; d y p d y following benchmarks: S&P 500 ( g g k (LargeCap),Cap) Russell Midcap® (Mid Cap) Russell 2000® (Small Cap) Russell 1000 Value® (Large Value) Russell 1000 Growth® (Large Growth) Cap), Cap), Value), Growth), Robert W Baird & Co W. Co.Russell Midcap Value® ( p ® (Mid Value), Russell Midcap Growth® ( ) p ® (Mid Growth), Russell 2000 Value® ( ) ® (Small Value), and Russell 2000 ) Baird Market Review | Domestic Equity 13Growth® (Small Growth). See important disclosures and definitions included with this publication. Growth) publication

×