June 2011 hb economic update tag finance

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June 2011 hb economic update tag finance

  1. 1. 2011 Mid-Year Economic Update and Investment Outlook
  2. 2. THE DISCLAIMER STATEMENT <ul><li>This presentation focuses on a wide range of economics and finance issues in order to educate you on the linkages between these topics and their impact on the overall economy and investment markets. The content of this presentation represents the opinions of Homrich Berg regarding these educational topics and should not be interpreted as direct investment advice or marketing of HB services. Information included is from sources believed to be reliable. </li></ul>
  3. 3. <ul><li>ECONOMIC </li></ul><ul><li>UPDATE </li></ul>
  4. 4. SUMMARY THOUGHTS <ul><li>Economic growth signals are still positive and consumption is apparently rebounding, while corporate earnings are strong. </li></ul>GOOD BAD UGLY Unemployment, Housing, Interest Rates, and Oil all loom as potential caution flags that could reverse the good news story Government debt and overall debt are not going away as major issues that could reduce long term growth and lead to unpleasant outcomes
  5. 5. Do You Recognize This Economy? Hint: It’s The USA <ul><li>YEAR OVER YEAR CHANGE </li></ul><ul><li>GDP growth rate +56% </li></ul><ul><li>Personal Income +4.35% </li></ul><ul><li>Savings Rate +23.91% </li></ul><ul><li>Fixed Investment +5.37% </li></ul><ul><li>Steel Output +10.32% </li></ul><ul><li>Business Sales +8.86% </li></ul><ul><li>Durable Goods Sales +12.2% </li></ul><ul><li>Factory Shipments +7.21% </li></ul><ul><li>Retail Store Sales +7.31% </li></ul><ul><li>Factory Orders +17.18% </li></ul><ul><li>Exports +12.58% </li></ul>Source: Alhambra Investments Contrarian Musings blog, November 28, 2010
  6. 6. The Economy Is Improving…slowly Source: U.S. Department of Commerce Bureau of Economic Analysis
  7. 7. Broad Signals Look Positive LEADING AND COINCIDENT ECONOMIC INDICATORS Source: The Conference Board
  8. 8. Consumption Continues To Increase Source: U.S. Department of Commerce Bureau of Economic Analysis
  9. 9. And Retail Sales Are Almost Back To Pre-Recession Levels Source: U.S. Census Bureau
  10. 10. Stimulus and QE2 May Not Have Been Perfect - But Appear To Have Helped Bond and Stock Markets! Source: Homrich Berg Analysis
  11. 11. But this recovery doesn’t “feel” very good Source: The Chart Store S&P 500 in Secular Decline vs. Gold
  12. 12. Other Bad News… Deep Job Losses = Slow Road To Recovery Source: U.S. Department of Labor Bureau of Labor Statistics
  13. 13. No Quick Rebound This Time For Jobs Source: U.S. Department of Labor Bureau of Labor Statistics
  14. 14. High Long Term Unemployed Could Create Negative Consumption Impact (Eventually?) Source: U.S. Department of Labor Bureau of Labor Statistics
  15. 15. Unlike Past Recoveries, Interest Rates Can’t Really Go Lower To Help This Recovery! Source: Board of Governors of U.S. Federal Reserve System
  16. 16. New Housing Starts Not Leading Recovery This Time Source: U.S. Census Bureau
  17. 17. Home Prices Were Starting To Improve – But Watch Out For Housing Price Double Dip in 2011 Source: S&P Case Shiller Home Price Index
  18. 18. Inflation In General Looms As A Potential New Challenge That Will Test The Fed’s Policies Source: U.S. Department of Labor Bureau of Labor Statistics
  19. 19. And Oil Prices Could Have An Unpleasant Impact On Growth If They and Gas Prices Continue To Rise Source: Doug Short, dshort.com
  20. 20. The Ugly - Excessive Government Debt Is A Bearish Concern That Could Impact Long Term GDP Growth Source: February 2010 Pimco Investment Outlook
  21. 21. When Fannie/Freddie Debt Is Included, We Feel Like Greece! Source: Ned Davis Research Greece is “only” 120%
  22. 22. The Forecast For Now Is Not Improving Unless We Tackle The Major Retirement/Medical Benefits Programs Source: Congressional Budget Office, Office of Management and Budget, Data as of 8/3/10
  23. 23. Excessive Overall Debt Is A Bearish Concern Even Beyond Government Debt – We Still Have To Deleverage TOTAL GOVERNMENT, CORPORATE, AND HOUSEHOLD DEBT Source: U.S. Bureau of Census, Federal Reserve Flow of Funds Reports
  24. 24. SUMMARY THOUGHTS <ul><li>Economic growth signals are very positive and consumption is apparently rebounding, while corporate earnings (and government policy) are reviving the stock market </li></ul>GOOD BAD UGLY Unemployment, Housing, Interest Rates, and Oil all loom as potential caution flags that could reverse the good news story Government debt and overall debt are not going away as major issues that could reduce long term growth and lead to unpleasant outcomes
  25. 25. INVESTMENT OUTLOOK
  26. 26. Market Indicators We Monitor Are Mixed Technical Momentum and Breadth indicators are both trending negative for market performance to continue to improve Sentiment indicators are the opposite – high pessimism typically leads towards a reboun Interest rate indicators are mixed, with the much uncertainly around the end of QE2 Valuation metrics are mostly neutral or slightly bearish, with one concern being revenue growth in 2011 continuing to support the earnings growth (is it sustainable?) Source: January 2011 HB Analysis
  27. 27. Valuations: US Corporate Bonds vs. S&P 500
  28. 28. Demographic Trends Point To Extended Secular Bear Market Despite The Current Optimism
  29. 29. Long Term Demographics – a U.S. positive
  30. 30. Investment Trends To Watch For Rest of 2011 Rosier forecasts of moving towards 4% annualized GDP growth came from many analysts earlier, but expect only slightly better housing and jobs stories in 2011 as that depressing overhang continues – this is the big caution sign for rosy growth and stock market predictions. Bumpy up and down stock market ride ahead even though overall trend likely upward with many analysts predicting 10%-20% S&P 500 growth for 2011 (we thought first half of 2011 might do well, but have been worried about second half). Bond market potentially goes in reverse as rates start to rise eventually and investors flood back out – we have seen some of this retail investor move already GDP U.S. Equities Fixed Income
  31. 31. Investment Trends To Watch For 2011 Real estate still not out of the woods despite massive REIT stock uptick – debt maturity rollover issue not done yet and commercial space inventory still high. Commodities should continue to grind higher pushed by eventual modest inflation and continued emerging market demand. Emerging market equities and debt attractive – but everyone is chasing it, so buyer beware…volatility ahead, and emerging market governments will want to cool down inflation. Some European countries potentially stronger growth than USA – but euro debt crisis looms over that story no matter what. Real Estate Commodities International Markets
  32. 32. CONTACT INFORMATION <ul><li>Homrich Berg – One Buckhead Plaza 3060 Peachtree Road, NW Suite 830 Atlanta, Georgia 30305 Phone: 404-264-1400 Fax: 404-237-5114 </li></ul><ul><li>Homrich Berg – North Atlanta 5400 Laurel Springs Parkway Suite 304 Suwanee, Georgia 30024 Phone: 404-264-1400 Fax: 404-237-5114 </li></ul>

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