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The document analyzes the economic outlook for 2014 and 2015, highlighting key trends in the stock market, interest rates, and economic indicators. It emphasizes the uncertain economic recovery, the performance of various market sectors, and the implications of Federal Reserve policies. Additionally, it discusses the decline in recession probability and improvements in lending and liquidity conditions.

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SUNYAB Executive MBASUNYAB Executive MBA The Outlook for 2014 and 2015The Outlook for 2014 and 2015
 The Average Duration of the 10 PreviousThe Average Duration of the 10 Previous Post War Bull Markets Was 57.1 Months.Post War Bull Markets Was 57.1 Months.  The Average Percentage Gain of The 10The Average Percentage Gain of The 10 Previous Post War Bull Markets WasPrevious Post War Bull Markets Was 126.5%.126.5%.
ApproachApproach  Identify Meaningful Trends in Financial MarketsIdentify Meaningful Trends in Financial Markets  Identify Meaningful Trends in ImportantIdentify Meaningful Trends in Important Monetary and Economic VariablesMonetary and Economic Variables (Are The Financial Market Trends Rational?)(Are The Financial Market Trends Rational?)  Position Portfolios To Participate in the TrendsPosition Portfolios To Participate in the Trends
The Anatomy of a CycleThe Anatomy of a Cycle Stock Market Economy Interest Rates Source: Hugh Johnson Advisors
The Anatomy of a Mania (and FinancialThe Anatomy of a Mania (and Financial Crisis)Crisis)  The Stage of InvestmentThe Stage of Investment  The Stage of SpeculationThe Stage of Speculation  The Stage of Financial DistressThe Stage of Financial Distress  The Stage of RevulsionThe Stage of Revulsion
This disappointing performance of the U.S.This disappointing performance of the U.S. economy shouldn’t be surprising. We haveeconomy shouldn’t be surprising. We have presented evidence thatpresented evidence that recessions associatedrecessions associated with systemic banking crises tend to be deepwith systemic banking crises tend to be deep and protracted and that this pattern is evidentand protracted and that this pattern is evident across both history and countries.across both history and countries. Carmen M. Reinhart and Kenneth RogoffCarmen M. Reinhart and Kenneth Rogoff Sorry, U.S. Recoveries Aren’t DifferentSorry, U.S. Recoveries Aren’t Different
Since January Low The S&P 500 Has AppreciatedSince January Low The S&P 500 Has Appreciated 6.6%6.6% Source: Bloomberg News; Hugh Johnson Advisors S&P 500 1720 1740 1760 1780 1800 1820 1840 1860 1880 1900 1920 12/ 27 1/ 17 2/ 7 2/ 28 3/ 21 4/ 11 5/ 2 5/ 23 January 31st 2014: 1783 May 23rd 2014: 1900
But…Bear Market Sectors Have GenerallyBut…Bear Market Sectors Have Generally Performed Well.Performed Well. Source: Bloomberg News; Hugh Johnson Advisors. Bear Sectors in red. Sector Since 1/31/2014 Energy 12.5% Basic Materials 10.0% Consumer Non-Cyclical 8.3% Telecommunications 7.0% Technology 7.0% Industrial 6.6% S&P 500 6.6% Utilities 6.3% Healthcare 5.2% Finance 4.4% Consumer Cyclical 3.4%
Large Capitalization Have Stocks OutperformedLarge Capitalization Have Stocks Outperformed Mid and Small Capitalization StocksMid and Small Capitalization Stocks Source: Bloomberg News; Hugh Johnson Advisors Index/CapitalizationIndex/Capitalization Since 1/31/2014Since 1/31/2014 S&P 500 (Large)S&P 500 (Large) 6.6%6.6% S&P 400 (Mid)S&P 400 (Mid) 4.3%4.3% S&P 600 (Small)S&P 600 (Small) -0.1%-0.1%
Longer-Term Interest Rates Have Declined FromLonger-Term Interest Rates Have Declined From 2.65% To 2.53%.2.65% To 2.53%. Source: Bloomberg News; Hugh Johnson Advisors Yield 10-Year U.S. Treasury Note 2.4 2.5 2.6 2.7 2.8 2.9 3.0 3.1 12/ 27 1/ 17 2/ 7 2/ 28 3/ 21 4/ 11 5/ 2 5/ 23 January 31st 2014: 2.65% May 23rd 2014: 2.53%
The Yield Curve Has Narrowed From 2.63% to 2.50% Source: Bloomberg News; Hugh Johnson Advisors Yield Curve: 10-Year UST less 91-Day UST 2.4 2.5 2.6 2.7 2.8 2.9 3.0 12/ 27 1/ 17 2/ 7 2/ 28 3/ 21 4/ 11 5/ 2 5/ 23 May 23rd 2014: 2.50% January 31st 2014: 2.63%
Recession Probability Has Declined And RemainsRecession Probability Has Declined And Remains Low.Low. Source: Federal Reserve Bank of New York Month/Year Recession Probability May-13 5.3% June-13 6.7% July-13 7.5% August-13 6.3% September-13 6.0% October-13 5.7% November-13 6.4% December-13 5.7% January-14 4.5% February-14 4.2% March-14 4.3% April-14 5.4%
Quality Spreads WidenedQuality Spreads Widened Source: Bloomberg News; Hugh Johnson Advisors Spread: BAA Corporate less 10-Year UST 1.9 2.0 2.1 2.2 2.3 2.4 2.5 12/27 1/10 1/24 2/7 2/21 3/7 3/21 4/4 4/18 5/2 5/16 May 23rd 2014: 2.28% April 18th 2014: 2.12%
Quality Spreads Have WidenedQuality Spreads Have Widened Source: Bloomberg News; Hugh Johnson Advisors Spread: "Junk" less 10-Year UST 2.6 2.7 2.8 2.9 3.0 3.1 3.2 3.3 3.4 3.5 12/ 27 1/ 17 2/ 7 2/ 28 3/ 21 4/ 11 5/ 2 5/ 23 May 23rd 2014: 3.00% April 18th 2014: 2.91%
The Message of the Financial MarketsThe Message of the Financial Markets IsIs Ambiguous with a Negative LeanAmbiguous with a Negative Lean
The Message of the Financial MarketsThe Message of the Financial Markets IsIs Inconsistent, In My View, with the Performance ofInconsistent, In My View, with the Performance of Important Monetary and Economic VariablesImportant Monetary and Economic Variables Hopefully We Can Explain the DisconnectHopefully We Can Explain the Disconnect
The Federal Reserve Policy RemainsThe Federal Reserve Policy Remains Accommodative…Accommodative… More LaterMore Later Source: Federal Reserve Real Federal Funds Rate -3.0% -2.5% -2.0% -1.5% -1.0% -0.5% Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 January 2012: -2.8% April 2012: -1.9%
Total Bank LendingTotal Bank Lending ImprovingImproving Source: Federal Reserve All Loans and Leases (Y/ Y) 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 4.5% 5.0% 5.5% 6.0% Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 January 2012: 3.0% April 2014: 3.7%
Lending to BusinessesLending to Businesses ImprovingImproving Source: Federal Reserve Commercial and I ndustrial Loans (Y/ Y) 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% 10.0% 11.0% 12.0% 13.0% 14.0% Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 January 2012: 10.3% April 2014: 10.3%
Real Estate Lending IsReal Estate Lending Is ImprovingImproving Source: Federal Reserve Real Estate Loans (Y/ Y) -1.0% -0.5% 0.0% 0.5% 1.0% 1.5% 2.0% Apr- 12 Jul- 12 Oct- 12 Jan- 13 Apr- 13 Jul- 13 Oct- 13 Jan- 14 Apr- 14 January 2012: -2.5% April 2014: +.4%
The Growth Rate of The Money Supply Continues at aThe Growth Rate of The Money Supply Continues at a Good Pace. The Longer-Term Average Growth Rate hasGood Pace. The Longer-Term Average Growth Rate has been 6.9%.been 6.9%. Source: Federal Reserve Money Supply (M2 Y/ Y) 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% 10.0% 11.0% 12.0% Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 April 2014: +6.0% January 2012: +10.4%
As A Result, Domestic Liquidity Conditions RemainAs A Result, Domestic Liquidity Conditions Remain Positive. The Longer Term Average Growth Rate has beenPositive. The Longer Term Average Growth Rate has been 2.9%.2.9%. Source: Bureau of Economic Analysis; Federal Reserve Ratio: M2/ GDP (Y/ Y) 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% Jan-12 Mar-12 May-14 Jul-14 Sep-14 Nov-12 Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 April 2014: +2.2% January 2012: +4.9%
Leading Indicators For The Economy Continue To RiseLeading Indicators For The Economy Continue To Rise Source: Conference Board I ndex of Leading Economic I ndicators 90 92 94 96 98 100 102 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Index Up 11 of 12 Months; One Month Unchanged
The Ratio of Coincident Economic Indicators-to-LaggingThe Ratio of Coincident Economic Indicators-to-Lagging Economic IndicatorsEconomic Indicators Source: Conference Board Ratio: Coincident-To-Lagging Economic I ndicators 0.86 0.87 0.88 0.89 0.90 0.91 0.92 0.93 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 Continues to Decline
Real Gross Domestic ProductReal Gross Domestic Product Source: Blue Chip Economic Indicators; HJA Quarter Consensus-Real GDP HJA-Real GDP 2014-Q1 0.1% 0.1% 2014-Q2 3.4% 3.6% 2014-Q3 3.0% 3.4% 2014-Q4 3.1% 2.9% 2015-Q1 3.0% 3.0% 2015-Q2 3.0% 3.1% 2015-Q3 3.0% 3.2% 2015-Q4 2.9% 3.3%       2013 Average 1.9% 1.9% 2014 Average 2.4% 2.5% 2015 Average 3.0% 3.2%
““Historical forecast errors are large in economicHistorical forecast errors are large in economic terms, indicating that-if past performance is aterms, indicating that-if past performance is a good guide to future accuracy-uncertainty aboutgood guide to future accuracy-uncertainty about the economic outlook is considerable.”the economic outlook is considerable.” Federal Reserve StudiesFederal Reserve Studies
The Consensus Forecast “Tends” To Be Too HighThe Consensus Forecast “Tends” To Be Too High (or Too Low) and Trends Down (or Up)(or Too Low) and Trends Down (or Up) Source: Blue Chip Economic Indicators, HJA 2014 Consensus Forecast; Historical Trend of Forecasts 0.0% 0.2% 0.4% 0.6% 0.8% 1.0% 1.2% 1.4% 1.6% 1.8% January February March April May June July August September October November December January February March April May June July August September October November December 1.4% 1.6% 1.8% 2.0% 2.2% 2.4% 2.6% 2.8% 3.0% 2014 Consensus Forecast; Big “Uptick”? Historical Trend: Difference Between Forecast and Outcome
EmploymentEmployment Source: Bureau of Labor Statistics; HJA; Bloomberg News Quarter Consensus-NFP HJA-NFP 2014-Q1 190 169 2014-Q2 225 189 2014-Q3 205 237 2014-Q4 210 203 2015-Q1 208 243 2015-Q2 NA 222 2015-Q3 NA 256 2015-Q4 NA 262       2013 Average 200 200 2014 Average 205 199 2015 Average 210 246
The Unemployment RateThe Unemployment Rate Source: Blue Chip Economic Indicators; HJA Quarter Consensus-Unemployment Rate HJA-Unemployment Rate 2014-Q1 6.7% 6.7% 2014-Q2 6.4% 6.5% 2014-Q3 6.3% 6.3% 2014-Q4 6.1% 6.1% 2015-Q1 6.0% 5.9% 2015-Q2 5.9% 5.8% 2015-Q3 5.8% 5.6% 2015-Q4 5.7% 5.4%       2013 Average 7.4% 7.4% 2014 Average 6.4% 6.4% 2015 Average 5.9% 5.7%
Consumer InflationConsumer Inflation Source: Blue Chip Economic Indicators; HJA Quarter Consensus-CPI HJA-CPI 2014-Q1 1.4% 1.4% 2014-Q2 1.8% 1.3% 2014-Q3 1.8% 1.3% 2014-Q4 2.0% 1.9% 2015-Q1 2.0% 1.8% 2015-Q2 1.9% 2.1% 2015-Q3 1.9% 2.4% 2015-Q4 2.0% 2.6%       2013 Average 1.5% 1.5% 2014 Average 1.8% 1.5% 2015 Average 2.1% 2.1%
Consumer SpendingConsumer Spending Source: Blue Chip Economic Indicators, HJA Quarter Consensus-Consumer Spending HJA-Consumer Spending 2014-Q1 3.0% 3.0% 2014-Q2 3.3% 2.8% 2014-Q3 2.8% 2.9% 2014-Q4 2.8% 2.6% 2015-Q1 2.8% 2.7% 2015-Q2 2.9% 2.7% 2015-Q3 2.9% 2.7% 2015-Q4 2.8% 2.8%       2013 Average 2.0% 2.0% 2014 Average 3.0% 2.8% 2015 Average 2.9% 2.7%
Deleveraging Is Largely Behind UsDeleveraging Is Largely Behind Us Source: Financial Accounts of the United States, Federal Reserve Household Debt::Net Worth 14.0% 16.0% 18.0% 20.0% 22.0% 24.0% 26.0% 2000Q1 2001Q1 2002Q1 2003Q1 2004Q1 2005Q1 2006Q1 2007Q1 2008Q1 2009Q1 2010Q1 2011Q1 2012Q1 2013Q1
Short Term Interest Rates (Current Level .03%)Short Term Interest Rates (Current Level .03%) Source: Blue Chip Financial Indicators; HJA Quarter Consensus 91-Day HJA 91-Day 2014-Q1 0.10 0.05 2014-Q2 0.10 0.04 2014-Q3 0.10 0.08 2014-Q4 0.10 0.09 2015-Q1 0.20 0.09 2015-Q2 0.30 0.10 2015-Q3 0.60 0.32 2015-Q4 0.90 0.32       2013 Average 0.31 0.31 2014 Average 0.10 0.06 2015 Average 0.50 0.21
Longer Term Interest Rates (Current Level 2.53%)Longer Term Interest Rates (Current Level 2.53%) Source: Blue Chip Financial Indicators; HJA Quarter Consensus 10-Year HJA 10-Year 2014-Q1 2.76 2.76 2014-Q2 2.80 2.70 2014-Q3 3.00 2.82 2014-Q4 3.30 2.82 2015-Q1 3.40 2.82 2015-Q2 3.60 2.84 2015-Q3 3.70 3.03 2015-Q4 3.90 3.02       2013 Average 2.79 2.35 2014 Average 2.97 2.78 2015 Average 3.65 2.93
Stock Prices (Current Level 1900)Stock Prices (Current Level 1900) Source: HJA Quarter S&P 500 EPS (LTM) P/E S&P 500 2014-Q1 $112.34 16.3 1836 2014-Q2 $114.15 15.9 1813 2014-Q3 $115.87 16.0 1849 2014-Q4 $117.21 15.9 1858 2015-Q1 $118.62 15.7 1866 2015-Q2 $120.04 15.7 1884 2015-Q3 $121.47 15.9 1930 2015-Q4 $123.01 15.8 1941         2013 Average $107.67 15.3 1645 2014 Average $114.89 16.0 1839 2015 Average $120.78 15.8 1905
““Stratalergy”Stratalergy” The RisksThe Risks
SUNYAB The Outlook for 2014 and 2015 Fed Policy and Inflation and Exit Strategy
The Balance Sheet of Commercial Banks Credit Market Instruments $10,736,464 Net interbank transactions -$13,268 Open Market Paper $1,043 Checkable Deposits $707,549 U.S. Treasuries $118,963 Small Time and Savings Deposits $5,178,047 Agency and GSE $1,295,471 Large Time Deposits $2,422,809 Municipal Securities $205,733 Federal Funds and Security Repurchase Agreements$922,415 Corporate and Foreign Bonds $1,083,888 Credit Market Instruments $973,747 Loans $1,992,602 Open Market Paper $423 Other Loans and Advances $277 Corporate and Foreign Bonds $176,852 Mortgages $4,943,019 Other Loans and Advances $796,472 Consumer Credit $1,095,468 Taxes Payable $18,499 Equities $92,793 Miscellaneous Liabilities $1,832,320 Mutual Funds $30,796 Foreign Direct Investment $154,503 Security Credit $320,176 Net Transactions Due To Holding Cos $1,210,493 Life Insurance Reserves $100,277 Equity Investments in Funding Corps $225,287 Miscellaneous Assets $977,742 Unidentifies Miscellaneous Liabilities $242,037 Leases to Households $11,789 Vault Cash $41,482 Reserves $23,014 Other $10,661,000 Total Financial Assets $12,322,744 Total Financial Liabilities $12,042,117 U.S. Commercial Banks 2007 IIIQ
The Balance Sheet of Commercial Banks Credit Market Instruments $11,868,055 Net interbank transactions $460,291 Open Market Paper $0 Checkable Deposits $1,825,586 U.S. Treasuries $305,217 Small Time and Savings Deposits $8,115,778 Agency and GSE $1,948,543 Large Time Deposits $1,762,234 Municipal Securities $424,536 Federal Funds and Security Repurchase Agreements $438,435 Corporate and Foreign Bonds $777,681 Credit Market Instruments $885,448 Loans $2,506,965 Open Market Paper $59,662 Other Loans and Advances $0 Corporate and Foreign Bonds $397,657 Mortgages $4,368,587 Other Loans and Advances $428,129 Consumer Credit $1,536,526 Taxes Payable -$47,463 Equities $116,843 Miscellaneous Liabilities $2,523,970 Mutual Funds $86,692 Foreign Direct Investment $203,416 Security Credit $375,536 Net Transactions Due To Holding Cos $1,944,382 Life Insurance Reserves $143,914 Equity Investments in Funding Corps $122,931 Miscellaneous Assets $864,636 Unidentifies Miscellaneous Liabilities $253,241 Leases to Households $7,921 Vault Cash $73,648 Reserves $2,249,070 Other $15,964,278 Total Financial Assets $15,778,394 Total Financial Liabilities $15,964,278 2013 IVQ U.S. Commercial Banks
If Lending/Money Growth Begins To Rise, The Federal Reserve Has An Exit Strategy. This could change! Can The Federal Reserve Do Anything About It?This could change! Can The Federal Reserve Do Anything About It? A staff presentation outlined several approaches to raising short-termA staff presentation outlined several approaches to raising short-term interest rates when it becomes appropriate to do so, and to controllinginterest rates when it becomes appropriate to do so, and to controlling the level of short term interest rates once they were above thethe level of short term interest rates once they were above the effective lower bound, during a period when the Federal Reserve willeffective lower bound, during a period when the Federal Reserve will have a very large balance sheet. The approaches differed in terms ofhave a very large balance sheet. The approaches differed in terms of the combination of policy tools that might be used to accomplish thosethe combination of policy tools that might be used to accomplish those objectives.objectives. In addition to the rate of interest paid on excess reserveIn addition to the rate of interest paid on excess reserve balances, the tools considered included fixed-rate overnight reservebalances, the tools considered included fixed-rate overnight reserve repurchase (ON RRP) operations, term reverse repurchaserepurchase (ON RRP) operations, term reverse repurchase agreements, and the Term Deposit Facility (TDF).agreements, and the Term Deposit Facility (TDF). Minutes FOMC meeting of April 30 2014Minutes FOMC meeting of April 30 2014
SUNYAB The Outlook for 2014 and 2015 The Euro Zone
The Outlook for The Euro ZoneThe Outlook for The Euro Zone Source: OECD; Blue Chip Economic Indicators; HJA, Consensus Forecast for Euro Area; Composite Index of Leading Economic Indicators for Euro Area 99.0 99.5 100.0 100.5 101.0 January- Febr March-13 April-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 IndexofLeadingEconomic Indicators 0.6% 0.7% 0.8% 0.9% 1.0% 1.1% 1.2% 1.3% 1.4% 1.5% 2012Forecast 2014, Euro Area Forecast Composite Index of Leading Economic Indicators
SUNYAB The Outlook for 2014 and 2015 Emerging Markets
The Outlook For Emerging Markets: China.The Outlook For Emerging Markets: China. Continues to DeteriorateContinues to Deteriorate Source: Blue Chip Economic Indicators; OECD; HJA Consensus Forecast for China; Composite Index of Leading Economic Indicators for China 98.5 98.7 98.9 99.1 99.3 99.5 99.7 99.9 100.1 100.3 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 IndexofLeadingEconomic Indicators 7.2% 7.4% 7.6% 7.8% 8.0% 8.2% 2014Forecast 2014, China Forecast Composite Index of Leading Economic Indicators
The Outlook For Emerging Markets: Brazil.The Outlook For Emerging Markets: Brazil. Continues to DeteriorateContinues to Deteriorate Source: Blue Chip Economic Indicators; OECD; HJA Consensus Forecast for Brazil; Composite Index of Leading Economic Indicators for Brazil 98.0 98.5 99.0 99.5 100.0 100.5 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 IndexofLeadingEconomic Indicators 1.6% 2.1% 2.6% 3.1% 3.6% 4.1% 4.6% 2014Forecast 2014, Brazil Forecast Composite Index of Leading Economic Indicators
The Outlook For Emerging Markets: Russia.The Outlook For Emerging Markets: Russia. Continues to DeteriorateContinues to Deteriorate Source: Blue Chip Economic Indicators; OECD; HJA Consensus Forecast for Russia; Composite Index of Leading Economic Indicators for Russia 99.0 99.1 99.2 99.3 99.4 99.5 99.6 99.7 99.8 99.9 100.0 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 IndexofLeadingEconomic Indicators 0.4% 0.9% 1.4% 1.9% 2.4% 2.9% 3.4% 3.9% 4.4% 4.9% 2014Forecast 2014, Russia Forecast Composite Index of Leading Economic Indicators
The Outlook For Emerging Markets: India.The Outlook For Emerging Markets: India. Continues to DeteriorateContinues to Deteriorate Source: Blue Chip Economic Indicators; OECD; HJA Consensus Forecast for India; Composite Index of Leading Economic Indicators for India 97.5 97.7 97.9 98.1 98.3 98.5 98.7 98.9 99.1 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 IndexofLeadingEconomic Indicators 5.0% 5.5% 6.0% 6.5% 7.0% 2014Forecast 2014, India Forecast Composite Index of Leading Economic Indicators
Portfolio StructurePortfolio Structure  Asset AllocationAsset Allocation  Domestic Equities-International EquitiesDomestic Equities-International Equities AllocationAllocation  Capitalization AllocationCapitalization Allocation  Sector AllocationSector Allocation
SUNYABSUNYAB The Outlook for 2014 and 2015The Outlook for 2014 and 2015 And BeyondAnd Beyond
Long-Term Bond Bear Market; Long-Term Stock Bull Market Stocks: 9.7% Bonds: .4% 25 Years 1921-1946 36 Years 1946-1982 30 Years 1982-2012 Yield BAA Corporate Bond (1919-2013) 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 18.0 1919- 01 1931- 01 1943- 01 1955- 01 1967- 01 1979- 01 1991- 01 2003- 01
SUNYABSUNYAB The Outlook for 2014 and 2015The Outlook for 2014 and 2015 EnergyEnergy
Oil Source: IMF, BP Statistical Review 2013, HJA Year World Real GDP Global Consumption Global Production Price 2010 4.1 87,833 83,272 $79 2011 2.9 88,879 84,210 $95 2012 2.5 89,774 86,152 $94 2013 2.6 90,891 86,235 $97 2014 3.4 92,022 87,142 $100 2015 3.8 93,166 88,018 $103 2016 3.9 94,325 88,884 $106 2017 3.9 95,499 89,737 $110 2018 3.9 96,687 90,585 $113           1980-2012 2.8% 1.2% 1.0% 2.9%
Energy Independence Source: IMF, BP Statistical Review 2013, HJA Primary Energy 2005 2010 2015 2018 US Oil Consumption 939.8 847.4 818.4 800.4 US Oil Production 309.1 332.9 537.2 798.0 % Shortfall -67.1% -60.7% -34.4% -0.3%           US Natural Gas Consumption 568.5 619.3 672.2 692.8 US Natural Gas Production 467.6 549.5 674.6 745.4 % Shortfall -17.8% -11.3% 0.4% 7.6%           US Coal Consumption 574.2 523.9 460.2 442.1 US Coal Production 595.1 556.1 521.1 501.0 % Shortfall 3.6% 6.1% 13.2% 13.3%           Total Consumption 2,082.5 1,990.6 1,950.8 1,935.2 Total Production 1,371.8 1,438.5 1,732.9 2,044.4 % Shortfall -34.1% -27.7% -11.2% 5.6%
SUNYABSUNYAB The Outlook for 2014 and 2015The Outlook for 2014 and 2015 HousingHousing
Housing Should Continue To Expand But At A Slower Pace Quarter Existing Home Sales Existing Inventory Existing Prices   (Mls Annual Rate) (Months) Median (Ths $) 2013-Q1 4.9 4.5 $176.4 2013-Q2 5.1 5.1 $203.4 2013-Q3 5.4 5.0 $211.4 2013-Q4 5.4 5.1 $206.8 2014-Q1 5.4 5.1 $202.9 2014-Q2 5.4 5.2 $226.3 2014-Q3 5.4 5.3 $231.0 2014-Q4 5.4 5.4 $223.8         2013 Average 5.2 4.9 $199.5 2014 Average 5.4 5.3 $221.0 2015 Average 5.4 5.6 $231.9 Source: Bloomberg News; HJA

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Hugh Johnson UAlbany MBA Presentation

  • 1.
    SUNYAB Executive MBASUNYABExecutive MBA The Outlook for 2014 and 2015The Outlook for 2014 and 2015
  • 2.
     The AverageDuration of the 10 PreviousThe Average Duration of the 10 Previous Post War Bull Markets Was 57.1 Months.Post War Bull Markets Was 57.1 Months.  The Average Percentage Gain of The 10The Average Percentage Gain of The 10 Previous Post War Bull Markets WasPrevious Post War Bull Markets Was 126.5%.126.5%.
  • 3.
    ApproachApproach  Identify MeaningfulTrends in Financial MarketsIdentify Meaningful Trends in Financial Markets  Identify Meaningful Trends in ImportantIdentify Meaningful Trends in Important Monetary and Economic VariablesMonetary and Economic Variables (Are The Financial Market Trends Rational?)(Are The Financial Market Trends Rational?)  Position Portfolios To Participate in the TrendsPosition Portfolios To Participate in the Trends
  • 4.
    The Anatomy ofa CycleThe Anatomy of a Cycle Stock Market Economy Interest Rates Source: Hugh Johnson Advisors
  • 5.
    The Anatomy ofa Mania (and FinancialThe Anatomy of a Mania (and Financial Crisis)Crisis)  The Stage of InvestmentThe Stage of Investment  The Stage of SpeculationThe Stage of Speculation  The Stage of Financial DistressThe Stage of Financial Distress  The Stage of RevulsionThe Stage of Revulsion
  • 6.
    This disappointing performanceof the U.S.This disappointing performance of the U.S. economy shouldn’t be surprising. We haveeconomy shouldn’t be surprising. We have presented evidence thatpresented evidence that recessions associatedrecessions associated with systemic banking crises tend to be deepwith systemic banking crises tend to be deep and protracted and that this pattern is evidentand protracted and that this pattern is evident across both history and countries.across both history and countries. Carmen M. Reinhart and Kenneth RogoffCarmen M. Reinhart and Kenneth Rogoff Sorry, U.S. Recoveries Aren’t DifferentSorry, U.S. Recoveries Aren’t Different
  • 7.
    Since January LowThe S&P 500 Has AppreciatedSince January Low The S&P 500 Has Appreciated 6.6%6.6% Source: Bloomberg News; Hugh Johnson Advisors S&P 500 1720 1740 1760 1780 1800 1820 1840 1860 1880 1900 1920 12/ 27 1/ 17 2/ 7 2/ 28 3/ 21 4/ 11 5/ 2 5/ 23 January 31st 2014: 1783 May 23rd 2014: 1900
  • 8.
    But…Bear Market SectorsHave GenerallyBut…Bear Market Sectors Have Generally Performed Well.Performed Well. Source: Bloomberg News; Hugh Johnson Advisors. Bear Sectors in red. Sector Since 1/31/2014 Energy 12.5% Basic Materials 10.0% Consumer Non-Cyclical 8.3% Telecommunications 7.0% Technology 7.0% Industrial 6.6% S&P 500 6.6% Utilities 6.3% Healthcare 5.2% Finance 4.4% Consumer Cyclical 3.4%
  • 9.
    Large Capitalization HaveStocks OutperformedLarge Capitalization Have Stocks Outperformed Mid and Small Capitalization StocksMid and Small Capitalization Stocks Source: Bloomberg News; Hugh Johnson Advisors Index/CapitalizationIndex/Capitalization Since 1/31/2014Since 1/31/2014 S&P 500 (Large)S&P 500 (Large) 6.6%6.6% S&P 400 (Mid)S&P 400 (Mid) 4.3%4.3% S&P 600 (Small)S&P 600 (Small) -0.1%-0.1%
  • 10.
    Longer-Term Interest RatesHave Declined FromLonger-Term Interest Rates Have Declined From 2.65% To 2.53%.2.65% To 2.53%. Source: Bloomberg News; Hugh Johnson Advisors Yield 10-Year U.S. Treasury Note 2.4 2.5 2.6 2.7 2.8 2.9 3.0 3.1 12/ 27 1/ 17 2/ 7 2/ 28 3/ 21 4/ 11 5/ 2 5/ 23 January 31st 2014: 2.65% May 23rd 2014: 2.53%
  • 11.
    The Yield CurveHas Narrowed From 2.63% to 2.50% Source: Bloomberg News; Hugh Johnson Advisors Yield Curve: 10-Year UST less 91-Day UST 2.4 2.5 2.6 2.7 2.8 2.9 3.0 12/ 27 1/ 17 2/ 7 2/ 28 3/ 21 4/ 11 5/ 2 5/ 23 May 23rd 2014: 2.50% January 31st 2014: 2.63%
  • 12.
    Recession Probability HasDeclined And RemainsRecession Probability Has Declined And Remains Low.Low. Source: Federal Reserve Bank of New York Month/Year Recession Probability May-13 5.3% June-13 6.7% July-13 7.5% August-13 6.3% September-13 6.0% October-13 5.7% November-13 6.4% December-13 5.7% January-14 4.5% February-14 4.2% March-14 4.3% April-14 5.4%
  • 13.
    Quality Spreads WidenedQualitySpreads Widened Source: Bloomberg News; Hugh Johnson Advisors Spread: BAA Corporate less 10-Year UST 1.9 2.0 2.1 2.2 2.3 2.4 2.5 12/27 1/10 1/24 2/7 2/21 3/7 3/21 4/4 4/18 5/2 5/16 May 23rd 2014: 2.28% April 18th 2014: 2.12%
  • 14.
    Quality Spreads HaveWidenedQuality Spreads Have Widened Source: Bloomberg News; Hugh Johnson Advisors Spread: "Junk" less 10-Year UST 2.6 2.7 2.8 2.9 3.0 3.1 3.2 3.3 3.4 3.5 12/ 27 1/ 17 2/ 7 2/ 28 3/ 21 4/ 11 5/ 2 5/ 23 May 23rd 2014: 3.00% April 18th 2014: 2.91%
  • 15.
    The Message ofthe Financial MarketsThe Message of the Financial Markets IsIs Ambiguous with a Negative LeanAmbiguous with a Negative Lean
  • 16.
    The Message ofthe Financial MarketsThe Message of the Financial Markets IsIs Inconsistent, In My View, with the Performance ofInconsistent, In My View, with the Performance of Important Monetary and Economic VariablesImportant Monetary and Economic Variables Hopefully We Can Explain the DisconnectHopefully We Can Explain the Disconnect
  • 17.
    The Federal ReservePolicy RemainsThe Federal Reserve Policy Remains Accommodative…Accommodative… More LaterMore Later Source: Federal Reserve Real Federal Funds Rate -3.0% -2.5% -2.0% -1.5% -1.0% -0.5% Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 January 2012: -2.8% April 2012: -1.9%
  • 18.
    Total Bank LendingTotalBank Lending ImprovingImproving Source: Federal Reserve All Loans and Leases (Y/ Y) 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 4.5% 5.0% 5.5% 6.0% Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 January 2012: 3.0% April 2014: 3.7%
  • 19.
    Lending to BusinessesLendingto Businesses ImprovingImproving Source: Federal Reserve Commercial and I ndustrial Loans (Y/ Y) 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% 10.0% 11.0% 12.0% 13.0% 14.0% Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 January 2012: 10.3% April 2014: 10.3%
  • 20.
    Real Estate LendingIsReal Estate Lending Is ImprovingImproving Source: Federal Reserve Real Estate Loans (Y/ Y) -1.0% -0.5% 0.0% 0.5% 1.0% 1.5% 2.0% Apr- 12 Jul- 12 Oct- 12 Jan- 13 Apr- 13 Jul- 13 Oct- 13 Jan- 14 Apr- 14 January 2012: -2.5% April 2014: +.4%
  • 21.
    The Growth Rateof The Money Supply Continues at aThe Growth Rate of The Money Supply Continues at a Good Pace. The Longer-Term Average Growth Rate hasGood Pace. The Longer-Term Average Growth Rate has been 6.9%.been 6.9%. Source: Federal Reserve Money Supply (M2 Y/ Y) 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% 10.0% 11.0% 12.0% Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 April 2014: +6.0% January 2012: +10.4%
  • 22.
    As A Result,Domestic Liquidity Conditions RemainAs A Result, Domestic Liquidity Conditions Remain Positive. The Longer Term Average Growth Rate has beenPositive. The Longer Term Average Growth Rate has been 2.9%.2.9%. Source: Bureau of Economic Analysis; Federal Reserve Ratio: M2/ GDP (Y/ Y) 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% Jan-12 Mar-12 May-14 Jul-14 Sep-14 Nov-12 Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 April 2014: +2.2% January 2012: +4.9%
  • 23.
    Leading Indicators ForThe Economy Continue To RiseLeading Indicators For The Economy Continue To Rise Source: Conference Board I ndex of Leading Economic I ndicators 90 92 94 96 98 100 102 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Index Up 11 of 12 Months; One Month Unchanged
  • 24.
    The Ratio ofCoincident Economic Indicators-to-LaggingThe Ratio of Coincident Economic Indicators-to-Lagging Economic IndicatorsEconomic Indicators Source: Conference Board Ratio: Coincident-To-Lagging Economic I ndicators 0.86 0.87 0.88 0.89 0.90 0.91 0.92 0.93 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 Continues to Decline
  • 25.
    Real Gross DomesticProductReal Gross Domestic Product Source: Blue Chip Economic Indicators; HJA Quarter Consensus-Real GDP HJA-Real GDP 2014-Q1 0.1% 0.1% 2014-Q2 3.4% 3.6% 2014-Q3 3.0% 3.4% 2014-Q4 3.1% 2.9% 2015-Q1 3.0% 3.0% 2015-Q2 3.0% 3.1% 2015-Q3 3.0% 3.2% 2015-Q4 2.9% 3.3%       2013 Average 1.9% 1.9% 2014 Average 2.4% 2.5% 2015 Average 3.0% 3.2%
  • 26.
    ““Historical forecast errorsare large in economicHistorical forecast errors are large in economic terms, indicating that-if past performance is aterms, indicating that-if past performance is a good guide to future accuracy-uncertainty aboutgood guide to future accuracy-uncertainty about the economic outlook is considerable.”the economic outlook is considerable.” Federal Reserve StudiesFederal Reserve Studies
  • 27.
    The Consensus Forecast“Tends” To Be Too HighThe Consensus Forecast “Tends” To Be Too High (or Too Low) and Trends Down (or Up)(or Too Low) and Trends Down (or Up) Source: Blue Chip Economic Indicators, HJA 2014 Consensus Forecast; Historical Trend of Forecasts 0.0% 0.2% 0.4% 0.6% 0.8% 1.0% 1.2% 1.4% 1.6% 1.8% January February March April May June July August September October November December January February March April May June July August September October November December 1.4% 1.6% 1.8% 2.0% 2.2% 2.4% 2.6% 2.8% 3.0% 2014 Consensus Forecast; Big “Uptick”? Historical Trend: Difference Between Forecast and Outcome
  • 28.
    EmploymentEmployment Source: Bureau ofLabor Statistics; HJA; Bloomberg News Quarter Consensus-NFP HJA-NFP 2014-Q1 190 169 2014-Q2 225 189 2014-Q3 205 237 2014-Q4 210 203 2015-Q1 208 243 2015-Q2 NA 222 2015-Q3 NA 256 2015-Q4 NA 262       2013 Average 200 200 2014 Average 205 199 2015 Average 210 246
  • 29.
    The Unemployment RateTheUnemployment Rate Source: Blue Chip Economic Indicators; HJA Quarter Consensus-Unemployment Rate HJA-Unemployment Rate 2014-Q1 6.7% 6.7% 2014-Q2 6.4% 6.5% 2014-Q3 6.3% 6.3% 2014-Q4 6.1% 6.1% 2015-Q1 6.0% 5.9% 2015-Q2 5.9% 5.8% 2015-Q3 5.8% 5.6% 2015-Q4 5.7% 5.4%       2013 Average 7.4% 7.4% 2014 Average 6.4% 6.4% 2015 Average 5.9% 5.7%
  • 30.
    Consumer InflationConsumer Inflation Source:Blue Chip Economic Indicators; HJA Quarter Consensus-CPI HJA-CPI 2014-Q1 1.4% 1.4% 2014-Q2 1.8% 1.3% 2014-Q3 1.8% 1.3% 2014-Q4 2.0% 1.9% 2015-Q1 2.0% 1.8% 2015-Q2 1.9% 2.1% 2015-Q3 1.9% 2.4% 2015-Q4 2.0% 2.6%       2013 Average 1.5% 1.5% 2014 Average 1.8% 1.5% 2015 Average 2.1% 2.1%
  • 31.
    Consumer SpendingConsumer Spending Source:Blue Chip Economic Indicators, HJA Quarter Consensus-Consumer Spending HJA-Consumer Spending 2014-Q1 3.0% 3.0% 2014-Q2 3.3% 2.8% 2014-Q3 2.8% 2.9% 2014-Q4 2.8% 2.6% 2015-Q1 2.8% 2.7% 2015-Q2 2.9% 2.7% 2015-Q3 2.9% 2.7% 2015-Q4 2.8% 2.8%       2013 Average 2.0% 2.0% 2014 Average 3.0% 2.8% 2015 Average 2.9% 2.7%
  • 32.
    Deleveraging Is LargelyBehind UsDeleveraging Is Largely Behind Us Source: Financial Accounts of the United States, Federal Reserve Household Debt::Net Worth 14.0% 16.0% 18.0% 20.0% 22.0% 24.0% 26.0% 2000Q1 2001Q1 2002Q1 2003Q1 2004Q1 2005Q1 2006Q1 2007Q1 2008Q1 2009Q1 2010Q1 2011Q1 2012Q1 2013Q1
  • 33.
    Short Term InterestRates (Current Level .03%)Short Term Interest Rates (Current Level .03%) Source: Blue Chip Financial Indicators; HJA Quarter Consensus 91-Day HJA 91-Day 2014-Q1 0.10 0.05 2014-Q2 0.10 0.04 2014-Q3 0.10 0.08 2014-Q4 0.10 0.09 2015-Q1 0.20 0.09 2015-Q2 0.30 0.10 2015-Q3 0.60 0.32 2015-Q4 0.90 0.32       2013 Average 0.31 0.31 2014 Average 0.10 0.06 2015 Average 0.50 0.21
  • 34.
    Longer Term InterestRates (Current Level 2.53%)Longer Term Interest Rates (Current Level 2.53%) Source: Blue Chip Financial Indicators; HJA Quarter Consensus 10-Year HJA 10-Year 2014-Q1 2.76 2.76 2014-Q2 2.80 2.70 2014-Q3 3.00 2.82 2014-Q4 3.30 2.82 2015-Q1 3.40 2.82 2015-Q2 3.60 2.84 2015-Q3 3.70 3.03 2015-Q4 3.90 3.02       2013 Average 2.79 2.35 2014 Average 2.97 2.78 2015 Average 3.65 2.93
  • 35.
    Stock Prices (CurrentLevel 1900)Stock Prices (Current Level 1900) Source: HJA Quarter S&P 500 EPS (LTM) P/E S&P 500 2014-Q1 $112.34 16.3 1836 2014-Q2 $114.15 15.9 1813 2014-Q3 $115.87 16.0 1849 2014-Q4 $117.21 15.9 1858 2015-Q1 $118.62 15.7 1866 2015-Q2 $120.04 15.7 1884 2015-Q3 $121.47 15.9 1930 2015-Q4 $123.01 15.8 1941         2013 Average $107.67 15.3 1645 2014 Average $114.89 16.0 1839 2015 Average $120.78 15.8 1905
  • 36.
  • 37.
    SUNYAB The Outlook for2014 and 2015 Fed Policy and Inflation and Exit Strategy
  • 38.
    The Balance Sheetof Commercial Banks Credit Market Instruments $10,736,464 Net interbank transactions -$13,268 Open Market Paper $1,043 Checkable Deposits $707,549 U.S. Treasuries $118,963 Small Time and Savings Deposits $5,178,047 Agency and GSE $1,295,471 Large Time Deposits $2,422,809 Municipal Securities $205,733 Federal Funds and Security Repurchase Agreements$922,415 Corporate and Foreign Bonds $1,083,888 Credit Market Instruments $973,747 Loans $1,992,602 Open Market Paper $423 Other Loans and Advances $277 Corporate and Foreign Bonds $176,852 Mortgages $4,943,019 Other Loans and Advances $796,472 Consumer Credit $1,095,468 Taxes Payable $18,499 Equities $92,793 Miscellaneous Liabilities $1,832,320 Mutual Funds $30,796 Foreign Direct Investment $154,503 Security Credit $320,176 Net Transactions Due To Holding Cos $1,210,493 Life Insurance Reserves $100,277 Equity Investments in Funding Corps $225,287 Miscellaneous Assets $977,742 Unidentifies Miscellaneous Liabilities $242,037 Leases to Households $11,789 Vault Cash $41,482 Reserves $23,014 Other $10,661,000 Total Financial Assets $12,322,744 Total Financial Liabilities $12,042,117 U.S. Commercial Banks 2007 IIIQ
  • 39.
    The Balance Sheetof Commercial Banks Credit Market Instruments $11,868,055 Net interbank transactions $460,291 Open Market Paper $0 Checkable Deposits $1,825,586 U.S. Treasuries $305,217 Small Time and Savings Deposits $8,115,778 Agency and GSE $1,948,543 Large Time Deposits $1,762,234 Municipal Securities $424,536 Federal Funds and Security Repurchase Agreements $438,435 Corporate and Foreign Bonds $777,681 Credit Market Instruments $885,448 Loans $2,506,965 Open Market Paper $59,662 Other Loans and Advances $0 Corporate and Foreign Bonds $397,657 Mortgages $4,368,587 Other Loans and Advances $428,129 Consumer Credit $1,536,526 Taxes Payable -$47,463 Equities $116,843 Miscellaneous Liabilities $2,523,970 Mutual Funds $86,692 Foreign Direct Investment $203,416 Security Credit $375,536 Net Transactions Due To Holding Cos $1,944,382 Life Insurance Reserves $143,914 Equity Investments in Funding Corps $122,931 Miscellaneous Assets $864,636 Unidentifies Miscellaneous Liabilities $253,241 Leases to Households $7,921 Vault Cash $73,648 Reserves $2,249,070 Other $15,964,278 Total Financial Assets $15,778,394 Total Financial Liabilities $15,964,278 2013 IVQ U.S. Commercial Banks
  • 40.
    If Lending/Money GrowthBegins To Rise, The Federal Reserve Has An Exit Strategy. This could change! Can The Federal Reserve Do Anything About It?This could change! Can The Federal Reserve Do Anything About It? A staff presentation outlined several approaches to raising short-termA staff presentation outlined several approaches to raising short-term interest rates when it becomes appropriate to do so, and to controllinginterest rates when it becomes appropriate to do so, and to controlling the level of short term interest rates once they were above thethe level of short term interest rates once they were above the effective lower bound, during a period when the Federal Reserve willeffective lower bound, during a period when the Federal Reserve will have a very large balance sheet. The approaches differed in terms ofhave a very large balance sheet. The approaches differed in terms of the combination of policy tools that might be used to accomplish thosethe combination of policy tools that might be used to accomplish those objectives.objectives. In addition to the rate of interest paid on excess reserveIn addition to the rate of interest paid on excess reserve balances, the tools considered included fixed-rate overnight reservebalances, the tools considered included fixed-rate overnight reserve repurchase (ON RRP) operations, term reverse repurchaserepurchase (ON RRP) operations, term reverse repurchase agreements, and the Term Deposit Facility (TDF).agreements, and the Term Deposit Facility (TDF). Minutes FOMC meeting of April 30 2014Minutes FOMC meeting of April 30 2014
  • 41.
    SUNYAB The Outlook for2014 and 2015 The Euro Zone
  • 42.
    The Outlook forThe Euro ZoneThe Outlook for The Euro Zone Source: OECD; Blue Chip Economic Indicators; HJA, Consensus Forecast for Euro Area; Composite Index of Leading Economic Indicators for Euro Area 99.0 99.5 100.0 100.5 101.0 January- Febr March-13 April-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 IndexofLeadingEconomic Indicators 0.6% 0.7% 0.8% 0.9% 1.0% 1.1% 1.2% 1.3% 1.4% 1.5% 2012Forecast 2014, Euro Area Forecast Composite Index of Leading Economic Indicators
  • 43.
    SUNYAB The Outlook for2014 and 2015 Emerging Markets
  • 44.
    The Outlook ForEmerging Markets: China.The Outlook For Emerging Markets: China. Continues to DeteriorateContinues to Deteriorate Source: Blue Chip Economic Indicators; OECD; HJA Consensus Forecast for China; Composite Index of Leading Economic Indicators for China 98.5 98.7 98.9 99.1 99.3 99.5 99.7 99.9 100.1 100.3 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 IndexofLeadingEconomic Indicators 7.2% 7.4% 7.6% 7.8% 8.0% 8.2% 2014Forecast 2014, China Forecast Composite Index of Leading Economic Indicators
  • 45.
    The Outlook ForEmerging Markets: Brazil.The Outlook For Emerging Markets: Brazil. Continues to DeteriorateContinues to Deteriorate Source: Blue Chip Economic Indicators; OECD; HJA Consensus Forecast for Brazil; Composite Index of Leading Economic Indicators for Brazil 98.0 98.5 99.0 99.5 100.0 100.5 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 IndexofLeadingEconomic Indicators 1.6% 2.1% 2.6% 3.1% 3.6% 4.1% 4.6% 2014Forecast 2014, Brazil Forecast Composite Index of Leading Economic Indicators
  • 46.
    The Outlook ForEmerging Markets: Russia.The Outlook For Emerging Markets: Russia. Continues to DeteriorateContinues to Deteriorate Source: Blue Chip Economic Indicators; OECD; HJA Consensus Forecast for Russia; Composite Index of Leading Economic Indicators for Russia 99.0 99.1 99.2 99.3 99.4 99.5 99.6 99.7 99.8 99.9 100.0 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 IndexofLeadingEconomic Indicators 0.4% 0.9% 1.4% 1.9% 2.4% 2.9% 3.4% 3.9% 4.4% 4.9% 2014Forecast 2014, Russia Forecast Composite Index of Leading Economic Indicators
  • 47.
    The Outlook ForEmerging Markets: India.The Outlook For Emerging Markets: India. Continues to DeteriorateContinues to Deteriorate Source: Blue Chip Economic Indicators; OECD; HJA Consensus Forecast for India; Composite Index of Leading Economic Indicators for India 97.5 97.7 97.9 98.1 98.3 98.5 98.7 98.9 99.1 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 IndexofLeadingEconomic Indicators 5.0% 5.5% 6.0% 6.5% 7.0% 2014Forecast 2014, India Forecast Composite Index of Leading Economic Indicators
  • 48.
    Portfolio StructurePortfolio Structure Asset AllocationAsset Allocation  Domestic Equities-International EquitiesDomestic Equities-International Equities AllocationAllocation  Capitalization AllocationCapitalization Allocation  Sector AllocationSector Allocation
  • 49.
    SUNYABSUNYAB The Outlook for2014 and 2015The Outlook for 2014 and 2015 And BeyondAnd Beyond
  • 50.
    Long-Term Bond BearMarket; Long-Term Stock Bull Market Stocks: 9.7% Bonds: .4% 25 Years 1921-1946 36 Years 1946-1982 30 Years 1982-2012 Yield BAA Corporate Bond (1919-2013) 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 18.0 1919- 01 1931- 01 1943- 01 1955- 01 1967- 01 1979- 01 1991- 01 2003- 01
  • 52.
    SUNYABSUNYAB The Outlook for2014 and 2015The Outlook for 2014 and 2015 EnergyEnergy
  • 53.
    Oil Source: IMF, BPStatistical Review 2013, HJA Year World Real GDP Global Consumption Global Production Price 2010 4.1 87,833 83,272 $79 2011 2.9 88,879 84,210 $95 2012 2.5 89,774 86,152 $94 2013 2.6 90,891 86,235 $97 2014 3.4 92,022 87,142 $100 2015 3.8 93,166 88,018 $103 2016 3.9 94,325 88,884 $106 2017 3.9 95,499 89,737 $110 2018 3.9 96,687 90,585 $113           1980-2012 2.8% 1.2% 1.0% 2.9%
  • 54.
    Energy Independence Source: IMF,BP Statistical Review 2013, HJA Primary Energy 2005 2010 2015 2018 US Oil Consumption 939.8 847.4 818.4 800.4 US Oil Production 309.1 332.9 537.2 798.0 % Shortfall -67.1% -60.7% -34.4% -0.3%           US Natural Gas Consumption 568.5 619.3 672.2 692.8 US Natural Gas Production 467.6 549.5 674.6 745.4 % Shortfall -17.8% -11.3% 0.4% 7.6%           US Coal Consumption 574.2 523.9 460.2 442.1 US Coal Production 595.1 556.1 521.1 501.0 % Shortfall 3.6% 6.1% 13.2% 13.3%           Total Consumption 2,082.5 1,990.6 1,950.8 1,935.2 Total Production 1,371.8 1,438.5 1,732.9 2,044.4 % Shortfall -34.1% -27.7% -11.2% 5.6%
  • 55.
    SUNYABSUNYAB The Outlook for2014 and 2015The Outlook for 2014 and 2015 HousingHousing
  • 56.
    Housing Should ContinueTo Expand But At A Slower Pace Quarter Existing Home Sales Existing Inventory Existing Prices   (Mls Annual Rate) (Months) Median (Ths $) 2013-Q1 4.9 4.5 $176.4 2013-Q2 5.1 5.1 $203.4 2013-Q3 5.4 5.0 $211.4 2013-Q4 5.4 5.1 $206.8 2014-Q1 5.4 5.1 $202.9 2014-Q2 5.4 5.2 $226.3 2014-Q3 5.4 5.3 $231.0 2014-Q4 5.4 5.4 $223.8         2013 Average 5.2 4.9 $199.5 2014 Average 5.4 5.3 $221.0 2015 Average 5.4 5.6 $231.9 Source: Bloomberg News; HJA