1. 8/28/2009 Wealth Management Research
US pocket summary
A weekly overview of market performance and Wealth Management Research's outlook, investment strategy and forecasts.
Asset Class Performance & Strategy Highlighted WMR Themes - at a glance
Extended Asset Market Returns Dividend Ruler Stock List monthly update, Equity Investment Theme, 28 August 2009
Allocation In this report, we provide an update of our "dividend ruler" stock screen—a list of companies with attractive fundamentals and above-
Strategy* MTD YTD 2008 average dividend yields that also have historically delivered strong, consistent dividend per share growth, i.e., "as straight as a ruler."
US Equity - 4.7% 17.6% -37.3%
Non-US Developed Eq. + 3.8% 24.7% -43.2% US fixed income September update: Winding down a hot summer, Bond Investment Theme, 27 August 2009
Emerging Market Eq. + 0.2% 51.9% -53.2% While we still believe that investment grade corporate bonds, municipals, and TIPS are the most attractive sectors of the fixed income
US Fixed Income -- 0.7% 4.2% 5.2% market, valuations are much less compelling than earlier this year. This month we recalibrated the weights within the credit sector by scaling
back the overweight in IG credit to pay for a slight increase in HY. We believe spreads on agency debentures and mortgage-backed
Non-US Fixed Income + 1.4% 5.4% 4.4%
securities could widen later this year as the Fed purchase programs end.
Cash (USD) - 0.0% 0.1% 1.8%
Commodities + 0.2% 8.2% -35.6% Emerging Markets Top List, 25 August 2009
Total return indices in USD: Russell 3000, MSCI EAFE & Canada, MSCI Emerging This List is a selection of sovereign bonds in Emerging Markets countries that WMR currently favors.
Markets, BarCap US Aggregate, BarCap Global Aggregate ex-USD, Citigroup 3-
month T-bill, DJ UBS
August update, U.S. Top 25 Stock List, 1 Aug 2009
The UBS WMR US Top 25 stock rose 6.8% (total return) in July and the S&P 500 rose 7.6%. Year to date, the Top 25 list is up 15.0%, and
the S&P 500 is up 11.0%. Since its inception on 18 January 2006, the list has outperformed the S&P 500 by 1,383 basis points, down 3.3%
Equity Regions' Strategy & Performance versus the S&P 500's decline of 17.1%.
Market Returns *To access these reports please contact your Financial Advisor or access the reports via online services
Strategy* MTD YTD 2008
US Equity --- 4.7% 17.6% -37.3%
S&P 500 n.a 4.4% 14.1% -38.5%
DJIA n.a 4.5% 9.2% -33.8%
Nasdaq n.a 2.5% 28.6% -40.5%
EMU ++ 6.0% 22.9% -47.1%
UK n 3.9% 28.3% -48.3%
Japan n 2.9% 10.2% -29.1% US Dollar Fixed Income Strategy & Performance Bond Regions Strategy & Performance
Emerging Markets ++ 0.2% 51.9% -53.2% Market Returns Market Returns
Total return indices in USD: Russell 3000, MSCI for non-US. Price return indices in USD: S&P
500, DJIA, Nasdaq. Forecasts are currently being aligned with new US investment process
and will be published within the next several weeks. Strategy* MTD YTD 2008 Strategy* MTD YTD 2008
Treasuries -- 0.6% -3.5% 14.0% US -- 0.7% 4.2% 5.2%
TIPS + 1.1% 6.0% -1.1% EMU ++ 1.1% 8.1% 1.0%
US Equity Sector Strategy & Performance Agencies - 0.3% 0.3% 9.6% UK n 1.6% 16.7% -24.6%
Market Returns Inv. Grade Corporates ++ 1.8% 15.5% -6.8% Japan -- 2.4% -2.7% 27.4%
Sector Strategy* Weekly MTD YTD 2008 High Yield Corporates + 1.8% 40.3% -26.1% Total return indices in USD: Barclays Capital .
Cons. Discr. + 3.1% 5.3% 25.1% -33.5% Preferred Securities n -1.5% 9.1% -25.2%
Cons. Staples + 1.3% 1.1% 5.7% -15.4% Mortgages n 0.4% 4.1% 8.3% Regional Indicators
Energy ++ 2.8% 3.0% 5.3% -34.9% Emerging Markets n 2.1% 19.4% -10.2% 2009 Consensus S&P 500 EPS USD 60
Financials n 3.2% 13.3% 19.1% -55.3% Municipals n.a 1.8% 11.2% -4.0% 2009 UBS WMR S&P 500 EPS USD 54
Health Care --- 2.0% 3.5% 9.8% -22.8% Total return indices in USD: BAS / Merrill Lynch 2010 Consensus S&P 500 EPS USD 75
Industrials + 3.3% 6.2% 9.2% -39.9% 2010 UBS WMR S&P 500 EPS USD 65
IT + 2.0% 3.2% 40.6% -43.1% Source: UBS WMR, All market performance data is from Bloomberg data as of date listed on top of this document, using representative indices and is
Materials + 1.5% 3.0% 32.9% -45.7% provided for information only.
Telecom - 2.2% -1.3% -0.4% -30.5% Please ask your Financial Advisor for the most recent Investment Strategy Guide and WMR Forecast Tables.
Utlities -- 1.4% 1.8% 4.0% -29.0% Scale for tactical deviation charts
Total return indices in USD: S&P 500 sector indices Symbol Description/Definition
+ moderate overweight vs. benchmark - moderate underweight vs. benchmark n Neutral, i.e. on benchmark
US Equity Size, Style Strategy, and Performance ++ overweight vs. benchmark -- underweight vs. benchmark n/a not applicable
Indicates +/- change in most
Market Returns +++ strong overweight vs. benchmark --- strong underweight vs. benchmark + -
recent update
Style Strategy* MTD YTD 2008 The overweight and underweight recommendations represent tactical deviations that can be applied to any appropriate benchmark portfolio allocation.
Large- Cap Value + 6.3% 11.8% -36.8% They reflect WMR’s short- to medium-term assessment of market opportunities and risks in the respective asset classes and market segments. The
Large - Cap Growth + 3.0% 23.1% -38.4% benchmark allocation is not specified here. Please see the most recent Investment Strategy Guide for definitions/explanations of benchmark allocation.
They should be chosen in line with the risk profile of the investor. Note that the Regional Equity Strategy is provided on an unhedged basis (i.e., it is
Mid-Cap n 5.9% 26.8% -41.5%
assumed that investors carry the underlying currency risk of such investments). Thus, the deviations from the benchmark reflect our views of the
Small-Cap - 5.0% 18.1% -33.8% underlying equity in combination with our assessment of the associated currencies.
Total return indices in USD: Russell
This report has been prepared by UBS Financial Services Inc. (UBS FS) & UBS AG * Please see the most recent Investment Strategy Guide for an interpretation of the tactical tilts and an explanation of the corresponding
benchmark allocation.
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2. 8/28/2009 Wealth Management Research
US pocket summary
Currency Markets Performance & WMR Forecasts Central Bank Target Rates Overview and WMR Forecasts
Market Returns Forecast
2010
current MTD YTD 2008 in 3 m in 6 m in 12 m in % Current Aug Sept Oct Nov Dec Jan Feb Mar Apr May Jun Jul
USDCAD 1.0877 0.9% -10.8% 22.1% 1.08 1.05 1.00 Fed 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25
EURUSD 1.4341 0.6% 2.6% -4.2% 1.45 1.50 1.57 ECB 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00
GBPUSD 1.6284 -2.6% 11.6% -26.5% 1.67 1.72 1.77 BoE 0.50 0.50 0.50 0.50 0.50 0.50 0.50 0.50 0.50 0.50 0.50 0.50 0.50
USDCHF 1.0594 -0.9% -0.9% -5.7% 1.05 1.01 0.99 BoJ 0.10 0.10 0.10 0.10 0.10 0.10 0.10 0.10 0.10 0.10 0.10 0.10 0.10
USDSEK 7.1254 -0.9% -9.1% 21.1% 6.90 6.53 6.11 SNB 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25
USDJPY 93.5200 -1.2% 3.2% -18.9% 97.00 100.00 105.00 BoC 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25
AUDUSD 0.8392 0.4% 19.4% -19.7% 0.83 0.85 0.88 RBA 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00
Please refer to most recent WMR Forecast Tables for further details.
Please refer to most recent WMR Forecast Tables for further details.
Commodities Performance & WMR Forecasts Interest Rate WMR Forecasts
Market Returns Forecast Short Rates Bond Yields
current MTD YTD 2008 1-3 m 9-12m (3m LIBOR) (10y gov)
WTI Crude (US$/bbl) 72.49 4.4% 62.5% -53.5% Sideways 85 in % current in 12m current in 12m
Nat. Gas (US$/mmbtu) 2.84 -22.2% -49.4% -24.9% Bullish 6.20 USA 0.36 0.30 3.45 4.25
Gold (US$/oz) 944.60 0.6% 9.1% 5.8% Bullish 1150 Canada 0.56 0.30 3.39 3.80
Aluminum (US$/mt) 1851.00 -0.9% 22.8% -36.1% Bearish 1800 EMU 0.80 1.00 3.25 4.00
Copper (US$/mt) 6257.50 9.4% 105.7% -54.2% Bullish 7000 UK 0.69 0.60 3.56 4.30
Silver (US$/oz) 14.22 4.3% 30.7% -23.0% Bullish 15.00 Switzerland 0.32 0.30 1.98 2.80
Corn (Usc/bushel) 323.00 -4.9% -20.6% -10.6% Bullish 480 Japan 0.39 0.30 1.31 1.80
Bullish = we target the upper range, Sideways = we expect a sideways move, Bearish = we Please refer to most recent WMR Forecast Tables for
target the lower range. Please refer to most recent WMR Forecast Tables for our short term further details.
and long term views for 3 months and 12 months, respectively.
Growth & Inflation WMR Forecasts Reports of Note Published in the Last Week - at a glance
GDP Growth Inflation US economics: Cyclical recovery at the doorstep, Economic Theme, 28 Aug 2009
(Real GDP % chg. yoy) (CPI; % change yoy) In this edition of our monthly US economic outlook, we reiterate the rough roadmap for recovery that we laid out last month and introduce our
in % 2008 2009F 2010F 2008 2009F 2010F detailed 2010 forecasts. We also test the hypothesis of a strong business fixed investment recovery despite a lackluster consumer recovery. In our
view, historically low capacity utilization and a lack of vigorous consumer demand speak strongly against a robust recovery in business investment.
World 3.2 -0.8 2.8 5.7 1.6 2.8
USA 0.4 -2.5 2.2 3.8 -0.7 1.8 As good as it gets, Investment Strategy Guide, 27 August 2009
Canada 0.7 -1.5 2.2 2.4 0.5 2.1 Equity markets have continued to move higher this month, buoyed by additional evidence that the global economy is on the path to recovery. We
EMU 0.7 -4.0 0.2 3.3 0.5 1.3 recommend holding a pro-cyclical portfolio tilt. This includes a preference for equities and commodities over fixed income and cash, a preference
Germany 1.3 -6.0 0.3 2.6 0.5 1.5 for cyclical over defensive equity sectors, and a preference for corporate bonds over other parts of the fixed in-come market.
France 0.7 -2.5 0.5 2.8 0.6 1.5
Italy -0.9 -4.0 -0.1 3.3 1.0 1.8 Equity markets: The case for having equities in portfolios, Market Update, 26 Aug 2009
Even after a huge rally, with shares rising more than 45% from their lows in March, there is still a case for including equities in a portfolio.
Spain 1.0 -3.7 -0.8 4.1 0.8 2.0
The case is built on a longer-term outlook rather than on any quick-win trading opportunities. The gains stemming from the relief that a
UK 0.7 -3.4 -0.2 3.6 0.7 1.4 full-fledged depression had been avoided are now mostly behind us. As more normal, cyclical patterns re-emerge, our valuation analysis
Switzerland 1.6 -2.8 -0.4 2.4 -0.4 0.6 still suggests that equities should offer good longer-term returns.
Japan -0.7 -6.0 1.5 1.4 -0.8 0.5
Asia ex Japan 6.0 3.0 6.1 6.2 0.3 2.6 Investing in volatile times, Part 3: Achieving financial goals in a changed world, UBS life themes, 26 Aug 2009
China 9.0 7.8 8.5 6.1 -1.2 1.6 Defining your goals is a vital first step to long-term investment success and peace of mind. The aftermath of the financial crisis will impact
Please refer to most recent WMR Forecast Tables for further details. the investment landscape in several ways, including probable changes to tax policies and pension programs. Your goals need to be defined
and structured in a comprehensive personal financial plan.
Financial crisis thermometers: Bi-weekly update, Economic Theme, 24 Aug 2009
In this report, we give our stance on where we stand in the current financial crisis by measuring financial, economic and credit health with
the help of "thermometers". The financial health thermometer for the US and Eurozone deteriorated mildly, while it improved for the UK
and stalled for Japan over the course of the last two weeks. The US credit health thermometer improved in July and now stands below its
level immediately preceding the collapse of Lehman Brothers last fall.
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