hugh johnson ualbany mba presentation

SUNYAB Executive MBA SUNYAB Executive MBA

The Outlook for 2014 and The Outlook for 2014 and 20152015

The Average Duration of the 10 Previous The 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 10 The Average Percentage Gain of The 10 Previous Post War Bull Markets Was Previous Post War Bull Markets Was 126.5%. 126.5%.

The Average Duration of the 10 Previous The 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 10 The Average Percentage Gain of The 10 Previous Post War Bull Markets Was Previous Post War Bull Markets Was 126.5%. 126.5%.

ApproachApproachApproachApproach

Identify Meaningful Trends in Financial Identify Meaningful Trends in Financial MarketsMarkets

Identify Meaningful Trends in Important Identify Meaningful Trends in Important Monetary and Economic Variables Monetary and Economic Variables

(Are The Financial Market Trends (Are The Financial Market Trends Rational?)Rational?)

Position Portfolios To Participate in the Position Portfolios To Participate in the TrendsTrends

Identify Meaningful Trends in Financial Identify Meaningful Trends in Financial MarketsMarkets

Identify Meaningful Trends in Important Identify Meaningful Trends in Important Monetary and Economic Variables Monetary and Economic Variables

(Are The Financial Market Trends (Are The Financial Market Trends Rational?)Rational?)

Position Portfolios To Participate in the Position Portfolios To Participate in the TrendsTrends

The Anatomy of a CycleThe Anatomy of a CycleThe Anatomy of a CycleThe Anatomy of a Cycle

Stock Market

EconomyInterest Rates

Source: Hugh Johnson Advisors

The Anatomy of a Mania (and Financial The 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 have economy shouldn’t be surprising. We have presented evidence that presented evidence that recessions recessions associated with systemic banking crises associated with systemic banking crises tend to be deep and protracted and that tend to be deep and protracted and that this pattern is evident across both history this pattern is evident across both history and countries.and countries.

Carmen M. Reinhart and Kenneth Carmen M. Reinhart and Kenneth RogoffRogoff

Sorry, U.S. Recoveries Aren’t Sorry, U.S. Recoveries Aren’t DifferentDifferent

This disappointing performance of the U.S. This disappointing performance of the U.S. economy shouldn’t be surprising. We have economy shouldn’t be surprising. We have presented evidence that presented evidence that recessions recessions associated with systemic banking crises associated with systemic banking crises tend to be deep and protracted and that tend to be deep and protracted and that this pattern is evident across both history this pattern is evident across both history and countries.and countries.

Carmen M. Reinhart and Kenneth Carmen M. Reinhart and Kenneth RogoffRogoff

Sorry, U.S. Recoveries Aren’t Sorry, U.S. Recoveries Aren’t DifferentDifferent

Since January Low The S&P 500 Has Since January Low The S&P 500 Has Appreciated 6.6% Appreciated 6.6%

Since January Low The S&P 500 Has Since January Low The S&P 500 Has Appreciated 6.6% Appreciated 6.6%

Source: Bloomberg News; Hugh Johnson Advisors

S&P 500

1720

17401760

17801800

1820

18401860

18801900

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 Generally But…Bear Market Sectors Have Generally

Performed Well.Performed Well. But…Bear Market Sectors Have Generally But…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 Large Capitalization Have Stocks Outperformed Mid and Small Capitalization Outperformed Mid and Small Capitalization

StocksStocks

Large Capitalization Have Stocks Large Capitalization Have Stocks Outperformed Mid and Small Capitalization Outperformed Mid and Small Capitalization

StocksStocks


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 Longer-Term Interest Rates Have Declined From 2.65% To 2.53%. From 2.65% To 2.53%.

Longer-Term Interest Rates Have Declined Longer-Term Interest Rates Have Declined From 2.65% To 2.53%. From 2.65% To 2.53%.


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%

The Yield Curve Has Narrowed From 2.63% to 2.50%


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 Recession Probability Has Declined And Remains Low.Remains Low.

Recession Probability Has Declined And Recession Probability Has Declined And Remains Low.Remains 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 Widened Quality Spreads Widened Quality Spreads Widened Quality Spreads Widened


Spread: BAA Corporate less 10-Year UST

1.9

2.0

2.1

2.2

2.3

2.4

2.5

12/ 2

71/

101/

24 2/7

2/21 3/

73/

21 4/4

4/18 5/

25/

16

May 23rd 2014: 2.28%

April 18th 2014: 2.12%

Quality Spreads Have Widened Quality Spreads Have Widened Quality Spreads Have Widened Quality Spreads Have Widened


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 Markets The Message of the Financial Markets Is Is Ambiguous with a Negative LeanAmbiguous with a Negative Lean

The Message of the Financial Markets The Message of the Financial Markets Is Is Ambiguous with a Negative LeanAmbiguous with a Negative Lean

The Message of the Financial Markets The Message of the Financial Markets Is Is Inconsistent, In My View, with the Inconsistent, In My View, with the

Performance of Important Monetary and Performance of Important Monetary and Economic VariablesEconomic Variables

Hopefully We Can Explain the DisconnectHopefully We Can Explain the Disconnect

The Message of the Financial Markets The Message of the Financial Markets Is Is Inconsistent, In My View, with the Inconsistent, In My View, with the

Performance of Important Monetary and Performance of Important Monetary and Economic VariablesEconomic Variables

Hopefully We Can Explain the DisconnectHopefully We Can Explain the Disconnect

The Federal Reserve Policy Remains The Federal Reserve Policy Remains Accommodative… Accommodative… More LaterMore Later

The Federal Reserve Policy Remains The 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%Ja

n-1

2

Apr-

12

Jul-

12

Oct

-12

Jan-1

3

Apr-

13

Jul-

13

Oct

-13

Jan-1

4

Apr-

14January 2012: -2.8%

April 2012: -1.9%

Total Bank Lending Total Bank Lending ImprovingImproving Total Bank Lending Total Bank Lending ImprovingImproving


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-1

2

Apr-

12

Jul-

12

Oct

-12

Jan-1

3

Apr-

13

Jul-

13

Oct

-13

Jan-1

4

Apr-

14

January 2012: 3.0%

April 2014: 3.7%

Lending to Businesses Lending to Businesses ImprovingImproving Lending to Businesses Lending to Businesses ImprovingImproving


Commercial and Industrial 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-1

2

Apr-

12

Jul-

12

Oct

-12

Jan-1

3

Apr-

13

Jul-

13

Oct

-13

Jan-1

4

Apr-

14

January 2012: 10.3%

April 2014: 10.3%

Real Estate Lending Is Real Estate Lending Is ImprovingImprovingReal Estate Lending Is Real Estate Lending Is ImprovingImproving


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 The Growth Rate of The Money Supply Continues at a Good Pace. The Longer-Term Average Growth a Good Pace. The Longer-Term Average Growth

Rate has been 6.9%.Rate has been 6.9%.

The Growth Rate of The Money Supply Continues at The Growth Rate of The Money Supply Continues at a Good Pace. The Longer-Term Average Growth a Good Pace. The Longer-Term Average Growth

Rate has been 6.9%.Rate has been 6.9%.


Money Supply (M2 Y/ Y)

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

11.0%

12.0%Ja

n-1

2

Apr-

12

Jul-

12

Oct

-12

Jan-1

3

Apr-

13

Jul-

13

Oct

-13

Jan-1

4

Apr-

14

April 2014: +6.0%

January 2012: +10.4%

As A Result, Domestic Liquidity Conditions Remain As A Result, Domestic Liquidity Conditions Remain Positive. The Longer Term Average Growth Rate has Positive. The Longer Term Average Growth Rate has

been 2.9%.been 2.9%.

As A Result, Domestic Liquidity Conditions Remain As A Result, Domestic Liquidity Conditions Remain Positive. The Longer Term Average Growth Rate has Positive. The Longer Term Average Growth Rate has

been 2.9%.been 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%Ja

n-1

2

Mar

-12

May

-14

Jul-

14

Sep-1

4

Nov-

12

Jan-1

3

Mar

-13

May

-13

Jul-

13

Sep-1

3

Nov-

13

Jan-1

4

Mar

-14

April 2014: +2.2%

January 2012: +4.9%

Leading Indicators For The Economy Continue To Leading Indicators For The Economy Continue To

RiseRise Leading Indicators For The Economy Continue To Leading Indicators For The Economy Continue To

RiseRise

Source: Conference Board

Index of Leading Economic Indicators

90

92

94

96

98

100

102Ja

n-1

2

Apr-

12

Jul-

12

Oct

-12

Jan-1

3

Apr-

13

Jul-

13

Oct

-13

Jan-1

4

Apr-

14

Index Up 11 of 12 Months; One Month Unchanged

The Ratio of Coincident Economic Indicators-to-The Ratio of Coincident Economic Indicators-to-Lagging Economic IndicatorsLagging Economic Indicators

The Ratio of Coincident Economic Indicators-to-The Ratio of Coincident Economic Indicators-to-Lagging Economic IndicatorsLagging Economic Indicators

Source: Conference Board

Ratio: Coincident-To-Lagging Economic Indicators

0.860.870.880.890.900.910.920.93

Jan-1

2

Mar

-12

May

-12

Jul-

12

Sep-1

2

Nov-

12

Jan-1

3

Mar

-13

May

-13

Jul-

13

Sep-1

3

Nov-

13

Jan-1

4

Mar

-14

Continues to Decline

Real Gross Domestic ProductReal Gross Domestic Product 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 Historical forecast errors are large in economic terms, indicating that-if past economic terms, indicating that-if past performance is a good guide to future performance is a good guide to future accuracy-uncertainty about the economic accuracy-uncertainty about the economic outlook is considerable.”outlook is considerable.”

Federal Federal Reserve StudiesReserve Studies

The Consensus Forecast “Tends” To Be Too The Consensus Forecast “Tends” To Be Too High (or Too Low) and Trends Down (or Up)High (or Too Low) and Trends Down (or Up)The Consensus Forecast “Tends” To Be Too The Consensus Forecast “Tends” To Be Too High (or Too Low) and Trends Down (or Up)High (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%

Jan

uar

y

Feb

ruar

y

Mar

ch

Ap

ril

May

Jun

e

July

Au

gu

st

Sep

tem

ber

Oct

ob

er

No

vem

ber

Dec

emb

er

Jan

uar

y

Feb

ruar

y

Mar

ch

Ap

ril

May

Jun

e

July

Au

gu

st

Sep

tem

ber

Oct

ob

er

No

vem

ber

Dec

emb

er

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

EmploymentEmploymentEmploymentEmployment

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 RateThe Unemployment RateThe Unemployment Rate


QuarterConsensus-Unemployment

RateHJA-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 InflationConsumer InflationConsumer Inflation


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 SpendingConsumer SpendingConsumer Spending

Source: Blue Chip Economic Indicators, HJA

QuarterConsensus-Consumer

SpendingHJA-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 UsDeleveraging 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%2000Q

1

2001Q

1

2002Q

1

2003Q

1

2004Q

1

2005Q

1

2006Q

1

2007Q

1

2008Q

1

2009Q

1

2010Q

1

2011Q

1

2012Q

1

2013Q

1

Short Term Interest Rates (Current Short Term Interest Rates (Current Level .03%)Level .03%)

Short Term Interest Rates (Current Short Term Interest Rates (Current Level .03%)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 Longer Term Interest Rates (Current Level 2.53%)2.53%)

Longer Term Interest Rates (Current Level Longer Term Interest Rates (Current Level 2.53%)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)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

““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 -$13,268Open Market Paper $1,043 Checkable Deposits $707,549U.S. Treasuries $118,963 Small Time and Savings Deposits $5,178,047Agency and GSE $1,295,471 Large Time Deposits $2,422,809Municipal Securities $205,733 Federal Funds and Security Repurchase Agreements$922,415Corporate and Foreign Bonds $1,083,888 Credit Market Instruments $973,747Loans $1,992,602 Open Market Paper $423Other Loans and Advances $277 Corporate and Foreign Bonds $176,852Mortgages $4,943,019 Other Loans and Advances $796,472Consumer Credit $1,095,468 Taxes Payable $18,499Equities $92,793 Miscellaneous Liabilities $1,832,320Mutual Funds $30,796 Foreign Direct Investment $154,503Security Credit $320,176 Net Transactions Due To Holding Cos $1,210,493Life Insurance Reserves $100,277 Equity Investments in Funding Corps $225,287Miscellaneous Assets $977,742 Unidentifies Miscellaneous Liabilities $242,037

Leases to Households $11,789Vault Cash $41,482Reserves $23,014 Other $10,661,000

Total Financial Assets $12,322,744 Total Financial Liabilities $12,042,117

U.S. Commercial Banks2007 IIIQ

The Balance Sheet of Commercial Banks

Credit Market Instruments $11,868,055 Net interbank transactions $460,291Open Market Paper $0 Checkable Deposits $1,825,586U.S. Treasuries $305,217 Small Time and Savings Deposits $8,115,778Agency and GSE $1,948,543 Large Time Deposits $1,762,234Municipal Securities $424,536 Federal Funds and Security Repurchase Agreements $438,435Corporate and Foreign Bonds $777,681 Credit Market Instruments $885,448Loans $2,506,965 Open Market Paper $59,662Other Loans and Advances $0 Corporate and Foreign Bonds $397,657Mortgages $4,368,587 Other Loans and Advances $428,129Consumer Credit $1,536,526 Taxes Payable -$47,463Equities $116,843 Miscellaneous Liabilities $2,523,970Mutual Funds $86,692 Foreign Direct Investment $203,416Security Credit $375,536 Net Transactions Due To Holding Cos $1,944,382Life Insurance Reserves $143,914 Equity Investments in Funding Corps $122,931Miscellaneous Assets $864,636 Unidentifies Miscellaneous Liabilities $253,241

Leases to Households $7,921Vault Cash $73,648Reserves $2,249,070 Other $15,964,278

Total Financial Assets $15,778,394 Total Financial Liabilities $15,964,278

2013 IVQU.S. Commercial Banks

If Lending/Money Growth Begins To Rise, The Federal Reserve Has An Exit Strategy.

If Lending/Money Growth Begins To Rise, The Federal Reserve Has An Exit Strategy.

This could change! Can The Federal Reserve Do Anything About This could change! Can The Federal Reserve Do Anything About It?It?

A staff presentation outlined several approaches to raising short-A staff presentation outlined several approaches to raising short-term interest rates when it becomes appropriate to do so, and to term interest rates when it becomes appropriate to do so, and to controlling the level of short term interest rates once they were controlling the level of short term interest rates once they were above the effective lower bound, during a period when the above the effective lower bound, during a period when the Federal Reserve will have a very large balance sheet. The Federal Reserve will have a very large balance sheet. The approaches differed in terms of the combination of policy tools approaches differed in terms of the combination of policy tools that might be used to accomplish those objectives. that might be used to accomplish those objectives. In addition to In addition to the rate of interest paid on excess reserve balances, the tools the rate of interest paid on excess reserve balances, the tools considered included fixed-rate overnight reserve repurchase (ON considered included fixed-rate overnight reserve repurchase (ON RRP) operations, term reverse repurchase agreements, and the RRP) operations, term reverse repurchase agreements, and the Term Deposit Facility (TDF).Term Deposit Facility (TDF).

Minutes FOMC meeting of April 30 2014Minutes FOMC meeting of April 30 2014

SUNYAB


The Euro Zone

The Outlook for The Euro ZoneThe Outlook for The Euro ZoneThe 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

Jan

uar

y-

Feb

r

Mar

ch-1

3

Ap

ril-

13

May

-13

Jun

-13

Jul-

13

Au

g-1

3

Sep

-13

Oct

-13

No

v-13

Dec

-13

Jan

-14

Feb

-14

Mar

-14

Ap

r-14

May

-14

Ind

ex o

f L

ead

ing

Eco

no

mic

In

dic

ato

rs

0.6%0.7%0.8%0.9%1.0%1.1%1.2%1.3%1.4%1.5%

2012

Fo

reca

st

2014, Euro Area Forecast

Composite Index of Leading Economic Indicators

SUNYAB


Emerging Markets

The Outlook For Emerging Markets: China. The Outlook For Emerging Markets: China.

Continues to DeteriorateContinues to Deteriorate 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

98.598.798.999.199.399.599.799.9

100.1100.3

Jan

-13

Feb

-13

Mar

-13

Ap

r-13

May

-13

Jun

-13

Jul-

13

Au

g-1

3

Sep

-13

Oct

-13

No

v-13

Dec

-13

Jan

-14

Feb

-14

Mar

-14

Ap

r-14

May

-14

Ind

ex o

f L

ead

ing

Eco

no

mic

In

dic

ato

rs

7.2%

7.4%

7.6%

7.8%

8.0%

8.2%

2014

Fo

reca

st

2014, China Forecast


The Outlook For Emerging Markets: Brazil. The Outlook For Emerging Markets: Brazil.

Continues to DeteriorateContinues to Deteriorate The Outlook For Emerging Markets: Brazil. The Outlook For Emerging Markets: Brazil.



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

Ap

r-13

May

-13

Jun

-13

Jul-

13

Au

g-1

3

Sep

-13

Oct

-13

No

v-13

Dec

-13

Jan

-14

Feb

-14

Mar

-14

Ap

r-14

May

-14

Ind

ex o

f L

ead

ing

Eco

no

mic

In

dic

ato

rs

1.6%

2.1%

2.6%

3.1%

3.6%

4.1%

4.6%

2014

Fo

reca

st

2014, Brazil Forecast


The Outlook For Emerging Markets: Russia. The Outlook For Emerging Markets: Russia.

Continues to DeteriorateContinues to Deteriorate The Outlook For Emerging Markets: Russia. The Outlook For Emerging Markets: Russia.



Consensus Forecast for Russia; Composite Index of Leading Economic Indicators for Russia

99.099.199.299.399.499.599.699.799.899.9

100.0

Jan

-13

Feb

-13

Mar

-13

Ap

r-13

May

-13

Jun

-13

Jul-

13

Au

g-1

3

Sep

-13

Oct

-13

No

v-13

Dec

-13

Jan

-14

Feb

-14

Mar

-14

Ap

r-14

May

-14

Ind

ex o

f L

ead

ing

Eco

no

mic

In

dic

ato

rs

0.4%0.9%

1.4%1.9%2.4%

2.9%3.4%

3.9%4.4%4.9%

2014

Fo

reca

st

2014, Russia Forecast


The Outlook For Emerging Markets: India. The Outlook For Emerging Markets: India.

Continues to DeteriorateContinues to Deteriorate The Outlook For Emerging Markets: India. The Outlook For Emerging Markets: India.



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

Ap

r-13

May

-13

Jun

-13

Jul-

13

Au

g-1

3

Sep

-13

Oct

-13

No

v-13

Dec

-13

Jan

-14

Feb

-14

Mar

-14

Ap

r-14

May

-14

Ind

ex o

f L

ead

ing

Eco

no

mic

In

dic

ato

rs

5.0%

5.5%

6.0%

6.5%

7.0%

2014

Fo

reca

st

2014, India Forecast


Portfolio StructurePortfolio StructurePortfolio StructurePortfolio Structure

Asset AllocationAsset Allocation

Domestic Equities-International Domestic Equities-International Equities Allocation Equities Allocation

Capitalization AllocationCapitalization Allocation

Sector AllocationSector Allocation

Asset AllocationAsset Allocation

Domestic Equities-International Domestic Equities-International Equities Allocation Equities Allocation

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

Long-Term Bond Bear Market; Long-Term Stock Bull Market

Stocks: 9.7%Bonds: .4%

25 Years 1921-194636 Years 1946-1982

30 Years 1982-2012

Yield BAA Corporate Bond (1919-2013)

0.02.04.06.08.0

10.012.014.016.018.0

1919-01

1931-01

1943-01

1955-01

1967-01

1979-01

1991-01

2003-01

SUNYAB SUNYAB


EnergyEnergy

Oil Oil

Source: IMF, BP Statistical Review 2013, HJA

Year World Real GDPGlobal

ConsumptionGlobal

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 IndependenceEnergy 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


HousingHousing

Housing Should Continue To Expand But At A Slower Pace

Housing Should Continue To Expand But At A Slower Pace

QuarterExisting 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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