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Economic Update
G10\MMF Roadshow template.ppt
It is said that over time, bonds lead equities …
Source: Zero Hedge
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… let’s hope this time is different!
Source: Zero Hedge
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Central bank intervention has distorted all asset prices
Interestingly, however, it is ‘safety’, not ‘risk’ that is hitting all-time highs!
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How ‘safe’ is our government bond market?
Nominal yields are at all-time lows (price equivalent at an all-time high)
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Are US equities rightly considered a safe haven?
% of US Corporate Profits over Nominal GDP vs S&P Total Return
Profit as a % of GDP
S&P (total return index)
Source: Datastream
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G10\MMF Roadshow template.ppt
Japan: “A bug in search of a windshield”
Source: Datastream and Bloomberg
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To us, risk is largely a function of the price you
pay
Perceived Safety
•
Government bonds
•
IG bonds
•
US equities
•
‘Defensive’ equities
•
Japanese Yen
•
Gold
Perceived Risk
}
• European equities
Expensive
• Japanese equities
• Cyclical equities
• US$
}
Cheap
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Equities – Dispersion between regions is extreme
Source: Lipper 31/12/08 to 17/08/12
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Equities – Cyclicals trade at an attractive discount
European cyclicals % PE premium vs defensives
Source: MSCI, Datastream, Morgan Stanley Research
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How does OMT work?
ECB
EFSF
€
€ €
€ €
€
€
€ €
€ €
€
€€
€
€ €
Limited
Purchase of debt
OMT
Austerity
Greece
Ireland
Portugal
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We believe/hope the USD is bottoming…
Source: Bloomberg
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…which brings us to Gold!
USD TWI, Gold
Source: BoE, Bloomberg, Morgan Stanley Research
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‘Safety’ was key in 2011. Today it’s overpriced.
2012
2011
2012
2011
2012
2011
2011
2012
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Fortunately…
Source: Lipper from 30/12/11 to 07/09/12
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Important Information
This document is issued by Cazenove Capital Management (Cazenove Capital). It is for information purposes only and does not constitute an offer to enter
into any contract/agreement nor a solicitation to buy or sell any investment or to provide any services referred to therein.
This document is solely for the use of professional intermediaries and is not for general public distribution.
The contents of this document are based upon sources of information believed to be reliable, however, save to the extent required by applicable law or
regulations, no guarantee, warranty or representation (express or implied) is given as to its accuracy or completeness, and Cazenove Capital or connected
companies, directors, officers and employees do not accept any liability or responsibility in respect of the information or any recommendations expressed
herein which, moreover, are subject to change without notice.
This document has been produced based on Cazenove Capital Management’s research and analysis and represents our house view. Unless otherwise
stated all views are those of Cazenove Capital Management. It may not be reproduced in any form without the express permission of Cazenove Capital
Management and to the extent that it is passed on, care must be taken to ensure this is in the form which accurately reflects the information given here.
Unless otherwise indicated, the source for all data is Cazenove Capital.
Past performance is no indicator of future performance. The value of investments and the income from them can go down as well as up and an investor may
not get back the amount invested and may be affected by fluctuations in markets and exchange rates.
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provide investment products and services.
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