Download 2012 Market Outlook

2012 Market Outlook
Jon Erickson, CFA
Senior Vice President, Research
First Trust Advisors LP
U.S. Sector Returns – 2011
25.00%
20.00%
15.00%
10.00%
5.00%
0.00%
-5.00%
-10.00%
-15.00%
-20.00%
Returns represent the S&P 500 GICS Sectors for the period 12/31/10 through 12/31/11. Returns are for illustrative purposes only and not indicative of any
investment. An investment cannot be made directly in an index. Past performance is no guarantee of future results.
U.S. Sector Returns – YTD 2012
Returns represent the S&P 500 GICS Sectors for the period 12/31/11 through 5/10/12. Returns are for illustrative purposes only and not indicative of any investment.
An investment cannot be made directly in an index. Past performance is no guarantee of future results.
U.S. Style Returns – 2011
6.00%
5.00%
4.00%
3.00%
2.00%
1.00%
0.00%
-1.00%
-2.00%
-3.00%
S&P 500
Value
S&P 500
S&P 500
Growth
S&P 400
Value
S&P 400
S&P 400
Growth
S&P 600
Value
S&P 600
S&P 600
Growth
Returns for the period 12/31/10 through 12/31/11. Returns are for illustrative purposes only and not indicative of any investment. An investment cannot be made
directly in an index. Past performance is no guarantee of future results.
U.S. Style Returns – YTD 2012
Returns for the period 12/31/11 through 5/10/12. Returns are for illustrative purposes only and not indicative of any investment. An investment cannot be made
directly in an index. Past performance is no guarantee of future results.
Country Returns – 2011
5.00%
0.00%
-5.00%
-10.00%
-15.00%
-20.00%
-25.00%
-30.00%
-35.00%
-40.00%
Returns are represented by MSCI Country Indexes for the period 12/31/10 through 12/31/11. Returns are for illustrative purposes only and not indicative of any
investment. An investment cannot be made directly in an index. Past performance is no guarantee of future results.
Country Returns – YTD 2012
Returns are represented by MSCI Country Indexes for the period 12/31/11 through 5/10/12. Returns are for illustrative purposes only and not indicative of any
investment. An investment cannot be made directly in an index. Past performance is no guarantee of future results.
Britain
$15B
Germany
$45B
France
$75B
Greece
$236B
Ireland
$867B
Amount owed between
countries as of
December 31, 2010 in
billions of dollars
Italy
$1.5 Trillion
$46B
$18B
Spain
$1.1 Trillion
Portugal
$286B
$86B
$28B
Source: New York Times
Debt vs. GDP
$16,000
$14,000
$12,000
$10,000
$8,000
$6,000
$4,000
$2,000
$0
Japan
Japan
Greece
Greece
Italy
Italy
United
States
United
States
France
France
Canada
Germany
United
Kingdom
Canada Germany
United
Kingdom
India
India
Brazil
Brazil
Spain
Spain
Australia
China
Russia
Australia
China
Russia
GDP
5458.872 305.415 2055.114 14657.8 2582.527 1574.051 3315.643 2247.455 1537.966 2090.314 1409.946 1235.539 5878.257 1465.079
DEBT
12024.93 433.7614 2445.766 13419.47 2175.667 1322.928 2652.329 1735.984 1109.973 1380.974 847.5763 275.5935 1041.112 144.6146
%Debt/GDP 220.28% 142.02% 119.01% 91.55% 84.25% 84.05% 79.99% 77.24% 72.17% 66.07% 60.11% 22.31% 17.71%
9.87%
Source: IMF
As of 12/31/2010
3.8
trillions
3.6
3.4
3.2
Federal Outlays
3.0
Federal Receipts
2.8
2.6
2.4
2.2
2.0
1.8
1.6
2000
2002
2004
Source: Treasury Department. Data from January 2000 through November 2011.
2006
2008
2010
2012
26
percent
index 15,000
12,500
?
24
10,000
7,500
5,000
22
2,500
20
1,250
18
Government Spending as a % of GDP
Dow Jones Industrial Average (Log Scale)
16
1965
1970
1975
1980
1985
1990
1995
2000
2005
2010
500
2015
Source: OMB, WSJ. Data from January 1965 through February 2012. Returns are for illustrative purposes only and not indicative of any investment. An investment cannot be made
directly in an index. Past performance is no guarantee of future results.
Housing Starts (Thousands, Annual Rate)
2400
2000
Normal = 1.6 Million
1600
1200
800
400
04
05
06
Source: Census Bureau. Data from January 2004 through November 2011.
07
08
09
10
11
Household Financial Obligations Ratio
Recurring Monthly Payments as a Percent of After-Tax Income
20
19
18
17
16
15
14
80
85
90
95
Source: Federal Reserve Board. Data from First Quarter 1980 through Third Quarter 2011.
00
05
10
S&P 500 Index
1552.50
1527.46
7/13/2007
3/24/2000
1357.99
5/10/2012
815.28
9/30/2002
676.53
3/9/2009
Returns are for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index. Past performance is no guarantee
of future results.
S&P 500 Index
Theoretical 8% compounded growth
Returns are for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index. Past performance is no guarantee
of future results.
S&P 500 10 Year Rolling Return
Returns are for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index. Past performance is no guarantee
of future results.
10 Year US Treasury vs. Earnings Yield
Returns are for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index. Past performance is no guarantee
of future results.
20 Years
Price/ Sales
Current
20 Years
Price/ Cash Flow
Current
20 Years
Current
Price/ Book
Data obtained from the Compustat database. Data as of 2-28-2012. Comparisons are for illustrative purposes only and not indicative of any investment. An investment cannot be made
directly in an index. Past performance is no guarantee of future results.
500
billions, USD
400
300
200
100
0
-100
-200
Net Equity Fund Flows Rolling 12 Month
Net Bond Fund Flows Rolling 12 Month
-300
1996
1998
2000
2002
2004
2006
Source: ICI, FT Advisors
2008
2010
2012
Certain Considerations
These slides were prepared by First Trust Advisors L.P. (FTA) and reflect the current opinion of FTA. It is based on sources
and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change
without notice. The information does not constitute a solicitation or an offer to buy or sell any security.
Investing involves risks, including the risk of loss.
An investment in common stocks involves risks such as an economic recession and the possible deterioration of either the
financial condition of the issuers of equity securities or the general condition of the stock market. An investment in smallcap companies or mid-cap companies is subject to additional risks as the share prices of small-cap and mid-cap companies
are often more volatile than those of larger companies due to various factors, including limited trading volumes, products,
financial resources, management inexperience, and less publicly available information. An investment concentrated in
common stocks of issuers from a specific industry sector is more risky than a broadly diversified portfolio.
An investment in foreign securities is subject to additional risks, such as currency fluctuations, political risk, the lack of
adequate financial information, withholding taxes, and exchange control restrictions impacting foreign issuers. Risks
associated with investing in foreign securities may be more pronounced in emerging markets, where the securities markets are
substantially smaller, less developed, less liquid, less regulated, and more volatile than the U.S. and developed foreign markets.
An investment in U.S. Treasury securities involves certain risks including changes in interest rates, economic recession,
deterioration of the U.S. Treasury market or investor’s perception thereof, and possible downgrades by credit rating agencies.
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