Download Re-examine - KAM South

ECONOMIC RECOVERY 2011
Shifting into Second Gear
Jobs, housing and slow GDP growth
prevent the economy from reaching full
speed
Christian Koch, CFP® |
KAM South
Shifting into Second Gear | About Us
• KAM South is a boutique investment management and financial
planning firm located in Atlanta, GA.
• We are a “fee only” firm that is completely objective and 100%
on your side of the table.
• We offer a unique goals based approach to financial planning
coupled with customized portfolio management.
• Christian Koch, CFP® has over 15 years of active investment
management experience. Prior to founding KAM South, he
worked as an equity research analyst for a large institutional
money manager, bank trust department and as a financial
analyst for a mutual fund complex. He is a Certified Financial
Planner ™ and is a member of the New York Society of
Securities Analysts, the Financial Planning Association of
Georgia and the Harvard Business School Club of Atlanta.
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Shifting into Second Gear | Today’s Agenda
• Why does the economy feel like it’s stuck in second gear?
– Reasons for optimism
– Improvements in GDP
– Encouraging markets
– Growth in manufacturing
– Improving economic indicators
– Reasons for caution
– Persistent unemployment
– Depressed housing sector
– What does it mean for investors?
3
Shifting into Second Gear | Economic Update
Recession is over!
Longest U.S. recessions (months)
Start Date
Recession ends
June 2009
Source: National Bureau of Economic Research
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Shifting into Second Gear | Reasons for Optimism
Economy slowing – but it’s still growth
8
Gross Domestic Product – 1981 to 1Q 2011
6
4
2
0
1Q11
4Q10
3Q10
2Q10
1Q10
4Q09
3Q09
2Q09
1Q09
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
1984
1983
1982
1981
-2
-4
-6
-8
Real GDP
Source: Bureau of Economic Analysis
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Shifting into Second Gear | Reasons for Optimism
•
Returns were modest and markets were
volatile as investors reacted to softening
economic data and sovereign debt
concerns.
Financial Markets Performance
Selected Markets (in USD)
U.S. Small Cap
U.S. Large Cap
World Equities
•
Supply chain disruption related to the
earthquake in Japan, higher energy
prices and fiscal problems in Greece
roiled financial markets.
Emerging Mkts Equity
Real Estate
International Equity
High Yield Bonds
Cash
Inflation Linked Bonds
•
Riskier assets fell out of favor as
investors turned to more conservative
choices.
U.S. Inv Grade Bonds
Global Bonds
Emerging Markets Debt
U.S. Treasury Bonds
-5.00
0.00
Q2 2011
5.00
10.00
YTD 2011
Source: SEI, in USD, Small Cap = Russell 2000, Large Cap = Russell 1000, World Equities = MSCI World Index, Emerging Markets Equity = MSCI EME, Real Estate = DJ Wilshire RESI
Index, Developed International Equity Markets = MSCI EAFE, High Yield = Merrill Lynch US HY Master II Constrained, Cash = ML USD LIBOR 3M, Inflation Linked = Barclays Capital 110Yr U.S. TIPS and Barclays Capital 1-5 Year US TIPS Index, U.S. Investment Grade Bonds = Barclay’s Capital U.S. Aggregate, Global Bonds = Barclay’s Capital Aggregate Global Bond
Index, Emerging Markets Debt = JP Morgan EMBIGD, Treasury = Treasury component of the Barclay’s U.S. Aggregate
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Shifting into Second Gear | Reasons for Optimism
Modest economic expansion
Leading Economic Indicators –November 2009 to June 2011
118
116
114
112
110
108
106
104
102
100
Source: The Conference Board
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Shifting into Second Gear | Reasons for Optimism
Growth in manufacturing
Purchasing Managers Index
50 and above equals
manufacturing growth
Source: Institute of Supply Management
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Shifting into Second Gear | Reasons for Optimism
Consumers are spending more
Percentage change from previous period
10
8
6
4
2
0
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
-2
Personal consumption expenditures
-4
Goods
Services
Source: Bureau of Economic Analysis
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Shifting into Second Gear | Reasons for Optimism
U.S. is exporting more goods
Source: U.S. Department of Commerce
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Shifting into Second Gear | Reasons for Optimism
Loan delinquencies declining
Source: Federal Reserve Board
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Shifting into Second Gear | Reasons for Caution
Depressed housing market
7,000
6,000
5,000
4,000
New Homes
3,000
Existing homes
2,000
1,000
0
Sale of new and existing homes (thousands of units)
Source: National Association of Home Builders
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Shifting into Second Gear | Reasons for Caution
Stubborn unemployment
U.S. Unemployment Rate (%) December 2009 to June 2011
10.2
10
9.8
9.6
9.4
9.2
9
8.8
8.6
8.4
8.2
Source: U.S. Bureau of Statistics
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Shifting into Second Gear | Reasons for Caution
Pace of job growth slowing
Source: Bureau of Labor Statistics
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Shifting into Second Gear | Employment by industry
Most industries show drop in unemployment
Source: Bureau of Labor Statistics
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Shifting into Second Gear | Employment by region
Unemployment
significantly
below national
average in 25
states.
Unemployment
remains
troublesome in the
West due to
distressed housing
market
Source: Wall Street Journal, June 17, 2011.
Unemployment
rates same as
national average in
20 states.
Northeast
has lowest
jobless rate
of all
regions.
Midwest
greatly
improved due
to surge in
manufacturing.
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Shifting into Second Gear | Reasons for Caution
Volatile energy prices
Spot oil prices: $/barrel 2000-2011
$160.00
$140.00
$120.00
$100.00
$80.00
$60.00
$40.00
$20.00
Source: Dow Jones and Company
1/1/2011
7/1/2010
1/1/2010
7/1/2009
1/1/2009
7/1/2008
1/1/2008
7/1/2007
1/1/2007
7/1/2006
1/1/2006
7/1/2005
1/1/2005
7/1/2004
1/1/2004
7/1/2003
1/1/2003
7/1/2002
1/1/2002
7/1/2001
1/1/2001
7/1/2000
1/1/2000
$0.00
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Shifting into Second Gear | Reasons for Caution
Economic slowdown is a global affair
Real GDP Annual Percentage by Region
* Projection
Source: International Monetary Fund
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Shifting into Second Gear | Conclusions
What does it all mean?
• Recession is over – even though it may not feel like it
• Reasons for optimism
• Investment markets are cooperating
• Manufacturing is heating up
• Economic indicators are encouraging
• Reasons for caution
• Unemployment stuck at unacceptable levels
• Housing market appears to have retreated
• Remember, you’re not alone
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Shifting into Second Gear | Message for Investors
Follow the “Three Rs”
1. Review your financial goals
2. Re-examine you investment
strategy
3. Remain invested
9.35%
* Invested in the S&P 500 Index Jan. 1, 1980 to December 31, 2010
Source: GE Asset Management. Past performance does not guarantee future results. An investor cannot invest directly in an index or average
and they do not include sales charges or operating expenses associated with an investment in a mutual fund, which would reduce total returns.
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Shifting into Second Gear | Our Role
Benefits of working with us:
•
Identify and reconfirm short-term and long-term goals
•
Maintain customized investment strategy that supports individual objectives
•
Provide guidance through fluctuating markets, avoiding emotion-driven mistakes
•
Access broad selection of diversified mutual funds and other securities
•
Advise during market crisis, upcoming bull market and the next market dip (they will all
happen again!)
•
Educate so you can understand and make the right investment decisions
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Disclosure
This material represents an assessment of the market environment at a specific point in
time and is not intended to be a forecast of future events, or a guarantee of future results.
SEI Investments Management Corporation (SIMC) is the adviser to the SEI Funds, which
are distributed by SEI Investments Distribution Co. (SIDCo.) SIMC and SIDCo are wholly
owned subsidiaries of SEI Investments Company. Neither SEI nor its subsidiaries are
affiliated with your advisor
Carefully consider the investment objectives, risk factors and charges and
expenses before investing. This and other information can be found in the Funds’
prospectuses, which may be obtained by calling 1-800-DIAL-SEI. Read it carefully
before investing.
There are risks involved with investing, including loss of principal. Current and future
portfolio holdings are subject to risks as well. Diversification may not protect against
market risk. There is no assurance the objectives discussed will be met. Past
performance does not guarantee future results
Index returns are for illustrative purposes only and do not represent actual portfolio
performance. Index returns do not reflect any management fees, transaction costs or
expenses. One cannot invest directly in an index.
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