Americas
Europe
Asia
Karen Ward
London
Dr. David Kelly, CFA
New York
Tai Hui
Hong Kong
Chaoping Zhu,
CFA
Shanghai
David Lebovitz
New York
Gabriela Santos
New York
Michael Bell, CFA
London
Vincent Juvyns
Luxembourg
Marcella Chow
Hong Kong
Jordan Jackson
New York
Jack Manley
New York
Hugh Gimber, CFA
London
Tilmann Galler, CFA
Frankfurt
Ian Hui
Hong Kong
Ambrose Crofton,
CFA
London
Maria Paola Toschi
Milan
Adrian Tong
Hong Kong
Shogo Maekawa
Tokyo
Jai Malhi, CFA
London
Elena Domecq
Madrid
Sahil Gauba
Mumbai
Agnes Lin
Taipei
Max McKechnie
London
Lucia Gutierrez Mellado
Madrid
Clara Cheong
Singapore
Kerry Craig, CFA
Melbourne
Meera Pandit, CFA
New York
Olivia Schubert
New York
Stephanie Aliaga
New York
Nimish Vyas
New York
S&P 500 Price Index
4,800
Characteristic
4,500
4,200
3,900
3,600
Dec. 31, 2021
P/E (fwd.) = 21.2x
4,766
3/24/2000 10/9/2007 2/19/2020 12/31/2021
Index Level
1,527
1,565
3,386
4,766
P/E Ratio (fwd.)
25.2x
15.1x
19.2x
21.2x
Dividend Yield
1.4%
1.9%
1.9%
1.4%
10-yr. Treasury
6.2%
4.7%
1.6%
1.5%
+113%
Feb. 19, 2020
P/E (fwd.) = 19.2x
3,386
3,300
3,000
2,700
-34%
2,400
+401%
2,100
1,800
1,500
Oct. 9, 2002
P/E (fwd.) = 14.1x
777
+106%
1,200
-49%
600
'96
'97
'98
'99
'00
-57%
+101%
Dec. 31, 1996
P/E (fwd.) = 15.9x
741
900
'01
Mar. 23, 2020
P/E (fwd.) = 13.3x
2,237
Oct. 9, 2007
P/E (fwd.) = 15.1x
1,565
Mar. 24, 2000
P/E (fwd.) = 25.2x
1,527
'02
'03
'04
'05
Mar. 9, 2009
P/E (fwd.) = 10.4x
677
'06
'07
'08
'09
'10
'11
'12
'13
'14
'15
'16
'17
'18
'19
'20
'21
S&P 500 Index: Forward P/E ratio
28x
26x
Description
Latest 25-year avg.*
P/E
Forward P/E
21.18x
CAPE
24x
Shiller's P/E
40.9
27.86
2.05
Div. Yield
Dividend yield
1.35%
2.00%
1.97
P/B
Price to book
4.41
3.08
1.66
Price to cash flow
16.17
11.11
2.30
EY minus Baa yield 1.35%
0.16%
-0.60
P/CF
EY Spread
22x
16.83x
Std. dev. Over/under-Valued
1.30
Valuation measure
Dec. 31, 2021:
21.18x
+1 Std. dev.: 20.17x
20x
18x
25-year average: 16.83x
16x
-1 Std. dev.: 13.48x
14x
12x
10x
8x
'96
'98
'00
'02
'04
'06
'08
'10
'12
'14
'16
'18
'20
Forward P/E and subsequent 1-yr. returns
Forward P/E and subsequent 5-yr. annualized returns
S&P 500 Total Return Index
S&P 500 Total Return Index
60%
60%
Dec. 31, 2021: 21.2x
40%
40%
Dec. 31, 2021: 21.2x
20%
20%
0%
0%
-20%
-20%
-40%
-40%
R² = 39%
R² = 3%
-60%
8.0x
11.0x
14.0x
17.0x
20.0x
23.0x
-60%
26.0x
8.0x
11.0x
14.0x
17.0x
20.0x
23.0x
26.0x
S&P 500 earnings per share
Percent change in S&P 500, earnings and valuations
Index annual operating earnings
Year-to-date, indexed to 100
145
$275
$250
135
$225
Consensus analyst estimates
$200
Share of return
2021
Earnings growth
34.5%
Multiple growth
-7.6%
S&P 500 price return
26.9%
Earnings recessions
125
$175
$150
115
$125
$100
105
$75
$50
95
$25
$0
'88
'91
'94
'97
'00
'03
'06
'09
'12
'15
'18
'21
85
Dec '20
Feb '21
Apr '21
Jun '21
Aug '21
Oct '21
Dec '21
S&P 500 year-over-year operating EPS growth
Annual growth broken into revenue, changes in profit margin & changes in share count
100%
2021*
Share of EPS growth 2021* Avg. '01-20
Margin
55.3%
2.8%
Revenue
16.9%
3.0%
Share count
-0.6%
0.3%
Total EPS
71.7%
6.0%
80%
60%
72%
47%
40%
24%
19%
20%
22%
19%
13%
15%
15%
15%
17%
11%
6%
5%
4%
0%
0%
-11%
-6%
-20%
-22%
-40%
-31%
-40%
-60%
'01
'02
'03
'04
'05
'06
'07
'08
'09
'10
'11
'12
'13
'14
'15
'16
'17
'18
'19
'20
'21
S&P 500 profit margins
Labor share of income and profit margins*
Quarterly operating earnings/sales
Compensation and adjusted after-tax corporate profits, SAAR
11%
Labor share
Profit margin
59%
10%
58%
10%
9%
57%
8%
8%
56%
6%
7%
55%
4%
6%
54%
2%
5%
53%
14%
3Q21: 13.2%
12%
Recession
4%
0%
'92
'94
'96
'98
'00
'02
'04
'06
'08
'10
'12
'14
'16
'18
'20
52%
'48 '52 '56 '60 '64 '68 '72 '76 '80 '84 '88 '92 '96 '00 '04 '08 '12 '16 '20
Value vs. Growth relative valuations
S&P 500 sector earnings correlation to real GDP
1Q 2009 – 3Q 2021
Rel. fwd. P/E ratio of Value vs. Growth, 1997 - present
1.40
Industrials
1.20
0.82
Comm. Svcs*
Recession
Growth cheap/Value
expensive
1.00
0.80
0.45
Health Care
0.34
Materials
0.33
Energy
0.30
Financials**
0.30
Info. Tech.
0.30
Growth
Long-term avg.*:0.72
0.60
Value cheap/Growth
expensive
Dec. 31, 2021:
0.52
0.40
Style
0.20
Value
Growth
Forward PE
LongCurrent
term avg.*
15.77x
14.09x
30.61x
20.63x
Div. yield**
LongCurrent
term avg.*
2.00%
2.60%
0.71%
1.33%
Real Estate
Value
0.28
Cons. Disc.
0.09
Cons. Staples
0.09
Utilities
0.01
0.00
'97
'99
'01
'03
'05
'07
'09
'11
'13
'15
'17
'19
'21
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1
P/E ratio of the top 10 and remaining stocks in the S&P 500
Weight of the top 10 stocks in the S&P 500
Next 12 months
% of market capitalization of the S&P 500
36%
45x
Current Average % of avg.
33.2x
19.8x
168%
Top 10
15.7x
126%
Remaining stocks 19.7x
21.2x
16.4x
129%
S&P 500
40x
Dec. 31, 2021:
30.5%
32%
28%
24%
35x
20%
16%
30x
12%
'96
25x
'98
'00
'02
'04
'06
'08
'10
'12
'14
'16
'18
'20
Earnings contribution of the top 10 in the S&P 500
Based on last 12 months’ earnings
36%
20x
32%
28%
15x
Dec. 31, 2021:
25.8%
24%
20%
10x
16%
5x
12%
'96
'98
'00
'02
'04
'06
'08
'10
'12
'14
'16
'18
'20
'96
'98
'00
'02
'04
'06
'08
'10
'12
'14
'16
'18
'20
Valuation dispersion between the 20th and 80th percentile of S&P 500 stocks
35
25-yr. average
16.0
11.3
Median S&P 500 P/Es
Valuation spread
Current
20.3
21.7
30
25
20
15
10
5
'97
'98
'99
'00
'01
'02
'03
'04
'05
'06
'07
'08
'09
'10
'11
'12
'13
'14
'15
'16
'17
'18
'19
'20
'21
16.6%
19.8%
13.4%
14.9%
16.6%
Blend
Growth
25.2%
28.7%
27.6%
28.3%
22.6%
12.7%
Value
Large
13.0%
Value
15.8
Mid
Growth
Large
Blend
Current P/E vs. 20-year avg. P/E
Mid
Value
Large
2021
Mid
10-year annualized
15.7
Blend
21.2
13.7
19.4
61.7%
Mid
32.4%
38.3%
42.9%
37.1%
35.6%
31.7%
Small
23.4
17.0
20.4
43.3
21.4
35.5
Value
Blend
Growth
105.5%
119.0%
136.0%
134.1%
131.5%
122.2%
141.1%
128.5%
114.1%
Value
Blend
Growth
Large
45.0%
16.4
115.0%
135.3%
165.1%
Mid
Large
27.1%
15.9
33.7
Since market low (March 2020)
Large
Growth
2.8%
Mid
Blend
14.8%
Small
Value
Small
Since market peak (February 2020)
28.3%
18.5
108.2%
118.2%
165.1%
Small
14.1%
Small
Small
13.2%
30.6
15.5
14.5
12.0%
Growth
93.5%
109.1%
121.9%
Real
Estate
2.8%
Health
Care
13.3%
Cons.
Staples
5.9%
Utilities
2.5%
S&P 500
Index
100.0%
Weight
Comm.
Services*
10.2%
0.3%
1.0%
2.4%
5.8%
18.4%
46.1%
11.6%
1.8%
8.7%
4.0%
0.0%
100.0%
Russell Value weight
5.1%
3.8%
20.7%
11.5%
5.7%
10.2%
7.3%
5.1%
18.0%
7.4%
5.1%
100.0%
Russell 2000 weight
4.4%
3.8%
16.0%
15.2%
11.3%
14.5%
3.1%
7.4%
18.1%
3.4%
2.7%
100.0%
4Q21
8.0
15.2
4.6
8.6
12.8
16.7
0.0
16.8
11.2
13.3
12.9
11.0
2021
54.6
27.3
35.0
21.1
24.4
34.5
21.6
42.5
26.1
18.6
17.7
28.7
Since market peak
(February 2020)
12.6
56.0
31.3
30.3
55.9
72.7
41.1
27.0
40.1
28.1
8.9
45.0
Since market low
(March 2020)
155.5
144.1
130.0
123.4
128.3
150.9
97.6
104.7
94.4
68.6
69.2
119.0
Beta to S&P 500
1.5
1.1
1.2
1.1
1.1
1.1
0.9*
0.7
0.8
0.7
0.4
1.0
Correl. To Treas. Yields
0.6
0.4
0.6
0.5
0.3
0.1
0.3*
0.3
0.1
0.2
0.2
0.4
51.3
56.8
30.1
43.8
34.0
58.2
44.7
-
38.5
32.7
-
42.9
NTM earnings growth
26.8%
4.0%
-9.0%
35.8%
29.9%
9.9%
6.6%
6.9%
6.8%
6.2%
1.5%
8.5%
20-yr. avg.
84.4%
18.7%
21.7%
13.4%
16.7%
14.4%
10.6%*
6.4%
9.0%
8.1%
4.1%
11.6%
Forward P/E ratio
11.0x
17.0x
14.9x
20.7x
31.4x
28.2x
20.6x
24.5x
17.4x
21.9x
11.8x
21.2x
20-yr. avg.
14.2x
14.8x
12.4x
16.2x
18.9x
18.5x
19.7x*
16.2x
15.3x
17.1x
14.9x
15.5x
Buyback yield
0.4%
1.5%
1.4%
0.7%
2.7%
0.1%
1.4%
2.1%
0.7%
2.3%
2.0%
2.8%
2.4%
1.2%
-1.2%
-1.1%
1.2%
1.9%
1.3%
1.8%
-1.1%
-1.0%
1.6%
1.6%
4.1%
2.7%
1.8%
2.5%
1.9%
2.3%
1.5%
2.2%
0.6%
1.4%
0.8%
1.1%
0.8%
1.3%*
2.4%
4.1%
1.5%
1.9%
2.5%
2.8%
3.0%
4.0%
1.4%
2.1%
20-yr. avg.
Dividend yield
20-yr. avg.
EPS
P/E
Foreign % of sales
Return %)
Russell Growth weight
β
Tech.
29.2%
% ρ
Cons.
Disc.
12.5%
Bbk
Materials Financials Industrials
2.6%
10.7%
7.8%
Div
S&P weight
Energy
2.7%
2007
2008
Mom en. Min. Vol.
2009
Value
17.8%
-25.7%
38.8%
Defens.
Defens.
Cyclical
17.7%
-26.7%
36.9%
Quality
High Div.
10.1%
-27.6%
MultiFactor
5.5%
Quality
-31.2%
4.3%
Sm all
Cap
-33.8%
Value
Value
1.1%
-36.9%
Min. Vol.
High Div.
0.0%
Cyclical
-0.8%
Sm all
Cap
-1.6%
MultiFactor
-39.3%
MultiFactor
29.8%
Sm all
Cap
27.2%
2010
Sm all
Cap
26.9%
MultiFactor
18.3%
2011
2012
2013
2014
2015
High Div.
Cyclical
Value
Value
Mom en.
14.3%
20.1%
43.2%
17.7%
9.3%
Min. Vol.
Value
12.9%
16.8%
Sm all
Cap
38.8%
Sm all
Cap
16.3%
MultiFactor
37.4%
Mom en.
Defens.
18.2%
10.1%
Cyclical
Quality
17.9%
7.5%
Quality
High Div.
24.9%
15.9%
MultiFactor
7.3%
High Div. Min. Vol. Mom en.
MultiFactor
15.7%
Cyclical
35.0%
-2.7%
11.2%
28.9%
13.0%
Value
Cyclical
Defens.
Defens.
Quality
-3.4%
10.7%
28.9%
10.7%
-44.8%
16.5%
12.0%
10.6%
25.3%
-1.6%
34.4%
27.8%
27.6%
11.5%
20.7%
Quality
Cyclical
Cyclical
27.2%
11.2%
19.9%
14.0%
22.2%
MultiFactor
13.7%
MultiFactor
21.5%
Defens.
High Div. Min. Vol.
Value
2.6%
13.6%
14.2%
Sm all
Cap
-4.2%
Quality
Value
34.3%
18.4%
Defens.
Cyclical
Cyclical
12.8%
Value
Defens.
Cyclical
Cyclical
MultiFactor
0.4%
Quality
Cyclical
Quality
22.5%
Min. Vol.
12.7%
Mom en.
15.9%
6.1%
17.6%
Cyclical
4.6%
Cyclical
Sm all
Cap
4.9%
Mom en.
11.8%
14.9%
Quality
Value
29.2%
Quality
Quality
Mom en.
29.6%
Value
0.7%
Cyclical
36.3%
Quality
14.7%
2021
1.5%
High Div.
34.8%
2020
37.8%
27.3%
15.1%
2019
Sm all
Cap
22.5%
16.3%
MultiFactor
14.8%
2018
Mom en. Min. Vol.
5.6%
14.7%
-40.9%
2017
16.5%
18.4%
Mom en. Mom en.
Sm all
Cap
21.3%
Min. Vol. Min. Vol. High Div.
Mom en. Mom en. Mom en. High Div.
Min. Vol. High Div.
2016
High Div. Mom en.
-2.3%
28.1%
Defens. Min. Vol.
-2.9%
28.0%
Cyclical
Value
-5.3%
27.7%
-5.6%
MultiFactor
26.6%
19.2%
MultiFactor
-9.7%
Sm all
Cap
25.5%
7.7%
Sm all
Cap
14.6%
Sm all
Cap
-11.0%
Value
Mom en.
Defens.
-6.4%
5.1%
12.3%
Min. Vol. High Div.
10.7%
19.5%
Defens.
Quality
Min. Vol.
-0.9%
9.4%
Sm all
Cap
-4.4%
Defens.
2007 - 2021
Ann.
Vol.
Quality
Sm all
Cap
20.0%
Quality
17.1%
MultiFactor
11.4%
MultiFactor
25.1%
Defens.
25.0%
Min. Vol. High Div.
5.8%
21.9%
Defens. Min. Vol.
5.2%
21.0%
22.5%
1.7%
Sm all
Cap
14.8%
Value
Defens.
Value
Mom en.
-11.1%
21.4%
-0.2%
12.9%
High Div. High Div.
Min. Vol. Mom en.
10.5%
17.7%
MultiFactor
10.1%
MultiFactor
17.7%
High Div.
Quality
9.4%
15.7%
Defens.
High Div.
9.1%
15.1%
Value
Defens.
9.1%
13.9%
Sm all
Cap
8.7%
Min. Vol.
13.2%
S&P intra-year declines vs. calendar year returns
Despite average intra-year drops of 14.0%, annual returns were positive in 32 of 42 years
40%
34%
31%
30%
27%
26%
26%
29%
26%
27%
23%
20%
20%
30%
27%
26%
17%
15%
20%
19%
16%
15%
14%
12%
10%
13%
11%
10%
9%
7%
4%
3%
2%
1%
13%
4%
0%
0%
-2%
-10%
-10%
-7%
-8%
-9%
-8%-8%
-1%
-3%
-7%-6%-6%-5%
-8%
-11%
-9%
-13%
-20% -17% -17%
-18%
-3%
-10%
-12% -13%
-19%
-20%
-6%
-8%-7%-8%
-10%
-10%
-14%
-6%
-7%
-11%
-12%
-16%
-19%
-17%
-5%
-7%
-20%
-23%
-30%
-28%
-30%
-34%
-34%
-34%
-40%
-38%
-50%
-49%
-60%
'80
'85
'90
'95
'00
'05
'10
'15
'20
Stock returns and interest rate movements before and after the Global Financial Crisis
Monthly S&P 500 returns, 10yr U.S. Treasury, rolling 2yr correlations, 1965 – present
1
0.8
1965 - January 2009
Stocks and rates move together until yields rise to
4.5% and then move in opposite directions
0.6
February 2009 - present
Stocks and rates move together until yields rise to
3.6% and then move in opposite directions
Rolling 2yr correlation
0.4
0.2
0
-0.2
-0.4
-0.6
-0.8
-1
0%
2%
4%
6%
8%
10%
10yr UST
12%
14%
16%
18%
Real GDP
Components of GDP
Billions of chained (2012) dollars, seasonally adjusted at annual rates
3Q21 nominal GDP, USD trillions
$26
$21,000
GDP (%)
Q/Q saar
Y/Y
$20,000
4Q20
4.5
-2.3
1Q21
6.3
0.5
2Q21
6.7
12.2
4.7% Housing
3Q21
2.3
4.9
$22
13.0% Investment ex-housing
$19,000
$18
17.6% Gov't spending
$18,000
Trend growth:
2.0%
$14
$17,000
$16,000
$10
68.8% Consumption
$15,000
$6
$14,000
$2
$13,000
$12,000
'01
'03
'05
'07
'09
'11
'13
'15
'17
'19
'21
-$2
-4.1% Net exports
Change in confirmed cases and fatalities in the U.S.
Progress toward immunity
7-day moving average
Percentage of population, end of month
450,000
Confirmed cases
7,200
100%
6,400
90%
Fatalities
400,000
350,000
5,600
300,000
4,800
80%
Vaccinated only*
Est. Infected & vaccinated***
Est. Infected only**
70%
60%
250,000
4,000
50%
200,000
3,200
40%
150,000
2,400
100,000
1,600
20%
800
10%
50,000
0
Feb '20
0
Jun '20
Oct '20
Feb '21
Jun '21
Oct '21
30%
0%
Feb '20 May '20 Aug '20 Nov '20 Feb '21 May '21 Aug '21 Nov '21
High-frequency data
Year-over-year % change; Year-over-2 year after 3/15/21*
100%
Consumer debit/credit transactions
Hotel occupancy
U.S. seated diners
TSA traveler traffic
80%
60%
Min.
-34%
-69%
-100%
-96%
Current
13%
-9%
-24%
-17%
y/2y
40%
20%
0%
-20%
-40%
-60%
-80%
-100%
Feb '20
Apr '20
Jun '20
Aug '20
Oct '20
Dec '20
Feb '21
Apr '21
Jun '21
Aug '21
Oct '21
Dec '21
Growth in working-age population
Drivers of GDP growth
Percent increase in civilian non-institutional population ages 16-64
Average year-over-year % change
1.8%
5.0%
Native born
1.5%
1.2%
1.1%
0.9%
0.3%
Census
forecast
Immigrant
1.2%
1.1%
4.5%
0.6%
0.5%
Growth in workers
+ Growth in real output per worker
Growth in real GDP
4.3%
4.0%
0.6%
3.6%
0.4%
0.8%
0.3%
0.0%
'80-'89
'90-'99
'00-'09
3.5%
0.2%
0.2%
0.3%
0.7%
0.6%
0.17%
0.03%
'20-'29
'10-'19
3.3%
3.1%
3.2%
3.0%
1.8%
Growth in private non-residential capital stock
2.5%
Non-residential fixed assets, year-over-year % change
1.0%
6%
1.5%
2.0%
1.8%
5%
2020: 1.6%
4%
1.8%
1.5%
0.7%
2.4%
1.0%
3%
1.7%
0.1%
2%
0.5%
1%
2.1%
2.5%
0.9%
1.4%
2.1%
1.6%
1.0%
'51-'60
'61-'70
'71-'80
'81-'90
'91-'00
'01-'10
'11-'20
0.0%
0%
'55
'60
'65
'70
'75
'80
'85
'90
'95
'00
'05
'10
'15
'20
The 2022 federal budget
Federal budget surplus/deficit
% of GDP, 1990 – 2031, CBO Baseline Forecast
CBO Baseline forecast, USD trillions
2021: Forecast
-12.4%
-18%
$6.0
Total spending: $5.5tn
-14%
$5.0
Other: $967bn (17%)
Borrowing: $1,153bn (21%)
Net int.: $306bn (6%)
$4.0
Non-defense
disc.: $866bn
(16%)
$3.0
Defense:
$749bn (14%)
$2.0
Social Security:
$1,199bn (22%)
Other: $355bn (6%)
-6%
Social
insurance:
$1,391bn (25%)
-2%
2%
'90
Corporate: $317bn (6%)
$1.0
Income:
$2,328bn (42%)
'00
'05
'10
'15
'20
'25
'30
Total government spending
Sources of financing
CBO's Baseline economic assumptions
'23-'24
1.6%
2.1%
2.3%
3.8%
% of GDP, 1940 – 2031, CBO Baseline Forecast, end of fiscal year
Forecast
120%
2021:
99.6%
100%
Sources of financing
$0.0
2022
6.1%
1.9%
2.7%
4.1%
'95
Federal net debt (accumulated deficits)
Medicare &
Medicaid:
$1,457bnspending
(26%)
Total government
Real GDP growth
10-year Treasury
Headline inflation (CPI)
Unemployment
2031:
-5.5%
2022:
-4.7%
-10%
2031:
106.4%
80%
60%
'25-'26
1.3%
2.6%
2.4%
4.2%
'27-'31
1.6%
3.2%
2.4%
4.4%
40%
20%
'40
'48
'56
'64
'72
'80
'88
'96
'04
'12
'20
'28
Consumer balance sheet
Household debt service ratio
3Q21, trillions of dollars outstanding, not seasonally adjusted
Debt payments as % of disposable personal income, SA
$180
14%
Total assets: $162.7tn
$160
$140
3Q07 Peak
1Q09 Low
$85.1tn
$73.9tn
13%
12%
11%
Homes: 25%
4Q07: 13.2%
1Q80:
10.6%
4Q21**:
9.0%
10%
$120
9%
Other tangible: 5%
8%
Deposits: 9%
'80
$100
$80
Other non-revolving: 2%
Revolving*: 5%
Auto loans: 7%
Other liabilities: 10%
Student debt: 10%
$40
Other financial assets: 42%
'95
'00
'05
'10
'15
'20
Not seasonally adjusted, USD billions
4Q21**:
$150,788
$160,000
$140,000
$120,000
3Q07: $70,726
$100,000
$80,000
Total liabilities: $18.0tn
$20
'90
Household net worth
Pension funds: 19%
$60
'85
$60,000
$40,000
Mortgages: 65%
$0
Assets
Liabilities
$20,000
'90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20
Top 10% share of pre-tax national income
Ratio of U.S. financial assets to GDP
55%
Income share:
50.5%
6.0x
4Q21:
5.6x*
50%
5.5x
45%
40%
5.0x
35%
4.5x
30%
'50
'55
'60
'65
'70
'75
'80
'85
'90
'95
'00
'05
'10
'15
4.0x
Spending as a share of income after tax
Consumer expenditure survey, 2020
100%
90%
3.5x
80%
3.0x
61%
60%
40%
2.5x
20%
2.0x
0%
Top 10%
Bottom 90%
'51 '56 '61 '66 '71 '76 '81 '86 '91 '96 '01 '06 '11 '16 '21
JOLTS job openings
JOLTS quits
Total nonfarm job openings, thousands, seasonally adjusted
Total nonfarm quits, thousands, seasonally adjusted
5,000
12,000
Oct. 2021: 4,157
4,000
11,000
Oct. 2021: 11,033
10,000
3,000
9,000
2,000
8,000
1,000
'00
'02
'04
'06
'08
'10
'12
'14
'16
'18
'20
7,000
JOLTS layoffs
6,000
Total nonfarm layoffs, thousands, seasonally adjusted
4,000
13,000
5,000
3,500
4,000
3,000
2,500
3,000
2,000
2,000
1,500
Oct. 2021: 1,361
1,000
1,000
'00
'02
'04
'06
'08
'10
'12
'14
'16
'18
'20
'00
'02
'04
'06
'08
'10
'12
'14
'16
'18
'20
Civilian unemployment rate and year-over-year wage growth
Private production and non-supervisory workers, seasonally adjusted, percent
16%
50-year avg.
14%
Unemployment rate
6.3%
Wage growth
4.0%
Apr. 2020: 14.8%
12%
Nov. 1982: 10.8%
Oct. 2009: 10.0%
10%
May 1975: 9.0%
Jun. 1992: 7.8%
8%
Jun. 2003: 6.3%
6%
Nov. 2021:
5.9%
4%
2%
Nov. 2021: 4.2%
0%
'70
'72
'74
'76
'78
'80
'82
'84
'86
'88
'90
'92
'94
'96
'98
'00
'02
'04
'06
'08
'10
'12
'14
'16
'18
'20
CPI and core CPI
% change vs. prior year, seasonally adjusted
15%
Recession
50-yr. avg. Oct. 2021 Nov. 2021
3.9%
6.2%
6.9%
Headline CPI
12%
9%
Core CPI
3.8%
4.6%
5.0%
Food CPI
4.0%
5.3%
6.1%
Energy CPI
4.7%
30.0%
33.5%
Headline PCE deflator
3.4%
5.1%
5.7%
Core PCE deflator
3.3%
4.2%
4.7%
6%
3%
0%
-3%
'71
'73
'75
'77
'79
'81
'83
'85
'87
'89
'91
'93
'95
'97
'99
'01
'03
'05
'07
'09
'11
'13
'15
'17
'19
'21
The U.S. dollar
The U.S. trade balance
U.S. Dollar Index
Current account balance, % of GDP
130
-7%
-6%
-5%
120
3Q21: -3.7%
-4%
-3%
-2%
110
-1%
Dec. 31, 2021:
96.0
100
0%
'96
'98
'00
'02
'04
'06
'08
'10
'12
'14
'16
'18
'20
Developed markets interest rate differentials
90
Difference between U.S. and international 10-year yields*
3%
80
2%
1%
70
Dec. 31, 2021: 1.3%
0%
60
-1%
'96
'99
'02
'05
'08
'11
'14
'17
'20
'96
'98
'00
'02
'04
'06
'08
'10
'12
'14
'16
'18
'20
Change in production and consumption of liquid fuels
Price of oil
Production, consumption and inventories, millions of barrels per day
WTI crude, nominal prices, USD/barrel
Production
2018
U.S.
OPEC
Russia
Global
Consumption
2019
2020 2021* 2022*
Growth since '18
$160
$140
17.9 19.5
36.7 34.7
11.4 11.5
100.4 100.4
18.6
30.7
10.5
93.8
18.8 20.1
31.6 33.9
10.8 11.6
95.6 100.9
12.4%
-7.7%
1.7%
0.5%
20.5 20.5
13.6 14.0
99.7 100.3
0.7
0.1
18.2
14.4
91.8
2.0
19.8 20.5
15.3 15.9
96.9 100.5
-1.3
0.5
-0.2%
16.7%
0.8%
U.S.
China
Global
Inventory Change
Jul. 3, 2008:
$145.29
$120
Jun. 13, 2014:
$106.91
$100
Oct. 3, 2018:
$76.41
$80
U.S. crude oil inventories and rig count**
Dec. 31,
2021:
$75.21
Million barrels, number of active rigs
1,300
2,000
1,200
1,500
$60
$40
1,100
1,000
1,000
500
0
'14
'15
'16
$20
Feb. 11, 2016:
$26.21
Active rigs
Inventories (incl. SPR)
900
'13
Feb. 12, 2009:
$33.98
'17
'18
'19
'20
'21
Apr. 21, 2020: $11.57
$0
'01
'03
'05
'07
'09
'11
'13
'15
'17
'19
'21
Global investment in energy transition
Cost of wind, solar, natural gas, nuclear and coal
Billions USD, nominal
Mean LCOE*, 2021, dollar per megawatt hour
$400
$600
Wind
Storage, electrification, carbon capture, other
Solar
Natural gas
Coal
Nuclear
$300
Renewable energy
$500
$200
$100
$400
$0
'09
'10
'11
'12
'13
'14
'15
'16
'17
'18
'19
'20
'21
$300
Global solar and wind power capacity additions
350
Capacity (gigaw atts)
$200
$100
$0
'04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20
Wind
Share of capacity additions
300
60%
250
50%
200
40%
150
30%
100
20%
50
10%
0
0%
'10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21F '22F
Share of capacity additions
70%
Solar
Federal funds rate expectations
FOMC and market expectations for the federal funds rate
7%
Federal funds rate
FOMC December 2021 forecasts
FOMC year-end estimates
Percent
6%
2021
2022
2023
2024
Long
run*
Change in real GDP, 4Q to 4Q
5.5
4.0
2.2
2.0
1.8
Unemployment rate, 4Q
4.3
3.5
3.5
3.5
4.0
Headline PCE inflation, 4Q to 4Q
5.3
2.6
2.3
2.1
2.0
Market expectations as of Dec. 31, 2021
FOMC long-run projection*
5%
4%
3%
2.50%
2.10%
2%
1.60%
0.90%
1%
1.37% 1.36%
0.98%
0.13%
0%
'00
'02
'04
'06
'08
'10
'12
'14
'16
'18
'20
'22
'24
Long run
The Federal Reserve balance sheet
Forecast*
USD trillions
$10
Balance sheet expansion under rounds of quantitative easing (QE), USD billions
$9
Announced Terminated Length (m) Treasuries
$8
$7
MBS
Loans** Balance sheet
QE1
11/25/2008
3/31/2010
16
$300
$1,074
$0
$1,403
QE2
11/3/2010
6/29/2012
19
$829
-$196
$0
$568
QE3
9/13/2012
10/29/2014
25
$822
$874
$0
$1,674
QE4***
3/23/2020
Ongoing
21
$3,178
$1,244
$75
$4,599
Loans
$6
$5
Other
$4
MBS
$3
$2
Treasuries
$1
$0
'03
'04
'05
'06
'07
'08
'09
'10
'11
'12
'13
'14
'15
'16
'17
'18
'19
'20
'21
'22
Nominal and real U.S. 10-year Treasury yields
20%
Sep. 30, 1981:
15.84%
Average
(1958 - YTD 2021) Dec. 31, 2021
Nominal yields
5.82%
1.51%
Real yields
2.20%
-3.45%
Inflation
3.62%
4.96%
15%
10%
Nominal 10-year U.S. Treasury yield
Dec. 31, 2021:
1.51%
5%
Real 10-year U.S. Treasury yield
0%
Dec. 31, 2021:
-3.45%
-5%
'58
'61
'64
'67
'70
'73
'76
'79
'82
'85
'88
'91
'94
'97
'00
'03
'06
'09
'12
'15
'18
'21
U.S. Treasuries
Yield
Return
12/31/2021 12/31/2020
2021
YTD
Impact of a 1% rise in interest rates
Avg.
Correlation Correlation
Maturity to 10-year to S&P 500
Assumes a parallel shift in the yield curve
-1.2%
-2.0%
2Y UST
2-Year
0.73%
0.13%
-0.57%
2 years
0.67
-0.41
-3.5%
-4.7%
5Y UST
5-Year
1.26%
0.36%
-2.80%
5
0.92
-0.36
TIPS
-1.04%
-1.06%
5.96%
10
0.57
0.20
10-Year
1.52%
0.93%
-3.60%
10
1.00
-0.33
30-Year
1.90%
1.65%
-4.62%
30
0.93
-0.31
-2.8%
-4.1%
TIPS
-7.3%
-8.8%
10Y UST
30Y UST
-18.0%
-19.8%
-6.4%
-8.7%
IG Corps
Sector
-5.0%
-6.8%
U.S. Aggregate
IG Corps
2.33%
1.74%
-1.04%
12.3
0.42
0.38
U.S. Aggregate
1.75%
1.12%
-1.54%
8.7
0.85
0.02
Convertibles
3.66%
4.91%
4.49%
-
-0.29
0.87
U.S. HY
4.21%
4.18%
5.28%
6.5
-0.25
0.72
Municipals
1.11%
1.07%
1.52%
13.1
0.37
0.09
MBS
MBS
1.98%
1.25%
-1.04%
6.1
0.81
-0.16
ABS
ABS
1.96%
2.87%
1.11%
2.4
-0.04
0.10
Floating Rate
Floating Rate
0.48%
0.54%
0.52%
2.0
-0.22
0.44
Convertibles
0.4%
U.S. HY
-3.8%
-3.9%
-5.1%
Municipals
-2.8%
-4.8%
Total return
-1.2%
-2.3%
Price return
-24%
2.1%
-1.6%
0.4%
-0.1%
-19%
-14%
-9%
-4%
1%
6%
U.S. Treasury yield curve
6.0%
Yield range over past 10 years
5.0%
3.96%
4.0%
3.72%
Dec. 31, 2013
3.04%
3.0%
2.45%
1.75%
2.0%
Dec. 31, 2021
1.44%
1.94%
1.52%
1.26%
1.0%
0.97%
0.73%
0.39%
0.78%
0.38%
1.90%
1.19%
0.96%
Aug. 4, 2020
0.36%
0.52%
0.19%
0.0%
3m 1y
2y 3y
5y
7y
10y
20y
30y
Default rate and spread to worst
Percent
20%
Long-run avg. Dec. 31, 2021
Default rate
3.66%
0.38%
Spread-to-worst
5.72%
4.29%
Recovery rate
39.60%
44.90%
16%
12%
Recession
8%
4%
0%
'90
'93
'96
'99
'02
'05
'08
'11
'14
'17
'20
Spread-to-worst across fixed income sectors
Basis points, past 15 years
1,200
Axis
2,400
15-year range
15-year median
Current
1,000
2,000
800
1,600
600
1,200
480
404
367
400
446
502
332
200
176
138
101
69
800
321
483
272
400
64
42
321
346
96
0
0
Municipals
IG corps
MBS
ABS
EMD ($)
EMD (LCL)
EM Corp
U.S. HY
Leveraged
Loans
U.S. debt to GDP ratios
Baa corporate debt*
Percentage of nominal GDP
Percentage of Baa-rated investment-grade corporate debt outstanding
140%
60%
50%
120%
% of 2Q21 GDP
Government
124.9%
Household
79.0%
Non-financial corporate
82.3%
100%
Dec. 2021:
50.4%
40%
30%
20%
10%
0%
'89 '91 '93 '95 '97 '99 '01 '03 '05 '07 '09 '11 '13 '15 '17 '19 '21
80%
Duration of investment-grade corporate credit universe
Years
60%
10
Dec. 2021:
8.7 years
9
40%
8
Recession
20%
7
Average: 6.3 years
6
5
0%
4
'74 '77 '80 '83 '86 '89 '92 '95 '98 '01 '04 '07 '10 '13 '16 '19
'89 '91 '93 '95 '97 '99 '01 '03 '05 '07 '09 '11 '13 '15 '17 '19 '21
Developed market central bank bond purchases
Number of rate changes by EM and DM central banks**
USD billions, 12-month rolling flow
Forecast*
$6,000
120
Cuts
Hikes
Fed
BoJ
$5,000
100
ECB
BoE
Total
$4,000
80
$3,000
60
$2,000
40
$1,000
20
$0
0
-$1,000
'16
'17
'18
'19
'20
'21
'22
'08
'09
'10
'11
'12
'13
'14
'15
'16
'17
'18
'19
'20
'21
Yield
Aggregates
Global bond market
2021 Return
12/31/2021 12/31/2020
Local
USD
-1.54% -1.54%
Correlation
to 10-year
6.8 years
0.89
$130
8.00
0.37
$120
U.S.
1.75%
1.12%
Gbl. ex-U.S.
1.07%
0.68%
Japan
0.18%
0.11%
0.14% -10.22%
9.60
0.53
Germany
0.05%
-0.28%
-1.64% -8.59%
7.30
0.17
UK
1.18%
0.60%
-4.54% -5.41%
11.00
0.26
Italy
0.76%
0.32%
-2.55% -9.42%
7.30
0.01
Spain
0.32%
0.00%
-2.39% -9.27%
7.50
0.02
-
-6.41%
USD trillions
Duration
$140
$110
U.S.
Dev. ex-U.S.
EM
12/31/1989
57.6%
41.3%
1.2%
6/30/2021
35.4%
39.8%
24.8%
$100
$90
EM: $34tn
$80
$70
$60
Sector
$50
5.2 years
0.17
$40
-3.15%
3.90
-0.22
$30
-1.80%
7.60
-0.07
Euro Corp.
0.52%
0.24%
-0.97% -7.95%
Euro HY
3.55%
3.40%
4.21%
EMD ($)
5.27%
4.91%
-
EMD (LCL)
5.72%
5.22%
EM Corp.
4.11%
4.51%
-2.92% -8.75%
5.20
-0.08
5.90
-0.07
Developed
ex-U.S.: $54tn
$20
U.S.: $48tn
$10
$0
-
0.91%
'89 '91 '93 '95 '97 '99 '01 '03 '05 '07 '09 '11 '13 '15 '17 '19
Average credit rating of EM debt universe
EMD yield and weight in Bloomberg Global Agg. Index
EMBIG index
Weighted yield-to-worst
9
BBB+
45%
Investment-grade rating
10
BBB-
40%
EMD index yield contribution
BB+
11
EMD index weight
BB12
BB13
35%
B14
+
Dec. 2021:
28.7%
30%
High yield rating
B15
B-16
'95
'98
'01
'04
'07
'10
'13
'16
'19
25%
Emerging and developed markets duration
20%
Current modified duration
Dec. 2021:
13.7%
15%
12
10.1
10
8
10%
6
6.5
6.7
6.9
7.2
7.6
8.2
8.6
5.1
4
5%
2
0
EMD
(LCL)
0%
'11
'12
'13
'14
'15
'16
'17
'18
'19
'20
'21
EM IG
corp.
Europe IG U.S.
corp.
Treasury
debt
U.K. IG
corp.
EMD ($) Germany U.S. IG
govt. debt corp.
Japan
gov. debt
2007
2008
EMD LCL.
Treas.
18.1%
13.7%
2009
High
Yield
58.2%
TIPS
MBS
EMD USD
11.6%
8.3%
2010
2011
2012
EMD LCL.
TIPS
EMD USD
15.7%
13.6%
MBS
29.8%
10.7%
16.8%
-0.3%
7.5%
1.5%
ABS
EMD USD
Treas.
24.7%
12.2%
EMD LCL.
22.0%
TIPS
Corp.
6.9%
-2.4%
18.7%
Asset
Alloc.
7.6%
Asset
Alloc.
16.5%
Barclays
Agg
6.5%
2018
2019
2020
2021
EMD LCL.
ABS
EMD USD
TIPS
TIPS
15.2%
2.7%
15.0%
11.0%
6.0%
Muni
Corp.
Corp.
1.3%
14.5%
9.9%
High
Yield
5.3%
Treas.
Muni
8.0%
1.5%
Asset
Alloc.
5.5%
EMD USD EMD USD
10.2%
10.3%
9.8%
-1.4%
7.4%
1.2%
9.9%
Corp.
Corp.
Corp.
Corp.
MBS
Treas.
Corp.
9.0%
8.1%
9.8%
-1.5%
6.1%
0.8%
6.1%
Barclays
Agg
7.8%
Asset
Alloc.
7.6%
Asset
Alloc.
-1.8%
Barclays
Agg
6.0%
Barclays
Agg
0.5%
Asset
Alloc.
4.8%
Asset
Alloc.
7.7%
Barclays
Agg
-2.0%
Asset
Alloc.
5.4%
ABS
TIPS
Muni
TIPS
EMD USD
6.2%
-4.9%
12.9%
6.3%
7.3%
Corp.
EMD LCL.
TIPS
Treas.
MBS
4.6%
-5.2%
11.4%
5.9%
6.2%
TIPS
7.0%
MBS
EMD USD EMD USD EMD LCL.
Muni
Muni
Treas.
6.8%
-2.6%
5.1%
Barclays
Agg
4.2%
-12.7%
High
Yield
-26.2%
5.9%
5.4%
Treas.
Muni
EMD LCL.
Treas.
-3.6%
2.4%
-1.8%
2.0%
13.5%
1.1%
5.5%
6.1%
Asset
Alloc.
9.8%
High
Yield
7.1%
Asset
Alloc.
-0.2%
Muni
Treas.
5.4%
Barclays
Agg
0.0%
4.3%
5.0%
Asset
Alloc.
-0.6%
Barclays
Agg
8.7%
Asset
Alloc.
6.6%
TIPS
TIPS
4.2%
4.8%
Muni
0.2%
4.7%
Asset
Alloc.
5.3%
Asset
Alloc.
-0.4%
Barclays
Agg
2.6%
Barclays
Agg
3.5%
TIPS
TIPS
EMD USD
-1.3%
8.4%
5.3%
-0.7%
2.0%
3.0%
TIPS
MBS
ABS
-1.4%
1.7%
3.0%
-5.3%
MBS
TIPS
ABS
2.6%
-8.6%
1.7%
High
Yield
-4.5%
EMD LCL. EMD LCL. EMD LCL.
-9.0%
-5.7%
-14.9%
8.7%
Corp.
3.6%
3.7%
EMD USD
Corp.
-2.7%
5.1%
2.2%
High
Yield
1.9%
0.9%
6.1%
High
Yield
11.2%
ABS
TIPS
5.9%
MBS
6.4%
EMD USD
Barclays
Agg
7.5%
ABS
EMD USD
MBS
EMD LCL.
Corp.
ABS
ABS
Treas.
TIPS
ABS
ABS
Corp.
Treas.
ABS
High
Yield
5.0%
1.0%
High
Yield
14.3%
MBS
High
Yield
-2.1%
High
Yield
2.5%
2007-2021
Ann.
Vol.
High
EMD LCL.
Yield
7.4%
11.8%
2017
High
Yield
7.5%
Corp.
Barclays
EMD USD
Agg
-12.0%
5.9%
2016
High
Yield
17.1%
High
Yield
15.8%
EMD USD
3.4%
3.3%
Corp.
MBS
Muni
9.1%
ABS
Asset
Alloc.
-1.9%
-2.5%
Muni
EMD LCL.
Barclays
Agg
7.0%
Muni
Muni
Muni
9.0%
Asset
Alloc.
6.2%
2015
High
Yield
15.1%
Barclays
Agg
5.2%
Treas.
2014
17.4%
2013
High
Yield
7.4%
Corp.
-1.0%
MBS
-1.0%
Muni
Muni
7.5%
5.2%
Barclays
Agg
-1.5%
Corp.
Treas.
MBS
-2.5%
6.9%
3.9%
Barclays
Agg
3.9%
ABS
4.2%
3.5%
Asset
Alloc.
3.8%
EMD USD
Treas.
Muni
-1.8%
3.3%
MBS
3.7%
Treas.
MBS
EMD USD
MBS
ABS
Treas.
ABS
1.0%
2.5%
-4.3%
6.4%
3.4%
-2.3%
2.9%
Barclays
Agg
3.3%
Muni
Treas.
EMD LCL.
ABS
EMD LCL.
MBS
0.2%
2.3%
-6.2%
3.8%
2.5%
2.5%
EMD LCL. EMD LCL.
2.7%
-8.7%
Returns
2021
Local
USD
2020
Local
USD
15-years
Ann.
Weights in MSCI All Country World Index
% global market capitalization, float adjusted
Beta
Emerging Europe exUK
markets
13%
11%
Regions
U.S. (S&P 500)
-
28.7
-
18.4
10.7
0.90
AC World ex-U.S.
13.5
8.3
6.5
11.1
4.2
1.07
EAFE
19.2
11.8
1.3
8.3
4.1
1.04
Europe ex-UK
24.4
16.5
2.1
11.6
4.8
1.18
Emerging markets
0.1
-2.2
19.5
18.7
4.8
1.18
Japan 6%
Selected Countries
Pacific 3%
Canada 3%
United States
61%
Representation of cyclical and technology sectors
United Kingdom
19.6
18.5
-13.2
-10.4
2.3
1.02
% of index market capitalization
France
29.7
20.6
-3.9
4.7
4.7
1.22
100%
Germany
13.9
5.9
3.0
12.3
4.7
1.31
80%
Japan
13.8
2.0
9.2
14.9
3.4
0.72
60%
Cyclical sectors*
77%
66%
54%
-21.6
-21.6
28.3
29.7
5.8
1.10
40%
India
28.9
26.7
18.6
15.9
6.7
1.26
20%
Brazil
-11.2
-17.2
4.8
-18.9
0.9
1.50
Russia
21.6
20.0
3.4
-11.6
0.9
1.49
32%
59%
56%
54%
46%
42%
China
Technology
33%
29%
23%
16%
14%
14%
8%
1%
0%
S&P 500 ACWI
ex-U.S.
EM
North
Asia
EM
Europe
Japan
EM
South
Asia
EM
LATAM
0%
EM
EMEA
U.S. dollar and international GDP growth
Currency impact on international returns
Real GDP growth: U.S.-intl. (5-year moving avg.); USD: 100=1984
MSCI All Country World ex-U.S. Index, total return
6%
5%
115
U.S.
World ex-U.S.
Difference
'87-'91 92-'00 01-'11 12-'19 20-'25
2.6%
3.8%
1.7%
2.4%
1.3%
3.7%
2.6%
2.9%
2.9%
3.5%
-1.1%
1.2% -1.2% -0.5% -2.2%
110
105
4%
60%
42.1%
41.4%
40%
27.8%
27.2%
100
22.1%
21.4%
3%
17.1%
20%
17.1%
17.4%
15.8%
11.6%
95
11.1% 8.3%
2%
5.0%
90
0%
1%
85
-5.3%
0%
80
-3.4%
-13.3%
-20%
-13.8%
-1%
75
-2%
70
-40%
Local currency return
-3%
65
U.S. - International GDP growth
Currency return
-45.2%
U.S. dollar return
U.S. dollar
-4%
60
'84 '87 '90 '93 '96 '99 '02 '05 '08 '11 '14 '17 '20 '23
-60%
'03
'05
'07
'09
'11
'13
'15
'17
'19
'21
MSCI EAFE and MSCI USA relative performance
U.S. dollar, total return, cumulative outperformance*
400%
374%
(6.1 years)
Regime change determined when there is sustained outperformance
of one region over the other for a cumulative 12 months.
350%
U.S. outperformance
EAFE outperformance
300%
275%
(14.1 years)
250%
220%
(6.2 years)
200%
150%
80%
(2.5 years)
100%
28%
(3.3 years)
50%
99%
(4.2 years)
89%
(2.0 years)
36%
(1.4 years)
51%
(4.0 years)
64%
(7.3 years)
0%
-50%
'71
'76
'81
'86
'91
'96
'01
'06
'11
'16
'21
International: Price-to-earnings discount vs. U.S.
International: Difference in dividend yields vs. U.S.
MSCI AC World ex-U.S. vs. S&P 500 Indices, next 12 months
MSCI AC World ex-U.S. minus S&P 500 Indices, next 12 months
2.0%
10%
5%
S&P 500
20 yr. avg. P/E
ratio
15.5x
Current P/E
ratio
21.2x
13.3x
14.3x
ACWI ex-U.S.
1.8%
Dec. 31, 2021:
1.6%
0%
1.6%
+1 Std. dev.: -5.9%
-5%
+1 Std. dev.: 1.4%
1.4%
-10%
Average: -13.2%
Average: 1.1%
1.2%
-15%
1.0%
-1 Std. dev.: -20.4%
-20%
-1 Std. dev.: 0.9%
0.8%
-25%
-2 Std. dev.:-27.7%
0.6%
-30%
Dec. 31, 2021:
-32.7%
-3 Std. dev.:-35.0%
0.4%
-35%
0.2%
-40%
'01
'03
'05
'07
'09
'11
'13
'15
'17
'19
'21
'01
'03
'05
'07
'09
'11
'13
'15
'17
'19
'21
Global earnings growth
Global valuations
Calendar year consensus estimates
Current and 25-year next 12 months price-to-earnings ratio
60%
60%
50%
55%
49x
37x
56%
54%
50%
33x
46%
40%
Current
38%
35%
32%
25-year range
29x
25-year average
30%
20%
20%
14%
16%
21.2x
8%
10%
25x
21x
7%
6%
4%
0%
19.7x
17x
-3%
15.6x
16.8x
14.7x
-10%
14.8x
13x
-13%
-20%
2020
2021
12.3x
11.8x
11.7x
EM
China
9x
-26%
-30%
12.2x
-29%
2022
% cyclical sectors*
5x
-40%
U.S.
China
EM
Europe
Japan
U.S.
Europe
Japan
Returns of thematic indices
Revenue exposure vs. country of listing
Total return, U.S. dollar, Dec. 31, 2014 = 100
% of total revenue from home countries
80%
350
EM Asia tech
European luxury goods
U.S. growth
AC World ex-U.S.
66%
60%
60%
52%
44%
300
40%
20%
250
0%
Europe
200
Japan
U.S.
EM
Change in international sector weightings
% point change from Dec. 31, 2005
15%
EM
150
EAFE
10%
5%
5%
5%
1% 1%
5%
2%
2%
6%
3%
0%
100
-1%
-5%
-2%
-5%
-10%
-15%
50
'14
'15
'16
'17
'18
'19
'20
-11%
-12%
Commod. Financials Indust.
Other
Tech
Health Consumer
Care
COVID-19 vaccine rollout
Total vaccine doses administered per hundred people
210
S. Korea
UK
China
France
Germany
200
190
180
170
Japan
Brazil
U.S.
160
150
140
130
120
110
India
100
90
80
70
60
50
40
30
20
10
0
Dec '20
Jan '21
Feb '21
Mar '21
Apr '21
May '21
Jun '21
Jul '21
Aug '21
Sep '21
Oct '21
Nov '21
Dec '21
Global PMI suppliers’ delivery times index*
Global PMI input and output prices**
30
75
Nov. 2021:
70.0
Slower
delivery time
Nov. 2021:
36.4
Prices rising
70
35
65
40
Nov. 2021:
61.5
60
45
Input prices
55
50
50
Output prices
55
45
Faster
delivery time
Prices falling
60
40
'05
'07
'09
'11
'13
'15
'17
'19
'21
'10
'12
'14
'16
'18
'20
Global Composite (manufacturing & services combined) Purchasing Managers’ Index, quarterly
Emerging
Developed
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2021
Nov
Dec
Global
54.8
-
Manufacturing
54.2
-
Services
55.6
-
DM
55.8
-
EM
52.5
-
U.S.
57.2
56.9
Japan
53.3
51.8
UK
57.6
53.2
Euro Area
55.4
53.4
Germany
52.2
50.0
France
56.1
55.6
Italy
57.6
-
Spain
58.3
-
China
51.2
-
India
59.2
-
Brazil
52.0
-
Russia
48.4
50.2
Year-over-year headline inflation by country and region, quarterly
2008
Developed
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2021
Oct
Nov
-
-
DM
4.6%
4.8%
EM
-
-
U.S.
6.2%
6.8%
Canada
4.7%
4.7%
Japan
0.1%
0.6%
UK
4.2%
5.1%
Euro Area
4.1%
4.9%
Germany
4.6%
6.0%
France
3.2%
3.4%
Italy
3.2%
3.9%
Spain
5.4%
5.5%
Greece
2.8%
4.0%
China
1.5%
2.3%
Indonesia
1.7%
1.7%
Korea
-2.1% -1.5%
Taiwan
2.3%
2.6%
India
4.5%
4.9%
Brazil
10.7% 10.7%
Mexico
6.2%
7.4%
Russia
8.1%
-
Global
Emerging
2009
Greenhouse gas emissions targets
Global energy mix
Billions of tons per year, CO2 equivalent
% of primary energy consumption
18
60%
Current
policy
forecast
16
Path to net zero
Net zero
2050 forecast
50%
14
China
40%
12
Oil
10
30%
Coal
8
Gas
U.S.
20%
6
EU
Nuclear & Hydro
4
10%
2
Renewables
0%
0
'90
'00
'10
'20
'30
'40
'50
'60
'70
'80
'90
'00
'10
'20
'30
'40
'50
Growth of the middle class
Regional contribution to middle class growth: 2020 to 2030
Percent of total population
Millions of people
1,800
100%
1995
2020F
2030F
32
1,600
79%
80%
-3
57
80
79%
1,400
73%
72%
10
Rest of
Asia, 133
1,200
61%
China,
453
60%
55%
41%
41%
40%
40%
30%
1,000
800
600
30%
21%
400
20%
India,
883
200
4%
1%
0%
0
0%
India
Indonesia
China
Brazil
Mexico
Asia Pacific
Sub-Saharan
Africa
Middle East
and North
Africa
Central and North America
South America
Europe
China real GDP contribution
Monetary stimulus: Reserve requirement ratio
Year-over-year % change
26%
20%
Investment
Large banks
Small and medium banks
24%
18.3%
Consumption
22%
Net exports
20%
4.1%
18%
15%
16%
9.4%
14%
10.6%
12%
9.6%
10%
10%
9.7%
8.0%
6.7% 3.9%
7.9%
6.8%
7.4%
7.0%
6.9%
5.1%
6.7%
'09
'11
'13
'15
'17
'19
'21
1.0%
6.1%
3.3%
5%
4.2% 5.4% 5.0%
4.1% 3.3% 1.6% 3.1%
2.6% 2.8%
3.9% 4.2%
-4.0% -1.1%
-0.6%
0.5%
-0.2% -0.1%
6.1%
3.8%
4.6% 4.0% 4.4% 3.5%
0.3%
-0.9%
0.7%
-0.5%
Fiscal stimulus: Fiscal deficit*
% GDP
4.9%
4.4%
0.2%
0%
4.9%
1.9%
2.3%
6.3%
0.4%
-5%
8%
9.8%
7.9% 7.8%
2.2%
0.6% 4.4% 0.8% 1.1%
-0.5%
-0.03%
0%
-2%
-4%
-6%
-8%
-10%
-12%
-14%
-16%
-18%
-14%
'10
'11
'12
'13
'14
'15
'16
'17
'18
'19
'20
'21F
MSCI Emerging Markets Index: Inclusion of China A-shares
Latin
EMEA 12% America
12%
Taiwan
15%
EMEA
15%
Taiwan
12%
Asia exChina, Korea
& Taiwan
18%
Korea
12%
A-shares
Foreign
H-shares
2%
listed
10%
8% P-chips
8%
Red-chips
4%
May 2019
China: 32%
Korea
12%
Foreign
listed
9%
EMEA
13%
Latin
America
11%
Asia exChina, Korea
& Taiwan
17%
P-chips
8%
H-shares
8%
Taiwan
14%
Asia exChina, Korea
& Taiwan
17%
Korea
12%
Foreign
listed
6%
A-shares
4%
P-chips
17%
Red-chips
4%
November 2019
China: 34%
Latin
America
7%
H-shares
6%
December 2021
China: 35%
A-shares
5%
Red-chips
2%
Weight of China in bond universe and bond indices
100%
5%
6%
36%
38%
90%
80%
37%
Other
35%
50%
70%
60%
50%
25%
40%
30%
3%
20%
18%
10%
26%
25%
30%
31%
1%
27%
33%
8%
10%
7%
4%
Global aggregate
Local EMD sovereigns
USD EMD corporates
USD EMD sovereigns
18%
14%
0%
Global bond universe
14%
U.S.
Europe,
Middle East
& Africa
Latin
America
Asia exChina
China
U.S. Large Cap
EAFE
EME
Bonds
Corp. HY
Munis
Currencies
EMD
Commodities
REITs
Hedge funds
Private equity
Gold
U.S.
Large
Cap
EAFE
EME
Bonds
Corp.
HY
Munis
Currcy.
EMD
Cmdty.
REITs
Hedge
funds
Private
equity
Gold
Ann.
Volatility
1.00
0.86
0.75
-0.10
0.82
0.16
-0.34
0.61
0.59
0.72
0.86
0.82
0.04
14%
1.00
0.89
-0.09
0.83
0.17
-0.51
0.69
0.62
0.53
0.91
0.86
0.15
14%
1.00
0.05
0.81
0.28
-0.65
0.79
0.63
0.44
0.80
0.83
0.38
17%
1.00
0.12
0.77
-0.18
0.44
-0.06
0.18
-0.13
-0.31
0.68
3%
1.00
0.33
-0.43
0.85
0.72
0.65
0.82
0.75
0.24
8%
1.00
-0.24
0.62
0.13
0.49
0.12
-0.05
0.57
3%
1.00
-0.54
-0.50
-0.05
-0.32
-0.59
-0.53
6%
1.00
0.57
0.54
0.63
0.56
0.56
7%
1.00
0.42
0.66
0.76
0.30
15%
1.00
0.54
0.58
0.10
15%
1.00
0.87
0.02
5%
1.00
0.00
#N/A
8%
1.00
15%
Alternative asset class yields
Hedge fund returns in different market environments
Average return in up and down months for S&P 500
12%
3.3%
4%
10.9%
2%
1.2%
10%
0%
8.6%
-2%
8%
HFRI FW Comp.
-1.4%
S&P 500
-4%
-4.0%
-6%
6%
S&P 500 up
4.8%
4.1%
4%
S&P 500 down
4.6%
3.9%
Hedge fund returns in different market environments
Average return in up and down months for Bloomberg Agg.
0.9%
1.0%
2%
0.6%
0.5%
0.0%
0%
0.0%
-0.5%
-1.0%
HFRI FW Comp.
Bloomberg U.S. Agg.
Bloomberg Barclays Agg up
-0.6%
Bloomberg Barclays Agg down
Private vs. public equity sector weights
Number of listed U.S. companies*
8,500
13.6%
8,000
Tech
34.9%
7,500
Sep. 2021:
5,956
7,000
20.7%
6,500
Health Care
15.3%
6,000
5,500
15.4%
5,000
Industrials
4,500
13.2%
4,000
12.9%
'91
Russell 2000
Cons. Disc.
11.2%
U.S. private equity
'94
'97
'00
'03
'06
'09
'12
'15
'18
Average size and median age at IPO
$300
15.2%
Financials
12
Average IPO size (LHS, $mm)
11
Median age (RHS, years)
10
$250
8.2%
$200
9
2.3%
Comm. Services
$150
7.2%
8
7
$100
19.9%
6
Other**
$50
9.9%
0%
5%
10%
15%
20%
25%
'21
30%
35%
40%
5
$0
4
1980-1989
1990-1998
1999-2000
2001-2019
Commodity prices
Gold prices
Commodity price z-scores
USD per ounce
-4
Bloomberg
Commodity Index
-3
-2
-1
0
1
2
$59.48
3
4
5
$152.01
$2,500
Dec. 31, 2021:
$1,829
Gold
Gold, inflation adjusted
$2,000
$99.17
Livestock
$16.21
$41.63
$1,500
$22.42
Agriculture
$34.15
$97.40
$60.79
Crude oil
$1,000
$500
$11.57
$110.53
$0
$75.21
Silver
$11.77
$23.35
Natural gas
$6.31
$1,049.60
$2,069.40
$1,828.60
Industrial metals
'86
'91
'96
'01
'06
'11
'16
'21
Commodity prices and inflation
$1.48
$4.06
Gold
'81
$37.14
$84.23
$184.18
Year-over-year % change
8%
Headline CPI
6%
80%
Bloomberg Commodity Index
60%
4%
40%
2%
20%
0%
0%
$172.89
Example
​High level
Low level
Current
-2%
-20%
-4%
-40%
-6%
-60%
'02
'04
'06
'08
'10
'12
'14
'16
'18
'20
2007
2008
2009
EM
Equity
39.8%
Fixed
Incom e
5.2%
EM
Equity
79.0%
Com dty.
Cash
16.2%
1.8%
High
Yield
59.4%
DM
Equity
11.6%
Asset
Alloc.
-25.4%
DM
Equity
32.5%
Asset
Alloc.
7.1%
High
Yield
-26.9%
Fixed
Incom e
7.0%
Sm all
Cap
-33.8%
Large
Cap
5.5%
Cash
4.8%
2010
2015
2016
2017
EM
Equity
37.8%
8.3%
19.7%
28.0%
2.8%
Sm all
Cap
26.9%
Fixed
Incom e
7.8%
High
Yield
19.6%
Large
Cap
32.4%
Large
Cap
13.7%
Large
Cap
1.4%
High
Yield
14.3%
DM
Equity
25.6%
EM
Equity
19.2%
High
Yield
3.1%
EM
Equity
18.6%
DM
Equity
23.3%
Fixed
Incom e
6.0%
Fixed
Incom e
0.5%
Large
Cap
12.0%
Large
Cap
21.8%
Large
Cap
2.1%
DM
Equity
17.9%
Asset
Alloc.
14.9%
Asset
Alloc.
5.2%
0.1%
Sm all
Cap
16.3%
High
Yield
7.3%
Sm all
Cap
4.9%
REITs
Cash
2.9%
0.0%
Asset
Alloc.
-2.0%
0.0%
High
Yield
0.0%
High
Yield
-2.7%
Asset
Alloc.
8.3%
Fixed
Incom e
-2.0%
EM
Equity
-1.8%
Sm all
Cap
-4.4%
Fixed
Incom e
2.6%
EM
Equity
-2.3%
DM
Equity
-4.5%
EM
Equity
-14.6%
DM
Equity
1.5%
REITs
REITs
Com dty.
28.0%
16.8%
Sm all
Cap
27.2%
Large
Cap
15.1%
-35.6%
Large
Cap
26.5%
High
Yield
14.8%
Asset
Alloc.
-0.7%
Large
Cap
16.0%
Large
Cap
-37.0%
Asset
Alloc.
25.0%
Asset
Alloc.
13.3%
Sm all
Cap
-4.2%
Asset
Alloc.
12.2%
DM
Equity
-11.7%
Fixed
Incom e
4.2%
Com dty.
Cash
-13.3%
0.1%
Com dty.
-37.7%
18.9%
DM
Equity
8.2%
Sm all
Cap
-1.6%
DM
Equity
-43.1%
Fixed
Incom e
5.9%
Fixed
Incom e
6.5%
Cash
Cash
0.1%
0.1%
EM
Equity
-53.2%
2014
27.9%
REITs
REITs
Com dty.
2013
Sm all
Cap
21.3%
REITs
-15.7%
2012
Sm all
Cap
38.8%
High
Yield
3.2%
REITs
2011
Cash
EM
Equity
-18.2%
Cash
REITs
REITs
-9.5%
-17.0%
Cash
1.8%
Fixed
Incom e
0.0%
2019
2020
Large
Cap
31.5%
Sm all
Cap
20.0%
28.7%
EM
Equity
18.7%
Large
Cap
18.4%
REITs
2021
41.3%
Large
Cap
10.6%
Large
Cap
28.7%
Sm all
Cap
8.7%
Com dty.
REITs
REITs
-4.0%
Sm all
Cap
25.5%
27.1%
7.5%
High
Yield
-4.1%
DM
Equity
22.7%
Asset
Alloc.
10.6%
Sm all
Cap
14.8%
High
Yield
6.6%
REITs
REITs
23.2%
EM
Equity
22.9%
Sm all
Cap
22.5%
Cash
Com dty.
0.0%
11.8%
Sm all
Cap
14.6%
DM
Equity
-0.4%
EM
Equity
11.6%
Asset
Alloc.
14.6%
Large
Cap
-4.4%
Asset
Alloc.
19.5%
DM
Equity
8.3%
Asset
Alloc.
13.4%
Asset
Alloc.
5.7%
DM
Equity
18.9%
High
Yield
10.4%
Asset
Alloc.
-5.8%
EM
Equity
18.9%
Fixed
Incom e
7.5%
DM
Equity
11.8%
EM
Equity
4.8%
Large
Cap
16.9%
Sm all
Cap
-11.0%
High
Yield
12.6%
High
Yield
7.0%
High
Yield
1.0%
DM
Equity
4.1%
High
Yield
12.2%
Cash
Cash
0.5%
0.0%
Fixed
Incom e
4.1%
Asset
Alloc.
11.7%
Com dty. Com dty. Com dty. Com dty.
-1.1%
2018
2007 - 2021
Vol.
Ann.
-24.7%
REITs
8.6%
REITs
8.7%
Fixed
Incom e
3.5%
Com dty.
1.7%
Cash
Cash
0.3%
0.8%
Com dty.
-11.2%
DM
Equity
-13.4%
EM
Equity
-14.2%
Fixed
Incom e
8.7%
Com dty. Com dty.
7.7%
-3.1%
Cash
REITs
2.2%
-5.1%
Fixed
Incom e
-1.5%
EM
Equity
-2.2%
Com dty.
19.1%
0.8%
Fixed
Incom e
3.3%
Com dty.
Cash
-2.6%
0.7%
Cash
Flow by firm as % of total U.S. equity market volume
Investment flows by age
Indexed to February 18, 2020, 7-day moving average
2020 – 3Q21
5
30%
Robinhood
4
TD
25%
3
Schwab
18-25
25-40
40-65
65+
E*TRADE
2
1
20%
0
Jan '20
15%
Apr '20
Jul '20
Oct '20
Jan '21
Apr '21
Jul '21
Oct '21
Investment flows by income*
Indexed to February 18, 2020, 7-day moving average
7
$75-125k
$0-20k
6
$125k+
$20-35k
10%
5
$35-50k
4
$50-75k
3
5%
2
1
0%
Jan '20
May '20
Sep '20
Jan '21
May '21
Sep '21
0
Jan '20
Apr '20
Jul '20
Oct '20
Jan '21 Apr '21
Jul '21
Oct '21
Range of stock, bond and blended total returns
Annual total returns, 1950 - 2021
60%
50%
40%
Stocks
Bonds
50/50 portfolio
47%
43%
30%
Annual avg.
total return
11.5%
5.8%
9.0%
Growth of $100,000 over
20 years
$880,148
$308,786
$562,115
33%
28%
20%
23%
21%
19%
10%
16%
16%
17%
12%
1%
6%
0%
-3%
-8%
-10%
-2%
-1%
1%
2%
5%
1%
-15%
-20%
-30%
-39%
-40%
-50%
1-yr.
5-yr.
rolling
10-yr.
rolling
14%
20-yr.
rolling
Portfolio returns: Equities vs. equity and fixed income blend
$160,000
$140,000
$120,000
Jul. 20:
Feb. 19:
60/40
S&P 500 peak
portfolio
Jun. 8:
40/60 portfolio recovers
recovers
$100,000
$80,000
$60,000
Feb '20
Aug. 10:
S&P 500
recovers
Mar. 23:
S&P 500
troughs
Apr '20
40/60 stocks & bonds
60/40 stocks & bonds
S&P 500
Jun '20
Aug '20
Oct '20
Dec '20
Feb '21
Apr '21
Jun '21
Aug '21
Oct '21
Dec '21
20-year annualized returns by asset class (2001 – 2020)
12%
10.0%
10%
9.9%
8.7%
8.2%
8%
7.5%
6.4%
5.9%
6%
5.0%
4.8%
3.7%
4%
2.9%
2.1%
2%
1.4%
0%
-0.5%
-2%
REITs
EM Equity Small Cap High Yield
S&P 500
60/40
40/60
DM Equity
Bonds
Homes
Average
Investor
Inflation
Cash
Commodity
Income earned on $100,000 in savings accounts*
$7,000
Income generated in a savings account
Income needed to beat inflation
Income needed to beat education inflation
$6,000
Income needed to beat medical care inflation
$5,000
2006: $4,510
Current: $4,960
$4,000
$3,000
Current: $2,106
$2,000
Current: $1,737
$1,000
Current: $70
$0
'94
'96
'98
'00
'02
'04
'06
'08
'10
'12
'14
'16
'18
'20
Equity market correlations and yields
Hedge adjusted yield, last 12 months, 10-year correlations, quarterly
9%
Direct lending
Higher yielding
sectors
8%
7%
Hedge adjusted yield
U.S. government
6%
U.S. non-government
International
Alternatives
EMD (LCL)
5%
Infra.
APAC Real estate
EMD ($)
U.S. Real estate
Euro HY
4%
U.S. HY
EM Corp.
Europe Real estate
Convertibles
3%
Stronger correlation
to equities
U.S. corps
30y UST
2%
MBS
10y UST
1%
UK
Germany
Japan
5y UST
2y UST
0%
-0.8
-0.6
-0.4
U.S. Aggregate
-0.2
TIPS
Euro Corp.
Munis
0.0
0.2
Correlation to S&P 500
Floating rate
0.4
0.6
0.8
1.0
S&P 500 total return: Dividends vs. capital appreciation
Average annualized returns
20%
Capital appreciation
15%
Dividends
13.6%
12.6%
10%
15.3%
14.2%
8.2%
4.4%
5%
5.1%
1950s
0%
3.3%
1.6%
4.2%
4.4%
2.5%
1.8%
-2.7%
2.7%
3.3%
1960s
1970s
1980s
1990s
2000s
2010s
1950-2021
-5%
Asset class yields
6%
5.3%
5%
U.S. equity
4.5%
International
4.2%
Fixed income
4%
3.0%
3%
2.5%
2%
2.5%
2.4%
2.1%
2.0%
1.8%
1.5%
1.4%
0.7%
1%
0%
EMD($)
Preferreds
U.S. High
Yield
Global
REITs
DM Equity International EM Equity Convertibles U.S. Value
U.S.
U.S. 10-year U.S. Equity U.S. Growth
Equity
Aggregate
Asset allocation: Corporate DB plans. endowments
Corporate pension liabilities and 10-year UST yield
35.2%
Equities
$2.4
0%
$2.0
1%
32.1%
Liabilities ($tn)
2%
$1.6
10yr UST (inv.)
9.0%
Fixed Income
49.9%
4%
$0.8
5%
18.0%
Hedge Funds
$0.4
3.8%
6%
$0.0
4.3%
'02
'04
'06
'08
'10
'12
'14
'16
'18
'20
Pension return assumptions
9.5%
Endowments
5.4%
Real Estate
7%
'00
12.3%
Private Equity
3%
$1.2
3.7%
Corporate DB plans
9.0%
S&P 500 companies
8.5%
State & local governments
8.0%
15.7%
Other Alternatives
7.5%
3.3%
7.0%
6.5%
4.4%
Cash
6.0%
2.9%
5.5%
5.0%
0%
10%
20%
30%
40%
50%
60%
'92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20
All indexes are unmanaged and an individual cannot invest directly in an index. Index returns do not
include fees or expenses.
Equities:
The Dow Jones Industrial Average is a price-weighted average of 30 actively traded blue-chip U.S. stocks.
The MSCI ACWI (All Country World Index) is a free float-adjusted market capitalization weighted index that is
designed to measure the equity market performance of developed and emerging markets.
The MSCI EAFE Index(Europe, Australasia, Far East)is a free float-adjusted market capitalization index that is
designed to measure the equity market performance of developed markets, excluding the US & Canada.
The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to
measure equity market performance in the global emerging markets.
The MSCI Europe Index is a free float-adjusted market capitalization index that is designed to measure
developed market equity performance in Europe.
The MSCI Pacific Index is a free float-adjusted market capitalization index that is designed to measure equity
market performance in the Pacific region.
The Russell 1000 Index® measures the performance of the 1,000 largest companies in the Russell 3000.
The Russell 1000 Growth Index® measures the performance of those Russell 1000 companies with higher priceto-book ratios and higher forecasted growth values.
The Russell 1000 Value Index® measures the performance of those Russell 1000 companies with lower price-tobook ratios and lower forecasted growth values.
The Russell 2000 Index® measures the performance of the 2,000 smallest companies in the Russell 3000 Index.
The Russell 2000 Growth Index® measures the performance of those Russell 2000 companies with higher priceto-book ratios and higher forecasted growth values.
The Russell 2000 Value Index® measures the performance of those Russell 2000 companies with lower price-tobook ratios and lower forecasted growth values.
The Russell 3000 Index® measures the performance of the 3,000 largest U.S. companies based on total market
capitalization.
The Russell Midcap Index® measures the performance of the 800 smallest companies in the Russell 1000
Index.
The Russell Midcap Growth Index ® measures the performance of those Russell Midcap companies with higher
price-to-book ratios and higher forecasted growth values. The stocks are also members of the Russell 1000
Growth index.
The Russell Midcap Value Index ® measures the performance of those Russell Midcap companies with lower
price-to-book ratios and lower forecasted growth values. The stocks are also members of the Russell 1000 Value
index.
The S&P 500 Index is widely regarded as the best single gauge of the U.S. equities market. The index includes a
representative sample of 500 leading companies in leading industries of the U.S. economy. The S&P 500 Index
focuses on the large-cap segment of the market; however, since it includes a significant portion of the total value
of the market, it also represents the market.
Fixed income:
The Bloomberg 1-3 Month U.S. Treasury Bill Index includes all publicly issued zero-coupon US Treasury Bills that
have a remaining maturity of less than 3 months and more than 1 month, are rated investment grade, and have $250
million or more of outstanding face value. In addition, the securities must be denominated in U.S. dollars and must be
fixed rate and non convertible.
The Bloomberg Global High Yield Index is a multi-currency flagship measure of the global high yield debt market.
The index represents the union of the US High Yield, the Pan-European High Yield, and Emerging Markets (EM) Hard
Currency High Yield Indices. The high yield and emerging markets sub-components are mutually exclusive. Until
January 1, 2011, the index also included CMBS high yield securities.
The Bloomberg Municipal Index: consists of a broad selection of investment-grade general obligation and revenue
bonds of maturities ranging from one year to 30 years. It is an unmanaged index representative of the tax-exempt
bond market.
The Bloomberg US Dollar Floating Rate Note (FRN) Index provides a measure of the U.S. dollar denominated
floating rate note market.
The Bloomberg US Corporate Investment Grade Index is an unmanaged index consisting of publicly issued US
Corporate and specified foreign debentures and secured notes that are rated investment grade (Baa3/BBB or higher)
by at least two ratings agencies, have at least one year to final maturity and have at least $250 million par amount
outstanding. To qualify, bonds must be SEC-registered.
The Bloomberg US High Yield Index covers the universe of fixed rate, non-investment grade debt. Eurobonds and
debt issues from countries designated as emerging markets (sovereign rating of Baa1/BBB+/BBB+ and below using
the middle of Moody’s, S&P, and Fitch) are excluded, but Canadian and global bonds (SEC registered) of issuers in
non-EMG countries are included.
The Bloomberg US Mortgage Backed Securities Index is an unmanaged index that measures the performance of
investment grade fixed-rate mortgage backed pass-through securities of GNMA, FNMA and FHLMC.
The Bloomberg US TIPS Index consists of Inflation-Protection securities issued by the U.S. Treasury.
The J.P. Morgan Emerging Market Bond Global Index(EMBI)includes U.S. dollar denominated Brady bonds,
Eurobonds, traded loans and local market debt instruments issued by sovereign and quasi-sovereign entities.
The J.P. Morgan Domestic High Yield Index is designed to mirror the investable universe of the U.S. dollar domestic
high yield corporate debt market.
The J.P. Morgan Corporate Emerging Markets Bond Index Broad Diversified (CEMBI Broad Diversified)is an
expansion of the J.P. Morgan Corporate Emerging Markets Bond Index (CEMBI). The CEMBI is a market
capitalization weighted index consisting of U.S. dollar denominated emerging market corporate bonds.
The J.P. Morgan Emerging Markets Bond Index Global Diversified (EMBI Global Diversified) tracks total returns
for U.S. dollar-denominated debt instruments issued by emerging market sovereign and quasi-sovereign entities:
Brady bonds, loans, Eurobonds. The index limits the exposure of some of the larger countries.
The J.P. Morgan GBI EM Global Diversified tracks the performance of local currency debt issued by emerging
market governments, whose debt is accessible by most of the international investor base.
The U.S. Treasury Index is a component of the U.S. Government index.
Other asset classes:
The Alerian MLP Index is a composite of the 50 most prominent energy Master Limited Partnerships (MLPs) that provides
investors with an unbiased, comprehensive benchmark for the asset class.
The Bloomberg Commodity Index and related sub-indices are composed of futures contracts on physical commodities and
represents twenty two separate commodities traded on U.S. exchanges, with the exception of aluminum, nickel, and zinc
The Cambridge Associates U.S. Global Buyout and Growth Index® is based on data compiled from 1,768 global (U.S. &
ex –U.S.) buyout and growth equity funds, including fully liquidated partnerships, formed between 1986 and 2013.
The CS/Tremont Hedge Fund Index is compiled by Credit Suisse Tremont Index, LLC. It is an asset-weighted hedge fund
index and includes only funds, as opposed to separate accounts. The Index uses the Credit Suisse/Tremont database, which
tracks over 4500 funds, and consists only of funds with a minimum of US$50 million under management, a 12-month track
record, and audited financial statements. It is calculated and rebalanced on a monthly basis, and shown net of all performance
fees and expenses. It is the exclusive property of Credit Suisse Tremont Index, LLC.
The HFRI Monthly Indices (HFRI) are equally weighted performance indexes, utilized by numerous hedge fund managers as
a benchmark for their own hedge funds. The HFRI are broken down into 4 main strategies, each with multiple sub strategies.
All single-manager HFRI Index constituents are included in the HFRI Fund Weighted Composite, which accounts for over
2200 funds listed on the internal HFR Database.
The NAREIT EQUITY REIT Index is designed to provide the most comprehensive assessment of overall industry
performance, and includes all tax-qualified real estate investment trusts (REITs) that are listed on the NYSE, the American
Stock Exchange or the NASDAQ National Market List.
The NFI-ODCE, short for NCREIF Fund Index -Open End Diversified Core Equity, is an index of investment returns reporting
on both a historical and current basis the results of 33 open-end commingled funds pursuing a core investment strategy, some
of which have performance histories dating back to the 1970s. The NFI-ODCE Index is capitalization-weighted and is reported
gross of fees. Measurement is time-weighted.
Definitions:
Investing in alternative assets involves higher risks than traditional investments and is suitable only for sophisticated
investors. Alternative investments involve greater risks than traditional investments and should not be deemed a complete
investment program. They are not tax efficient and an investor should consult with his/her tax advisor prior to investing.
Alternative investments have higher fees than traditional investments and they may also be highly leveraged and engage in
speculative investment techniques, which can magnify the potential for investment loss or gain. The value of the investment
may fall as well as rise and investors may get back less than they invested.
Bonds are subject to interest rate risks. Bond prices generally fall when interest rates rise.
Investments in commodities may have greater volatility than investments in traditional securities, particularly if the
instruments involve leverage. The value of commodity-linked derivative instruments may be affected by changes in overall
market movements, commodity index volatility, changes in interest rates, or factors affecting a particular industry or
commodity, such as drought, floods, weather, livestock disease, embargoes, tariffs and international economic, political and
regulatory developments. Use of leveraged commodity-linked derivatives creates an opportunity for increased return but, at
the same time, creates the possibility for greater loss.
Derivatives may be riskier than other types of investments because they may be more sensitive to changes in economic or
market conditions than other types of investments and could result in losses that significantly exceed the original investment.
The use of derivatives may not be successful, resulting in investment losses, and the cost of such strategies may reduce
investment returns.
Distressed Restructuring Strategies employ an investment process focused on corporate fixed income instruments,
primarily on corporate credit instruments of companies trading at significant discounts to their value at issuance or obliged (par
value) at maturity as a result of either formal bankruptcy proceeding or financial market perception of near term proceedings.
Investments in emerging markets can be more volatile. The normal risks of investing in foreign countries are heightened
when investing in emerging markets. In addition, the small size of securities markets and the low trading volume may lead to a
lack of liquidity, which leads to increased volatility. Also, emerging markets may not provide adequate legal protection for
private or foreign investment or private property.
The price of equity securities may rise, or fall because of changes in the broad market or changes in a company’s financial
condition, sometimes rapidly or unpredictably. These price movements may result from factors affecting individual companies,
sectors or industries, or the securities market as a whole, such as changes in economic or political conditions. Equity securities
are subject to “stock market risk” meaning that stock prices in general may decline over short or extended periods of time.
Equity market neutral strategies employ sophisticated quantitative techniques of analyzing price data to ascertain
information about future price movement and relationships between securities, select securities for purchase and sale. Equity
Market Neutral Strategies typically maintain characteristic net equity market exposure no greater than 10% long or short.
Global macro strategies trade a broad range of strategies in which the investment process is predicated on movements in
underlying economic variables and the impact these have on equity, fixed income, hard currency and commodity markets.
International investing involves a greater degree of risk and increased volatility. Changes in currency exchange rates and
differences in accounting and taxation policies outside the U.S. can raise or lower returns. Some overseas markets may not be
as politically and economically stable as the United States and other nations.
There is no guarantee that the use of long and short positions will succeed in limiting an investor's exposure to domestic
stock market movements, capitalization, sector swings or other risk factors. Using long and short selling strategies may have
higher portfolio turnover rates. Short selling involves certain risks, including additional costs associated with covering short
positions and a possibility of unlimited loss on certain short sale positions.
Merger arbitrage strategies which employ an investment process primarily focused on opportunities in equity and equity
related instruments of companies which are currently engaged in a corporate transaction.
Mid-capitalization investing typically carries more risk than investing in well-established "blue-chip" companies. Historically,
mid-cap companies' stock has experienced a greater degree of market volatility than the average stock.
Price to forward earnings is a measure of the price-to-earnings ratio (P/E) using forecasted earnings. Price to book value
compares a stock's market value to its book value. Price to cash flow is a measure of the market's expectations of a firm's
future financial health. Price to dividends is the ratio of the price of a share on a stock exchange to the dividends per share
paid in the previous year, used as a measure of a company's potential as an investment.
Real estate investments may be subject to a higher degree of market risk because of concentration in a specific industry,
sector or geographical sector. Real estate investments may be subject to risks including, but not limited to, declines in the
value of real estate, risks related to general and economic conditions, changes in the value of the underlying property owned
by the trust and defaults by borrower.
Relative Value Strategies maintain positions in which the investment thesis is predicated on realization of a valuation
discrepancy in the relationship between multiple securities.
Small-capitalization investing typically carries more risk than investing in well-established "blue-chip" companies since
smaller companies generally have a higher risk of failure. Historically, smaller companies' stock has experienced a greater
degree of market volatility than the average stock.
The Market Insights program provides comprehensive data and commentary on global markets without reference to products. Designed as a tool to help clients understand the markets and support investment
decision-making, the program explores the implications of current economic data and changing market conditions.
For the purposes of MiFID II, the JPM Market Insights and Portfolio Insights programs are marketing communications and are not in scope for any MiFID II / MiFIR requirements specifically related to investment research.
Furthermore, the J.P. Morgan Asset Management Market Insights and Portfolio Insights programs, as non-independent research, have not been prepared in accordance with legal requirements designed to promote the
independence of investment research, nor are they subject to any prohibition on dealing ahead of the dissemination of investment research.
This document is a general communication being provided for informational purposes only. It is educational in nature and not designed to be taken as advice or a recommendation for any specific investment product, strategy, plan
feature or other purpose in any jurisdiction, nor is it a commitment from J.P. Morgan Asset Management or any of its subsidiaries to participate in any of the transactions mentioned herein. Any examples used are generic,
hypothetical and for illustration purposes only. This material does not contain sufficient information to support an investment decision and it should not be relied upon by you in evaluating the merits of investing in any securities or
products. In addition, users should make an independent assessment of the legal, regulatory, tax, credit, and accounting implications and determine, together with their own financial professional, if any investment mentioned herein
is believed to be appropriate to their personal goals. Investors should ensure that they obtain all available relevant information before making any investment. Any forecasts, figures, opinions or investment techniques and strategies
set out are for information purposes only, based on certain assumptions and current market conditions and are subject to change without prior notice. All information presented herein is considered to be accurate at the time of
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Prepared by: David P. Kelly, Jordan K. Jackson, David M. Lebovitz, John C. Manley, Meera Pandit, Gabriela D. Santos, Stephanie Aliaga, Sahil Gauba, Olivia C. Schubert and Nimish Vyas.
Unless otherwise stated, all data are as of December 31, 2021 or most recently available.
Guide to the Markets – U.S.
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