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
Meera Pandit, CFA
New York
Jack Manley
New York
Hugh Gimber, CFA
London
Tilmann Galler, CFA
Frankfurt
Ian Hui
Hong Kong
Jordan Jackson
New York
Stephanie Aliaga
New York
Max McKechnie
London
Maria Paola Toschi
Milan
Adrian Tong
Hong Kong
Shogo Maekawa
Tokyo
Olivia Schubert
New York
Nimish Vyas
New York
Natasha May
London
Elena Domecq
Madrid
Sahil Gauba
Mumbai
Agnes Lin
Taipei
Zara Nokes
London
Lucia Gutierrez Mellado
Madrid
Clara Cheong
Singapore
Kerry Craig, CFA
Melbourne
S&P 500 Price Index
Jan. 3, 2022
P/E (fwd.) = 21.4x
4,797
4,800
4,500
4,200
3,900
Characteristic
Index Level
P/E Ratio (fwd.)
Dividend Yield
10-yr. Treasury
3/24/2000 10/9/2007 2/19/2020
1,527
1,565
3,386
25.2x
15.1x
19.2x
1.4%
1.9%
1.9%
6.2%
4.7%
1.6%
1/3/2022
4,797
21.4x
1.3%
1.6%
9/30/2022
3,586
15.1x
1.9%
3.8%
-25%
+114%
Feb. 19, 2020
P/E (fwd.) = 19.2x
3,386
3,600
3,300
Sep. 30, 2022
P/E (fwd.) = 15.1x
3,586
3,000
2,700
-34%
2,400
+401%
Mar. 23, 2020
P/E (fwd.) = 13.3x
2,237
2,100
1,800
Mar. 24, 2000
P/E (fwd.) = 25.2x
1,527
Oct. 9, 2007
P/E (fwd.) = 15.1x
1,565
1,500
+106%
-49%
+101%
1,200
900
600
Dec. 31, 1996
P/E (fwd.) = 15.9x
741
-57%
Oct. 9, 2002
P/E (fwd.) = 14.1x
777
Mar. 9, 2009
P/E (fwd.) = 10.4x
677
'96 '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
S&P 500 Index: Forward P/E ratio
28x
26x
24x
Valuation measure
Description
Latest
25-year avg.*
P/E
Forward P/E
15.15x
16.84x
Std. dev. Over/under-Valued
-0.50
CAPE
Shiller's P/E
27.15x
27.97x
-0.13
Div. Yield
Dividend yield
1.90%
1.99%
0.26
P/B
Price to book
3.18x
3.10x
0.10
Price to cash flow
11.51x
11.18x
0.15
EY minus Baa yield
0.57%
0.24%
-0.17
P/CF
22x
EY Spread
20x
+1 Std. dev.: 20.19x
18x
25-year average: 16.84x
16x
Sep. 30, 2022:
15.15x
14x
-1 Std. dev.: 13.49x
12x
10x
8x
'97
'99
'01
'03
'05
'07
'09
'11
'13
'15
'17
'19
'21
Forward P/E and subsequent 1-yr. returns
Forward P/E and subsequent 5-yr. annualized returns
S&P 500 Total Return Index
60%
Sep. 30, 2022: 15.1x
S&P 500 Total Return Index
60%
40%
40%
20%
20%
0%
0%
-20%
-20%
-40%
-40%
Sep. 30, 2022: 15.1x
R² = 4%
-60%
8.0x
11.0x
14.0x
17.0x
20.0x
23.0x
R² = 36%
26.0x
-60%
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
110
$300
$275
105
Consensus analyst estimates
$250
Earnings recessions
100
$225
95
$200
90
$175
$150
85
$125
80
$100
75
$75
70
$50
65
$25
$0
'88
'91
'94
'97
'00
'03
'06
'09
'12
'15
'18
'21
'24
Share of return
Year-to-date
Earnings growth
5.1%
Multiple growth
-29.9%
S&P 500 price return
-24.8%
60
Dec '21
Feb '22
Apr '22
Jun '22
Aug '22
S&P 500 year-over-year operating EPS growth
Annual growth broken into revenue, changes in profit margin & changes in share count
100%
80%
60%
47%
Share of EPS grow th
2022
Avg. '01-'21
Margin
-9.5%
5.1%
Revenue
9.1%
3.8%
Share count
0.8%
0.2%
Total EPS
0.3%
9.1%
70%
40%
24%
19% 19%
20%
2022*
22%
17%
15%
15%
13% 15%
11%
6%
5%
0%
4%
0%
0%
-6%
-11%
-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
'22
S&P 500 profit margins
Labor share of income and profit margins*
Quarterly operating earnings/sales
Compensation and adjusted after-tax corporate profits as % of GDP
14%
11%
2Q22*:
10.9%%
12%
Recession
59%
58%
Profit margin
10%
57%
9%
56%
8%
55%
7%
54%
10%
53%
6%
8%
52%
Labor share
5%
51%
4%
50%
'50 '55 '60 '65 '70 '75 '80 '85 '90 '95 '00 '05 '10 '15 '20
S&P 500 sales per share and PPI for intermediate materials
Year-over-year % change, monthly, last 20 years
6%
30%
S&P 500 sales per share
20%
4%
PPI – intermediate m aterials
10%
0%
2%
-10%
Correlation**: 80%
0%
-20%
'92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 '22
'02
'04
'06
'08
'10
'12
'14
'16
'18
'20
Value vs. Growth relative valuations
S&P 500 operating leverage by sector
Rel. fwd. P/E ratio of Value vs. Growth, 1997 - present
Impact on operating income from a 1% rise in revenues
1.40
Growth cheap/Value
expensive
Recession
Energy
1.20
8.9x
Financials
6.8x
Materials
4.2x
1.00
0.80
Long-term avg.*: 0.72
0.60
Value cheap/Growth
expensive
Sep. 30, 2022:
0.59
Cons. Staples
1.5x
Tech.
1.4x
Health Care
1.3x
Utilities
1.2x
Cons. Disc.
1.2x
Value
Growth
0.40
Value
Forward PE
LongCurrent
term avg.*
12.09x
14.09x
Growth
20.38x
'01
'05
Style
0.20
Div. yield**
LongCurrent
term avg.*
2.60%
2.59%
20.72x
1.15%
Comm. Services
Industrials
Real Estate
1.34%
0.8x
0.5x
0.1x
0.00
'97
'99
'03
'07
'09
'11
'13
'15
'17
'19
'21
0.0x
2.0x
4.0x
6.0x
8.0x
10.0x
Valuation dispersion between the 20th and 80th percentile of S&P 500 stocks
35
30
25-yr. average Current
Median S&P 500 P/E
Valuation spread
16.0
11.4
14.5
13.6
25
20
15
10
5
'96
'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
'22
10-year annualized
YTD
13.7%
9.4%
10.3%
10.9%
Growth
-17.8%
-23.9%
-30.7%
-20.4%
-24.3%
-31.5%
Value
Large
11.7%
Blend
12.1
Mid
Large
9.2%
Value
Large
Growth
Mid
Blend
Mid
Current P/E vs. 20-year avg. P/E
Value
11.8
Blend
15.1
13.7
13.8
12.2%
Mid
5.4%
4.7%
-2.1%
8.1%
1.6%
-6.8%
Blend
Growth
69.0%
66.8%
63.6%
86.4%
75.3%
52.3%
90.1%
71.2%
51.4%
Small
16.3
16.8
16.9
20.3
22.8
21.3
34.1
Current P/E as % of 20-year avg. PE
Value
Blend
Growth
Large
10.4%
Value
13.2
19.7
88.5%
97.9%
109.8%
Mid
Large
4.5%
Since market low (March 2020)
Large
Growth
-29.3%
Mid
Blend
-25.1%
Small
Value
Small
Since market peak (February 2020)
-21.1%
18.6
82.1%
84.6%
97.2%
Small
8.8%
Small
Small
8.6%
20.4
15.5
14.4
7.9%
Growth
78.2%
78.7%
66.7%
Materials Financials Industrials
2.5%
11.0%
7.9%
Cons.
Disc.
11.7%
Tech.
26.4%
Comm.
Services*
8.1%
Real
Estate
2.8%
Health
Care
15.1%
Cons.
Staples
6.9%
Utilities
3.1%
S&P 500
Index
100.0%
1.4%
3.0%
7.2%
17.1%
42.9%
7.4%
1.6%
12.2%
5.7%
0.0%
100.0%
7.8%
4.1%
20.0%
10.0%
6.0%
8.8%
8.0%
4.8%
17.3%
7.2%
6.0%
100.0%
Russell 2000 weight
6.1%
4.0%
17.3%
14.8%
10.2%
12.8%
2.7%
6.4%
18.9%
3.4%
3.4%
100.0%
2.3
-7.1
-3.1
-4.7
4.4
-6.2
-12.7
-11.0
-5.2
-6.6
-6.0
-4.9
YTD
34.9
-23.7
-21.2
-20.7
-29.9
-31.4
-39.0
-28.8
-13.1
-11.8
-6.5
-23.9
52.0
19.0
3.4
3.3
9.3
18.4
-14.0
-4.5
21.8
12.9
1.8
10.4
244.7
86.1
81.1
77.1
60.1
72.0
20.4
53.3
69.0
48.7
58.2
66.8
Beta to S&P 500
1.3
1.1
1.1
1.1
1.2
1.1
1.1*
0.8
0.8
c
0.6
0.5
1.0
Correl. to Treas. yields
-0.1
-0.4
-0.4
-0.4
-0.6
-0.7
-0.6
-0.5
-0.5
c
-0.3
-0.3
-0.6
Foreign % of sales
38.6
56.3
21.6
32.5
34.3
58.2
41.7
16.6
36.9
44.5
1.8
40.2
NTM earnings growth
6.5%
-2.8%
6.6%
20.1%
23.7%
7.8%
7.4%
7.4%
0.6%
5.7%
4.9%
7.6%
86.4%
17.1%
20.9%
13.9%
16.6%
13.8%
10.3%*
6.6%
8.6%
7.8%
4.1%
11.3%
(February 2020)
Since market low
(March 2020)
20-yr avg.
12.4x
10.8x
15.1x
23.1x
18.5x
13.4x
15.7x
15.0x
18.6x
17.8x
15.1x
13.8x
14.7x
12.4x
16.2x
19.1x
18.1x
19.2x*
16.6x
15.1x
17.2x
15.2x
15.5x
Buyback yield
1.9%
1.5%
3.3%
0.8%
4.1%
0.3%
2.5%
2.2%
2.0%
2.4%
2.3%
2.9%
4.5%
1.5%
-1.9%
-1.3%
1.7%
1.9%
1.2%
1.8%
-0.4%
-1.0%
2.4%
1.7%
Bbk
3.6%
2.7%
2.5%
2.4%
2.5%
2.3%
2.1%
2.2%
1.0%
1.4%
1.2%
1.1%
1.2%
1.2%*
3.8%
4.0%
1.8%
1.9%
3.0%
2.8%
3.4%
3.9%
1.9%
2.1%
20-yr avg.
Dividend yield
20-yr avg.
P/E
7.9x
20-yr avg.
Div
Forward P/E ratio
EPS
Since market peak
Return (%)
QTD
β
1.6%
Russell Value weight
% ρ
Russell Growth weight
Weight
Energy
S&P weight 4.5%
2007 - 2021
Ann.
Vol.
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
YTD
Mom en.
Min. Vol.
Value
Sm all Cap
High Div.
Cyclical
Value
Value
Mom en.
Sm all Cap
Mom en.
Min. Vol.
Cyclical
Mom en.
Value
Defens.
Mom en.
Sm all Cap
17.8%
-25.7%
38.8%
26.9%
14.3%
20.1%
43.2%
17.7%
9.3%
21.3%
37.8%
1.5%
36.3%
29.6%
29.2%
-7.5%
11.8%
22.5%
Defens.
Defens.
Cyclical
MultiFactor
Min. Vol.
Value
Sm all Cap
Min. Vol.
Min. Vol.
High Div.
Cyclical
Mom en.
Quality
Cyclical
Cyclical
High Div.
Quality
Value
17.7%
-26.7%
36.9%
18.3%
12.9%
16.8%
38.8%
16.5%
5.6%
16.3%
27.3%
-1.6%
34.4%
27.8%
27.6%
-15.7%
11.5%
20.7%
Quality
High Div.
MultiFactor
Mom en.
Defens.
Sm all Cap
MultiFactor
High Div.
Quality
Value
Quality
High Div.
Mom en.
Sm all Cap
Quality
Min. Vol.
Cyclical
Cyclical
10.1%
-27.6%
29.8%
18.2%
10.1%
16.3%
37.4%
14.9%
4.6%
15.9%
22.5%
-2.3%
28.1%
20.0%
27.2%
-17.3%
11.2%
19.9%
MultiFactor
Quality
Sm all Cap
Cyclical
Quality
MultiFactor
Cyclical
MultiFactor
Cyclical
Cyclical
Value
Defens.
Min. Vol.
Quality
MultiFactor
MultiFactor
Min. Vol.
Mom en.
5.5%
-31.2%
27.2%
17.9%
7.5%
15.7%
35.0%
14.8%
2.6%
14.0%
22.2%
-2.9%
28.0%
17.1%
25.1%
-22.7%
10.5%
17.7%
Min. Vol.
Sm all Cap
Quality
High Div.
MultiFactor
Mom en.
Mom en.
Mom en.
High Div.
MultiFactor
MultiFactor
Cyclical
Value
MultiFactor
Defens.
Value
MultiFactor
MultiFactor
4.3%
-33.8%
24.9%
15.9%
7.3%
15.1%
34.8%
14.7%
0.7%
13.7%
21.5%
-5.3%
27.7%
11.4%
25.0%
-23.5%
10.1%
17.7%
Min. Vol.
High Div.
Quality
MultiFactor
Min. Vol.
High Div.
Sm all Cap
High Div.
Quality
Value
Value
High Div.
Min. Vol.
Mom en.
Quality
Quality
Cyclical
MultiFactor
1.1%
-36.9%
18.4%
14.7%
6.1%
12.8%
34.3%
13.6%
0.4%
10.7%
19.5%
-5.6%
26.6%
5.8%
21.9%
-25.1%
9.4%
15.7%
High Div.
MultiFactor
Min. Vol.
Quality
Value
Min. Vol.
High Div.
Defens.
Defens.
Quality
Min. Vol.
MultiFactor
Sm all Cap
Defens.
Min. Vol.
Mom en.
Defens.
High Div.
0.0%
-39.3%
18.4%
14.2%
-2.7%
11.2%
28.9%
13.0%
-0.9%
9.4%
19.2%
-9.7%
25.5%
5.2%
21.0%
-26.3%
9.1%
15.1%
Cyclical
Mom en.
Mom en.
Value
Cyclical
Defens.
Defens.
Quality
Sm all Cap
Defens.
High Div.
High Div.
Sm all Cap
Quality
Value
Defens.
-0.8%
-40.9%
17.6%
12.7%
-3.4%
10.7%
28.9%
10.7%
-4.4%
7.7%
14.6%
-11.0%
22.5%
1.7%
14.8%
-27.7%
9.1%
13.9%
Sm all Cap
Cyclical
Defens.
Defens.
Sm all Cap
High Div.
Min. Vol.
Sm all Cap
Value
Mom en.
Defens.
Value
Defens.
Value
Mom en.
Cyclical
Sm all Cap
Min. Vol.
-1.6%
-44.8%
16.5%
12.0%
-4.2%
10.6%
25.3%
4.9%
-6.4%
5.1%
12.3%
-11.1%
21.4%
-0.2%
12.9%
-30.2%
8.7%
13.2%
Sm all Cap Sm all Cap
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%
27%
26%
26%
29%
26%
27%
23%
20%
20%
30%
27%
26%
17%
15%
15%
20%
19%
16%
14%
12%
1%
13%
9%
7%
4%
2%
13%
11%
10%
YTD
3%
4%
0%
0%
-6% -2%-3%
-7%
-7%-6% -5%
-8% -8%
-12%
-8%
-7% -8%
-9% -8%
-8%
-10%
-9%
-10%
-10%
-11%
-17%
-13% -14%
-13%
-20% -17%-18%
-17%
-19%
-20%
-23%
-6%
-1%
-3%
-6%-7%
-11%
-12%
-7%
-10%
-5%
-16%
-19%
-20%
-28%
-25%
-25%
-30%
-34%
-34%
-34%
-40%
-38%
-49%
-60%
'80
'85
'90
'95
'00
'05
'10
'15
'20
Return needed to reach January 2022 peak of 4797
Bull and bear markets
S&P 500 level as of September 30, 2022 is 3,586
Bull m arkets
1-yr
35.7%
2-yrs
35.7%
38.2%
17.6%
3-yrs
40.8%
12.1%
X% Implied avg. annualized total return
Bear m arkets
Bull begin
Duration
Bull return
date
(m onths)
Market
peak
Bear return*
Duration
(m onths)*
Jul 1926
152%
37
Sep 1929
-86%
32
Mar 1935
129%
23
Mar 1937
-60%
61
Apr 1942
158%
49
May 1946
-30%
36
Jun 1949
267%
85
Aug 1956
-22%
14
Oct 1960
39%
13
Dec 1961
-28%
6
Oct 1962
76%
39
Feb 1966
-22%
7
Oct 1966
48%
25
Nov 1968
-36%
17
May 1970
74%
31
Jan 1973
-48%
20
Mar 1978
62%
32
Nov 1980
-27%
20
Aug 1982
229%
60
Aug 1987
-34%
3
Oct 1990
417%
113
Mar 2000
-49%
30
Oct 2002
101%
60
Oct 2007
-57%
17
Mar 2009
401%
131
Feb 2020
-34%
1
Mar 2020
114%
21
Jan. 2022**
-25%
8
Averages
162%
51
-
-41%
20
X% Implied cumulative total return
4-yrs
5-yrs
9.4%
43.5%
46.2%
7.9%
0%
5%
10%
15%
20%
25%
30%
35%
40%
April 1960 – February 1961
November 1973 – March 1975
December 1969 – November 1970
140
7.5%
150
6%
120
6.5%
130
5%
175
9.5%
150
8.5%
7.5%
125
100
5.5%
110
4%
October 1960
80
90
4.5%
-18 -14 -10 -6 -2 2
-18 -14 -10 -6 -2 2
6 10 14 18
January 1980 – July 1980
8%
125
7%
105
6%
85
150
10%
135
7.0%
130
9%
125
6.5%
115
6.0%
110
8%
90
180
5.5%
160
5.0%
4.5%
October
2002
120
4.0%
100
3.5%
-30 -26 -22 -18 -14 -10 -6 -2 2
Unemployment Rate
S&P 500 Total Return
7%
-18 -14 -10 -6 -2 2
215
195
175
155
135
115
95
February
2009
-18 -14 -10 -6 -2 2
6
Recession
Market Low
105
6 10 14 18
5.5%
October 1990
95
6 10 14 18
December 2007 – June 2009
6.0%
140
July 1990 – March 1991
7.5%
5%
March 2001 – November 2001
6 10 14 18
145
6 10 14 18
200
4.5%
-18 -14 -10 -6 -2 2
11%
July 1982
65
75
170
March 1980
2
3%
5.5%
September 1974
6 10 14 18
July 1981 – November 1982
145
-18 -14 -10 -6 -2
June 1970
6.5%
100
-18 -14 -10 -6 -2 2
5.0%
6 10 14 18
March 2020 – April 2020
10.5%
9.5%
8.5%
7.5%
6.5%
5.5%
4.5%
200
180
15%
March 2020
March 2020
160
12%
140
9%
120
6%
100
80
3%
-18 -14 -10 -6 -2 2
6 10 14 18
Length of expansions and recessions
The Great Depression and post-war recessions
Months
Length and severity of recession
140
5-yrs
Average length (months):
Expansions: 47 months
120
Great Depression:
26.7% decline in real GDP
Recessions: 14 months
4-yrs
100
Length of recession in years
-26.7%
80
60
40
3-yrs
Financial Crisis:
4.0% decline in real GDP
2-yrs
Post-WWII demobilization:
12.7% decline in real GDP
-4.0%
Pandemic recession:
10.1% decline in real GDP
-3.1%-2.5%
1-yrs
-3.4%
-1.5%-2.4%
-12.7%
20
-3.0%
-0.2%
-0.1%
-2.2%
0
1921 1927 1938 1949 1958 1970 1980 1991 2009
0-yrs
1910
1930
1950
1970
-1.4%
1990
-0.4%
2010
-10.1%
Real GDP
Components of GDP
Billions of chained (2012) dollars, seasonally adjusted at annual rates
2Q22 nominal GDP, USD trillions
$26
$21,000
GDP (%)
Q/Q saar
Y/Y
$20,000
3Q21
2.7
5.0
4Q21
7.0
5.7
1Q22
-1.6
3.7
2Q22
-0.6
1.8
4.6% Housing
13.6% Investment ex-housing
$22
$19,000
17.5% Gov't spending
$18
$18,000
Trend growth:
2.0%
$14
$17,000
$16,000
$10
68.4% 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
Variables used by the NBER in making recession determination*
% change month-over-month
Real personal incom e less transfers
Nonfarm payroll em ploym ent
Household survey em ploym ent
Real consum er spending
Real w holesale + retail sales
Industrial production
% change, last six months
2.0%
1.0%
0.0%
0.2%
1.5%
1.4%
1.6%
0.7%
-1.0%
-3.1%
-2.0%
-3.0%
-4.0%
Real personal income less
transfers
Nonfarm payroll
employment
Household survey
employment
Real consumer spending
Real wholesale + retail
sales
Industrial production
Jul
Aug
Jun
Apr
May
Feb
Mar
Jan
Dec
Oct
Nov
Sep
Jul
2022
Aug
Jun
Apr
May
Feb
Mar
Jan
Dec
Oct
Nov
Sep
Jul
2021
Aug
Jun
Apr
May
Feb
Mar
Jan
Dec
Oct
Nov
Sep
Jul
2020
Aug
Jun
Apr
May
Feb
Mar
Jan
2019
Residential investment as a % of GDP
Business fixed investment as a % of GDP
Quarterly, seasonally adjusted
Quarterly, seasonally adjusted
7%
16%
Recession
15%
6%
2Q22: 4.6%
5%
2Q22: 13.0%
14%
13%
4%
Average: 12.8%
12%
Average: 4.4%
3%
11%
2%
10%
'68
'73
'78
'83
'88
'93
'98
'03
'08
'13
'18
'68
'73
'78
'83
'88
'93
'98
'03
Light vehicle sales
Total business inventory/sales ratio
Mil vehicles, seasonally adjusted ann. rate
Days of sales, monthly, seasonally adjusted
20
18
16
14
Average: 14.8m
12
Aug. 2022:
13.2m
10
8
'76
'81
'86
'91
'96
'01
'06
'11
'16
'21
55
53
51
49
47
45
43
41
39
37
35
'08
'13
'18
Average: 43.0 days
Jul. 2022: 40.2 days
'81
'86
'91
'96
'01
'06
'11
'16
'21
U.S. home price growth by city
Housing affordability index*
S&P Case-Shiller Home Price Index, Jul. 2022, y/y % change
Index
220
Miami
31.7%
Dallas
200
More affordable
180
24.7%
160
Atlanta
22.8%
Phoenix
22.4%
National home price
15.8%
Los Angeles
15.7%
Denver
15.6%
140
120
Jul. 2022:
102.2
100
80
Seattle
'81
13.7%
800
Boston
13.3%
780
760
12.7%
10%
'01
'17
'13
'09
'05
'21
2Q22:
773
Average: 749
700
9.4%
0%
'97
720
10.8%
Washington D.C.
'93
740
11.7%
San Francisco
'89
Median, quarterly
New York City
Portland
'85
Credit score at mortgage origination
14.5%
Chicago
Less affordable
60
20%
30%
40%
680
'99
'01
'03
'05
'07
'09
'11
'13
'15
'17
'19
'21
Housing inventories
Single-family housing starts
Inventory of new and existing single family homes for sale, thous, SA*
Seasonally adjusted annual rate (SAAR), thous houses
4,500
2,000
4,000
1,800
3,500
1,600
Aug. 2022: 935
1,400
3,000
Average: 2,399
1,200
2,500
1,000
2,000
Average: 1,017
800
1,500
600
Aug. 2022: 1,536
1,000
400
500
200
'82
'85
'88
'91
'94
'97
'00
'03
'06
'09
'12
'15
'18
'21
'59 '63 '67 '71 '75 '79 '83 '87 '91 '95 '99 '03 '07 '11 '15 '19
Rental vacancy rate
Multi-family housing starts
Percent
Seasonally adjusted annual rate (SAAR), thous houses
1,000
12%
11%
800
10%
Aug. 2022: 621
9%
8%
600
Average: 7.3%
Average: 364
400
7%
6%
5%
2Q22: 5.6%
4%
200
0
'56 '60 '64 '68 '72 '76 '80 '84 '88 '92 '96 '00 '04 '08 '12 '16 '20
'59 '63 '67 '71 '75 '79 '83 '87 '91 '95 '99 '03 '07 '11 '15 '19
The 2022 federal budget
Federal budget surplus/deficit
CBO Baseline forecast, USD trillions
% of GDP, 1990 – 2032, CBO Baseline Forecast
$7.0
-18%
$6.0
Other: $1,009bn (17%)
Borrowing: $1,036bn (18%)
Net int.: $399bn (7%)
Other: $354bn (6%)
$5.0
$4.0
Non-defense
disc.: $962bn
(16%)
$3.0
Defense:
$760bn (13%)
$2.0
Social
Security:
$1,212bn (21%)
$1.0
$0.0
Forecast
2020:
-15.0%
-14%
Total spending: $5.9tn
2021:
-12.4%
2022:
-4.2%
-10%
-6%
-2%
Social
insurance:
$1,465bn (25%)
2%
Corporate: $395bn (7%)
'90
'95
'00
'05
'10
'15
'20
'25
'30
Federal net debt (accumulated deficits)
% of GDP, 1940 – 2032, CBO Baseline Forecast, end of fiscal year
Incom e:
$2,623bn (45%)
Medicare &
Medicaid:
$1,531bn (26%)
120%
2021:
99.6%
100%
Total government spending
Sources of financing
2032:
109.6%
80%
CBO's Baseline economic assumptions
2022
'23-'24
'25-'26
'27-'32
Real GDP grow th
4.4%
2.4%
1.5%
1.7%
10-year Treasury
2.1%
2.9%
3.3%
3.8%
Headline inflation (CPI)
6.6%
3.0%
2.3%
2.4%
Unem ploym ent
3.9%
3.6%
3.9%
4.5%
60%
Forecast
40%
20%
'40
'48
'56
'64
'72
'80
'88
'96
'04
'12
'20
'28
Consumer balance sheet
Household debt service ratio
2Q22, trillions of dollars outstanding, not seasonally adjusted
$180
14%
Total assets: $162.7tn
$160
$140
3Q07 Peak
1Q09 Low
Debt payments as % of disposable personal income, SA
$85.2tn
$74.0tn
4Q07: 13.2%
13%
12%
1Q80:
10.6%
11%
Homes: 28%
3Q22**:
9.5%
10%
$120
9%
Other tangible: 5%
$100
Deposits: 10%
$80
Pension funds: 18%
8%
'80
'85
'90
'95
'00
'05
'10
'15
'20
Excess personal savings relative to pre-pandemic trend
$60
$40
Other non-revolving: 2%
Revolving*: 6%
Auto loans: 7%
Other liabilities: 10%
Student debt: 9%
0.5
0.4
Cumulative excess
savings: $2.01tn
0.3
0.2
Other financial assets: 39%
Total liabilities: $18.9tn
$20
Disposable personal income less consumer outlays, minus pre-pandemic trend
growth***, $ trillions, monthly
0.1
0.0
Mortgages: 66%
$0
Assets
Liabilities
-0.1
Net excess savings remaining: $1.01tn
Savings drawdown: $0.91tn
-0.2
'19
'20
'21
'22
Consumer Sentiment Index and subsequent 12-month S&P 500 returns
120
Avg. subsequent 12-mo. S&P 500 returns
8 sentiment troughs
110
100
Jan. 2000: -2.0%
+4.1%
+24.9%
8 sentiment peaks
Jan. 2004:
+4.4%
Mar. 1984: +13.5%
Aug. 1972:
-6.2%
Feb. 2020:
+29.0%
Jan. 2007:
-4.2%
Jan. 2015: -2.7%
May 1977: +1.2%
90
Average: 85.6
80
Mar. 2003:
+32.8% Oct. 2005:
+14.2%
70
60
Apr. 2020:
+43.6%
Oct. 1990: +29.1%
Feb. 1975:
+22.2%
50
Sentiment cycle turning point and subsequent
12-m onth S&P 500 Index return
May 1980:
+20.0%
Sep. 2022:
58.6
Nov. 2008: Aug. 2011:
+15.4%
+22.2%
40
'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
Ratio of job openings to job seekers
JOLTS quits
Job openings* lagged 1 month divided by unemployed persons, SA
Total nonfarm quits, thousands, seasonally adjusted
5,000
2.2
Jul. 2022: 4,179
Recession
4,000
2.0
1.8
Jul./Aug. 2022:
1.87
3,000
1.6
2,000
1.4
1,000
'00
'02
'04
'06
'08
'10
'12
'14
'16
'18
'20
1.2
JOLTS layoffs
Total nonfarm layoffs, thousands, seasonally adjusted
1.0
13,500
4,000
0.8
3,500
0.6
3,000
2,500
0.4
2,000
0.2
1,500
Jul. 2022: 1,398
0.0
'73 '76 '79 '82 '85 '88 '91 '94 '97 '00 '03 '06 '09 '12 '15 '18 '21
1,000
'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
6.2%
Wage growth
4.0%
Apr. 2020: 14.7%
12%
Nov. 1982: 10.8%
Oct. 2009: 10.0%
10%
May 1975: 9.0%
Jun. 1992: 7.8%
8%
Jun. 2003: 6.3%
Aug. 2022: 6.1%
6%
4%
2%
Aug. 2022: 3.7%
0%
'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
CPI and core CPI
% change vs. prior year, seasonally adjusted
15%
Recession
50-yr. avg. Jul. 2022
8.5%
4.0%
Headline CPI
12%
Aug. 2022
8.2%
Core CPI
3.9%
5.9%
6.3%
Food CPI
4.1%
10.9%
11.4%
Energy CPI
4.9%
32.9%
23.9%
Headline PCE deflator
3.5%
6.4%
6.2%
Core PCE deflator
3.3%
4.7%
4.9%
9%
6%
3%
0%
-3%
'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
'22
Contributors to headline inflation
Inflation expectations, next 5 years
Contribution to y/y % change in CPI, not seasonally adjusted
% change vs. prior year, non-seasonally adjusted
10%
4.5%
9%
Energy
New and used vehicles
Other
Food at hom e
10yr Avg. Sep. 2022
9.1%
Restaurants, hotels and transp.
Shelter
8.5%
8.6%
4.0%
8.5%
8.3%
8.3%
7.9%
8%
3.5%
7.5%
Consumer expectations
2.7%
2.7%
Professional forecasters
2.3%
2.8%
5yr inflation breakevens
1.8%
2.1%
7.0%
7%
6.8%
3.0%
6.2%
6%
5.3%
5.4%
2.5%
5%
2.0%
4%
1.5%
3%
1.0%
2%
0.5%
1%
0%
0.0%
Aug '21
Oct '21
Dec '21
Feb '22
Apr '22
Jun '22
Aug '22
'12
'13
'14
'15
'16
'17
'18
'19
'20
'21
'22
The U.S. dollar
The U.S. trade balance
U.S. Dollar Index
Current account balance, % of GDP
130
-7%
-6%
-5%
120
2Q22: -4.0%
-4%
Sep. 30, 2022:
112.1
-3%
-2%
110
-1%
0%
'97
100
'99
'01
'03
'05
'07
'09
'11
'13
'15
'17
'19
'21
Developed markets interest rate differentials
Difference between U.S. and international 10-year yields*
90
3%
2%
80
1%
Sep. 30, 2022: 1.8%
70
0%
-1%
60
'97
'00
'03
'06
'09
'12
'15
'18
'21
'97
'99
'01
'03
'05
'07
'09
'11
'13
'15
'17
'19
'21
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
2021 2022* 2023*
Growth since '19
2019
2020
U.S.
19.5
18.6
19.0
20.2
21.4
9.7%
OPEC
34.6
30.7
31.7
34.1
34.5
-0.3%
Russia
11.5
10.5
10.8
10.9
9.3
-18.7%
100.3
93.9
95.7
100.1
101.3
1.0%
U.S.
20.5
18.2
19.9
20.4
20.8
1.0%
China
14.0
14.4
15.3
15.3
16.0
13.9%
Global
100.7
91.8
97.4
99.5
101.5
0.8%
-0.4
2.1
-1.7
0.6
-0.2
Production
Global
$160
Jul. 3, 2008:
$145.29
$140
Consumption
$120
Inventory Change
Jun. 13, 2014:
$106.91
$100
U.S. crude oil inventories and rig count**
Sep. 30,
2022:
Oct. 3, 2018: $79.49
$76.41
$80
Million barrels, number of active rigs
2,000
1,300
Active rigs
1,200
$60
1,500
1,100
$40
1,000
1,000
500
900
Feb. 12, 2009:
$33.98
$20
Feb. 11, 2016:
$26.21
Inventories (incl. SPR)
0
800
'13
'14
'15
'16
'17
'18
'19
'20
'21
'22
Apr. 21, 2020: $11.57
$0
'02
'04
'06
'08
'10
'12
'14
'16
'18
'20
'22
Global investment in energy transition
Cost of wind, solar, natural gas, nuclear and coal
Billions USD, nominal
Mean LCOE*, 2021, dollar per megawatt hour
$800
$400
Storage, electrification, carbon capture, other
Wind
Renewable energy
Solar
Natural gas
Coal
Nuclear
$700
$300
$600
$500
$200
$400
$300
$100
$200
$100
$0
$0
'04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21
'09
'10
'11
'12
'13
'14
'15
'16
'17
'18
'19
'20
'21
Federal funds rate expectations
FOMC and market expectations for the federal funds rate
7%
FOMC September 2022 forecasts
Federal funds rate
Percent
FOMC year-end estimates
2022
2023
2024
2025
Long
run*
Change in real GDP, 4Q to 4Q
0.2
1.2
1.7
1.8
1.8
Unemployment rate, 4Q
3.8
4.4
4.4
4.3
4.0
Headline PCE inflation, 4Q to 4Q
5.4
2.8
2.3
2.0
2.0
Core PCE inflation, 4Q to 4Q
4.5
3.1
2.3
2.1
6%
Market expectations
FOMC long-run projection*
5%
4.40%
4.60%
3.90%
4.21%
4%
4.20%
4.00%
3.13%
3%
2.50%
2%
1%
0%
'00
'02
'04
'06
'08
'10
'12
'14
'16
'18
'20
'22
'24
Long run
The Federal Reserve balance sheet
USD trillions
Forecast*
$10
Balance sheet expansion under rounds of quantitative easing (QE), USD billions
$9
Announced Terminated Length (m) Treasuries
$8
$7
MBS
Loans** Balance sheet
16
$300
$1,074
$0
11/3/2010
6/29/2012
19
$829
-$196
$0
$568
9/13/2012
10/29/2014
25
$822
$874
$0
$1,674
3/23/2020
3/15/2022
24
$3,286
$1,343
$62
$4,779
11/25/2008
QE2
QE3
QE4
Loans
$1,403
3/31/2010
QE1
$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
'23
'24
'25
Nominal and real U.S. 10-year Treasury yields
20%
Sep. 30, 1981:
15.84%
15%
Nominal yields
Real yields
Inflation
Average
(1958 - YTD 2022)
5.79%
2.13%
3.65%
Sep. 30, 2022
3.83%
-2.52%
6.32%
Nominal 10-year U.S. Treasury yield
10%
Sep. 30, 2022:
3.83%
5%
Real 10-year U.S. Treasury yield
0%
Sep. 30, 2022:
-2.52%
-5%
'58
'61
'64
'67
'70
'73
'76
'79
'82
'85
'88
'91
'94
'97
'00
'03
'06
'09
'12
'15
'18
'21
Yield
Impact of a 1% rise or fall in interest rates
Return
9/30/2022
12/31/2021
2022
YTD
2-Year
4.22%
0.73%
-4.59%
2 years
0.71
-0.25
5-Year
4.06%
1.26%
-10.79%
5
0.93
-0.21
TIPS
1.68%
-1.04%
-13.61%
10
0.61
0.30
10-Year
3.83%
1.52%
-16.85%
10
1.00
-0.19
30-Year
3.79%
1.90%
-31.49%
30
0.93
-0.20
U.S. Treasuries
Avg.
Correlation Correlation
Maturity to 10-year to S&P 500
Total return, assumes a parallel shift in the yield curve
6.2%
2.4%
2Y UST
Sector
5Y UST
IG Corps
-1.4%
-14.61%
8.5
0.85
0.18
IG Corps
5.69%
2.33%
-18.72%
11.0
0.50
0.46
Convertibles
7.14%
3.66%
-19.85%
-
-0.20
0.87
U.S. HY
U.S. HY
9.68%
4.21%
-14.74%
5.7
-0.14
0.75
Municipals
Municipals
4.04%
1.11%
-12.13%
12.8
0.47
0.20
MBS
MBS
4.83%
1.98%
-13.66%
8.1
0.78
0.09
ABS
Leveraged Loans
10.52%
4.60%
-3.66%
-2.66%
2.3
2.5
0.11
-0.04
-0.03
0.24
24.2%
-12.2%
-1.4%
1.75%
1.96%
12.6%
-4.2%
U.S. Aggregate
4.75%
5.50%
-1.3%
10Y UST
U.S. Aggregate
ABS
10.5%
TIPS
30Y UST
8.6%
-0.3%
11.0%
12.8%
Convertibles
Leveraged Loans
-20%
5.4%
9.7%
13.8%
5.6%
11.2%
-3.1%
10.8%
-1.1%
7.0%
1% fall
2.7%
1% rise
13.0%
8.0%
-10%
0%
10%
20%
30%
U.S. Treasury yield curve
6.0%
Yield range over past 10 years
5.0%
4.22%
4.0%
4.25%
4.06%
3.97%
3.83%
Sep. 30, 2022
4.08%
3.79%
4.05%
3.92%
3.0%
1.94%
2.0%
1.90%
Dec. 31, 2021
1.44%
1.52%
1.26%
0.97%
0.73%
1.0%
0.39%
0.19%
0.0%
3m 1y
2y
3y
5y
7y
10y
20y
30y
Default rate and spread-to-worst
Percent
20%
16%
Default rate
Spread-to-worst
Recovery rate
Long-run avg.
3.59%
5.69%
39.90%
Sep. 30, 2022
1.20%
5.75%
65.10%
12%
Recession
8%
4%
0%
'90
'93
'96
'99
'02
'05
'08
'11
'14
'17
'20
Yield-to-worst across fixed income sectors
Percent, past 10 years
Axis
8.0%
16.0%
10-year range
10-year median
Current
14.0%
7.0%
6.8%
5.7%
6.0%
12.0%
10.5%
4.8%
5.0%
9.7%
9.6%
4.8%
10.0%
9.0%
7.9%
4.0%
7.3%
4.2%
4.1%
3.8%
8.0%
3.1%
3.0%
6.0%
5.5%
2.7%
5.7%
6.3%
4.9%
2.0%
4.0%
4.5%
1.5%
1.4%
6.0%
2.0%
1.0%
1.0%
0.0%
0.0%
Municipals* IG corps
U.S.
Treasuries
MBS
ABS
Euro IG
EMD ($) EMD (LCL) EM Corp
Euro HY
U.S. HY
Leveraged
Loans
Developed market central bank bond purchases
Market pricing for central bank hikes in 2022
USD billions, 12-month rolling flow
Number of 25bp hikes priced into OIS contracts for year-end 2022**
$6,000
20
Forecast*
Fed
18
Fed
$5,000
19
BoJ
17
BoJ
$4,000
ECB
BoE
16
ECB
15
BoE
14
Total
13
12
$3,000
11
10
9
$2,000
8
7
$1,000
6
5
4
$0
3
2
1
-$1,000
0
-1
-2
-$2,000
'16
'17
'18
'19
'20
'21
'22
'23
Jul '21
Sep '21
Nov '21
Jan '22
Mar '22
May '22
Jul '22
Sep '22
Yield
Yield
Aggregates
Aggregates
9/29/2022 12/31/2021
12/31/2021
9/30/2022
Global bond market
2022 Return
Return
2022
Local
Local
Correlation
to 10-year
6.2 years
0.90
$130
-23.40%
-22.95%
7.10
0.51
0.54
$120
U.S.
U.S.
4.70%
4.75%
1.75%
1.75%
-14.35% -14.61%
-14.35%
-14.61%
Gbl.ex-U.S.
ex-U.S.
Gbl.
3.03%
3.00%
1.07%
1.07%
Japan
Japan
0.58%
0.58%
0.18%
0.18%
-3.15% -22.89%
-22.87%
-3.08%
9.30
0.56
0.58
Germany
Germany
2.89%
2.83%
0.05%
0.05%
-14.00% -25.66%
-26.14%
-13.71%
6.30
0.38
0.43
UK
UK
4.71%
4.66%
1.18%
1.18%
-21.93% -35.38%
-36.40%
-21.60%
8.30
8.40
0.42
0.47
--
USD trillions
Duration
USD
$140
$110
U.S.
U.S.
Dev.
ex-U.S.
Dev. ex-U.S.
EM
EM
12/31/1989
12/31/1989
57.5%
57.6%
41.3%
41.3%
1.2%
1.2%
3/31/2022
12/31/2021
36.3%
35.9%
37.5%
38.3%
25.8%
26.3%
$100
$90
$35tn
EM:EM:
$36tn
$80
Italy
Italy
3.95%
3.84%
0.76%
0.76%
China
China
2.80%
2.82%
2.75%
2.75%
-16.65% -27.76%
-28.42%
-16.14%
6.10
0.23
0.28
5.90
5.90
0.53
0.56
$70
6.01%
7.07%
-8.95%
-7.76%
Sector
Sector
$60
$50
EuroCorp.
Corp.
Euro
4.30%
4.24%
0.52%
0.52%
-14.85% -26.41%
-26.87%
-14.58%
4.5 years
years
4.5
0.34
0.38
$40
EuroHY
HY
Euro
9.03%
9.01%
3.55%
3.55%
-15.27% -26.87%
-27.24%
-15.11%
3.20
3.20
-0.05
0.00
$30
EMD($)
($)
EMD
9.60%
9.57%
5.27%
5.27%
5.70
5.80
0.26
0.31
EMD(LCL)
(LCL)
EMD
7.36%
7.31%
5.72%
5.72%
EMCorp.
Corp.
EM
7.85%
7.86%
4.11%
4.11%
--
-24.02%
-23.95%
-9.53% -18.57%
-19.04%
-9.32%
4.80
4.80
0.14
0.17
4.80
4.90
0.14
0.19
$20
Developed
Developed
ex-U.S.: $52tn
ex-U.S.: $52tn
U.S.:
$50tn
$49tn
U.S.:
$10
$0
--
-16.15%
-16.21%
'89 '91 '93 '95 '97
'21
'19 '21
'17 '19
'15 '17
'13 '15
'11 '13
'09 '11
'07 '09
'05 '07
'03 '05
'01 '03
'99 '01
'97 '99
Muni tax-equivalent and Treasury yield curves
State and local and federal net debt
8.0%
% of GDP, 1930-2021, end of fiscal year
7.5%
120%
7.2%
Dec. 2021:
99.6%
7.0%
Muni tax-equivalent yield curve
6.0%
100%
5.7%
5.3% 5.4%
5.0%
80%
5.2%5.3%
U.S. Treasury yield curve
4.0%
Federal debt
4.2%
4.1% 4.0%
60%
4.1%
3.8%
3.8%
3.3%
3.0%
40%
2.0%
20%
Dec. 2021:
14.0%
State and local debt
1.0%
0%
0.0%
3m 1y 2y 3y 5y
7y
10y
20y
30y
'30 '36 '42 '48 '54 '60 '66 '72 '78 '84 '90 '96 '02 '08 '14 '20
Bloomberg U.S. Aggregate intra-year declines vs. calendar year returns
Despite average intra-year drops of 3.1%, annual returns positive in 42 of 46 years
40%
33
30%
22
19
20%
16
15
15
16
15
12
8
10%
8
9
7
6
3
10
10
10
8
7
4
4 4
4
3
3
1 2
9
7
5 6
9
8
6
4
8
3 4
2
1
0
0%
-1
-2 -2
-2
-4
-7
-10%
-4
-2 -2 -3 -1 -2 -2 -3 -2
-2 -2
-5
-5
-7
-1
-2 -2
-2
-2 -1 -2 -1
-2
-2 -3
-2 -2 -2
-3
-3 -4 -2
-3 -2
-3
-4
-4
-4
-4
-5 -5
-5
-5
-9
-15
-20%
'76
'81
'86
'91
'96
'01
'06
'11
'16
'21
-15
Returns
2022 YTD
Local
USD
2021
Local
USD
15-years
Ann.
Weights in MSCI All Country World Index
% global market capitalization, float adjusted
Beta
Emerging
markets
11%
Regions
U.S. (S&P 500)
-
-23.9
-
28.7
10.7
0.90
AC World ex-U.S.
-15.8
-26.2
13.5
8.3
4.2
1.07
EAFE
-14.1
-26.8
19.2
11.8
4.1
1.04
Europe ex-UK
-21.0
-31.2
24.4
16.5
4.8
1.18
Emerging markets
-20.5
-26.9
0.1
-2.2
4.8
1.18
United Kingdom
-1.3
-18.6
19.6
18.5
2.3
1.02
France
-17.1
-28.6
29.7
20.6
4.7
1.22
Europe exUK
11%
Japan 5%
Pacific 3%
Canada 3%
Selected Countries
United
States
62%
Representation of key sectors in international markets
% of index market capitalization
60%
Technology
Germany
-27.0
-37.1
13.9
5.9
4.7
1.31
Japan
-7.1
-26.1
13.8
2.0
3.4
0.72
China
-29.4
-31.1
-21.6
-21.6
5.8
1.10
-0.8
-9.4
28.9
26.7
6.7
1.26
Brazil
8.6
11.8
-11.2
-17.2
0.9
1.50
Korea
-27.8
-40.0
0.8
-7.9
5.9
1.49
48%
Com modities
40%
33%
28%
26%
21%
India
Financials
20%
14%
11%11%
7%
27%
23%
18%
14%
9%
25%
14%
10% 13%10% 11%
7%
5%
14%
1%
0%
S&P ACWI
500 ex-U.S.
EM
North
Asia
21%
20%
EM
Europe Japan
0%
EM
EM
EM
South LATAM EMEA
Asia
U.S. dollar and international GDP growth
Currency impact on international returns
Real GDP growth: U.S.-intl. (5-year moving avg.); U.S. dollar: 100 = 1984
6%
5%
115
U.S.
World ex-U.S.
Difference
'87-'91 92-'00 01-'11 12-'19 20-'25
2.6%
3.7% -1.1%
2.4%
1.9%
3.8%
2.6%
1.2%
2.9%
3.1%
-1.2%
1.1% -2.3% -0.5% -1.2%
4%
MSCI All Country World ex-U.S. Index, total return
60%
110
105
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%
-3.4%
0%
80
-13.3%
-20%
-13.8%
-1%
75
-26.2%
-2%
70
-3%
-40%
Local currency return
Currency return
65
U.S. - International GDP growth
-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%
250%
210%
(15.0 years)
200%
220%
(6.2 years)
150%
100%
80%
(2.5 years)
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
10%
2.0%
5%
S&P 500
20 yr. avg. P/E
ratio
15.4x
Current P/E
ratio
15.1x
13.1x
10.8x
ACWI ex-U.S.
Sep. 30, 2022:
1.9%
1.8%
+2 Std. dev: 1.6%
0%
1.6%
-5%
+1 Std. dev.: 1.4%
+1 Std. dev: -7.0%
1.4%
Average: -14.8%
1.2%
-10%
Average: 1.2%
-15%
1.0%
-20%
-1 Std. dev: -22.6%
-1 Std. dev.: 0.9%
0.8%
-25%
-2 Std. dev.: -30.3%
0.6%
-30%
Sep. 30, 2022:
-28.8%
0.4%
-35%
-3 Std. dev.: -38.1%
-40%
0.2%
'02
'04
'06
'08
'10
'12
'14
'16
'18
'20
'22
'02
'04
'06
'08
'10
'12
'14
'16
'18
'20
'22
Global earnings growth
Global valuations
Calendar year consensus estimates
Current and 25-year next 12 months price-to-earnings ratio
20%
2022
60%
57%
% cyclical sectors* (RHS)
49x
37x
Current
53%
2023
12/31/2021
33x
50%
2024
25-year range
16%
25-year average
15%
45%
29x
14%
40%
25x
34%
12%
21.2x
10%
30%
9%
8%
8% 8%
8%
7%
17x
4%
15%
0%
0%
China
EM
Europe
13x
Japan
11.8x
11.8x
10.5x
9x
2%
U.S.
14.6x
15.1x
5%
4%
14.7x
6%
6%
5%
21x
10.4x
11.7x
9.6x
5x
U.S.
Japan
Europe
EM
China
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
550
80%
67%
60%
European renewable energy
60%
500
U.S. growth
EM Asia tech
450
50%
44%
40%
European luxury goods
AC World ex-U.S.
20%
400
0%
350
Europe
Japan
U.S.
EM
Change in international sector weightings
300
% point change from Dec. 31, 2005
15%
250
EM
EAFE
10%
200
8%
6%
4%
5%
2%
2% 1%
1%
1%
2%
0%
150
-5%
100
0%
-1%
-4%
-10%
-15%
50
'14
'15
'16
'17
'18
'19
'20
'21
-12%
-11%
Commod. Financials
Indust.
Other
Tech
Health
Care
Consumer
Global Composite (manufacturing & services combined) Purchasing Managers’ Index, quarterly
Emerging
Developed
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2022
Aug
Sep*
Global
49.3
49.5
Manufacturing
50.3
50.1
Services
49.2
49.9
DM
46.9
-
EM
53.4
-
U.S.
44.6
49.3
Japan
49.4
50.9
UK
49.6
48.4
Euro Area
48.9
48.2
Germany
46.9
45.9
France
50.4
51.2
Italy
49.6
-
Spain
50.5
-
China
53.0
-
India
58.2
-
Brazil
53.2
-
Russia
50.4
-
Year-over-year headline inflation by country and region, quarterly
Emerging
Developed
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2022
Jul
Aug
Global
7.7%
7.6%
DM
8.0%
8.0%
EM
5.6%
5.3%
U.S.
8.5%
8.3%
Canada
7.6%
7.0%
Japan
2.6%
3.0%
UK
10.1%
9.9%
Euro Area
8.9%
9.1%
Germany
8.5%
8.8%
France
6.8%
6.6%
Italy
8.4%
9.1%
Spain
10.7%
10.5%
Greece
11.3%
11.2%
China
2.7%
2.5%
Indonesia
4.9%
4.7%
Korea
6.3%
5.7%
Taiwan
3.7%
3.2%
India
6.7%
7.0%
Brazil
10.1%
8.7%
Mexico
8.2%
8.7%
Russia
15.1%
14.3%
Global PMI suppliers’ delivery times*
Global PMI input and output prices**
Figure shown is 100 - Global PMI suppliers’ delivery times index
75
70
Slower
delivery time
Aug. 2022:
67.1
Prices rising
70
65
65
60
60
55
Input prices
Aug.
2022:
55.2
55
Aug.
2022:
56.9
50
50
Output prices
45
45
Faster
delivery time
Prices falling
40
40
'05
'07
'09
'11
'13
'15
'17
'19
'21
'10
'12
'14
'16
'18
'20
'22
Regional contribution to middle class growth: 2020 to 2030
Millions of people
Growth of the middle class
Percent of total population
100%
1,800
1995
2020F
2030F
32
1,600
79%
80%
73%
-3
57
80
79%
72%
10
1,400
Rest of
Asia, 133
1,200
61%
China,
453
60%
55%
41%
41%
40%
40%
30%
1,000
800
600
30%
21%
400
India,
883
20%
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 for GDP, contribution to GDP for components
26%
Large banks
15%
9.4%
10.6%
9.6%
10%
3Q21
4Q21
1Q22
Investm ent
0.4%
-0.5%
1.3%
0.3%
Consum ption
0.7%
1.1%
3.3%
-0.8%
Net exports
3.8%
3.4%
0.2%
1.0%
Total GDP
4.9%
4.0%
4.8%
0.4%
Small and medium banks
22%
2Q22
18%
14%
9.7%
8.0%
6.7% 3.9% 7.9% 7.8%
7.0%
6.9%
5.1%
10%
8.1%
6.8%
7.4%
6.7%
1.1%
6%
6.1%
3.3%
4.1% 3.3%
1.6% 3.1%
2.6%
'09
4.2% 5.4% 5.0%
4.6% 4.0% 4.4% 3.5%
3.9% 4.2%
2.2%
3.3% 0.4%
0.3%
0%
-5%
0.2%
0.4%
-0.6%
-4.0%-1.1%
0.5%
-0.2%-0.1%
-0.9%
'17
'19
'21
% GDP
0%
2.3%
4.9%
4.4%
'15
Fiscal stimulus: Fiscal deficit*
5.3% 1.3%
6.3%
'13
4.8%
1.9%
5%
'11
2.8%
1.0%
0.7% 0.6% 1.7%
0.3%
-0.5%
-0.5%
0.2% -0.8%
0%
-2%
-4%
-4%
-6%
-6%
-8%
-8%
-10%
-10%
-12%
-12%
-14%
-14%
-16%
-16%
-18%
-18%
-2%
-12%
-14%
'10'10 '11'11'12'12'13'13'14 '14'15 '15
'16 '16
'17 '17
'18 '18
'19 '19
'20
'21 '22F
'20
'21F
MSCI Emerging Markets Index: Inclusion of China A-shares
EMEA 12%
Taiwan
15%
EMEA
15%
Latin
America
12%
Taiwan
12%
Asia ex-China,
Korea & Taiwan
18%
Foreign
listed
9%
May 2019
China: 32%
Latin
America
11%
P-chips
8%
Latin
America
8%
Taiwan
15%
Asia ex-China,
Korea & Taiwan
17%
Korea
12%
Korea
12%
A-shares
Foreign
H-shares
2%
listed
10%
8% P-chips 8%
Red-chips
4%
EMEA
14%
H-shares
8%
Asia ex-China,
Korea & Taiwan
17%
Korea
13%
A-shares
4%
Red-chips
4%
November 2019
China: 34%
Foreign
listed
3%
P-chips
15%
A-shares
5%
Hshares
7% Redchips
September 2022 2%
China: 32%
Weight of China in bond universe and bond indices
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
5%
6%
36%
38%
29%
48%
29%
25%
3%
18%
Other
32%
25%
30%
33%
1%
18%
30%
36%
14%
8%
10%
7%
Global bond universe
Global aggregate
Local EMD sovereigns
USD EMD corporates
14%
5%
USD EMD sovereigns
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
0.89
0.76
0.25
0.85
0.34
-0.42
0.68
0.43
0.77
0.84
0.79
0.09
0.15
1.00
0.90
0.24
0.87
0.37
-0.57
0.75
0.47
0.64
0.86
0.82
0.17
0.15
1.00
0.30
0.82
0.42
-0.69
0.80
0.49
0.52
0.76
0.76
0.37
0.18
1.00
0.37
0.86
-0.35
0.66
-0.18
0.41
-0.02
-0.08
0.56
0.04
1.00
0.45
-0.49
0.86
0.50
0.68
0.81
0.72
0.26
0.08
1.00
-0.34
0.74
-0.12
0.55
0.14
0.16
0.47
0.04
1.00
-0.57
-0.44
-0.20
-0.32
-0.53
-0.55
0.06
1.00
0.29
0.61
0.57
0.54
0.50
0.08
1.00
0.32
0.62
0.58
0.34
0.17
1.00
0.59
0.54
0.17
0.16
1.00
0.81
0.03
0.05
1.00
0.04
0.08
1.00
0.15
Equity market correlations and yields
Hedge-adjusted yield, last 12 months, 10-year correlations, quarterly
Direct lending
9%
U.S. government
U.S. non-government
8%
Higher yielding
sectors
Convertibles
International
Alternatives
Hedge-adjusted yield
7%
Euro HY
EMD ($)
EMD (LCL)
U.S. HY
6%
EM Corp.
Infra.
5%
4%
Stronger correlation
to equities
APAC Real estate
U.S. Real estate
Europe Real estate
3%
2%
30y UST
5y UST
MBS
U.S. Aggregate
Germany
10y UST
UK
2y UST
U.S. corps
TIPS
Munis
Japan
Floating rate
1%
0%
-0.4
-0.2
0.0
Euro Corp.
0.2
0.4
Correlation to S&P 500
0.6
0.8
1.0
Alternative asset class yields
Hedge fund returns in different market environments
16%
Average return in up and down months for S&P 500
15%
4%
14.7%
14%
2%
13%
12%
1.2%
0%
11%
HFRI FW Comp.
10%
9%
3.3%
-2%
8.70%
8%
S&P 500
-1.5%
-4%
-4.3%
7%
6%
5%
4%
3%
-6%
5.1%
S&P 500 up
4.1%
3.7%
3.7%
Average return in up and down months for Bloomberg Agg.
0.9%
1.0%
0.6%
2%
1%
S&P 500 down
Hedge fund returns in different market environments
0.5%
0%
0.0%
-0.1%
-0.5%
HFRI FW Comp.
Bloomberg U.S. Agg.
-1.0%
Bloomberg Agg up
-0.8%
Bloomberg Agg down
Bloomberg Commodity Index
Commodity prices
Since index inception, total returns
Bloomberg commodity index constituents
480
Bloom berg Com m odity Index
Jul. 2, 2008
474
Constituents
420
Apr. 29, 2011
353
360
-57%
+220%
Jun. 9, 2022
293
+72%
300
-18%
-64%
240
+131%
Mar. 2, 2009
293
180
Sep. 30, 2022
241
Nov. 5, 2001
148
Mar. 18, 2020
127
120
'01
'03
'05
'07
'09
'11
'13
'15
'17
'19
'21
Sub-indices
Energy
WTI crude oil
Natural gas
Brent crude
Low sulphur gas oil
RBOB gasoline
ULS diesel
Grains
Corn
Soybeans
Soybean meal
Wheat
Soybean oil
HRW w heat
Industrial m etals
Copper
Aluminum
Zinc
Nickel
Precious m etals
Gold
Silver
Softs
Sugar
Coffee
Cotton
Livestock
Live cattle
Lean hogs
Current
price level
YTD change
Change
since
6/9/2022*
$45.81
$84.53
$0.29
$459.25
$296.33
$423.18
$4.89
$49.30
$13.76
$75.78
$775.95
$45.81
$94.26
$130.02
$143.44
$305.35
$30.47
$96.19
$200.98
$473.06
$180.72
$169.75
$47.18
$91.08
$13.70
$30.51
$21.98
$54.50
$3.96
48.3%
17.9%
85.1%
30.9%
70.4%
30.5%
35.2%
17.2%
21.4%
17.4%
8.1%
12.4%
25.5%
7.3%
-17.0%
-24.3%
-23.5%
-12.9%
1.8%
-10.9%
-10.2%
-19.8%
-1.7%
-3.0%
-0.4%
-8.6%
-2.0%
-3.2%
0.1%
-26.1%
-30.4%
-25.0%
-24.3%
-22.3%
-30.9%
-11.7%
-12.4%
-7.1%
-21.1%
0.2%
-16.9%
-15.5%
-22.3%
-22.1%
-22.6%
-21.7%
-18.5%
-25.1%
-10.5%
-10.8%
-13.7%
-11.5%
-7.6%
-3.9%
-31.4%
-0.6%
-0.1%
-3.3%
U.S. real estate cap rate spreads
U.S. vacancy rates by property type
Percent
Transaction based, spread to 10y UST, 4-quarter rolling average
18%
5%
Apartment
Office
Industrial
Retail
16%
4%
14%
12%
3%
10%
Average: 2.9%
8%
2%
6%
Jun. 2022:
2.3%
4%
1%
2%
0%
0%
'98
'00
'02
'04
'06
'08
'10
'12
'14
'16
'18
'20
'22
'00
'02
'04
'06
'08
'10
'12
'14
'16
'18
'20
'22
2007 - 2021
Ann.
Vol.
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
YTD
EM
Equity
Fixed
Incom e
EM
Equity
REITs
REITs
REITs
Sm all
Cap
REITs
REITs
Sm all
Cap
EM
Equity
Cash
Large
Cap
Sm all
Cap
REITs
Com dty.
Large
Cap
REITs
39.8%
5.2%
79.0%
27.9%
8.3%
19.7%
38.8%
28.0%
2.8%
21.3%
37.8%
1.8%
31.5%
20.0%
41.3%
13.6%
10.6%
23.2%
Com dty.
Cash
High
Yield
Sm all
Cap
Fixed
Incom e
High
Yield
Large
Cap
Large
Cap
Large
Cap
High
Yield
DM
Equity
Fixed
Incom e
REITs
EM
Equity
Large
Cap
Cash
Sm all
Cap
EM
Equity
16.2%
1.8%
59.4%
26.9%
7.8%
19.6%
32.4%
13.7%
1.4%
14.3%
25.6%
0.0%
28.7%
18.7%
28.7%
0.6%
8.7%
22.9%
DM
Equity
Asset
Alloc.
DM
Equity
EM
Equity
High
Yield
EM
Equity
DM
Equity
Fixed
Incom e
Fixed
Incom e
Large
Cap
Large
Cap
REITs
Sm all
Cap
Large
Cap
Com dty.
Fixed
Incom e
REITs
Sm all
Cap
11.6%
-25.4%
32.5%
19.2%
3.1%
18.6%
23.3%
6.0%
0.5%
12.0%
21.8%
-4.0%
25.5%
18.4%
27.1%
-14.6%
7.5%
22.5%
Asset
Alloc.
High
Yield
REITs
Com dty.
Large
Cap
DM
Equity
Asset
Alloc.
Asset
Alloc.
Cash
Com dty.
Sm all
Cap
High
Yield
DM
Equity
Asset
Alloc.
Sm all
Cap
Asset
Alloc.
High
Yield
Com dty.
7.1%
-26.9%
28.0%
16.8%
2.1%
17.9%
14.9%
5.2%
0.0%
11.8%
14.6%
-4.1%
22.7%
10.6%
14.8%
-19.1%
6.6%
19.1%
Fixed
Incom e
Sm all
Cap
Sm all
Cap
Large
Cap
Cash
Sm all
Cap
High
Yield
Sm all
Cap
DM
Equity
EM
Equity
Asset
Alloc.
Large
Cap
Asset
Alloc.
DM
Equity
Asset
Alloc.
High
Yield
Asset
Alloc.
DM
Equity
7.0%
-33.8%
27.2%
15.1%
0.1%
16.3%
7.3%
4.9%
-0.4%
11.6%
14.6%
-4.4%
19.5%
8.3%
13.5%
-19.1%
6.1%
18.9%
Large
Cap
Com dty.
Large
Cap
High
Yield
Asset
Alloc.
Large
Cap
REITs
Cash
Asset
Alloc.
REITs
High
Yield
Asset
Alloc.
EM
Equity
Fixed
Incom e
DM
Equity
Large
Cap
EM
Equity
Large
Cap
5.5%
-35.6%
26.5%
14.8%
-0.7%
16.0%
2.9%
0.0%
-2.0%
8.6%
10.4%
-5.8%
18.9%
7.5%
11.8%
-23.9%
4.8%
16.9%
Cash
Large
Cap
Asset
Alloc.
Asset
Alloc.
Sm all
Cap
Asset
Alloc.
Cash
High
Yield
High
Yield
Asset
Alloc.
REITs
Sm all
Cap
High
Yield
High
Yield
High
Yield
Sm all
Cap
DM
Equity
High
Yield
4.8%
-37.0%
25.0%
13.3%
-4.2%
12.2%
0.0%
0.0%
-2.7%
8.3%
8.7%
-11.0%
12.6%
7.0%
1.0%
-25.1%
4.1%
12.2%
DM
Equity
DM
Equity
Fixed
Incom e
Fixed
Incom e
EM
Equity
Sm all
Cap
Fixed
Incom e
Fixed
Incom e
Com dty.
Fixed
Incom e
Cash
Cash
DM
Equity
Fixed
Incom e
Asset
Alloc.
-11.7%
4.2%
-2.0%
-1.8%
-4.4%
2.6%
3.5%
-11.2%
8.7%
0.5%
DM
Equity
EM
Equity
DM
Equity
Com dty.
DM
Equity
-4.5%
-14.6%
1.5%
1.7%
-13.4%
Cash
Cash
EM
Equity
0.3%
0.8%
-14.2%
High
Yield
REITs
Com dty.
3.2%
-37.7%
18.9%
8.2%
Sm all
Cap
DM
Equity
Fixed
Incom e
Fixed
Incom e
Com dty.
Cash
EM
Equity
-1.6%
-43.1%
5.9%
6.5%
-13.3%
0.1%
-2.3%
REITs
EM
Equity
Cash
Cash
EM
Equity
-15.7%
-53.2%
0.1%
0.1%
-18.2%
Com dty. Com dty. Com dty. Com dty.
-1.1%
-9.5%
-17.0%
-24.7%
0.0%
-26.8%
4.1%
11.7%
Fixed
Incom e
EM
Equity
Cash
Fixed
Incom e
-3.1%
-1.5%
-26.9%
0.8%
3.3%
Cash
REITs
EM
Equity
REITs
Com dty.
Cash
2.2%
-5.1%
-2.2%
-27.9%
-2.6%
0.7%
Com dty. Com dty.
7.7%
Range of stock, bond and blended total returns
Annual total returns, 1950 - 2021
60%
50%
Stocks
Bonds
50/50 portfolio
47%
40%
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
Equities vs. 60/40 portfolio: Last 20 years’ daily market performance by decile
1.5%
1.19%
S&P 500
60/40 portfolio*
1.0%
0.71%
0.43%
0.5%
0.05% 0.04%
0.21% 0.14%
0.71%
0.42%
0.26%
0.0%
-0.5%
-0.34%
-0.66%
-1.0%
-1.5%
-0.26%
-0.16%
-0.06% -0.03%
-0.58%
-1.15%
10th
20th
30th
40th
50th
60th
70th
80th
90th
20-year annualized returns by asset class (2002 – 2021)
12%
11.2%
10.0%
10%
9.5%
9.4%
8.2%
7.4%
8%
6.8%
6.4%
6%
4.3%
4.2%
4%
3.6%
2.2%
2%
1.8%
1.2%
0%
REITs
EM Equity
S&P 500
Small Cap High Yield
60/40
DM Equity
40/60
Bonds
Homes
Average
Investor
Inflation
Commodity
Cash
Average annualized return on 6-month CD vs. annualized CPI inflation and subcomponents
By decade, derived from subcomponents of the consumer price index
12%
6-mo. CD rate
Headline inflation
10%
10.0%
Education inflation
9.6%
Medical inflation
8.3%
Housing inflation
8%
7.0%
6.7%
6%
5.8%
5.4%
5.5%
5.0%
5.3%
4.1%
4%
3.0%
3.3%
2.8%
2.9%
2.6%
2%
3.6%
4.6%
2.9%
2.9%
2.1%
2.1%
1.8%
0.5%
0.3%
2010s
2020s so far*
0%
1980s
1990s
2000s
Percent of Republicans and Democrats who rate national economic conditions as excellent or good
Percent
100%
Jan. ’01 – Jan. ’09
Jan. ’09 – Jan. ’17
Jan. ’17 – Jan. '21
90%
80%
Jan. '21 - today
Last 30 years
Avg. ann. return
-4.5%
16.3%
16.0%
-2.7%
Republican / Lean Republican
Total
Democrat / Lean Democrat
10.6%
Election Day
Election Day
Election Day
70%
60%
50%
40%
30%
20%
20%
13%
10%
5%
0%
'00
'01
'02
'03
'04
'05
'06
'07
'08
'09
'10
'11
'12
'13
'14
'15
'16
'17
'18
'19
'20
'21
'22
Asset allocation: Current portfolio positioning
Biggest portfolio shifts
Average moderate (60/40) allocation as of September 2022
Largest % allocation changes by Morningstar category, last 3 months**
Other*: 2%
Diversified Emerging Mkts
Non-U.S.
Bond: 4%
1.2%
Cash: 8%
Intermediate Core-Plus Bond
U.S. Equity:
44%
1.7%
Ultrashort Bond
3.5%
Large Blend -1.2%
U.S. Bond:
27%
Mid-Cap Blend
-0.8%
Non-U.S.
Equity: 15%
Intermediate Core Bond
-2.0%
-0.6%
-0.5%
1.0%
2.5%
4.0%
Asset allocation: Corporate DB plans. endowments
Corporate pension liabilities and 10-year UST yield
$2.4
0%
$2.0
1%
35.2%
Equities
32.1%
2%
Liabilities ($tn)
$1.6
9.0%
Fixed Income
3%
49.9%
$1.2
4%
10yr UST (inv.)
$0.8
5%
18.0%
Hedge Funds
3.8%
$0.4
12.3%
Private Equity
4.3%
6%
$0.0
Endowments
7%
'00
'02
'04
'06
'08
'10
'12
'14
'16
'18
'20
'22
Corporate DB plans
Pension return assumptions
5.4%
Real Estate
9.5%
9.0%
3.7%
8.5%
15.7%
Other Alternatives
S&P 500 companies
State & local governments
8.0%
7.5%
3.3%
7.0%
4.4%
Cash
6.5%
6.0%
2.9%
5.5%
0%
10%
20%
30%
40%
50%
60%
5.0%
'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
price-to-book ratios and higher forecasted growth values.
The Russell 1000 Value Index® measures the performance of those Russell 1000 companies with lower priceto-book 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
price-to-book ratios and higher forecasted growth values.
The Russell 2000 Value Index® measures the performance of those Russell 2000 companies with lower priceto-book 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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accordance with market conditions and taxation agreements and investors may not get back the full amount invested. Both past performance and yields are not reliable indicators of current and future results.
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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 September 30, 2022 or most recently available.
Guide to the Markets – U.S.
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