LPL Financial Member FINRA/SIPC 1 Member FINRA/SIPC PRESENTER
NAME DATE December 9, 2014
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LPL Financial Member FINRA/SIPC 2 The U.S. economy continues
its transition from the slow gross domestic product (GDP) growth of
2011 2013 to more sustained, broad-based growth. Central banks
around the world will also be on the move in 2015. Washington
shifts from a relatively quiet 2014 to take a bigger role in
2015.
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LPL Financial Member FINRA/SIPC 3 Stock prices in 2015 may
potentially record their seventh consecutive year of positive
returns. Global central bank policies will be in focus and will be
contradictory. Volatility returns to more normal levels after
several years of below-average swings in equity prices.
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LPL Financial Member FINRA/SIPC 44
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55 THIS END UP U.S. ECONOMIC GROWTH PICKS UP 3.0%+ Growth We
expect the U.S. economy will expand at a rate of 3% or slightly
higher in 2015, which matches the average growth rate over the past
50 years. This forecast is based on contributions from consumer
spending, business capital spending, and housing, which are poised
to advance at historically average or better growth rates in
2015.
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LPL Financial Member FINRA/SIPC 6 ECONOMY Current Conditions
Lag Past Recoveries in All Major GDP Categories Source: LPL
Financial Research 11/14/14
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LPL Financial Member FINRA/SIPC 7 ECONOMY The Current Expansion
Is the Fifth Longest Since WWII Source: LPL Financial Research,
National Bureau of Economic Research (NBER) 11/14/14
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LPL Financial Member FINRA/SIPC 8 Source: LPL Financial
Research, Bureau of Labor Statistics, Haver Analytics 11/14/14 The
time frame for all data is the last 10 years: 20042014. Several
labor market indexes are being monitored by Federal Reserve Chair
Janet Yellen and the Federal Open Market Committee.
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LPL Financial Member FINRA/SIPC 9 Source: LPL Financial
Research, Bureau of Labor Statistics, Haver Analytics 11/14/14 The
time frame for all data is the last 10 years: 20042014. Several
labor market indexes are being monitored by Federal Reserve Chair
Janet Yellen and the Federal Open Market Committee.
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LPL Financial Member FINRA/SIPC 10 PRIORITY SHIPPING STOCKS
SHOULD DELIVER THE GOODS 59% Returns Historically since WWII, the
average annual gain on stocks has been 79%. Thus, our forecast is
in-line with average stock market growth. We forecast a 59% gain,
including dividends, for U.S. stocks in 2015 as measured by the
S&P 500. This gain is derived from earnings per share (EPS) for
S&P 500 companies growing 510%. Earnings gains are supported by
our expectation of improved global economic growth and stable
profit margins in 2015.
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LPL Financial Member FINRA/SIPC 11 STOCKS Probability of Solid
Stock Market Gain if U.S. Economy Not in Recession Source: LPL
Financial Research, Bloomberg data, NBER 11/14/14 Past performance
is not indicative of future results. Indexes are unmanaged and
cannot be invested into directly.
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LPL Financial Member FINRA/SIPC 12 STOCKS Earnings Indicator
Pointing Higher Source: LPL Financial Research, Thomson Reuters,
FactSet 11/14/14 Past performance is not indicative of future
results. Indexes are unmanaged and cannot be invested into
directly.
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LPL Financial Member FINRA/SIPC 13 STOCKS Stock Returns Have
Been Healthy in the Year Prior to the First Rate HikeAnd in the
Year Following Source: LPL Financial Research, Bloomberg data, FOMC
11/14/14 Past performance is not indicative of future results.
Indexes are unmanaged and cannot be invested into directly.
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LPL Financial Member FINRA/SIPC 14 STOCKS Over the Long Term,
PEs Have Provided a Road Map for Equity Returns Source: LPL
Financial Research, Standard & Poors 11/14/14 Scale is
inverted. PEs shown are trailing.
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LPL Financial Member FINRA/SIPC 15 All investing entails risk,
including loss of principle. International and emerging markets
investing involves special risks, such as currency fluctuation and
political instability, and may not be suitable for all investors.
Small cap stocks may be subject to a higher degree of risk than
more established companies securities. The illiquidity of the small
cap market may adversely affect the value of these investments.
Because of its narrow focus, sector investing will be subject to
greater volatility than investing more broadly across many sectors
and companies. STOCKS Investment Ideas Expected to Deliver in 2015
Cyclical sectors have historically performed well during the middle
and late stages of the business cycle. Small caps have potential to
participate in market upside in 2015, based on their U.S.-based
exposure. U.S. stocks may be poised for better growth and
trajectory of that growth relative to developed foreign equity
markets.
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LPL Financial Member FINRA/SIPC 16 ADDED POSTAGE REQUIRED
VOLATILITY BRINGS OPPORTUNITY AND CHALLENGES Return of
Volatility
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LPL Financial Member FINRA/SIPC 17 VOLATILITY Number of Stock
Market Pullbacks & Corrections During Bull Markets Since WWII
Source: LPL Financial Research, Bloomberg 11/14/14 Pullbacks
defined as S&P 500 losses of more than 5%. Corrections defined
as 1020% losses. Past performance is not indicative of future
results. One cannot invest directly into an index.
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LPL Financial Member FINRA/SIPC 18 VOLATILITY Five Forecasters:
Recession Unlikely in 2015 Source: LPL Financial Research,
Bloomberg 11/14/14
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LPL Financial Member FINRA/SIPC 19 There is no guarantee that a
diversified portfolio will enhance overall returns or outperform a
nondiversified portfolio. Diversification does not ensure against
market risk. Merger arbitrage: This strategy consists of buying
shares of the target company in a proposed merger and fully or
partially hedging the exposure to the acquirer by shorting the
stock of the acquiring company or other means. Bonds are subject to
market and interest rate risk if sold prior to maturity. Bond
values and yields will decline as interest rates rise, and bonds
are subject to availability and change in price. Corporate bonds
are considered higher risk than government bonds but normally offer
a higher yield and are subject to market, interest rate, and credit
risk, as well as additional risks based on the quality of issuer
coupon rate, price, yield, maturity, and redemption features.
VOLATILITY Investment Ideas Expected to Deliver in 2015 Municipal
bonds are subject to availability, price, and to market and
interest rate risk if sold prior to maturity. Bond values will
decline as interest rate rise. Interest income may be subject to
the alternative minimum tax. Federally tax-free but other state and
local taxes may apply. Currency risk is a form of risk that arises
from the change in price of one currency against another.
Commodity-linked investments may be more volatile and less liquid
than the underlying instruments or measures, and their value may be
affected by the performance of the overall commodities baskets as
well as weather, disease, and regulatory developments. Merger
arbitrage historically produces low correlations to stocks and
bonds, with risk similar to fixed income. Fixed income remains one
of the best diversifiers of equity market drawdowns. Global macro
should provide strong diversification benefits, with reduced
correlation and a potentially attractive risk/return profile.
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LPL Financial Member FINRA/SIPC 20 HANDLE WITH CARE FRAGILE
RETURNS INSIDE Flat Returns
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LPL Financial Member FINRA/SIPC 21 BONDS A 0.25% to 0.75% Rise
in Bond Yields Translates to Low or Marginally Negative Total
Returns Source: LPL Financial Research, Barclays Aggregate Bond
Index data 11/14/14 Barclays Aggregate Bond Index Total Return
Scenario Analysis: Projected total return over one-year horizon for
given change in interest rates. This is a hypothetical example and
is not representative of any specific situation. Your results will
vary. The hypothetical rates of return used do not reflect the
deduction of fees and charges inherent to investing.
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LPL Financial Member FINRA/SIPC 22 BONDS Inflation-Adjusted
Yields Remain Below Historical Norms Source: LPL Financial
Research, Bloomberg, Barclays Index data 11/14/14
Inflation-adjusted yields may be below zero if inflation is greater
than yields.
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LPL Financial Member FINRA/SIPC 23 BONDS Low Defaults Should
Support High-Yield Bond Valuations Source: LPL Financial Research,
Moodys, Barclays Index data 10/31/14 High-yield spread is the yield
differential between the average yield of high-yield bonds and the
average yield of comparable maturity Treasury bonds.
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LPL Financial Member FINRA/SIPC 24 BONDS Smaller Packages: The
Municipal Bond Market May Continue to Shrink in 2015 Source: LPL
Financial Research, Federal Reserve Flow of Funds 06/30/14
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LPL Financial Member FINRA/SIPC 25 BONDS Treasury Yields Begin
to Move 36 Months Before First Hike Source: LPL Financial Research,
Bloomberg data 10/31/14 Past performance is not indicative of
future results.
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LPL Financial Member FINRA/SIPC 26 BONDS Strong Foreign Demand
May Help Support Treasuries Due to a Wide Yield Advantage Source:
LPL Financial Research, Bloomberg data 10/31/14 Past performance is
not indicative of future results.
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LPL Financial Member FINRA/SIPC 27 High-yield/junk bonds are
not investment-grade securities, involve substantial risks, and
generally should be part of the diversified portfolio of
sophisticated investors. Corporate bonds are considered higher risk
than government bonds but normally offer a higher yield and are
subject to market, interest rate, and credit risk, as well as
additional risks based on the quality of issuer coupon rate, price,
yield, maturity, and redemption features. Municipal bonds are
subject to availability, price, and to market and interest rate
risk if sold prior to maturity. Bond values will decline as
interest rate rise. Interest income may be subject to the
alternative minimum tax. Federally tax-free but other state and
local taxes may apply. BONDS Investment Ideas Expected to Deliver
in 2015 High-yield bonds have benefitted from stable credit quality
and low defaults. Among high-quality bonds, municipal bonds and
investment-grade corporate bonds have offered modest value.
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LPL Financial Member FINRA/SIPC 28 Weighing the Sector
Implications of Midterm Election Results: XXXXXX Energy: Expect
more exports and faster permitting. Healthcare: ACA changes likely
on the way. Financial services: Possible relief on the horizon for
regional banks. Housing finance reform: Legislation possible, but
significant hurdles exist.
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LPL Financial Member FINRA/SIPC 29 Most Important Delivery Will
Be Setting the Stage for 2016 Deliver strong economic growth,
improving labor conditions, a continued environment for
fast-growing corporate earnings, and a favorable backdrop for
expanding equity prices.
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LPL Financial Member FINRA/SIPC 30
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LPL Financial Member FINRA/SIPC 31 Not FDIC or NCUA/NCUSIF
Insured | No Bank or Credit Union Guarantee | May Lose Value | Not
Guaranteed by Any Government Agency | Not a Bank/Credit Union
Deposit The opinions voiced in this material are for general
information only and are not intended to provide or be construed as
providing specific investment advice or recommendations for any
individual security. To determine which investments may be
appropriate for you, consult your financial advisor prior to
investing. All performance referenced is historical and is no
guarantee of future results. All indexes are unmanaged and cannot
be invested into directly. Economic forecasts set forth may not
develop as predicted, and there can be no guarantee that strategies
promoted will be successful. The Leading Economic Index (LEI) is an
economic variable, such as private-sector wages, that tends to show
the direction of future economic activity. The Standard & Poors
500 Index is a capitalization-weighted index of 500 stocks designed
to measure performance of the broad domestic economy through
changes in the aggregate market value of 500 stocks representing
all major industries. The Barclays Capital Aggregate Bond Index is
an unmanaged market capitalization-weighted index of most
intermediate-term U.S. traded investment-grade, fixed rate, non-
convertible, and taxable bond market securities including
government agency, corporate, mortgage-backed, and some foreign
bonds. NYSE Composite Index is an index that measure the
performance of all stocks listed on the New York Stock Exchange.
The NYSE Composite Index includes more than 1,900 stocks, of which
over 1,500 are U.S. companies. The Federal Open Market Committee
(FOMC) is the branch of the Federal Reserve Board that determines
the direction of monetary policy. The FOMC is composed of the board
of governors, which has seven members, and five reserve bank
presidents. The Labor Market Conditions Index (LMCI) is a dynamic
factor model of labor market indicators, which extracts the primary
common variation from 19 labor market indicators. This tool was
recently developed by the Federal Reserve. Quantitative easing (QE)
is a government monetary policy occasionally used to increase the
money supply by buying government securities or other securities
from the market. Quantitative easing increases the money supply by
flooding financial institutions with capital in an effort to
promote increased lending and liquidity. This research material has
been prepared by LPL Financial. To the extent you are receiving
investment advice from a separately registered independent
investment advisor, please note that LPL Financial is not an
affiliate of and makes no representation with respect to such
entity. IMPORTANT DISCLOSURES Tracking # 1-334244 Exp. 12/15
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LPL Financial Member FINRA/SIPC 32 LPL Financial Member
FINRA/SIPC THANK YOU FOR YOUR BUSINESS