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TRANSCRIPT
NCM Macro Review
JULY 2017
NCM MacroUnited States
Markets
Contents
• United States Macro
• Employment
• Inflation
• Business and consumer investment
• Sector Analysis
• International
• Economic surprises
• Economic analysis
• Currencies
• Commodities
• United States Markets
• Equity market valuations
• Interest rates
• Margins and returns on assets at US companies
NCM MacroUnited States
Market
2,150
2,200
2,250
2,300
2,350
2,400
2,450
2,500
Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17
S&P 500 YTD
NCM MacroUnited States
Market
0
500
1,000
1,500
2,000
2,500
3,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
S&P 500 since 2000
NCM MacroUnited States
Market
0
10
20
30
40
50
60
70
80
90
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
SPX Index - Volatility 30 Day
NCM MacroUnited States
Market
0
10
20
30
40
50
60
70
80
90
100
1928 1933 1938 1943 1948 1953 1958 1963 1968 1973 1978 1983 1988 1993 1998 2003 2008 2013
SPX Index - Volatility 30 Day
NCM MacroUnited States
Market
1.2%
28.3%
63.8%
80.0%
88.1%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100
Cumulative Frequency of Periods of Volatility
NCM MacroUnited States
Employment
200
220
240
260
280
300
320
340
Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17
Weekly Jobless Claims ('000s)
NCM MacroUnited States
Employment
0
2
4
6
8
10
12
52
54
56
58
60
62
64
66
68
1948 1953 1958 1963 1968 1973 1978 1983 1988 1993 1998 2003 2008 2013
Unemployment vs. Participation Rate (%)
Participation Rate Unemployment Rate
NCM MacroUnited States
Employment
0
2
4
6
8
10
12
60
61
62
63
64
65
66
67
68
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Unemployment vs. Participation Rate (%)
Participation Rate Unemployment Rate
NCM MacroUnited States
Inflation
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
6.0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Consumer Price Index Y/y
CPI Ex Food & Energy CPI Headline
NCM MacroUnited States
Inflation
10
20
30
40
50
60
70
80
90
100
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
ISM Price Index
Manufacturing Services
NCM MacroUnited States
Employment
20
25
30
35
40
45
50
55
60
65
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
ISM Manufacturing Employment
NCM MacroUnited States
Employment
45
47
49
51
53
55
57
59
61
May-12 Nov-12 May-13 Nov-13 May-14 Nov-14 May-15 Nov-15 May-16 Nov-16 May-17
ISM Manufacturing Employment
NCM MacroUnited States
Inflation
65
75
85
95
105
115
125
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
DXY Dollar Index
NCM MacroUnited States
Business Investing
50
70
90
110
130
150
170
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Dodge Momentum Index
The Momentum Index is a monthly measure of
the first (or initial) report for nonresidential
building projects in planning, which have been
shown to lead construction spending for
nonresidential buildings by a full year.
NCM MacroUnited States
Business Investing
20
30
40
50
60
70
80
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
ISM New Orders
Manufacturing Services
NCM MacroUnited States
Business Investing
-40
-30
-20
-10
0
10
20
30
40
50
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Cap Ex Forecasts
Philadelphia Fed 6-month Outlook Richmond Fed Annualized CapEx
NCM MacroUnited States
Consumer
0
20
40
60
80
100
120
140
160
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Consumer Confidence
NCM MacroUnited States
Consumer
8.0
10.0
12.0
14.0
16.0
18.0
20.0
22.0
1976 1981 1986 1991 1996 2001 2006 2011 2016
Autos – Seasonal Adjusted Annual Rate (millions)
NCM MacroUnited States
Consumer
95
100
105
110
115
120
125
130
135
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Manheim Used Car Value Index
NCM MacroUnited States
Consumer
0
200
400
600
800
1000
1200
1400
1600
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
New 1-Family homes sold
Range bound between 300 and 1,000
since 1963 except for the time period
of 2002 – 2006.
NCM MacroUnited States
Consumer
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
5.5
19
87
19
88
19
89
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
Delinquency Rates - All Consumer Loans (%)
NCM MacroUnited States
Consumer
80
90
100
110
120
130
140
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Household Debt to Disposable Income Ratio
NCM MacroUnited States
Consumer / Inflation
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Job Stayer vs. Job Switcher Wage Growth
Job Stayer Job Switcher 5 per. Mov. Avg. (Job Stayer) 5 per. Mov. Avg. (Job Switcher)
NCM MacroUnited States
Consumer / Inflation
-1.50
-1.00
-0.50
0.00
0.50
1.00
1.50
2.00
2.50
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Value to Switching (Switching less Staying Wage Growth)
Value to Switching 5 per. Mov. Avg. (Value to Switching)
NCM MacroUnited States
Sector Analysis
Year
Motor
Vehicle and
Parts Dealers
Furniture and
Home
Furnishings
Stores
Electronics
and
Appliance
Stores
Building
Materials and
Garden
Supplies
Food &
Beverage
Stores
Grocery
Stores
Health and
Personal
Care Stores
Gasoline
Stations
Clothing
and
Accessories
Sporting Goods,
Hobby, Book and
Music Stores
General
Merchandise
Stores
Department
stores (ex-
Leases)
Miscellaneou
s Store
retailers
Nonstore
Retailers
Food Services
and Drinking
Place
1992 14.41% 1.80% 1.47% 4.51% 12.76% 11.62% 3.09% 5.38% 4.12% 1.68% 8.51% 6.08% 1.88% 2.71% 7.00%
1993 15.23% 1.78% 1.56% 4.53% 12.05% 10.98% 2.98% 5.22% 4.01% 1.67% 8.53% 6.02% 1.98% 2.74% 6.93%
1994 16.08% 1.79% 1.69% 4.66% 11.40% 10.40% 2.86% 5.08% 3.82% 1.69% 8.44% 5.89% 2.06% 2.85% 6.67%
1995 16.40% 1.79% 1.83% 4.66% 11.02% 10.06% 2.87% 5.11% 3.70% 1.71% 8.48% 5.81% 2.14% 2.92% 6.58%
1996 16.72% 1.80% 1.82% 4.70% 10.69% 9.75% 2.92% 5.18% 3.65% 1.69% 8.41% 5.66% 2.20% 3.12% 6.46%
1997 16.72% 1.85% 1.79% 4.88% 10.45% 9.51% 3.03% 5.10% 3.58% 1.66% 8.47% 5.62% 2.31% 3.22% 6.58%
1998 16.87% 1.89% 1.82% 4.95% 10.20% 9.26% 3.17% 4.70% 3.65% 1.68% 8.60% 5.47% 2.41% 3.28% 6.64%
1999 17.32% 1.91% 1.78% 4.95% 9.83% 8.94% 3.23% 4.82% 3.61% 1.64% 8.61% 5.23% 2.36% 3.44% 6.44%
2000 17.11% 1.96% 1.76% 4.94% 9.55% 8.64% 3.34% 5.37% 3.60% 1.63% 8.66% 4.98% 2.30% 3.88% 6.53%
2001 17.06% 1.91% 1.67% 4.99% 9.68% 8.75% 3.49% 5.26% 3.51% 1.61% 8.94% 4.78% 2.16% 3.78% 6.63%
2002 16.85% 1.94% 1.72% 5.11% 9.58% 8.65% 3.71% 5.16% 3.55% 1.58% 9.21% 4.57% 2.11% 3.90% 6.81%
2003 16.72% 1.92% 1.71% 5.23% 9.43% 8.51% 3.83% 5.48% 3.55% 1.52% 9.32% 4.27% 2.03% 4.09% 6.96%
2004 16.35% 1.95% 1.77% 5.56% 9.25% 8.32% 3.76% 6.11% 3.58% 1.50% 9.38% 4.07% 1.97% 4.30% 7.05%
2005 15.92% 1.96% 1.80% 5.76% 9.12% 8.21% 3.77% 6.80% 3.59% 1.45% 9.48% 3.86% 1.93% 4.59% 7.12%
2006 15.52% 1.94% 1.81% 5.76% 9.04% 8.12% 3.85% 7.25% 3.66% 1.44% 9.53% 3.67% 1.96% 4.90% 7.28%
2007 15.23% 1.86% 1.78% 5.37% 9.17% 8.23% 3.97% 7.56% 3.71% 1.42% 9.68% 3.51% 1.95% 5.16% 7.44%
2008 13.48% 1.71% 1.82% 5.18% 9.80% 8.80% 4.24% 8.63% 3.74% 1.44% 10.27% 3.43% 1.92% 5.51% 7.86%
2009 12.52% 1.59% 1.78% 4.87% 10.61% 9.52% 4.71% 7.30% 3.82% 1.50% 11.00% 3.49% 1.93% 5.79% 8.43%
2010 13.12% 1.51% 1.72% 4.59% 10.27% 9.21% 4.60% 7.95% 3.77% 1.42% 10.68% 3.27% 1.88% 6.02% 8.25%
2011 13.42% 1.45% 1.65% 4.45% 10.05% 9.03% 4.48% 8.78% 3.76% 1.33% 10.30% 3.03% 1.84% 6.23% 8.16%
2012 13.92% 1.44% 1.60% 4.43% 9.86% 8.85% 4.30% 8.71% 3.75% 1.30% 10.08% 2.79% 1.73% 6.41% 8.23%
2013 14.49% 1.44% 1.56% 4.55% 9.69% 8.68% 4.26% 8.27% 3.72% 1.28% 9.86% 2.58% 1.70% 6.53% 8.19%
2014 14.77% 1.44% 1.50% 4.59% 9.70% 8.68% 4.34% 7.74% 3.63% 1.23% 9.65% 2.43% 1.68% 6.77% 8.33%
2015 15.31% 1.48% 1.47% 4.68% 9.71% 8.68% 4.39% 6.06% 3.59% 1.27% 9.48% 2.32% 1.70% 7.03% 8.74%
2016 15.50% 1.50% 1.39% 4.86% 9.70% 8.67% 4.61% 5.56% 3.52% 1.28% 9.19% 2.15% 1.75% 7.68% 8.35%
Median 15.52% 1.80% 1.72% 4.87% 9.80% 8.80% 3.77% 5.56% 3.65% 1.50% 9.32% 4.07% 1.96% 4.30% 7.05%
NCM MacroUnited States
Sector AnalysisYear
Health and
Personal
Care Stores
Department
stores (ex-
Leases)
Nonstore
Retailers
Food Services
and Drinking
Place
1992 3.09% 6.08% 2.71% 7.00%
1993 2.98% 6.02% 2.74% 6.93%
1994 2.86% 5.89% 2.85% 6.67%
1995 2.87% 5.81% 2.92% 6.58%
1996 2.92% 5.66% 3.12% 6.46%
1997 3.03% 5.62% 3.22% 6.58%
1998 3.17% 5.47% 3.28% 6.64%
1999 3.23% 5.23% 3.44% 6.44%
2000 3.34% 4.98% 3.88% 6.53%
2001 3.49% 4.78% 3.78% 6.63%
2002 3.71% 4.57% 3.90% 6.81%
2003 3.83% 4.27% 4.09% 6.96%
2004 3.76% 4.07% 4.30% 7.05%
2005 3.77% 3.86% 4.59% 7.12%
2006 3.85% 3.67% 4.90% 7.28%
2007 3.97% 3.51% 5.16% 7.44%
2008 4.24% 3.43% 5.51% 7.86%
2009 4.71% 3.49% 5.79% 8.43%
2010 4.60% 3.27% 6.02% 8.25%
2011 4.48% 3.03% 6.23% 8.16%
2012 4.30% 2.79% 6.41% 8.23%
2013 4.26% 2.58% 6.53% 8.19%
2014 4.34% 2.43% 6.77% 8.33%
2015 4.39% 2.32% 7.03% 8.74%
2016 4.61% 2.15% 7.68% 8.35%
Median 3.77% 4.07% 4.30% 7.05%
NCM MacroUnited States
Sector Analysis
NCM MacroUnited States
Sector Analysis
NCM MacroUnited States
Sector Analysis
NCM MacroInternational
Currencies
NCM MacroInternational
Interest Rates
NCM MacroInternational
Economics
NCM MacroInternational
Economics
NCM MacroInternational
Economics
NCM MacroInternational
Economics
NCM MacroInternational
Economics
NCM MacroMarkets
Commodities
NCM MacroMarkets
Commodities
NCM MacroUnited States
Markets
NCM MacroUnited States
Markets
NCM MacroUnited States
Markets
NCM MacroUnited States
Markets
NCM MacroUnited States
Markets
International Economics• Growth is becoming clearer, especially in Europe
• Enthusiasm might mean the near-term move is overdone
• Countries with significant commodity exposure are struggling
• Inflation largely stable, with energy noise
United States Economics• The US appears to be a few years ahead of Europe (e.g. central banks, inflation, growth)
• Business investment is rising and companies are spending on projects (e.g. FDX, ORCL, wage growth).
Manufacturing economy has improved but autos are a concern. Lots of runway for housing
• Wage growth is picking up and short-term interest rates are rising
United States Markets• Valuations are not cheap but understandable
• Relationship between volatility and returns is incoherent
• Secular trends toward ecommerce are accelerating
• Consumer balance sheets are sound and debt/income ratios may fall near-term due to higher income
• Opportunities: enabling technologies as companies implement cap ex, housing
• Concerns: weak commodities, volatility in tech stocks, autos
NCM Macro
DISCLOSURES
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