www.ecabot.com | [email protected] cabot’s wealth management, inc. salem rotary january 5, 2016 |...
TRANSCRIPT
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www.eCabot.com | [email protected]
Cabot’s Wealth Management, Inc.Salem Rotary
January 5, 2016 | Salem, MA
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2016 Global Economy – Improving with Upside
ROB LUTTS, PRESIDENT & CHIEF INVESTMENT OFFICER
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26TH ANNUAL WEALTH MANAGEMENT CONFERENCE
Outline
1.STATE OF ECONOMIES AND MARKETS
2.WHAT MATTERS TODAY?
3.WHAT STRATEGIES WILL WORK TODAY?
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• Global Economic Recovery in
Question:
Global Slowdown – Led by China
• Central Bank Intervention:
New Exit Phase Beginning in USA
Key Factors Today
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What Matters Today?
•Growth
•Debt
•Freedoms
•Innovation - Underestimated
•War’s and Conflicts
•Confidence - Lacking
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26TH ANNUAL WEALTH MANAGEMENT CONFERENCE
Energy Innovation:• U.S. is Expanding Energy Production Rapidly – • 82% over 7 years. Impact – Lower Inflation and interest
rates• Driving manufacturing in USA – cost advantage to USA –
amazing positive factor (not well appreciated)• Driving Profits Higher for many U.S. Companies
U.S. Innovation Pace is Expanding:• Silent Innovation Revolution – Like Industrial Revolution in
1900s• U.S. Leading World Innovation: Google, Apple, Facebook,
Linked In, Salesforce.com, Illumina, SolarCity, Tesla, Biogen
Unexpected Changes Having Key Impact
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26TH ANNUAL WEALTH MANAGEMENT CONFERENCE
• Interest Rate Trends Favorable for Equities:
Competition is Weak
• Low Energy Cost – Very Positive
• Innovation Trends – Unappreciated
• Deferred Capital Spending:
Indications Trend Finally Picking up
• Equity Valuations Higher, Yet Attractive Today:
P/E at Fair Value Today
• Consumer Finances are Strong Today
U. S. Economy on Good Foundation Today
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Unimaginable Energy Revolution!Peak at 9,600 in May …now about 9,200 BBD
Never Underestimate American Ingenuity and Innovation
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26TH ANNUAL WEALTH MANAGEMENT CONFERENCE
Dramatic Rig Adjustment Will Soon Stabilize Oil Prices
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26TH ANNUAL WEALTH MANAGEMENT CONFERENCE
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26TH ANNUAL WEALTH MANAGEMENT CONFERENCE
Could inflation stay low longer? Yes – time will tell
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26TH ANNUAL WEALTH MANAGEMENT CONFERENCE
Normal recovery at this stage of employment usually at quicker pace
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26TH ANNUAL WEALTH MANAGEMENT CONFERENCE
Debt Obligations of HouseholdsNow Dramatically Lower
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26TH ANNUAL WEALTH MANAGEMENT CONFERENCE
Consumers Coming Back! Still Lower than Normal Confidence
101 ReadingWell Below Prior Peaks
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26TH ANNUAL WEALTH MANAGEMENT CONFERENCE
New Home Formations Very Strong – Good Sign for Growth
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Global Abundance
•Debt
•Commodities
•Capital / Liquidity
•Global Conflict – Middle East
•Political “Hot Air”
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26TH ANNUAL WEALTH MANAGEMENT CONFERENCE
August 2015 Financial Markets
Financial Turbulence
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26TH ANNUAL WEALTH MANAGEMENT CONFERENCE
The Financial Markets Environment We All Want
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26TH ANNUAL WEALTH MANAGEMENT CONFERENCE
Core Belief: Innovation Leads to Great Value Creation
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More information has been produced in the last 20 years than the previous 5,000. Today the amount of information and knowledge in the world is doubling every 18 months.
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26TH ANNUAL WEALTH MANAGEMENT CONFERENCE
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Benefits of information technologycan take us a long way!I believe Internet and IT will have much larger impact on productivity than electricity.
Speed of productivity increased dramatically
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U.S. Economy: Most Resilient, Adaptable, Creative and Innovative Economy
• Why? Free Markets, Capital Markets, Legal System, Educational System, Entrepreneurs Who Drive Ideas, Culture of Growth and Progress
• Expect More Growth and a Better Economy in the coming years
• Disruption to established industries high – Value Erosion
• Opportunities for value creation very high in next decade
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Wealth Management:• Investment management• Asset allocation (equities, fixed income, international
securities, alternative assets, etc.)• Investment choices within each asset class
• Retirement planning• Tax planning• Estate planning• Risk management (planning for catastrophic risks
including disability, death, long-term care, personal liability, personal property)
Core Belief: Wealth Management Process is Critical
“Investment management and thus Asset Allocation” is one of the (important) components within “Wealth Management”
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Markets
26TH ANNUAL WEALTH MANAGEMENT CONFERENCE
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Equity Markets Today
• Monetary Condition Positive
• Earnings Positive
• Valuation Fair
• Investor Psychology
Positive
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26TH ANNUAL WEALTH MANAGEMENT CONFERENCE
14 Year Trading Range 1999 – 2013 Now Ended – BREAKOUT Positive
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26TH ANNUAL WEALTH MANAGEMENT CONFERENCE
Markets Have Upward Bias –2013 Breakout – Very Positive
A Secular Bullish Phase or a Cyclical Bullish Phase?
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Source: Bloomberg
NOTE: The S&P 500 Index is a widely recognized, unmanaged Index of common stock prices.
“Normal” Market Volatility:3 Corrections per year > 5%1 Correction per year > 10%1 Correction every 3+ years > 20%
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26TH ANNUAL WEALTH MANAGEMENT CONFERENCE
The Public Is Not Participatingin this Bull Market! Surprising.
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30 Year Treas. Bond 3.0% 9/10/15
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The Bullish Projections By Some Analysts
Earnings Multiple*** Target Upside
2016 $123.00 19.0 X 2,340 14%
As of 12/31/15 SP 500 is 2050*** Between 1-3 % inflation Ave. P/E is 19X
How High Can Stocks Go?
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Summary
•US Stocks Overweight
•Foreign Stocks - Developed Neutral
•Emerging Markets/Frontier Neutral
•Domestic and Foreign Bonds Shorter
•Precious Metals Under
•REITS Neutral
•Alternative Assets Neutral
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Strategy
26TH ANNUAL WEALTH MANAGEMENT CONFERENCE
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Changing World
•Amazon Market Cap > Walmart
•Macy’s Closing 40 mainline stores
•Top Rated Auto is Electric Vehicle
•Advertising dollar moving on-line
•Sharing Economy: Uber, Airbnb, ESTY, Zipcar, Kickstarter
•Consumer Intelligence is High
26TH ANNUAL WEALTH MANAGEMENT CONFERENCE
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Cabot’s Top Growth Themes
Health Diagnostic Innovation: • Biotechnology and Genomic Breakthroughs • Sequencing, Testing, Gene Editing, Equipment, Analysis
Cyber Security: • Network, Big Data, Privacy and Protecting Data, • Advanced Analytics, Business Intelligence
Transportation Innovation: • New platform (Electric Vehicles) of power generation, • Batteries, Electric Vehicles and, Use of Solar for auto power
26TH ANNUAL WEALTH MANAGEMENT CONFERENCE
“Innovation is the specific instrument of entrepreneurship...the act that endows resources with a new capacity to create wealth.”
- Peter F. Drucker
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26TH ANNUAL WEALTH MANAGEMENT CONFERENCE
• Advanced Materials: Carbon Fibers, Composite Materials, Advanced Glass (solar) technologies, Composite Woods, Advanced Adhesives
• Internet Efficiency: Cloud, Storage, Security, Smart Software
• Digital Efficiency: Smart Stop Lights, A More Efficient World is Coming
• Alternative Energy: Solar, Batteries, Power Management, Efficient Transfer of Power, Residential Power Management
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26TH ANNUAL WEALTH MANAGEMENT CONFERENCE
• Search and Artificial Intelligence: Coming Sooner Than Anyone Expects: “The Singularity” – Ray Kurzweil
• Education: Digital Education, Mobil Education, New Delivery Mechanisms
• Technology: Applications, Smart Processes, Banking, Utilities, Retail Chain, Software
• Health Monitoring: Wearable devices, Disease Management, link to medical system, Insurance driven
• Emerging Middle Class of Emerging Markets: Banking, Consumption, Retail, Capital Goods
• Alternative Currency and Real Assets: Protecting purchasing power of currency, Non Paper Currency, Gold, Silver and hard assets, Digital Currency and Land and Real Estate
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Genomics
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Change is Coming
26TH ANNUAL WEALTH MANAGEMENT CONFERENCE
Science 100 years ago to today
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26TH ANNUAL WEALTH MANAGEMENT CONFERENCE
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Better Treatments and Cures
•Routine DNA sequencing to monitor overall health
•Personalized medicine. Cures
•Longer, healthier lifespans
•Much lower healthcare costs
•Higher quality of life, esp. seniors
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26TH ANNUAL WEALTH MANAGEMENT CONFERENCE
The Electric Vehicle Industry- Innovation
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26TH ANNUAL WEALTH MANAGEMENT CONFERENCE
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1.2 Gigawatts of power equals : 1 nuclear Power Plant, 1,450 Large Wind Turbines, 60% of the Hoover Dam, Two Huge Gas Turbines, 10 Jett Engines, 6 million bike riders, and 8 million solar panels.
Tesla Battery FactoryReno, Nevada – 2017 Production Date
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26TH ANNUAL WEALTH MANAGEMENT CONFERENCE
• Shorter Term: 1-2 years Positive on U.S. Economy and Equities in General – Volatility Expected as we adjust to normalized interest rates
• Mid Term: 2-4 years Yes …We See Troubles Brewing… New Bubbles in Economy. Eventually valuations will become excessive.
• Long Term – Coming Decade: U.S. is well positioned to benefit from innovation
Emerging Middle Class – 3 Billion Entering This Phase
Is Six -Year Bull Market Over? Cyclical Bull or Secular Bull
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Resilient, Adaptable, Creative and Innovative
•Expect More Growth and a Better Economy in the coming years
•Disruption to established industries high Value Erosion
•Opportunities for value creation very high in next decade
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QUESTIONS