2019全球展望.pdf
One Glendinning Place Westport, CT 06880 (203) 226-3030 bridgewater Global Outlook January 20191 OUTLOOK As global liquidity continued to pull back last year, almost every asset class around the world fell. The question going forward is what the flow-through will be to growth and how policy makers will respond. With almost no tightening priced in, any tightening would be faster than discounted, and even a pause would not provide much stimulation. Markets are pricing earnings to grow at a moderate pace. We think these expectations are too optimistic, particularly in the U.S. When the next downturn comes, it could be a real mess. Central banks have little room to ease and high levels of political conflict will make an effective policy response difficult. For information about the data sources used to inform the analysis in this outlook and other important information, please review the “Important Disclosures and Other Information” located at the end of the presentation.2 Central Bank Tightens Risk Premiums FallECB Pullback AND THE FINANCIAL SYSTEM IS RELATIVELY HEALTHY FOR THIS STAGE OF THE CYCLE -6% -4% -2% 0% 2% 4% 6% 8% 10% 12% 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 Bank Lending and Funding (%GDP, 6mma) Bank Lending Flow Hot Money Funding Flow8 AMIDST THIS TIGHTENING, MOST ASSETS UNDERPERFORMED IN 2018 Natural Gas 9.2% Gold -4.6% Oil -17.6% Brazil Govt Bonds 2.5% Brazil Equities -5.7% Spain Equities -18.0% Japan Govt Bonds 1.6% United Kingdom Govt Bonds -5.8% Nickel -18.3% Korea Sovr Spreads 1.6% Canada Govt Bonds -6.8% Canada Equities -18.6% Brazil Sovr Spreads 0.8% United States Equities -7.1% Copper -19.4% India Govt Bonds 0.6% Australia Govt Bonds -7.2% Italy Equities -19.5% China Sovr Spreads 0.5% Spain Sovr Spreads -7.7% Aluminum -19.5% United States Corp Spreads -0.5% France Sovr Spreads -8.1% Korea Equities -22.6% Russia Sovr Spreads -0.6% Euroland Corp Spreads -8.4% Zinc -23.5% United States Govt Bonds -0.8% Italy Sovr Spreads -9.8% Germany Equities -23.5% Mexico Sovr Spreads -0.8% India Equities -12.9% China Equities -28.3% Russia Equities -1.7% Australia Equities -13.9% Turkey Equities -43.8% Korea Govt Bonds -1.7% France Equities -14.9% Turkey Govt Bonds -48.9% Mexico Govt Bonds -2.2% Japan Equities -15.2% Germany Govt Bonds -4.0% Mexico Equities -16.4% Turkey Sovr Spreads -4.2% United Kingdom Equities -16.7% Global Assets Ranked by 2018 Performance (USD Excess Returns) Data shown through December 31, 2018.9 MARKETS TYPICALLY LEAD THE ECONOMY Equity market peaks often followed by many months of continued economic strength and earnings growth-but also tightening Equity Market Peaks in Tightening Cycles Year of Equity Peak Months Until Economy Peaks Next 12m Equity Excess Return Next 12m Earnings Growth Next 12m Chg in Bond Yield 1966 12 -15% 6% -0.2% 1968 9 -8% -2% 1.4% 1972 11 -24% 20% 0.3% 1980 9 -13% 4% 1.4% 1983 No Turn -13% 16% 2.1% 1987 19 -16% 23% -0.1% 2000 1 -19% -25% -1.0% 2007 4 -12% -12% -0.5% Based on historical data for the US.10 EQUITY WEAKNESS HAS BEEN DUE TO FALLING VALUATIONS, WHILE EARNINGS GREW MODESTLY 80% 85% 90% 95% 100% 105% 110% 115% Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 Apr-18 Jul-18 Oct-18 Global Equity Market Action (Indexed to Jan 2018) Equity Price EPS P/E Ratio -40% -30% -20% -10% 0% 10% 20% Jan-17 Jul-17 Jan-18 Jul-18 United States Price Fwd EPS Fwd P/E -40% -30% -20% -10% 0% 10% 20% Jan-17 Jul-17 Jan-18 Jul-18 Euroland Price Fwd EPS Fwd P/E -40% -30% -20% -10% 0% 10% 20% Jan-17 Jul-17 Jan-18 Jul-18 China Price Fwd EPS Fwd P/E Plentiful liquidity and strong earnings during 2017 Softening earnings growth and tight liquidity starts to drag prices Pullback in liquidity while earnings are still strong causes prices to move sideways 11 Emerging Markets ex-China 00 05 10 15 2 -5.0% -2.5% 0.0% 2.5% 5.0% 7.5% 10.0% 12.5% Growth Potential Japan 00 05 10 15 2 -7.5% -5.0% -2.5% 0.0% 2.5% 5.0% Growth Potential Eurozone 00 05 10 15 2 -4% -3% -2% -1% 0% 1% 2% 3% 4% Growth Potential United States 00 05 10 15 2 -3% -2% -1% 0% 1% 2% 3% 4% 5% Growth Potential China 00 05 10 15 2 2.5% 5.0% 7.5% 10.0% 12.5% Growth Potential GLOBAL GROWTH IS WEAKENING Data shown through January 2019. Emerging Markets ex-China China United States Eurozone Japan12 THE BENEFIT TO GROWTH FROM U.S. FISCAL STIMULUS IS STARTING TO FADE -$1,600 -$1,400 -$1,200 -$1,000 -$800 -$600 -$400 -$200 $0 05 08 11 14 17 20 U.S. Budget Deficit ($ Billions) Estimate -1.5% -1.0% -0.5% 0.0% 0.5% 1.0% 1.5% 05 08 11 14 17 20 U.S. Fiscal Impact on Growth Estimate13 -4% -3% -2% -1% 0% 1% 2% 3% 4% 00 05 10 15 20 Rest of Economy Contribution to Real GDP Growth -4% -3% -2% -1% 0% 1% 2% 3% 4% 00 05 10 15 20 Housing and Autos Contribution to Real GDP Growth IN THE U.S., INTEREST-RATE-SENSITIVE HOUSEHOLD SPENDING AND BUSINESS INVESTMENT IS STARTING TO SLOW Timely Est. Timely Est. -4.0% -3.0% -2.0% -1.0% 0.0% 1.0% 2.0% 3.0% 4.0% 2000 2005 2010 2015 2020 Business Investment Contribution to Real GDP Growth Timely Est Fwd Est14 CENTRAL BANKS PAUSING RATE HIKES WOULDNT BE VERY STIMULATIVE BECAUSE ITS ALREADY PRICED IN -4% -2% 0% 2% 4% 6% 8% 10% 06 08 10 12 14 16 18 20 22 Fed Balance Sheet (%GDP, Y/Y) -50 bps 0 bps 50 bps 100 bps 150 bps 200 bps 12345 Years Out Global Discounted Annual Tightening USA EUR JPN GBR CHN 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 90 95 00 05 10 15 20 25 U.S. Short Rate Di s cou nt ed15 MARKETS ARE EXPECTING MODERATE EARNINGS GROWTH AND U.S. OUTPERFORMANCE TO CONTINUE Forward estimate is based on Bridgewater analysis. -0.6 -0.4 -0.2 0.0 0.2 0.4 0.6 0.8 1970 1980 1990 2000 2010 2020 USA vs Developed World Fwd EPS (ln) Implied Future Path of Earnings 4.1 4.2 4.3 4.4 4.5 4.6 4.7 4.8 4.9 5.0 5.1 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 US Earnings Per Share Actual EPS (ln) BW Est Analyst Est (2017) Analyst Est (Today)16 CASH HAS BECOME A GOOD ALTERNATIVE, ESPECIALLY IN THE U.S. Data as of December 2018. Return expectations are based on Bridgewater analysis. Please review the “Important Disclosures and Other Information” located at the end of this presentation. 0% 2% 4% 6% 8% 10% Forward Cash Rate 10 Year Bond Yield 10 Year Expected Equity Re turn The Risk Curve is Relatively Flat More risky Less risky 2013: Still steep after years of easing Midway through QE3, some recovery and a bit of a move out the risk curve 2009: Crisis & Fed starts easing Curve steep as equities sell off, the Fed pushes short rates to zero, and turns to QE Now Curve relatively flat despite equity selloff, with Fed raising rates & reversing QE. Expected Return (Yield) -1% 1% 3% 5% 7% 9% 11% 13% Forward Cash Rate 10 Year Bond Yield 10 Year Expected Equity Return Eurozone 2013 2009 Now -1% 1% 3% 5% 7% 9% Forward Cash Rate 10 Year Bond Yield 10 Year Expected Equity Return Japan 2013 2009 Now 0% 2% 4% 6% 8% 10% Cash Rate 10 Year Bond Yield 10 Year Expected Equity Return Emerging Markets 2013 2011 Now Eurozone Japan Emerging Markets17 Emerging Markets ex-China 00 05 10 15 20 -5.0% -2.5% 0.0% 2.5% 5.0% 7.5% 10.0% 12.5% Growth Potential China 00 05 10 15 20 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% Growth Potential Bank Claims on Financials (NBFIs and Other Banks) 2010 2015 35% 40% 45% 50% 55% 60% 65% 70% 75% -2% 0% 2% 5% 8% 10% 13% 15% Level (%GDP) Change (12m, %GDP) Bank Claims on Real Economy 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 130% 135% 140% 145% 150% 155% 160% 165% 170% 175% 180% 0% 5% 10% 15% 20% 25% 30% Level (%GDP) Change (6m, %GDP) MEANWHILE, CHINA IS SLOWING DUE TO PAST TIGHTENING AND THE GLOBAL GROWTH SLOWDOWN Top charts updated through January 2019. Bottom charts updated through November 2018. Please review the “Important Disclosures and Other Information” located at the end of this presentation.18 Base Money Creation (%GDP) 10 15 0% 2% 5% 8% CHINESE POLICY MAKERS ARE NOW EASING MONETARY AND FISCAL POLICY AND PAUSING REGULATORY TIGHTENING Please review the “Important Disclosures and Other Information” located at the end of this presentation. 1% 2% 3% 4% 5% 6% 2010 2012 2014 2016 2018 3m Swap Rate -20 -15 -10 -5 0 5 10 15 20 2007 2009 2011 2013 2015 2017 2019 Regulatory Stimulus/Tightening - Change CBRC cracks down on WMPs, restricts new lending by banks. Tightening on frothy housing market. Opening of muni bond market to combat “significant downward pressure“ on economy. New rules require more transparency on WMP assets and interbank lending. 2015 Stock Market crash. Regulatory windstorm - crackdown on shadow products. Lull over party congress followed by resurgence in regulatory pressure. More neutral stance as conditions have slowed. 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 2015 2016 2017 2018 2019 Local Govt Net Issuance (%GDP, 12mma)19 UNIQUE RISKS OF THE NEXT DOWNTURN Central banks ability to reverse the next downturn will be limited. Political divisions will impact effective policy action. Deflation with interest rates near zero can trigger a self- reinforcing rise in real interest rates and rising risk premiums. Too many financial promises to be kept.20 Global Outlook Appendix21 THE COMPOSITION OF MARKET ACTION CHANGED THROUGHOUT 2018 Data shown as of December 27, 2018. Please review the “Important Disclosures and Other Information” located at the end of this presentation. This analysis incorporates components of the All Weather Lens, which is an analytical approach to assess the behavior of the major drivers of asset performance and their impact on markets during any given period, based on Bridgewaters understanding of global financial markets. Information shown is the result of analyses of actual and simulated market data. -10% -8% -6% -4% -2% 0% 2% 4% 6% Jan-18 Apr-18 Jul-18 Oct-18 Jan-19 Returns from Changes in the Discount Rate Tightening was a bearish pressure on assets throughout the year. -10% -8% -6% -4% -2% 0% 2% 4% 6% Jan-18 Apr-18 Jul-18 Oct-18 Jan-19 Returns from Changes in Risk Premiums Tightening then flowed through to rising risk premiums -10% -8% -6% -4% -2% 0% 2% 4% 6% Jan-18 Apr-18 Jul-18 Oct-18 Jan-19 Returns from Growth Rate Being Faster Than Discounted and tightening and rising risk premiums eventually began to flow through to declining growth expectations as well. -10% -8% -6% -4% -2% 0% 2% 4% 6% Jan-18 Apr-18 Jul-18 Oct-18 Jan-19 Returns from Inflation Rate Being Higher Than Discounted Discounted inflation has been roughly stable through the year, albeit down a bit recently. 22 WHILE U.S. EQUITIES AND BONDS ARE PRICING IN UNPRECEDENTED OUTPERFORMANCE, CURRENCY PRICING ISNT AS EXTREME -2% -1% 0% 1% 2% 20 40 60 80 00 20 Real Long Rate (U.S. vs Developed World) -3% -1% 1% 3% 20 40 60 80 00 20 Real Implied Earnings Growth (U.S. vs Developed World) -30% -10% 10% 30% 50% 20 40 60 80 00 20 Real Exchange Rate (U.S. vs Developed World) 100-year highs 100-year highs Not at extremes and priced to depreciate Data current as of December 2018. Please review the “Important Disclosures and Other Information” located at the end of this presentation.23 EMERGING MARKET VALUATIONS AND SENTIMENT ARE LOW -40% -30% -20% -10% 0% 10% 20% 30% 80 90 00 10 20 EM ex-CHN Real FX Real FX vs USD 3yr Disc 30% 40% 50% 60% 70% 80% 90% 100% 110% 120% 00 05 10 15 20 EM ex-CHN Earnings per Share EM vs US Equities 10% 11% 12% 13% 14% 15% 16% 17% 18% 08 10 12 14 16 18 EM Asset Share of Global Mutual Funds & ETF Holdings -40% -20% 0% 20% 40% 60% 80% 00 05 10 15 Investment Manager Sentiment on EM Equities Please review the “Important Disclosures and Other Information” located at the end of this presentation.24 -4 -3 -2 -1 0 1 2 3 70 80 90 00 10 20 EM ex-China FX vs USD -6 -4 -2 0 2 4 6 8 10 90 00 10 20 EM ex-China Equities in USD ENVIRONMENTS OF CONTRACTING LIQUIDITY ARE TYPICALLY TOUGH FOR EMERGING MARKET ASSETS FX returns shown in cumulative terms. FX analysis incorporates components of the All Weather Lens, which is an analytical approach to assess the behavior of the major drivers of asset performance and their impact on markets during any given period, based on Bridgewaters understanding of global financial markets. Information shown is the result of analyses of actual and simulated market data. Please review the “Important Disclosures and Other Information” located at the end of this presentation. Liquidity Expands Liquidity Contracts Emerging Markets ex-China 00 05 10 15 20 -5.0% -2.5% 0.0% 2.5% 5.0% 7.5% 10.0% 12.5% Growth Potential25 LARGE DIVERGENCES ACROSS EM COUNTRIES SUSCEPTIBILITY TO LIQUIDITY PULLBACK Today: Emerging Market Susceptibility Reliance on Foreign Capital Ability to Manage Country Current Account (%GDP) Financial Inflows (%GDP) Hard FX Ext Debt (%GDP) ST Ext Debt (%Total Ext) FX Pegged or Heavily Managed Net Reserves (%GDP) Ext Debt in Local FX (%Total) Aggregate Susceptibility Argentina -5% 9% 31% 10% No 3% 13% Very High Turkey -7% 3% 45% 16% No 1% 6% Very High Chile -1% 4% 54% 14% No 19% 8% Med South Africa -3% 7% 19% - No 11% 59% Med Indonesia -2% 1% 25% 8% No 6% 15% Med Brazil -1% 1% 28% 6% No 14% 4% Med Hungary 3% -2% 59% 25% No 8% 23% Med/Low Poland 0% -1% 49% 11% No 13% - Med/Low Malaysia 4% 4% 55% 24% No 17% 15% Med/Low Czech Republic 1% -1% 68% 32% Yes 51% - Med/Low Taiwan 14% 4% 26% 23% No 58% - Med/Low Mexico -1% 2% 25% 7% No 10% 25% Med/Low India -2% 5% 13% 5% No 12% 36% Med/Low Philippines -1% 0% 17% 5% No 19% 3% Low Peru -1% 1% 27% 7% No 19% - Low Thailand 12% 2% 19% 13% No 40% 35% Low Russia 3% -1% 22% 6% No 21% 27% Low South Korea 5% 2% 20% 8% No 26% 27% Low Please review the “Important Disclosures and Other Information” located at the end of this presentation.