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RBC Global Asset Management
Daniel E. Chornous, CFA Chief Investment Officer
RBC Global Asset Management
November 2012
2
Global Investment Outlook PMIs swing upward…
30
35
40
45
50
55
60
65
2008 2009 2010 2011 2012 2013
Global Purchasing Manager's Indices
JPMorgan Global Mfg. PMIISM Mfg. PMIChina Mfg. PMIEuro Area Mfg. PMI
Source: Haver Analytics, RBC GAM
ISM Peak Jan 2011: 59.9
0
2
4
6
8
10
12
14
16
1980 1985 1990 1995 2000 2005 2010 2015
%
U.S. 10-Year T-Bond YieldEquilibrium Range
Last Plot: 1.69%
Current Range: 2.31% - 4.14% (Mid: 3.22%)
Source: RBC GAM, RBC CM
40
65
106
174
284
464
759
1240
2026
3311
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015
S&P 500 EquilibriumNormalized Earnings & Valuations
Source: RBC GAM
Nov. '12 Range: 1215 - 2045 (Mid: 1630)
Nov. '13 Range: 1303 - 2192 (Mid: 1747)
Current (23-November-12): 1409
3
Critical factors Housing sector begins to heal
-15
-10
-5
0
5
10
15
20
25
30
35
1990 1995 2000 2005 2010 2015
YoY
% C
hange
U.S. Housing PricesCore Logic National HPI ex-Distressed Properties*
*Distressed Properties include short sales and real estate owned (REO)
Source: Core Logic
20% Below peak housing price
30% Below peak housing price
40% Below peak housing price
2.0
2.5
3.0
3.5
4.0
4.5
1990 1995 2000 2005 2010 2015
X
Home Prices as a Multiple of Median Household IncomeExisting House Price Divided by Median Income
Source: National Association of Realtors
Peak of Housing MarketMedian Price $230,900
Average Ratio 1986-2001: 2.85Last Plot: 2.59
22% Correction required to achieve average ratio
4
Critical factors Housing sector begins to heal
0.4
0.8
1.2
1.6
2.0
2.4
1980 1985 1990 1995 2000 2005 2010 2015
Mill
ion
Un
its
U.S. Housing – New Private Housing Units StartedTotal Starts Including Farm Housing
Source: Census, Housing Starts
-60
-50
-40
-30
-20
-10
0
10
20
30
40
50
2000 2003 2006 2009 2012 2015
YoY
% C
hange
Un
its S
old
United States Housing StatisticsExisting Home Sales
Source: National Association of Realtors
2
4
6
8
10
12
1990 1995 2000 2005 2010 2015
Month
s
U.S. Housing – Month's Supply of Homes on the MarketExisting Single Family Homes
Source: National Association of Realtors
Last Plot: 5.4
5
Critical factors Credit conditions continue to ease
-45
-25
-5
15
35
55
75
95
1990 1995 2000 2005 2010 2015
QoQ
% C
hange
Senior Loan Officer Survey on Bank Lending Practices
Loan Officers Reporting Tightening Standards
Mortgage Loans to Individuals (Inverted)
Commercial & Industrial Loans (Inverted)
Source: Federal Reserve, Haver Analytics
Tightening
Easing
-80
-60
-40
-20
0
20
40
60
80
1990 1995 2000 2005 2010 2015
QoQ
% C
hange
Senior Loan Officer Survey on Bank Lending Practices
Banks Reporting Stronger Demand for C & I Loans
Large and Medium Firms
Small Firms
Source: Federal Reserve, Haver Analytics
More Demand
Less Demand
6
Critical factors Credit conditions continue to ease
-40
-20
0
20
40
60
80
100
2003 2006 2009 2012
QoQ
% C
hang
e
ECB Euro Area Bank Lending Survey
Banks Reporting Tightening Credit Standards
Loans to Individuals for House Purchases(Inverted)
Loans to Enterprises (Inverted)
Source: European Central Bank, Haver Analytics
Tightening
Easing
-80
-60
-40
-20
0
20
40
60
80
2003 2006 2009 2012
QoQ
% C
hange
ECB Euro Area Bank Lending Survey
Change in Business Loan Demand
Large Enterprises
Small and Medium Enterprises
Source: European Central Bank, Haver Analytics
More Demand
Less Demand
-60
-40
-20
0
20
40
60
2003 2006 2009 2012
QoQ
% C
hang
e
ECB Euro Area Bank Lending SurveyChange in Demand for Consumer Credit
Source: European Central Bank, Haver Analytics
-80
-60
-40
-20
0
20
40
60
80
2003 2006 2009 2012
Qo
Q %
Ch
an
ge
ECB Euro Area Bank Lending SurveyChange in Demand for Housing Loans
Source: European Central Bank, Haver Analytics
7
Critical factors Corporate and household deleveraging largely behind
14
15
16
17
18
19
20
1980 1985 1990 1995 2000 2005 2010 2015
%
U.S. Financial Obligations RatioTotal Obligations as a % of Personal Disposable Income
Source: Federal Reserve
Last Plot: (Q2'12): 15.8%Average 1980-Present: 17.2%
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
1980 1985 1990 1995 2000 2005 2010 2015
$ B
illio
ns
U.S. Consumer Debt Outstanding(Total, SAAR)
Source: Federal Reserve
Last Plot: Q2 '12 $12.9 Tr
Peak: Q1 '08 $13.9 Tr
8
Critical factors Corporate and household deleveraging largely behind
20
40
60
80
100
120
140
160
1990 1995 2000 2005 2010 2015
Ind
ex L
eve
l
United StatesConsumer Confidence by Income Level
Confidence: Income Over $50,000
Confidence: Income Under $50,000
Source: The Conference Board, RBC GAM
0.7
0.8
0.9
1.0
1.1
1.2
1.3
1.4
1.5
1.6
1.7
1.8
2006 2007 2008 2009 2010 2011 2012 2013In
de
x L
eve
l
Luxury StocksS&P Global Luxury Index Relative to S&P 500
Source: Standard & Poor's, Bloomberg, RBC GAM
9
Critical factors Corporate and household deleveraging largely behind
9
10
11
12
13
14
1994 1997 2000 2003 2006 2009 2012
Tie
r 1
Ris
k-B
ase
d C
apita
l R
atio
(%
)
U.S. Banks Capital Ratios
Note: Tier 1 risk-based capital ratio of all FDIC insured institutions.Source: FDIC, Haver Analytics, RBC GAM
5
10
15
20
25
30
35
40
45
50
1980 1984 1988 1992 1996 2000 2004 2008 2012
Co
rpo
rate
De
bt-
to-I
nco
me
Ra
tio
(%
)
U.S. Corporate Leverage
Source: Federal Reserve Board, Haver Analytics, RBC GAM
10
Critical factors – …but threats remain Fiscal cliff is nearing
Bush Tax Cuts
Payroll Tax Cut
Budget Control Act
UI Extension
Other
2012 2013
If nothing is done,
expiring fiscal policy
chops a huge 3% off
2013 GDP growth….
Politicians
will hopefully
soften the
blow….
…or a 2013
recession could
loom
FISCAL CLIFF
Source: RBC GAM, CBO
11
Critical factors – …but threats remain Fiscal cliff is nearing
2.2 2.5
0.3
-0.6-1.3
-1.4
-4.6
-6
-4
-2
0
2
4
2008 2009 2010 2011 2012 2013Ch
ange
in B
udge
t B
ala
nce
as a
% o
f G
DP
U.S. Fiscal Drag Mounts
Note: A negative number indicates smaller deficit / bigger surplus versus prior year.Source: International Monetary Fund, Haver Analytics, RBC GAM
RBC GAM base case scenario
"Thelma & Louise" scenario
Fiscal boost
Fiscal drag
12
Critical factors – …but threats remain European debt crisis chronic, but not terminal
0
200
400
600
800
1000
1200
1400
1600
1800
2000
2200
2010 2011 2012 2013
Basis
Poin
ts
European Banks – Ireland, Spain & PortugalCDS 5-Year Spreads
Santander BBVA
Banco Espirito Santo Banco Comercial Portugues
Allied Irish Bank of Ireland
Société Générale
Source: Bloomberg
13
Critical factors – …but threats remain China growth nearing a bottom?
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
18.0
20.0
22.0
30
35
40
45
50
55
60
65
70
75
80
2005 2006 2007 2008 2009 2010 2011 2012 2013
Le
ve
l
China Purchasing Managers Index and GDP
Real GDP (RHS)
Purchasing Manager's Index (LHS)
Source: China National Bureau of Statistics, Markit
-4
-2
0
2
4
6
8
10
12
14
2000 2005 2010 2015
YoY
% C
hange
ChinaConsumer Price Index
Overall CPI
CPI Excluding Food
Source: China National Bureau of Statistics
14
Stress Indicators
0
10
20
30
40
50
60
70-2
-1
0
1
2
3
1990 1995 2000 2005 2010 2015
%%
U.S. Yield Curve vs. VIX Volatility
Recession Periods
U.S. 10yr-2yr Spread (LHS, Inv, Adv 30 Months)
VIX (RHS)
Source: RBC GAM
VIX Nov. 23: 15.1
0.0
5.0
10.0
15.0
20.0
25.0
0
500
1000
1500
2000
2500
1986 1990 1994 1998 2002 2006 2010 2014
%
Basis
Poin
ts
High Yield Bond Spread
Credit Suisse HY Index Spread-to-Worst LastPlot: 603 (LHS)
Spread-to-Worst Threshold
HY Default Loss Rate (7 Months Later) LastPlot: 0.98% (RHS)
Source: Credit Suisse, RBC GAM
588 bps588 bps
15
Employment A critical concern, though signs of healing are beginning to show
-8
-6
-4
-2
0
2
4
6
8
10
30
35
40
45
50
55
60
65
70
75
80
1990 1995 2000 2005 2010 2015
Yo
Y %
Ch
an
ge
Ind
ex L
eve
l
United States ISM Manufacturing Index and Non-Farm Employment
ISM Manufacturing Index (Adv. 12 Months, LHS)
Non-Farm Employment (RHS)
Source: Institute for Supply Management, BLS
-5
-4
-3
-2
-1
0
1
2
3
4
50
2
4
6
8
10
12
14
16
1990 1995 2000 2005 2010 2015
Yo
Y %
Ch
an
ge
%
United StatesNon-Farm Employment and the Fed Funds Rate
Fed Funds Rate (Inverted, Adv 18 Mos, LHS)
Non-Farm Employment (RHS)
Source: ISI Portfolio Strategy
-6
-4
-2
0
2
4
6
8
1990 1995 2000 2005 2010 2015
YoY
% C
hange
United StatesReal Consumer Spending and Non-Farm Employment
Non-Farm Employment
Real Personal Consumption
Source: Bureau of Labor Statistics, Bureau of Economic Analysis, Citigroup
16
Economic indicators Move past a period of negative surprise
-5
-4
-3
-2
-1
0
1
2
3
1980 1985 1990 1995 2000 2005 2010 2015
Index L
evel
Chicago Fed National Activity IndexThree Month Moving Average
Source: Federal Reserve Bank of Chicago, RBC GAM
+0.7
-0.7
Risk of Inflation
Risk of Recession
20
30
40
50
60
70
80
2002 2004 2006 2008 2010 2012
% o
f Rep
orts
Westpac United States Data Surprise IndexPositive Surprise
Source: Westpac Strategy Group
17
30
35
40
45
50
55
60
65
1998 2000 2002 2004 2006 2008 2010 2012
Global Leading IndicatorsJP Morgan Global Purchasing Managers Index
Source : Haver Analytics
Current Recent Trough Cycle Peak
Canada 58.3 46.8 (Jul-11) 73.2 (Mar-11)
Russia 52.9 49.8 (Jul-11) 55.6 (Mar-11)
India 52.9 50.4 (Sep-11) 59.0 (May-10)
United States 51.7 49.6 (Aug-12) 59.9 (Jan-11)
Brazil 50.2 45.5 (Sep-11) 57.8 (Jan-10)
China 49.5 47.6 (Aug-12) 57.4 (Jan-10)
United Kingdom 47.5 45.2 (Jul-12) 59.5 (Nov-10)
Japan 46.9 45.7 (Apr-11) 54.7 (May-10)
Germany 46.0 43.0 (Jul-12) 62.7 (Feb-11)
Italy 45.5 43.3 (Oct-11) 59.0 (Feb-11)
France 43.7 42.7 (Sep-12) 57.9 (Nov-10)Source: Markit, Haver Analytics
Global Purchasing Managers Indices
Manufacturing - as of October 2012
Economic indicators PMIs turn higher
18
Fixed Income Short rates near crisis levels as central banks continue to ease
-2
0
2
4
6
8
10
12
14
16
18
20
22
24
1980 1985 1990 1995 2000 2005 2010 2015
%
U.S. Fed FundsEquilibrium Range
Last Plot: 0.16%
Current Range: 0.30% - 2.57% (Mid: 1.43%)
Source: Federal Reserve, RBC GAM
-100
-80
-60
-40
-20
0
20
40
60
80
100
1980 1985 1990 1995 2000 2005 2010 2015
% A
bove/B
elo
w E
quili
brium
Global (ex-Japan) Short-Term Interest Rate CompositeShort-Term Interest Rates Relative to Equilibrium
Source: RBC GAM
Last Plot: -71.0%
19
Fixed Income Long term bond yields held down by risk aversion and unorthodox policy
-4
-2
0
2
4
6
8
10
12
14
16
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015
%
United StatesCPI Inflation
36-month Centred CPI Inflation
Actual Monthly CPI Inflation
Source: RBC GAM, RBC CM
Last Plot : 2.3%
12-month Forecast: 1.8%
36-month Centred CPI
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
12.0
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015
%
United StatesReal 10 Year T-Bond Yield
Real T-Bond Yield
Real 10-Year Time Weighted Yield
Source: RBC GAM, RBC CM
+1 SD
-1 SDAverage: 2.5%
Last Plot: -0.6%
12-month Forecast: 1.14%
0
2
4
6
8
10
12
14
16
1980 1985 1990 1995 2000 2005 2010 2015
%
U.S. 10-Year T-Bond YieldEquilibrium Range
Last Plot: 1.69%
Current Range: 2.31% - 4.14% (Mid: 3.22%)
Source: RBC GAM, RBC CM
20
Fixed Income Ultra-low yields not just a domestic issue
1
3
5
7
9
11
13
15
17
1980 1985 1990 1995 2000 2005 2010 2015
%
Canada 10-Year Bond YieldEquilibrium Range
Last Plot: 1.79%
Current Range: 2.50% - 4.18% (Mid: 3.34%)
Source: RBC GAM, RBC CM
2
4
6
8
10
12
14
16
18
1980 1985 1990 1995 2000 2005 2010 2015
%
Eurozone 10-Year Bond YieldEquilibrium Range
Last Plot: 2.58%
Current Range: 3.20% - 4.41% (Mid: 3.80%)
Source: RBC GAM, RBC CM
0
2
4
6
8
10
12
14
1980 1985 1990 1995 2000 2005 2010 2015
%
Japan 10-Year Bond YieldEquilibrium Range
Last Plot: 0.74%
Current Range: 1.22% - 2.07% (Mid: 1.65%)
Source: RBC GAM, RBC CMSource: RBC GAM, RBC CM
0
2
4
6
8
10
12
14
16
18
1980 1985 1990 1995 2000 2005 2010 2015
%
United Kingdom 10-Year GiltEquilibrium Range
Last Plot: 1.84%
Current Range: 2.33% - 4.41% (Mid: 3.37%)
Source: RBC GAM, RBC CM
21
Fixed Income Long term bond yields held down by risk aversion and unorthodox policy
-60
-40
-20
0
20
40
60
1980 1984 1988 1992 1996 2000 2004 2008 2012
% A
bo
ve
/Be
low
Eq
uili
briu
m
Global Bond Market Composite10-Year Government Bond Yields Relative to Equilibrium
Last Plot: -41.50%
Source: RBC GAM
22
Fixed Income Technical indicators suggest elevated risk in fixed income markets
Source: RBC CM
Long-term Price Momentum
-60
-40
-20
0
20
40
60
80
1980 1985 1990 1995 2000 2005 2010 2015
YoY
% C
hange
U.S. 10-Year T-bond YieldsRate of Change
Source: RBC GAM
Oversold
Overbought
Last Plot: -18.3%
Sell bonds as yield moves above 1.65%
Current Yield: 1.69%
0
20
40
60
80
100
1995 2000 2005 2010 2015
% B
ulli
sh
U.S 10-Year T-Bond Bullish Consensus
Source: Market Vane, RBC GAM
Too Many Bulls
Too Many Bears
Last Plot: 74% Bulls
US TSY 10YR BOND YLD U10Y.ZZ.U
100 MONTHS AUG04 - 23NOV12
TREND:
TURN
(TU-CL)%:
SMO TPL:
1.5234
1.1608
-31.31
10326
HI-JUN06
HI/LO DIFF
5.1364
-71.42%
LO-JUL12 1.4679
CLOSE 1.6899
1.50
2.00
2.50
3.00
3.50
4.00
4.50
2004 2005 2006 2007 2008 2009 2010 2011 2012
23
Equity Markets Global markets far below “fair value”
40
65
106
174
284
464
759
1240
2026
3311
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015
S&P 500 EquilibriumNormalized Earnings & Valuations
Source: RBC GAM
Nov. '12 Range: 1215 - 2045 (Mid: 1630)
Nov. '13 Range: 1303 - 2192 (Mid: 1747)
Current (23-November-12): 1409
141
217
334
514
792
1221
1881
2899
1980 1985 1990 1995 2000 2005 2010 2015
Eurozone Datastream IndexNormalized Earnings & Valuations
Source: Datastream, Consensus Economics, RBC
Nov. '12 Range: 1217 - 2288 (Mid: 1752)
Nov. '13 Range: 1405 - 2643 (Mid: 2024)
Current (23-November-12): 1050
48
62
81
106
137
179
233
303
394
1995 2000 2005 2010 2015
Emerging Market Datastream IndexNormalized Earnings & Valuations
Source: Datastream, RBC GAM
Nov. '12 Range: 210 - 370 (Mid: 290)
Nov. '13 Range: 227 - 400 (Mid: 314)
Current (23-November-12): 258
24
Equity Markets Global markets far below “fair value”
-60
-40
-20
0
20
40
60
80
100
1980 1985 1990 1995 2000 2005 2010 2015
% A
bove/B
elo
w F
air V
alu
e
Global Stock Market CompositeEquity Market Indexes Relative to Equilibrium
Source: RBC GAM
Last Plot: -15.7%
25
70
80
90
100
110
120
130
140
150
2006 2007 2008 2009 2010 2011 2012 2013
Con
sen
sus E
arn
ings E
stim
ate
s (
$U
S)
S&P 500 Composite IndexConsensus Earnings Estimates
2011 2012
2013 2014
Source: ThomsonReuters
$90
$95
$100
$105
$110
Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
U.S. Analyst Overoptimism in S&P 500 EPS Estimates(Monthly Pattern, Averages for 1985-2010)
Average Forecast Error Rebased to Feb. 2012 Forecast
2012 Mean Earnings Estimate
Source: Chopra, ThomsonReuters, RBC GAM
Earnings
Sluggish economy/rising expectations are a growing challenge
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Above C
onsensus R
eport
s
Companies Reporting Results Above Consensus Forecasts
% Greater Than Expectations
Long-Term Average: 62%
Source: ThomsonReuters
97% Companies Reporting
Last Plot: 64%
26
Equity Markets Valuations still depressed
0
5
10
15
20
25
30
35
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015
X
S&P 500 IndexNormalized (Equilibrium) Price/Earnings Ratio
P/E on Trailing 12 Months Earnings
+/- 1 Standard Deviation from Equilibrium P/E
+/- 2 Standard Deviations from Equilibrium P/E
Source: RBC GAM
Nov. '12 Range: 1 Std. Dev.: 12.9x - 20.9x (Mid: 16.9x)
Nov. '12 Range: 2 Std. Dev.: 8.9x - 24.8x (Mid: 16.9x)
Current: 14.4x
27
Equity Markets Valuations still depressed
2012 Top Down 2012 Bottom Up Trailing 12 Months Recessionary*
P/E $101.4 $102.6 $97.8 $73.4
Equilibrium 16.9 1712.4 1731.6 1651.0 1238.2
1 Standard Deviation 12.9 1309.5 1324.1 1262.5 946.9
2 Standard Deviation 8.9 906.5 916.6 874.0 655.5
2013 Top Down 2013 Bottom Up
P/E $106.3 $113.7
Equilibrium 16.9 1794.6 1918.9
1 Standard Deviation 12.9 1372.3 1467.4
2 Standard Deviation 8.9 950.0 1015.8
*Trailing 12-Month Earnings to November 2012 less 25%
Source: Bloomberg, Thomson Reuters, RBC GAM
Earnings Estimates & Alternative Scenarios for Valuation and Outcomes for the S&P 500
Consensus
Consensus
28
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
2009 2010 2011 2012 2013
U.S. Factor Returns Relative to the S&P 1500Cumulative Returns to Small Cap
Source: RBC GAM
*Returns to small cap vs. S&P 1500 starting 03/2009
0.0%
2.5%
5.0%
7.5%
10.0%
2009 2010 2011 2012 2013
U.S. Factor Returns Relative to the S&P 1500Cumulative Returns to Value
Source: RBC GAM
*Returns to value vs. S&P 1500 starting 03/2009
Styles What’s working
29
Styles What’s not working
-10.0%
-7.5%
-5.0%
-2.5%
0.0%
2.5%
2009 2010 2011 2012 2013
U.S. Factor Returns Relative to the S&P 1500Cumulative Returns to Momentum (Technical)
Source: RBC GAM
*Returns to momentum vs. S&P 1500 starting 03/2009
-5.0%
-2.5%
0.0%
2.5%
5.0%
2009 2010 2011 2012 2013
U.S. Factor Returns Relative to the S&P 1500Cumulative Returns to Growth
Source: RBC GAM
*Returns to growth vs. S&P 1500 starting 03/2009
30
20%
30%
40%
50%
60%
70%
80%
90%
1986 1990 1994 1998 2002 2006 2010 2014
Quart
erly R
etu
rns
S&P 500 - Returns to Perfect ForesightDifference Between Median Performance of Top and Bottom Deciles
Low Spreads
High Spreads
Source: Bank of America Merrill Lynch
Average: 47.8%
Foresight = 1 quarter in advance
Styles Macro/beta trade continues to dominate
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1.0
1972 1976 1980 1984 1988 1992 1996 2000 2004 2008 2012
S&P 500 Stock CorrelationsMedian Correlations of S&P 500 Stocks
to the S&P 500 Index
Source: Ned Davis Research
Last Plot: 0.57
Long-term Average: 0.46
31
Equity Markets Technical indicators
0
10
20
30
40
50
60
70
80
2001 2003 2005 2007 2009 2011 2013
%
AAII Sentiment SurveyPercent Bearish
Source: American Association of Individual Investors (AAII)
Last Plot: 40.8
Too Many Bears
Not Enough Bears
0
10
20
30
40
50
60
70
80
2001 2003 2005 2007 2009 2011 2013
%
AAII Sentiment SurveyPercent Bullish
Source: American Association of Individual Investors (AAII)
Last Plot: 35.8
Too Many Bulls
Not Enough Bulls
32
Equity Markets Technical indicators
-8500
-6500
-4500
-2500
-500
1500
3500
500
700
900
1100
1300
1500
1700
2007 2008 2009 2010 2011 2012 2013
S&P 500 & Equity Mutual Fund Flows
Domestic Equity Flows (13-Week Moving Average, RHS)
S&P 500 (LHS)
Source: ICI, Ned Davis Research, RBC GAM
?
400
600
800
1000
1200
1400
1600
1800
2000
2200
40%
45%
50%
55%
60%
65%
70%
75%
2000 2003 2006 2009 2012
S&P 500 & Strategists' Recommended Allocation for Stocks
Allocation to Equities (LHS)
S&P 500 (RHS)
Source: Bloomberg, RBC GAM, Bank of America Merrill Lynch
33
Source: RBC CM
Absolute Price with Price Momentum Relative Price with Price Momentum
Source: RBC CM
Equity Markets Technical indicators – Emerging markets turn a corner
MSCI EMERGING MARKET GLOBAL EMGL.ZZ.I
100 MONTHS AUG04 - 23NOV12
TREND:
TURN
(TU-CL)%:
SMO TPL:
931.439
810.868
-18.58
10311
HI-OCT07
LO/HI DIFF
1337.63
204.18%
LO-AUG04 439.75
CLOSE 995.94
600
800
1000
1200
2004 2005 2006 2007 2008 2009 2010 2011 2012
MSCI EMERGING MARKET GLOBAL
Rel. S&P 500EMGL.ZZ.I
100 MONTHS AUG04 - 23NOV12
TREND:
TURN
(TU-CL)%:
SMO TPL:
0.67524
0.63184
-10.60
10215
HI-SEP10
LO/HI DIFF
0.94245
136.66%
LO-AUG04 0.39823
CLOSE 0.70677
0.40
0.50
0.60
0.70
0.80
0.90
2004 2005 2006 2007 2008 2009 2010 2011 2012
34
Asset Mix Trailing 10-year Stock vs. Bond Market Performance
-200
-100
0
100
200
300
400
500
600
700
1935 1945 1955 1965 1975 1985 1995 2005 2015
Sto
ck M
ark
et
Outp
erf
orm
ance %
10-Year U.S. Stock and Bond PerformanceStock Market 10-Year Total Return minus Long Bond Total
Return
S&P 500 10-Year Total Return minus Barclays Capital Long-Term T-Bond 10-Year Total Return
Source: Ned Davis Research
Mean: 120.5%
+1 Std Dev
-1 Std Dev
-2 Std Dev
+2 Std Dev
35
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© RBC Global Asset Management Inc. 2012.
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