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These are noted economist Hugh Johnson's slides from his presentation to University at Albany MBA students, alums, and guests on May 28 regarding his forecast for the rest of 2014 and 2015.
Citation preview
SUNYAB Executive MBA SUNYAB Executive MBA
The Outlook for 2014 and The Outlook for 2014 and 20152015
The Average Duration of the 10 Previous The Average Duration of the 10 Previous Post War Bull Markets Was 57.1 Months.Post War Bull Markets Was 57.1 Months.
The Average Percentage Gain of The 10 The Average Percentage Gain of The 10 Previous Post War Bull Markets Was Previous Post War Bull Markets Was 126.5%. 126.5%.
The Average Duration of the 10 Previous The Average Duration of the 10 Previous Post War Bull Markets Was 57.1 Months.Post War Bull Markets Was 57.1 Months.
The Average Percentage Gain of The 10 The Average Percentage Gain of The 10 Previous Post War Bull Markets Was Previous Post War Bull Markets Was 126.5%. 126.5%.
ApproachApproachApproachApproach
Identify Meaningful Trends in Financial Identify Meaningful Trends in Financial MarketsMarkets
Identify Meaningful Trends in Important Identify Meaningful Trends in Important Monetary and Economic Variables Monetary and Economic Variables
(Are The Financial Market Trends (Are The Financial Market Trends Rational?)Rational?)
Position Portfolios To Participate in the Position Portfolios To Participate in the TrendsTrends
Identify Meaningful Trends in Financial Identify Meaningful Trends in Financial MarketsMarkets
Identify Meaningful Trends in Important Identify Meaningful Trends in Important Monetary and Economic Variables Monetary and Economic Variables
(Are The Financial Market Trends (Are The Financial Market Trends Rational?)Rational?)
Position Portfolios To Participate in the Position Portfolios To Participate in the TrendsTrends
The Anatomy of a CycleThe Anatomy of a CycleThe Anatomy of a CycleThe Anatomy of a Cycle
Stock Market
EconomyInterest Rates
Source: Hugh Johnson Advisors
The Anatomy of a Mania (and Financial The Anatomy of a Mania (and Financial Crisis)Crisis)
The Stage of InvestmentThe Stage of Investment The Stage of SpeculationThe Stage of Speculation The Stage of Financial DistressThe Stage of Financial Distress The Stage of RevulsionThe Stage of Revulsion
This disappointing performance of the U.S. This disappointing performance of the U.S. economy shouldn’t be surprising. We have economy shouldn’t be surprising. We have presented evidence that presented evidence that recessions recessions associated with systemic banking crises associated with systemic banking crises tend to be deep and protracted and that tend to be deep and protracted and that this pattern is evident across both history this pattern is evident across both history and countries.and countries.
Carmen M. Reinhart and Kenneth Carmen M. Reinhart and Kenneth RogoffRogoff
Sorry, U.S. Recoveries Aren’t Sorry, U.S. Recoveries Aren’t DifferentDifferent
This disappointing performance of the U.S. This disappointing performance of the U.S. economy shouldn’t be surprising. We have economy shouldn’t be surprising. We have presented evidence that presented evidence that recessions recessions associated with systemic banking crises associated with systemic banking crises tend to be deep and protracted and that tend to be deep and protracted and that this pattern is evident across both history this pattern is evident across both history and countries.and countries.
Carmen M. Reinhart and Kenneth Carmen M. Reinhart and Kenneth RogoffRogoff
Sorry, U.S. Recoveries Aren’t Sorry, U.S. Recoveries Aren’t DifferentDifferent
Since January Low The S&P 500 Has Since January Low The S&P 500 Has Appreciated 6.6% Appreciated 6.6%
Since January Low The S&P 500 Has Since January Low The S&P 500 Has Appreciated 6.6% Appreciated 6.6%
Source: Bloomberg News; Hugh Johnson Advisors
S&P 500
1720
17401760
17801800
1820
18401860
18801900
1920
12/ 27 1/ 17 2/ 7 2/ 28 3/ 21 4/ 11 5/ 2 5/ 23
January 31st 2014: 1783
May 23rd 2014: 1900
But…Bear Market Sectors Have Generally But…Bear Market Sectors Have Generally
Performed Well.Performed Well. But…Bear Market Sectors Have Generally But…Bear Market Sectors Have Generally
Performed Well.Performed Well.
Source: Bloomberg News; Hugh Johnson Advisors. Bear Sectors in red.
Sector Since 1/31/2014
Energy 12.5%
Basic Materials 10.0%
Consumer Non-Cyclical 8.3%
Telecommunications 7.0%
Technology 7.0%
Industrial 6.6%
S&P 500 6.6%
Utilities 6.3%
Healthcare 5.2%
Finance 4.4%
Consumer Cyclical 3.4%
Large Capitalization Have Stocks Large Capitalization Have Stocks Outperformed Mid and Small Capitalization Outperformed Mid and Small Capitalization
StocksStocks
Large Capitalization Have Stocks Large Capitalization Have Stocks Outperformed Mid and Small Capitalization Outperformed Mid and Small Capitalization
StocksStocks
Source: Bloomberg News; Hugh Johnson Advisors
Index/CapitalizationIndex/Capitalization Since 1/31/2014Since 1/31/2014
S&P 500 (Large)S&P 500 (Large) 6.6%6.6%
S&P 400 (Mid)S&P 400 (Mid) 4.3%4.3%
S&P 600 (Small)S&P 600 (Small) -0.1%-0.1%
Longer-Term Interest Rates Have Declined Longer-Term Interest Rates Have Declined From 2.65% To 2.53%. From 2.65% To 2.53%.
Longer-Term Interest Rates Have Declined Longer-Term Interest Rates Have Declined From 2.65% To 2.53%. From 2.65% To 2.53%.
Source: Bloomberg News; Hugh Johnson Advisors
Yield 10-Year U.S. Treasury Note
2.4
2.5
2.6
2.7
2.8
2.9
3.0
3.1
12/ 27 1/ 17 2/ 7 2/ 28 3/ 21 4/ 11 5/ 2 5/ 23
January 31st 2014: 2.65%
May 23rd 2014: 2.53%
The Yield Curve Has Narrowed From 2.63% to 2.50%
The Yield Curve Has Narrowed From 2.63% to 2.50%
Source: Bloomberg News; Hugh Johnson Advisors
Yield Curve: 10-Year UST less 91-Day UST
2.4
2.5
2.6
2.7
2.8
2.9
3.0
12/ 27 1/ 17 2/ 7 2/ 28 3/ 21 4/ 11 5/ 2 5/ 23
May 23rd 2014: 2.50%
January 31st 2014: 2.63%
Recession Probability Has Declined And Recession Probability Has Declined And Remains Low.Remains Low.
Recession Probability Has Declined And Recession Probability Has Declined And Remains Low.Remains Low.
Source: Federal Reserve Bank of New York
Month/Year Recession Probability
May-13 5.3%
June-13 6.7%
July-13 7.5%
August-13 6.3%
September-13 6.0%
October-13 5.7%
November-13 6.4%
December-13 5.7%
January-14 4.5%
February-14 4.2%
March-14 4.3%
April-14 5.4%
Quality Spreads Widened Quality Spreads Widened Quality Spreads Widened Quality Spreads Widened
Source: Bloomberg News; Hugh Johnson Advisors
Spread: BAA Corporate less 10-Year UST
1.9
2.0
2.1
2.2
2.3
2.4
2.5
12/ 2
71/
101/
24 2/7
2/21 3/
73/
21 4/4
4/18 5/
25/
16
May 23rd 2014: 2.28%
April 18th 2014: 2.12%
Quality Spreads Have Widened Quality Spreads Have Widened Quality Spreads Have Widened Quality Spreads Have Widened
Source: Bloomberg News; Hugh Johnson Advisors
Spread: "Junk" less 10-Year UST
2.6
2.7
2.8
2.9
3.0
3.1
3.2
3.3
3.4
3.5
12/ 27 1/ 17 2/ 7 2/ 28 3/ 21 4/ 11 5/ 2 5/ 23
May 23rd 2014: 3.00%
April 18th 2014: 2.91%
The Message of the Financial Markets The Message of the Financial Markets Is Is Ambiguous with a Negative LeanAmbiguous with a Negative Lean
The Message of the Financial Markets The Message of the Financial Markets Is Is Ambiguous with a Negative LeanAmbiguous with a Negative Lean
The Message of the Financial Markets The Message of the Financial Markets Is Is Inconsistent, In My View, with the Inconsistent, In My View, with the
Performance of Important Monetary and Performance of Important Monetary and Economic VariablesEconomic Variables
Hopefully We Can Explain the DisconnectHopefully We Can Explain the Disconnect
The Message of the Financial Markets The Message of the Financial Markets Is Is Inconsistent, In My View, with the Inconsistent, In My View, with the
Performance of Important Monetary and Performance of Important Monetary and Economic VariablesEconomic Variables
Hopefully We Can Explain the DisconnectHopefully We Can Explain the Disconnect
The Federal Reserve Policy Remains The Federal Reserve Policy Remains Accommodative… Accommodative… More LaterMore Later
The Federal Reserve Policy Remains The Federal Reserve Policy Remains Accommodative… Accommodative… More LaterMore Later
Source: Federal Reserve
Real Federal Funds Rate
-3.0%
-2.5%
-2.0%
-1.5%
-1.0%
-0.5%Ja
n-1
2
Apr-
12
Jul-
12
Oct
-12
Jan-1
3
Apr-
13
Jul-
13
Oct
-13
Jan-1
4
Apr-
14January 2012: -2.8%
April 2012: -1.9%
Total Bank Lending Total Bank Lending ImprovingImproving Total Bank Lending Total Bank Lending ImprovingImproving
Source: Federal Reserve
All Loans and Leases (Y/ Y)
1.0%1.5%2.0%2.5%3.0%3.5%4.0%4.5%5.0%5.5%6.0%
Jan-1
2
Apr-
12
Jul-
12
Oct
-12
Jan-1
3
Apr-
13
Jul-
13
Oct
-13
Jan-1
4
Apr-
14
January 2012: 3.0%
April 2014: 3.7%
Lending to Businesses Lending to Businesses ImprovingImproving Lending to Businesses Lending to Businesses ImprovingImproving
Source: Federal Reserve
Commercial and Industrial Loans (Y/ Y)
4.0%5.0%6.0%7.0%8.0%9.0%
10.0%11.0%12.0%13.0%14.0%
Jan-1
2
Apr-
12
Jul-
12
Oct
-12
Jan-1
3
Apr-
13
Jul-
13
Oct
-13
Jan-1
4
Apr-
14
January 2012: 10.3%
April 2014: 10.3%
Real Estate Lending Is Real Estate Lending Is ImprovingImprovingReal Estate Lending Is Real Estate Lending Is ImprovingImproving
Source: Federal Reserve
Real Estate Loans (Y/ Y)
-1.0%
-0.5%
0.0%
0.5%
1.0%
1.5%
2.0%
Apr-12
Jul-12
Oct-12
Jan-13
Apr-13
Jul-13
Oct-13
Jan-14
Apr-14
January 2012: -2.5%
April 2014: +.4%
The Growth Rate of The Money Supply Continues at The Growth Rate of The Money Supply Continues at a Good Pace. The Longer-Term Average Growth a Good Pace. The Longer-Term Average Growth
Rate has been 6.9%.Rate has been 6.9%.
The Growth Rate of The Money Supply Continues at The Growth Rate of The Money Supply Continues at a Good Pace. The Longer-Term Average Growth a Good Pace. The Longer-Term Average Growth
Rate has been 6.9%.Rate has been 6.9%.
Source: Federal Reserve
Money Supply (M2 Y/ Y)
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
10.0%
11.0%
12.0%Ja
n-1
2
Apr-
12
Jul-
12
Oct
-12
Jan-1
3
Apr-
13
Jul-
13
Oct
-13
Jan-1
4
Apr-
14
April 2014: +6.0%
January 2012: +10.4%
As A Result, Domestic Liquidity Conditions Remain As A Result, Domestic Liquidity Conditions Remain Positive. The Longer Term Average Growth Rate has Positive. The Longer Term Average Growth Rate has
been 2.9%.been 2.9%.
As A Result, Domestic Liquidity Conditions Remain As A Result, Domestic Liquidity Conditions Remain Positive. The Longer Term Average Growth Rate has Positive. The Longer Term Average Growth Rate has
been 2.9%.been 2.9%.
Source: Bureau of Economic Analysis; Federal Reserve
Ratio: M2/ GDP (Y/ Y)
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%Ja
n-1
2
Mar
-12
May
-14
Jul-
14
Sep-1
4
Nov-
12
Jan-1
3
Mar
-13
May
-13
Jul-
13
Sep-1
3
Nov-
13
Jan-1
4
Mar
-14
April 2014: +2.2%
January 2012: +4.9%
Leading Indicators For The Economy Continue To Leading Indicators For The Economy Continue To
RiseRise Leading Indicators For The Economy Continue To Leading Indicators For The Economy Continue To
RiseRise
Source: Conference Board
Index of Leading Economic Indicators
90
92
94
96
98
100
102Ja
n-1
2
Apr-
12
Jul-
12
Oct
-12
Jan-1
3
Apr-
13
Jul-
13
Oct
-13
Jan-1
4
Apr-
14
Index Up 11 of 12 Months; One Month Unchanged
The Ratio of Coincident Economic Indicators-to-The Ratio of Coincident Economic Indicators-to-Lagging Economic IndicatorsLagging Economic Indicators
The Ratio of Coincident Economic Indicators-to-The Ratio of Coincident Economic Indicators-to-Lagging Economic IndicatorsLagging Economic Indicators
Source: Conference Board
Ratio: Coincident-To-Lagging Economic Indicators
0.860.870.880.890.900.910.920.93
Jan-1
2
Mar
-12
May
-12
Jul-
12
Sep-1
2
Nov-
12
Jan-1
3
Mar
-13
May
-13
Jul-
13
Sep-1
3
Nov-
13
Jan-1
4
Mar
-14
Continues to Decline
Real Gross Domestic ProductReal Gross Domestic Product Real Gross Domestic ProductReal Gross Domestic Product
Source: Blue Chip Economic Indicators; HJA
Quarter Consensus-Real GDP HJA-Real GDP
2014-Q1 0.1% 0.1%
2014-Q2 3.4% 3.6%
2014-Q3 3.0% 3.4%
2014-Q4 3.1% 2.9%
2015-Q1 3.0% 3.0%
2015-Q2 3.0% 3.1%
2015-Q3 3.0% 3.2%
2015-Q4 2.9% 3.3%
2013 Average 1.9% 1.9%
2014 Average 2.4% 2.5%
2015 Average 3.0% 3.2%
““Historical forecast errors are large in Historical forecast errors are large in economic terms, indicating that-if past economic terms, indicating that-if past performance is a good guide to future performance is a good guide to future accuracy-uncertainty about the economic accuracy-uncertainty about the economic outlook is considerable.”outlook is considerable.”
Federal Federal Reserve StudiesReserve Studies
The Consensus Forecast “Tends” To Be Too The Consensus Forecast “Tends” To Be Too High (or Too Low) and Trends Down (or Up)High (or Too Low) and Trends Down (or Up)The Consensus Forecast “Tends” To Be Too The Consensus Forecast “Tends” To Be Too High (or Too Low) and Trends Down (or Up)High (or Too Low) and Trends Down (or Up)
Source: Blue Chip Economic Indicators, HJA
2014 Consensus Forecast; Historical Trend of Forecasts
0.0%
0.2%
0.4%
0.6%
0.8%
1.0%
1.2%
1.4%
1.6%
1.8%
Jan
uar
y
Feb
ruar
y
Mar
ch
Ap
ril
May
Jun
e
July
Au
gu
st
Sep
tem
ber
Oct
ob
er
No
vem
ber
Dec
emb
er
Jan
uar
y
Feb
ruar
y
Mar
ch
Ap
ril
May
Jun
e
July
Au
gu
st
Sep
tem
ber
Oct
ob
er
No
vem
ber
Dec
emb
er
1.4%
1.6%
1.8%
2.0%
2.2%
2.4%
2.6%
2.8%
3.0%2014 Consensus Forecast; Big “Uptick”?
Historical Trend: Difference Between Forecast and Outcome
EmploymentEmploymentEmploymentEmployment
Source: Bureau of Labor Statistics; HJA; Bloomberg News
Quarter Consensus-NFP HJA-NFP
2014-Q1 190 169
2014-Q2 225 189
2014-Q3 205 237
2014-Q4 210 203
2015-Q1 208 243
2015-Q2 NA 222
2015-Q3 NA 256
2015-Q4 NA 262
2013 Average 200 200
2014 Average 205 199
2015 Average 210 246
The Unemployment RateThe Unemployment RateThe Unemployment RateThe Unemployment Rate
Source: Blue Chip Economic Indicators; HJA
QuarterConsensus-Unemployment
RateHJA-Unemployment
Rate
2014-Q1 6.7% 6.7%
2014-Q2 6.4% 6.5%
2014-Q3 6.3% 6.3%
2014-Q4 6.1% 6.1%
2015-Q1 6.0% 5.9%
2015-Q2 5.9% 5.8%
2015-Q3 5.8% 5.6%
2015-Q4 5.7% 5.4%
2013 Average 7.4% 7.4%
2014 Average 6.4% 6.4%
2015 Average 5.9% 5.7%
Consumer InflationConsumer InflationConsumer InflationConsumer Inflation
Source: Blue Chip Economic Indicators; HJA
Quarter Consensus-CPI HJA-CPI
2014-Q1 1.4% 1.4%
2014-Q2 1.8% 1.3%
2014-Q3 1.8% 1.3%
2014-Q4 2.0% 1.9%
2015-Q1 2.0% 1.8%
2015-Q2 1.9% 2.1%
2015-Q3 1.9% 2.4%
2015-Q4 2.0% 2.6%
2013 Average 1.5% 1.5%
2014 Average 1.8% 1.5%
2015 Average 2.1% 2.1%
Consumer SpendingConsumer SpendingConsumer SpendingConsumer Spending
Source: Blue Chip Economic Indicators, HJA
QuarterConsensus-Consumer
SpendingHJA-Consumer
Spending
2014-Q1 3.0% 3.0%
2014-Q2 3.3% 2.8%
2014-Q3 2.8% 2.9%
2014-Q4 2.8% 2.6%
2015-Q1 2.8% 2.7%
2015-Q2 2.9% 2.7%
2015-Q3 2.9% 2.7%
2015-Q4 2.8% 2.8%
2013 Average 2.0% 2.0%
2014 Average 3.0% 2.8%
2015 Average 2.9% 2.7%
Deleveraging Is Largely Behind UsDeleveraging Is Largely Behind UsDeleveraging Is Largely Behind UsDeleveraging Is Largely Behind Us
Source: Financial Accounts of the United States, Federal Reserve
Household Debt::Net Worth
14.0%
16.0%
18.0%
20.0%
22.0%
24.0%
26.0%2000Q
1
2001Q
1
2002Q
1
2003Q
1
2004Q
1
2005Q
1
2006Q
1
2007Q
1
2008Q
1
2009Q
1
2010Q
1
2011Q
1
2012Q
1
2013Q
1
Short Term Interest Rates (Current Short Term Interest Rates (Current Level .03%)Level .03%)
Short Term Interest Rates (Current Short Term Interest Rates (Current Level .03%)Level .03%)
Source: Blue Chip Financial Indicators; HJA
Quarter Consensus 91-Day HJA 91-Day
2014-Q1 0.10 0.05
2014-Q2 0.10 0.04
2014-Q3 0.10 0.08
2014-Q4 0.10 0.09
2015-Q1 0.20 0.09
2015-Q2 0.30 0.10
2015-Q3 0.60 0.32
2015-Q4 0.90 0.32
2013 Average 0.31 0.31
2014 Average 0.10 0.06
2015 Average 0.50 0.21
Longer Term Interest Rates (Current Level Longer Term Interest Rates (Current Level 2.53%)2.53%)
Longer Term Interest Rates (Current Level Longer Term Interest Rates (Current Level 2.53%)2.53%)
Source: Blue Chip Financial Indicators; HJA
Quarter Consensus 10-Year HJA 10-Year
2014-Q1 2.76 2.76
2014-Q2 2.80 2.70
2014-Q3 3.00 2.82
2014-Q4 3.30 2.82
2015-Q1 3.40 2.82
2015-Q2 3.60 2.84
2015-Q3 3.70 3.03
2015-Q4 3.90 3.02
2013 Average 2.79 2.35
2014 Average 2.97 2.78
2015 Average 3.65 2.93
Stock Prices (Current Level 1900)Stock Prices (Current Level 1900)Stock Prices (Current Level 1900)Stock Prices (Current Level 1900)
Source: HJA
Quarter S&P 500 EPS (LTM) P/E S&P 500
2014-Q1 $112.34 16.3 1836
2014-Q2 $114.15 15.9 1813
2014-Q3 $115.87 16.0 1849
2014-Q4 $117.21 15.9 1858
2015-Q1 $118.62 15.7 1866
2015-Q2 $120.04 15.7 1884
2015-Q3 $121.47 15.9 1930
2015-Q4 $123.01 15.8 1941
2013 Average $107.67 15.3 1645
2014 Average $114.89 16.0 1839
2015 Average $120.78 15.8 1905
““Stratalergy”Stratalergy”
The RisksThe Risks
““Stratalergy”Stratalergy”
The RisksThe Risks
SUNYAB
The Outlook for 2014 and 2015
Fed Policy and Inflation and Exit Strategy
The Balance Sheet of Commercial Banks
Credit Market Instruments $10,736,464 Net interbank transactions -$13,268Open Market Paper $1,043 Checkable Deposits $707,549U.S. Treasuries $118,963 Small Time and Savings Deposits $5,178,047Agency and GSE $1,295,471 Large Time Deposits $2,422,809Municipal Securities $205,733 Federal Funds and Security Repurchase Agreements$922,415Corporate and Foreign Bonds $1,083,888 Credit Market Instruments $973,747Loans $1,992,602 Open Market Paper $423Other Loans and Advances $277 Corporate and Foreign Bonds $176,852Mortgages $4,943,019 Other Loans and Advances $796,472Consumer Credit $1,095,468 Taxes Payable $18,499Equities $92,793 Miscellaneous Liabilities $1,832,320Mutual Funds $30,796 Foreign Direct Investment $154,503Security Credit $320,176 Net Transactions Due To Holding Cos $1,210,493Life Insurance Reserves $100,277 Equity Investments in Funding Corps $225,287Miscellaneous Assets $977,742 Unidentifies Miscellaneous Liabilities $242,037
Leases to Households $11,789Vault Cash $41,482Reserves $23,014 Other $10,661,000
Total Financial Assets $12,322,744 Total Financial Liabilities $12,042,117
U.S. Commercial Banks2007 IIIQ
The Balance Sheet of Commercial Banks
Credit Market Instruments $11,868,055 Net interbank transactions $460,291Open Market Paper $0 Checkable Deposits $1,825,586U.S. Treasuries $305,217 Small Time and Savings Deposits $8,115,778Agency and GSE $1,948,543 Large Time Deposits $1,762,234Municipal Securities $424,536 Federal Funds and Security Repurchase Agreements $438,435Corporate and Foreign Bonds $777,681 Credit Market Instruments $885,448Loans $2,506,965 Open Market Paper $59,662Other Loans and Advances $0 Corporate and Foreign Bonds $397,657Mortgages $4,368,587 Other Loans and Advances $428,129Consumer Credit $1,536,526 Taxes Payable -$47,463Equities $116,843 Miscellaneous Liabilities $2,523,970Mutual Funds $86,692 Foreign Direct Investment $203,416Security Credit $375,536 Net Transactions Due To Holding Cos $1,944,382Life Insurance Reserves $143,914 Equity Investments in Funding Corps $122,931Miscellaneous Assets $864,636 Unidentifies Miscellaneous Liabilities $253,241
Leases to Households $7,921Vault Cash $73,648Reserves $2,249,070 Other $15,964,278
Total Financial Assets $15,778,394 Total Financial Liabilities $15,964,278
2013 IVQU.S. Commercial Banks
If Lending/Money Growth Begins To Rise, The Federal Reserve Has An Exit Strategy.
If Lending/Money Growth Begins To Rise, The Federal Reserve Has An Exit Strategy.
This could change! Can The Federal Reserve Do Anything About This could change! Can The Federal Reserve Do Anything About It?It?
A staff presentation outlined several approaches to raising short-A staff presentation outlined several approaches to raising short-term interest rates when it becomes appropriate to do so, and to term interest rates when it becomes appropriate to do so, and to controlling the level of short term interest rates once they were controlling the level of short term interest rates once they were above the effective lower bound, during a period when the above the effective lower bound, during a period when the Federal Reserve will have a very large balance sheet. The Federal Reserve will have a very large balance sheet. The approaches differed in terms of the combination of policy tools approaches differed in terms of the combination of policy tools that might be used to accomplish those objectives. that might be used to accomplish those objectives. In addition to In addition to the rate of interest paid on excess reserve balances, the tools the rate of interest paid on excess reserve balances, the tools considered included fixed-rate overnight reserve repurchase (ON considered included fixed-rate overnight reserve repurchase (ON RRP) operations, term reverse repurchase agreements, and the RRP) operations, term reverse repurchase agreements, and the Term Deposit Facility (TDF).Term Deposit Facility (TDF).
Minutes FOMC meeting of April 30 2014Minutes FOMC meeting of April 30 2014
SUNYAB
The Outlook for 2014 and 2015
The Euro Zone
The Outlook for The Euro ZoneThe Outlook for The Euro ZoneThe Outlook for The Euro ZoneThe Outlook for The Euro Zone
Source: OECD; Blue Chip Economic Indicators; HJA,
Consensus Forecast for Euro Area; Composite Index of Leading Economic Indicators for Euro Area
99.0
99.5
100.0
100.5
101.0
Jan
uar
y-
Feb
r
Mar
ch-1
3
Ap
ril-
13
May
-13
Jun
-13
Jul-
13
Au
g-1
3
Sep
-13
Oct
-13
No
v-13
Dec
-13
Jan
-14
Feb
-14
Mar
-14
Ap
r-14
May
-14
Ind
ex o
f L
ead
ing
Eco
no
mic
In
dic
ato
rs
0.6%0.7%0.8%0.9%1.0%1.1%1.2%1.3%1.4%1.5%
2012
Fo
reca
st
2014, Euro Area Forecast
Composite Index of Leading Economic Indicators
SUNYAB
The Outlook for 2014 and 2015
Emerging Markets
The Outlook For Emerging Markets: China. The Outlook For Emerging Markets: China.
Continues to DeteriorateContinues to Deteriorate The Outlook For Emerging Markets: China. The Outlook For Emerging Markets: China.
Continues to DeteriorateContinues to Deteriorate
Source: Blue Chip Economic Indicators; OECD; HJA
Consensus Forecast for China; Composite Index of Leading Economic Indicators for China
98.598.798.999.199.399.599.799.9
100.1100.3
Jan
-13
Feb
-13
Mar
-13
Ap
r-13
May
-13
Jun
-13
Jul-
13
Au
g-1
3
Sep
-13
Oct
-13
No
v-13
Dec
-13
Jan
-14
Feb
-14
Mar
-14
Ap
r-14
May
-14
Ind
ex o
f L
ead
ing
Eco
no
mic
In
dic
ato
rs
7.2%
7.4%
7.6%
7.8%
8.0%
8.2%
2014
Fo
reca
st
2014, China Forecast
Composite Index of Leading Economic Indicators
The Outlook For Emerging Markets: Brazil. The Outlook For Emerging Markets: Brazil.
Continues to DeteriorateContinues to Deteriorate The Outlook For Emerging Markets: Brazil. The Outlook For Emerging Markets: Brazil.
Continues to DeteriorateContinues to Deteriorate
Source: Blue Chip Economic Indicators; OECD; HJA
Consensus Forecast for Brazil; Composite Index of Leading Economic Indicators for Brazil
98.0
98.5
99.0
99.5
100.0
100.5
Jan
-13
Feb
-13
Mar
-13
Ap
r-13
May
-13
Jun
-13
Jul-
13
Au
g-1
3
Sep
-13
Oct
-13
No
v-13
Dec
-13
Jan
-14
Feb
-14
Mar
-14
Ap
r-14
May
-14
Ind
ex o
f L
ead
ing
Eco
no
mic
In
dic
ato
rs
1.6%
2.1%
2.6%
3.1%
3.6%
4.1%
4.6%
2014
Fo
reca
st
2014, Brazil Forecast
Composite Index of Leading Economic Indicators
The Outlook For Emerging Markets: Russia. The Outlook For Emerging Markets: Russia.
Continues to DeteriorateContinues to Deteriorate The Outlook For Emerging Markets: Russia. The Outlook For Emerging Markets: Russia.
Continues to DeteriorateContinues to Deteriorate
Source: Blue Chip Economic Indicators; OECD; HJA
Consensus Forecast for Russia; Composite Index of Leading Economic Indicators for Russia
99.099.199.299.399.499.599.699.799.899.9
100.0
Jan
-13
Feb
-13
Mar
-13
Ap
r-13
May
-13
Jun
-13
Jul-
13
Au
g-1
3
Sep
-13
Oct
-13
No
v-13
Dec
-13
Jan
-14
Feb
-14
Mar
-14
Ap
r-14
May
-14
Ind
ex o
f L
ead
ing
Eco
no
mic
In
dic
ato
rs
0.4%0.9%
1.4%1.9%2.4%
2.9%3.4%
3.9%4.4%4.9%
2014
Fo
reca
st
2014, Russia Forecast
Composite Index of Leading Economic Indicators
The Outlook For Emerging Markets: India. The Outlook For Emerging Markets: India.
Continues to DeteriorateContinues to Deteriorate The Outlook For Emerging Markets: India. The Outlook For Emerging Markets: India.
Continues to DeteriorateContinues to Deteriorate
Source: Blue Chip Economic Indicators; OECD; HJA
Consensus Forecast for India; Composite Index of Leading Economic Indicators for India
97.5
97.7
97.9
98.1
98.3
98.5
98.7
98.9
99.1
Jan
-13
Feb
-13
Mar
-13
Ap
r-13
May
-13
Jun
-13
Jul-
13
Au
g-1
3
Sep
-13
Oct
-13
No
v-13
Dec
-13
Jan
-14
Feb
-14
Mar
-14
Ap
r-14
May
-14
Ind
ex o
f L
ead
ing
Eco
no
mic
In
dic
ato
rs
5.0%
5.5%
6.0%
6.5%
7.0%
2014
Fo
reca
st
2014, India Forecast
Composite Index of Leading Economic Indicators
Portfolio StructurePortfolio StructurePortfolio StructurePortfolio Structure
Asset AllocationAsset Allocation
Domestic Equities-International Domestic Equities-International Equities Allocation Equities Allocation
Capitalization AllocationCapitalization Allocation
Sector AllocationSector Allocation
Asset AllocationAsset Allocation
Domestic Equities-International Domestic Equities-International Equities Allocation Equities Allocation
Capitalization AllocationCapitalization Allocation
Sector AllocationSector Allocation
SUNYABSUNYAB
The Outlook for 2014 and 2015The Outlook for 2014 and 2015
And BeyondAnd Beyond
Long-Term Bond Bear Market; Long-Term Stock Bull Market
Long-Term Bond Bear Market; Long-Term Stock Bull Market
Stocks: 9.7%Bonds: .4%
25 Years 1921-194636 Years 1946-1982
30 Years 1982-2012
Yield BAA Corporate Bond (1919-2013)
0.02.04.06.08.0
10.012.014.016.018.0
1919-01
1931-01
1943-01
1955-01
1967-01
1979-01
1991-01
2003-01
SUNYAB SUNYAB
The Outlook for 2014 and 2015The Outlook for 2014 and 2015
EnergyEnergy
Oil Oil
Source: IMF, BP Statistical Review 2013, HJA
Year World Real GDPGlobal
ConsumptionGlobal
Production Price
2010 4.1 87,833 83,272 $79
2011 2.9 88,879 84,210 $95
2012 2.5 89,774 86,152 $94
2013 2.6 90,891 86,235 $97
2014 3.4 92,022 87,142 $100
2015 3.8 93,166 88,018 $103
2016 3.9 94,325 88,884 $106
2017 3.9 95,499 89,737 $110
2018 3.9 96,687 90,585 $113
1980-2012 2.8% 1.2% 1.0% 2.9%
Energy IndependenceEnergy Independence
Source: IMF, BP Statistical Review 2013, HJA
Primary Energy 2005 2010 2015 2018
US Oil Consumption 939.8 847.4 818.4 800.4
US Oil Production 309.1 332.9 537.2 798.0
% Shortfall -67.1% -60.7% -34.4% -0.3%
US Natural Gas Consumption 568.5 619.3 672.2 692.8
US Natural Gas Production 467.6 549.5 674.6 745.4
% Shortfall -17.8% -11.3% 0.4% 7.6%
US Coal Consumption 574.2 523.9 460.2 442.1
US Coal Production 595.1 556.1 521.1 501.0
% Shortfall 3.6% 6.1% 13.2% 13.3%
Total Consumption 2,082.5 1,990.6 1,950.8 1,935.2
Total Production 1,371.8 1,438.5 1,732.9 2,044.4
% Shortfall -34.1% -27.7% -11.2% 5.6%
SUNYABSUNYAB
The Outlook for 2014 and 2015The Outlook for 2014 and 2015
HousingHousing
Housing Should Continue To Expand But At A Slower Pace
Housing Should Continue To Expand But At A Slower Pace
QuarterExisting Home
Sales Existing Inventory Existing Prices
(Mls Annual Rate) (Months) Median (Ths $)
2013-Q1 4.9 4.5 $176.4
2013-Q2 5.1 5.1 $203.4
2013-Q3 5.4 5.0 $211.4
2013-Q4 5.4 5.1 $206.8
2014-Q1 5.4 5.1 $202.9
2014-Q2 5.4 5.2 $226.3
2014-Q3 5.4 5.3 $231.0
2014-Q4 5.4 5.4 $223.8
2013 Average 5.2 4.9 $199.5
2014 Average 5.4 5.3 $221.0
2015 Average 5.4 5.6 $231.9
Source: Bloomberg News; HJA
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