BREXIT : Preparing for the uncertainty
Welcome! Julian Clay EMC ¢ Economic condi)ons Will Hobbs - Barclays Head of Investment strategy – Europe surrounding BREXIT ¢ Strategy in an uncertain Chris White environment Strategy ¢ Growing sales through John Blackburn Sales uncertainty ¢ Managing finances in Ross Chris)e Finance uncertain )mes 9.30am Q&A 10.00am Finish
Wealth and Investment Management The end of the world? William Hobbs Head of Investment Strategy May 2017
How sure can we be … ?
“The only function of economic forecasting is to make astrology look respectable.” John Kenneth Galbraith “It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.” Mark Twain (Josh Billings) 5
Global real GDP Global real GDP Source: Datastream, Barclays All investments can fall in value. You may lose capital. Please note that past performance is not a guide to future performance. 6
Beware statistics …
Measuring the economy is not easy Source: Fastfordmag 8
Brexit
UK – doing ok Source: Datastream, Barclays All investments can fall in value. You may lose capital. Please note that past performance is not a guide to future performance.
UK – doing ok Source: Datastream, Barclays All investments can fall in value. You may lose capital. Please note that past performance is not a guide to future performance.
Brexit – likely unhelpful... Source: Datastream, Barclays All investments can fall in value. You may lose capital. Please note that past performance is not a guide to future performance.
Brexit – the return of the euro crisis? (part 1) Source: Datastream, Barclays All investments can fall in value. You may lose capital. Please note that past performance is not a guide to future performance.
Brexit – the return of the euro crisis? (part 2) Source: Datastream, Barclays All investments can fall in value. You may lose capital. Please note that past performance is not a guide to future performance.
Global trade to GDP Source: Datastream, Barclays All investments can fall in value. You may lose capital. Please note that past performance is not a guide to future performance. 15
Global poverty reduction Poverty headcount ratio at $1.90 a day (2011 PPP, % of 100 pop) 80 1981 2012 60 40 20 0 East Asia and Pacific excl. high income countries South Asia LatAm and Caribbean excl. high income countries Source: World Bank, Datastream, Barclays All investments can fall in value. You may lose capital. Please note that past performance is not a guide to future performance. 16
Contribution to world GDP growth Contribution to world GDP growth (%, purchasing power parity) 16 14 Emerging market and devleoping economies 12 Advanced economies 10 8 6 4 2 0 -2 -4 1981 1986 1991 1996 2001 2006 2011 2016 Source: IMF WEO. Datastream, Barclays All investments can fall in value. You may lose capital. Please note that past performance is not a guide to future performance.
US GDP and import growth Source: Datastream, Barclays All investments can fall in value. You may lose capital. Please note that past performance is not a guide to future performance. 18
Does the US president matter? GDP growth by presidential term (%, 1945-2012) Obama-1 Bush II-2 Bush II-1 Clinton-2 Clinton-1 Bush I Reagan-2 Reagan-1 Carter Nixon-Ford Nixon Johnson Kennedy- Johnson Eisenhower-2 Eisenhower-1 Truman-2 0 1 2 3 4 5 6 7 Source: Blinder and Watson, Barclays All investments can fall in value. You may lose capital. Please note that past performance is not a guide to future performance. 19
US labour market – wages picking up 4.5 Year on year (%) 4.0 US average hourly earnings: total private US average hourly earnings: total nonfarm production and nonsuprvisory 3.5 US Employment Cost Index: total compensation Atlanta Fed median wage growth tracker 3.0 2.5 2.0 1.5 1.0 Oct-06 Jun-09 Mar-12 Nov-14 Source: Datastream, Barclays All investments can fall in value. You may lose capital. Please note that past performance is not a guide to future performance.
Interest rates can rise a long way... Source: Datastream, Barclays All investments can fall in value. You may lose capital. Please note that past performance is not a guide to future performance.
“This is my long-run forecast in brief. The material conditions of life will continue to get better for most people, in most countries, most of the time, indefinitely. Within a century or two, all nations and most of humanity will be at or above today's Western living standards … … I also speculate, however, that many people will continue to think and say that the conditions of life are getting worse.” Julian Simon, “The State of Humanity” 22
Disclaimer This document has been issued and approved by Barclays Bank PLC. Although information in this document has been obtained from sources believed to be reliable, we do not represent or warrant its accuracy, and such information may be incomplete or condensed. This document does not constitute a prospectus, offer, invitation or solicitation to buy or sell securities and is not intended to provide the sole basis for any evaluation of the securities or any other instrument, which may be discussed in it. All estimates and opinions included in this document constitute our judgement as of the date of the document and may be subject to change without notice. This document is not a personal recommendation and you should consider whether you can rely upon any opinion or statement contained in this document without seeking further advice tailored for your own circumstances. This document is confidential and is being submitted to selected recipients only. It may not be reproduced or disclosed (in whole or in part) to any other person without our prior written permission. Law or regulation in certain countries may restrict the manner of distribution of this document and persons who come into possession of this document are required to inform themselves of and observe such restrictions. We or our affiliates may have acted upon or have made use of material in this document prior to its publication. You should seek advice concerning any impact this investment may have on your personal tax position from your own tax adviser. Barclays offers wealth and investment management products and services to its clients through Barclays Bank PLC and its subsidiary companies. Barclays Bank PLC is registered in England and authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Registered No. 1026167. Registered Office: 1 Churchill Place, London E14 5HP. 23
Strategy in an uncertain environment Chris White EMC Consultant Business Development and Strategy
UK Business Confidence “As uncertainty con/nues to prevail and shocks are the new normal, it is no surprise to see business confidence remaining sta/c and in nega/ve territory.” UK Business Confidence Monitor Q1 2017
Uncertainty…what uncertainty?? Compe))on World economy Technology General elec)on Globalisa)on Climate change Trump Exchange rates BREXIT Infla)on N.Korea
“The willingness to consider possibility requires a tolerance of uncertainty” Rachel Naomi Remen Author, MD, US Medical Expert
Planning through four levels of uncertainty A B True ambiguity C A range of futures LEVEL 4 Alterna)ve Not even a futures LEVEL 3 range of future A clear Range of future outcomes enough LEVEL 2 outcomes Limited set of future possible future LEVEL 1 outcomes – one A single view of of which will the future occur. Source: Those awfully clever people at Harvard Business School
Three strategic positions during uncertainty…. Shape the Adapt to the Reserve the future future right to play Play a leadership Win through Invest enough to role in your speed and agility stay in the game sector – grab but avoid opportuni)es commitments. Source: Those awfully clever people at Harvard Business School
Scenario planning - a common sense planning tool “By having an awareness of what could happen, you are beBer able to prepare for what will happen”. Focal Issue IdenJfy driving ? forces Create the ‘Scenario team’
Scenario planning – what are your ‘driving forces’? • Economic growth? P oli)cal • Consumer confidence? E conomic • Infla)on – high/low? S ocial • Exchange rates – material costs? T echnological • New exports markets? L egal • New in-bound compe)tors? E nvironmental • Changed regula)on? • Training investment?
Scenario planning - a common sense planning tool “By having an awareness of what could happen, you are beBer able to prepare for what will happen”. IdenJfy Develop Define Focal Issue IdenJfy driving criJcal plausible implicaJons ? forces uncertainJes scenarios and strategies Create the ‘Scenario team’
Top 5 scenario planning tips Don ’ t Beware of Don’t Combat Encourage make giving too assume over free and decisions much the future confidence open 1 2 3 4 5 based just weight to will look and debate on what unlikely like the excessive you events past opJmism already know “By having an awareness of what could happen, you are beBer able to prepare for what will happen”.
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