RenMac 2020 Outlook Call ll 12/19/2019 1 Overall Less policy - PowerPoint PPT Presentation

RenMac 2020 Outlook Call ll 12/19/2019 1

Overall • Less policy risk in 2020 than 2019. • Trump needs strong economy. • Lawmakers are risk-averse. • Shortened-legislative calendar. • Trade will continue to be a headwind but should be less of a drag than 2019. 12/19/2019 2

North America • House set to pass USMCA before adjourning. • Senate set to pass next year after impeachment. • Mexico has already ratified. • Canada expected to approve in late January. • Provides greater certainty and removes threat of tariffs. 12/19/2019 3

Chin ina • Phase one signing in January. • First time Trump reduced tariffs. • Phase two negotiations not expected to start soon. • Resolving easy issues leaves difficult ones remaining. • In Trump’s political interest to remove more tariffs closer to election. • Non-tariff measures will continue regardless. 12/19/2019 4

Europe • WTO Airbus Ruling. • Digital Services Tax. • 301 could replace 232. • G7 Meeting in June 2020. • UK can legally leave EU 1/31/20. • Johnson says UK will formally leave EU by 12/31/20. • Hard Brexit would mean larger scale deal with U.S. 12/19/2019 5

20 2020 • Biden currently well positioned. • Multiple winners in early contests increases odds of brokered convention. • Longer Democratic Primary benefits Trump. • Good economy likely to result in Trump being re-elected. • Hard for Dems to flip Senate. 12/19/2019 6

GDP Growth Consensus sees sub 2% growth as far as the eye can see Bloomberg News Consensus GDP estimates (QoQ % SAAR) 1.95 1.9 1.9 1.9 1.90 1.85 1.8 1.8 1.80 1.75 1.7 1.70 1.65 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Source: Renaissance Macro Research, Bloomberg 12/19/2019 7

Consumer Sp Spending 12/19/2019 8

Consumer Sp Spending 12/19/2019 9

Sa Saving Rate Will the saving rate ever drop? 10 450 500 8 550 6 600 650 4 700 2 750 85 90 95 00 05 10 15 20 Personal Saving Rate (LHS) Household Net Worth to Income (inverted, RHS) Source: Renaissance Macro Research, Haver Analytics 12/19/2019 10

Housing 12/19/2019 11

Housing Permits point to construction upturn (% change, year-over-year) 60% 40% 20% 0% -20% -40% -60% 96 98 00 02 04 06 08 10 12 14 16 18 Private Construction: Residential: New Housing Units New Pvt Housing Units Authorized by Building Permit Source: Renaissance Macro Research, Haver Analytics 12/19/2019 12

Housing Owner occupied housing rising more rapidly (% change, year-over-year) 6% 4% 2% 0% -2% -4% 66 71 76 81 86 91 96 01 06 11 16 Total Owner Occupied Housing Units Total Renter Occupied Housing Units Source: Renaissance Macro Research, Haver Analytics 12/19/2019 13

In Inventories Inventories are running below final demand (billions $) 140 90 40 -10 -60 10 11 12 13 14 15 16 17 18 19 Real Change in Real Pvt Inventories Change consistent with final demand Source: Renaissance Macro Research, Haver Analytics 12/19/2019 14

In Inventories 12/19/2019 15

Fix ixed In Investments Hard to see this repeating in 2020 Private fixed investment (two quarter % SAAR) 175% 150% 125% 100% 75% 50% 25% 0% -25% -50% -75% 08 10 12 14 16 18 Aircraft Mining Exploration/Shafts/Wells Source: Renaissance Macro Research, Haver Analytics 12/19/2019 16

Fin inancial Condit itions Follow financial conditions for investment outlook 9.5 175 9.0 150 8.5 125 8.0 7.5 100 7.0 75 6.5 6.0 50 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 Equipment & Software investment, % of GDP (LHS) Nonfinancial corporate, mkt value/net worth % (lead 2 quarters, RHS) Source: Renaissance Macro Research, Haver Analytics 12/19/2019 17

Macro / / M Market Attr trib ibutio ion SP500 Index 1-day Chg Attribution (Rolling Sum) (Jan-18 till Current) 400 300 200 100 0 -100 -200 -300 -400 -500 -600 Jan-18 Mar-18 May-18 Jul-18 Sep-18 Nov-18 Jan-19 Mar-19 May-19 Jul-19 Sep-19 Nov-19 Earnings & Eco Data Federal Reserve Washington DC 12/19/2019 18

Glo lobal 12/19/2019 19

Employment 12/19/2019 20

Employment - Wages 12/19/2019 21

Employment Strong labor market draws in workers Labor Force Participation Rate 67.0 66.0 65.0 64.0 63.0 62.0 07 08 09 10 11 12 13 14 15 16 17 18 19 Actual Age-Adjusted* *Holds distribution of population fixed to December 2007 Source: Renaissance Macro Research, Haver Analytics 12/19/2019 22

In Inflation 12/19/2019 23

In Inflation Core services responsible for much of the slowing Core PCE price index (% change, year-over-year) 8 6 4 2 0 -2 -4 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15 17 19 Core services less healthcare Core goods Source: Renaissance Macro Research, Haver Analytics 12/19/2019 24

Unemployment and In Infla lation 12/19/2019 25

Market Ele lection Year Path: Beware Q2 12/19/2019 26

Market More Im Important Than Fed 12/19/2019 27

Market Cycle le Clo lock Su Support rtive 12/19/2019 28

Credit t Sp Spreads at t New Cycle Lo Lows 12/19/2019 29

Weakening Yen = = Glo lobal Li Liquidit ity 12/19/2019 30

Doll llar r Weakening, g, Not Broken 12/19/2019 31

Beta Working = = Ris isk Se Seeking 12/19/2019 32

Copper Fir irming / / Breaking Downtrend 12/19/2019 33

Cru rude St Stabiliz izing / / Breaking Downtrend 12/19/2019 34

EM Breaking Out 12/19/2019 35

Gold ld Consolidating in in an Uptrend 12/19/2019 36

10 10yr Yie ields Consolidating in in Downtrend 12/19/2019 37

Valu luations O.K .K., , But Yie ields Im Important 12/19/2019 38

Tactical Se Sentim iment Uncomfort rtable 12/19/2019 39

Where’s the Value Today? 12/19/2019 40

Opportunities in in Fin ins/Mats/Disc Momentum/Trend Rolling Alpha 12/19/2019 41

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