BNY Mellon International Equity Fund Class I · NASDAQ:SNIEX
BNY Mellon International Equity Fund Class I — BNY Mellon Investment Management — Q3 2022 Earnings Presentation
46 slides from BNY Mellon International Equity Fund Class I's earnings presentation, July 2022
Slide 1: Global Macro Outlook: Confronting the Bear
FOR INSTITUTIONAL, PROFESSIONAL, QUALIFIED INVESTORS AND QUALIFIED CLIENTS. FOR GENERAL PUBLIC DISTRIBUTION IN THE US ONLY. Global Macro Outlook Confronting the Bear Global Economics and Investment Analysis Group BNY Mellon Investment Management July 2022
Slide 2: World economic activity eased further in Q2 2022, surprising to the downside
World economic activity eased further in Q2 2022, surprising to the downside Latest data available as of July 6, 2022. Source: Macrobond. Charts are provided for illustrative purposes and are not a reliable indicator of current or future performance 2
Slide 3: While inflation remains elevated, adverse price surprises have peaked
While inflation remains elevated, adverse price surprises have peaked Latest data available for both charts as of July 6, 2022. Source: Macrobond. Charts are provided for illustrative purposes and are not a reliable indicator of current or future performance 3
Slide 4: Wage inflation remains high – way above the Fed's comfort level
Wage inflation remains high – way above the Fed’s comfort level Latest data available for both charts as of July 6, 2022. Source: Macrobond. Charts are provided for illustrative purposes and are not a reliable indicator of current or future performance 4
Slide 5: Record inflation has sharply raised market & policy rates, weighed on equities
Record inflation has sharply raised market & policy rates, weighed on equities and… . Latest data for both charts available as of July 6, 2022. Source: Macrobond. Charts are provided for illustrative purposes and are not a reliable indicator of current or future performance 5
Slide 6: …re-strengthened the USD, tightening financial conditions to pre-pandemic levels
…re-strengthened the USD, tightening financial conditions to pre-pandemic levels Latest data available for both charts as of July 6, 2022. FCI stands for Financial Conditions Index Source: Macrobond. Charts are provided for illustrative purposes and are not a reliable indicator of current or future
Slide 7: Recession risks increased & year-ahead policy expectations are flagging
As a result, recession risks increased & year-ahead policy expectations are flagging Latest data available for both charts as of July 6, 2022. Source: Macrobond. Charts are provided for illustrative purposes and are not a reliable indicator of current or future performance 7
Slide 8: The Fed seems to be prioritizing price-stability over recession risk
The Fed seems to be prioritizing price-stability over recession risk Unconventional monetary policies, such as the Federal Reserve’s quantitative easing (QE) program, have played a large role in shaping world economies since the 2007–10 financial crisis set off a global recession. Economists, howeve
Slide 9: The labour market is tight & mismatches persist – fuelling wage pressure
The labour market is tight & mismatches persist – fuelling wage pressure A Beveridge curve, or UV curve, is a graphical representation of the relationship between unemployment and the job vacancy rate, the number of unfilled jobs expressed as a proportion of the labor force. Latest data available as
Slide 10: Meanwhile, U.S. demand remains reasonably robust, though past its peak
Meanwhile, U.S. demand remains reasonably robust, though past its peak Durables, also known as durable goods or consumer durables, are goods that do not need to be purchased very often and typically last for at least three years. Nondurable goods are any consumer goods in an economy that are either
Slide 11: Supply disruption remains a key factor; some signs pressures are easing
And supply disruption remains a key factor; some signs pressures are easing The New York Fed’s global supply chain pressure index integrates transportation cost data and manufacturing indicators to provide a gauge of global supply chain conditions. The CRB Spot Market Price Index is a measure of pri
Slide 12: Europe's reliance on Russian supplies exposes it to a prolonged energy price shock
Europe’s reliance on Russian supplies exposes it to a prolonged energy price shock Data as of July 6, 2022. Source: Macrobond. Charts are provided for illustrative purposes and are not a reliable indicator of current or future performance 12
Slide 13: Also grappling with a terms of trade shock & cost of living crisis
Also grappling with a terms of trade shock & cost of living crisis Data as of July 6, 2022. Source: Macrobond. Charts are provided for illustrative purposes and are not a reliable indicator of current or future performance 13
Slide 14: Weakening growth, fragmentation risk & surging inflation places the ECB in a bind
Weakening growth, fragmentation risk & surging inflation places the ECB in a bind ECB stands for European Central Bank. Data as of July 6, 2022. Source: Macrobond. Charts are provided for illustrative purposes and are not a reliable indicator of current or future performance 14
Slide 15: Ongoing Ukraine conflict has delayed, but not prevented, easing of commodity prices
Ongoing Ukraine conflict has delayed, but not prevented, easing of commodity prices Latest data available as of July 6, 2022. Source: Macrobond. Charts are provided for illustrative purposes and are not a reliable indicator of current or future performance 15
Slide 16: Supply chain normalization will lower upstream & tradable goods price pressure
Supply chain normalization will lower upstream & tradable goods price pressure Latest data available as of July 6, 2022. Source: Macrobond. Charts are provided for illustrative purposes and are not a reliable indicator of current or future performance 16
Slide 17: China's easing lockdowns to help supply chains & activity
China’s easing lockdowns to help supply chains & activity, but Zero-covid still a risk Latest data available as of July 6, 2022. Source: Macrobond. Charts are provided for illustrative purposes and are not a reliable indicator of current or future performance 17
Slide 18: After the Q2 slump, Chinese growth to pick-up but 5.5% target is too high
After the Q2 slump, Chinese growth to pick-up sequentially but 5.5% target is too high Latest data available as of July 6, 2022. Source: Macrobond. Charts are provided for illustrative purposes and are not a reliable indicator of current or future performance 18
Slide 19: Real estate still exerts a sizable drag on China growth
Real estate still exerts a sizable drag on China growth; infra-credit will struggle to offset Latest data available as of July 6, 2022. Source: Macrobond. Charts are provided for illustrative purposes and are not a reliable indicator of current or future performance 19
Slide 20: Global drivers dominate EM sentiment; commodity exporters diverge from rest
Global drivers dominate EM sentiment; commodity exporters diverge from rest EM CPI and Policy Rate EM Trade Balance: commodity exporters win Q4/22 policy rate forecast Policy rate 12 10 Current (May-22) vs pre-pandemic vs Nov-21 7.5 End-2022 CPI forecast 8 Change in 12 month trade balance since Jan
Slide 21: Our scenarios
Our scenarios Source: BNY Mellon Global Economics and Investment Analysis (GEIA); for detailed information on each scenario, please see latest Vantage Point report for Q3 2022. 21 Projections or forecasts regarding future event, targets or expectation, are only current as of the date indicated. Ther
Slide 22: Growth forecasts – the slowdown is likely be greater than median expectations
Growth forecasts – the slowdown is likely be greater than median expectations ro area h a Four quarter percentage changes Four quarter percentage changes Four quarter percentage changes ean est case Reuters poll of economists, ean est case Reuters poll of economists, ean est case Forecasts begin in
Slide 23: Inflation Forecasts – US price growth will slow more gradually than expected
Inflation Forecasts – US price growth will slow more gradually than expected Four quarter percentage changes ro area Four quarter percentage changes ean est case ean est case arket pricing, Reuters poll of economists, arket pricing, Reuters poll of economists, Forecasts begin in Q2 2022 and were cal
Slide 24: Monetary Policy Forecasts – policy will likely remain tight for some time
Monetary Policy Forecasts – policy will likely remain tight for some time edera ds rate er cent ean est case arket pricing, Reuters poll of economists, Forecasts begin in Q2 2022 and were calculated as of June 20, 2022 Source: BNY Mellon Investment Management and Fathom Consulting. The dotted line s
Slide 25: Market pricing and performance
Market pricing and performance
Slide 26: Equity valuations under significant pressure as real yields push higher
Equity valuations under significant pressure as real yields push higher PE: price to earnings ratio. Data as of July 6, 2022. Source: JP Morgan and Macrobond. Charts are provided for illustrative purposes and are not indicative of the past or future performance of any BNY Mellon product. 26
Slide 27: Also vulnerable to tighter Fed policy, and an overshoot in real yields
Also vulnerable to tighter Fed policy, and an overshoot in real yields PE: price to earnings ratio. Data as of July 6, 2022. Source: Macrobond. Charts are provided for illustrative purposes and are not indicative of the past or future performance of any BNY Mellon product. 27
Slide 28: Earnings remain supportive but estimates are softening
Earnings remain supportive but estimates are softening Latest data available as of July 6, 2022. Source: Macrobond. Charts are provided for illustrative purposes and are not a reliable indicator of current or future performance 28
Slide 29: Breadth continued weakening steadily in the second quarter
Breadth continued weakening steadily in the second quarter % of stocks above 200-day moving average Latest data available as of July 6, 2022. Source: Macrobond. Charts are provided for illustrative purposes and are not a reliable indicator of current or future performance 29
Slide 30: High-dividend yield, low volatility factors and staples led in Q2'22
High-dividend yield, low volatility factors and consumer staples, utilities led in Q2’22 Latest data available as of July 7, 2022 for both charts. Source: Macrobond. Charts are provided for illustrative purposes and are not a reliable indicator of current or future performance 30
Slide 31: Chinese equities have been a bright spot since May
Chinese equities have been a bright spot since May MSCI China vs. MSCI EM ex-China Latest data available as of July 6, 2022. Source: Macrobond. Charts are provided for illustrative purposes and are not a reliable indicator of current or future performance 31
Slide 32: Interest rate implied volatility increased on higher macro & policy uncertainty
Interest rate implied volatility increased on higher macro & policy uncertainty A swaption is an option granting its owner the right but not the obligation to enter into an underlying swap. Latest data available as of July 6, 2022. Source: Macrobond. Charts are provided for illustrative purposes and
Slide 33: Developed market sovereign yields continued to trend higher, except for Japan
Developed market sovereign yields continued to trend higher, except for Japan Latest data available as of July 7, 2022. Source: Macrobond Charts are provided for illustrative purposes and are not a reliable indicator of current or future performance 33
Slide 34: Yield-curves re-flattened signaling tighter policy & rising recession risk
But yield-curves re-flattened signaling tighter policy & rising recession risk Latest data available as of July 6, 2022. Source: Macrobond. Charts are provided for illustrative purposes and are not a reliable indicator of current or future performance 34
Slide 35: Inflation expectations are key for what may happen to real rates
Inflation expectations are key for what may happen to real rates Inflation expectations have increased to uncomfortable levels. Households appear willing to tolerate inflation between -1% and 3%. But when current inflation moves above 3%, expected inflation turns up Latest data available as of March
Slide 36: More risk is now priced into credit markets and Europe periphery bonds
More risk is now priced into credit markets and Europe periphery bonds HY: high yield. IG: investment grade. *OAS: option adjusted spread. **Bunds are another way to describe German 10-year government bond yields. Data as of July 6, 2022. Source: Macrobond. Charts are provided for illustrative purpo
Slide 37: Spreads widened through Q2 2022, with B-rated & below widening the most
Spreads widened through Q2 2022, with B-rated & below widening the most USD corporate credit spreads since 2000 Latest data available as of June 7, 2022. Source: Macrobond. Charts are provided for illustrative purposes and are not a reliable indicator of current or future performance 37
Slide 38: FX & rates volatility have risen on widening policy differentials
FX & rates volatility have risen on widening policy differentials and stronger USD Latest data available as of July 6, 2022. Source: Macrobond. Charts are provided for illustrative purposes and are not a reliable indicator of current or future performance 38
Slide 39: Equity price forecasts – we see further downside to equities
Equity price forecasts – we see further downside to equities ro to ndex ndex ean est case Reuters poll of economists, ean est case Reuters poll of economists, Forecasts begin in Q2 2022 and were calculated as of June 20, 2022 Source: BNY Mellon Investment Management and Fathom Consulting. The dotted
Slide 40: Fixed income and credit forecasts – further upward pressure on yields and spreads
Fixed income and credit forecasts – further upward pressure on yields and spreads likely te ear o er e t o d e ds est e t rade s read h h e d s read er cent ercentage points asis points ean est case ean est case arket pricing, ean est case Forecasts begin in Q2 2022 and were calculated as of June 20
Slide 41: Oil price and dollar forecasts
Oil price and dollar forecasts – we see oil prices stabilising and USD strengthening r es a a st a or rre es U per barrel ndex, anuary ean est case ean est case Forecasts begin in Q2 2022 and were calculated as of June 20, 2022 Source: BNY Mellon Investment Management and Fathom Consulting. The dott
Slide 42: Investment Conclusions
Investment Conclusions Equities ort o o ret r s • The immediate outlook for equities remains poor – markets are likely to remain volatile as ndex recession risk is elevated, risk premia remain high, and our fan chart forecasts suggest risks are skewed to the downside. • Short-duration parts of the m
Slide 43: Definitions
Definitions Purchasing Manger Indices (PMI) An economic indicator derived from monthly surveys of private sector companies. A level above 50 indicates expansion compared to the prior month and below 50 contraction. MSCI All-Country World The MSCI All-Country World Index is an index that tracks the p
Slide 44: Disclosures
Disclosures FOR INSTITUTIONAL, PROFESSIONAL, QUALIFIED INVESTORS AND QUALIFIED CLIENTS. FOR GENERAL PUBLIC DISTRIBUTION IN THE U.S. ONLY. This material should not be considered as investment advice or a recommendation of any investment manager or account arrangement. Any statements and opinions expr
Slide 45: BNY Mellon Global Economics and Investment Analysis Team
BNY Mellon Global Economics and Investment Analysis Team 45
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