Ninety One Plc · LSE:N91
Ninety One — Ninety One SA webinar (June 2020)
30 slides from Ninety One's conference presentation, Jun 23, 2020
Slide 1: A new age for global markets?
A new age for global markets? Philip Saunders: Co-Head Multi Asset Growth 23 June 2020
Slide 2: Important information
Important information All information and opinions provided are of a general nature and are not intended to address the circumstances of any particular individual or entity. We are not acting and do not purport to act in any way as an advisor or in a fiduciary capacity. No one should act upon such i
Slide 3: Outlook
Outlook Our central scenario has generally been playing out ‒ Material shock to growth but not a typical recession ‒ Policies of strict isolation seem to be working ‒ The liquidity shock led to valuations moving to discount a materially more negative outcome ‒ Market crash versus typical bear market
Slide 4: The clear trend is down in most regions
The clear trend is down in most regions COVID-19 Growth rates in confirmed COVID-19 cases across regions 100% China Singapore 90% Japan 80% South Korea Iran 70% Italy France 60% Germany EU Other 50% Spain 40% UK US 30% 20% 10% 0% 1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 55 58 61 64 67 70 7
Slide 5: Getting the measure of COVID-19
Getting the measure of COVID-19 Susceptibility may be lower due to prior antibodies. That means herd immunity threshold may be much lower than the 80% generally assumed The vast majority of countries had decreased COVID-19 infection rates after national lockdowns were lifted The most parsimonious ex
Slide 6: Getting the measure of COVID-19
Getting the measure of COVID-19 “If what you are doing ain’t working, change what you are doing” ‒ It is an inflammatory disease not an influenza ‒ C-19 causes a hyperactive immune system response in vulnerable patients (cytokine storm) which causes inflammation and blood clotting ‒ Anti inflammator
Slide 7: Getting the measure of COVID-19
Getting the measure of COVID-19 A remarkable number of treatments and vaccines under way Current count of treatments and vaccines 223 Treatments in consideration 141 Vaccines in development COVID-19 treatments and vaccines (combined) Antibodies Antivirals Cell-Based Therapies RNA Based Treatments Do
Slide 8: Getting the measure of COVID-19
Getting the measure of COVID-19 Chinese industrial production was rebounding well ahead of the easing of lockdowns Chinese industrial production versus trend Forecasts are inherently limited and are not a reliable indicator of future results. Source: Refinitiv. 8
Slide 9: The recovery in global industrial production is likely to be dynamic
The recovery in global industrial production is likely to be dynamic Growth assets are likely to be heavily influenced by the behaviour of industrial production Global industrial production versus trend Forecasts are inherently limited and are not a reliable indicator of future results. Source: Refi
Slide 10: Global equities – a bear market or another ‘panic attack’?
Global equities – a bear market or another ‘panic attack’? MSCI World Index (as at 12 June 2020) 150 140 130 120 110 100 90 Dec-16 Apr-17 Aug-17 Dec-17 Apr-18 Aug-18 Dec-18 Apr-19 Aug-19 Dec-19 Apr-20 Source: Bloomberg, MSCI World index as at 12 June 2020. 10
Slide 11: ‘It’s the economy, stupid’
‘It’s the economy, stupid’ James Carville, political consultant and campaign manager for Bill Clinton 11
Slide 12: ‘It’s the liquidity, stupid’
‘It’s the liquidity, stupid’ Explosive US money supply growth US Federal reserve M2 money supply YoY % change 25 20 15 10 5 0 2010 2014 2018 2012 2016 1970 1974 1980 1982 1986 2020 1972 1976 1988 1978 1984 1960 1990 2000 1962 1964 1966 1968 1992 1994 1996 1998 2002 2004 2006 2008 Source: Bloomberg a
Slide 13: Is the quantum of stimulus announced sufficient?
Is the quantum of stimulus announced sufficient? Summary of key stimulus measures to date (% of GDP) Monetary Fiscal 31.1% 42.1% 13.0% 38.1% 34.2% 6.1% 15.2% 4.3% (total) 9.8% US Eurozone UK Japan China Source: Bloomberg. UBS, Federal Reserve websites and press releases, ECB website and press releas
Slide 14: Volatility…
Volatility… … on a declining trend Volatility index (VIX) from January 2006 to June 2020 90 80 70 60 50 40 38.51 30 20 10 0 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 Jan-20 Source: CBOE VIX Index, Bloomberg as at 15 June 2020 14
Slide 15: The recovery has broadened across asset classes
The recovery has broadened across asset classes EM IG has staged a sharp catch up as equity markets consolidated their recent gains c. 240bps spread widening 392 over c.4 week period to 900 peak on 23 March 800 261 c. 130 bps spread 700 compression from 151 peak to 15 June 2020 600 500 400 300 260.7
Slide 16: … and risk premia have reduced dramatically
… and risk premia have reduced dramatically Moves in high yield debt spreads c. 730bps spread widening 1094 over 4 week period to peak 2500 on 23 March 637 2000 367 c. 460 bps spread compression from peak to 15 June 2020 1500 1000 637 500 0 Source: Bloomberg B of A ML spreads, as at 15 June 2020 16
Slide 17: … equity market leadership finally beginning to broaden
… equity market leadership finally beginning to broaden Cyclicals vs Defensives (2 years) 120 115 110 105 100 95 90 85 80 75 70 Jan-18 Apr-18 Jul-18 Oct-18 Jan-19 Apr-19 Jul-19 Oct-19 Jan-20 Apr-20 US Europe ex UK UK Japan Asia ex Japan Source: Bloomberg as at 15 June 2020 17
Slide 18: Asia / China continues to move up the value chain
Asia / China continues to move up the value chain Growth at attractive prices Capex vs. sales R&D spend vs. sales 12.0% 4.0% MSCI Asia ex Japan MSCI Asia ex Japan MSCI US MSCI US 11.0% MSCI Europe 3.5% MSCI Europe 10.0% 3.0% 9.0% 8.0% 2.5% 7.0% 2.0% 6.0% 1.5% 5.0% 4.0% 1.0% CY 2005 CY 2003 CY 2004 C
Slide 19: All bets on a Eurozone breakup are off (for now)
All bets on a Eurozone breakup are off (for now) The EU has united around the need to reflate 19
Slide 20: The return of great power competition
The return of great power competition The United States once viewed China as a competitor, it now sees it as an adversary 20
Slide 21: Bi-polar US politics
Bi-polar US politics Until recently the Republicans were regarded as heavy favourites to retain control of the senate Dead heat in the senate Source: Bloomberg as at May 2020 21
Slide 22: Beginning of the Great Rotation?
Beginning of the Great Rotation?
Slide 23: Capital market assumptions vs historic outcomes
Capital market assumptions vs historic outcomes Global Fixed income Capital market assumptions as at 31 March 2020 Capital market assumptions as at 30 September 2019 18.0% Historic outcome interquartile ranges – rolling 10 year annualised returns 16.0% 14.0% 12.0% 10.0% 8.0% 7.8% 7.6% 6.0% 4.0% 3.7%
Slide 24: Capital market assumptions vs historic outcomes
Capital market assumptions vs historic outcomes Global Equities Capital market assumptions as at 31 March 2020 25.0% Capital market assumptions as at 30 September 2019 Historic outcome interquartile ranges – rolling 10 year annualised returns 20.0% 15.0% 12.4% 12.4% 10.9% 10.0% 7.7% 7.7% 8.4% 7.3% 5
Slide 25: Capital market assumptions: the bond windfall is behind us
Capital market assumptions The bond windfall is behind us 10% 9% 8% 100% global equity 7% 6% Return p.a. 5% 4% 50% global equity, 3% 100% diversified fixed 50% diversified fixed income 2% 1% income 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% Risk p.a. Current forecast 25y realised 10y realised ‒ The bond bul
Slide 26: Global Strategic Managed
Global Strategic Managed Current allocations Growth Defensive Uncorrelated Alternatives 6.7% 70.7% 22.6% 6.7% Core Global Equity Fixed Income 27.2% 13.3% Total currencies Breakdown Cash & Forwards 9.2% Fixed Income North America 44.3% Equities 65.5% 5.2% UK 6.6% Bonds 18.6% Thematic Equity 38.3% Eur
Slide 27: A new age for global markets?
A new age for global markets? Our central scenario has generally been playing out: ‒ Market ‘crash’ moved asset valuations to discount an excessively negative outcome of the impact of C-19 ‒ Fed successfully addressed the problem of a local US and international liquidity shock greatly reducing the c
Slide 28: Thank you
Thank you www.ninetyone.com
Slide 29: Questions
Questions
Slide 30: Important information
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