Bernstein International Strategic Equities Portfolio - SCB · NASDAQ:STESX
Bernstein International Strategic Equities Portfolio - SCB — Bernstein — Q2 2024 Earnings Presentation
55 slides from Bernstein International Strategic Equities Portfolio - SCB's earnings presentation, July 2024
Slide 1: The Good Place? 2Q 2024 Macro and Markets Review
The Good Place? 2Q 2024 Macro and Markets Review This presentation is provided by Bernstein. This presentation booklet has been provided to you for use in a private and confidential meeting to discuss a potential or existing investment-advisory relationship. This presentation is not an advertisement
Slide 2: Questions We Heard from Our Clients During 2Q 2024
Questions We Heard from Our Clients During 2Q 2024 Is the Bull case now the Base Will high rates choke off a Will the Fed cut at all in 2024? case? recovery? What risk does the deficit How will the election affect Is AI a game changer? impose? markets and the economy? Is now the right time to get in
Slide 3: 2Q 2024: The Good Place?
2Q 2024: The Good Place? Economic Backdrop: The (Steady) Song Remains The Same Growth is decent and inflation is falling toward target. The Fed is waiting to ease and the labor market is sound. True, there are risks (unemployment, retail spending, geopolitical, Fed error) … but can they overwhelm th
Slide 4: Macro Outlook
Macro Outlook BERNSTEIN
Slide 5: 2Q 2024 Diagnostic—Where Things Stand, Where We’re Going
2Q 2024 Diagnostic—Where Things Stand, Where We’re Going Recession Growth Expansion 0% Inflation 8% Monetary 0% 5.5% Policy Bear Stock Bull Market Returns Market Bear Bond Bull Market Returns Market Where things stand Where we’re going (Bernstein view) • Growth is still ~1.5-2% with modest slowing e
Slide 6: Wall Street’s Key Economic and Market Expectations for 2024
Wall Street’s Key Economic and Market Expectations for 2024 AB’s View: 2024 Low Consensus High Bernstein Global growth: Growth is likely to slow modestly. A disruptive hard landing continues US GDP* –0.8% 1.6% 3.2% 1.5% to appear unlikely. Monetary policy: Tightening has ended, and Global GDP* 2.0%
Slide 7: Post-COVID US Recovery Stands Out
Post-COVID US Recovery Stands Out Total Employment, Quarters Past Recession Start, Cumulative Real US GDP Growth, Quarters Past Recession Normalized Start, Percent 115 25 2009 2009 20 110 2001 15 2020 2001 105 10 2020 5 100 0 95 –5 90 –10 0 6 12 18 24 30 36 42 48 0 6 12 18 24 30 36 42 48 Quarters Qu
Slide 8: Yet US Retail Sales Show Some Deceleration
Yet US Retail Sales Show Some Deceleration Corporate America has responded to evidence of a slowdown US Retail Sales YoY, % Change "Many consumer pocketbooks are still stretched, and “McDonald’s Makes New Pitch to Inflation-Weary we see the effect of that in our business mix as they're Eaters: A Mea
Slide 9: Consumer Debt Causing Some Strain, Though Shouldn’t Be Overstated
Consumer Debt Causing Some Strain, Though Shouldn’t Be Overstated Total Debt Balance and Its Composition Total Balance by Delinquency Status Trillions of Dollars Percent 12 18 63% of GDP 10 3% 8 9% 6 15 85% of GDP 6% 4 2 9% 0 2% 1Q03 1Q04 1Q05 1Q06 1Q07 1Q08 1Q09 1Q10 1Q11 1Q12 1Q13 1Q14 1Q15 1Q16 1
Slide 10: Given Modest Expected Headwinds, Inflation Should Slow to Target
Given Modest Expected Headwinds, Inflation Should Slow to Target FOMC and tighter financial conditions continue to bring inflation to heel 9 Benign inflation prints this summer would likely provide enough confidence for 8 the Fed to begin rate cuts in 3Q 7 6 5 4 3 Fed Target 2 2.0% 1 0 Jun 21 Dec 21
Slide 11: Across Developed Markets Inflation Has Fallen to 2%–4% Range
Across Developed Markets Inflation Has Fallen to 2%–4% Range Core inflation year-over-year vs. 3-month annualized rate 6% United Kingdom 5% Portugal Last 3 Months Annualized 4% Norway US PCE Euro Area 3% Germany US CPI Italy 2% Canada Spain Switzerland 1% Japan France 0% 0.0% 0.5% 1.0% 1.5% 2.0% 2.5
Slide 12: Rate Cutting Has Started by Key Central Banks
Rate Cutting Has Started by Key Central Banks Central Bank Policy Rates 2Q 2025 6 Consensus Expectations 5 4 3 2 1 0 –1 –2 Jun 21 Dec 21 Jun 22 Dec 22 Jun 23 Dec 23 Jun 24 Dec 24 Federal Reserve European Central Bank Bank of Canada Swiss National Bank Central Bank of Sweden As of June 30, 2024. Hist
Slide 13: Equity View
Equity View BERNSTEIN
Slide 14: The Balance of Factors Still Tilts Bullish, in Our Opinion
The Balance of Factors Still Tilts Bullish, in Our Opinion Bullish Bearish AI Development Exogenous Consumer Shock Solid Stress Earnings Fed Put Growth Delayed Monetary Inflation Geopolitical Policy Reacceleration Risk Event Slowing Easing Resilient Fed Cuts Inflation Labor Market As of June 30, 202
Slide 15: US Earnings Have Been Solid of Late, Expected to Ramp
US Earnings Have Been Solid of Late, Expected to Ramp Consensus S&P 500 EPS and Growth (%, YoY) $70 $65 +17.1% +7.3% $60 +5.8% +8.2% +5.9% $55 +3.9% $50 3Q23 4Q23 1Q24 2Q24E 3Q24E 4Q24E $58.91 $55.56 $56.49 $58.99 $63.22 $65.08 As of June 30, 2024. Current analysis and forecasts do not guarantee fut
Slide 16: Positive Next 12 Months Earnings Revisions Not Just a US Story
Positive Next 12 Months Earnings Revisions Not Just a US Story Earnings Revisions, Percentile vs. History (1988–Present) By Region & Sector for the Next 12 Months Global N America Europe ex UK Japan UK MoM Chg Communications 95% 95% 53% 34% 71% + Consumer Cyclicals 91% 94% 54% 71% 56% + Healthcare 8
Slide 17: Market Leadership Still Benefiting from Tech Cycle
Market Leadership Still Benefiting from Tech Cycle Concentration can cut both ways, not simply a risk S&P 500 Contribution to Return, 2024 Top 25 Contributing Non-Tech Stocks Percent Change in Price YTD 18% 80% 16% 70% 3.4% 14.5% 14% 60% 12% S&P 500 YTD: 2.8% 50% 14.5% LLY, 10% GOOGL, AVGO, GOOG, JP
Slide 18: AI Investing: It Takes an iPhone Moment to Clarify Winners and Losers
AI Investing: It Takes iPhone Moment to Clarify Winners and Losers Mobile phone innovation is further along the disruptive journey while AI is in the early stages Mobile Phones: from Broadband Build-Out to Application Future of AI: From Training Infrastructure Build-Out to Monetization Application M
Slide 19: Our Target Ranges Are Unchanged, but Bull Case Is Looking More Likely
Our Target Ranges Are Unchanged, but Bull Case Is Looking More Likely Bullish economic case, more than our base case, has played out thus far in 2024 Scenario Analysis: S&P 500, YE 2024—not incl. dividends Base and Bull Case 6,000 Would necessitate: 5,800 5,750 continued inflation deceleration, 5,50
Slide 20: Fixed-Income View
Fixed-Income View BERNSTEIN
Slide 21: Corporate Bond Market Quality Improved, Munis Remain Strong
Corporate Bond Market Quality Improved, Munis Remain Strong Share of Bloomberg US Corporate Bond Index (A, BBB) Share of Bloomberg US Municipal Bond Index (A, BBB) 55% 35% 30% 50% 25% 20% 45% 15% 10% 40% 5% 35% 0% 2014 2016 2018 2020 2022 2014 2016 2018 2020 2022 A BBB A BBB As of June 30, 2024. Pas
Slide 22: With Higher Bond Yields, Losses Are Harder to Come By
With Higher Bond Yields, Losses Are Harder to Come By Rise in 10-Year UST Yield Needed to Wipe Out Interest Income Muni Indexes: 70 bps 1-Year 30 bps Muni Index 460 bps 50 bps 2-Year 30 bps Muni Index 240 bps 40 bps 5-Year 30 bps Muni Index 160 bps 40 bps 10-Year 30 bps Muni Index 110 bps 6/30/2020
Slide 23: Despite Higher Rates, Muni Income Delivering Positive Total Return
Despite Higher Rates, Muni Income Delivering Positive Total Return Bloomberg Municipal Bond Index Cumulative Total Return Since June 2023 Bloomberg Municipal 5.0% Bond Index Return (Left) 5.0% 3.0% 4.8% 4.6% 1.0% 4.4% –1.0% 4.2% –3.0% 10-Year US Treasury 4.0% Yield (Right) –5.0% 3.8% Jun 23 Sep 23 D
Slide 24: How to Think About Election Impact
How to Think About Election Impact 24
Slide 25: Candidate Policy Differences
Candidate Policy Differences Issue/Sector Biden Trump • Raise corporate tax rate from 21% to 28% • Maintain corporate tax rate at 21% (per 2017 TCJA) Corporate Taxes • Increasing minimum tax for large corporations from 15% to 21% • Top tax rate remains at 37% • Top tax rate reverts to 39.6% • Make t
Slide 26: Game Planning the Policy Impact
Game Planning the Policy Impact Republican White House Democratic White House Republican Congress Divided Government • Tax Cut and Jobs Act fully extended • TCJA partially expires • Possibility of additional tax cuts • Likelihood of higher effective corporate tax rate • Increased discretionary spend
Slide 27: What to Know About Returns During Administrations
What to Know About Returns During Administrations Year Administration S&P Return 1929–1933 Hoover –31% 1933–1945 Roosevelt 12% 1945–1953 Truman 16% 1953–1961 Eisenhower 16% 1961–1963 Kennedy 10% 1963–1969 Johnson 11% 1969–1974 Nixon –1% 1974–1977 Ford 15% Average, Annualized Return per Administratio
Slide 28: True or False: The Fed Doesn’t Act During Election Years?
True or False: The Fed Doesn’t Act During Election Years? The Fed Has Moved Rates in 15 of the Last 16 Election Years Percent Change in Fed Funds Rate During Election Years* 4.0 2.0 1.9 1.5 1.3 1.0 1.3 1.0 0.5 0.5 0.3 0.0 –0.3 –1.0 –1.5 –2.5 –4.1 1956 1960 1964 1968 1972 1976 1980 1984 1988 1992 199
Slide 29: What to Do?
What to Do? BERNSTEIN
Slide 30: Cash Investors Lost Out over Last 18 Months
Cash Investors Lost Out over Last 18 Months Investors stand to benefit from the imminent deployment of record cash balances Is Cash King? Investors Now Sit on Bloated Cash Balances Returns Since Start of 2023: Cash vs. Diversified Portfolios Money-Market Funds, Total Asset Level (USD Trillions) 6.5
Slide 31: Target Return: Opportunities Catalyzed by the Current Environment
Best Ideas PE & VC Opportunistic Credit Core Opportunities Catalyzed by the Private Credit Current Environment: Near-Term Volatility Upside participation with downside protection or the benefit of active tax Target Return loss harvesting Real Estate, Peak Rates Debt & Equity The hiking cycle will en
Slide 32: Appendix
Appendix BERNSTEIN
Slide 33: What We Said at Year-End 2023
What We Said at Year-End 2023 Our Expectations It’s Only July, but… “The (Fed’s) dovish tone provides an improved backdrop in 2024.” “The economic slowdown should arrive in 2024. That said, the slowdown should be modest.” “We expect cash to underperform…again.” “With rate cuts on the horizon, yields
Slide 34: Expected Returns Across Allocations
Expected Returns Across Allocations Projected median 10-year annualized return* Last 10 Years† 6.3% 5.6% 4.9% 3.7% 2.2% All Bonds 30/70 60/40 80/20 All Stocks <2% <2% Probability of 20% Peak-to- Trough Loss Within 10 Years‡ 17% 40% 61% As of June 30, 2024. Neither past nor forecasted performance is
Slide 35: Despite Sell-Offs, Long-Term Investors Remain Well Within Plan
Despite Sell-Offs, Long-Term Investors Remain Well Within Plan 10-Year Forecasted Returns (as of January 2019) Projected* and Actual Returns (Annualized) Actual Annualized Net-of-Fee Return:† Great Markets 6.3% 10.2% Typical Markets 6.1% Hostile Markets 2.3% 2019 2020 2021 2022 2023 2024 2025 2026 2
Slide 36: Markets Are Often Reaching New Heights
Markets Are Often Reaching New Heights S&P 500 at or Near All-Time Highs* January 1950–June 2024 At or Near High Log Scale S&P 500 Price Level 1000 Price Level 100 10 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 Since 1949, the S&P 500 has been at or near all-time highs
Slide 37: Current Market Rally Looks Like 2009’s
Current Market Rally Looks Like 2009’s S&P 500 Performance Relative to Trough 500 450 Trajectory Post-GFC 400 We Are Here 350 300 250 200 150 100 0 1 2 3 4 5 6 7 8 9 10 Years Before and After Trough 2009 Rally 2020 Rally As of June 30, 2024. Past performance does not guarantee future results. Trough
Slide 38: Beyond Leaders, Valuations More Reasonable
Beyond Leaders, Valuations More Reasonable 12-Month Forward Price/Earnings Ratio 35x 21x 16x 14x 12x Magnificent 7* S&P 500 S&P 500 Equal Weight MSCI EAFE MSCI EM Current 10-Year Average† As of June 30, 2024. Past performance does not guarantee future results. Simulated or hypothetical performance r
Slide 39: With Higher Bond Yields, Losses Are Harder to Come By
With Higher Bond Yields, Losses Are Harder to Come By Rise in 10-Year UST Yield Needed to Wipe Out Interest Income Taxable Indexes: 20 bps Long 20 bps Corporate 50 bps Index 30 bps Intermediate 30 bps Corporate 130 bps Index 10 bps Long 10 bps Treasury 30 bps Index 10 bps Intermediate 20 bps Treasur
Slide 40: If Yields Fall, Bond Total Return Should Outpace Yield Alone
If Yields Fall, Bond Total Return Should Outpace Yield Alone 10-Year US Treasury Yield (%) Total Return, 12 months forward* (Percent) 5 4 4.7% AB Forecast, 10-Year US Treasury Yield (%) YE 2024 4.00% 1.0% 3 2 3.7% 1 0 2018 2019 2020 2021 2022 2023 Muni Intermediate Duration Income Price Appreciation
Slide 41: Bonds Begin to Rally in Advance of First Cut
Bonds Begin to Rally in Advance of First Cut Fixed-income returns in rate-cut cycles since 1980, indexed to nine months before first cut Municipal Bond Returns Taxable Bond Returns Cumulative return, indexed to nine months prior to rate cuts Cumulative return, indexed to nine months prior to rate cu
Slide 42: What Happens Next on the US Budget
What Happens Next on the US Budget • The total deficit is unlikely to change, irrespective of the electoral outcome. • There will likely be different ways of getting to the deficit; different balances between taxing and spending, but, absent true fiscal reform, the deficit itself is likely to persis
Slide 43: Geopolitics: Events Rarely Have a Lasting Market Impact
Geopolitics: Events Rarely Have a Lasting Market Impact Select geopolitical events since 1970 and S&P 500 returns (percent) First First Event Trading Day 1 Week 1 Month 1 Quarter 1 Year Event Trading Day 1 Week 1 Month 1 Quarter 1 Year Watergate 6/19/1972 (0.1) (1.4) 0.4 (3.0) SARS† 2/11/2003 (0.1)
Slide 44: Elections in 2024: It Isn’t Just the US
Elections in 2024: It Isn’t Just the US Indonesia South Africa UK USA Taiwan El Salvador Russia Panama EZ Parliament Brazil Uruguay Venezuela Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Pakistan India Mexico Sri Lanka Ghana Senegal Turkey Dominican France Republic As of June 30, 2024. Source: AB
Slide 45: Ten-Year Capital Market Projections: Asset Classes
Ten-Year Capital Market Projections: Asset Classes Median 10-Year Mean Annual Mean Annual One-Year 10-Year Annual Growth Rate Return Income Volatility Equivalent Volatility Cash Equivalents 3.9% 4.0% 4.0% 0.5% 5.0% Short-Term Treasuries 4.1% 4.2% 4.1% 1.2% 4.4% Short-Term Taxables 4.3% 4.4% 4.7% 1.5
Slide 46: Notes on Wealth Forecasting System
Notes on Wealth Forecasting System 1. Purpose and Description of Wealth Forecasting Analysis Bernstein’s Wealth Forecasting Analysis is designed to assist investors in making their long-term investment decisions as to their allocation of investments among categories of financial assets. Our planning
Slide 47: Notes on Wealth Forecasting System
Notes on Wealth Forecasting System 2. Modeled Asset Classes The following assets or indexes were used in this analysis to represent the various model classes: Asset Class Modeled As Annual Turnover Cash Equivalents 3-month US Treasury bills 100% Short-Term Treasuries US Treasuries of 2-year maturity
Slide 48: Notes on Wealth Forecasting System
Notes on Wealth Forecasting System 3. Volatility Volatility is a measure of dispersion of expected returns around the average. The greater the volatility, the more likely it is that returns in any one period will be substantially above or below the expected result. The volatility for each asset clas
Slide 49: Notes on Wealth Forecasting System
Notes on Wealth Forecasting System 7. Tax Rates Bernstein’s Wealth Forecasting Analysis has used the following tax rates for this analysis: Federal Income Federal Capital State Income State Capital Tax Method Taxpayer Scenario Start Year End Year Tax Rate Gains Tax Rate Tax Rate Gains Tax Rate Type
Slide 50: Glossary of Risk and Return Statistics
Glossary of Risk and Return Statistics Summary statistics are based on 10,000 simulated trials. Along each trial (or “path”), price changes and cash flows are projected at an annual interval, out to 50 years. Statistics are computed based on the ranges of outcomes across these paths. Median Annualiz
Slide 51: Index Descriptions
Index Descriptions The Bloomberg Global High Yield Index represents noninvestment-grade fixed-income securities of companies in the US, developed, and emerging markets. The Bloomberg US Treasury Index represents the performance of US Treasuries within the US government fixed-income market. The Bloom
Slide 52: Glossary
Glossary Active Management: Managing a portfolio through security selection designed to outperform the portfolio’s benchmark. Active Share: The degree of difference between a portfolio and its benchmark index, calculated using the weight of individual securities in the portfolio relative to the benc
Slide 53: Glossary (cont.)
Glossary (cont.) Inflation-Protected Bonds: Bonds whose values are indexed to inflation, normally adjusted on a semiannual basis. The most well known are Treasury Inflation-Protected Securities, or TIPS. Inflation-protected bonds are designed to shield investors from the negative impact of inflation
Slide 54: Disclosures and Important Information
Disclosures and Important Information Hypothetical, back-tested, or simulated performance has many inherent limitations, only some of which are described herein. The hypothetical performance shown herein has been constructed with the benefit of hindsight and does not reflect the impact that certain
Slide 55: The [A/B] logo is a registered service mark of AllianceBernstein, and AllianceBernstein ® is
The [A/B] logo is a registered service mark of AllianceBernstein, and AllianceBernstein® is a registered service mark, used by permission of the owner, AllianceBernstein L.P. © 2024 AllianceBernstein L.P. BPWM-569252-2024-07-08