OneAscent Enhanced Small and Mid Cap ETF · AMEX:OASC
OneAscent Enhanced Small and Mid Cap ETF — OneAscent Investment Solutions — Q1 2023 Earnings Presentation
62 slides from OneAscent Enhanced Small and Mid Cap ETF's earnings presentation, Jan 17, 2023
Slide 1: OneAscent Market Update: Q1 2023
OneAscent Market Update: Q1 2023 January 17th, 2023
Slide 2: Today's Speakers
Today’s Speakers Cole Robert C. Nathan Pearson Doll Willis CFA CFA, CAIA • President, Investment Solutions • Chief Investment Officer, Crossmark Global • Director of Portfolio Strategy • CFA Level III Candidate Investments • Previously CIO of Greenhawk Corporation, a • Previously a Senior Investment
Slide 3: Q4 2022 market returns
Q4 2022 market returns The S&P 500 recovered ground to finish the year just above bear market territory International Stocks staged a stronger recovery during the fourth quarter This caused international returns to exceed US stock returns for the year, in contrast to the prior 10 years which w
Slide 4: OneAscent Peak Allocation Performance
OneAscent Peak Allocation Performance as of 12/31/2022 Group/Investment 1 Month 3 Month 1 Year 3 Year 5 Year OneAscent Equity Allocation -3.1 9.9 -20.1 4.8 6.3 Equity Benchmark -3.8 10.2 -17.3 3.9 5.0 +/- Benchmark 0.7 -0.2 -2.7 1.0 1.3 OneAscent Growth Allocation -2.6 8.7 -18.6 4.1 4.9 Growth Bench
Slide 5: Our Approach to Values-Based Investing
Our Approach to Values-Based Investing We assess how a company interacts with every single person and every square inch. Eliminate Evaluate Elevate companies whose products or companies to identify those that companies that make the practices cause harm meet our investment objectives world a better
Slide 6: We seek to Eliminate companies that harm stakeholders
We seek to Eliminate companies that demonstrably and consistently harm their stakeholders. Reference to OneAscent’s values-based investing approach is provided for illustrative purposes only and indicates a general framework of guiding principles that inform OneAscent’s overall research process. One
Slide 7: We seek to Elevate companies that promote flourishing
We seek to Elevate companies that demonstrably and consistently promote flourishing for their stakeholders. Reference to OneAscent’s values-based investing approach is provided for illustrative purposes only and indicates a general framework of guiding principles that inform OneAscent’s overall rese
Slide 8: Robert C. Doll, CFA, Chief Investment Officer
Robert C. Doll, CFA® Chief Investment Officer Financial services industry veteran, with over 40 years of experience. Experienced portfolio manager for large-cap equity strategies, as well as long and long-short equity strategies. Author of weekly, quarterly, and annual investment commentaries focusi
Slide 9: 2023 Theme: The Fed Calls the Shots
2023 Theme The Fed Calls the Shots Q: Will the Fed insist on 2% inflation? Normal Recession OR Q: Will the Fed blink, raise the inflation target to . 3%, and possibly tolerate 4% inflation? Soft Landing OR Q: Will the Fed attempt to thread the needle? Shallow Recession
Slide 10: 2023 Investment Questions
2023 Investment Questions Have central Will we have a What are trough What is core Can bond yields banks already recession? earnings? inflation rate? fall further? overtightened? SS a How will QT Will there be How long will What happens Will China complicate breakage the dollar stay to the war and r
Slide 11: Prediction: Shallow Recession
PREDICTION 1 The U.S. experiences a shallow recession as real GDP is in bottom ten of last 50 years. Why Recession? Fundamentals Why Shallow? * Yield curve deeply inverted (deepest in 40 years) * Consumer cash still strong (especially top half) * Commodity prices down (Oil down 40% in six © Excess c
Slide 12: Yield Curve, OECD Leading Indicator, Real M2
3-Month / 10-Year Yield Curve Source: Bloomberg. OECD Leading Indicator Real U.S. M2 Source: Bloomberg. Source: Bloomberg. 5
Slide 13: Probability Real GDP
Probability Real GDP Soft Landing 30% 1.5 Mild Recession 50% 0.5 Average Recession 20% -0.5 Note: Real GDP likely to be in bottom quintile of last 50 years for U.S. and globe Memo Growth Rate U.S. Bottom Quartile 1.5% Global Bottom Quintile 2.0% Global Bottom Decile 1.5% 6
Slide 14: If Fed insists on 2%: recession probability
WAS 0-2% If Fed insists on 2% → Recession probability near 100% PEAKED 8-9% • Stocks vulnerable (earnings cuts severe), bonds good CURRENTLY 6-7% If Fed raises target to 3% and can tolerate 4% HEADING TO 4-5% → Soft landing possible • Stocks okay, earnings targets achieved, valuation questionable FE
Slide 15: Core PCE Still Way Above Fed Target
Core PCE Still Way Above Fed Target Services vs. Goods CPI (YoY) Source: Canaccord Genuity. Source: Wolfe Research. 8
Slide 16: Sources: Wolfe Research Portfolio Strategy, Bloomberg, Crossmark.
Sources: Wolfe Research Portfolio Strategy, Bloomberg, Crossmark. 9
Slide 17: Fed rate expectations
1 Fed will eventually raise rates 25 basis points (not 50) 2 Fed reaches peak rates at 5% or higher early in 2023 3 Fed keeps rates at peak longer than consensus expects 4 Fed funds exits 2023 at 5% or higher 5 5 Additional inversion likely Note: Fed still has $9 trillion of balance sheet assets to
Slide 18: Current Policy Rate Less Current CPI Reading
Current Policy Rate Less Current CPI Reading Note: as of 12/31/22. 11
Slide 19: S&P Earnings
S&P 500 Operating EPS - Consensus S&P Earnings $252 Consensus Our Guess $230 2021 $204 (Actual) $204 (Actual) $232 $221 2022 $221 +10% $220 +8% Wolfe Estimates 2022E: $220 (-1% Below Consensus) 2023 $231 +8% $200 -9% 2023E: $190 (-18% Below Consensus) 2024 $254 +9% $230 +15% Sources: Wolfe Research
Slide 20: S&P 500 Probability Scenario
S&P 500 Probability Scenario Low % Close % 10-Year Yield % 30% Soft Landing 3600 -6.2% 4200 +9.4% 4.25% +38bp 50% Mild Recession 3400 -12.4% 3900 +1.6% 3.50% -37bp 20% Normal Recession 3000 -21.9% 3600 -6.2% 2.75% -112bp Probability Weighted Average 3930 3.60% Reminder: Stocks have never bottomed be
Slide 21: Fed actions will determine how fast we go down
Fed actions will be the most important determinant of how fast we go down the bear market path Current Situation Our base case remains that a mild recession hits in 2023 Once a recession hits, we need to worry about worst-case scenarios Source: Wolfe Research. 14
Slide 22: Current Historical Percentile
Historical Last Year Valuation Metrics Current Percentile Percentile U.S. Market Cap / GDP 22.0x 96 100 Cash Flow Yield 6.7% 85 95 Free Cash Flow Yield 4.1% 51 60 Forward P/E 17.9x 83 94 Cyclically Adjusted P/E (CAPE) 26.2x 83 93 Price / Book 4.0x 90 95 EV/EBITDA 12.5x 88 99 Yield Gap vs. 10-Yr U.S.
Slide 23: Number of down years
Number of down years (Total Returns) 19/95 20% Number of back to back down years 3/94 3% Number of three down years in a row 0/94 0% (In fact, never in the 250-year history of U.S. Treasuries) Note: Total return for 2021-2022 was worst in over 100 years. 16
Slide 24: Overweights and Underweights
OVERWEIGHTS UNDERWEIGHTS Energy Utilities • Record free cash flow • Expensive vs. bonds and other equities • Limited capex due to environmental restrictions • Payout rates high • Strong earnings growth • Hurt by higher rates and inflation Risk: Significant decline in oil prices, war ends Risk: Moder
Slide 25: 2010-2021 vs 2021-2024 CAGR
20 18% 15 10 9% 7% 5 5% 0 2010 - 2021 (CAGR) 2021 - 2024 (CAGR) Source: FactSet, Goldman Sachs Global Investment Research. As of December 1, 2022. 18
Slide 26: Value vs. Growth index
Value vs. Growth index Source: Tuck School of Business Data Library, BofA US Equity & Quant Strategy. Note: October performance is based on the Russell 1000 Value & Growth index. 19
Slide 27: Sources: Morningstar and Hartford Funds. 2/22.
Sources: Morningstar and Hartford Funds. 2/22. 20
Slide 28: Market leadership shifts
• Average Stock > Index (Equal-weighted • Central bank distortions portfolios > cap-weighted portfolios) • Very low/negative interest rates • Small > Big • Cash in up markets • Value > Growth • High stock correlations • Interest rates flat to up • Low tracking error • Stocks flattish or down • Low d
Slide 29: International Equities To Outperform U.S.
MSCI Annual Returns (%) International Equities To Outperform U.S. in 2022 MSCI USA MSCI ACWI ex US 2011 1.4 (13.7) 1 U.S. expensive vs. ROW 2012 15.3 16.8 2013 31.8 15.3 2014 12.7 (3.9) 2 U.S. tends to lag international when rates are rising 2015 0.7 (5.7) 2016 10.9 4.5 2017 21.2 27.2 3 Likely dolla
Slide 30: FY2 P/E Multiple Current vs. Last 10 Years
FY2 P/E Multiple 24x Current vs. Last 10-Years High (consensus bottom-up) YE 2021 22x Median 20x Current P/E High High 18x 17.8 High 16 x 14 x +1σ 13.1 12.7 12 x Low 12.1 -1σ Low Low Low 10 x US Dev. Europe Japan APxJ Source: Goldman Sachs Global Investment Research. As of December 2, 2022. 23
Slide 31: Population and GDP growth by country
2024 Consensus GDP Growth India 6.6% China 4.9% Rank Country Population Spain 2.0% Brazil 1.9% 1 China 1,410,539,758 Canada 1.7% 2 India 1,389,637,446 USA 1.4% Germany 1.3% 3 United States 332,838,183 France 1.3% Italy 1.2% 4 Indonesia 277,329,163 UK 1.1% Japan 1.1% 5 Pakistan 242,923,845 Source: Go
Slide 32: 2023 - Washington DC
2023 - Washington DC Third Year Of A Presidential Cycle Tends To Be Strong For US Equities • With Republicans taking control of the House, voters have removed the party power in 8 of the past 9 Average elections. (Most political volatility since the post-Civil 20 War period.) 16.3% • The 2024 Presid
Slide 33: Globalization Is Over For Now
Globalization Is Over For Now Total Trade As a Share of World GDP • Globalization – each country makes and sells what it does (Our World in Data, Globalization over 5 Centuries) best (“free trade”) • Significant growth engine for the global economy (global GFC trade went from 5% of global GDP in 194
Slide 34: Large Deficits Drive Federal Debt
Large Deficits Will Drive Federal Debt Held By Consequences The Public To Unprecedented Levels • Counter-cyclical fiscal policy less likely in a recession • Tough to extend Trump tax cuts (2017) • Additional social spending agenda stymied Pandemic • More economic and market volatility and potential
Slide 35: Key takeaways
1 The economy is weakening and will probably experience a mild recession in 2023. 2 Inflation is still too high even though it will probably come down during 2023. 3 The Fed is not done raising rates and those rates may stay higher for longer. 4 Earnings estimates are too high almost regardless of t
Slide 36: Investment recommendations
1 Expect choppy markets (buy dips/trim rallies) 2 Focus on earnings growth (not P/E expansion) and free cash flow 3 Own some bonds (unlike advice a year ago) 4 Diversify across asset classes and geographies (more non-U.S.) 5 Own high-quality value and less expensive growth 6 Consider an absolute ret
Slide 37: OneAscent Large Cap Core, Value, Growth
OneAscent Large Cap Core, Large Cap Value, Large Cap Growth • Cautious/opportunistic • Buy dips/trim rallies • Focus on quality, profitability, valuation • Overweight established technology, HMO's/biotech, specialty retail, energy • Underweight high P/E, highly competitive areas (e.g., communication
Slide 38: Crossmark Global Investments disclosures
Crossmark Global Investments, Inc. (Crossmark) is an investment adviser registered with the Securities and Exchange Commission that provides discretionary investment management services to mutual funds, institutions, and individual clients. Investment advice can be provided only after the delivery o
Slide 39: Q&A
Q&A . OneAscent INVESTMENTS 39
Slide 40: Allocation Committee Update & Outlook Q4 2022
Allocation Committee Update & Outlook Q4 2022 Nathan Willis, CFA, CAIA Director of Portfolio Strategy OneAscent Investments
Slide 41: Q4 2022 market discussion
Q4 2022 market discussion • Review of markets in Q4 • Navigator process and investment outlook • What actions should I be taking in my portfolio? 41
Slide 42: Q4 2022 market returns
Q4 2022 market returns Market 12/31/2022 Market Returns Ending Returns Ending 12/31/2022 Fourth 10 Yr 25 year Category Quarter 1 Year (Ann.) (Ann.) US Stocks US Stocks S&P 500 7.5% -18.1% 12.5% 7.6% Russell 2000 Index 6.2% -20.5% 9.0% 7.1% International Stocks International Stocks MSCI EAFE 17.4% -1
Slide 43: What has driven US stock returns for the last 10 years?
40.5 Market Returns Ending 12/31/2022 10 Yr 25 year Category (Ann.) (Ann.) US Stocks S&P 500 12.5% 7.6% Russell 2000 Index 9.0% 7.1% International Stocks MSCI EAFE 5.3% 5.1% MSCI Emerging Markets 1.8% 6.1% Bonds Bloomberg Aggregate Bond 1.1% 4.0% Source: Bloomberg, What has driven US Stock returns f
Slide 44: This is water
This is water Federal Federal Reserve Reserve Balance SheetBalance Sheet of $7.5 Trillion – creation Fed Funds Fed Funds Interest Rate Interest – 0.25% Rate for 9 of 13 years Minimal money creation Unprecedented money creation Source: Bloomberg, Bureau of Economic Analysis, Statistica 44
Slide 45: This is water
This is water S&P 500 Price Federal Reserve Balance Sheet Fed Funds Interest Rate Source: Bloomberg, Bureau of Economic Analysis, Statistica 45
Slide 46: Navigator Outlook: January 2023
Navigator Outlook: January 2023 VALUATION ECONOMY SENTIMENT TECHNICAL NEGATIVE SLIGHTLY NEUTRAL SLIGHTLY POSITIVE NEGATIVE POSITIVE The statements contained in this presentation are the opinions of OneAscent Investment Solutions, LLC and data available at the time of publication, and is not intended
Slide 47: Valuation
Valuation Both stocks and bonds have gotten cheaper since 2021 Source: Bloomberg 47
Slide 48: Navigator Outlook: January 2023
Navigator Outlook: January 2023 VALUATION ECONOMY SENTIMENT TECHNICAL NEGATIVE SLIGHTLY NEUTRAL SLIGHTLY POSITIVE NEGATIVE POSITIVE The statements contained in this presentation are the opinions of OneAscent Investment Solutions, LLC and data available at the time of publication, and is not intended
Slide 49: Recession watch
Recession watch Source: Bloomberg The Fed’s preferred recession The Market thinks rates will be indicator is flashing warning signs lower in 2023 and 2024 than the Fed thinks 49
Slide 50: Navigator Outlook: January 2023
Navigator Outlook: January 2023 VALUATION ECONOMY SENTIMENT TECHNICAL NEGATIVE SLIGHTLY NEUTRAL SLIGHTLY POSITIVE NEGATIVE POSITIVE The statements contained in this presentation are the opinions of OneAscent Investment Solutions, LLC and data available at the time of publication, and is not intended
Slide 51: Technicals
Technicals S&P 500 S&P 500 Advance/Decline Line Market breadth has improved Source: Bloomberg 51
Slide 52: Navigator Outlook: January 2023
Navigator Outlook: January 2023 VALUATION ECONOMY SENTIMENT TECHNICAL NEGATIVE SLIGHTLY NEUTRAL SLIGHTLY POSITIVE NEGATIVE POSITIVE The statements contained in this presentation are the opinions of OneAscent Investment Solutions, LLC and data available at the time of publication, and is not intended
Slide 53: Investor Sentiment is Negative
Investor Sentiment is Negative AAII Sentiment Survey 1/5/2023 70.00% AAII INVESTOR SENTIMENT Bullish, 60.00% 20.50% 50.00% 40.00% Bearish, 42.00% 30.00% 20.00% 10.00% 0.00% Neutral, Bullish Neutral Bearish 37.50% Investor Sentiment, a contrarian indicator, has been negative for some time Source: AAI
Slide 54: Navigator Outlook: January 2023
Navigator Outlook: January 2023 VALUATION ECONOMY SENTIMENT TECHNICAL NEGATIVE SLIGHTLY NEUTRAL SLIGHTLY POSITIVE NEGATIVE POSITIVE 54
Slide 55: Long-term Outlook
Long-term Outlook 2016 World Series Champions Chicago Cubs 100 year winning percentage – 49.1% 55
Slide 56: Long-term Outlook
Long-term Outlook S&P 500 Valuation (Price/Sales) MSCI EAFE Valuation(Price/Sales) S&P 500 P/S Ratio minus MSCI P/S Ratio US large cap stocks are still more expensive than International stocks Source: Bloomberg 56
Slide 57: Long-term Outlook
Long-term Outlook US large cap stocks are still more expensive than small cap stocks Source: Bloomberg 57
Slide 58: Portfolio game plan
Portfolio game plan Understand the Environment Embrace the Environment Consider using alternative strategies to lower Stock volatility may continue portfolio volatility and capture diversified returns Returns are likely to be below Make use of tactical strategies, rebalancing and average in the comi
Slide 59: Learn more about our solutions
If you’d like to learn more about our solutions, visit us at investments.oneascent.com or email us at info@oneascent.com AssetAllocation–Q2 2022 Allocation Fact Sheets Investment Dashboard Commentary Follow ONEASCENT on: Contact Us: investments.oneascent.com info@oneascent.com 205-847-1343 59
Slide 60: Important Disclosures
Important Disclosures OneAscent Investment Solutions LLC (“OneAscent”) was formed in March 2017, and manages a variety of equity, income and balanced asset strategies for client accounts. OneAscent is an investment adviser registered with the United States Securities and Exchange Commission. Registr
Slide 61: Important Disclosures
Important Disclosures Turnkey Model Performance: Performance information for the attached strategy is calculated using model performance and is based on the portfolio allocation data since inception. The strategy has not materially changed since inception. Model performance is net of any fees on the
Slide 62: Get Connected
Get Connected: investments.oneascent.com info@oneascent.com 205-847-1343
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