55 slides from OneAscent Enhanced Small and Mid Cap ETF's corporate update, Jan 18, 2022
Slide 1: OneAscent Market Update: Q1 2022
OneAscent Market Update: Q1 2022 January 18th, 2022
Slide 2: Agenda
Agenda 1. Welcome and OneAscent Investments Introduction – Cole Pearson 2. Manager Spotlight – Bob Doll, CFA – Crossmark 3. Investment Committee Update & Outlook – Nathan Willis, CFA, CAIA Upcoming Events Please submit your questions to: Q2 – April 19th, 2022 info@oneascent.com Q3 – July 19th, 2022
Slide 3: Our investment philosophy
Our investment philosophy Values-Based We believe aligning your investments with your values is a wise approach to investing. Long-Term We maintain a long-term focus both in investment analysis and management of our business. Globally Diversified We invest across multiple markets and asset cla
Slide 4: Our approach to Values-Based Investing
Our approach to Values-Based Investing Eliminate companies whose products or practices cause harm Evaluate companies to identify those that meet our investment objectives Elevate Companies who make the world a better place Reference to OneAscent’s values-based investing approach is provided for illu
Slide 5: At OneAscent, we see a disconnect
At OneAscent, we see a disconnect. 10% of American adults believe that each of these • Absolute moral truth exists • Jesus lived a sinless life statements are true, indicating that they hold biblical • You cannot earn your way to Heaven • Satan is a real being values 1 … • The Bible is totally accur
Slide 6: What values would you never violate to make a profit?
What values do you have that you’d never want to violate just to make a profit? 6
Slide 7: Risk-based, globally diversified portfolios
Risk-based, globally diversified portfolios The OneAscent Turnkey Models are Highest designed to offer five risk-based asset allocation models that align with an Equity investor’s values. Risk-based exposure Growth begins with a strategic allocation to stocks and bonds, and then diversifies Moderate
Slide 8: 2022 Investment Outlook Predictions
2022 Investment Outlook 10 Predictions 8
Slide 9: 2022 Outlook
2022 Outlook “The test of a first rate intelligence is the ability to hold two opposing ideas in mind at the same time and still retain the ability to function.” - F. Scott Fitzgerald Tug of war between earnings tailwinds and valuation headwinds. - Crossmark 2022 Predictions Theme “The broad market
Slide 10: Consensus Macro U.S. Estimates
U.S. real growth and inflation remain above-trend but decline from 2021 levels Consensus Macro U.S. Estimates Real GDP GDP Deflator Nominal GDP 2019 2.3% 1.8% 4.1% 2020 -3.4% 1.2% -2.2% 2021 5.5% 3.3% 9.0% 2022 3.9% 3.1% 7.1% Long-Term Potential 1.5% – 2.5% 2.0% - 3.0% 4.0% - 5.0% Source: St. Louis
Slide 11: Economy Balance Sheet
U.S. real growth and inflation remain above-trend but decline from 2021 levels Economy Balance Sheet Positives Negatives 1. Economic growth above trend 1. Economic growth slowing 2. Economy still re-opening 2. Re-opening is not uniform 3. Impact of massive monetary and fiscal stimulus 3. Monetary an
Slide 12: Fed/Inflation Observations
Inflation falls, but core inflation remains stuck at around 3% Fed/Inflation Observations Causes Of Higher Structural Inflation • Fed focus has moved (belatedly) from fighting unemployment to fighting inflation. 1 Rising demand/monetary and fiscal stimulus • We believe current inflation consists of
Slide 13: Annual 10-Year U.S. Treasury Returns
For the first time since 1958/1959, 10-Year Treasuries provide a second consecutive year of negative returns Annual 10-Year U.S. Treasury Returns 35% 30% 25% 20% 15% 10% 5% 0% -5% -10% -15% 1994 1996 1998 2000 1928 1930 1932 1934 1936 1938 1940 1942 1944 1946 1948 1950 1952 1954 1956 1958 1960 1962
Slide 14: Fed/Bond Market Observations
For the first time since 1958/1959, 10-Year Treasuries provide a second consecutive year of negative returns Fed/Bond Market Observations The Fed shifted (belatedly) from fighting The Fed is slowly taking away the proverbial punch The Fed will eventually raise rates unemployment to fighting inflatio
Slide 15: 2022 S&P 500 Earnings, P/E, & Targets
Stocks experience their first 10% correction since the pandemic and fail to make the gains widely expected 2022 S&P 500 Earnings, P/E, & Targets Probability P/E Earnings Price Target △ 60% Base Case 2022 20x $225 4500 -5.6% 2023 18.75x $240 25% Bull Case 2022 21.75x $230 5000 +4.9% 2023 20x $250 15%
Slide 16: S&P 500 TTM P/E
Stocks experience their first 10% correction since the pandemic and fail to make the gains widely expected S&P 500 P/E vs. Inflation Average S&P 500 TTM P/E by CPI Y/Y Tranche (1950 – Current) 20 18.6 18 17.4 16.8 16 15.1 S&P 500 TTM P/E 14 12 10.9 10 9.5 8.5 8.0 8 6 4 2 0 -2 - 0% 0 - 2% 2 - 4% 4 -
Slide 17: Unemployment vs. Stock Prices
Stocks experience their first 10% correction since the pandemic and fail to make the gains widely expected Unemployment vs. Stock Prices Forward 6 Month S&P 500 Performance by Unemployment Rate Decile 8.3% 7.8% 5.3% 5.0% 4.8% 4.8% 4.7% 2.7% Current 1.6% 0.2% Decile 1 Decile 2 Decile 3 Decile 4 Decil
Slide 18: U.S. Valuation Metrics Are High Relative To History
Stocks experience their first 10% correction since the pandemic and fail to make the gains widely expected U.S. Valuation Metrics Are High Relative To History Aggregate Index Russell 3000: Percent of Index with Price-to-Sales Ratios > 10x Valuation Metric Current Historical Percentile 20.0% 18.0% U.
Slide 19: The Average Stock Has Stalled
Stocks experience their first 10% correction since the pandemic and fail to make the gains widely expected The Average Stock Has Stalled Value Line Arithmetic Index 10400 10200 10000 9800 9600 9400 9200 9000 8800 8600 8400 8200 8000 7800 Dec-20 Jan-21 Feb-21 Mar-21 Apr-21 May-21 Jun-21 Jul-21 Aug-21
Slide 20: Cyclical > Defensives, Value > Growth, Small > Large
Cyclical, value, and small stocks outperform defensive, growth, and large stocks The two triplets are often related: • Cyclical, value, and small often lead together • Defensives, growth, and large often lead together Cyclical > Defensives Value > Growth Small > Large 1. Cyclicals tend to outperform
Slide 21: Overweights and Underweights
Financials and energy outperform utilities and communication services OVERWEIGHTS UNDERWEIGHTS FINANCIALS COMMUNICATION SERVICES • Very inexpensive • Regulatory overhaul • Balance sheets highest quality in a long time • Long duration hurts in rising rate environment • Biggest beneficiaries of rising
Slide 22: Sector And Industry Group Sensitivity To Interest Rates
Financials and energy outperform utilities and communication services Sector And Industry Group Sensitivity To Interest Rates Correlation Of Sector Excess Returns With 10-Year Treasury Yields Financials Materials Industrials Energy Autos & Components Media & Ent Cons Durables Info Tech Consumer Disc
Slide 23: International Equities To Outperform U.S. in 2022
International stocks outperform the U.S. for only the second year in the last decade MSCI Annual Returns (%) International Equities To Outperform U.S. in 2022 MSCI USA MSCI ACWI ex US 2011 2.0 (13.3) 1 Non-U.S. markets more cyclical than U.S. 2012 16.1 17.4 2013 2014 32.6 13.4 15.9 (3.3) 2 U.S. tend
Slide 24: EPS Growth Expectations, Potential Dollar Weakness
International stocks outperform the U.S. for only the second year in the last decade EPS Growth Expectations Potential Dollar Weakness 1 2022 2023 P/E 2022 Dollar viewed as defensive U.S. +8% +9% 21.2x Euro Zone +8% +9% +9% +8% 15.7x 14.3x 2 Non-U.S. relative economic and earnings improvement Japan
Slide 25: Avoid, Embrace, Engage
Values-based investing continues to gain share Names for This Type of Investing Key Issues 1. Values-Based 7. Screened 1. Human Capital Management 7. Anti-Corruption 2. ESG 8. Ethical 2. Treatment of Community & Environment 8. Board Policies 3. Impact 9. Green 3. Family Values 9. Executive Pay 4. Su
Slide 26: BRI Screened Portfolio Ties the S&P 500 Index
Values-based investing continues to gain share BRI Screened Portfolio Ties the S&P 500 Index Cumulative Returns of BRI Screened Portfolio vs. S&P 500 Index 1/1/2000 – 12/31/2019 Source: Biblically Responsible Investing Institute (BRII), Bloomberg. Data to 12/31/2019. 26
Slide 27: Federal Interest Payments As % Of Total Receipts
After a 60+ year low in 2021, federal interest expense as a percentage of revenue begins a long-term move higher Federal U.S. Government Annual Interest Payments As % Of Total Receipts 30% 28% 26% 24% 22% 20% 18% 16% 14% 12% 10% Jan-45 Jan-50 Jan-55 Jan-60 Jan-65 Jan-70 Jan-75 Jan-80 Jan-85 Jan-90 J
Slide 28: Large Deficits Will Drive Federal Debt To Unprecedented Levels
After a 60+ year low in 2021, federal interest expense as a percentage of revenue begins a long-term move higher Large Deficits Will Drive Federal Debt Held By The Public To Unprecedented Levels Federal debt held by the public as a percentage of GDP (%) 200.0 180.0 Projected 160.0 140.0 Pandemic 120
Slide 29: Congressional Party Affiliations
Republicans gain at least 20-25 House seats and barely win the Senate Congressional Party Affiliations Current Projected Key Themes House Senate House Senate Economy - Democrat 222 50 200 49 Inflation Change (-22) (-1) Crime Republican 213 50 235 51 Immigration + Trump Change (+22) (+1) Note: The U.
Slide 30: Historical Patterns
Republicans gain at least 20-25 House seats and barely win the Senate Historical Patterns Average Market Drawdown in Election Cycle 73% % of years S&P 500 higher Year 1 -13.4% 62% % of mid-term election years S&P 500 higher Year 2 -19.0% Year 3 -11.7% % of first presidential mid-term election 44% ye
Slide 31: Conclusions
Conclusions The Fed has ceased to be the best friend of the 01 06 International earnings growth should be as strong as financial markets (the proverbial punchbowl is slowly U.S. earnings growth. being removed). Inflation will recede but remain stubbornly high. 02 07 China will increase as a threat t
Slide 32: What Should An Investor Do In 2022?
What Should An Investor Do In 2022? 1 Own more cyclical and high-quality value and less expensive growth 2 Expect lower return markets 3 Watch inflation carefully 4 Consider an absolute return strategy to compliment market exposures 5 Diversify across asset classes and geographies (more non-U.S.) 6
Slide 33: About Crossmark Global Investments
About Crossmark Global Investments A Faith-Based Investment Firm Distributing And Managing Values-Based Products Crossmark Global Investments is a faith-based firm that creates, manages, and distributes values- based investment strategies that equip financial intermediaries and their clients to alig
Slide 34: Values-Based Investing
Values-Based Investing Do you give your money away Do you invest your money based Do you invest your money based based on your values? on your values? on God’s values? Negative Screening Positive Inclusion Examples include: Companies “doing good” Treatment of Employees, Tobacco Adult Entertainment A
Slide 35: Quantitative Model
Quantitative Model Quantitative (2/3) Values (1/3) Multi-factor Model Avoid, Embrace, Engage • Valuation • Avoid – Traditional Steward Screens • Earnings Dynamics • Embrace, e.g. • Profitability • Promoting Justice • Capital Use • Family Values • Quality • Treatment of Employees, Community, Environm
Slide 36: Crossmark 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 37: OneAscent Large Cap Core SMA
OneAscent Large Cap Core SMA As of 12/31/2021 Snapshot Top 10 Holdings Sector Weights vs. Benchmark Inception 3/15/2017 Alphabet Inc 5.97 Financials 7.58 Category Large Cap Blend Microsoft Corp 5.87 Energy 3.83 Benchmark Russell 1000 Meta Platforms Inc 3.77 Communication Services 1.95 Average Market
Slide 38: Questions
Questions Please submit your questions to: info@oneascent.com
Slide 39: Investment Committee Update & Outlook Q1 2022
Investment Committee Update & Outlook Q1 2022 Nathan Willis, CFA, CAIA Director of Portfolio Strategy OneAscent Investments
Slide 40: Navigating the “ups” and “downs” of the market
Navigating the “ups” and “downs” of the market STRATEGIC “The Roadmap” • Set annually • Determined by capital market assumptions TACTICAL • Risk-based market exposure “The Navigation” • Updated monthly • Objective assessment of the health of global markets • Behavioral alpha, risk-mitigation
Slide 41: Navigating the “ups” and “downs” of the market
Navigating the “ups” and “downs” of the market TACTICAL “The Navigation” STRATEGIC “The Roadmap”
Slide 42: Navigator Outlook: January 2022
Navigator Outlook: January 2022 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 43: Navigator Outlook: January 2022
Navigator Outlook: January 2022 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 44: Navigator Outlook: January 2022
Navigator Outlook: January 2022 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 45: Navigator Outlook: January 2022
Navigator Outlook: January 2022 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 46: Navigator Outlook: January 2022
Navigator Outlook: January 2022 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: OneAscent Philosophy: Values-Based
OneAscent Philosophy: Values-Based 2Source: US SIF 3Source: Barna and American Culture & Faith Institute – estimates that 10% of American adults currently have a biblical worldview 4Source: Kingdom Advisors and Morningstar
Slide 48: OneAscent Philosophy: Long-Term
OneAscent Philosophy: Long-Term Excerpt from the Tacoma News Tribune April 11, 1953 Source: https://www.truthorfiction.com/tacoma-news-tribune-no-escape- from-telephones-1953
Slide 49: OneAscent Philosophy: Globally Diversified
OneAscent Philosophy: Globally Diversified *Source: Eaton Vance, World Economic Outlook Database, October 2019; World Bank. Gross domestic product based on purchasing-power-parity (PPP) share of world total (percent). Purchasing-power-parity adjusts GDPs for differences in prices, so aggregate count
Slide 50: Asset Allocation – January 2022
Asset Allocation – January 2022 CONSERVATIVE AGGRESSIVE PRESERVATION CONSERVATIVE MODERATE GROWTH EQUITY Equity 21% 42% 62% 82% 96% US Large Cap 7% 13% 19% 25% 29% US SMID Growth 4% 8% 12% 15% 16% US SMID Value 4% 8% 12% 15% 16% Developed Large Cap 6% 7% 10% 14% 18% Developed SMID Cap - 3% 5% 7% 9%
Slide 51: Asset Allocation Performance
Asset Allocation Performance As of 12/31/2021 Group/Investment 1 Month 3 Month YTD 1 Year 3 Year OneAscent Equity Allocation 3.1 5.7 14.8 14.8 21.7 Equity Benchmark 4.0 5.3 17.2 17.2 19.7 +/- Benchmark -0.9 0.4 -2.4 -2.4 2.0 OneAscent Growth Allocation 2.6 5.2 13.3 13.3 18.9 Growth Benchmark 3.2 4.4
Slide 52: 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–Q1 2022 Allocation Fact Sheets Investment Dashboard Commentary Follow ONEASCENT on: Contact Us: investments.oneascent.com info@oneascent.com 205-847-1343
Slide 53: 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 54: 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 55: Get Connected
Get Connected: investments.oneascent.com info@oneascent.com 205-847-1343