Bernstein International Strategic Equities Portfolio - SCB · NASDAQ:STESX
Bernstein International Strategic Equities Portfolio - SCB — Bernstein Private Wealth Management — Investor Presentation (July 2023)
48 slides from Bernstein International Strategic Equities Portfolio - SCB's investor presentation, July 2023
Slide 1: Resilient: 2Q23 Macro and Markets Perspective
Resilient 2Q23 Macro and Markets Perspective 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 and
Slide 2: Our Perspective: Resilient
Our Perspective: Resilient Stock Rally a Welcome Surprise We have to admit pleasant surprise with the market’s rally this year. We didn’t expect the economy to be as resilient nor the AI theme to yield such demonstrable impact in 2023. We’ve been on record calling 10/12/22 the bear market low—just k
Slide 3: Key Economic and Market Expectations, 2023–2024
Key Economic and Market Expectations, 2023–2024 AB Economic Team Forecasts • Global growth: Gradual weakening for the next few quarters 2023 2024 but not an imminent hard landing. US GDP 0.8% 1.0% • Inflation: Receding, but the pace of progress has been slow and variable across geographies. That sho
Slide 4: What We Believe…
What We Believe… While forecasting is more difficult under uncertain conditions like today’s, below are our market perspectives that may impact your asset allocation decisions and opportunities The stock market priced a recession and bottomed in October The Fed has 1–2 more hikes but no more and sta
Slide 5: Why Are Equities Rallying?
Why Are Equities Rallying? Bernstein Private Wealth Management 5
Slide 6: Reason: Leadership and Concentration Have Contributed
Reason: Leadership and Concentration Have Contributed YTD Market and Cross-Sectional Returns S&P 500 YTD Contributions 80% 3% 16% Equal Weight 70% Top 10 Contibutors* 0.2% 0.2% 1.2% 0.4% 60% 1.2% 1.3% 50% 1.10% 2.1% 40% Nasdaq 100 2.3% 30% 3.0% 20% S&P 500 S&P 500 Rest of Market Apple Microsoft Alph
Slide 7: Beyond Leaders, Average Stock 40% Cheaper
Beyond Leaders, Average Stock 40% Cheaper Rest of Market Not Expensive, Could Allow For Broadening of Performance Average Forward Multiple of S&P 500 Stocks* 30x 19x 19x 18x Top Ten Contributors All Others All Others—5-Year Avg All Others—10-Year Avg As of June 30, 2023. Past performance does not gu
Slide 8: Reason: Inflation Has Now Clearly Peaked
Reason: Inflation Has Now Clearly Peaked US Inflation Is Now Decelerating in Both Headline and Core Historically, Equities Rally After Inflation Peaks Average Return, 12 Mos After Peak 12.5% 10 50.0% Avg Return, –5.5% 6 Mos Before Peak 9 40.0% 8 30.0% 7 20.0% Headline Inflation (%, YoY) Average Retu
Slide 9: Reason: Investors Are Anticipating Fed Funds Rate Peak This Fall
Reason: Investors Are Anticipating Fed Funds Rate Peak This Fall Market Implied Policy Rate (Percent) S&P 500 Returns, Post Peak Fed Funds Effective Rate Average 8% 5.6 40% Positive Outcomes 5.4 30% 20% 5.2 10% 5.0 Market is pricing 0% 4.8 in Nov peak –10% 4.6 –20% 4.4 Tech –30% Bubble Negative Outc
Slide 10: Reason: Stronger Consumer Has Buttressed Earnings…
Reason: Stronger Consumer Has Buttressed Earnings… Unemployment Remains at Historically …Bolstering Consumer Spending Keeping S&P 500 Earnings Afloat Low Levels… 7.0 6.0 $245 5.5 $216 $219 6.5 5.0 6.0 4.5 5.5 Core Personal 4.0 Consumption 5.0 3.5 Expenditures (YoY,%) Unemployment (YoY,%) 3.0 4.5 2.5
Slide 11: …And Earnings and Stock Performance Are Tightly Correlated
…And Earnings and Stock Performance Are Tightly Correlated S&P 500 Stock Price and Earnings S&P 500 Stock Price and Earnings Growth 5,000 60% 4,500 $250 4,000 40% 3,500 $200 YoY Growth (Percent) S&P 500 Index Level 20% 3,000 S&P 500 EPS 2,500 $150 0% 2,000 $100 1,500 –20% 1,000 $50 500 –40% 0 $0 –60
Slide 12: Has the Next Bull Market Begun?
Has the Next Bull Market Begun? Bernstein Private Wealth Management 12
Slide 13: The Market’s Resilience to Date Would Suggest So
The Market’s Resilience to Date Would Suggest So Just look at what the economy has contended with and has trudged through… Issue Reason For Resilience Small economic countries + limited gas impact on Europe due to mild 17+ months of war in Ukraine winter ~45% commodity price spike (1H 2022) ~33% dec
Slide 14: We Believe We’re Eight Months into the Next Bull Market…
We Believe We’re Eight Months into the Next Bull Market… 4,500 4,400 Sticky Inflation & Bank Stress: 4,300 “Higher for Longer” Sell-Off 6 Weeks, –8% Decline Inflation weighs on Mega Cap Tech 4,200 4 Weeks, –7% Decline 4,100 Scorching CPI & 75 bps Hike 2 Weeks, 4,000 –5% Decline 3,900 3,800 Total Ral
Slide 15: …But a Consumer Slowdown Will Make 2H Bumpy…
…But a Consumer Slowdown Will Make 2H Bumpy … Weekly Hours and Earnings Are Declining Personal Savings Is Falling Avg Weekly Hours 10 Avg Hourly Earnings Worked (Right Scale) 35.5 30 8 (YoY, Percent) 35 20 6 34.5 US Personal Saving Rate (Percent) 4 34 10 2 33.5 0 0 33 2007 2011 2015 2019 2023 2007 2
Slide 16: …Yet Manageable
…Yet Manageable Job Openings and Limited Excess Should Soften the Slowdown High Job Openings to Soften Job Losses Debt by Sector relative to GDP vs. Start of GFC 14,000 180% 12,000 Start of GFC 130% Q4 2007 Job Openings, Thousands 10,000 80% 8,000 30% 6,000 –20% 4,000 –70% 2,000 1990 1994 1998 2002
Slide 17: Look Past the Near Term and Focus on Horizon
Look Past the Near Term and Focus on Horizon Scenario Analysis: S&P 500, YE 2024—not incl. dividends 5,100 5,000 Bull: Inflation Craters + Rate Cuts 4,900 4,750 Inflation falls rapidly while growth merely slows. Fed feels comfortable enough with 4,500 the path to begin cutting rates this summer. S&P
Slide 18: What’s Next for the Bond Market?
What’s Next for the Bond Market? Bernstein Private Wealth Management 18
Slide 19: As Market Reset Fed Expectations, Bond Returns Partially Retraced Gains
As Market Reset Fed Expectations, Bond Returns Partially Retraced Gains 10-Year US Treasury Yield Bloomberg US Aggregate Index Price Level vs. Oct 24, 2022 5% 10% (4/5): +9% 9% Oct 24, 2022: 4.25% 8% (6/30): 7% +7% 4% Jun 30, 2023: 3.8% 6% 5% 4% 3% Apr 5 , 2023: 3.3% 3% 2% 1% (10/24) 2% 0% Oct 22 De
Slide 20: Time Between Last Hike and First Cut Is Varied
Time Between Last Hike and First Cut Is Varied 0.0 Federal Funds Effective Rate Relative to Final Hike –0.2 1981 1995 2000 1969 2006 2019 1984 1989 –0.4 –0.6 –0.8 1974 –1.0 0 1 2 3 4 5 6 7 8 9 10 11 12 13 Months After Final Hike in Cycle As of June 30, 2023. Historical analysis is not necessarily in
Slide 21: The Path for Rates, Plus Bond Income, Will Drive Muni Returns
The Path for Rates, Plus Bond Income, Will Drive Muni Returns Scenario Analysis: Expected 12-Month Municipal Returns 5 US Treasury Rises to 4.0% Inflation slows but only modestly, causing the Fed to remain restrictive, for longer. In 4 4.0% this case, an intermediate-duration municipal portfolio cou
Slide 22: Anatomy of Falling Rates
Anatomy of Falling Rates (i.e., why you should extend bond duration now) Illustrative Impact on Fixed Income Total Return and Income Representative Indices Total Return, 12 months forward* Starting Yield, 12 months forward† Percent Percent 6.7% 2.8% 3.4% 3.9% 3.6% 2.8% 2.5% 2.1% Government Money Mun
Slide 23: What to Do?
What to Do? Bernstein Private Wealth Management 23
Slide 24: Take What the Markets Give You
Take What the Markets Give You Markets are near-term focused but HNW investors are long-term oriented Adding To or Withdrawing Have Excess Cash/Money Seeking Opportunity From Accounts Market Funds Assumption: markets may be Assumption: Interest rates are near Assumption: Bank credit will volatile an
Slide 25: Bank Lending Pullback Should Impact Those Needing Perpetual Capital
Bank Lending Pullback Should Impact Those Needing Perpetual Capital Commercial Real Estate and Middle Market Corporate Likely Most Impacted Total Bank Lending (USD Billions) YoY Growth Rate of Total Lending 14 11,400 12 11,200 11,000 10 10,800 8 10,600 6 10,400 4 10,200 2 10,000 9,800 0 Jan 22 Mar 2
Slide 26: Best Ideas for 2H 2023 and Beyond
Best Ideas for 2H 2023 and Beyond Private Corporate Credit Opportunities Catalyzed by the Current Environment: Near-Term Volatility Mitigating downside risk, while Target Return Real Estate allowing for upside participation Debt Peak Rates The hiking cycle will end soon and the Buffered economy is e
Slide 27: Appendix
Appendix Bernstein Private Wealth Management 27
Slide 28: What Happened to That Recession Everyone Was Expecting?!
What Happened to That Recession Everyone Was Expecting?! 2023 Consensus Forecasts Over Time (YoY, % Change) • Forecasters were most negative on the economy in mid- October • Not surprisingly, that’s when the stock market hit its lows 3.0 • Economic activity has since been better than feared, fueling
Slide 29: Investing Around Recessions: Rules of Thumb Don’t Apply
Investing Around Recessions: Rules of Thumb Don’t Apply Historical Return Before and After Recessions • Historical evidence doesn’t show a consistent pattern of Percent returns while being investing around recessions. Each cycle is different 50 • Historically, markets tend to bottom after the recess
Slide 30: Student Loans
Student Loans A Substantial Expense, but Likely Won’t Break the Bank A Big Bill… But Not Enough to Change the Base Case Unemployment Remains Low Particularly for those with Bachelor’s Degree and Higher • What’s happened: Federal student loan payments are set to resume in October 2023 after 9 extensi
Slide 31: Commercial Real Estate Debt
Commercial Real Estate Debt Compelling near-term investment opportunity Catalysts Opportunities • Growing Funding Gap • Alternative Lenders to Benefit from Increased Market • Maturity wall of ~1.5T in CRE debt maturing by 2025, with Share ~$525M to be funded by regional banks. • Alternative lenders
Slide 32: China Reopening
China Reopening Reopening Falls Flat, Leaving Investors Underwhelmed Intensifying Pressure on Exports has been a Key Driver China Manufacturing PMI 55 • Cyclical Pressure: slowing global growth from aggressive monetary policy around the world, coupled with normalization 53 of consumption away from t
Slide 33: Markets have Reversed YTD after a Hostile 2022
Markets have Reversed YTD after a Hostile 2022 Long Term Investors Remain on Track - Returns in US dollars 2019–2021 Cumulative 2022 YTD 2023 2019–June 2023 Return Annualized Return Global 74% –18% 13% 11% Developed World 80% –18% 15% 12% US 100% –18% 17% 16% Equities Developed Int 48% –14% 11% 8% E
Slide 34: Despite 2022, Many Investors Remain on Plan Due to Strong 2019–2021
Despite 2022, Many Investors Remain on Plan Due to Strong 2019–2021 Projected* and Actual Returns** (Annualized) Expected Returns by Asset Class (10-Year Annualized Growth Rates, %) 3 Years into Plan: 10-yr forecasted return as of Dec ‘19 8.8% 7.8 4.8% 7.4 7.1 7.2 1.1% 2019 2020 2021 2022 2023 2024
Slide 35: International Leadership Is Episodic; You Want to Be There When It Turns
International Leadership Is Episodic; You Want to Be There When It Turns Growth of a Dollar Dev Int: Emerging US: Emerging Markets: US: Apr 1984– Markets: Dec 1994–Mar Apr 2000–Dec 2007 Jan 2008–Mar 2023 Dec 1987 Jan 1988–Nov 1994 2000 3.5 6.5 3.5 3.5 4.5 3.5 2.5 4.5 2.5 2.5 2.5 1.5 2.5 1.5 1.5 1.5
Slide 36: Stocks Have Mostly Risen Despite Intra-Year Corrections
Stocks Have Mostly Risen Despite Intra-Year Corrections S&P 500 (%) by Calendar Year 40 Year’s Total Return 30 20 10 0 –10 –20 –30 –40 Intra-Year Peak-to-Trough Decline –50 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 As of March 31, 2
Slide 37: ~25% of Any Recovery Occurs in Month One, ~40% by Month Three
~25% of Any Recovery Occurs in Month One, ~40% by Month Three % of % of Weeks Recovery in Recovery in After a Bear Market Troughs Peak-to- Peak-to- from Start 1st Month 1st 3 Months % Recovery Occurring in… Peak Trough Peak-to- Recovery to Down Following Following Month Months Trough Fall Months 20%
Slide 38: Market Sell-Offs: Last 60 Years
Market Sell-Offs: Last 60 Years Cumulative Returns Peak-to- 12-Month Return 3-Year Return 5-Year Return 10-Year Return Peak Trough Peak-to- Trough Following Following Following Following Month Month Trough Fall Trough Trough** Trough** Trough** Months 12/12/1961 6/26/1962 6 –27% 37% 75% 106% 186% 2/
Slide 39: Ten-Year Capital Markets Projections: Asset Classes
Ten-Year Capital Markets Projections: Asset Classes Median 10-Year One-Year 10-Year Annual Mean Annual Return Mean Annual Income Growth Rate Volatility Equivalent Volatility Cash Equivalents 3.5% 3.6% 3.6% 0.5% 4.9% Short-Term Treasuries 4.2% 4.3% 4.0% 1.2% 4.1% Short-Term Taxables 4.5% 4.6% 4.5% 1.
Slide 40: Notes on the Bernstein Wealth Forecasting System
Notes on the Bernstein 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
Slide 41: Notes on the Bernstein Wealth Forecasting System (cont.)
Notes on the Bernstein Wealth Forecasting System (cont.) 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 Treasur
Slide 42: Notes on the Bernstein Wealth Forecasting System (cont.)
Notes on the Bernstein Wealth Forecasting System (cont.) 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 volatili
Slide 43: Notes on the Bernstein Wealth Forecasting System (cont.)
Notes on the Bernstein Wealth Forecasting System (cont.) 7. Tax Rates Bernstein’s Wealth Forecasting Analysis has used the following tax rates for this analysis: Federal Income Federal Capital State Income Tax State Capital Taxpayer Scenario Start Year End Year Tax Method Type Tax Rate Gains Tax Rat
Slide 44: 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 Bloomb
Slide 45: 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 46: 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 inflatio
Slide 47: 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 48: 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. © 2023 AllianceBernstein L.P. BPWM-400280-2023-07-10
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