First Citizens Bancshares, Inc. · NASDAQ:FCNCA
First Citizens Bancshares — Investor Presentation (December 2024)
37 slides from First Citizens Bancshares's investor presentation, Dec 11, 2024
Slide 1: 2025 Market Outlook
Brent Ciliano, SVP Chief Investment Officer 2025 Market Outlook Phillip Neuhart, SVP Director of Market and December 11, 2024 Economic Research
Slide 2: Five Themes for 2025
Five Themes for 2025 1. Fundamentals: Still in Place? 2. The Fed May Deliver Fewer Cuts 3. We Expect Lower Future Returns from Here 4. Portfolio Balance and Broader Diversification Is Critical 5. Market Tenets to Remember
Slide 3: But first ... a look back at 2024
But first ... a look back at 2024
Slide 4: 2024 Lookback: The US Economy Outperformed, but Inflation Persists
2024 Lookback: The US Economy Outperformed, but Inflation Persists Economic Activity Labor Market Inflation GDP Growth New Jobs per Month Consumer Price Index +1.3% +2.7% +74,000 +190,000 2.6% 2.9% Expectation for 2024, Actual 2024 Expectation for 2024, Actual 2024 Expectation for 2024, Actual 2024
Slide 5: 2024 Lookback: US Equities Led Other Asset Classes by a Mile
2024 Lookback: US Equities Led Other Asset Classes by a Mile Total Return by Asset Class 30% YTD 2024 (12/09/2024) 25% 20% 15% 10% 5% 0% U.S. Equities Intl. Developed Emerging Aggregate Municipal Equities Market Equities Fixed Income Bonds Source: Bloomberg, First Citizens Wealth. Data as of 12/9/20
Slide 6: 2024 Lookback: The S&P 500 Has Hit All-Time Highs, Returned 29%
2024 Lookback: The S&P 500 Has Hit 60 All-Time Highs, Returned 29% S&P 500 Index 6500 6000 5500 5000 2024 total return: +29% 4500 4000 Total return since 2023: +63% 3500 Dec '22 Apr '23 Aug '23 Dec '23 Apr '24 Aug '24 Dec '24 Source: Bloomberg, First Citizens Wealth. Data as of 12/9/2024. 6
Slide 7: 2024 Lookback: Treasury Yields Swung Significantly in 2024
2024 Lookback: Treasury Yields Swung Significantly in 2024 US Treasury Yield Curve 5.6% 5.4% As of Latest date - Dec. 9 5.4% 2024 low - Sept. 16 5.4% 5.2% 5.4% 2024 high - Apr. 25 5.2% 5.0% 4.9% 5.0% 4.9% 4.7% 4.7% 4.7% 4.8% 4.8% 4.9% 4.9% 4.6% 4.6% 4.4% 4.4% 4.4% 4.4% 4.2% 4.2% 4.5% 4.2% 4.1% 4.1%
Slide 8: 1. Fundamentals: Still in Place?
1. Fundamentals: Still in Place?
Slide 9: The Labor Market Is a Wild Card for 2025
The Labor Market Is a Wild Card for 2025 800 Payroll Job Growth US Unemployment and Job Availability 80% Thousands, three-month moving average 700 12% Unemployment Rate Net Share of Consumers Reporting Jobs Are Hard to Get 60% 600 10% 40% 500 20% 400 8% Estimated 0% 300 breakeven 6% rate 200 -20% 4%
Slide 10: Wages Are Up, But So Are Prices, Especially for Essential Spending
Wages Are Up, But So Are Prices, Especially for Essential Spending Changes in Inflation and Price Levels Since 2021 25 Inflation Rate Prices are up "Common Man" Price Index about 20% 20 Consumer Price Index Wages 15 Wages are up 10 about 16% 5 Inflation is down to about 2.5% 0 Jul '21 Jul '22 Jul '2
Slide 11: Consumer Expenditures Are Holding Up
Consumer Expenditures Are Holding Up Personal Consumption Expenditures 50% Percent change, year over year 40% Services 20-year average: Goods Services: 4.9% 30% Goods: 4.2% 20% 10% +7.0% 0% +1.6% -10% -20% 2018 2019 2020 2021 2022 2023 2024 Source: Bloomberg, First Citizens Wealth. Data through Octo
Slide 12: Low-Income Household Spending Has Not Grown for Over Three Years
Low-Income Household Spending Has Not Grown for Over Three Years Inflation-Adjusted Growth in Retail Spending by Household Income July 2021 = 0 15% 10% 5% 0% -5% -10% Low Income Middle Income High Income -15% 2018 2019 2020 2021 2022 2023 2024 Note: Data are adjusted for inflation and seasonality. L
Slide 13: Consumers Are Missing Loan Payments
Consumers Are Missing Loan Payments US Credit Card Delinquency and Interest Rates Consumers Reporting Likely to Miss a 25% Debt Payment in Next Three Months 16% Commercial bank credit card interest rate 30-day delinquency rate 15% 20% 14% 15% 13% 12% 10% 11% 10% 5% 9% 8% 0% 2014 2015 2016 2017 2018
Slide 14: Corporate Earnings
Corporate Earnings Estimated Next 12-Month S&P 500 Operating Margin ▪ 2024 estimated growth is 9.6% 18% 17.5% 17% ▪ 2025 estimated growth is 15.0% 16% 15% ▪ Average growth since 1950 is 7.6% 14% 13% 2012 2014 2016 2018 2020 2022 2024 Source: FactSet, Bloomberg, Strategas. Data as of 12/6/2024. 14
Slide 15: 2. The Fed May Slow the Pace of Rate Cuts
2. The Fed May Slow the Pace of Rate Cuts
Slide 16: The Economy Is Giving Mixed Signals
The Economy Is Giving Mixed Signals Rationale for fewer rate cuts Rationale for more rate cuts • US economy has been resilient • Fed funds rate looks elevated vs. 2.5% inflation • Level of interest rates vs. L/T history • Unemployment rate is up • Financial conditions are easy • Delinquency rates ar
Slide 17: Markets Expect the Fed Will Cut Rates 2-3 Times Next Year
Markets Expect the Fed Will Cut Rates 2-3 Times Next Year 6% Federal Funds Rate 5.4% 5% 4.6% Market-implied policy rates 4.4% -3 4.2% -4 4.0% 3.8% 4% cuts 3.7% cuts -5 cuts -5.5 -6 -6.5 cuts cuts cuts 3% 2% 1% 0% Before Today End-2024 March 2025 June 2025 Sept. 2025 End-2025 9/18/2024 Source: Bloomb
Slide 18: 3. We Expect Lower Future Returns From Here
3. We Expect Lower Future Returns From Here
Slide 19: US Equity 10-year Rolling Returns Have Been Above Average
US Equity 10-year Rolling Returns Have Been Above Average S&P 500 Rolling 10-Year Returns 25% Percent, Annualized 20% 13.3% 15% 10% Long-term average: 10.6% 5% 0% -5% -10% Source: Source: Strategas, S&P Dow Jones Indices. Data as of 11/30/2024. 19
Slide 20: Market Valuation Is Looking Increasingly Stretched
Market Valuation Is Looking Increasingly Stretched S&P 500 Next Twelve Months Price-to-Earnings Ratio 28X 24.8x 24X 23.1x 22.5x 20X +1 Standard Deviation Average 16X 12X -1 Standard Deviation 8X 1988 1991 1994 1997 2000 2003 2006 2009 2012 2015 2018 2021 2024 Source: Bloomberg, Strategas. Data as of
Slide 21: Valuations Below Peak, Above Average
Valuations Below Peak, Above Average • While the Cyclically-Adjusted P/E ratio (CAPE) has been a bad predictor of shorter-term performance… S&P 500: Cyclically-Adjusted Price-to-Earnings Ratio 50 Nov. '24: 45 Dec. '23: 37.4x 38.3x 40 35 30 25 20 15 10 Average = 17.4x 5 0 1881 1891 1901 1911 1921 193
Slide 22: Valuations Significantly Elevated
Valuations Significantly Elevated • …it has been a very accurate predictor of longer-term (decade) performance. S&P 500: Cyclically-Adjusted Price-to-Earnings Ratio vs. 10-Year Total Real Return, 1881-2014 20% 10-Year Annualized Real Total Return 15% 10% 5% 1998 1929 2002 0% 2001 2000 -5% 1999 -10%
Slide 23: Get Out of Stocks? No, Diversify
Get Out of Stocks? No, Diversify "The Lost Decade" (12/31/1999 through 12/31/2009) Index Cumulative Return Annualized Return S&P 500 Large Cap -9.1% -1.0% S&P 400 Mid Cap 85.2% 6.4% S&P 400 Mid Cap Value 134.4% 8.9% S&P 600 Small Cap 85.0% 6.3% S&P 600 Small Cap Value 109.3% 7.7% Global Equity (non-
Slide 24: P/E Ratios Suggest There is Room For Broadening
P/E Ratios Suggest There is Room For Broadening Cap. Weight Price-to-Forward Earnings Top 10 Stocks 45x Top 11-500 40x 35x 30x 25x 20x 15x 10x 5x 2000 2004 2008 2012 2016 2020 2024 Source: Trivariate Research. Data through November 2024. 24
Slide 25: S&P 500 Price Target
S&P 500 Price Target Next Twelve-Month S&P 500 Price Target Percent Change from NTM Price Level 12/9/24 Bear 4,600 -24.0% Base 6,400 5.7% Bull 6,900 14.0% Source: Bloomberg, FactSet, First Citizens Wealth. Data through December 9, 2024. 25
Slide 26: 4. Portfolio Balance Remains Essential
4. Portfolio Balance Remains Essential
Slide 27: The Next 10 Years Could Be in Stark Contrast to the Last 10 Years
The Next 10 Years Could Be in Stark Contrast to the Last 10 Years US Asset Class Returns 10 years ended Nov. Next 10 Annualized Percent 2024 years* difference differential US Large Cap Stocks 13.3% 6.5% -6.8% -51% US Core Taxable Bonds 1.5% 4.9% 3.4% 227% Annualized Spread 11.8% 1.6% Source: * Horiz
Slide 28: What Might That Mean for Portfolios?
What Might That Mean for Portfolios? Hypothetical Two-Security Portfolios 10 years ended Next 10 Nov. 2024 years* 80:20% US Portfolio 11.0% 6.2% 50:50% US Portfolio 7.4% 5.7% Annualized Spread 3.6% 0.5% Source: Horizon Actuarial Services Annual Capital Market Assumptions Survey 2024, Bloomberg. Port
Slide 29: Fixed Income Is Offering a Robust Starting Point
Fixed Income Is Offering a Robust Starting Point US Fixed Income Indices Yield-to-Worst Index As of 12/09/2024 2-Year Treasury 4.1% 10-Year Treasury 4.2% Aggregate Bond 4.6% Intermediate Government/Credit 4.4% Municipal Bond 3.4% Investment Grade Corporate Bond 5.0% High Yield Corporate Bond 7.1% So
Slide 30: Yield-to-Worst Is a Relatively Good Approximation of Total Return
Yield-to-Worst Is a Relatively Good Approximation of Total Return Aggregate Bond Index Return 200% Percent Capture of Yield-to-Worst 180% 160% 140% 120% 100% 80% 60% 40% 20% 0% -20% 1995 1999 2003 2007 2011 2015 2019 2023 Source: Bloomberg, First Citizens Wealth. Data as of 2024:Q3. 30
Slide 31: 5. Market Tenets to Remember
5. Market Tenets to Remember
Slide 32: Market Timing Is a Dangerous Game
Market Timing Is a Dangerous Game Growth of $10,000, S&P 500 Compounded Total Returns January 1, 1995 - November 30, 2024 $140,000 $131,347 37% less 54% less 73% less 83% less 89% less 92% less $120,000 • Nearly half (48%) of the S&P $100,000 500 Index’s strongest days $83,010 occurred during a bear
Slide 33: Keeping Drawdowns in Perspective
Keeping Drawdowns in Perspective Major S&P 500 Declines - 1950 to Present 1-year % Months Months 1-year Post Recovery Peak-to- Start Date End Date Peak-to- % Decline Low of Previous Full Trough High Recovery 1/3/2022 10/12/2022 9 -24.5% 23.6% 93.3% 24 2/19/2020 3/23/2020 1 -33.8% 79.1% 118.6% 6 9/20
Slide 34: Being Invested Is What Matters
Being Invested Is What Matters Percent Capture of Perfect Timing with $12,000 Annual Contribution 1980-2024 YTD Perfect Timing Portfolio Value: $17,039,920 S&P 500 Cash 100% 100% 92% 87% 90% 76% 80% 70% 60% 50% 40% 30% 20% 10% 3% 3% 3% 3% 0% Perfect Timing Worst Timing First Day of Year Monthly Doll
Slide 35: Time IN Markets Matters
Time IN Markets Matters First PC S&P 500 Index Ukraine (Crimea) demonstrated Growth of $10,000 From 1970-2024 crisis First confirmed Three Mile Hurricane Katrina COVID-10 case in Fall of AI wins first Chess Island nuclear U.S. Saigon accident First mobile Iraq invades Kuwait match Birth of the iPhon
Slide 36: Stay Informed with Our Latest Releases
Stay Informed with Our Latest Releases In Brief | A look at the week ahead in under two minutes every Monday morning Q&A Videos | Monthly conversations covering 2-3 of the top questions we’re hearing from clients Market updates | Monthly interactive discussions with in- depth analysis of markets and
Slide 37: Authors and Important Disclosures
Authors Important Disclosures Brent Ciliano, CFA | SVP, Chief Investment Officer This material is for informational purposes only and is not intended to be an offer, specific investment strategy, recommendation, or solicitation to purchase or sell any security or insurance Capital Management Group |
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