A World of Change & the Allocation Conundrum Global Interdependence Center January 29, 2015
Michael D. McNiven, PhD Managing Director & Portfolio Manager Michael.McNiven@Cumber.com
ŠCopyright 2014 Cumberland AdvisorsŽ. Further distribution prohibited without prior permission.
Presentation Outline 1. World Demographics and GDP (8 slides) 2. World Central Bank Policy (4 slides) 3. Investment Allocation Decisions (2 slides)
ŠCopyright 2014 Cumberland AdvisorsŽ. Further distribution prohibited without prior permission.
1. Visualizing Global Population Density
Source: Map by valeriepieris on Reddit ŠCopyright 2014 Cumberland AdvisorsŽ. Further distribution prohibited without prior permission.
3
World Population
Source: Population Reference Bureau 2014
ŠCopyright 2014 Cumberland AdvisorsŽ. Further distribution prohibited without prior permission.
4
World & Country Demographics
Source: Population Reference 2014
ŠCopyright 2014 Cumberland AdvisorsŽ. Further distribution prohibited without prior permission.
5
World Gross Domestic Product
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6
Comparing Population vs. GDP
Country
% World Population
% World GDP
4.4%
23.1%
China
18.84%
12.6%
Japan
1.75%
6.7%
India
17.91%
2.7%
Nigeria
2.45%
.7%
Pakistan
2.68%
.3%
Bangladesh
2.18%
.21%
United States
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Real GDP Growth Real GDP Growth (Percent per annum)
2013
2014
2015
2016
2017
2018
2019
World
3.3
3.3
3.5
4
4
4
4
Advanced Markets
1.4
1.8
2.3
2.4
2.4
2.3
Euro Area
-0.4
0.7
1.2
1.7
1.7
Japan
1.5
0.9
1.1
1.1
United States
2.2
2.2
3.1
Sweden
1.6
2.1
United Kingdom
1.7
Israel
2010-14
2015-16
2.3
3.9 1.8
3.8 2.4
1.6
1.6
0.6
1.4
1
1
1
1.6
1.1
3
2.7
2.7
2.7
2.2
3.1
2.5
3
2.6
2.3
2.2
2.8
2.8
3
2.6
2.5
2.5
2.5
2.5
1.6
2.6
3.2
2.5
3.3
3.7
4.2
4
3.8
3.7
3.5
Emerging Markets
5.2
4.6
5.1
5.7
5.8
6
6
6.1
5.4
China
7.7
7.4
7.2
7
6.8
6.4
6.3
8.5
7.1
India
5
5.3
6.3
6.5
6.9
6.9
6.9
6.4
6.4
Indonesia
5.8
5.2
5.8
6.0
6.2
6.0
6.0
6.0
5.9
Thailand
2.9
0.6
4.3
4.0
3.8
3.8
3.8
3.6
4.2
Philippines
7.2
6.3
6.5
6.0
6.0
6.0
6.0
6.3
6.2
Brazil
2.5
0
1
2.2
2.8
3
3.2
2.8
1.6
Mexico
1.1
2.4
3.5
4
3.8
3.8
3.8
3.3
3.8
Columbia
4.7
4.8
4.6
4.7
4.6
4.5
4.5
4.8
4.7
Turkey
4.1
2.8
3
4.4
4.6
4.5
4.5
5.4
3.7
Qatar
6.5
6.5
7
7.3
6.6
6.6
6.2
9.8
7.2
Sources: Historical – IMF; Projections – Cumberland Advisors
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8
The Middle Class: Size & Distribution 2009
2020
2030
Number of People (millions & global share)
Number of People (millions & global share)
Number of People (millions & global share)
North America
338
18%
333
10%
322
7%
Europe
664
36%
703
22%
680
14%
Central and South America
181
10%
251
8%
313
6%
Asia Pacific
525
28%
1,740
54%
3,228
66%
Sub-Saharan Africa
32
2%
57
2%
107
2%
Middle East and North Africa
105
6%
165
5%
234
5%
1,845
100%
3,249
100%
4,884
100%
World Source: Societe Generale
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Latin America: World’s Highest Rates of Inequality
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2. Central Bank Policy Monthly Central Bank Assets for US, Japan, and Euro Area June-06 to Dec-14 14000
Cumberland Advisors Estimate
12000
Estimate includes ECB $ Billions
10000
8000
6000
4000
2000
0
Federal Reserve
ECB
Bank of Japan
Source: Haver Analytics ŠCopyright 2014 Cumberland AdvisorsŽ. Further distribution prohibited without prior permission.
11
Federal Reserve Maturity Structure: Assets Less than one year
One to 10 Yr
Over ten yr
$5.0
QE-3 $4.5
$4.0
$3.5
QE-2
$ Trillions
$3.0
QE-1 $2.5
$2.0
$1.5
$1.0
$0.5
$0.0
Source: Haver Analytics ŠCopyright 2014 Cumberland AdvisorsŽ. Further distribution prohibited without prior permission.
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ŠCopyright 2014 Cumberland AdvisorsŽ. Further distribution prohibited without prior permission.
1/1/2015
10/1/2014
7/1/2014
4/1/2014
1/1/2014
10/1/2013
7/1/2013
4/1/2013
1/1/2013
10/1/2012
7/1/2012
4/1/2012
1/1/2012
10/1/2011
7/1/2011
4/1/2011
1/1/2011
10/1/2010
7/1/2010
4/1/2010
1/1/2010
10/1/2009
7/1/2009
4/1/2009
1/1/2009
10/1/2008
7/1/2008
4/1/2008
1/1/2008
10/1/2007
7/1/2007
4/1/2007
1/1/2007
10/1/2006
7/1/2006
4/1/2006
1/1/2006
Estimated Duration of Federal Reserve Assets 7
6
5
4
3
2
1
Weekly Data
Source: Haver Analytics
13
Federal Deficit
Source: Haver Analytics and Congressional Budget Office ŠCopyright 2014 Cumberland AdvisorsŽ. Further distribution prohibited without prior permission.
14
3. Investment Allocation Decisions
Source: Dorsey Wright & Associates ŠCopyright 2014 Cumberland AdvisorsŽ. Further distribution prohibited without prior permission.
15
Optimal Long-term Allocation Where does international & tactical management fit into an overall long-term allocation? International %
Tactical %
Conservative
10
25
Moderate
20
35
Aggressive
30
50-100
Sample Equity Allocation
Tactical Allocation 25%
Sample Balanced Allocation Fixed Income 40%
US Equities 50%
International Equities 25%
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Tactical Allocation 15%
US Equities 30% International Equities 15%
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Disclosure All material presented is compiled from sources believed to be reliable. However, accuracy cannot be guaranteed. Past performance is no guarantee of future results. All investments involve risk including loss of principal. Fixed income investments are subject to interest rate and credit risk.
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