McVEAN Trading & Investments, LLC
GLOBAL ECONOMIC OUTLOOK February 1, 2016
Global Interdependence Center Monterrey, Mexico Michael Drury Chief Economist McVean Trading and Investments, LLC
Past Performance Is Not Necessarily Indicative Of Future Results.
0
2015 GLOBAL GDP $73.6 TRILLION (-3.6% Y/Y)
NAFTA $20T +2.4%
-9.7%
Japan+South Korea+Taiwan $6.2T -5.9%
China $11.5T +8.0%
-4.1%
EUROPE $17.5T -10.9%
Other $10.5T +0.8%
Australia+Brazil+ Argentina+Russia+ OPEC $7.9T -17.7% Past Performance Is Not Necessarily Indicative Of Future Results.
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U.S. MAP
SUNBELT
Past Performance Is Not Necessarily Indicative Of Future Results.
2
U.S.; EUROPE; CHINA
SUBURBS
RUST BELT
Past Performance Is Not Necessarily Indicative Of Future Results.
SUNBELT
3
REAL GDP CURRENT QTR % CHANGE FROM YEAR AGO 14%
12%
10%
8%
6%
4%
2%
0%
NASDAQ BUBBLE
RTC CRISIS
-2%
-4%
LEHMAN -6% Jan-49
Jan-55
Jan-61
Jan-67
Jan-73
Jan-79
Jan-85
Jan-91
Jan-97
Jan-03
Jan-09
Jan-15
Q3 2015 Past Performance Is Not Necessarily Indicative Of Future Results.
4
REAL GDP CURRENT QTR % CHANGE FROM YEAR AGO 16%
14%
12%
10%
8%
6%
4%
2%
0%
ASIAN CRISIS
NIKKEI BUBBLE
-2%
-4%
-6% Jan-49
LEHMAN Jan-55
Jan-61
Jan-67
Jan-73
Jan-79
Jan-85
Jan-91
Past Performance Is Not Necessarily Indicative Of Future Results.
Jan-97
Jan-03
Jan-09
Jan-15
5
US TRADE BALANCE AS A % OF GDP 2%
1%
0%
-1%
-2%
-3%
-4%
-5%
-6% Jan-60
Jan-64
Jan-68
Jan-72
Jan-76
Jan-80
Jan-84
Jan-88
Jan-92
Jan-96
Jan-00
Jan-04
Jan-08
Jan-12 Q3 2015
Past Performance Is Not Necessarily Indicative Of Future Results.
6
US Household Wealth 2200
280
2000
260
1800 240
1600 220 1400
200 1200
180
1000
800 1/1/2000
160
1/1/2002
1/1/2004
1/1/2006
1/1/2008 S&P
1/1/2010
HOME PRICE
Past Performance Is Not Necessarily Indicative Of Future Results.
1/1/2012
1/1/2014
Dec-15 7
DOMESTIC CORPORATE PROFITS VS CAPITAL INVESTMENT AS A % OF GDP
12%
16.0%
15.0% 10% 14.0%
8%
13.0%
12.0% 6% 11.0%
4% Mar-75
10.0% Mar-79
Mar-83
Mar-87
Mar-91
Mar-95
DOMESTIC CORPORATE PROFITS
Mar-99
Mar-03
Mar-07
CAPITAL INVESTMENT
Past Performance Is Not Necessarily Indicative Of Future Results.
Mar-11
Mar-15
Q3 15 8
POLICY LEVERS
• 1) Monetary Policy • 2) Fiscal Policy • 3) Regulation • 4) Exchange Rates Past Performance Is Not Necessarily Indicative Of Future Results.
9
MONETARY POLICY US OVERNIGHT RATE VS 10YR YIELD
20
18
16
14
12
10
8
6
4
2
0 1/1/1980
1/1/1984
1/1/1988
1/1/1992
1/1/1996 Overnight Rate
1/1/2000
1/1/2004
US 10YR Yield
Past Performance Is Not Necessarily Indicative Of Future Results.
1/1/2008
1/1/2012
Dec 15 10
5 YR TREASURY YIELD CHANGE FROM 5 YEARS AGO 2
1
0
-1
-2
-3
-4
-5
-6 Jan-89
Jan-91
Jan-93
Jan-95
Jan-97
Jan-99
ACTUAL
Jan-01
Jan-03
Jan-05
Jan-07
Jan-09
Jan-11
Jan-13
Jan-15
Jan-17
Jan-19
PROJECTION AT CURRENT RATE
Past Performance Is Not Necessarily Indicative Of Future Results.
11
FISCAL POLICY FEDERAL GOVERNMENT DEFICIT AS A % OF GDP 10%
8%
6%
4%
2%
0%
-2%
-4% Jan-78
Jan-82
Jan-86
Jan-90
Jan-94
Jan-98
Jan-02
Jan-06
Jan-10
Jan-14 Q3 2015
Past Performance Is Not Necessarily Indicative Of Future Results.
12
REGULATION • • • • • • • •
• • •
• • • • • • • •
Exclusion of Utility Operations-Related Swaps with Utility Special Entities from De Minimis Threshold for Swaps with Special Entities Prohibitions and Restrictions on Proprietary Trading and Certain Interests in, and Relationships with, Hedge Funds and Private Equity Funds Derivatives Clearing Organizations and International Standards Protection of Collateral of Counterparties to Uncleared Swaps; Treatment of Securities in a Portfolio Margining Account in a Commodity Broker Bankruptcy Swap Dealers and Major Swap Participants; Clerical or Ministerial Employees Clearing Exemption for Certain Swaps Entered Into by Cooperatives Harmonization of Compliance Obligations for Registered Investment Companies Required To Register as Commodity Pool Operators Enhanced Risk Management Standards for Systemically Important Derivatives Clearing Organizations Interpretive Guidance and Policy Statement Regarding Compliance With Certain Swap Regulations Exemptive Order Regarding Compliance With Certain Swap Regulations Process for a Designated Contract Market or Swap Execution Facility To Make a Swap Available to Trade, Swap Transaction Compliance and Implementation Schedule, and Trade Execution Requirement Under the Commodity Exchange Act Core Principles and Other Requirements for Swap Execution Facilities Core Principles and Other Requirements for Swap Execution Facilities; Correction Procedures To Establish Appropriate Minimum Block Sizes for Large Notional OffFacility Swaps and Block Trades Procedures To Establish Appropriate Minimum Block Sizes for Large Notional OffFacility Swaps and Block Trades Procedures To Establish Appropriate Minimum Block Sizes for Large Notional OffFacility Swaps and Block Trades; Correction Reassignment of Commission Staff Responsibilities and Delegations of Authority Delegation of Authority To Disclose Confidential Information to a Contract Market, Registered Futures Association or Self-Regulatory Organization Clearing Exemption for Swaps Between Certain Affiliated Entities
• DODD FRANK
Past Performance Is Not Necessarily Indicative Of Future Results.
13
EXCHANGE RATE Dollar / Euro Cross vs Dollar / Yen 1.6
280
1.5
258
1.4
236
1.3
214
1.2
192
1.1
170
1
148
0.9
126
0.8
104
0.7
82
0.6 1/1/1980
60 1/1/1984
1/1/1988
1/1/1992
1/1/1996 Dollar_Euro
1/1/2000
1/1/2004
Dollar_Yen
Past Performance Is Not Necessarily Indicative Of Future Results.
1/1/2008
1/1/2012
Dec 15 14
AGGREGATE HOURS WORKED VS AVERAGE HOURLY EARNINGS THREE MO AVG % CHANGE FROM 3 MO AVG YEAR AGO
6.0%
4.5%
4.0%
4.0%
2.0%
3.5%
0.0%
3.0%
-2.0%
2.5%
-4.0%
2.0%
-6.0%
1.5%
-8.0% Jan-85
1.0% Jan-89
Jan-93
Jan-97
AGGREGATE HOURS WORKED
Jan-01
Jan-05
Jan-09
AVERAGE HOURLY EARNINGS (right)
Past Performance Is Not Necessarily Indicative Of Future Results.
Jan-13
Dec-15 15
RETAIL SALES EX GASOLINE VS DISPOSABLE INCOME 3 MONTH AVERAGE % CHANGE FROM 3 MONTH AVERAGE YEAR AGO
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
-2.0%
-4.0%
-6.0%
-8.0%
-10.0% Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
RETAIL SALES EX GAS
Jan-08
Jan-09
Jan-10
Jan-11
DISPOSABLE INCOME
Past Performance Is Not Necessarily Indicative Of Future Results.
Jan-12
Jan-13
Jan-14
Jan-15
Nov-15 16
TOTAL RETAIL SALES VS RETAIL SALES EX GASOLINE 3 MONTH AVERAGE % CHANGE FROM 3 MONTH AVERAGE YEAR AGO
9.0%
6.0%
3.0%
0.0%
-3.0%
-6.0%
-9.0%
-12.0% Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
RETAIL SALES
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
EX GAS STATION SALES
Past Performance Is Not Necessarily Indicative Of Future Results.
Jan-12
Jan-13
Jan-14
Jan-15
Nov-15 17
US, EUROPE, JAPAN, CHINA PMI 65
80
60
65
55
50
50
35
45
20
40
5
35
-10
30 1/1/2006
-25 1/1/2007
1/1/2008
1/1/2009
1/1/2010
CHINA
1/1/2011
Eurozone
1/1/2012 US
1/1/2013
JAPAN (RS)
Past Performance Is Not Necessarily Indicative Of Future Results.
1/1/2014
1/1/2015
Dec-15 18
BALANCE SHEETS MONTHLY
5000
4500
4000
Billions of US$
3500
3000
2500
2000
1500
1000
500
US
Europe
Japan
Past Performance Is Not Necessarily Indicative Of Future Results.
Dec-15 19
EXCHANGE RATE Yen / Euro Cross 0.011
0.01
0.009
0.008
0.007
0.006
0.005 1/1/1986
1/1/1990
1/1/1994
1/1/1998
1/1/2002
1/1/2006
1/1/2010
1/1/2014
Dec 15 Past Performance Is Not Necessarily Indicative Of Future Results.
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U.S., EUROPE AND JAPAN GDP 10%
8%
6%
4%
2%
0%
-2%
-4%
-6%
-8%
-10% Jan-95
Jan-97
Jan-99
Jan-01
Jan-03 US
Jan-05 Europe
Jan-07
Jan-09
Japan
Past Performance Is Not Necessarily Indicative Of Future Results.
Jan-11
Jan-13
Jan-15
Q1 2015 21
SHANGHAI COMPOSITE STOCK MARKET 6000
5500
5000
4500
4000
3500
3000
2500
2000
1500
1000
Jan-16 Past Performance Is Not Necessarily Indicative Of Future Results.
22
CHINESE YUAN IN US$
0.17
0.165
0.16
0.155
0.15
0.145
0.14
0.135
0.13
0.125
0.12 Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12
Jan-13
Jan-14
Jan-15
Jan-15 23 Past Performance Is Not Necessarily Indicative Of Future Results.
CHINA NOMINAL GDP GROWTH IN US$ CURRENT QUARTER % CHANGE FROM YEAR AGO
35.0%
30.0%
25.0%
20.0%
15.0%
10.0%
5.0%
0.0% Mar-01
Mar-02
Mar-03
Mar-04
Mar-05
Mar-06
Mar-07
Mar-08
Mar-09
Mar-10
Mar-11
Mar-12
Mar-13
Mar-14
Mar-15
Q3 15 Past Performance Is Not Necessarily Indicative Of Future Results.
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CORN VS COPPER 850
500
450
750 400 650 350
550
300
250
450
200 350 150 250 100
150 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Corn
Copper
Past Performance Is Not Necessarily Indicative Of Future Results.
50
Dec-15 25
WTI CRUDE OIL 160
140
120
100
80
60
40
20 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15
Dec-15 Past Performance Is Not Necessarily Indicative Of Future Results.
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CHINA GDP GROWTH
CURRENT QUARTER %CH FROM YEAR AGO 15.0
15.0
12.5
10.0
10.0
5.0
7.5
0.0
5.0 Mar-02
-5.0 Mar-03
Mar-04
Mar-05
Mar-06
Mar-07
Mar-08
REAL GDP (LHS)
Mar-09
Mar-10
Mar-11
Mar-12
GDP DEFLATOR (RHS)
Past Performance Is Not Necessarily Indicative Of Future Results.
Mar-13
Mar-14
Mar-15 Q3 15
27
CHINESE NOMINAL GDP BY SECTOR
3 MONTH AVERAGE % CHANGE FROM YEAR AGO
30.0%
25.0%
20.0%
15.0%
10.0%
5.0%
0.0% Jan-99
Jan-01
Jan-03
Jan-05
Jan-07
PRIMARY & SECONDARY
Jan-09 TERTIARY
Past Performance Is Not Necessarily Indicative Of Future Results.
Jan-11
Jan-13
Jan-15
Q3 2015 28
CHINA TOTAL AMOUNT OF SOCIAL FINANCING 12 MONTH AVERAGE
1600
1400
1200
1000
800
600
400
200
0
Nov 15 Past Performance Is Not Necessarily Indicative Of Future Results.
29
REAL ESTATE IN CHINA Sales of Commercial Buildings in Eastern, Central and Western Regions for January-November Floor Space of Commercial Buildings Sold Regions
National Total Eastern Central Western
Share of Production 100.0% 46.6% 26.9% 26.3%
Growth Rate Y/Y (%) 7.4 9.6 7.3 3.8
Sales of Commercial Buildings Share of Value Sold 100.0% 60.2% 20.1% 19.8%
Growth Rate Y/Y (%) 15.6 21.1 10.9 5.5
Real Estate Investment in Eastern, Central and Western Regions for January- August
Regions
National Total Eastern Central Western
Investment Share
100.0% 55.6% 21.6% 22.7%
% of Investment in Residential Buildings
Growth Rate Y/Y (%)
67.3% 67.0% 70.0% 65.4%
Past Performance Is Not Necessarily Indicative Of Future Results.
1.3 1.1 1.8 1.1
Residential Buildings 0.7 1.2 1.3 -1.2
30
CHINESE EXPORT VS IMPORTS 3 MO AVG %CH FROM 3 MO AVG YEAR AGO
66.0%
49.5%
33.0%
16.5%
0.0%
-16.5%
-33.0% Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 EXPORTS
IMPORTS
Past Performance Is Not Necessarily Indicative Of Future Results.
Nov 15 31
CHINESE GLOBAL TRADE SURPLUS BILLIONS OF US$ - 3 MONTH AVERAGE
900.0
800.0
700.0
600.0
500.0
400.0
300.0
200.0
100.0
0.0
-100.0 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15
Nov-15 Past Performance Is Not Necessarily Indicative Of Future Results.
32