1. Art and Diseño

CIO Weekly
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United States
CIO WM Research | 30 January 2015
Top of the Morning daily podcast
Deeper dive
How does ECB QE compare
to its counterparts, and will
it work?
What we are watching
02
• “Week in Review/Preview“ with
Brian Nick, Senior Strategist
US economic growth
www.ubs.com/topofthemorning
Global leading indicators
Global central banks03 Dashboard What you need to know – Review
05
“Greek democracy today chose to stop going
gently into the night. Greek democracy
resolved to rage against the dying of the light.”
Yanis Varoufakis, Greece’s new finance minister
1 Left-wing, anti-austerity party Syriza won 149 seats in the
fears of a supply glut and weighed on WTI and Brent prices. We
expect Brent to drop to USD 40/bbl over the next three months.
300-seat Greek parliament and formed a coalition government
with the Independent Greeks, a right-wing party that also opposes
4 The Federal Reserve signaled that it would keep short-term
the bailout agreement. Greek equity markets suffered their worst day on
record on Wednesday on reports that bank deposit outflows may have
interest rates near zero at least until mid-year. It judged “that it can
been as high as EUR 11bn in January (equivalent to around 7% of all
be patient” before hiking rates, meaning that it is unlikely to act in March
household deposits). Greek banks are borrowing some EUR 75bn a
or April, but remains open to a move at the June meeting. It upgraded its
month in emergency liquidity funding from the
assessment of current economic activity, but
European Central Bank, but will soon be required
added “international developments” (i.e. the rela“CIO believes that Greece
to seek more costly assistance from the Central
tive strength of the US dollar) as a policy considerBank of Greece when the current bailout packation. The market reaction was somewhat conis unlikely to secure
age expires. We believe that Greece is unlikely to
fused, with the dollar rallying and equity markets
major conces­sions in the
secure major concessions in the upcoming negofalling (indicating a hawkish interpretation), but at
tiations, though a euro exit or large default is
the same time with government bond yields dropupcoming negotiations,
unlikely. For more information please refer to our
ping and the market implied “lift-off” date getthough a euro exit or
publication “Greece: Syriza wins election.”
ting nudged further out into the future. If the Fed
large default is unlikely.”
does indeed manage to hike rates before year
end, it will be flying in the face of actions else2 Russia’s foreign-currency credit rating
where in the world. Since the beginning of the year, 13 global central
was downgraded by S&P to one notch below investment grade for
banks have eased policy, most notably the European Central Bank.
the first time in a decade. In response, the Russian government unveiled
60 measures to support the economy and stimulate structural reform,
including a RUB 1trn recapitalization of the banking system and a
RUB 300bn injection of capital into Vnesheconombank, the state development bank. In other news, EU leaders noted “evidence of [Russia’s] conLevel
1-w chg
YTD chg
tinued and growing support” for separatists in eastern Ukraine and called
Market moves
on the EU to consider “further restrictive measures.” With downward
S&P 500
2,021
–2.01%
–1.73%
DJIA
17,417
–2.23%
–2.16%
pressure on global oil prices ongoing, the ruble fell 9% against the US
Nasdaq
4,683
–1.38%
–1.05%
dollar this week.
Which got us thinking …
3 King Abdullah Abdulaziz of Saudi Arabia died last ­Friday.
Crude oil prices temporarily bounced higher on the news. However,
the new King Salman announced that he would maintain the policies of his predecessor, causing prices to retreat. News later in the
week that US commercial crude oil stocks surged to an 84-year
high while domestic production reached a 42-year high heightened
ab
Nikkei 225
Eurostoxx 50
MSCI EM
Gold
Brent crude oil
US 10-year yield
VIX
17,674
3,372
973
$ 1276/oz
$ 49.1/bbl
1.751%
18.80
0.93%
1.48%
–1.05%
–0.86%
1.26%
–11bps
+2.4pts
1.28%
7.16%
1.77%
6.40%
–14.30%
–42bps
–0.4pts
Source: Bloomberg, as of 30 January 2015, EST 4 am
This week’s editorial
Storm warnings
Mike Ryan, CFA, Chief Investment Strategist, Wealth Management Americas
04
This report has been prepared by UBS Financial Services Inc. and UBS AG. Please see important disclaimer on page 9. Sections of this report
were originally published outside the US and have been customized for US distribution.
Deeper dive
30 January 2015
How does ECB QE compare to its
counterparts, and will it work?
course, ECB President Mario Draghi left
the door open to extending it if inflation
expectations have not improved by September 2016.
Chris Wright
Strategist
Last week the European Central Bank’s
(ECB) Governing Council launched a historic full-blown quantitative easing (QE)
program – a mere six years after the US
Federal Reserve and the Bank of England
did so.
What does the ECB hope to achieve?
The ECB’s goal is to “see a sustained
adjustment in the path of inflation.” In
theory, buying sovereign bonds from the
private sector drives down yields, making
them less attractive to own; investors
will thus be encouraged to move up the
risk curve, bringing down the yield on all
debt instruments and inflating equity
prices. In principle, rising asset prices
should create a wealth effect, leading to
more spending and less saving; and
lower debt costs should boost demand
for borrowing, also increasing spending
and investment. Additional benefits can
be gained from a positive signaling
effect, giving confidence to the economy, and from a weaker currency.
How big?
The ECB’s program, at EUR 1.1trn, is
larger than the market was expecting, giving credence to the ECB pledge that it will
do “whatever it takes.” However, when
compared to the US and UK’s programs as
a percent of GDP, it is not even half the
size at just 11% (US 25%, UK 22%,
although they did begin six years ago). Of
Why it might not work
Whether QE has been successful in doing
this elsewhere is debatable, but its prospects for success in the Eurozone are
even more questionable. The potential
for a meaningful wealth effect is far
smaller than in the US, since financial
assets account for just 49% of net
household wealth compared to 82% in
Tobias Hochstrasser
Strategist
ECB has plenty of room for catch-up with its QE
Central bank balance sheets/GDP, indexed to 100 at January 2007
the US. Also, debt costs are already at
rock bottom. While it is true that US
­government yields were also at all-time
lows when the Fed started QE, a 10-year
bond still yielded 3%. An equivalent
German bond today yields less than
0.4%, and a Portuguese one just 2.5%.
In addition, since 85% of lending to
non-financial firms in the Eurozone is via
bank loans (the figure in the US is half
this), lower yields in the public market
won’t necessarily feed through to borrowers as fast as they would in the US.
There is doubt whether QE has even
worked in the US. While US bond yields
continued to fall, US GDP has not sustainably accelerated (although one could
argue that QE prevented deceleration).
Inflation has also not meaningfully
picked up outside periods of USD weakness. This raises the question whether
the only immediate economic benefit of
QE comes from a weaker currency and
the “importing” of inflation.
Me first, then you
After the financial crisis, the only time US
inflation climbed over 2% for more than
two months was during the Fed’s QE2 program when the dollar weakened almost
10%. The same is true for Japan after
Prime Minister Shinzo Abe’s unleashed his
Benefits from the wealth effect are likely to be
far smaller in the Eurozone
Financial assets as a percentage of net household wealth
90%
600
80%
500
70%
60%
400
50%
300
40%
30%
200
20%
100
10%
0
2007
0%
2008
Eurozone
2009
2010
UK
2011
US
Source: Thomson Reuters, UBS, as of 29 January 2015
2
CIO WM Research
2012
2013
2014
US
Eurozone
Japan
Source: ECB, Federal Reserve, Open Europe, UBS, as of 29 January 2015
Please see important disclaimer and disclosures at the end of the document.
The bottom line / What we are watching
substantial QE “arrow.” If the ECB is now
trying to do the same, it will take further
comfort from OECD data indicating that a
10% fall in the euro will equate to a 0.3%
inflation boost in the first year, 0.7% in the
second, and 1.0% in the third.
The flaw in this strategy is that currency
strength is a purely relative game. Not
every country can weaken its currency at
the same time. And the Eurozone could
risk a fallout from its main trading part-
30 January 2015
ners (US, UK, and China) if it persists with
such a policy.
The theory of time
That QE benefits asset owners is a given.
And since it is expected to lead to a sustained currency weakening, ECB QE is certainly positive for our overweight of Eurozone equities, half of whose revenue
comes from outside the region; it also
benefits short EURUSD positions. But it
will take time for this program to work. By
leaving the door open to extending QE,
the ECB appears to be aware of this. Deleveraging in the Eurozone has slowed, and
demand for credit is now increasing. By
supporting the economy for a sustained
period, the ECB hopes to buy the region
enough time to complete its recovery. The
report, “ECB QE: A Historic Day,” published 22 January has further details.
Chris Wright and Tobias Hochstrasser
The bottom line
The ECB QE program looks large in absolute terms, but
is smaller than those of other major central banks
relative to GDP. Its immediate benefit to the economy is
not obvious due to the realities of the Eurozone credit
market. Eurozone QE will weaken the euro, which
Preferred investment views
Asset Class
Most preferred
Equities
Least preferred
•US1 ()
• US small and mid caps1 ()
•Eurozone1 ()
•Transformational
technologies2 ()
• The rising Millennials2 ()
•E-Commerce
• Cancer therapeutics
• US capex
• Emerging markets
Fixed income
•
•
•
•
• Government bonds
• Emerging market corporate
bonds
• Emerging market sovereign
bonds3 ()
Foreign
exchange
•USD
•GBP
US investment grade3 ()
US high yield3 ()
Mortgage interest-only
US senior loans
•EUR
•CHF1 ()
Cash
 Recent upgrades  Recent downgrades
2
3
What we are watching – Preview
1 US employment report. The number of jobs created
for the month of January and the unemployment rate are
two key indicators that we'll be paying attention to in this
report. We'll be looking for any insight into the current state
of the US labor market.
Alternative
investments
1
could boost exports and import inflation into member
countries, and it will support the region’s equity
market.
Changes made on 19 January 2015
Added on 12 January 2015
Changes made on 15 December 2014
For more information, please see the most recent UBS House View: Investment Strategy Guide.
Source: UBS CIO WMR, as of 22 January 2015
2 Global leading indicators. Final purchasing managers’
indices for January around the world will be published on 2
February. While the ISM manufacturing index is expected to
indicate ongoing robust growth in the US, we expect signs of
slowing growth in China and of sluggish growth in the Eurozone.
3 Global central banks. Apart from the Fed, most central
banks have recently eased their policies. The next central
banks in focus will be the Reserve Bank of Australia on 3
February and the Bank of England on 5 February.
4 Greece. With the election of the Left-wing Syriza party
all eyes are on the new administration's negotiations with the
Troika.
5 Earnings. 102 S&P 500 companies are reporting earnings next week. As earnings are the key driver of long-term
equity returns we'll be watching this data closely.
Sections of this report were originally published outside the US on
29 January 2015 and have been customized for US distribution.
Recent issues of “Deeper dive”
• Who's losing out from the falling oil price? (16 January 2015)
• What would surprise us in 2015? (9 January 2015)
3
CIO WM Research
• Super bulls, negative rates, oil, Russia, and some potholes:
2014 in review (19 December 2014)
• What does falling crude mean for US shale? (5 December 2014)
Please see important disclaimer and disclosures at the end of the document.
Editorial
30 January 2015
Storm warnings
Mike Ryan, CFA
Chief Investment Strategist,
Wealth Management Americas
Most of us in the Northeast spent the early part of this past
week hunkering down for what weather channel junkies
warned us would be the storm of the century (“storm-ageddon”). Grocery store shelves were stripped of milk, sales of
snow shovels surged and cars queued up at gas stations with
anxious motorists looking to top off the tank in preparation
for a storm that was expected to bring three feet of snow and
50mph winds. Governors in four states across the region declared “states of emergency” and imposed travels bans and
curfews. Thousands of flights were cancelled, train service
was suspended and the New York City subway system shut
down for only the second time in history. While children rummaged around basements for sleighs and boots, the adults of
the household surfed through Netflix for season 2 of “House
of Cards.”
We were ready for the worst…but apparently the storm wasn’t.
While eastern Long Island and coastal New England got hit
pretty hard (especially Nantucket), most major metropolitan
areas in the region were spared. Above ground power lines
remained intact, streets were quickly plowed and rail service
was quickly restored. What had been advertised as perhaps the
worst storm in New York City’s history, probably wouldn’t even
have made it into the top three of last year’s winter weather
events.
Markets seem to have been battling their own storm warnings over the past several weeks. Concerns over the impact
of declining energy prices, the Greek national election, corporate earnings season, the Fed’s policy decision and softer than
expected economic data have alternatively weighed upon risk
assets. While none should be casually dismissed, and all require
some sort of preparedness, we see each of these “blowing
over” in much the same way that the “non-blizzard” of 2015
did.
So let’s assess these storm warnings.
Energy prices continued to trend lower this week, with WTI
crude reaching a new cyclical low of $44.50. There are those
who argue that the precipitous decline in crude prices is a sort
of “canary in the coal mine” (no pun intended) reflective of an
approaching sharp deceleration in growth. We disagree. While
4
CIO WM Research
slackening demand explains some of the drop, much of the
decline in energy costs is the result of excess supply. It is our
view that the selloff in crude is still a net positive for the US
economy, as lower energy costs provide additional support to
the consumer – a view that appears to have been corroborated
by last week’s consumer sentiment reading.
The kick-off to earnings season was accompanied by a somewhat higher level of angst than usual due to the rising dollar
and falling energy prices. Although companies that are especially exposed to both the greenback and energy revenues
had already been aggressively guiding down expectations for
weeks, there was still concern that this could be the quarter
that earnings failed to meet market expectations. But with over
50% of the S&P having already reported, those fears now appear to have been overblown. The percentage of companies
reporting revenues and profits in excess of expectations has
been no worse than average since this expansion began in
2009. Overall earnings growth in Q4 2014 is likely to come
in around 6%, which was our estimate coming into reporting
season. And early revisions to Q1 2015 earnings are not on a
particularly worrying trajectory.
Lastly, as we braced for the blizzard last Monday we were
greeted with the news that Greek voters had elected a new
government led by the SYRIZA party and its new Prime Minister, Alexis Tsipras. Tsipras is expected to demand a renegotiation of the deal Greece struck in 2012 with European policymakers. The so-called Troika provided an aid and debt relief
package in exchange for internal reforms and a more austere
budget. For many non-Greeks, this renegotiation represents
an unwelcome revisiting of the problems that plagued global
financial markets from 2010 to 2012. Fortunately, the news’
market impact appears to have been localized to Greek assets.
Credit spreads on bonds issued by Italy, Portugal and other European countries, which fluctuated wildly in prior installments
of this Greek drama, barely budged this week. While the final
negotiations may involve some further tinkering with Greece’s
sovereign debt and an easing of reform demands, we assess
the probability of Greece leaving the euro area altogether to
be quite low, as are the chances that the impact spreads to
greater Europe.
Of course, we are far from done with this winter, and more
storms may be on their way. As investors, we always want
make preparations for the worst-case scenario. But while overpreparing for a storm probably leads to nothing more than
wasted government resources and an inconvenienced citizenry,
over-preparing for a worst-case scenario in your investment
portfolio can cause rash decisions resulting in foregone returns.
Kind Regards,
Mike Ryan
Please see important disclaimer and disclosures at the end of the document.
Dashboard
30 January 2015
Strategy and performance
Cross asset and equities
Tactical Asset Allocation
Market Returns
Asset Classes
MTD
YTD
2014
Tactical Asset Allocation
Market Returns
US Equity Sectors
Weekly MTD
YTD 2014
Equity
–0.6%
–0.6% 4.4%
Cons. Discr.
–0.4% –2.0% –2.0% 10.1%
Fixed Income
–0.4%
–0.4% 0.5%
Cons. Staples
–2.7% 0.8% 0.8% 15.9%
Commodities
–5.3%
–5.3% –17.9%
––– ––
underweight
–
n
neutral
+
++
+++
overweight
Total return indices in USD
Note: Indexes used to calculate returns are MSCI All Country World (for Equity), Barclays Capital Global
Aggregate Index (for Fixed Income), Dow Jones-UBS Commodity Index Total Return
Source: UBS Chief Investment Office/CIO WMR, as of 29 January 2015
Tactical Asset Allocation
MTD
YTD
–2.5% –2.5% –2.5% 21.0%
Materials
–2.3% –1.4% –1.4% 7.2%
2014
Telecom
–3.0% –0.6% –0.6% 2.9%
Utilities
–1.5% 13.0%
Large-Cap Value
–2.6%
–2.6% 13.9%
Large-Cap Growth
–0.4%
–0.4% 13.6%
Mid-Cap
–0.2%
–0.2% 13.6%
Small-Cap
–1.2%
–1.2%
5.2%
1.0%
1.0%
–4.8%
1.8%
1.8%
–2.1%
–
––– ––
underweight
n
neutral
+
++ +++
overweight
Total return indices in USD
Note: Indexes used to calculate returns are MSCI All Country World (for Equity), Barclays Capital Global
Aggregate Index (for Fixed Income), Dow Jones-UBS Commodity Index Total Return
Source: UBS Chief Investment Office/CIO WMR, as of 29 January 2015
S&P 500 forecast
CIO WMR
6-month rolling price target
2125
2013 earnings per share actual
USD 110
2014 earnings per share estimate
USD 119
2015 earnings per share estimate
USD 127
Source: UBS CIO WMR, as of 29 January 2015
Tactical deviations from benchmark: Scale for charts – Symbol Description/Definition
+
moderate overweight
vs. benchmark
++
overweight vs.
benchmark
+++
strong overweight vs.
benchmark
–
––
–––
moderate underweight
vs. benchmark
n
Neutral, i.e. on
benchmark
underweight vs.
benchmark
strong underweight vs.
benchmark
Notes
This represents the tactical asset allocation for a moderate, taxable investor without alternative
investments.
Each bar represents a +/- 2% tactical tilt or part thereof (i.e., one bar = 0.5% to 2%,
2 bars = 2.5% to 4%, 3 bars = over 4%).
See the latest UBS House View: Investment Strategy Guide for an interpretation of the tactical
deviations and an explanation of the corresponding benchmark allocation.
Tactical time horizon is approximately six months.
Total return market performance is from Bloomberg as of close of business on source date, using
representative indices, and is provided for information only.
Past performance is no indication of future performance.
5
CIO WM Research
–1.4% 2.8% 2.8% 25.3%
–1.7% –2.0% –2.0% 10.3%
–1.5%
Emerging Markets
–2.7% –5.4% –5.4% 15.7%
Healthcare
Industrials
US
Int’l Developed
–3.4% –5.5% –5.5% –6.9%
Technology
Market Returns
Equities
Energy
Financials
0.9%
––– ––
–
underweight
n
neutral
+
4.7% 4.7% 29.3%
++ +++
Total return indices in USD
overweight
Note: S&P 500 Sector Indexes used to calculate returns.
Source: UBS CIO WMR, as of 29 January 2015
Tactical Asset Allocation
Market Returns
International Developed Equities
MTD
YTD
2014
EMU
1.2%
1.2%
–7.8%
UK
0.2%
0.2%
–4.9%
–3.8%
Japan
1.8%
1.8%
Australia
–2.1%
–2.1% –2.9%
Canada
–7.6%
–7.6%
2.9%
Switzerland
1.3%
1.3%
0.3%
NA
NA
NA
Other
–––
––
underweight
–
n
neutral
+
++
+++
overweight
Total return indices in USD
Note: MSCI Region or Country Indexes used to calculate returns.
Preference in hedged terms (excluding currency movements).
Source: UBS Chief Investment Office/WMR, as of 29 January 2015
The overweight and underweight recommendations represent tactical deviations
that can be applied to any appropriate benchmark portfolio allocation. They reflect CIO WMR’s assessment of market opportunities and risks in the respective
asset classes and market segments. The benchmark allocation is not specified here.
Please see the most recent UBS House View: Investment Strategy Guide for definitions/
explanations of benchmark allocation. They should be chosen in line with the risk
profile of the investor. Note that the Regional Bond Strategy is provided on an unhedged basis (i.e., it is assumed that investors carry the underlying currency risk of
such investments). Thus, the deviations from the benchmark reflect our views of
the underlying equity and bond markets in combination with our assessment of the
associated currencies.
+
–
Indicates +/– change
Terms and Abbreviations
EMU = European Monetary Union and is comprised of European countries that have adopted the
Euro as their currency, Int’l = international, MTD = month-to-date, USD = US dollar,
YTD = year-to-date.
Please see important disclaimer and disclosures at the end of the document.
Dashboard
30 January 2015
Strategy and performance
Fixed income and currencies
Tactical Asset Allocation
Market Returns
Fixed income
MTD
YTD
2014
Tactical Asset Allocation
Market Returns
USD Taxable Fixed Income
MTD
YTD
2014
US
1.8%
1.8%
5.9%
Treasuries
2.4%
2.4%
6.0%
Government
2.1%
2.1%
4.8%
TIPS
2.7%
2.7%
4.5%
Municipal
1.7%
1.7%
9.0%
Agencies
1.4%
1.4%
4.1%
IG Corporates*
2.4%
2.4%
7.4%
Agency MBS
0.6%
0.6%
6.1%
HY Corporates
0.6%
0.6%
2.5%
IG Corporate
2.3%
2.3%
7.5%
Int’l Developed
–1.9%
–1.9% –3.2%
HY Corporates
0.7%
0.7%
2.5%
Emerging Markets
0.7%
0.7%
Preferred Securities
2.0%
2.0%
15.4%
–
––– ––
underweight
n
neutral
+
3.9%
++ +++
overweight Total return indices in USD
Note: Indexes used to calculate returns are Barclays Capital (BarCap) US Aggregate, BarCap US Aggregate Government, BarCap Municipal Bond, BarCap US Aggregate Credit (for IG), BarCap US Aggregate
Corp HY, BarCap Global Aggregate ex-USD (for Int’l Developed), BarCap Emerging Markets Government
and BarCap Global Emerging Markets USD (50% of each for Emerging Markets).
Source: UBS Chief Investment Office/CIO WMR, as of 29 January 2015
Market Returns
Tactical Asset Allocation
Foreign exchange
MTD
YTD
2014
NA
NA
USD
NA
EUR
–6.4%
–6.4% –12.3%
GBP
–3.3%
–3.3% –5.6%
JPY
–1.2%
–1.2% 13.9%
CHF
–7.1%
–7.1% 12.0%
Other
NA
–––
––
underweight
–
+
n
neutral
NA
NA
++
+++
overweight
Change against USD
Source: UBS Chief Investment Office/CIO WMR, as of 29 January 2015
Tactical deviations from benchmark: Scale for charts – Symbol Description/Definition
+
moderate overweight
vs. benchmark
++
overweight vs.
benchmark
+++
strong overweight vs.
benchmark
–
––
–––
moderate underweight
vs. benchmark
n
Neutral, i.e. on
benchmark
underweight vs.
benchmark
strong underweight vs.
benchmark
Notes
This represents the tactical asset allocation for a moderate, taxable investor without alternative
investments.
Each bar represents a +/- 2% tactical tilt or part thereof (i.e., one bar = 0.5% to 2%,
2 bars = 2.5% to 4%, 3 bars = over 4%).
See the latest UBS House View: Investment Strategy Guide for an interpretation of the tactical
deviations and an explanation of the corresponding benchmark allocation.
Tactical time horizon is approximately six months.
Emerging markets comprises corporate and sovereign bonds. In Foreign exchange, other refers to
other developed currencies.
Total return market performance is from Bloomberg as of close of business on source date, using
representative indices, and is provided for information only.
Past performance is no indication of future performance.
6
CIO WM Research
––– ––
–
underweight
n
neutral
+
++ +++
overweight
Total return indices in USD
Note: Indexes used to calculate returns are Bank of America Merrill Lynch (BoA ML) US Treasury, BoA ML
US Inflation-Linked Treasury, BoA ML US Composite Agency, BoA ML US Mortgage Backed Securities,
BoA ML US Corporate, BoA ML US High Yield Constrained, BoA ML Fixed Rate Preferred Securities.
Source: UBS CIO WMR, as of 29 January 2015
Market Returns
Tactical Asset Allocation
International Developed Fixed Income
MTD
YTD
2014
–4.9% –4.9%
–2.7%
UK
0.7%
0.7%
7.5%
Japan
1.5%
1.5%
–8.7%
NA
NA
NA
EMU
Other
––
–––
underweight
–
n
neutral
+
++
+++
Total return indices in USD
overweight
Note: BarCap Region or Country Indexes used to calculate returns.
Source: UBS Chief Investment Office/CIO WMR, as of 29 January 2015
The overweight and underweight recommendations represent tactical deviations
that can be applied to any appropriate benchmark portfolio allocation. They reflect CIO WMR’s assessment of market opportunities and risks in the respective
asset classes and market segments. The benchmark allocation is not specified here.
Please see the most recent UBS House View: Investment Strategy Guide for definitions/
explanations of benchmark allocation. They should be chosen in line with the risk
profile of the investor. Note that the Regional Bond Strategy is provided on an unhedged basis (i.e., it is assumed that investors carry the underlying currency risk of
such investments). Thus, the deviations from the benchmark reflect our views of
the underlying equity and bond markets in combination with our assessment of the
associated currencies.
The scale above does not pertain to the USD taxable fixed income table. The symbols
in that table describe varying degrees of preference in a USD taxable fixed income
portfolio.
+
–
Indicates +/– change
Terms and Abbreviations
EMU = European Monetary Union and is comprised of European countries that have adopted the
Euro as their currency, HY = high yield, Int’l = international IG = investment grade,
MBS = mortgage-backed securities, MTD = month-to-date, USD = US dollar, YTD = year-to-date.
Please see important disclaimer and disclosures at the end of the document.
Dashboard
30 January 2015
Earnings calendar
The Earnings Calendar provides publicly announced reporting dates and times of companies covered by Wealth Management
Research Americas. Reporting dates and times are subject to change by the reporting companies.
Date
Company
Ticker
Company
Ticker
Company
Ticker
2-Feb-2015
Alexandria Real Estate Equities, Inc.
ARE
American Capital Agency Corp.
AGNC
Anadarko Petroleum Corp.
APC
2-Feb-2015
EastGroup Properties, Inc.
EGP
Exxon Mobil Corp.
XOM
UDR, Inc.
UDR
3-Feb-2015
Aetna, Inc.
AET
Aflac, Inc.
AFL
Airgas, Inc.
ARG
3-Feb-2015
Annaly Capital Management, Inc.
NLY
CBL & Associates Properties, Inc.
CBL
Centene Corp.
CNC
3-Feb-2015
Emerson Electric Co.
EMR
Equity Residential
EQR
Ford Motor Co.
F
3-Feb-2015
Gannett Co., Inc.
GCI
Gilead Sciences, Inc.
GILD
McGraw Hill Financial, Inc.
MHFI
3-Feb-2015
The Walt Disney Co.
DIS
United Parcel Service, Inc.
UPS
W.R. Berkley Corp.
WRB
3-Feb-2015
Wisconsin Energy Corp.
WEC
4-Feb-2015
Boston Scientific Corp.
BSX
Cincinnati Financial Corp.
CINF
CVS Health Corp.
CVS
4-Feb-2015
Essex Property Trust, Inc.
ESS
General Motors Co.
GM
Humana, Inc.
HUM
4-Feb-2015
Marathon Petroleum Corp.
MPC
Merck & Co., Inc.
MRK
Prudential Financial, Inc.
PRU
4-Feb-2015
Suncor Energy, Inc.
SU
The Allstate Corp.
ALL
The Clorox Co.
CLX
4-Feb-2015
The Southern Co.
SO
Two Harbors Investment Corp.
TWO
Under Armour, Inc.
UA
4-Feb-2015
Yum! Brands, Inc.
YUM
5-Feb-2015
Apartment Investment & Management Co.
AIV
Apollo Global Management LLC
APO
Cigna Corp.
CI
5-Feb-2015
CME Group, Inc.
CME
Costco Wholesale Corp.
COST
Dunkin' Brands Group, Inc.
DNKN
5-Feb-2015
Entergy Corp.
ETR
Estee Lauder Cos., Inc.
EL
Home Loan Servicing Solutions Ltd.
HLSS
5-Feb-2015
Home Properties, Inc.
HME
Intercontinental Exchange, Inc.
ICE
Kimco Realty Corp.
KIM
5-Feb-2015
McKesson Corp.
MCK
Philip Morris International, Inc.
PM
Piedmont Office Realty Trust, Inc.
PDM
5-Feb-2015
Post Properties, Inc.
PPS
PPL Corp.
PPL
6-Feb-2015
Dominion Resources, Inc.
D
Marsh & McLennan Cos., Inc.
MMC
Source: Bloomberg, UBS, as of 29 January 2015
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CIO WM Research
Please see important disclaimer and disclosures at the end of the document.
Dashboard
30 January 2015
Key economic indicators
Date
Indicator
Period
Time (ET)
Unit
Consensus
Previous
02-Feb-15
Personal Income
December
8:30 AM
m/m
0.2%
0.4%
02-Feb-15
Personal Spending
December
8:30 AM
m/m
–2.0%
0.6%
02-Feb-15
Construction Expenditures
December
10:00 AM
m/m
0.7%
–0.3%
03-Feb-15
Factory Orders
December
10:00 AM
m/m
–2.0%
–0.7%
03-Feb-15
Light Vehicle Sales
January
level
16.85mn
16.8mn
04-Feb-15
ADP Employment Report
January
8:15 AM
change
220k
241k
04-Feb-15
Nonmanufacturing ISM
January
10:00 AM
level
56.5
56.5
05-Feb-15
Jobless Claims
For week, 31 January
8:30 AM
level
300k
265k
05-Feb-15
Trade Balance
December
8:30 AM
level
–$38.0bn
–$39.0bn
05-Feb-15
Nonfarm Business Productivity
4Q 2014
8:30 AM
q/q
0.9%
2.3%
05-Feb-15
Unit Labor Costs
4Q 2014
8:30 AM
q/q
1.0%
–1.0%
06-Feb-15
Nonfarm Payrolls
January
8:30 AM
m/m
231k
252k
06-Feb-15
Private Payrolls
January
8:30 AM
m/m
222k
240k
06-Feb-15
Unemployment Rate
January
8:30 AM
level
5.6%
5.6%
06-Feb-15
Average Hourly Earnings
January
8:30 AM
m/m
0.3%
–0.2%
06-Feb-15
Average Weekly Hours
January
8:30 AM
level
34.6
34.6
06-Feb-15
Consumer Credit
December
3:00 PM
level
$15.0bn
$14.1bn
Source: Bloomberg, UBS, as of 29 January 2015
UBS forecast estimates are published on Friday evenings in Economic Perspectives by economists employed by UBS Investment Research, a part of UBS Investment Bank.
m/m = month-over-month, q/q = quarter-over-quarter, k = thousand, bn = billion, y/y = year-over-year, mn = million
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CIO WM Research
Please see important disclaimer and disclosures at the end of the document.
Appendix
30 January 2015
Investing in Emerging Markets
Investors should be aware that Emerging Market assets are subject to, amongst others, potential risks linked to currency volatility, abrupt changes in the cost of capital and the economic growth outlook, as well as regulatory and sociopolitical risk, interest
rate risk and higher credit risk. Assets can sometimes be very illiquid and liquidity conditions can abruptly worsen. WMR generally
recommends only those securities it believes have been registered under Federal U.S. registration rules (Section 12 of the Securities
Exchange Act of 1934) and individual State registration rules (commonly known as “Blue Sky” laws). Prospective investors should be
aware that to the extent permitted under US law, WMR may from time to time recommend bonds that are not registered under US
or State securities laws. These bonds may be issued in jurisdictions where the level of required disclosures to be made by issuers is not
as frequent or complete as that required by US laws.
For more background on emerging markets generally, see the WMR Education Notes, “Emerging Market Bonds: Understanding
Emerging Market Bonds,” 12 August 2009 and “Emerging Markets Bonds: Understanding Sovereign Risk,” 17 December 2009.
Investors interested in holding bonds for a longer period are advised to select the bonds of those sovereigns with the highest credit
ratings (in the investment grade band). Such an approach should decrease the risk that an investor could end up holding bonds on
which the sovereign has defaulted. Sub-investment grade bonds are recommended only for clients with a higher risk tolerance and
who seek to hold higher yielding bonds for shorter periods only.
Disclaimer
Chief Investment Office (CIO) Wealth Management (WM) Research is published by UBS Wealth Management and UBS Wealth
Management Americas, Business Divisions of UBS AG (UBS) or an affiliate thereof. CIO WM Research reports published outside the US
are branded as Chief Investment Office WM. In certain countries UBS AG is referred to as UBS SA. This publication is for your information
only and is not intended as an offer, or a solicitation of an offer, to buy or sell any investment or other specific product. The analysis
contained herein does not constitute a personal recommendation or take into account the particular investment objectives, investment
strategies, financial situation and needs of any specific recipient. It is based on numerous assumptions. Different assumptions could
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Version as per May 2014.
© UBS 2015. The key symbol and UBS are among the registered and unregistered trademarks of UBS. All rights reserved.
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CIO WM Research
Please see important disclaimer and disclosures at the end of the document.