CAPITAL MARKETS OUTLOOK
Presented to: Arkansas State Chamber of Commerce and Associated Industries of Arkansas May 30, 2019
Prepared by: Lisa McIntire Shaw CFP®, CIMA®, with Cygnus Asset Management, LLC
Cygnus Story Why is our name Cygnus? Cygnus is the swan constellation of the Northern Cross, which is visible only in the northwest quadrant of the sky. We chose this name for our practice because in the investment world, our target for the performance of client accounts is the northwest quadrant of a risk vs. return chart – indicative of higher return with less risk. Philanthropy lies at the heart of Cygnus; these activities include both financial support/sponsorships as well as volunteerism. All team members support and participate in these activities. Causes that we include in our ongoing support: Melanoma Research Foundation, Atrium Healthcare Rehabilitation Center Pineville, Levine Cancer Institute, Global Interdependence Center .
CYGNUS ASSET MANAGEMENT, LLC
ASSET CLASS PERFORMANCE
$600
$500
$479.68
Growth of $100
$434.25 $400
$300 $252.24 $200 $146.73 $104.16 $79.95
$100
$2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Year U.S. Equity U.S. Fixed Income Commodities
Non-U.S. Equity Global Real Estate Cash & Cash Alternatives
QTD U.S. Equity Non-U.S. Equity U.S. Fixed Income
1-Year
3-Year
5-Year
10-Year
14.04%
8.77%
13.48%
10.36%
16.00%
10.31%
-4.22%
8.09%
2.57%
8.85%
2.94%
4.48%
2.03%
2.74%
3.77%
14.73%
11.38%
6.60%
6.62%
13.76%
Commodities
6.32%
-5.25%
2.22%
-8.92%
-2.56%
Cash & Cash Alternatives
0.60%
2.11%
1.17%
0.72%
0.41%
Global Real Estate (REITs)
Past performance is not indicative of future results
CYGNUS ASSET MANAGEMENT, LLC
ANNUAL ASSET CLASS TOTAL RETURNS
2009 Non-U.S. Equity 41.5%
2010
2011
2012
2015
2016
2017
2018
Non-U.S.
Cash & Cash
Equity
Alternatives
27.2%
1.9%
2019 YTD Real Estate
Fixed Income
Real Estate
U.S. Equity
Real Estate
Fixed Income
U.S Equity
19.3%
7.8%
29.0%
33.6%
13.9%
0.6%
12.7%
U.S. Equity
U.S. Equity
Commodities
U.S Equity
Fixed Income
U.S Equity
12.6%
0.5%
11.8%
21.1%
0.0%
14.0%
Blended
Non-U.S.
Non-U.S.
Portfolio
Equity
Equity
2.1%
16.8%
15.3%
Commodities
U.S. Equity
U.S. Equity
16.8%
1.0%
16.4%
U.S. Equity
40.2%
16.9%
U.S. Equity 28.3% Blended
Blended
Cash & Cash
Blended
Portfolio
Portfolio
Alternatives
Portfolio
20.2%
11.9%
0.1%
11.0%
18.9%
2014
Real Estate
Real Estate
Commodities
2013
Non-U.S. Equity 11.2%
Real Estate
Fixed Income
-8.7%
4.2%
Fixed Income
Fixed Income
Commodities
5.9%
6.5%
-13.3%
Cash & Cash
Cash & Cash
Non-U.S.
Alternatives
Alternatives
Equity
0.2%
0.1%
-13.7%
Cash & Cash Alternatives 0.1%
Blended
Blended
Cash & Cash
Blended
Portfolio
Portfolio
Alternatives
Portfolio
13.9%
7.1%
0.0%
7.1%
Real Estate
Fixed Income
1.6%
6.0%
Cash & Cash
Cash & Cash
Alternatives
Alternatives
0.1%
0.0%
Fixed Income -2.0%
Real Estate 14.0%
14.7%
Blended
Non-U.S.
Portfolio
Equity
-4.0%
10.3% Blended
Blended
Non-U.S.
Blended
Portfolio
Equity
Portfolio
-0.2%
4.5%
13.8%
Real Estate
Real Estate
Fixed Income
Real Estate
Commodities
-1.2%
3.8%
3.5%
-6.4%
6.3%
Fixed Income
Commodities
Commodities
Fixed Income
2.7%
1.7%
-11.2%
2.9%
Cash & Cash
Cash & Cash
Non-U.S.
Cash & Cash
Alternatives
Alternatives
Equity
Alternatives
0.3%
0.8%
-14.2%
0.60%
Non-U.S.
Non-U.S.
Equity
Equity
-3.9%
-5.7%
Commodities
Commodities
Commodities
Commodities
-1.1%
-9.5%
-17.0%
-24.7%
U.S Equity -5.2%
Portfolio 8.4%
Blended Portfolio Allocation: 45% U.S. Equity / 15% Non-U.S. Equity / 40% Fixed Income
Past performance is not indicative of future results Source: Morningstar Direct, as of 3/31/2019
CYGNUS ASSET MANAGEMENT, LLC
ASSET CLASS RETURNS
Most asset classes recovered from the fourth quarter pullback, with U.S. equities in the lead. U.S. small caps were a top performer in the first quarter, after experiencing severe losses of 20% in the fourth quarter of last year. Small-cap fundamentals are attractive relative to large caps, however, these companies are more volatile during market selloffs. Once the market finishes repricing, this may be an opportunity to rebalance assets into higher beta, small-cap strategies. 2.0%
U.S. Small Cap Equity
14.6% 9.5%
U.S. Large Cap Equity Non-U.S. Developed Mkt Equity-Small Cap
-9.4% 10.7% -3.7%
Non-U.S. Developed Mkt Equity-Large Cap Non-U.S. Emerging Market Equity
10.0% -7.4% 9.9%
5.9% 7.3%
High Yield Corporate Bonds -5.3%
Commodities
6.3% 4.5% 2.9%
Investment-Grade U.S. Aggregate Bonds -4.1%
Global Aggregate ex U.S. Bonds -15%
13.6%
-10%
-5%
1.5% 0%
5%
10%
15%
20%
Total Return 12 Months Ending 3/31/2019
Q1 2019
Past performance is not indicative of future results
CYGNUS ASSET MANAGEMENT, LLC
Source: Morningstar Direct, as of 3/31/2019
S&P 500 SECTOR RETURNS
“Technology scores high as favorable fundamental and technical momentum outweigh elevated relative valuation. Additionally, with many companies exposed to China, a tailwind will be added for the sector if our base case for a favorable outcome on U.S./China trade materializes.� - J. Michael Gibbs, Managing Director of Equity Portfolio & Technical Strategy 15.4%
Information Technology Real Estate
17.5% 3.2%
Industrials
17.2% 16.4%
13.2%
Consumer Discretionary
15.7% 7.8%
Communication Services
14.0%
9.5%
S&P 500
13.6% 10.5% 12.0%
Consumer Staples Utilities
19.3%
10.8% -0.4%
Materials
10.3% -4.7%
8.6% 14.9%
Health Care -10%
21.0%
1.3%
Energy
Financials
19.9%
6.6% 0%
10%
20%
Total Return 12 Months Ending 3/31/2019 Q1 2019 Returns are based on the GICS Classification model. Returns are cumulative total return for stated period, including reinvestment of dividends Source: Morningstar Direct, as of 3/31/2019
CYGNUS ASSET MANAGEMENT, LLC
EQUITY STYLES
“We favor growth-oriented strategies (in the near term) as the Federal Reserve's language regarding a potential ‘pauseʼ in policy tightening (raising short-term rates and decreasing their balance sheet), bodes well for growth relative to value, making cyclical sectors more favorable than their defensive counterparts. This could start to change if margin pressure from growth stocks damped earnings outlooks.” - Tactical Asset Allocation Outlook, April 2019 Investment Strategy Quarterly Q1 2019 Total Return
12-Month Total Return
Value
Blend
Grow th
Large
11.9%
14.0%
16.1%
Mid
14.4%
16.5%
Sm all
11.9%
14.6%
Value
Blend
Grow th
Large
5.7%
9.3%
12.7%
19.6%
Mid
2.9%
6.5%
11.5%
17.1%
Sm all
0.2%
2.0%
3.9%
Past performance is not indicative of future results
Source: Morningstar Direct, as of 3/31/2019
Style box returns based on the GICS Classification model. All values are cumulative total return for stated period including reinvestment of dividends. The indices used from left to right, top to bottom are: Russell 1000 Value Index, Russell 1000 Index, Russell 1000 Growth Index, Russell Mid-Cap Value Index, Russell Mid-Cap Blend Index, Russell Mid-Cap Growth Index, Russell 2000 Value Index, Russell 2000 Index and Russell 2000 Growth Index. Past performance is not indicative of future results. CYGNUS ASSET MANAGEMENT, LLC
THE U.S. TREASURY YIELD CURVE
“In a simple model of recessions, the current spread between the 10-year Treasury note yield and the federal funds target rate implies about a 30% chance that the economy will enter a recession in the next 12 months. At this point, a broad-based decline in economic activity does not appear to be the most likely scenario, but the odds are too high for comfort and investors should monitor the situation closely in the months ahead.” – Dr. Scott Brown, Chief Economist U.S. Treasury Yield Curve 3.5% 3.0%
Yield (%)
2.5%
2.0% 1.5% 1.0%
Maturity
Current (3/31/2019)
3/31/2018
Past performance is not indicative of future results
CYGNUS ASSET MANAGEMENT, LLC
30 y
20 y
10 y
7y
5y
3y
1m 3m 6m 1y
0.0%
2y
0.5%
Source: Federal Reserve, as of 3/31/2019
FIXED INCOME YIELDS
10
U.S. Fixed Income Yields
Yield to Worst (%)
8 6.43
6
4
4.08 3.55
2
2.41 2.41 1.88
0 10
11
12
13
14 Year
15
16
18
10-Year U.S. Treasury
BB Barclays 10-Year Municipal
BB Barclays U.S. Corporate High Yield
BB Barclays Credit
30-Yr Mortgage
Fed Funds Rate
Past performance is not indicative of future results
CYGNUS ASSET MANAGEMENT, LLC
17
Source: Bloomberg, as of 3/31/2019
S&P 500 YIELD VS. TREASURY YIELD
The 10-year Treasury yield continued to drop from its recent high in October last year, causing the spread between stocks and bonds to tighten. Still, bond yields are outpacing dividend yields, which has been the norm, historically.
16
Equity vs. Fixed Income Yields
14 12
Yield (%)
10 8 6 4 2.41 2.15
2 0 83
87
91
95
99
03
07
11
15
19
Year Recession
S&P 500 Dividend Yield
10-Year Treasury YTW
Past performance is not indicative of future results
CYGNUS ASSET MANAGEMENT, LLC
Source: Bloomberg, as of 3/31/2019
ALLOCATION OF ASSETS MATRIX 1938-2018 10 Years (2009-2018)
20 Years (1999-2018)
40 Years (1979-2018)
80 Years (1939-2018)
S&P 500
Inter. Gov't Bonds
Average Annual Return
Std. Dev
Years with Negative Return
Average Annual Return
Std. Dev
Years with Negative Return
Average Annual Return
Std. Dev
Years with Negative Return
Average Annual Return
Std. Dev
Years with Negative Return
100%
0%
13.12
14.27
1
5.62
15.90
5
11.53
15.61
7
10.74
15.55
19
90%
10%
12.07
12.68
1
5.59
14.07
5
11.17
14.04
7
10.28
14.01
18
80%
20%
11.01
11.10
1
5.54
12.24
5
10.80
12.52
7
9.80
12.49
18
70%
30%
9.93
9.54
1
5.46
10.42
5
10.41
11.04
7
9.30
11.00
17
60%
40%
8.84
8.01
1
5.35
8.62
5
9.99
9.63
6
8.77
9.56
16
50%
50%
7.73
6.52
1
5.22
6.87
4
9.54
8.34
5
8.22
8.20
15
40%
60%
6.62
5.11
1
5.05
5.23
4
9.07
7.22
5
7.65
6.96
13
30%
70%
5.49
3.87
1
4.86
3.85
2
8.57
6.36
3
7.06
5.92
10
20%
80%
4.35
3.02
0
4.64
3.11
0
8.05
5.90
1
6.45
5.20
6
10%
90%
3.20
2.91
1
4.39
3.47
1
7.51
5.91
2
5.81
4.96
4
0%
100%
2.04
3.62
2
4.12
4.69
3
6.95
6.41
4
5.16
5.25
9
The above table presents the annualized returns, dividends reinvested, and the standard deviation (variation around the historical mean) of the quarterly returns for each allocation during the stated period. Dividends are not guaranteed, and a company's future ability to pay dividends may be limited. The data presented above is based on quarterly figures taken from Callan. Equity returns are based on the historic performance of the Standard & Poor’s 500, and bond returns are based on the historic performance of the Ibbotson’s Intermediate GovernmentBased Index, a one-bondportfolio with the shortestnoncallable bond with a maturity not less than five years. Standard & Poor’s 500 (S&P 500) - Representing approximately 75% of the investable US equity market, the S&P 500 measures changes in stock market conditions based on the average performance of 500 widely held common stocks. It is a market-weightedindex calculated on a total return basis with dividends reinvested. Ibbotson’s Intermediate Government Based Index - constructedusing a one-bond portfolio. The bond chosen each year is the shortestnon-callable bond with a maturity between five and six years, and it is held for the calendar year. Standard Deviation is a measure of volatility, commonly viewed as risk. It is equal to the square root of the variance and reflects the average deviation of the observations from their sample mean. It describes the average deviation of the returns from the mean return over a certain period of time and measures how wide this range of returns typically is. The wider the typical range of returns, the higher the Standard Deviation of returns and the higher the risk. Index returns do not reflect the deduction of fees, trading costs or other expenses which would reduce returns. Any investor who attempts to mimic the performance of an index would incur fees and expenses which would reduce returns. The Index is referred to for informational purposes only; Investors may not make direct investments into any index. Past performance is not a guarantee of future results. All investing involves risk. This informationshould not be construedas a recommendationof any strategy.
CYGNUS ASSET MANAGEMENT, LLC
Past performance is not indicative of future results
STOCKS AND BONDS: VERSUS RETURN 1970-2018
CYGNUS ASSET MANAGEMENT, LLC
Past performance is not indicative of future results
PRICE-TO-EARNINGS AND PRICE-TO-BOOK RATIOS
“We see valuation as neutral currently. While we are seeing some slowdown, overall, economic conditions generally remain supportive of equities, in our view, given U.S. GDP growth, low inflation, and low interest rates. ” – Raymond James Equity Portfolio & Technical Strategy Group S&P 500 Price-to-Book
S&P 500 Price-to-Earnings 35
6
30
5 4
20
19.08 18.69
15
P/B Ratio
P/E Ratio
25
3.36 2.87
3
2
10
1
5
0
0 99
01
03
05
Recession
07
09 11 Year P/E Ratio
13
15
17
20-Yr Avg P/E
Source: Bloomberg, as of 3/31/2019
The price-to-earnings ratio, or P/E, is a common measure of the value of stocks. It shows the relationship between a stock’s price and the underlying company’s earnings (or profits) per share of stock. In essence, it calculates how many dollars you pay for each dollar of a company’s earnings. In very general terms, the higher the P/E ratio, the more likely the stock is to be overpriced. CYGNUS ASSET MANAGEMENT, LLC
99
01
03
05
Recession
07
09 11 Year P/B Ratio
13
15
17
20-Yr Avg P/B
Source: Bloomberg, as of 3/31/2019
The price-to-book ratio, or P/B, is a relative measure based on most recent price/accounting (book) value (quarterly, semiannual or annual data). Both price-to-earnings and price-to-book are accounting-based relative value measures. Past performance is not indicative of future results
COMMODITY PRICES
“Oil prices have already bounced back year-to-date from their recent lows but remain well below their 52-week highs. The oil futures curve is relatively flat, indicating minimal upside from current levels over the next five years. We tend to stay away from making short-term (weekly or monthly) commodity calls, but we are of the view that prices will be meaningfully higher in the second half of 2019.� - Pavel Molchanov, Energy Analyst, Equity Research Commodity Prices $2,000
$160
$1,800
$140
1295.4
$1,400
$120 $100
$1,200 $60.14
$1,000 $800
$80 $60
Oil Price / Barrel
Gold Price / Ounce
$1,600
$600 $40 $400 $20
$200 $0
$0 94
97
00
03
06 Year
Gold (London Bullion Market)
09
12
18
WTI Crude Oil
Past performance is not indicative of future results
CYGNUS ASSET MANAGEMENT, LLC
15
Source: Bloomberg, as of 3/31/2019
BROAD ASSET CLASS RETURNS Ranked in order of performance (best to worst) 1999-2018 2006 2007 2008 2009 2010 2011 2012
1999
2000
2001
2002
2003
2004
2005
Emerging Market 66.4%
Small Cap Value 22.8%
Small Cap Value 14.0%
Fixed Income 10.3%
Emerging Market 56.3%
Emerging Market 26.0%
Emerging Market 34.5%
Emerging Market 32.6%
Emerging Market 39.8%
Fixed Income 5.2%
Emerging Market 79.0%
Small Cap Growth 29.1%
Fixed Income 7.8%
Small Cap Growth 43.1%
Fixed Income 11.6%
Fixed Income 8.4%
HFRI Fund Weighted -1.5%
Small Cap Growth 48.5%
Small Cap Value 22.2%
Intl. Equity 13.5%
Intl. Equity 26.3%
Intl. Equity 11.2%
HFRI Fund Weighted -19.0%
Small Cap Growth 34.5%
Small Cap 26.9%
HFRI Fund Weighted 31.3%
Large Cap Value 6.1%
HFRI Fund Weighted 4.6%
Emerging Market -6.0%
Small Cap 47.3%
Intl. Equity 20.2%
HFRI Fund Weighted 9.3%
Small Cap Value 23.5%
HFRI Fund Weighted 10.0%
SmallCap Value -28.9%
Intl. Equity 31.8%
Large Cap Growth 28.2%
HFRI Fund Weighted 5.0%
Small Cap 2.5%
SmallCap Value -11.4%
Small Cap Value 46.0%
Small Cap 18.3%
Large Cap Value 5.8%
Large Cap Value 20.8%
Large Cap Growth 9.1%
Small Cap -33.8%
Intl. Equity 27.0%
Small Cap -3.0%
Emerging Market -2.4%
Intl. Equity -15.9%
Intl. Equity 38.6%
Large Cap Value 15.7%
Large Cap 4.9%
Small Cap 18.4%
Small Cap Growth 7.0%
Small Cap 21.3%
Large Cap -9.1%
Small Cap Growth -9.2%
Small Cap -20.5%
Large Cap Value 31.8%
Small Cap Growth 14.3%
Small Cap Value 4.7%
Large Cap 15.8%
Large Cap 21.0%
Intl. Equity -14.2%
Large Cap 28.7%
Large Cap 10.9%
Small Cap 4.6%
Large Cap Value 12.7%
Large Cap Growth -22.1%
Large Cap -11.9%
Large Cap -22.1%
Large Cap Growth 25.7%
HFRI Fund Weighted 9.0%
Fixed Income -0.8%
SmallCap Growth -22.4%
Large Cap Growth -12.7%
Large Cap Growth -23.6%
HFRI Fund Weighted 19.5%
SmallCap Value -1.5%
Emerging Market -30.6%
Intl. Equity -21.4%
SmallCap Growth -30.3%
Fixed Income 4.1%
Large Cap Large Cap Value Value -11.7% -20.9%
CYGNUS ASSET MANAGEMENT, LLC
2013
2014
2015
2016
2017
2018
Emerging Market 18.6%
Small Cap Growth 43.3%
Large Cap Growth 14.9%
Large Cap Growth 5.5%
Small Cap Value 31.7%
Emerging Market 37.8%
Fixed Income .0%
Large Cap Growth 4.7%
Small Cap Value 18.1%
Small Cap 38.8%
Large Cap 13.7%
Large Cap 1.4%
Small Cap 21.3%
Large Cap Growth 27.4%
Large Cap Growth .0%
Small Cap Value 24.5%
Large Cap 2.1%
Large Cap Value 17.7%
Small Cap Value 34.5%
Large Cap Value 12.4%
Fixed Income 0.5%
Large Cap Value 17.4%
Intl. Equity 25.0%
HFRI Fund Weighted -4.1%
Large Cap Growth 31.6%
Emerging Market 19.2%
Large Cap Value -0.5%
Int’l Equity 17.3%
Large Cap Growth 32.8%
Fixed Income 6.0%
HFRI Fund Weighted -0.4%
Large Cap 12.0%
Small Cap Growth 22.2%
Large Cap -4.4%
Large Cap Growth -34.9%
Small Cap 27.2%
Large Cap Value 15.1%
Small Cap Growth -2.9%
Small Cap 16.3%
Large Cap 32.4%
Small Cap Growth 5.6%
Intl. Equity -0.8%
Emerging Market 11.6%
Large Cap 21.8%
Large Cap Value -9.0%
Fixed Income 7.0%
Large Cap -37.0%
Large Cap 26.5%
Large Cap 15.1%
Small Cap -4.2%
Large Cap 16.0%
Large Cap Value 32.0%
Small Cap 4.9%
Small Cap Growth -1.4%
Small Cap Growth 11.3%
Large Cap Value 15.4%
Small Cap Growth -9.3%
Small Cap Growth 13.3%
Large Cap 5.5%
SmallCap Growth -38.5%
Large Cap Value 21.2%
Large Cap Growth 15.1%
SmallCap Value -5.5%
Large Cap Growth 14.6%
Intl. Equity 22.8%
Small Cap Value 4.2%
Large Cap Value -3.1%
Large Cap Growth 6.9%
Small Cap 14.6%
Small Cap -11.0%
Small Cap Growth 4.2%
HFRI Fund Weighted 12.9%
Large Cap Value 2.0%
Large CapValue -39.2%
Small Cap Value 20.6%
Int'l Equity 7.8%
HFRI Fund Weighted -5.7%
Small Cap Growth 14.6%
HFRI Fund Weighted 9.0%
HFRI Fund Weighted 3.4%
Small Cap -4.4%
Fixed Income 2.6%
Small Cap Value 7.8%
Small Cap Value -12.9%
Large Cap Growth 6.1%
Large Cap Growth 4.0%
Large Cap Growth 11.0%
Small Cap -1.6%
Intl. Equity -43.3%
HFRI Fund Weighted 11.5%
Fixed Income 6.5%
Int'l Equity -12.1%
HFRI Fund Weighted 4.8%
Fixed Income -2.0%
Emerging Market -1.8%
SmallCap Value -7.5%
Intl. Equity 1.0%
HFRI Fund Weighted 7.7%
Intl. Equity -13.8%
Fixed Income 4.3%
Fixed Income 2.4%
Fixed Income 4.3%
SmallCap Value -9.8%
Emerging Market -53.2%
Fixed Income 5.9%
HFRI Fund Weighted 5.7%
Emerging Market -18.2%
Fixed Income 4.2%
Emerging Market -2.3%
Intl. Equity -4.9%
Emerging Market -14.6%
HFRI Fund Weighted 0.5%
Fixed Income 3.5%
Emerging Market -14.2%
Past performance is not indicative of future results
Current
S&P 500 [Price Return] Dow Jones Industrials [Price Return] NASDAQ Composite [Price Return] Russell 2000 [Price Return] MSCI EAFE iShares S&P 500 Value ETF iShares S&P 500 Growth ETF Fidelity® Inv MM Fds Government Instl Invesco Ultra Short Duration ETF Commodity Index U.S. Dollar per Euro Gold per ounce Cygnus Asset Management Benchmarks Barclay US Aggregate Bond Index [TR] YTD S&P 500 [Total Return] {gross} YTD
2019 YTD
13.94% -6.2% 10.50% -5.6% 16.81% -3.9% 13.57% -12.2% 8.01% -16.4% 11.09% -9.2% Total return YTD % 15.40% -0.2% Total return YTD % 0.86% 0.5% Total return YTD % 0.30% 0.1% 4-week return 78.95 2.92% 76.72 $ 1.115 $ (0.028) $1.14 $ 1,274.20 -1.40% $1,283.00
2016
2015
2014
2013
9.5%
-0.7%
11.4%
29.6%
24.7%
15.3%
0.2%
7.5%
29.7%
27.1%
7.3%
7.0%
13.4%
40.0%
12.6%
19.9%
-4.4%
12.6%
22.4%
0.9%
-0.4%
3.2%
15.3% 27.2%
88.17
87.47
$1.20
$1.05
$1.09
$1.21
$1.32
$1,143.91 2016
$1,060.00 2015
$1,206.00 2014
$1,204.50 2013
YTD
2018
3.54% 14.86%
0.01%
3.54%
2.80%
0.5%
6.0%
-2.0%
-4.38%
21.83%
11.96%
1.4%
13.7%
32.4%
1.92% 2.0%
-3.06%
16.17%
7.79%
1.0%
10.6%
18.6%
-3.50% -3.94%
18.00% 19.82%
9.14% 9.95%
1.2%
12.1%
25.5%
1.99%
1.80%
2.08%
2.20%
2.20%
2.10%
As of Wednesday, May 22, 2019
CYGNUS ASSET MANAGEMENT, LLC
2017 18.9%
$1,297.20 2017
70/25/5 Blend = 11.30% 80/15/5 Blend = 12.43% 90/5/5 Blend = 13.57%
S&P 500 Dividend Yield [12 dvnd per share] /price Consumer Price Index [All Items] (y-o-y)
2018
2,856.27 25,776.61 7,750.84 1,531.63 1,857.58
WASHINGTON POLICY UPDATE: IS THERE A ‘TRUMP PUT’ ON THE MARKET?
“The market sold off hard in December around and during the shutdown, recession concerns had hit the market, and there were repeated warnings that if the shutdown continued for much longer, there was real risk of a negative gross domestic product in the first quarter.”
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WASHINGTON POLICY UPDATE: IS THERE A ‘TRUMP PUT’ ON THE MARKET?
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WHAT’S IN THE CARDS FOR OIL?
WHAT IS IMO 2020? The International Maritime Organization (IMO) has set regulations to cut sulfur in fuel used by the marine industry starting in January 2020.
“It is important to underscore just how impactful the IMO 2020 policy will be. We estimate it will effectively erase 1.5 million bpd (or 1.5%) of global oil supply, a very meaningful supply reduction.” -Pavel Molchanov, Energy Analyst, Equity Research CYGNUS ASSET MANAGEMENT, LLC
Data provided by Morningstar Direct, Bloomberg. This material is for informational purposes only and should not be used or construed as a recommendation regarding any security outside of a managed account. There is no assurance that any investment strategy will be successful or that any securities transaction, holdings, sectors or allocations discussed will be profitable. It should not be assumed that any investment recommendation or decisions made in the future will be profitable or will equal any investment performance discussed herein. Please note that all indices are unmanaged and investors cannot invest directly in an index. An investor who purchases an investment product that attempts to mimic the performance of an index will incur expenses that would reduce returns. Past performance is not indicative of future results. The performance noted in this presentation does not include fees and costs, which would reduce an investor's returns. • • • • • • • • • •
Fixed Income: subject to credit risk and interest rate risk. An issuer’s ability to pay the promised income and return of principal upon maturity may impact the issuer’s credit rating. Generally, when interest rates rise, bond prices fall, and vice versa. Specific-sector investing can be subject to different and greater risks than more diversified investments. Personal Consumption Expenditure Index (PCE): a measure of inflation, this index measures the price changes in consumer goods and services. Personal consumption expenditures consist of the actual and imputed expenditures of households; the measure includes data pertaining to durables, non-durables and services. Gross Domestic Product (GDP): a broad measurement of a nation’s overall economic activity. It is the monetary value of all the finished goods and services produced within a country's borders in a specific time period, including all private and public consumption, government outlays, investments and net exports that occur within a defined territory. Price-to-Earnings Ratio (P/E): a ratio for valuing a company that measures its current share price relative to its per-share earnings. Price-to-Book Ratio (P/B): A ratio used to compare a stock's market value to its book value. It is calculated by dividing the current closing price of the stock by the latest quarter's book value per share. Small-cap and Mid-Cap Equity: generally involve greater risks, and may not be appropriate for every investor. International investing also involves special risks, including currency fluctuations, different financial accounting standards, and possible political and economic volatility. High-Yield Fixed Income: not suitable for all investors. Risk of default may increase due to changes in the issuer’s credit quality. Price changes may occur due to changes in interest rates and the liquidity of the bond. When appropriate, these bonds should only comprise a modest portion of your portfolio. Commodities: trading is generally considered speculative because of the significant potential for investment loss. U.S. Government Fixed Income: guaranteed timely payment of principal and interest by the federal government. U.S. Treasury Bills: A short-term debt obligation backed by the U.S. government with a maturity of less than one year. Fixed Income Sectors: Returns based on the four sectors of Barclays Global Sector Classification Scheme: Securitized (consisting of U.S. MBS Index, the ERISA-Eligible CMBS Index and the fixed-rate ABS Index), Government Related (consisting of U.S. Agencies and non-corporate debts with four sub sectors: Agencies, Local Authorities, Sovereign and Supranational), Corporate (dollar-denominated debt from U.S. and non-U.S. industrial, utility, and financial institutions issuers), and Treasuries (includes public obligations of the U.S. Treasury that have remaining maturities of one year or more).
Asset allocation and diversification does not guarantee a profit nor protect against loss. Dividends are not guaranteed and will fluctuate.
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Past performance is not indicative of future results. Investing in international securities involves additional risks such as currency fluctuations, differing financial accounting standards, and possible political and economic instability. These risks are greater in emerging markets. The values of real estate investments may be adversely affected by several factors, including supply and demand, rising interest rates, property taxes, and changes in the national, state and local economic climate. Companies engaged in business related to a specific sector are subject to fierce competition and their products and services may be subject to rapid obsolescence. There are additional risks associated with investing in an individual sector including limited diversification. Asset class and reference benchmarks: ASSET CLASS
BENCHMARK
U.S. Equity
Russell 3000 TR
Non-U.S. Equity
MSCI ACWI ex US NR
U.S. Fixed Income
Barclays U.S. Aggregate Bond TR
Global Real Estate (prior to 2008)
NASDAQ Global Real Estate NR
Global Real Estate (2008-present)
FTSE EPRA/NAREIT Global Real Estate NR
Commodities
Bloomberg Commodity TR USD
Cash & Cash Alternatives
Citi Treasury Bill 3 Mon USD
Bloomberg Commodity Total Return Index: Formerly the Dow Jones-UBS Commodity Index TR (DJUBSTR),is composed of futures contracts and reflects the returns on a fully collateralized investment in the BCOM. This combines the returns of the BCOM with the returns on cash collateral invested in 3 Month U.S. Treasury Bills.
Barclays 10-Year Municipal Bond Index: A rules-based, market-value weighted index engineered for the long-term tax-exempt bond market. This index is the 10 year (8-12) component of the Municipal Bond Index. Barclays 10-Year U.S. Treasury Index: Measures the performance of U.S. Treasury securities that have a remaining maturity of 10 years. Barclays U.S. Aggregate Bond Index: Represents securities that are SEC-registered, taxable, and dollar denominated. The index covers the U.S. investment-grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities. Barclays Global Aggregate ex-U.S. Bond Index: Tracks an international basket of bonds that currently contains 65% government, 14% corporate, 13% agency and 8% mortgage-related bonds.
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Barclays High Yield Bond Index: Covers the universe of fixed-rate, non-investment grade debt. Pay-in-kind (PIK) bonds, Eurobonds, and debt issues from countries designated as emerging markets (e.g., Argentina, Brazil, Venezuela, etc.) are excluded, but Canadian and global bonds (SEC-registered) of issuers in non-EMG countries are included. Original issue zeroes, step-up coupon structures and 144-As are also included. Barclays U.S. Credit Index: an index composed of corporate and non-corporate debt issues that are investment grade (rated Baa3/BBB- or higher). Citi 3-Month Treasury-Bill Index: This is an unmanaged index of three-month Treasury bills. FTSE EPRA/NAREIT Global Real Estate Index : designed to represent general trends in eligible listed real estate stocks worldwide. Relevant real estate activities are defined as the ownership, trading and development of income producing real estate. MSCI All Country World Index Ex-U.S Index (ACWI ex U.S.): a market-capitalization-weighted index maintained by Morgan Stanley Capital International (MSCI) and designed to provide a broad measure of stock performance throughout the world, with the exception of U.S.-based companies. It includes both developed and emerging markets. MSCI EAFE Index (Europe, Australasia, Far East): a free-float adjusted market capitalization index that is designed to measure developed market equity performance, excluding the United States and Canada. The EAFE consists of the country indices of 21 developed nations. MSCI EAFE Growth Index: represents approximately 50% of the free-float adjusted market capitalization of the MSCI EAFE index, and consists of those securities classified by MSCI as most representing the growth style. MSCI EAFE Small-Cap Index: an unmanaged, market-weighted index of small companies in developed markets, excluding the U.S. and Canada. MSCI EAFE Value: represents approximately 50% of the free-float adjusted market capitalization of the MSCI EAFE index, and consists of those securities classified by MSCI as most representing the value style. MSCI Emerging Markets Index: designed to measure equity market performance in 25 emerging market indexes. The three largest industries are materials, energy and banks. MSCI Local Currency Index: a special currency perspective that approximates the return of an index as if there were no currency valuation changes from one day to the next. NASDAQ Global Real Estate Index: the index measures the performance of real estate stocks which listed on an Index Eligible Global Stock Exchange. The index is market-capitalization weighted. Russell 1000 Index: measures the performance of the 1,000 largest companies in the Russell 3000 Index, which represents approximately 90% of the investible U.S. equity market. Russell 1000 Value Index: measures the performance of those Russell 1000 companies with lower price-to-book ratios and lower forecasted growth values.
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Russell 1000 Growth Index: measures the performance of those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values. Russell Mid-Cap Index: measures the performance of the 800 smallest companies of the Russell 1000 Index, which represent approximately 30% of the total market capitalization of the Russell 1000 Index. Russell Mid-cap Value Index: measures the performance of those Russell Mid-cap companies with lower price-to-book ratios and lower forecasted growth values. Russell Mid-Cap Growth Index: measures the performance of those Russell Mid-cap companies with higher price-to-book ratios and higher forecasted growth values. Russell 2000 Index: measures the performance of the 2,000 smallest companies in the Russell 3000 Index, which represent approximately 8% of the total market capitalization of the Russell 3000 Index. Russell 2000 Value Index: measures the performance of those Russell 2000 companies with lower price-to-book ratios and lower forecasted growth values. Russell 2000 Growth Index: measures the performance of those Russell 2000 companies with higher price-to-book ratios and higher forecasted growth values. Russell 3000 Index: measures the performance of the 3,000 largest U.S. companies based on total market capitalization, which represents approximately 98% of the investable U.S. equity market. Standard & Poor’s 500 (S&P 500): measures changes in stock market conditions based on the average performance of 500 widely held common stocks. Represents approximately 68% of the investable U.S. equity market. S&P 500 Communication Services: comprises those companies included in the S&P 500 that are classified as members of the GICS® communication services sector. S&P 500 Consumer Discretionary: comprises those companies included in the S&P 500 that are classified as members of the GICS® consumer discretionary sector. S&P 500 Consumer Staples: comprises those companies included in the S&P 500 that are classified as members of the GICS® consumer staples sector. S&P 500 Energy: comprises those companies included in the S&P 500 that are classified as members of the GICS® energy sector. S&P 500 Financials: comprises those companies included in the S&P 500 that are classified as members of the GICS® financials sector S&P 500 Health Care: comprises those companies included in the S&P 500 that are classified as members of the GICS® health care sector. S&P 500 Industrials: comprises those companies included in the S&P 500 that are classified as members of the GICS® industrials sector.
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S&P 500 Information Technology: comprises those companies included in the S&P 500 that are classified as members of the GICS® information technology sector. S&P 500 Materials: comprises those companies included in the S&P 500 that are classified as members of the GICS® materials sector. S&P 500 Telecom Services: comprises those companies included in the S&P 500 that are classified as members of the GICS® telecommunication services sector. S&P 500 Utilities: comprises those companies included in the S&P 500 that are classified as members of the GICS® utilities sector.
The information contained herein is based on sources believed to be reliable but, its accuracy is not guaranteed © 2017 Raymond James & Associates, Inc., member New York Stock Exchange/SIPC © 2017 Raymond James Financial Services, Inc., member FINRA/SIPC
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Biographies Lisa McIntire Shaw, CFP速, CIMA速, Managing Partner Lisa is a founding partner of Cygnus Asset Management, LLC based in Charlotte, NC. She has more than 27 years of experience in the financial management arena. Her areas of special interest include international markets; charitable trusts; strategic wealth preservation; and domestic, corporate, government and municipal bonds. Lisa earned her Certified Financial Planner (CFP速) designation from the College of Financial Planning and her credentials as a Certified Investment Management Analyst (CIMA速) from the Wharton School at the University of Pennsylvania. She also holds a bachelor's degree in international studies from the University of North Carolina, Chapel Hill.
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