Danielle DiMartino Booth C E O a n d D i r e c t or o f I n t e l l i ge n c e
J u ly 12, 2 018
Danielle DiMartino Booth
Quill Intelligence
CEO & Director of Intelligence
Seasoned Thought Leaders
Wa l l S t r e e t
QI Analytics
Fe d e r a l Re s e r v e National Best Seller
Cray Supercomputer I n t e l l i g e n c e G a t h e r i n g To o l s e t s Graph Analytics
G l o b a l S p ea ke r D A I LY – T h e D a i l y F e a t h e r W E E K LY – M o n e y S t r o n g ( T h e Quill) Fu t u r e I n d u s t r y S p e c i a l i z e d Re p o r t s , B e s p o ke Re s e a r c h , S e l f- s e r v i c e D a t a Modeling
T h e Tru e $ 2 . 5 Tri l l i o n I n v e s t m e n t G r a d e B o n d M a r k e t D w a r f e d b y $ 5 Tri l l i o n i n H i g h R i s k D e b t
Total =$7.5 Trillion True High Grade Bonds ‘BBB’ Bonds High Yield Bonds Leveraged Loans
$1.22 Trillion $2.55 Trillion $1.21 Trillion
$2.56 Trillion
T h i s I s n ’ t You r G r a n d fat h e r ’ s I n v e s t m e n t G r a d e S p r e a d BBB share % of IG (right)
250
BBB-A spread(bps, left) 50%
200
40% 150
30% 100
20%
50
10%
0
0%
'90
'92
'94
'96
'98
'00
'02
'04
'06
Source: Barclays, Bloomberg, Morgan Stanley. Recessions shaded.
'08
'10
'12
'14
'16
'18
Worsening US Micro Fundamentals US IG Net Leverage (left)
US IG Interest Coverage (right)
2 .4
12
2 .2
11
2 .0
10
1 .8
9
1 .6
8
1 .4
7
1 .2
6
1 .0
'9 2
'9 4
'9 6
'9 8
'0 0
Source: Morgan Stanley. Recessions shaded.
'0 2
'0 4
'0 6
'0 8
'1 0
'1 2
'1 4
'1 6
'1 8
5
Earnings Per Share Growth with and Without Share Buybacks Earnings Per Share Earnings per Share w/0 Share-Buy Backs
130
EPS Growth% (left)
9%
EPS Growth% w/o Share-BuyBacks (right)
120 110
7%
100
5%
90
3%
80
1%
70 -1%
60
-3%
50
-5%
Source: Artemis
Sept 17
Mar 17
Sept 16
Mar 16
Sept 15
Mar 15
Sept 14
Mar 14
Sept 13
Mar 13
Sept 12
Mar 12
Sept 11
Mar 11
Sept 10
Mar 10
Sept 09
Mar 09
40
S ho uld I n v e s t ors L i s t e n to Stocks or B o nds? US 2s10s Yield Curve (%)
S&P 500 (right)
Fed Funds Target (%)
Source: Bloomberg
'1 8
'1 6
'1 4
'1 2
0 '1 0
-2 '0 8
500
'0 6
0
'0 4
1000
'0 2
2
'0 0
1500
'9 8
4
'9 6
2000
'9 4
6
'9 2
2500
'9 0
8
'8 8
3000
'8 6
10
T h e r e B u t For t h e G r a c e o f L a g G o C e n t r a l B a n k e r s
First Inversion
Fed Hikes after Inversion
Start of Recession
December 1988 February 2000 December 2005
Fed hiked 112.5 bps Fed hiked 75 bps Fed hiked 100 bps
Jul 1990 Mar 2001 Dec 2007
THANK YOU Danielle DiMartino Booth danielle@dimartinobooth.com