Leaning into Change
Leaning into Change
Sponsors
KEYNOTE SPEAKER
Leaning into Change
Sean McCarthy, CFA Regional Chief Investment Officer, Southwest Wells Fargo Private Bank
Leaning into Change
Economic and Market Strategy Update Sean McCarthy, CFA Regional Chief Investment Officer - Southwest February 2018
U.S. GDP Outlook 6
More Consistent Real GDP growth expected
5
5
4
4
3
3
2
2
1
1
0
0
-1
-1
-2
-2
-3
Real GDP (QoQ % SAAR)
Real GDP Componets (QoQ%)
Leaning into Change
6
-3
2015 Q1
2015 Q3
2016 Q1
2016 Q3
2017 Q1
2017 Q3
Government
Net Exports
Personal Consumption
Fixed Investment
Change in Private Inventories
GDP
2018 Q1
Source: Bloomberg Finance, LLP, Data as of 3Q17 for actuals ; 4Q17 and 1Q18 for estimates. Wells Fargo Investment Institute estimates. Dotted line represents Bloomberg consensus estimates. Estimates are not guaranteed and are subject to change. QoQ = quarter-over-quarter. SAAR = Seasonally Adjusted Annual Rate.
Will Job Gains = Wage Gains? 4
11
3.5
10
3
9
2.5 8 2 7 1.5 6
1 0.5
5
0
4 2007
2008
2009
2010
2011
2012
U.S. Average Hourly Earnings
Source: FactSet, Data as of 1/1/18. YoY = year-over-year
2013
2014
2015
Unemployment Rate
2016
2017
Unemployment Rate (in percent)
U.S. Average Hourly Earnings (YoY%)
Leaning into Change
Despite tight labor market wages haven’t broken from their 12-month range.
Consumers and Businesses Feeling Better Consumer confidence and business optimism near recovery highs.
Leaning into Change
Confidence at post recession highs
Source: FactSet, the shaded bar represents recession period.
Central Bank Balance Sheet European Central Bank assets top the Fed and Japan. 6000
Central Bank Assets (in Billion U.S. Dollars)
Leaning into Change
5000
4000
3000
2000
1000
0 2012
2013
2014 European Central Bank
Data as of 1/1/18. Source: Bloomberg Finance, LLP. ECB = European Central Bank.
2015
2016
Bank of Japan
Federal Reserve
2017
Diverging Monetary Policies Canada, U.S., U.K and Korea tighten, the rest of the developed world remains easy.
Global Central Bank Monitor Real GDP*
Inflation Rate*
Interest Rate
Last Move
United States
2.3
2.1
1.25 – 1.50
12/17 ( 0.25)
Japan
2.1
0.6
(0.05) – (0.10)
01/16 ( 0.20)
Eurozone
2.8
1.4
0.00
03/16 ( 0.05)
United Kingdom
1.7
3.1
0.50
11/17 ( 0.25)
Canada
3.4
2.1
1.00
09/17 ( 0.25)
China
6.8
1.8
4.35
11/15 ( 0.25)
India
6.3
5.2
6.00
08/17 (0.25)
Russia
1.8
2.5
7.75
12/17 ( 0.50)
Brazil
1.4
3.0
7.00
12/17 ( 0.50)
South Korea
3.8
1.5
1.50
11/17 ( 0.25)
Leaning into Change
Developed Countries
Emerging Countries
▪*Year-over-year growth rate. ▪Real GDP values are as of 3Q17. Canada is as of 11/1/17. Inflation is as of 1/1/18 except Japan, U.K., and Canada which are as of 12/1/17. Source: Bloomberg Finance, LLP..
Bull Markets: Historical Perspective This bull market has exceeded the average bull-market return and length.
Bull market return 500%
A larger circle represents a higher return bull market
400%
'32-'37
350% Bull Market Return
Leaning into Change
450%
'49-'56
'90-'00
300% 250%
'82-'87
200%
Current (March 2009 – Present)
'42-'46 150%
Average
100%
'70-'73
50%
'66-'68
'87-'90
'02-'07 '62-'66
'74-'80
'57-'61
0% 0
20
40
â–ŞSource: Bloomberg Finance LLP, S&P 500 Index Price Return as of 1/1/18. â–ŞPast performance is no guarantee of future results.
60 80 Bull Market Length (Months)
100
120
Global Equity Valuations: Too Much Or Not Enough? Global equity price/earnings (P/E) ratios are above historical averages.
30
Global forward valuations
Leaning into Change
S&P 500 Avg: 15.4x 25
MSCI EAFE (Developed Markets) Avg: 14.4x MSCI Emerging Markets Avg: 10.9x
20
18.2
15 14.9
12.5 10
5 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Source: FactSet, Wells Fargo Investment Institute, Data as of 1/1/18. An index is unmanaged and not available for direct investment. Past performance is no guarantee of future results. P/E ratios represent the total price of the index divided by its total earnings
Equity Market Volatility Volatility in 2017 was the lowest of the recovery. A CORRECTION IS NO REASON TO EXIT THE MARKET 50% 38% 32%
33%
30%
Leaning into Change
32% 29%
29%
30%
23%
26% 21.83%
21%
17%
16% 8%
10%
-3% -7% -7%
-6% -6% -5%
15%
11%
10%
5%
1%
-10%
16%
5%
2%
-7%
-19%
-9%
-11%
-12% -19%
-7% -7% -7%
-12%
-10%
-10%
-14%
-17%
-16%
-22%
-30%
12% 1%
-3% -8%
14%
-6% -7%
-2.58% -12% -10%
-19%
-27%
-29% -33%
-37%
-50% -48%
-70% '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17
Calendar Year S&P 500 Total Return
Source: FactSet, Wells Fargo Investment Institute.12/31/2017.
Calendar Year S&P 500 Drawdown
Disclosures The information in this report was prepared by Global Investment Strategy. Opinions represent GIS’ opinion as of the date of this report and are for general information purposes only and are not intended to predict or guarantee the future performance of any individual security, market sector or the markets generally. GIS does not undertake to advise you of any change in its opinions or the information contained in this report. Wells Fargo & Company affiliates may issue reports or have opinions that are inconsistent with, and reach different conclusions from, this report.
Leaning into Change
The information contained herein constitutes general information and is not directed to, designed for, or individually tailored to, any particular investor or potential investor. This material is not intended to be a client-specific suitability analysis or recommendation, an offer to participate in any investment, or a recommendation to buy, hold or sell securities. Do not use this information as the sole basis for investment decisions. Do not select an asset class or investment product based on performance alone. Consider all relevant information, including your existing portfolio, investment objectives, risk tolerance, liquidity needs and investment time horizon. Global Investment Strategy is a division of Wells Fargo Investment Institute, Inc. (“WFII”). WFII is a registered investment adviser and wholly owned subsidiary of Wells Fargo Bank, N.A., a bank affiliate of Wells Fargo & Company. Wells Fargo Advisors is registered with the U.S. Securities and Exchange Commission and the Financial Industry Regulatory Authority, but is not licensed or registered with any financial services regulatory authority outside of the U.S. Non-U.S. residents who maintain U.S.-based financial services account(s) with Wells Fargo Advisors may not be afforded certain protections conferred by legislation and regulations in their country of residence in respect of any investments, investment transactions or communications made with Wells Fargo Advisors. Wells Fargo Advisors is a trade name used by Wells Fargo Clearing Services, LLC and Wells Fargo Advisors Financial Network, LLC, Members SIPC, separate registered brokerdealers and non-bank affiliates of Wells Fargo & Company.
© 2018 Wells Fargo Investment Institute. All rights reserved. CAR-0118-02223
Leaning into Change
STRIVE TEAM
JENNIFER PIERSON
JASON VITORINO
RANDY COHEN
ADAM GOTTSCHALK
RON SWEEDYK
Managing Partner
Managing Partner
Director of Real Estate
Vice President
Financial Consulting
SHANNON NETTLES
SASHA MAHAN
KAYLA REEVES
WILL MEACHUM
JARED HARRISON
Transaction Coordinator
Marketing Coordinator
Marketing Coordinator
Real Estate Analyst
Financial Analyst
JAMES MANGUM
BRENT WALKER
CHADD BOSSOW
WILL MERRITT
KYLE ROZELL
Senior Associate
Financial Analyst
Associate - STNL
Associate - STNL
Associate - STNL
JAMES ANDERSON
SAM HOUSE
KAT HARVEY
DANIEL WENZ
JAKE DUTSON
ANNE MARTIN
Associate – Multi-Tenant
Associate – Multi-Tenant
Associate – Multi-Tenant
Associate – Multi-Tenant
Associate – Multi-Tenant
Associate - STNL
Leaning into Change
Company Stats - 2017
Type
# of Transactions
Total Value
STNL
42
$112,651,327
SHOPPING CENTERS
21
$184,605,892
TOTAL
63
$297,257,219
Leaning into Change
Cooperation Buyer’s Agent
# of Transactions
Percentage
STRIVE
38
60.32%
Outside Agent
25
39.68%
TOTAL
63
100.00%
Multi-Tenant Transactions - 2017
Leaning into Change
Texas
499 Costar Criteria: • Retail – Texas • 2, 3, 4, 5 Stars • Tenancy: Multi • Sale Date: 1/1/2017-12/31/2017 • Sale Status: Sold • Size: 5,000+ sq ft • Sale Price: $400,000+ • Included multi property sales • Exclude Bulk Portfolio Sales
*Costar – MT Transactions in Texas
Where Today’s Buyers Are Coming From
Leaning into Change
OR 0.25% (1)
CA 5.05% (20)
ID 0.25% (1)
MI 0.25% (1)
NV 0.25% (1)
MO 0.76% (3) AZ 0.25% (1)
NM 0.25% (1)
OK 0.51% (2) TX 85.61% (339)
HI 0.76% (3)
MA 0.25% (1)
NY 1.52% (6)
CT 0.25% (1)
IN IL 0.25% 0.76% (1) (3)
MD 0.25% (1)
TN 0.25% (1) GA 0.76% (3)
NC 0.51% (2) SC 0.25% (1) FL 0.76% (3)
*Costar – MT Transactions in Texas
STNL Transactions - 2017
Leaning into Change
Texas
538 Costar Criteria: • Retail – Texas • 2, 3, 4, 5 Stars • Tenancy: Single • Sale Date: 1/1/2017-12/31/2017 • Status: Sold • Sale Type: Investment • 900 total transactions • Went through portfolio and Multi sales • Went through all 2 stars *Costar – STNL Transactions in Texas
Where Today’s Buyers Are Coming From
Leaning into Change
MI 2.22% (8)
NY 2.78% (10)
CA 25.28% (91)
TX 48.89% (176)
FL 6.11% 22
*Costar – STNL Transactions in Texas
Retail Transactions - 2017
Leaning into Change
State
STNL Stats
MT Stats
All Retail
TX
176
48.89%
339
85.61%
515
68.12%
CA
91
25.28%
20
5.05%
111
14.68%
Other
93
25.83%
37
9.34%
130
17.20%
Total
360
100.00%
396
100.00%
756
100.00%
*Costar – All Transactions in Texas
Retail Transactions - 2017
Leaning into Change
NY/NJ/CT (2.91%) MI FL (1.19%) (3.31%)
AZ (0.79%)
Other (9.00%) CA (14.68%)
TX (68.12%)
*Costar – All Retail Properties Sold in Texas - 2017
Leaning into Change
Leaning into Change
Leaning into Change
Leaning into Change
Leaning into Change
PANEL
TONY RAMJI
STEVE PRESTON
ANNA GRAVES
JASON VITORINO
President and CEO Victory Real Estate Group
Chairman
Managing Director Crow Holdings Capital Partners
Managing Partner STRIVE Real Estate
North American Development Group NNN