FULLY INVESTED
6 October 2020
Investment lessons from history
BCI Global Investment Conference 2020
Patrice Rassou | Chief Investment Officer
2
3
1314
1340
1366
1392
1418
1444
1470
1496
1522
1548
1574
1600
1626
1652
1678
1704
1730
1756
1782
1008
1834
1860
1886
1912
1938
1964
1990
2018
World nominal rate, GDP-weighted (%)World nominal rate, arithmetically-weighted (%)
Linear (World nominal rate, GDP-weighted (%))Linear (World nominal rate, arithmetically-weighted (%))
20
18
16
14
12
10
8
6
4
2
0
STAGNATION
Source: FirstRand Investment Office
4
THE ZERO BOUND
Source: FirstRand Investment Office
5
0,00%
2,00%
4,00%
6,00%
8,00%
10,00%
12,00%
14,00%
16,00%
18,00%
Jan
1, 1
871
Jul 1
, 187
3Ja
n 1,
187
6Ju
l 1, 1
878
Jan
1, 1
881
Jul 1
, 188
3Ja
n 1,
188
6Ju
l 1, 1
888
Jan
1, 1
891
Jul 1
, 189
3Ja
n 1,
189
6Ju
l 1, 1
898
Jan
1, 1
901
Jul 1
, 190
3Ja
n 1,
190
6Ju
l 1, 1
908
Jan
1, 1
911
Jul 1
, 191
3Ja
n 1,
191
6Ju
l 1, 1
918
Jan
1, 1
921
Jul 1
, 192
3Ja
n 1,
192
6Ju
l 1, 1
928
Jan
1, 1
931
Jul 1
, 193
3Ja
n 1,
193
6Ju
l 1, 1
938
Jan
1, 1
941
Jul 1
, 194
3Ja
n 1,
194
6Ju
l 1, 1
948
Jan
1, 1
951
Jul 1
, 195
3Ja
n 1,
195
6Ju
l 1, 1
958
Jan
1, 1
961
Jul 1
, 196
3Ja
n 1,
196
6Ju
l 1, 1
968
Jan
1, 1
971
Jul 1
, 197
3Ja
n 1,
197
6Ju
l 1, 1
978
Jan
1, 1
981
Jul 1
, 198
3Ja
n 1,
198
6Ju
l 1, 1
988
Jan
1, 1
991
Jul 1
, 199
3Ja
n 1,
199
6Ju
l 1, 1
998
Jan
1, 2
001
Jul 1
, 200
3Ja
n 1,
200
6Ju
l 1, 2
008
Jan
1, 2
011
Jul 1
, 201
3Ja
n 1,
201
6Ju
l 1, 2
018
US 10 Year Treasury Rate
RETURN free RISK
Source: FirstRand Investment Office
6
656055454035302520151050
1880 1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 2020
30
Valuation : S&P PE
Source: FirstRand Investment Office
7
8
Crisis frequency
The S&P experienced ~ high fragility event per decade from the 1920s through to the 2008 GFC; in the last 10 years it experienced 5x as many
45
40
35
30
25
20
15
10
5
0
-5
‘28
‘32
‘36
‘40
’44
‘48
‘52
‘56
‘60
‘64
‘68
‘72
‘76
‘80
‘84
‘88
‘92
’96
‘00
‘04
‘08
‘12
‘16
‘20
Crisis frequency
Source: FirstRand Investment Office
9
Closing SPX and VIX on each date when SPX hit a new all-time high
Record level RISK
Source: FirstRand Investment Office
10
30
27
24
21
18
15
12
9
6
32007 2009 2011 2013 2015 2017 2019 2021E
G4 Central Bank balance sheet (USD tn)
-1
-3
-5
-7
-9
-11
-13
-15
-172008 2010 2012 2014 2016 2018 2020
G4+ China General Government headline fiscal balance
Global: Massive policy response
Source: FirstRand Investment Office
11
The FED induced momentum
Source: FirstRand Investment Office , Bloomberg
12
Adaptation
Scientists widely believe that polar bears evolved from a group of brown bears that became isolated by glaciers in an area near Siberia. The standard bears underwent a rapid series of evolutionary changes in order to survive on the ice. Today’s Polar Bear is superbly adapted to life in the Arctic.
13
Europe : Century Low vs S&PM
SC
I Eur
ope
vs S
&P
500
-R
elat
ive
pric
e pe
rfor
man
ce
140
120
100
80
60
40
201919 1929 1939 1949 1959 1969 1979 1989 1999 2009 2019
Europe: Century low vs S&P
Source: FirstRand Investment Office
14Source: FirstRand Investment Office
Europe: Reasons for underperformance
180
170
160
150
140
130
120
145
140
135
130
125
120
115
110
105
100
Dec-16 Apr-17 Aug-17 Dec-17 Apr-18 Aug-18 Dec-18 Ap-19 Aug-19
PharmaCap Code
Food & BevMaterials
BanksUtilities
InsuranceCons Dur
Household ProdEnergy
MSCI Europe – Top 10 Industry groups by weight0 2 4 6 8 10 12
American SugarNational LeadTenessee CoalUS LeatherAmerican cotton oilLaclede GasAmerican TobaccoChicago GasGeneral ElectricUS RubberNA Distilling & Cattle Feeding
American SugarNational LeadTenessee CoalUS LeatherAmerican cotton oilGeneral ElectricNA Distilling & Cattle FeedingUS SteelAmerican Smelting
American SugarNational LeadTenessee CoalUS LeatherGeneral ElectricUS SteelAmerican SmeltingGeneral MotorsTexacoWestinghouse ElectricAT&TAmerican Can
American SugarNational LeadGeneral ElectricUS SteelAmerican SmeltingGeneral MotorsTexacoWestinghouse ElectricAT&TAmerican CanDowSears RoebuckChevronWoolworth
American SugarGeneral ElectricUS SteelAmerican SmeltingGeneral MotorsTexacoWestinghouse ElectricAT&TAmerican CanDowSears RoebuckChevronWoolworthInternational HarvesterHoneywellGeneral FoodsInternational NickelExxon MobilChryslerBethlehem SteelUnion CarbideGoodyearEastman KodakProcter & GambleCoca ColaIBM
18901890 19001900 19101910 19201920 19301930 19401940 19501950
19601960 19701970 19801980 200019901990 20102000 2010 20202020General ElectricGeneral MotorsAT&TIntl PaperDowChevronHoneywellExxon MobilEastman KodakProcter & GambleCoca ColaIBMRaytheonAlcoa3MMerckAmerican ExpressPhillip MorrisMc DonaldsBoeingCatepillarJP MorganWalt Disney
Johnson & Johnshon
WalmartHome DepotIntelMicrosoftVerizonTravellersCisco
DowChevronExxon MobilProcter & GambleCoca ColaIBMRaytheon3MMerckAmerican ExpressMc DonaldsBoeingCatepillarJP MorganWalt Disney
Johnson & Johnshon
WalmartHome DepotIntelMicrosoftVerizonTravellersCiscoUnited HealthGoldman SacsNikeVisaAppleWalgreen BootsSalesforce.comAmgenPfizer
General ElectricUS SteelGeneral MotorsTexaco
Westinghouse Electric
AT&TAmerican CanIntl PaperDowSears RoebuckChevronWoolworthInternational HarvesterHoneywellGeneral FoodsInternational NickelExxon MobilBethlehem SteelUnion CarbideGoodyearEastman KodakProcter & GambleCoca ColaIBMRaytheonAlcoa3MMerckAmerican ExpressPhillip MorrisMc DonaldsBoeing
17
Source: FirstRand Investment Office
Survival Index- Dow 30
45,5%
55,6%
75,0%
85,7%
96,2% 96,2% 96,3% 96,3%89,3%
62,5%57,1%
77,4%
1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 2020
Longest Tenure in Dow 30 ?
110 Years
92 Years
Name the company always quoted for resisting CHANGE
70 Years
Who replaced Kodak?
1.4 trillion photos were taken in 2019
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