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January 2014. When Reflection Leads to Inflection. Quarterly Newsletter Q1 2014. Q1 2014. S&P 500 Index at Inflection Points. Q1 2014. S&P Price and P/E Ratio. Source: Standard & Poor’s, FactSet, Robert Shiller Data, J.P. Morgan Asset Management. Q1 2014.
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January 2014 When Reflection Leads to Inflection Quarterly Newsletter Q1 2014
Q1 2014 S&P 500 Index at Inflection Points
Q1 2014 S&P Price and P/E Ratio
Source: Standard & Poor’s, FactSet, Robert Shiller Data, J.P. Morgan Asset Management Q1 2014 S&P 500 Shiller Cyclically Adjusted P/E
Q1 2014 Shiller’s Cyclically Adjusted P/E Ratio 1881-2014 50 45 40 35 30 25 20 15 10 5 0 • “Dot Com” Collapse (2001) (1929) The Great Crash and the Beginning of the Great Depression (2005) Global Financial Crisis Current CAPE Level: 25.35x (1982) Black Monday
Q1 2014 Earnings Growth Without Commensurate Sales Growth 231% Reported EPS 25% Sales Per Share 0% 50% 100% 150% 200% 250% Source: Bloomberg Data
Q1 2014 S & P 500 EPS Growth
Q1 2014 S&P Positive and Negative Preannouncements Price EPS Guidance
Q1 2014 US Unemployment Rate
Q1 2014 While on par with renting nationally, buying is no longer cheaper for 175 of 277 largest metros
Q1 2014 Home Ownership Rate
Q1 2014 Fed Funds Rate and FOMC Interest Rate Projections Source: Federal Reserve, FacSet, JP Morgan Asset Management
Q1 2014 Fed Balance Sheet Source: Federal Reserve, FacSet, JP Morgan Asset Management
Q1 2014 Margin Borrowing CPI Adjusted and S&P 500 Index
Source: Bloomberg, Doubleline Capital Q1 2014 S&P 500 during FOMC Action
Q1 2014 Emerging Markets Currencies versus the US Dollar
Q1 2014 Developed World Markets versus Emerging Markets
Q1 2014 S&P 500 Index at Inflection Points Fed Innovation Bubble? Technology Innovation Bubble Lending Innovation Bubble QE3 End Fed Tapering June 2013 Source: S&P, First Call, Compustat, FactSet, JP Morgan Asset Management
Q1 2014 What Is Our Strategy for 2014? • Fixed Income • Keep bond maturities short to maintain liquidity • Implement Quality Barbell Strategy • Equity • Maintain patience for buy list stocks to reach entry prices • Buy on market dip • Seek opportunities in stocks that have been through trauma and now have clean bill of health
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