OCTOBER 2015

THE TRAVEL CONVENTIONGREECE

A STORM WARNING?

THE NEWS FEARS

• China slowdown

• Emerging Market effects

• US Interest rates

• Eurozone

• Greece

• Immigration

• UK Deficit & Growth

THE SHIPPING FORECAST

A KEY MOMENTOF ECONOMIC CHANGE

5

HOW BAD IS IT?

SOURCE BLOOMBERG.

UNPRECEDENTED STIMULI

• Low Rates

• Infrastructure Spending

• Quantitative Easing

• Commodity Price falls

AFTER THE STIMULANTS....

OLD NEWS………………..

• China Slowdown• US growth still not at pre-recession trend• Rate hikes will prompt slowdown?• Eurozone future• Greece• Ukraine• ISIS• China Sea Sores

BIG IMBALANCES

• Government debt and deficits

• Consumer debt

• Trade balances

• Income distribution

AFTER THE “NOUGHTIES”-THE TINY TEENS• Low Growth

• Low Inflation

• Low Interest Rates

• Low Returns

Now make some Money!

OIL PRICESOil price move is still happening!

59% fall

22% fall

COMMODITIES - ROLLING 5 YEARS

BALTIC DRY, COPPER, GOLD, BRENT CRUDE (WTI)

01/11 01/12 01/13 01/14 01/154,0004,000

5,0005,000

6,0006,000

7,0007,000

8,0008,000

9,0009,000

10,00010,000

11,00011,000

5281.00

Copper - Spot Price - LME (US$/MT)High: 9986.00 Low: 5063.75 Last: 5281.00

Recession Periods - United States Recession Periods - United Kingdom

UNEMPLOYMENT IS FALLING

GREEN – EUROPEAN, RED - UNITED STATES, YELLOW - UNITED KINGDOM

'01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '1533

44

55

66

77

88

99

1010

1111

1212

1313Unemployment Rates

Unemployment Rate, U-3 - Percent, Sa - United States - Percent, Sa - United StatesUnemployment Rate Claimant Count, Percent - United KingdomHarmonized Unemployment Rate, Both Sexes, All Ages, Sa - Euro Area (18 Countries)

CONSUMER CONFIDENCE & Savings

US, EUROZONE, UK AND JAPAN CONSUMER CONFIDENCE - 30 YEARS. GREY AREAS MARK RECESSIONS – EZ MEASUREMENT AGAINST GERMANY.GREEN – US AND UK HOUSEHOLD SAVINGS RATIO’S

01/85 01/88 01/91 01/94 01/97 01/00 01/03 01/06 01/09 01/12 01/15-40

-35

-30

-25

-20

-15

-10

-5

0

5

-6.90

©FactSet Research SystemsSource: FactSet

Eurozone Consumer ConfidenceHigh on 5/31/2000 2.40

Avg: -12.49

Low on 3/31/2009 -34.60

Consumer Survey - Consumer Confidence Indicator, Balance, Sa - Euro Area -16.40

01/85 01/87 01/89 01/91 01/93 01/95 01/97 01/99 01/01 01/03 01/05 01/07 01/09 01/11 01/13 01/150

20

40

60

80

100

120

140

160

14.5

15.0

15.5

16.0

16.5

17.0

17.5

18.0

18.5

15.27

101.54

©FactSet Research SystemsSource: FactSet

US Consumer ConfidenceConsumer Confidence Index, 1985=100, Sa, Index - United States 102.00Banking & Credit, Household Debt Service & Financial Obligations Ratios, For, Sa, Percent - United States 16.42

01/86 01/88 01/90 01/92 01/94 01/96 01/98 01/00 01/02 01/04 01/06 01/08 01/10 01/12 01/14-40

-35

-30

-25

-20

-15

-10

-5

0

5

10

2

4

6

8

10

12

14

16

18Consumer Survey - Consumer Confidence Indicator, Balance, Sa - United Kingdom UK - Households Saving Ratio (%, sa)Recession Periods - United Kingdom

RATES – LOWER FOR LONGER

LHS – BASE RATESRHS 10 YEAR TREASURY YIELDS, US (RED) JAPAN (GREEN), UK ORANGE, GERMANY (PINK) CANADA (BLUE) GLOBAL YIELDS GRADUALLY INCREASING.

'86 '87 '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 '150

2

4

6

8

10

12

14

16Lower for Longer

Japan Eurozone UK United States 01/96 01/99 01/02 01/05 01/08 01/11 01/140.0%0.0%

1.0%1.0%

2.0%2.0%

3.0%3.0%

4.0%4.0%

5.0%5.0%

6.0%6.0%

7.0%7.0%

8.0%8.0%

9.0%9.0%

JP: 0.38%

GY: 0.73%

CA: 1.49%

UK: 1.85%

US: 2.22%

Global 10Y Treasury YieldsUSA Japan UK GermanyCanada

UK & US INTEREST RATE EXPECTATIONS

US BASE RATES (GREEN) EXPECETED TO BE AT 2% IN SEPTEMBER 2018SOURCE BLOOMBERG

UK BASE RATES (ORANGE) EXPECTED TO BE AT 2% IN SEPTEMBER 2019

FX – GBP V US$, EURO AND JPY – 12M

WITH OVERSEAS MARKETS FAVOURED CURRENCY MANAGEMENT KEY.

Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep85

90

95

100

105

110

115

94.74

104.13

108.59

U.S. Dollar per British Pounds Daily1.55 0.00 -0.12% VWAP: High: 100.19 Low: 89.67 Chg: -5.26%

(INDEX) U.S. Dollar per British Pounds - Price (INDEX) Japanese Yen per British Pounds - Price(INDEX) Euro per British Pounds - Price

WHICH COMPANIES ARE GROWING PROFITS?

GDP GROWTH STILL POSITIVE

AVERAGE GLOBAL GROWTH CLOSE TO STATIC BUT CHANGES IN REGIONAL GROWTH RATES NOTABLE.

'08 '09 '10 '11 '12 '13 '14 '15-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

3.1%

0.0%

5.4%

4.2%

3.4% 3.4%3.4%

3.3%

GDP Still Growing

US UK Eurozone Japan EM World

http://www.google.co.uk/url?sa=i&rct=j&q=&esrc=s&frm=1&source=images&cd=&cad=rja&uact=8&docid=uCpN04JqSVo_yM&tbnid=FqIRe9fgde-k1M:&ved=0CAUQjRw&url=http://www.dimaperezlaw.com/&ei=HkZrU87QA6rT7AbQ_oHwDw&bvm=bv.66330100,d.ZWU&psig=AFQjCNE_cvzAHd5frhnqBD8q9roxLrFIew&ust=1399625495078976

USA – Higher Pressure

Rates Change?

Corporate Earnings still

rising!Iran/Cuba

Housing improving,

unemployment falling

Economic growth uninspiring

Fracking mad

US DEFICIT REDUCTION

GASOLINE PRICE FALL • Gas at the pumps

have fallen over 20% in the last 6 months

• The American motorist is $800 a year better off which is equivalent to a 2% pay rise.

• However yet to see spending. Americans are saving rather than consuming.

US Average Gasoline Price

2.25

2.50

2.75

3.00

3.25

3.50

3.75

4.00

4.25

O J A J O J A J O J A J O J A J O J A J2010 2011 2012 2013 2014 2015

THE WORLD BENEFITSCountries who export to the US

Country % of exports to US

China 16.7%

Japan 17.8%

South Korea 10.7%

Germany 7.9%

France 6.9%

UK 10.5%

REGIONAL STORMS

EU LEVEL PLAYING FIELD.....

EUROZONE

The Future of the Euro

“Grexit”?

Widespread economic

pickup

Company earnings rising at double

digit rates

QE = Growth?

Further financial integration

Immigration & Borders

THE SOUFFLE RISES – at last!

SOURCE: TWITTER - @MARK_WILLEM5

GOOD COMPANIESEuropean Earnings (pink) finally coming through!

WHITE MID CAP UKMAUVE EUROORANGE US

WEAK CURRENCY HELPS EXPORTSEuro over 10% weaker than start of 2014!

WATCH IT SHORTY!

SOURCE: NEWEUROPE.EU/EPA

FORECAST – CHANGEABLE!HJSTS

“GREAT ECONOMY -PITY ABOUT THE POLITICIANS”

36

UK

Jobs & growth vs Income Tax

Fixing the banking system

Tax reform?

2 UnionsNo Power or

Transport strategy

World’s5th - 8th -10th

?

KRANKIES – THE LOVECHILD?

SOURCE: NEWEUROPE.EU/EPA

KEYS TO ECONOMIC CONFIDENCEINEXPERIENCED POLITICIANS

INEXPERIENCED CIVIL SERVICE

CYNICAL MEDIA

HOBBLED BANKING

HOW HAS THE UK FARED?

SOURCE: GOOGLE IMAGES

The UK exports services such as:•Finance•Accounting•Legal•Tourism•University education

-7

-5

-3

-1

1

3

5

1998 2000 2002 2004 2006 2008 2010 2012 2014

Trade in Goods as % of GDP Trade in Services as % of GDP Trade Balance

UK trade balance

Real wages ticking up

RHS - GREEN – WAGE INFLATION V RED UK CONSUMER PRICE INFLATION

LIVING STANDARDS STARTING TO PICK UP AT LAST?

'06 '07 '08 '09 '10 '11 '12 '13 '14 '15-1

0

1

2

3

4

5

6

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0Real Wages Positive

UK - CPI All Items (YoY%, sa) Lmsb Awe, Regular Pay We Growth Yoy 3 Months Average, Sa, Percent - United Kingdom

GOVERNMENT DEFICIT

SOURCE: ONS

UK Govt’ forecast to borrow £70bn in 2015/2016

SOURCE: BANK OF ENGLAND

THE LONG AND WINDING ROAD

INFLATION LIKELY TO STAY LOW IN THE MID-TERM

UK PMIs

SOURCE:

45.0

47.5

50.0

52.5

55.0

57.5

60.0

62.5

65.0

S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A2012 2013 2014 2015

Construction Markit/CIPS UK Manufacturing PMI SA Markit/CIPS UK Services PMI Business Activity SA

-40.0%

-20.0%

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

Ch

ang

e in

Pri

ce

Change in Yield

30Yr 10Yr 3Yr

PRICE SENSITIVITY - BONDS1% fall in yields:

30yr = +20%10yr = +9%3 Yr = +3% 1% rise in yields:

30yr = -13%10yr = -8%3 Yr = -3%

UK POSITIVE ISSUES• “Re-shoring” – Noodles & Antler

• Record Car production

• Steel – 40 year peak

• Non EU exports now higher than EU

• Rice Cookers to Asia!

• Financial/Professional trade exports £55bn

• Over half million business start ups 550,000

• New Financing structures

• Record Employment

NOW - SOME RADICAL COMMON SENSE• Tax Reform

• NI & SME

• Stamp Duty – transactions & property

• Sugar & Fat Tax

• Pension Reform• Auto E

• Education

• Investment Reform• New Funding schemes

• Housing Free & Leasehold

• Infrastructure

EAST – Monsoons & Typhoons

JAPAN

Islands Dispute

Abe - nomics Yen Weakness

Debt 220%+ of GDP

Trade Turnaround

Nappy Sales

THE CHINA SEA -SORES

FEEL THE LOVE…….

BROKEN BRICS?

ChinaChange of Life

BrazilWeaker Exports

South AfricaPolitical issues

RussiaRule of law?

IndiaPost election

TurkeyOn the Cusp

MSCI Asia Ex Japan

ChinaSouth Korea

TaiwanBrazil

South AfricaIndia

MexicoRussia

MalaysiaIndonesiaThailandTurkeyPolandChile

PhilippinesHong KongSingapore

...FAVOUR Commodity IMPORTERS

SOURCE: ISHARES/7IM

54

MSCI Emerging Markets

ChinaSouth Korea

TaiwanBrazil

South AfricaIndia

MexicoRussia

MalaysiaIndonesiaThailandTurkeyPolandChile

Philippines

HOW BAD IS THE CHINA SLOWDOWN?

Solid growth in crude petroleum import volumes

Retail sales growth running >10%

Slowdown in industrial

production rate of growth

Wage growth running around

10% p.a.

THE NEW LEADERSHIP

THE NEW LEADERSHIP

JOINING THE “RESERVE” GANG

SOURCE: GaveKal

Chinese Currency is a big part of the Reserve once it punches its weight

RIDING THE ROLLERCOASTERShanghai Index (white) vs MSCI World (yellow) YTD

CHINA’S WORKING AGE POPULATION

SOURCE: UNITED NATIONS

KEY RISKS to the VIEW

EUROZONE GREEN/K SHOOTS

CHINA CHANGE of LIFE

UK SULLEN GROWTH & NERVES

US DEBT, DEFICIT & DEMAND

REBUILDING INVESTMENTCONFIDENCE

KEY WORD FOR ECONOMY - CONFIDENCE

POWER OF COMPOUNDING

Today’s value of £100 invested at the end of 69 years

SOURCE: BARCLAYS CAPITAL

1 – without reinvesting income

Nominal Equities £9,148

2 – gross income reinvested

Nominal Equities £179,265

CHOOSING NEXT YEAR’S TOP Asset Class COULD YOU?

SOURCE: BLOOMBERG, THOMSON REUTERSAS AT 1 JANUARY 2015

IT WORKS!

SOURCE: BLOOMBERG, THOMSON REUTERSAS AT 1 JANUARY 2015

SOURCE: 7IM/IBBOTSONAS AT 30TH JUNE 2015

7IM BALANCED FUNDASSET ALLOCATION CHANGES

Jun-

10

Dec-1

0

Jun-

11

Dec-1

1

Jun-

12

Dec-1

2

Jun-

13

Dec-1

3

Jun-

14

Dec-1

4

Jun-

150%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100% Cash & Money Markets

Currency Funds

CTAs

Hedge Funds & Other Strategies

Infrastructure

Property & Related Equity

Private Equity

Timber

Commodites & Related Equity

Emerging Market Bonds

Global Covertibles

Global High Yield

Global Corporate Bonds

Sterling Corporate Bonds

Index-linked Gilts

Global Index Linked Bonds

Short Term Gilts

Gilts (and Government-Related)

Global Government Bonds

Global Themes

Frontier Markets Equity

Emerging Markets Equity

Far East Equity

Japan Equity

European Equity

North American Equity

UK Small Cap Equity

UK Equity

FTSE 100

FTSE 100 TOTAL RETURN

N.B. Expected Maximum and Minimum Return ranges are based on 90% confidence level

SOURCE: FE ANALYTICS7IM / IBBOTSON STUDY 2015

Expected Maximum Return Expected Minimum Return

THEORY: BALANCED

Average Expected Return

N.B. Expected Maximum and Minimum Return ranges are based on 90% confidence level

SOURCE: FE ANALYTICS7IM / IBBOTSON STUDY 2015

Expected Maximum Return Expected Minimum Return Actual Compound Return

REALITY: BALANCED

Average Expected Return

All data refers to C Class Accumulation Units As at 30 th June 2015

REWARDING YOUR OWNHARD WORK

YOUR OWN PLANNING

Accountants

Lawyers

Insurance

Mortgage Providers

Banks

Trustees

Investment

ClientYour Family

FinancialPlanning

FORWARD FINANCIAL HEADLIGHTSCash flow – income and expenditure Now Long term future

SO WHAT DO YOU DO?Think broader family assets and liabilities

• Managing family assets

Improve Investment Discipline

• Reducing Costs

• Better than average Returns

• Reducing Risks

• Lower Volatility

• Regular financial planning

FAMILY BALANCE SHEET

House

Car

Pension

Life assurance

ISAs

Shares & National Savings

Cash

Mortgage

Credit Cards

Loans

ASSETS LIABILITIES

NET BALANCE £

THE Forecast? Fine, Clear & Sunny

THE ALTERNATIVE? Washed Up!

OCTOBER 2015

THE TRAVEL CONVENTIONGREECE

TWITTER @USTEWART WWW.7IM.CO.UK

THANKYOU