Bernstein International Strategic Equities Portfolio - SCB · NASDAQ:STESX
Bernstein International Strategic Equities Portfolio - SCB — Bernstein — Q1 2024 Earnings Presentation
54 slides from Bernstein International Strategic Equities Portfolio - SCB's earnings presentation, Apr 10, 2024
Slide 1: Waiting to Exhale: 1Q 2024 Macro and Markets Review
Waiting to Exhale 1Q 2024 Macro and Markets Review This presentation is provided by Bernstein. This presentation booklet has been provided to you for use in a private and confidential meeting to discuss a potential or existing investment-advisory relationship. This presentation is not an advertiseme
Slide 2: Questions We Heard from Our Clients During 1Q 2024
Questions We Heard from Our Clients During 1Q 2024 What happened to that Will inflation get back When will the Fed cut, and by recession we were all worried to normal? how much? about? Are stock returns still Is now the right time to invest How will the election affect concentrated in the excess cas
Slide 3: Investors Await Key Economic and Market Milestones
Investors Await Key Economic and Market Milestones Seeking Clarity on Inflation and Fed Cuts Inflation has fallen meaningfully since the summer of 2021—so much so that the Fed is likely to initiate cuts this year. But without a bit more assurance, investors still have uncertainty as to when and by h
Slide 4: Macro Outlook
Macro Outlook BERNSTEIN
Slide 5: 1Q 2024 Diagnostic—Where Things Stand, Where We're Going
1Q 2024 Diagnostic—Where Things Stand, Where We’re Going Recession Growth Expansion 0% Inflation 8% Monetary 0% 5.5% Policy Bear Stock Bull Market Returns Market Bear Bond Bull Market Returns Market Where things stand Where we’re going (Bernstein view) • Growth is still ~2% with modest slowing expec
Slide 6: Wall Street's Key Economic and Market Expectations for 2024
Wall Street’s Key Economic and Market Expectations for 2024 AB’s View: Low Consensus High Bernstein Global growth: Growth is likely to slow, but we do not expect a disruptive hard landing. US GDP* –0.8% 1.5% 3.2% 1.5% Monetary policy: Tightening has ended, and easing is on the horizon, though not li
Slide 7: Economy Has Been Performing Better than Expected for the Last Year
Economy Has Been Performing Better than Expected for the Last Year 100 Economic Data Better than Expected 50 0 Economic Data Worse than Expected –50 –100 Dec 22 Jun 23 Dec 23 Citi U.S. Economic Surprise Index As of March 31, 2024. Current analysis and forecasts do not guarantee future results. Sourc
Slide 8: We Expect Hiring To Slow Somewhat From Solid Pace
We Expect Hiring To Slow Somewhat From Solid Pace Net Jobs Added To US Economy Job Openings (Thousands) 500 14000 450 12000 400 10000 Thousands of Persons 350 300 8000 250 Average 6000 200 150 4000 Likely 2H range 100 2000 50 0 0 Dec 22 Jun 23 Dec 23 Jun 24 Dec 24 Dec 00 Dec 04 Dec 08 Dec 12 Dec 16
Slide 9: Persistently Higher Interest Rates Should Slow Consumer Spending
Persistently Higher Interest Rates Should Slow Consumer Spending Credit Card Rates (Percent) Mortgage Rates (Percent) 24 9 22 8 20 7 18 6 16 5 14 4 12 3 10 2 Dec 15 Dec 18 Dec 21 Dec 24 Dec 15 Dec 18 Dec 21 Dec 24 As of March 31, 2024. Past performance does not guarantee future results. Source: Fede
Slide 10: Given Modest Headwinds, Inflation Should Slow from Q1 Pace
Given Modest Headwinds, Inflation Should Slow from Q1 Pace FOMC and tighter financial conditions continue to bring inflation to heel 9 8 7 6 5 AB US Inflation 4 Forecast 2024 YE: 2.8% 3 2 Fed Target 2.0% 1 0 Jun 21 Dec 21 Jun 22 Dec 22 Jun 23 Dec 23 Jun 24 Dec 24 Core Inflation (3 mo. avg. annualize
Slide 11: Markets Outlook
Markets Outlook BERNSTEIN
Slide 12: Market Expectations for Fed Cuts in 2024 Have Wavered
Market Expectations for Fed Cuts in 2024 Have Wavered 2024 Rate Cut Expectations by Month 8 7 6 5 4 3 2 1 0 Oct 23 Nov 23 Dec 23 Jan 24 Feb 24 Mar 24 Apr 24 Market Expectation Bernstein Forecast As of April 10, 2024. Current analysis and forecasts do not guarantee future results. Source: Bloomberg,
Slide 13: If Yields Fall, Bond Total Return Should Outpace Yield Alone
If Yields Fall, Bond Total Return Should Outpace Yield Alone 10-Year US Treasury Yield (%) Total Return, 12 months forward* (Percent) 5 4 4.6% 10-Year US Treasury Yield (%) AB Forecast, 1.0% 3 YE 2024 4.25% 2 3.6% 1 0 2018 2019 2020 2021 2022 2023 Muni Intermediate Duration Income Price Appreciation
Slide 14: Corporate Earnings Picture Improves by Year-End and into 2025
Corporate Earnings Picture Improves by Year-End and into 2025 S&P 500 Trailing 12-Month Earnings per Share 260 240 2023 YE: AB 2025 YE $218 Forecast: 220 AB 2024 YE $252 200 Forecast: $233 180 160 140 120 100 2018 2019 2020 2021 2022 2023 2024 2025 As of March 31, 2024. Current analysis and forecast
Slide 15: Beyond Leaders, Valuations More Reasonable
Beyond Leaders, Valuations More Reasonable 12-Month Forward Price/Earnings Ratio 32x 21x 17x 14x 12x Magnificent 7* S&P 500 S&P 500 Equal Weight MSCI EAFE MSCI EM Current 10-Year Average† As of March 31, 2024. Past performance does not guarantee future results. Simulated or hypothetical performance
Slide 16: Dispersion Hits the "Magnificent 7," While Other Notable Stocks Hit Highs
Dispersion Hits the "Magnificent 7," While Other Notable Stocks Hit Highs Percent Change in Price YTD Representative Stocks Hitting New 52-Week Highs in March, YTD Return 82.5% General Ralph Eli Lilly Progressive Electric Lauren +33.5% +29.8% +37.5% +30.2% Netflix Disney Uber Kroger +24.7% +35.5% +2
Slide 17: The Market Rally Has Broadened Out
The Market Rally Has Broadened Out March 2024 All-Time Highs % of S&P 500 All-Time Highs by Date Achieved* Abbvie Inc Advanced Micro Devices Fortive Corp Gartner Inc Nxp Semiconductors Nv O'Reilly Automotive Inc Aflac Inc Ge Healthcare Technology Old Dominion Freight Line Allstate Corp General Dynam
Slide 18: Raising Our Ranges On Strong YTD Economic Activity
Raising Our Ranges On Strong YTD Economic Activity Bullish economic case, more than our Base case, has played out thus far in 2024 Scenario Analysis: S&P 500, YE 2024—not incl. dividends Base and Bull Case 6,000 Would necessitate: 5,800 5,750 continued inflation deceleration, 5,500 5,500 slightly sl
Slide 19: Cash Conundrum
Cash Conundrum BERNSTEIN
Slide 20: Cash Investors Lost Out Over Last Months
Cash Investors Lost Out Over Last 15 Months Investors stand to benefit from the imminent deployment of record cash balances Is Cash King? Investors Now Sit on Bloated Cash Balances Returns Since 2023: Cash vs. Diversified Portfolios Money-Market Funds, Total Asset Level (USD) $6.50 $6.4 Tn 19.9% $6.
Slide 21: Current Market Rally Looks Like 2009's
Current Market Rally Looks Like 2009’s S&P 500 Performance Relative to Trough 500 450 Trajectory Post-GFC 400 We Are Here 350 300 250 200 150 100 0 1 2 3 4 5 6 7 8 9 10 Years Before and After Trough 2009 Rally 2020 Rally As of March 31, 2024. Past performance does not guarantee future results. There
Slide 22: Best Ideas: Prepare for Slowdown While Taking What Market Provides
Best Ideas: Prepare for Slowdown While Taking What Market Provides PE & VC Private Credit Opportunities Catalyzed by the Current Environment: Near-Term Volatility Upside participation with downside Target Return protection or the benefit of active tax loss harvesting Real Estate, Peak Rates Debt & E
Slide 23: How to Think About Election Impact
How to Think About Election Impact 23
Slide 24: Markets Tend to Rally After Election Day, Tread Water Before
Markets Tend to Rally After Election Day, Tread Water Before S&P 500 Performance Around US Elections, Indexed to Election Day Since 1984 140% 130% 120% 110% 100% 90% 2008 80% 70% 60% –9 –8 –7 –6 –5 –4 –3 –2 –1 0 1 2 3 4 5 6 7 8 9 10 11 12 Election Day—Months Before and After Average 2020 2016 As of
Slide 25: What to Know About Returns During Administrations
What to Know About Returns During Administrations Year Administration S&P Return 1929–1933 Hoover –31% 1933–1945 Roosevelt 12% 1945–1953 Truman 16% 1953–1961 Eisenhower 16% 1961–1963 Kennedy 10% 1963–1969 Johnson 11% 1969–1974 Nixon –1% 1974–1977 Ford 15% Average, Annualized Return per Administratio
Slide 26: Policy Differences
Policy Differences Issue/Sector Biden Trump • Raise corporate tax rate from 21% to 28% • Maintain corporate tax rate at 21% (per 2017 TCJA) Corporate Taxes • Increasing minimum tax for large corporations from 15% to 21% • Top tax rate remains at 37% • Top tax rate reverts to 39.6% • Make the increas
Slide 27: Appendix
Appendix BERNSTEIN
Slide 28: What We Said at Year-End 2023
What We Said at Year-End 2023 Our Expectations It’s Only March, but… “The (Fed’s) dovish tone provides an improved backdrop in 2024.” “The economic slowdown should arrive in 2024. That said, the slowdown should be modest.” “We expect cash to underperform…again.” “With rate cuts on the horizon, yield
Slide 29: Expected Returns Across Allocations
Expected Returns Across Allocations Projected median 10-year annualized return* Last 10 Years** 6.3% 5.6% 4.9% 3.7% 2.2% All Bonds 30/70 60/40 80/20 All Stocks <2% <2% Probability of 20% Peak-to- Trough Loss Within 10 Years† 17% 40% 61% As of March 31, 2024. Neither past nor forecasted performance i
Slide 30: Despite Sell-Offs, Long-Term Investors Remain Well Within Plan
Despite Sell-Offs, Long-Term Investors Remain Well Within Plan 10-Year Forecasted Returns (as of January 2019) Projected* and Actual Returns (Annualized) Actual Annualized Net-of-Fee Return:† Great Markets 6.3% 10.2% Typical Markets 6.1% Hostile Markets 2.3% 2019 2020 2021 2022 2023 2024 2025 2026 2
Slide 31: Consistently Timing Asset-Class Leadership Is Impossible
Consistently Timing Asset-Class Leadership Is Impossible Index returns by calendar year (percent) 2014–2023 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Ann. Vol. 55.8 32.2 78.5 18.2 31.5 20.2 47.3 25.6 26.7 41.4 26.9 17.3 38
Slide 32: Strength of Current Rally Among Notable but Limited Company
Strength of Current Rally Among Notable but Limited Company Rolling Four-Month Percent Change in S&P 500 January 1945–March 2024 40% Post-1975 Post-1982 Dot-Com Bubble Post-GFC Rally Post-COVID Rally Recession Rally Recession Rally 30% 20% 10% 0% –10% –20% –30% –40% 1945 1955 1965 1975 1985 1995 200
Slide 33: Student Loan Payments to Resume
Student Loan Payments to Resume Student Loans Outstanding (USD Trillions)* Student Loan Math 1.8 • Roughly $1.6 trillion in outstanding student 1.6 loans, at an average interest rate of roughly 5.0% 1.4 1.2 • That implies payments of $80 billion per year, or roughly 0.4% of GDP; 0.1% per quarter 1 0
Slide 34: Stock Valuations Relative to Interest Rates
Stock Valuations Relative to Interest Rates Forward P/E Multiples* and Interest Rates Since 1978 30 Post–Global Financial Crisis Dot-Com Bubble 25 Mar All Other Periods Since 1978 2024 Forward S&P 500 P/E 20 Dec 2021 15 10 5 10Y Rate: 3.5%–4.5% 0 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 10-Year US T
Slide 35: Markets Are Often Reaching New Heights
Markets Are Often Reaching New Heights S&P 500 at or Near All-Time Highs* January 1950–March 2024 At or Near High Log Scale S&P 500 Price Level 1000 Price Level 100 10 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 Since 1949, the S&P 500 has been at or near all-time high
Slide 36: Bonds Begin to Rally in Advance of First Cut
Bonds Begin to Rally in Advance of First Cut Fixed-income returns in rate-cut cycles since 1980, indexed to nine months before first cut Municipal Bond Returns Taxable Bond Returns Cumulative return, indexed to nine months prior to rate cuts Cumulative return, indexed to nine months prior to rate cu
Slide 37: US Earnings Have Been Solid of Late, Expected To Ramp
US Earnings Have Been Solid of Late, Expected To Ramp S&P 500 EPS +7.5% +5.9% +8.6% +3.9% +3.0% 3Q23 4Q23 1Q24 2Q24E 3Q24E EPS 58.91 55.56 54.94 59.21 63.35 As of March 31, 2024. Current analysis and forecasts do not guarantee future results. Source: FactSet, S&P, and Bernstein analysis 37
Slide 38: Even Investing at Market Tops Has Beaten Sitting on the Sidelines
Even Investing at Market Tops Has Beaten Sitting on the Sidelines Returns since WWII Average Returns Investing Equal Amounts at Each Market Top Average Yield on Cash 10.1% 4.2% Annualized Return Since WWII: 11.0% As of March 31, 2024. Past performance is not necessarily indicative of future results.
Slide 39: Time Is Money
Time Is Money Missing just a few days in the market can completely erase gains S&P 500 Price Return Index Bloomberg Municipal Bond Total Return Index January 2023–March 2024 January 2023–March 2024 4.8% 28.7% 22.3% 2.7% 18.7% 1.5% 10.7% –1.0% Price Return Least Best 3 Least Best 5 Least Best 10 Tota
Slide 40: Elections in 2024: It Isn't Just the US
Elections in 2024: It Isn’t Just the US Indonesia South Africa USA Taiwan El Salvador Russia Panama EZ Parliament Brazil Uruguay Venezuela Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Pakistan India Mexico Sri Lanka Ghana Senegal Turkey Dominican Republic As of March 31, 2024. Source: AB 40
Slide 41: The US Federal Government Is an Insurance Company with an Army
The US Federal Government Is an Insurance Company with an Army As of March 31, 2024. Source: Congressional Budget Office 41
Slide 42: What Happens Next on the US Budget
What Happens Next on the US Budget • The total deficit is unlikely to change, irrespective of the electoral outcome. • There will likely be different ways of getting to the deficit; different balances between taxing and spending, but absent true fiscal reform, the deficit itself is likely to persist
Slide 43: Geopolitics: Events Rarely Have a Lasting Market Impact
Geopolitics: Events Rarely Have a Lasting Market Impact Select geopolitical events since 1970 and S&P 500 returns (percent) First First Event Trading Day 1 Week 1 Month 1 Quarter 1 Year Event Trading Day 1 Week 1 Month 1 Quarter 1 Year Watergate 6/19/1972 (0.1) (1.4) 0.4 (3.0) SARS† 2/11/2003 (0.1)
Slide 44: 10-Year Capital-Market Projections: Asset Classes
10-Year Capital-Market Projections: Asset Classes Median 10-Year One-Year 10-Year Annual Mean Annual Return Mean Annual Income Growth Rate Volatility Equivalent Volatility Cash Equivalents 3.7% 3.9% 3.9% 0.5% 5.0% Short-Term Treasuries 4.4% 4.5% 4.2% 1.2% 4.4% Short-Term Taxables 4.7% 4.8% 4.7% 1.5%
Slide 45: Estimated Spending Rate and Core Capital Amounts: Based on Age
Estimated Spending Rate and Core Capital Amounts: Based on Age Sustainable Spending Rate* Allocation 0/100 20/80 40/60 60/40 80/20 100/0 Age 55 1.4% 1.8% 2.1% 2.2% 2.2% 2.0% Age 65 2.0 2.4 2.6 2.8 2.8 2.6 Age 75 3.0 3.4 3.6 3.8 3.7 3.7 Estimated Core Capital—Spending $100,000 USD Millions Allocation
Slide 46: Notes on the Bernstein Wealth Forecasting System
Notes on the Bernstein Wealth Forecasting System 1. Purpose and Description of Wealth Forecasting Analysis Bernstein’s Wealth Forecasting Analysis is designed to assist investors in making their long-term investment decisions as to their allocation of investments among categories of financial assets
Slide 47: Notes on the Bernstein Wealth Forecasting System (cont.)
Notes on the Bernstein Wealth Forecasting System (cont.) 2. Modeled Asset Classes The following assets or indexes were used in this analysis to represent the various model classes: Asset Class Modeled As Annual Turnover Cash Equivalents 3-month US Treasury bills 100% Short-Term Treasuries US Treasur
Slide 48: Notes on the Bernstein Wealth Forecasting System (cont.)
Notes on the Bernstein Wealth Forecasting System (cont.) 3. Volatility Volatility is a measure of dispersion of expected returns around the average. The greater the volatility, the more likely it is that returns in any one period will be substantially above or below the expected result. The volatili
Slide 49: Notes on the Bernstein Wealth Forecasting System (cont.)
Notes on the Bernstein Wealth Forecasting System (cont.) 7. Tax Rates Bernstein’s Wealth Forecasting Analysis has used the following tax rates for this analysis: Federal Income Federal Capital- State Income Tax State Capital- Taxpayer Scenario Start Year End Year Tax Method Type Tax Rate Gains Tax R
Slide 50: Index Descriptions
Index Descriptions The Bloomberg Global High Yield Index represents noninvestment-grade fixed-income securities of companies in the US, developed, and emerging markets. The Bloomberg US Treasury Index represents the performance of US Treasuries within the US government fixed-income market. The Bloom
Slide 51: Glossary
Glossary Active Management: Managing a portfolio through security selection designed to outperform the portfolio’s benchmark. Active Share: The degree of difference between a portfolio and its benchmark index, calculated using the weight of individual securities in the portfolio relative to the benc
Slide 52: Glossary (cont.)
Glossary (cont.) Inflation-Protected Bonds: Bonds whose values are indexed to inflation, normally adjusted on a semiannual basis. The most well known are Treasury Inflation-Protected Securities, or TIPS. Inflation-protected bonds are designed to shield investors from the negative impact of inflation
Slide 53: Disclosures and Important Information
Disclosures and Important Information Hypothetical, back-tested, or simulated performance has many inherent limitations, only some of which are described herein. The hypothetical performance shown herein has been constructed with the benefit of hindsight and does not reflect the impact that certain
Slide 54: The [A/B] logo is a registered service mark of AllianceBernstein, and AllianceBernstein ® is
The [A/B] logo is a registered service mark of AllianceBernstein, and AllianceBernstein® is a registered service mark, used by permission of the owner, AllianceBernstein L.P. © 2024 AllianceBernstein L.P. BPWM-520790-2024-04-02