T. Rowe Price Group, Inc. · NASDAQ:TROW

T. Rowe Price — 2016 Global Market Outlook Press Briefing

21 slides from T. Rowe Price's conference presentation, Jan 25, 2016

  1. Slide 1: 2016 Global Market Outlook Press Briefing: Global Equities

    2016 Global Market Outlook Press Briefing GLOBAL EQUITIES Robert Sharps, CFA Senior Portfolio Manager and Member, Equity Steering Committee

  2. Slide 2: Global Equity Outlook: Summary

    Global Equity Outlook: Summary ENVIRONMENT  Remarkable recovery of U.S. stocks off March 2009 bottom stalled in 2015.  Challenging environment for corporate profit growth driven by falling oil prices and a strong U.S. dollar.  Divergent fundamentals in the U.S. and around the globe. The best of t

  3. Slide 3: U.S. Stocks Have Come a Long Way… but Stalled in 2015

    U.S. Stocks Have Come a Long Way… but Stalled in 2015 As of October 31, 2015 FEDERAL RESERVE’S MASSIVE MONETARY RESPONSE HAS WORKED S&P 500 INDEX: OCTOBER 2002 THROUGH OCTOBER 2015 2,400 Spread Containment Roots of the crisis of the crisis of the crisis Recovery 2,200 2,000 Mar-08: JPMorgan buys Bea

  4. Slide 4: Cumulative Real GDP Growth

    U.S. Economic Growth Has Been Muted As of September 30, 2015 GDP GROWTH IN ECONOMIC EXPANSIONS 40% 1975 1983 1991 2002 2009 35% 30% Cumulative Real GDP Growth 25% 20% 15% 10% 5% Current Recovery 0% 0 1 2 3 4 5 6 7 8 9 10 Length in Years Sources: JPMorgan and Haver Analytics. Past performance is not

  5. Slide 5: U.S. Maintains a Wide Performance Advantage Since Global Financial Crisis

    U.S. Maintains a Wide Performance Advantage Since Global Financial Crisis REGIONAL RETURNS (USD) March 2009*– October 2015 S&P 500 Europe Emerging Markets Japan +254% 350% 300 +156% 250 +110% 200 +106% 150 100 2009 2010 2011 2012 2013 2014 2015 Despite the sharp pullback in the third quarter of 2015

  6. Slide 6: U.S. Maintains a Wide Performance Advantage Since Global Financial Crisis

    U.S. Maintains a Wide Performance Advantage Since Global Financial Crisis EUROPE RETURNS March 2009*–October 2015 400% 350 +254% 300 +158% +156% The U.S. has had a particularly 250 wide performance advantage, even % 200 excluding currency impacts. 150 100 S&P 500 50 Europe (USD) Europe (Local) 0 200

  7. Slide 7: Corporate Earnings Matter Most to Stocks…and They Have Stalled

    Corporate Earnings Matter Most to Stocks…and They Have Stalled As of June 30, 2015 S&P 500 EARNINGS IN BULL MARKETS* March 2009 –- Jun 2015 Sept 2002 –- Oct 2007 Oct 1990 –- Jan 2000 400 Nov 1987 –- July 1990 Aug 1982 –- Aug 1987 Current Recovery 350 300 Index = 100 250 200 150 100 50 0 0 1 2 3 4 5

  8. Slide 8: Low Oil Price and Strong U.S. Dollar Both Weigh on S&P Earnings

    Low Oil Price and Strong U.S. Dollar Both Weigh on S&P 500 Earnings As of September 2, 2015 Strong U.S. dollar and low oil prices expected to result in a combined 6.9% drag on 3Q 2015 S&P 500 earnings results • “A 10% increase in the dollar results in a 1% drag on S&P 500 earnings”1 • “A 10% increas

  9. Slide 9: U.S.: Net Negative Share Issuance Partially Offset Impact of Weak Energy and Currency

    U.S.: Net Negative Share Issuance Partially Offset Impact of Weak Energy and Currency S&P 500 NET NEW SHARE ISSUANCE January 2000–September 2015* 200 U.S. $, Billions 0 -200 -400 -600 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 NUMBER AND VALUE OF U.S. M&A DEALS S

  10. Slide 10: U.S.: Energy and Currency Impact on Operating Earnings Expected to Dissipate

    U.S.: Energy and Currency Impact on Operating Earnings Expected to Dissipate As of October 29, 2015 Energy and the dollar are weighing on 2015 earnings expectations S&P 500 Operating Earnings per Share by Sector January 2008–December 2016 (E) $ 80 S&P 500 Health Care, Information Technology S&P 500

  11. Slide 11: U.S.: Valuations More Attractive After Pullback; Extremely Attractive vs. Bonds

    U.S.: Valuations More Attractive After Pullback; Extremely Attractive vs. Bonds S&P 500 PRICE TO 12 MONTHS S&P 500 DIVIDEND YIELD VS. 10 YEAR FORWARD EARNINGS TREASURY YIELD January 1997–September 2015 January 1997–September 2015 S&P 500 Div. Yield Minus Ten Year Treasury Yield Current 2% 0.4% 25 1%

  12. Slide 12: Europe: Expect Modest Growth; More Momentum in Periphery Countries

    Europe: Expect Modest Growth; More Momentum in Periphery Countries EUROPE CORE COUNTRIES REAL GDP GROWTH December 2005–June 2015 25.0 Quarter-to-Quarter % Change, Annualized Germany United Kingdom 20.0 EUROZONE REAL GDP GROWTH 15.0 June 2005–June 2015 10.0 6 5.0 Quarter-to-Quarter % Change, Annual R

  13. Slide 13: Japan: Impact of Abenomics Third Arrow Will Occur Over Longer Time Horizon

    Japan: Impact of Abenomics Third Arrow Will Occur Over Longer Time Horizon JAPAN—REAL GDP GROWTH June 2005–June 2015 15 Quarter-to-Quarter % Change, Annual Rate 10 • Abenomics policies have yielded uneven results. 5 • Whereas the first two “arrows” were more drastic measures, 0 the third “arrow” is

  14. Slide 14: Japan: Corporate Governance Is Improving, and Interesting Opportunities Remain

    Japan: Corporate Governance Is Improving, and Interesting Opportunities Remain JAPANESE CORPORATES USE OF INCREMENTAL RETURN ON EQUITY FREE CASH FLOW WHEN RISING1 January 1997–September 2015, MSCI Indices 1992–August 2015 22 Europe Emerging Markets 160 Japan USA Net New Dividends 20 140 Net New Shar

  15. Slide 15: Returns Vary by Country—and Will Continue to Be Uneven

    Returns Vary by Country—and Will Continue to Be Uneven As of October 31, 2015 Trailing 12-Month Return Trailing 36-Month Return Trailing 12- Yield Local Currency USD Local Currency USD month P/E CHINA 10.2x 3.1 -0.55% -0.48% 16.40% 16.40% INDIA 20.4x 1.5 -2.15% -8.06% 45.44% 19.73% BRAZIL 11.8x 4.1

  16. Slide 16: Most Latin American Economies Are Highly Levered to Commodities

    Most Latin American Economies Are Highly Levered to Commodities As of August 31, 2015 SHARE OF TOTAL EXPORTS (%) Oil Metals All Commodities Argentina 7.7 6.4 70.3 Brazil 8.5 14.6 52.4 Chile 0.0 55.0 63.0 Colombia 52.0 17.0 79.0 Ecuador 57.7 3.8 86.0 Mexico 11.1 2.3 16.6 Peru 11.0 53.0 70.0 Uruguay 0

  17. Slide 17: Highly Disparate Returns and Profitability Must Improve for Emerging Markets

    Highly Disparate Returns and Profitability Must Improve for Emerging Markets EM COUNTRY PROFITS (EPS) EM COUNTRY PROFITS (EPS) Since Last Cycle Peak (October 2007) Since Last Cycle Peak (October 2007) 200 China Russia Brazil South Africa 180 India Philippines Indonesia 180 160 160 140 140 120 120 10

  18. Slide 18: Consumption and Service Will Continue to Be Drivers of Global Growth

    Consumption and Service Will Continue to Be Drivers of Global Growth GLOBAL GROWTH AND CONSUMPTION 2013–2016 (E) 2013 2014 10 2015 (E) 80 2016 (E) Nominal Personal Consumption as % of GDP (latest available) 70 8 Personal Consumption (%) Year-Over-Year Growth (%) 60 6 50 4 40 2 30 0 20 -2 10 -4 0 Sou

  19. Slide 19: Conclusion: Keep Return Expectations Moderate

    Conclusion: Keep Return Expectations Moderate Diversification is important as nothing stands out as cheap  Extended global economic cycle likely. Post-global financial crisis economic healing continues. Inflation, the typical cycle-killer, not a near-term threat.  Conditions ripe for further gains

  20. Slide 20: Important Information

    IMPORTANT INFORMATION This material has been prepared for informational purposes only. The views contained herein are those of the presenter(s) as of the date of the presentation and are subject to change without notice; these views may differ from those of other T. Rowe Price associates. Informatio

  21. Slide 21: Thank You

    T.RowePrice’

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