Navigating Current Market Turmoil
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- 2. A global leader focused on you Source: company second-quarter earnings reports for 2008. Global influence The world’s leading wealth manager Wealth management presence Wealth management is our core business Historical perspective 140-year tradition serving individuals and families in Europe and the U.S. UBS Financial strength Well-capitalized bank with strong industry credit rating
- 3. Providing perspective New York São Paulo Tokyo London & Frankfurt Zurich Hong Kong Singapore Wealth Management Research Designed specifically for private clients First introduced in Switzerland in 2000 UBS Investment Research Focused on institutional investors Also suitable for individual investors
- 4. Navigating the current market turmoil Conversations with UBS
- 5. What is happening in the markets? • The S&P is down by 40% over the past 12 months* • Global equity markets have performed even worse • Fixed income provides no refuge • Investors are fleeing to cash positions * As of October 10, 2008
- 6. The most excessive buildup of consumer debt in history U.S. household financial liabilities to disposable income ratio Source: Datastream and UBS-WMR, as of October 10, 2008 0% 20% 40% 60% 80% 100% 120% 140% 160% Q1 1952 Q1 1962 Q1 1972 Q1 1982 Q1 1992 Q1 2002
- 7. Recent events resulted in locked markets and loss of confidence Events since the beginning of September Source: UBS-WMR, as of October10, 2008 900 1,000 1,100 1,200 1,300 1,400 50 100 150 200 250 300 350 Fannie and Freddie placed in conservatorship Lehman files Chapter 11 Rescue of AIG Paulson announces TARP FDIC seizes WaMu FDIC seizes Wachovia Congress approves TARP Congress rejects TARP Fed creates CPFF Coordinated central bank rate cut Sep 1 Sep 8 Sep 15 Sep 22 Oct 6 Sep 29 LIBOR 3 month – Fed funds rate S&P 500
- 8. Equity markets have provided the greatest returns over time Compound annual growth rates (1928-present) Source: Ibbotson and UBS-WMR, as of October 10, 2008 Stocks Bonds Cash 9.5% 5.5% 3.7%
- 9. Stocks have rarely been negative over five-year periods Source: Ibbotson and UBS-WMR, as of October 10, 2008 S&P 500: rolling five-year total return 1928 1938 1948 1958 1968 1978 1988 1998 2008 -100% 0% 100% 200% 300% 400% 500% 600%
- 10. Ten-year periods of negative growth are rarer still S&P 500: rolling 10-year total return Source: Ibbotson and UBS-WMR, as of October 10, 2008 1928 1938 1948 1958 1968 1978 1988 1998 2008 Risks of sustaining a capital loss over 10-year periods are far less likely -100% 0% 100% 200% 300% 400% 500% 600%
- 11. The five years following periods of negative returns show strong growth Periods where five-year rolling returns first turned negative and subsequent five-year total returns Note: the dates listed indicate the first month that the S&P 500 rolling five-year total return first turned negative. Past performance is no guarantee of future results. Source: Ibbotson and UBS-WMR, as of October 10, 2008 21% 33% -6% Average 16% 37% -12% Oct 2008 24% 62% -8% Sep 2002 35% 31% -1% Dec 1977 33% 22% -0.5% May 1974 0% 25% -8% Jan 1941 16% 22% -9% Sep 1931 Cash Bonds Stocks Periods of negative five-year returns for stocks 24% 32% 101% ?? ?? ?? 15% 25% 105% 67% 34% 93% 36% 42% 44% 1% 24% 146% 2% 34% 118% Cash Bonds Stocks Next five years
- 12. Why it’s not another Great Depression • Comparisons to the Great Depression are misleading • The lessons were learned and steps have been taken • Global economy is expected to expand above 3% in 2008 and 2% in 2009 • Longer-term growth prospects are better now than they were then
- 13. Recommendations Stay with a diversified portfolio Stay defensive
- 14. Consider municipal bonds 137% Oct 10, 2008 30-year municipal/Treasury chart with five-year average Source UBS-WMR, as of October 10, 2008 70.0 80.0 90.0 100.0 110.0 120.0 130.0 140.0 30-year Five-year average Jan 1985 Jan 1987 Jan 1989 Jan 1991 Jan 1993 Jan 1995 Jan 1997 Jan 1999 Jan 2001 Jan 2003 Jan 2005 Jan 2007 Jan 2009
- 15. Stay in the game Hypothetical value of $1 invested from 1987–2007 Source: © 2007 Morningstar, Inc. All rights reserved, 3/1/2007. Used with permission. Past performance is no guarantee of future results. This is for illustrative purposes only and not indicative of any specific investment. Indexes are not available for direct investment and reflect an unmanaged universe of securities which does not take into account advisory or transaction fees, all of which will reduce their overall return. S&P 500 S&P 500 minus best 17 months Treasury bills $9.31 $2.32 $2.42
- 16. “ These are days when many are discouraged. In the 93 years of my life, depressions have come and gone. Prosperity has always returned and will again.” John D. Rockefeller, 1933
- 17. Research designed for individual investors © 2008 UBS Financial Services Inc. All rights reserved. Member SIPC. UBS Financial Services Inc. is a subsidiary of UBS AG.
Editor's Notes
- #2: As people gather at event: Participants fill out a Client Contact card with basic contact information: Name, address, best contact phone, best contact time, etc.