March 29, 2019
Economic Overview 2
Global & Regional Growth Forecasts IMF GDP Forecasts (% change YoY) 2010 2011 2012 2013 2014 2015 2016 2017 2018 Advanced Economies 1.2% 1.4% 2.1% 2.3% 1.7% 2.4% 2.3% 2.0% 1.7% Emerging Markets 5.3% 5.1% 4.7% 4.3% 4.4% 4.7% 4.6% 4.5% 4.9% World 3.5% 3.5% 3.6% 3.5% 3.3% 3.8% 3.7% 3.5% 3.6% 10% 8% 2012 2013 2014 2015 2016 2017 2018 2019 2020 6% 4% 2% 0% -2% World Japan Canada Euro US Russia Brazil China India -4% -6% 3
China European Union United States India Japan Russia Brazil Indonesia Mexico South Korea Saudi Arabia Canada Turkey Australia Taiwan Switerland Norway Dominant Contributors of Global GDP IMF Share of World GDP based on Purchasing Power Parity (Year Ending 2018) 20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% 4
Global Mergers & Acquisitions M&A Transaction Value Global Index by Quarter (15 years) 5.00 4.50 4.00 3.50 3.68 4.05 3.30 4.32 3.60 3.40 3.90 3.00 2.50 2.14 2.73 2.50 2.22 2.27 2.23 2.33 2.00 1.79 1.50 1.34 1.00 0.50 0.00 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 5
Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Closer Look at China Export results provide valuable insight China Exports (exports by quarter) (USD billion) $250.00 $200.00 $150.00 $100.00 $50.00 $- 6
Closer Look at China % of GDP NSA Cumulative (10 years in CNY) 60% 50% 40% 30% 20% Farming and Forestry Industrie et construction Services 10% 0% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 7
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Total and Core CPI Canada and US Total and Core CPI (% change YoY) Canada US 4% CAN - Total CPI CAN - Core CPI 6% US - Total CPI US - Core CPI 3% 5% 4% 2% 3% 1% 2% 1% 0% 0% -1% -1% -2% -2% -3% 8
Consumer Spending & Business Investment Real Consumer Spending (q/q % a.r.) Real Business Investment (q/q % a.r.) 6.0% 6.0% 5.0% 5.0% 4.0% 4.0% 3.0% 3.0% 2.0% 1.0% Canada USA 2.0% 1.0% Canada É.-U. 0.0% 0.0% -1.0% -1.0% -2.0% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018-2.0% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 9
Corporate Profits Corporate Profits Growth Rate (% change YoY) US Corporate Profits Canada Corporate Profits 40% 20% 60% 40% 0% 20% -20% -40% -60% -80% -100% 0% -20% -40% -60% -80% -100% -120% 2010 2011 2012 2013 2014 2015 2016 2017 2018-120% 2010 2011 2012 2013 2014 2015 2016 2017 2018 US Corporate Profits Without IVA and CCA Profits After Tax SAAR (in billions) Bank of Canada Corporate Profits After Taxes SAAR 10
Job Market US Unemployment Rate Canadian Unemployment Rate 12.0% 12.0% 10.0% 8.0% 6.0% 9.3% 9.6% 8.9% 8.1% 7.4% 6.2% 5.3% 4.9% 4.4% 3.9% 10.0% 8.0% 6.0% 8.4% 8.0% 7.5% 7.3% 7.1% 6.9% 6.9% 7.0% 6.3% 5.8% 4.0% 4.0% 2.0% 2.0% 0.0% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 0.0% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 11
Closer look at Canada GDP Breakdown GDP Breakdown across commodity related sectors (Indexed) 115 Selected export related industries Industries most affected by commodity prices Rest of the Economy 110 105 100 95 90 85 2016 2017 2018 Note: Selected export-related industries includes manufacturing, agriculture, forestry, fishing and hunting, and transportation. Industries most affected by commodity prices includes mining, oil and gas, engineering and non-residential construction, and related professional services. 12
US Economic Indicators US Real GDP Growth US Core Inflation 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% 2011 2012 2013 2014 2015 2016 2017 2018 2019 0.0% 2012 2013 2014 2015 2016 2017 2018 2019 13
US Leading Economic Indicator (LEI) 15 Years ending March 2019 120 Leading Economic Index 110 100 90 80 70 60 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 14
US Home Sales and Prices 5 Years ending March 2019 5.8 5.6 5.4 5.2 5.0 4.8 4.6 4.4 4.2 4.0 US Existing Home Sales vs. Last month 11.8% vs. Last year (1.8%) 3.8 2014 2015 2016 2017 2018 $290.0 $270.0 $250.0 $230.0 $210.0 $190.0 $170.0 US Existing Home Selling Prices vs. Last month 0.1% vs. Last year 3.6% $150.0 2014 2015 2016 2017 2018 15
How Does Canada s Housing Market Compare? Canada housing market vs. U.S. housing market 20% 15% Existing Homes Prices US Canada 10% 5% 0% -5% -10% -15% -20% 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 16
Commodities 17
Commodity Overview Bloomberg Commodity Index 15 Year Performance to March 29, 2019 250 200 150 100 50 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 18
Crude reality: Price of Oil West Texas Intermediate ($US per barrel) 15 Year Price to March 29, 2019 $160 $140 $120 $100 $80 $60 $40 $20 $0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 19
Gold Bullion Gold (US$/troy ounce) 15 Year Price to March 29, 2019 $2,000 $1,800 $1,600 $1,400 $1,200 $1,000 $800 $600 $400 $200 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 20
Canada s PetroDollar The Canadian Dollar plots a similar course as the price of Oil CDN$ vs. Price of Crude Oil (10 Years) 1.2 120 1 100 0.8 0.6 0.4 80 60 40 CADUSD (lhs) WTI Oil Price (rhs) 0.2 20 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 0 21
Currencies 22
Canadian Dollar vs. U.S. Dollar Years ending March 2019 $1.10 $1.05 $1.00 $0.95 $0.90 $0.85 $0.80 $0.75 $0.70 $0.65 $0.60 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 2015 2018 23
FX Rates USD Comparisons 1 Year Rates to March 29, 2019 0.0096 Yen vs. USD Euro vs. USD CDN vs. USD 1.25 0.82 0.0094 0.0092 0.0090 1.20 1.15 0.80 0.78 0.0088 0.0086 1.10 0.76 0.74 0.0084 1.05 0.72 0.0082 Apr-18 Oct-18 1.00 Apr-18 Oct-18 0.70 Apr-18 Oct-18 24
Jan-00 Dec-02 Dec-05 Dec-08 Dec-11 Dec-14 Dec-17 Dec-20 Dec-23 Dec-26 Dec-29 Dec-32 Dec-35 Dec-38 Dec-41 Dec-44 Dec-47 Dec-50 Dec-53 Dec-56 Dec-59 Dec-62 Dec-65 Dec-68 Dec-71 Dec-74 Dec-77 Dec-80 Dec-83 Dec-86 Dec-89 Dec-92 Dec-95 Dec-98 Dec-01 Dec-04 Dec-07 Dec-10 Dec-13 Dec-16 Emerging Market Currencies Exchange rates against the U.S. Dollar 3 Year Rates to March 29, 2019 (Indexed to 100 on March 31, 2016) 140 130 120 110 100 90 80 70 60 50 40 Brazil Real Chilean Peso South African Rand Russia Rouble Indian Rupee Turkish Lira Argentine Peso Chinese Yuan 25
Currency The Hidden Difference n currencies vs. Canadian Dollar 1 Year Rates to March 29, 2019 to 100 on March 31, 2018) 105 100 95 90 85 USDCAD EURCAD JPYCAD 80 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Comparing 1 Year returns in local currency to CDN$-based Canada U.S. Euro Area Japan Emerg. Markets China World S&P/TSX S&P500 MSCI Europe NR MSCI Japan NR MSCI EM NR MSCI China NR MSCI World Local Currency Returns 9.2% 12.0% 4.3% (3.6%) (1.7%) (5.5%) 8.2% CDN$-Based Returns 9.2% 15.9% (0.5%) (4.3%) (4.1%) (2.2%) 9.1% 26
Equities 27
A View of Global Market Indices S&P/TSX Composite Index Prices - 12 months ending March 29, 2019 58000 56000 54000 52000 50000 48000 46000 44000 42000 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 S&P/TSX S&P 500 Euro Area Japan Emerg. Mkts China World 1-Year returns to Mar 29: 9.2% 12.0% 4.3% (3.6%) (1.7%) (5.5%) 8.2% Year-to-Date: 13.3% 13.6% 11.6% 7.6% 9.8% 17.9% 12.6% Quarter-to-Date: 13.3% 13.6% 11.6% 7.6% 9.8% 17.9% 12.6% Month-to-Date: 0.5% 1.2% 1.4% (0.5%) 1.2% 1.4% 1.0% 28
Global Market Results 60,000 50,000 40,000 30,000 20,000 10,000 2019 0 13.29% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 7,000 6,000 5,000 4,000 3,000 2,000 2019 1,000 13.65% 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 29 S&P/TSX Composite Index S&P 500 Index 7,000 6,000 5,000 4,000 3,000 2,000 2019 1,000 11.6% 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 7,000 6,000 5,000 4,000 3,000 MSCI Europe Index MSCI Japan Index 2,000 2019 1,000 7.6% 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
S&P/TSX by Sector S&P/TSX returns for 2018 and 2019 YTD 60% 50% 40% 30% 20% 10% 0% (10%) (20%) (30%) S&P/TSX Composite Index Health Care Information Technology Real Estate Utilities Energy Industrials Consumer Staples Financials Telecom Services Consumer Discretionary 2019 13.3% 49.1% 26.0% 17.5% 16.1% 15.6% 15.3% 10.6% 10.4% 10.0% 9.8% 8.5% 2018 (8.9%) (15.9%) 13.0% 2.0% (8.9%) (18.3%) (2.4%) 2.0% (9.3%) (0.8%) (16.0%) (9.3%) Materials 30
Don t Fear the Fed S&P 500 Index following the Federal Reserve boosting interest rates May 1958 - Nov 1959 July 1961 - Nov. 1966 July 1967 - Aug. 1969 March 1971 - Aug. 1971 Feb 1972 - July 1974 Jan. 1977 - May 1980 July 1980 - June 1981 Feb 1993 - Aug. 1984 June 1985 - Dec. 1985 Oct. 1986 - Sept. 1987 Mar. 1988 - Mar. 1989 Dec. 1993 - April 1995 June 1999 - July 2000 Dec. 2003 - July 2007-30.0% -20.0% -10.0% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 31
Fixed Income 32
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 U.S. Fed Overnight Rate Fed Funds: Target Rate (%) 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% 33
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Bank of Canada Overnight Rate Bank of Canada Overnight Rate (%) 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% 34
Central Bank Rates Central Bank Rates and 10-Year Government Bond Yields - 3 Years to March 29, 2019 Canada U.S. 3 2.5 2 1.5 1 0.5 0 Apr-16 Apr-17 Apr-18 Canada - Overnight Rate 10-Year GoC 3.5 3 2.5 2 1.5 1 0.5 0 Mar-16 Mar-17 Mar-18 US - Overnight Rate 10-Year Treasury 35
Central Bank rates around the globe Central Bank Rates and 10-Year Government Bond Yields - 10 Years to March 29, 2019 5.00% 4.50% 4.00% 3.50% 3.00% 2.50% 2.00% 1.50% Australia Canada England USA (Upper Range) ECB 1.00% 0.50% 0.00% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 36
US Canada Mexico Germany Britain France Italy Spain Greece Switzerland Japan Australia New Zealand Hong Kong South Korea India 10 Year Government Bond Yields As of March 29, 2019, 3 months ago and 1 year ago (bps) 10% 8% 6% 4% 2% 0% Today 3 months ago 12 months ago -2% Americas Europe Asia 37