The document provides an outlook and analysis for 2014 from Julius Baer Research. It summarizes global economic trends, opportunities in currencies, equities, bonds, and commodities. Key points include a more balanced global recovery, recoupling of growth between developed and emerging economies, solid growth and tame inflation creating opportunities in stocks, and signs of slowing Chinese gold demand indicating the fading supercycle in commodities.

1. Insights
Investment opportunities
Outlook 2014
Julius Baer Research / Publication date: 27 November 2013
Please find important legal information at the end of this publication.

2. Imprint
Publication date
Current prices

3. Editorial
Content

4. Overview
Outlook 2014
Next Generation
Economics
Currencies
Bonds
Equities
Commodities

5. Rating Target Price ISIN
Spot 3m 12m Spot 3m 12m
Rating Issuers
Value 12m Price 12m
2012 2013E 2014E 2012 2013E 2014E
2012 2013E 2014E 2012 2013E 2014E
Asset class Focus on ... Avoid ...

6. Outlook 2014
Recoupling
Growth stampede and savings glut
Long cycles coming to an end
Just when economists and
investors have become
used to changes in growth
patterns, the harbingers of
a new era are on their way
What has changed?
Recoupling
Chart 1: Recoupling – shrinking growth
differential

7. More balanced, but watch out for
currency crises
Especially for those econ-
omies with extreme current
account imbalances, curren-
cy crises are on the cards
in 2014
What happened to inflation fears? Chart 2: External imbalances in
selected emerging and advanced
economies
Chart 3: Global output gap*

8. Chart 4: Equity risk premium – in favour
of equities vs. bonds
Chart 5: Global equities – no bargain,
but not expensive either
Outlook 2014
Solid growth, tame inflation:
Good for stocks?
After all the years of owning
bonds and gold as a preferred
asset mix, the pain trade
in 2014 may yet again be
buying shares
Going against the grain
Where are the opportunities?

9. Thematic opportunities
Currencies:
Equities:
Bonds:
healthcare
sector:
Some biotechnology compa-
nies have made tremen-
dous progress with ‘orphan
drugs’, i.e. treatment of
rare diseases
Chart 6: M&A trend will be continued
in 2014

10. Next Generation
E-commerce and its impact on the logistics industry
New technology applications
and changing shopping
behaviour are key drivers
of e-commerce
The internet evolution
Changing shopping patterns
E-substitution and logistics
Chart 1: Global mobile commerce,
2011–2017E

11. The dynamics of e-sub-
stitution bring fundamental
changes to the logistics
industry
Strong B2C parcel volumes
Chart 2: UPS’s domestic volume mix
shifts from B2B to B2C
Chart 3: Annual parcel volume growth vs.
annual global real GDP growth, 2007–2012

12. Economics
Global recovery is becoming more synchronised
Convergence on the map
Disinflation allows lavish monetary
policy to continue
Chart 1: Surging cyclical synchronicity
indicator*
Chart 2: Deflation index** still positive
for the USA and Europe
A benign inflation backdrop
allows a continuation of
lavish monetary policy

13. Currencies
Dollar support from yield advantage close to peak
Peaking US yield advantage
A broadening global eco-
nomic recovery will at
least cap any further widen-
ing of the USD-EUR yield
differential
Chart 1: USD-EUR yield differential
Chart 2: USD is richly valued
Emerging market currency stress

14. Bonds
Anxiously waiting for the central banks’ first move
Ample liquidity provision
Liquidity provision will
remain generous in the
shorter term
Yield curve to steepen
Chart 1: In the short term, central bank
liquidity provision will keep rising
Chart 2: US yield curve could steepen
even more in 2014
Controlling the risk
Euro yield convergence

15. Chart 3: Banking union will foster more
convergence among EU banks
Chart 4: Convertible bonds were the most
profitable segment in 2013
The European banking
union will lead to more yield
convergence in 2014
Convertibles stay in demand

16. Equities
No year-end rally but constructive markets into 2014
No year-end rally expected
No correction expected
Chart 1: S&P 500 seasonal patterns
Chart 2: Total return decomposition
Outlook 2014
Equity markets in 2014
are driven rather by earn-
ings, not P/E expansion

17. WPP
Stock data
Price target: GBp 1500 Closing price: GBp 1355
Financials 2011 2012 2013E 2014E
Performance 1m 3m 12m
amazon.com
Stock data
Price target: USD 395 Closing price: USD 376.64
Financials 2011 2012 2013E 2014E
Performance 1m 3m 12m
Nobel Biocare
Stock data
Price target: CHF 10 Closing price: CHF 13.45
Financials 2011 2012 2013E 2014E
Performance 1m 3m 12m

18. Commodities
Year three of the fading supercycle
Themes for 2014Chart 1: North American crude oil
production
Chart 2: Chinese gold demand
We see increasing signs
of slowing Chinese
gold investment demand
Unnoticed Canadian oil boom

19. Important legal information
This publication has been produced by Bank Julius Baer & Co. Ltd., Zurich, which is authorised and regulated by the Swiss Financial
Market Supervisory Authority (FINMA). The information and opinions expressed in this publication were produced as of the date of
writing and are subject to change without notice.
IMPRINT
Christian Gattiker, Head of Research
Britta Simon, Equity Research,
David A. Meier, Economist,
David Kohl, Head of Currency Research,
Christoph Riniker, Head of Strategy Research,
Markus Allenspach, Head of Fixed Income Research,
Bruno Winiger, Equity Research,
Lilian Montero, Equity Research,
Patrik Lang, Head of Equity Research,
Norbert Rücker, Head of Commodity Research,
APPENDIX
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20. Equity rating change history as of 25/11/2013
Company Rating History
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21. Credit rating definitionInvestmentgrade
Moody’s S&P Fitch/IBCA Credit rating definition
Non-investmentgrade
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