22 May 2015 US Equity Insights How 10yr yields react to Fed hikes is the key to S&P PE IFigure 19: 10yr Treasury yields 9.2 3.0 2.8 26 2.4 2.2 20 1.6 1.8 el 4, to el n an 3.2 3.0 2.8 2.0 24 2.2 2.0 1.5 1.8 in 4

terest rates stayed very low despite better growth and tighter labor market Next 5%+ move is likely: Down Risk of near-term correction: Elevated "S&P PE stands on the shoulders of bonds." Thematic and sector strategy: Tilt toward: 1) Secular Growth Sectors - industries with strong sales growth in t

n scant long-term real interest rates globally, the FF rate and 10yr yield are likely plateau well below historical norms this cycle. This supports S&P PE upside. Figure 41: Unemployment rate and labor partici! tio rate riggg A AAA —P•succatcn an 64d 166n pop. In) igAgrne edidopx1 d entiodd Mn

n scant long-term real interest rates globally, the FF rate and 10yr yield are likely plateau well below historical norms this cycle. This supports S&P PE upside. Figure 41: Unemployment rate and labor partici! tio rate riggg A AAA —P•succatcn an 64d 166n pop. In) igAgrne edidopx1 d entiodd Mn

osure European Credit Strategy To follow the US or march to its own beat? US Equity Strategy Still low Treasury yields despite Fed hikes to boost S&P PE — Heavy tilts to Health Care & Tech European Equity Strategy 7% upside in 2016 but beware of the risk of a near-term correction FX Strategy Plen

476107 8 December 2015 World Outlook 2016: Managing with less liquidity US Equity Strategy: Still-low treasury yields despite Fed hikes to boost S&P PE — Heavy tilts to Health Care & Tech IIWe recently cut 2016E S&P EPS by $3 to $125 on revised assumptions of even lower oil prices and a stronger do

big-cap banks and select retailers 3) Commodity and industrial capital goods producers, prefer Transports Risk of near-term correction: Moderate "S&P PE stands on the shoulders of bonds 2014A $118 17.4 $38 2015E $119 17.4 $41 2016 end target: 2250-2300 2016E EFTA01476449 $125 18.2 $44