Volatility Returns - What’s Next?

AMY LUBAS, CFA Advisory Strategist

Ned Davis Research Group

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NED DAVIS RESEARCH GROUP Please see important disclosures at the end of this report. ii S&P 500 vs. VIX Index Daily Data 1996-12-31 to 2018-05-09 S&P 500 Index (2018-05-09 = 2,697.79) 3,162 3,162

2,512 2,512

1,995 1,995

1,585 1,585

1,259 1,259

1,000 1,000

794 794

631 631 Source: S&P Dow Jones Indices VIX Index (2018-05-09 = 13.42) High Fear 79 79 63 63 50 50 40 40 32 32 25 25 20 20 16 16 13 13 10 10

8 High Complacency Source: Chicago Board Options Exchange, Incorporated. www.cboe.com 8 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Long S&P 500 Index When: S&P 500 Index Performance Full History: 1996-12-31 to 2018-05-09 (1996-12-31 - 2018-05-09) % Gain/ % of VIX Index is $10,000 becomes VIX Index is Annum Time Above 28.5 $26780 Above 28.5 44.49 12.53 Below 28.5 $13599 21.5 - 28.5 1.24 23.96 Below 21.5 1.82 63.51 Buy and Hold $36420 Buy/Hold = 6.24% Gain/Annum

DAVIS72

NED DAVIS RESEARCH GROUP Please see important disclosures at the end of this report. 1 S&P 500 Index Daily Data 1979-01-02 to 2018-05-09 (Log Scale)

3,162 S&P 500 Index 2018-05-09 = 2697.79 3,162 2,512 2,512 1,995 1,995 1,585 1,585 1,259 1,259 1,000 1,000 794 794 631 631 501 501 398 398 316 316 251 251 200 200 158 158 126 126 100 100 Source: S&P Dow Jones Indices 325 325 Counts for current cases stop at market high since start of the most recent count 04/18/2018 = 13 Days 300 300 275 275 250 250 225 RECORD # OF DAYS 225 200 WITHOUT A 200 175 3% CORRECTION 175 150 150 125 125 100 100 75 75 50 50 25 25

1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

Data Range (years): Full History Statistics Chart View Statistics 1 2 3 5 10 20 Max Number of Days Without a 3.0% Correction Number of Days Without a 3.0% Correction 1979-01-02 - 2018-05-09 1979-01-02 - 2018-05-09 Correction Percentage: Mean 23.8 Mean 23.8 3 5 10 15 20 Median 13.0 Median 13.0 Market must reverse by +3% from market Max 307.0 Max 307.0 bottom before resetting the accumulation period. SMF_26_SP500 © Copyright 2018 Ned Davis Research, Inc. Further distribution prohibited without prior permission. All Rights Reserved. See NDR Disclaimer at www.ndr.com/copyright.html For data vendor disclaimers refer to www.ndr.com/vendorinfo/ NED DAVIS RESEARCH GROUP Please see important disclosures at the end of this report. 2 100-Day Volatility Indices -- Bitcoin, Gold, MSCI ACWI, and U.S. Dollar Daily Data 2014-12-31 to 2018-05-09 5.50 5.50 Bitcoin (USD)(2018-05-09 = 4.6%) Volatility Index = average absolute daily percent change in last 100 days 5.25 Gold (Spot) (2018-05-09 = 0.5%) HIGH VOLATILITY 5.25 MSCI ACWI (2018-05-09 = 0.5%) 5.00 U.S. Dollar Index (2018-05-09 = 0.3%) 5.00

4.75 4.75 4.50 VOLATILITY DIFFERS FOR 4.50 4.25 DIFFERENT ASSETS 4.25

4.00 4.00

3.75 3.75

3.50 3.50

3.25 3.25

3.00 3.00

2.75 2.75

2.50 2.50

2.25 2.25

2.00 2.00

1.75 1.75

1.50 1.50

1.25 1.25

1.00 1.00

0.75 0.75 LOW VOLATILITY 0.50 0.50

0.25 0.25 Source: MSCI, Bloomberg Finance L.P., Commodity Systems, Inc. (CSI) www.csidata.com Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May 2015 2016 2017 2018 I2B © Copyright 2018 Ned Davis Research, Inc. Further distribution prohibited without prior permission. All Rights Reserved. See NDR Disclaimer at www.ndr.com/copyright.html For data vendor disclaimers refer to www.ndr.com/vendorinfo/ NED DAVIS RESEARCH GROUP Please see important disclosures at the end of this report. 3 S&P 500 Index vs. NDR Crowd Sentiment Poll - Transitional Mode Basis Daily Data 1995-12-01 to 2018-05-09 S&P 500 Composite Index (2018-05-09 = 2697.79)

2,512 2,512

1,995 1,995

1,585 1,585

1,259 1,259

1,000 1,000

794 794

631 631 Source: S&P Dow Jones Indices NDR Crowd Sentiment Poll (2018-05-09 = 60.0) Extreme Optimism (Bearish) 80 78.9 80 75.7 75 73.5 73.9 73.3 75 71.9 72.2 73.0 70.5 70.7 70.7 71.6 70 69.2 69.8 70 65 65

60 58.1 60

55 55.2 55 53.3 50 52.7 50 49.7 49.9 47.6 47.2 45 46.6 46.8 45.8 45 43.8 42.5 42.8 40 40.5 40 38.4 35 38.0 35 33.5 33.9 30 30.9 30 Updates weekly on Wednesday mornings. Extreme Pessimism (Bullish) Source: Ned Davis Research, Inc. 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

S&P 500 Index Performance Full History: 1995-12-01 to 2018-05-09 NDR Crowd Sentiment Poll % Gain/ % of is Annum Time Above 66.0 -3.71 24.56 57.0 - 66.0 From Above 1.26 18.16 57.0 - 66.0 From Below 20.90 18.99 Below 57.0 10.59 37.80 Buy/Hold = 6.87% Gain/Annum

S574A

NED DAVIS RESEARCH GROUP Please see important disclosures at the end of this report. 4 Five Steps to Resuming Uptrend:

1 Oversold þ

2 Positive Divergences þ

3 Rebound: Failed or Broad þ

4 Retest þ ?

5 Breadth Thrust

NED DAVIS RESEARCH GROUP Please see important disclosures at the end of this report. 5 2018 SELL-OFF COMPARISON Climax Initial Retest Retest Retest #3 or Start Selling Low #1 #2 of Next Drop? Data Series 2/5/18 2/8/18 3/1/18 3/23/18 4/2/18 Chart Comment

Declining/Advancing Volume (NDR Multi-Cap) 61.3 10.4 2.2 12.3 24.7 S54A Most extreme on Feb. 5

% Stocks Above 10-Day M.A. (NDR Multi-Cap) 2.7 3.2 20.7 6.2 14.5 S45 Breadth worst on Feb. 5

NDR Big Mo Tape* 71.7 59.1 63.1 60.4 N/A DAVIS250 Weekly data, breadth slightly better on Mar. 23

VIX 37.3 33.5 22.5 24.9 23.6 S0583 Most extreme on Feb. 5

Total Put/Call Ratio (5-Day Avg.) 96.4 106.4 105.7 112.3 118.0 S583 Most pessimism on April 2

NDR Daily Trading Sentiment Composite 52.2 35.6 42.2 37.8 26.7 DAVIS265 Most pessimism on April 2

NDR Crowd Sentiment Poll 67.8 62.4 64.4 60.8 N/A S574A Hasn't reached extreme pessimism

NDR U.S. Stock Market Model Composite 66.7 65.0 79.2 72.5 85.0 S75 Highest on April 2

NDR U.S. Stock Market Model Internal Composite 58.3 50.0 83.3 75.0 100.0 S76 Highest on April 2

*Big Mo Tape updates weekly. 2/5/2018 reading is for week ending 2/2/2018. 2/8/2018 reading is for week ending 2/9/2018. 3/1/2018 reading is for week ending 3/2/2018. Ned Davis Research, Inc. T_BFC201804031.1

NED DAVIS RESEARCH GROUP Please see important disclosures at the end of this report. 6 Daily Data 2017-12-29 to 2018-12-31 DJIA Performance During Mid-Term Election Year: Recession vs. No Recession 103.75 103.75 103.50 No Recessions Dashed Line Represents Mid-Term Election Date 2018-11-06 103.50 Recessions 103.25 103.25 103.00 103.00 102.75 102.75 102.50 102.50 102.25 102.25 102.00 102.00 101.75 101.75 101.50 101.50 101.25 101.25 101.00 101.00 100.75 100.75 100.50 100.50 100.25 100.25 100.00 100.00 99.75 99.75 99.50 99.50 99.25 99.25 99.00 99.00 98.75 98.75 98.50 98.50 98.25 98.25 98.00 98.00 97.75 Recession Cases: NBER-defined recession during mid-term year 97.75 97.50 97.50 Based on Daily Data (1900-01-02 - 2017-12-29) 97.25 Trend Is More Important Than Level 97.25 97.00 Source: S&P Dow Jones Indices 97.00 02 11 23 01 12 22 05 14 23 04 13 24 03 14 23 04 13 22 03 13 24 02 13 22 31 12 21 02 11 22 31 09 20 30 11 20 01 Jan '18 Feb '18 Mar '18 Apr '18 May '18 Jun '18 Jul '18 Aug '18 Sep '18 Oct '18 Nov '18 Dec '18 Jan '19 BFC201803131A_C © Copyright 2018 Ned Davis Research, Inc. Further distribution prohibited without prior permission. All Rights Reserved. See NDR Disclaimer at www.ndr.com/copyright.html For data vendor disclaimers refer to www.ndr.com/vendorinfo/ NED DAVIS RESEARCH GROUP Please see important disclosures at the end of this report. 7 SHUT Index Around Mid-term Elections

108.0 Current Case (11/06/2018) Source: S&P Dow Jones Indices 108.0 Average SHUT Relative Strength 107.5 107.5 SHUT Index = Consumer Staples, Health Care, Utilities, Telecom Services 107.0 107.0 106.5 106.5 106.0 106.0 105.5 SHUT INDEX HAS 105.5 105.0 OUTPERFORMED 105.0 104.5 6 MONTHS PRIOR 104.5 104.0 TO MID-TERMS 104.0 103.5 10/11 CASES... 103.5 103.0 103.0 11 Mid-terms elections since 1972 102.5 102.5 102.0 ...BUT HAS 102.0 101.5 UNDERPERFORMED 101.5 101.0 10/11 CASES 6 MONTHS 101.0 100.5 FOLLOWING MID-TERMS 100.5 100.0 100.0 99.5 99.5 99.0 99.0 98.5 98.5 98.0 98.0 97.5 97.5 97.0 97.0 96.5 96.5 96.0 96.0 95.5 95.5 95.0 95.0 94.5 94.5 94.0 Mid-term Election Date 94.0 -12 -11 -10 -9 -8 -7 -6 -5 -4 -3 -2 -1 0 1 2 3 4 5 6 7 8 9 10 11 12 Months Prior | Months Post UIP802M © Copyright 2018 Ned Davis Research, Inc. Further distribution prohibited without prior permission. All Rights Reserved. See NDR Disclaimer at www.ndr.com/copyright.html For data vendor disclaimers refer to www.ndr.com/vendorinfo/ NED DAVIS RESEARCH GROUP Please see important disclosures at the end of this report. 8 GLOBAL BALANCED CASH ACCOUNT MODEL 10.0%

BONDS 20.9% STOCKS 69.1%

NED DAVIS RESEARCH GROUP Please see important disclosures at the end of this report. 9 ETF ASSET ALLOCATION MODEL

Equity 86.0% Bonds 7.0% Cash 7.0%

NED DAVIS RESEARCH GROUP Please see important disclosures at the end of this report. 10 Monthly Data 2008-05-30 to 2018-04-30 S&P 500 Index vs. U.S. Stock Market Model Internal, External and Composite (Monthly) S&P 500 Index (2018-04-30 = 2,648.05) 2,512 2,512

1,585 1,585

1,000 1,000

631 Source: S&P Dow Jones Indices 631 U.S. Stock Market Model Internal Composite (Monthly) (2018-04-30 = 100.00)

80 80 60 60 40 40 20 20 0 0 Source: Ned Davis Research, Inc. U.S. Stock Market Model External Composite (Monthly) (2018-04-30 = 60.00)

80 80 60 60 40 40 20 20 0 Source: Ned Davis Research, Inc. 0 U.S. Stock Market Model Composite (Monthly, 50% Internal, 50% External)(2018-04-30 = 80.00) 80 80 60 60 40 40 20 20

0 Source: Ned Davis Research, Inc. 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

S&P 500 Index Performance S&P 500 Index Performance Full History: 1979-11-30 to 2018-04-30 Chart View: 2008-05-30 to 2018-04-30 U.S. Stock Market Model % Gain/ % of U.S. Stock Market Model % Gain/ % of Composite is Annum Time Composite is Annum Time Above 70.0 18.61 42.66 Above 70.0 19.88 58.09 BULLISH 55.0 - 70.0 10.09 39.60 55.0 - 70.0 8.70 26.62 Below 55.0 -14.20 17.75 Below 55.0 -33.90 15.30 Buy/Hold = 8.73% Gain/Annum Buy/Hold = 6.63% Gain/Annum

S75A

NED DAVIS RESEARCH GROUP Please see important disclosures at the end of this report. 11 RALLY WATCH REPORT BEAR WATCH REPORT

Current Key Current Bearish Indicator Chart Level Level Indicator Chart Level Signal

Thrust (Less Than 50 Days)*: Trend/Breadth

10-Day Advancing Volume / (10-Day Advancing + Declining Volume) I55A 54.0 67.0 Global Stocks 5-Day ROC% 2-Month Smoothing I80 -0.0 Below -1.0 % of Stocks at 30-Day New Highs I55B 26.5 44.5

Equal-Weighted ACWI Price Index (% from 200-Day Smoothing) I81 1.7 Below -10** % of Stocks Above 10-Day Moving Averages I55C 70.4 91.0

% of ACWI Markets Above 10-Day Moving Averages I55D 57.4 95.1 Global Stock/Bond Ratio* (% from 200-Day Smoothing) I82 6.1 Below -10**

McClellan Oscillator I55E 4.3 8.2 Percentage of ACWI Markets at 252-Day New Lows I83 4.3 Above 20 Tape (50 Days)**: Percentage of ACWI Markets with Rising 200-Day Moving Aver- I84 70.2 Below 50 % of Stocks Above 10-Week Moving Averages S215B 53.8 72.0 ages

% of ACWI Stocks Above 50-Day Moving Averages IGP2000 57.3 65.0 Percentage of NDR Global Composite Stocks Above 40-Week I85 52.4 Below 50 Moving Averages % of ACWI Markets Above 50-Day Moving Averages I5210 59.6 75.0

MSCI ACWI 50-Day Moving Average IGB2000 591.4 582.2 Both NDR Global Composite Price and AD Line Smoothings I86 Both Bullish Bearish*** Tape (200 Days and Longer)**:

Volatility/Sentiment % of Stocks Above 40-Week Moving Averages S215B 55.0 64.0

% of ACWI Stocks Above 200-Day Moving Averages IGP2000 51.8 45.0 S&P 500 Volatility Index (VIX) I87 13.4 Above 28.5

% of ACWI Markets Above 200-Day Moving Averages I5205 68.1 85.0 World Stock Market Volatility**** I88 0.7 Above 1.0 46-Market 252-Day % New Highs Minus % New Lows I161A 0.0 0.0 DSI Global Sentiment Composite I89 63.6 Below 60 Sentiment***:

Green Shading = Indicator is eligible to signal but is currently not close to its bearish signal level. VIX Deviation From Trend S0235 81.2 105.0 Yellow Shading = Indicator is eligible to signal and is currently close to its bearish signal level. NDR Daily Crowd Sentiment Composite DAVIS265 56.7 41.5 Red Shading = Indicator has crossed its bearish signal level while eligible and is currently bearish. Unshaded = Indicator is currently ineligible to turn bearish. NDR Crowd Sentiment Poll S574A 60.0 57.0 Report Notes: Report Notes: Bearish signals closed out once indicator becomes bullish for six consecutive months or after 12-months from start of the * Indicator will turn green and bold once Current Reading surpasses Key Level for the first time in 3 months. signal, whichever occurs first. Indicator will remain highlighted for three months or until the benchmark corrects by 5% or more from the signal * Stock/Bond Ratio = MSCI World Price Index/Barclays Long-Term U.S. Treasury Total Return Index. date,whichever occurs first. ** Signal requires that indicator cross below smoothing by 10% within six months of remaining bullish (above smoothing for ** Indicator will turn green and bold once Current Reading surpasses Key Level and remain so until Indicator drops below Key 95% of the time)for six consecutive months. If the current level drops below the key level and no signal is triggered, one Level. or both of these conditions has not been met. *** Sentiment Indicators will turn bold and green when: *** Both bearish on first date that 50-day price smoothing down by 5% and 20-day AD line smoothing down by 2% simulta- S0235: Indicator reverses below 105 and remains between 87 and 105, neously. DAVIS265: Indicator falls and remains below 41.5, **** World Stock Market Volatility = Mean of the 100-Day Moving Averages of the Daily AbsoluteChanges of the 23 Devel- S574A: Indicator rises above 57 and remains between 57 and 66 oped Markets that Comprise the MSCI World Index

Ned Davis Research, Inc. ICS_55.RPT Ned Davis Research, Inc. ICS_80.RPT

NED DAVIS RESEARCH GROUP Please see important disclosures at the end of this report. 12 Watch Composites - Percentages of Bullish Indicators Daily Data 2008-05-12 to 2018-05-09 MSCI ACWI (2018-05-09 = 1,814.83) 1,585 1,585

1,000 1,000

631 631 Source: MSCI % of Rally Watch Indicators on Bullish Signals(2018-05-09 = 18.8%) 80 80 60 60 40 40 20 20 0 0 Source: Ned Davis Research, Inc. % of Top Watch Indicators on Bullish Signals(2018-05-09 = 55.6%)

80 80 60 60 40 40 20 20 Source: Ned Davis Research, Inc. % of Bear Watch Indicators on Bullish Signals(2018-05-09 = 70.0%)

80 80 60 60 40 40 20 20 0 Source: Ned Davis Research, Inc. 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

MSCI ACWI Performance MSCI ACWI Performance Chart View: 2008-05-12 to 2018-05-09 Full History: 1985-10-07 to 2018-05-09 % Gain/ % of % Gain/ % of NDR Watch Reports Annum Time NDR Watch Reports Annum Time All Bullish 14.72 20.14 All Bullish 17.48 13.41 Mixed 2.10 76.90 Mixed 6.05 83.47 All Bearish -5.33* 2.96 All Bearish -16.61 3.12 Buy/Hold = 3.89% Gain/Annum Buy/Hold = 6.71% Gain/Annum * Cases less than one year are not annualized

IWATCH

NED DAVIS RESEARCH GROUP Please see important disclosures at the end of this report. 13 Daily Data 2013-05-10 to 2018-05-09 Global Stocks vs. NDR Multi-Cap Equity Series 10-Day Advancing/(10-Day Advancing + Declining Volume) Global Stock Price Index** (2018-05-09 = 1,814.83) 1,995 1,995

1,778 1,778

1,585 1,585

1,413 1,413

1,259 1,259

1,122 6.9 3.1 1,122 8.4 5.7 1,000 ** MSCI World Index price returns used prior to 1988, MSCI ACWI price returns used thereafter. Source: MSCI 1,000 NDR Multi-Cap Equity Series 10-Day Advancing Volume / (10-Day Advancing + Declining Volume)(2018-05-09 = 54.01)

70 70 65 65 60 60 55 55 50 50 45 45 40 40 35 35 30 30 25 25 Bracket = 67 Source: Ned Davis Research, Inc. Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr 2014 2015 2016 2017 2018

Thrust signals (vertical dashed lines) = 10-Day Advancing / (10-Day Advancing + Declining Volume) first crosses Total Valid Cases Signal Median Median Rally Length Median Length to Rally above 67. Repeat signals screened for 3 months. Cases (>3% Rally) Accuracy (%) Rally (Calendar Days) (Calendar Days) Shaded periods = rallies > 3% during the 3 months following signals 33 24 72.7 7.3 58 10 (signal dates followed by corrections of 5% or more excluded)

I55A

NED DAVIS RESEARCH GROUP Please see important disclosures at the end of this report. 14 NED DAVIS RESEARCH GROUP Please see important disclosures at the end of this report. 15 S&P 500 SECTOR RELATIVE PERFORMANCE APR 30 - OCT 31 (ALL CASES 1972-2017) S&P 500 SECTOR RELATIVE PERFORMANCE APR 30 - OCT 31 WHEN POSITIVE S&P 500 RETURN (31 CASES 1972-2017) Mean Relative % Outperform S&P 500 Sector Return (%) S&P 500 Mean Relative % Outperform S&P 500 Sector Return (%) S&P 500

Consumer Staples 3.1 65% Financials 1.5 71%

Health Care 2.7 63% Information Technology 1.1 61%

Financials -0.1 61% Health Care 0.3 55%

Consumer Staples 0.2 52% Information Technology 0.1 57%

Telecom Services -1.6 48% Telecom Services 0.4 52%

Energy 0.3 45%

Utilities 1.1 52%

Utilities -0.5 42%

Energy 0.4 48% Consumer Discretionary -0.9 39%

Consumer Discretionary -1.6 39% Materials -2.1 39%

Materials -3.3 37% Industrials -0.6 26%

Industrials -1.5 24% S&P 500 (Absolute) 6.6 100% pos

31 cases when S&P 500 had a positive price return from April 30 - October 31: 1972-1973, 1975- S&P 500 (Absolute) 1.6 67% pos 1976, 1979-1980, 1982, 1984-1986, 1988-1989, 1991-1997, 1999, 2003-2007, 2009, 2012-2014, 2016, 2017. Source: S&P Dow Jones Indices. Source: S&P Dow Jones Indices. Ned Davis Research, Inc. T_ILC201805031.1 Ned Davis Research, Inc. T_ILC201805031.2

NED DAVIS RESEARCH GROUP Please see important disclosures at the end of this report. 16 QUESTION 1: Average length of bull market? ALL CYCLICAL BULL MARKETS ALL CYCLICAL BEAR MARKETS Statistic # Cases % Gain % GPA Days Statistic # Cases % Gain % GPA Days

Mean 36 85.5 185.6 768 Mean 36 -30.6 -35.6 399

Median 36 72.2 36.8 670 Median 36 -26.0 -27.9 358

Ned Davis Research, Inc. T_202.RPT Current Case (2/11/2016 to 1/26/2018) = 70.0% over 715 days CYCLICAL BULLS WITHIN SECULAR BULLS CYCLICAL BEARS WITHIN SECULAR BULLS Statistic # Cases % Gain % GPA Days Statistic # Cases % Gain % GPA Days

Mean 18 106.7 31.2 1027 Mean 14 -21.8 -36.2 283

Median 18 77.2 27.4 870 Median 14 -19.0 -23.4 245

A cyclical bull market requires a 30% rise in the DJIA after 50 calendar days or a 13% rise after 155 calendar days. A secular bull market is a period in which stock prices rise at an above-average rate for an extended period and suffer only relatively short intervening declines. Ned Davis Research, Inc. T_202.RPT

NED DAVIS RESEARCH GROUP Please see important disclosures at the end of this report. 17 DJIA Secular Bull Market Comparison 501 501 398 Secular Bull Starting in 1921 398 316 316 251 251 200 200 158 158 126 Secular Bull Ended in 1929 126 100 100 79 79 64.9% -18.6% 344.5% 282 Secular Bull Starting in 1942 282 251 251 224 224 200 200 178 178 158 1951 158 141 141 126 Secular Bull Ended in 1966 126 112 112 100 128.7% -23.2% 18.4% -16.3% 100 3,981 Secular Bull Starting in 1982 3,981 3,162 3,162 2,512 2,512 1,995 1,995 1992 1,585 1,585 1,259 Secular Bull Ended in 2000 1,259 1,000 1,000 65.7% -15.6% 150.6% -36.1% 72.5% -21.2% 31,623 Secular Bull Starting in 2009 31,623 25,119 25,119 19,953 19,953 15,849 15,849 2018-05-09 12,589 Shaded areas represent NDR- 12,589 10,000 defined cyclical bear markets 10,000 7,943 7,943 95.7% -16.8% 71.9% -14.5% 56.7% Source: S&P Dow Jones Indices 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 S0202A © Copyright 2018 Ned Davis Research, Inc. Further distribution prohibited without prior permission. All Rights Reserved. See NDR Disclaimer at www.ndr.com/copyright.html For data vendor disclaimers refer to www.ndr.com/vendorinfo/ NED DAVIS RESEARCH GROUP Please see important disclosures at the end of this report. 18 QUESTION 2: What 10-year yield level would be problematic for equities? Global Stock/Bond Yield Correlation Daily Data 1983-06-24 to 2018-05-08 (Log Scale) Global Stock Price Index* 1,585 1,585 1,259 1,259 1,000 1,000 794 794 631 631 501 501 398 398 316 316 251 251 200 200 158 *MSCI World Index price returns used prior to 1988, MSCI All Country World Index price returns used thereafter Source: MSCI 158

9 9 8 8 7 7 6 6 5 5 4 4 3 3 2 2 1 Global Aggregate Bond Yield (2018-05-08 = 1.3%) 1 0 Source: Barclays 0 Rolling 260-Day Correlation Stock Prices and Bond Yields Moving in Same Direction 0.75 0.75 Daily % Change of Global Stock Index & Global Bond Yield 0.50 (2018-05-08 = 0.19) 0.50

0.25 0.25

0.00 0.00

-0.25 WATCH FOR A CHANGE -0.25 IN CORRELATION -0.50 -0.50 Stock Prices and Bond Yields Moving in Opposite Directions 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 Correlation Period (market days): Date Range (years): 30 60 130 260 1 2 3 5 10 Max I278 © Copyright 2018 Ned Davis Research, Inc. Further distribution prohibited without prior permission. All Rights Reserved. See NDR Disclaimer at www.ndr.com/copyright.html For data vendor disclaimers refer to www.ndr.com/vendorinfo/ NED DAVIS RESEARCH GROUP Please see important disclosures at the end of this report. 19 Ned Davis Research Group

Q & A AMY LUBAS, CFA Advisory Strategist

Amy Lubas, CFA, is the Advisory Strategist for Ned Davis Research Group. She is a member of the Product team, and works closely with NDR’s Strategy team to provide strategy, implementation, and tools for investment advisors and wealth managers. Amy has been working in the investment industry since 1996, with both buy-side and sell-side experience. She joined the firm in July 2004 as an analyst on the sector team. She has been a sector generalist and a specialist, most recently serving as NDR’s Technology & Industrials Strategist. She developed strategy commentary in the U.S. Sector Strategy | Capex Corner publications for the Capex, Innovation & Productivity, and Transports themes, and provided industry recommendations within the Technology and Industrials sectors. She was also a contributor to the U.S. Sector Strategy [email protected] | Sector Allocation and quarterly U.S. Strategy | Benchmarks publications. From 2004 to 2011, she @AmyChesekLubas helped to quantitatively manage an equity pension portfolio using NDRG’s ranking systems and risk control techniques. www.linkedin.com/in/ Prior to NDRG, Amy worked as a Senior Equity Research Analyst at State Street Research & AmyChesekLubas Management in Boston, MA, where she provided investment recommendations on stocks within the technology sector to portfolio managers, and helped manage the firm’s Analyst Fund. Amy also worked in the Boston office of SG Cowen Securities Corporation as an Institutional Research Analyst, where she published equity research on the electronics manufacturing services industry for portfolio managers and analysts. Over the course of her career, Amy’s commentary has been featured in The Wall Street Journal, Barron’s, SmartMoney, Silicon Investor, and other financial and technology publications. Amy is a CFA charterholder and is an active member of CFA Tampa Bay. She is a cum laude gradu- ate in Finance from Boston College, and earned her Master in Business Administration in Finance from Vanderbilt University (Owen). Ned Davis Research Group NED DAVIS RESEARCH GROUP Generate alpha. identify risk. Choose Ned Davis Research. Macro sales @ndr.com ndamenta www.ndr.com Fu l (800) 241-0621 Founded in 1980, Ned Davis Research Group is a leading independent research fi rm with clients around the globe. With a range of products and services utilizing a 360° methodology, we deliver award-winning solutions to the world’s leading Idea VENICE investment management companies. Our clients include professionals from global investment fi rms, banks, insurance 600 Bird Bay Drive West companies, mutual funds, hedge funds, pension and endowment funds, and registered investment advisors. 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