ED CLISSOLD, CFA Chief U.S

Navigating a Mature Bull Market

ED CLISSOLD, CFA Chief U.S. Strategist Ned Davis Research Group

Generate Alpha. Identify Risk. September 2018 Choose Ned Davis Research. TABLE OF CONTENTS

NDR Approach ...... 1

Fundamental ...... 2-5

Macro 6-12

Sentiment ...... 13-15

Technical 16-20

Bottom Line ...... 21-22

NDR House Views 23

NED DAVIS RESEARCH GROUP Please see important disclosures at the end of this report. i NED DAVIS RESEARCH GROUP APPROACH

EXPECTATIONS: How the market Macro SHOULD BE acting

ndamenta Fu l

Idea TIMING: How the market IS acting

Technical

S entiment

NED DAVIS RESEARCH GROUP Please see important disclosures at the end of this report. 1 FUNDAMENTAL Unprecedented upward earnings revisions.

Weekly Data 2011-07-19 to 2018-09-13 Consensus Estimates for S&P 500 Operating Earnings per Share by Calendar Year 182.5 Calendar Year 2012: 03/28/2013 = 96.83 182.5 180.0 Calendar Year 2013: 03/31/2014 = 107.30 180.0 177.5 Calendar Year 2014: 03/31/2015 = 113.03 177.5 175.0 Calendar Year 2015: 03/31/2016 = 100.45 175.0 Calendar Year 2016: 03/31/2017 = 106.26 172.5 Calendar Year 2017: 04/05/2018 = 124.51 172.5 170.0 Calendar Year 2018: 09/13/2018 = 157.74 170.0 167.5 Calendar Year 2019: 09/13/2018 = 177.03 167.5 165.0 165.0 162.5 $145 TO $157 = +8% REVISION 162.5 160.0 160.0 157.5 2018 157.5 155.0 155.0 152.5 152.5 150.0 150.0 147.5 147.5 145.0 145.0 142.5 142.5 140.0 140.0 137.5 137.5 135.0 135.0 132.5 132.5 130.0 130.0 127.5 127.5 125.0 125.0 122.5 122.5 120.0 120.0 117.5 117.5 115.0 115.0 112.5 112.5 110.0 110.0 107.5 107.5 105.0 105.0 102.5 102.5 100.0 100.0 97.5 97.5 95.0 Source: Standard & Poor's 95.0 Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct 2011 2012 2013 2014 2015 2016 2017 2018 S677 © 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 FUNDAMENTAL How much are peak earnings worth?

S&P 500 INDEX VS. YEAR/YEAR EPS % GROWTH EPS Growth: % GPA

CONSENSUS >20% 2.6 FOR 4Q18

5 to 20% 6.8

-20 to +5% 12.1

RECESSION <=-20% -13.6 TERRITORY

Based on GAAP earnings per share. 3/31/1927-3/31/2018 Source: S&P Dow Jones Indices. Ned Davis Research Group S663

NED DAVIS RESEARCH GROUP Please see important disclosures at the end of this report. 3 FUNDAMENTAL Paying full price for strong earnings.

S&P 500 Price to GAAP Earnings Monthly Data 1929-02-28 to 2018-08-31 (Log Scale) S&P 500 Price to GAAP Earnings (08/31/2018): 23.7 134.4 134.4

119.0 119.0

105.3 105.3

93.1 93.1

82.2 82.2

72.5 72.5

63.9 63.9

56.2 56.2

49.3 49.3

43.2 43.2

37.8 37.8

32.9 32.9

28.6 28.6

24.7 24.7

21.3 21.3

18.2 18.2

15.5 15.5

13.1 13.1

10.9 10.9

8.9 8.9

7.2 7.2

5.7 5.7 Source: S&P Dow Jones Indices, Standard & Poor's Valuation designations based on quintiles up to that point in history. 1930 1935 1940 1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015

Extremely Overvalued Moderately Overvalued Fairly Valued Moderately Undervalued Extremely Undervalued

SMF_24.RPT © 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. 4 NED DAVIS RESEARCH 3600 VIEW OF U.S. STOCK MARKET SEPTEMBER 2018

Category Conclusion Comment

Good EPS growth, but Fundamentals Neutral mostly priced in

Macro

Sentiment

Technicals

Bottom Line

NED DAVIS RESEARCH GROUP Please see important disclosures at the end of this report. 5 MACRO Stocks cheap relative to bonds.

S&P 500 GAAP Earnings Yield less 10-Year Treasury Yield Monthly Data 1966-03-31 to 2018-08-31 (Log Scale) 6.9 S&P 500 GAAP Earnings Yield less 10-Year Treasury Yield (08/31/2018): 1.4 6.9 6.2 6.2 5.5 5.5 4.9 4.9 4.3 4.3 3.7 3.7 3.1 3.1 2.5 2.5 2.0 2.0 1.5 1.5 1.1 1.1 0.6 0.6 0.2 0.2 -0.2 -0.2 -0.6 -0.6 -0.9 -0.9 -1.2 -1.2 -1.6 -1.6 -1.8 -1.8 -2.1 -2.1 -2.4 -2.4 -2.6 -2.6 -2.9 -2.9 -3.1 -3.1 -3.3 -3.3 -3.5 -3.5 -3.7 -3.7 -3.9 -3.9 -4.0 -4.0 -4.2 -4.2 -4.3 -4.3 -4.5 -4.5 -4.6 -4.6 -4.7 -4.7 -4.8 Source: S&P Dow Jones Indices, Standard & Poor's Valuation designations based on quintiles up to that point in history. -4.8 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015

Extremely Overvalued Moderately Overvalued Fairly Valued Moderately Undervalued Extremely Undervalued

Daily 1/02/1963 - 9/14/2018 (Log Scale) Stock/Bond Rolling One-Year Correlation 2800 2800 2010 2010 S&P 500 Index 1442 1442 1035 1035 743 743 533 533 383 383 275 275 197 197 141 141 101 101 73 73 52 Source: S&P Dow Jones Indices 52 15 15 14 10-Year Treasury Note Yield (%) 14 13 13 12 12 11 11 10 10 9 9 8 8 7 7 6 6 5 5 4 4 3 3 2 2 Source: Federal Reserve Board Rolling One-Year Correlation: Stock Prices And Bond Yields 0.8 0.8 Daily % Change in S&P 500 & 10-Year Treasury Yield Move In Same Direction 0.6 0.6 0.4 DEFLATION FEARS 0.4 0.2 0.2 0.0 0.0 -0.2 -0.2 -0.4 -0.4 -0.6 INFLATION -0.6 -0.8 CONCERNS Stock Prices And Bond Yields -0.8 Move In Opposite Directions 9/14/2018 = 0.28

(S0947) 1967 1972 1977 1982 1987 1992 1997 2002 2007 2012 2017 � 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 MACRO Concerns about yield curve being too flat or too steep overblown.

S&P 500 Index vs. 10-2 Treasury Yield Curve Weekly Data 1976-06-04 to 2018-09-14 S&P 500 Index (2018-09-14 = 2,904.98) 2,512 2,512

1,585 1,585

1,000 1,000

631 631

398 398

251 251

158 158

100 100 Source: S&P Dow Jones Indices Yield Curve - 10-Year Minus Two-Year Treasury Yield(2018-09-14 = 0.22) 3.0 3.0 2.5 2.5 2.0 2.0 1.5 1.5 1.0 1.0 0.5 0.5 0.0 0.0 -0.5 -0.5 -1.0 -1.0 -1.5 -1.5 -2.0 -2.0 -2.5 Shaded Areas Designate National Bureau of Economic Research Recession Source: Federal Reserve Board -2.5 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

S&P 500 Index Performance Full History: 1976-06-04 to 2018-09-14 Yield Curve - 10-Year Minus Two-Year Treasury % Gain/ % of Yield Annum Time Above 1.5 5.81 28.01 0.0 - 1.5 11.04 57.58 Below 0.0 2.61 14.42 Buy/Hold = 8.31% Gain/Annum

S894

NED DAVIS RESEARCH GROUP Please see important disclosures at the end of this report. 8 MACRO Deflationary forces have not disappeared.

NED DAVIS RESEARCH GROUP Please see important disclosures at the end of this report. 9 MACRO Recession risks low, limiting downside risk to equities.

RECESSION WATCH REPORT RECESSION AND NON-RECESSION CYCLICAL BEAR MARKETS Median Lead Time of Months Since Recession Non-Recession Key Peak/ Recent Peak/ Metric Bears Bears Recession Current Trough to Trough in Indicator Level Level Recession Current Cycle

NDR Recession Probability Model1 50 1.2 11 2 % Change -29.7 -18.0

Breadth of Philly Fed State Leading Indexes2 70 98 13 3

NDR Economic Timing Model2 0 22 9 0 # Months 17.7 6.8 NDR Composite Leading Index2 -2.6 3.2 9 0 LITTLE EVIDENCE Ned Davis Research, Inc. T_203.RPT (excerpt) National Financial Conditions Index1 0.9 -0.9 8 OF 10 RECESSION Initial Claims for Unemployment Insurance (4-wk Avg)1 500 208.0 8 0

Conference Board's Consumer Confidence Index2 63.2 133.4 11 0

Conference Board's Business Confidence Index2 43 63 21 3

ISM Manufacturing Index2 48.0 61.3 11 0

ISM Non-Manufacturing Index2 51.4 58.5 16 1

1Reaching a trough before a recession 2Reaching a peak before a recession Ned Davis Research, Inc. ECON_20A.RPT

NED DAVIS RESEARCH GROUP Please see important disclosures at the end of this report. 10 MACRO Economy needs more than the consumer.

Quarterly 3/31/1995 - 6/30/2018 Percentage Point Contributions to GDP Growth 5.0 PCE 6/30/2018 = 2.55 5.0 4.0 4.0 3.0 3.0 2.0 2.0 1.0 1.0 0.0 0.0 -1.0 BIGGEST DRIVER -1.0

-2.0 Source: Bureau of Economic Analysis -2.0 Gross Private Domestic Investment 6/30/2018 = 0.10 4 4 2 2 0 0 -2 NEEDED -2 -4 FOR ESCAPE -4 -6 VELOCITY -6

2.5 Net Exports 6/30/2018 = 1.17 2.5 2.0 2.0 1.5 1.5 1.0 TRADE WAR RISK 1.0 0.5 0.5 0.0 0.0 -0.5 -0.5 -1.0 -1.0 -1.5 -1.5 Government 6/30/2018 = 0.41 1.2 1.2 0.9 TAX 0.9 0.6 CUTS 0.6 0.3 0.3 0.0 0.0 -0.3 -0.3 -0.6 -0.6 -0.9 -0.9

(E65) 1995 2000 2005 2010 2015 � 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. 11 NED DAVIS RESEARCH 3600 VIEW OF U.S. STOCK MARKET SEPTEMBER 2018

Category Conclusion Comment

Good EPS growth, but Fundamentals Neutral mostly priced in

Solid economy + modest Macro Bullish inflation uptick

Sentiment

Technicals

Bottom Line

NED DAVIS RESEARCH GROUP Please see important disclosures at the end of this report. 12 SENTIMENT Pessimism never fell to wash out levels.

S&P 500 Index vs. NDR Crowd Sentiment Poll - Transitional Mode Basis Daily Data 1995-12-01 to 2018-09-13 S&P 500 Composite Index (2018-09-13 = 2904.18)

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 (2018-09-13 = 67.4) 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 2018-09-13 NDR Crowd Sentiment Poll % Gain/ % of is Annum Time Above 66.0 -3.29 25.03 57.0 - 66.0 From Above 1.97 18.22 57.0 - 66.0 From Below 21.22 19.05 Below 57.0 10.59 37.23 Buy/Hold = 7.11% Gain/Annum

S574A

NED DAVIS RESEARCH GROUP Please see important disclosures at the end of this report. 13 SENTIMENT Has partisanship become the new normal?

S&P 500 Index vs. Philadelphia Fed Partisan Conflict Index Monthly Data 1984-12-31 to 2018-08-31 (Log Scale) S&P 500 Index (2018-08-31 = 2901.52) 3,162 3,162 S&P 500 Index Performance: 1,778 Participation Index % Gain/ % of 1,778 Deviation from Trend Annum Time 1,000 Above 100 16.75 50.50 1,000 * Below 100 1.32 49.50 562 562

316 316

178 178 Source: S&P Dow Jones Indices Partisan Conflict Index (2018-08-31 = 148.46) 251 251

200 200

158 158

126 126

100 100

79 79

63 63 Source: Federal Reserve Bank of Philadelphia

150 Partisan Conflict Index Deviation from Trend (6-Month Smoothing / 48-Month Smoothing) (2018-08-31 = 88.92) 150 140 140 130 130 120 120 110 110 100 100 90 90 80 80 Source: Federal Reserve Bank of Philadelphia 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 S1062 © 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. 14 NED DAVIS RESEARCH 3600 VIEW OF U.S. STOCK MARKET SEPTEMBER 2018

Category Conclusion Comment

Good EPS growth, but Fundamentals Neutral mostly priced in

Solid economy + modest Macro Bullish inflation uptick

Sentiment Neutral Pessimism not extreme

Technicals

Bottom Line

NED DAVIS RESEARCH GROUP Please see important disclosures at the end of this report. 15 TECHNICAL Sell in May period even weaker in mid-term years.

S&P 500 Cycle Composite for 2018 Daily Data 2017-12-29 to 2018-12-31 12.5 5.00 12.0 S&P 500 Cycle Composite for 2018 (Scale Right) Actual S&P 500 Composite Through 2018-09-14 (Scale Left) 11.5 4.75 11.0 4.50 10.5 4.25 10.0 2018 Cycle Composite 9.5 Places Equal Weight On: 4.00 9.0 One-Year Seasonal Cycle 3.75 8.5 Four-Year Presidential Cycle 8.0 10-Year Decennial Cycle 3.50 7.5 3.25 7.0 3.00 6.5 6.0 2.75 5.5 2.50 5.0 4.5 2.25 4.0 2.00 3.5 1.75 3.0 2.5 1.50 2.0 1.25 1.5 1.00 1.0 AVERAGE 0.5 YEAR 0.75 0.0 0.50 -0.5 Trend Is More Important Than Level -1.0 Based on Daily Data 1/3/1928 - 12/31/2017 0.25 -1.5 2018 0.00 -2.0 -0.25 -2.5 -3.0 -0.50 -3.5 -0.75 -4.0 Source: S&P Dow Jones Indices Lines represent cumulative year-to-date percent gains -1.00 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan 2018 2019 S01666 © 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. 16 TECHNICAL U.S. relative strength usually leads to more U.S. strength.

S&P 500 Index After S&P 500 Beats MSCI ACWI ex.-U.S. by 10% Year/Year 117 117 116 116 115 115 S&P 500 Index Change (%) After: 114 Start Dates 114 6 MONTHS 12 MONTHS 113 1990-03-31 -9.97 10.38 113 112 1991-10-31 5.73 6.68 112 1993-01-31 2.13 9.76 111 111 1995-02-28 15.28 31.40 110 1996-12-31 19.49 31.01 110 109 1998-09-30 26.49 26.13 109 2003-04-30 14.59 20.76 108 108 2011-03-31 -14.66 6.23 107 2013-12-31 6.05 11.39 107 106 2016-03-31 5.27 14.71 106 105 Average 7.04 16.85 105 104 104 103 103 102 102 101 101 100 100 99 99 98 98 97 97 96 96 95 95 94 94 93 93 92 92 91 91 90 U.S/ACWI ex. U.S. Crosses >10% Source: S&P Dow Jones Indices 90 -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 BFC201808281B_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. 17 TECHNICAL Breadth thrust elusive.

Standard & Poor's 500 Stock Index Daily Data 1980-10-10 to 2018-09-14 (Log Scale) 2,512 2,512 Combined statistics for all dates 1,995 1,995 10 21 42 63 84 126 253 Summary Item 1,585 Days Days Days Days Days Days Days 1,585 1,259 Mean 0.44 1.58 3.68 3.93 4.29 8.98 15.42 1,259 Median 0.96 1.56 3.30 5.22 5.64 8.84 13.93 1,000 Number Up 22 20 23 22 23 26 30 1,000 794 Number Down 9 11 8 9 8 5 1 794 All Periods Mean 0.37 0.78 1.56 2.33 3.13 4.75 9.94 2.5 YRS W/O 631 BREADTH THRUST 631 501 501

398 % Stocks 10 21 42 63 84 126 253 % Stocks 10 21 42 63 84 126 253 398 Event Date Event Date 316 Above MA Days Days Days Days Days Days Days Above MA Days Days Days Days Days Days Days 316 1982-08-23 90.93 4.5 6.8 19.8 18.0 19.4 27.5 41.5 2010-07-13 96.02 1.7 -0.5 1.3 6.4 10.8 15.9 20.3 251 1984-08-03 91.02 1.1 1.6 0.1 3.2 0.3 10.0 17.4 2010-09-02 93.77 3.3 4.3 9.5 12.1 16.7 21.2 7.7 251 200 1987-01-06 90.40 6.4 10.6 15.0 19.5 16.9 21.6 2.4 2011-03-30 90.40 -1.0 2.7 1.3 -1.6 -2.7 -13.3 6.0 200 1991-02-06 91.68 1.9 4.7 4.3 5.7 6.0 9.1 15.6 2011-07-01 96.07 -2.6 -6.4 -9.0 -15.5 -6.4 -6.1 2.6 158 1997-05-05 90.97 0.4 1.2 10.4 14.5 11.8 10.2 33.1 2011-08-29 97.41 -3.1 -4.9 6.2 -1.4 3.3 12.9 16.6 158 126 2002-10-21 90.73 1.0 -0.3 -1.7 -2.4 -5.7 2.1 14.5 2011-10-10 92.94 5.0 6.8 3.3 8.1 13.1 14.5 19.9 126 2003-03-20 91.64 0.1 1.9 5.0 13.6 11.8 18.7 25.1 2011-11-30 93.65 -2.8 0.9 6.2 9.8 13.8 2.5 12.8 100 2004-04-01 92.01 0.2 -1.3 -0.6 -0.6 -2.9 -0.1 4.3 2011-12-27 91.93 2.1 4.0 8.4 11.1 10.9 5.2 12.7 100 79 2004-05-26 90.44 1.9 1.7 -1.8 -0.9 -1.0 6.0 7.5 2012-07-03 92.46 -0.1 -0.7 2.4 5.2 2.9 6.7 20.3 79 2007-03-21 91.77 0.3 3.4 6.3 5.4 6.9 6.5 -5.9 2012-11-23 90.34 0.6 1.2 6.7 6.2 10.9 17.8 27.9 63 2008-11-04 92.64 -14.6 -16.0 -7.1 -15.9 -32.7 -9.8 6.1 2013-12-24 92.38 0.3 -2.8 0.6 0.9 2.0 6.8 13.9 63 50 2008-11-28 90.28 -1.8 -0.6 -7.9 -22.3 -9.5 5.4 23.7 2014-08-19 90.65 1.0 1.5 -4.8 3.0 1.6 5.8 2.7 50 2009-03-13 91.98 7.9 11.2 16.8 25.1 19.7 37.8 53.3 2014-10-21 93.23 3.6 5.5 6.7 6.3 8.7 8.8 5.7 40 Arrows show initial dates when indicator rose above 2009-10-14 90.25 -4.5 -0.4 2.0 5.2 0.3 9.2 7.7 2015-10-09 91.48 3.0 3.2 1.6 -4.5 -8.1 2.3 6.0 40 32 90% after falling to at least 10% in between. 2010-02-17 91.81 1.8 6.0 8.9 1.9 1.5 -0.6 21.5 2016-02-22 92.38 2.9 5.4 7.5 5.5 7.4 12.3 21.5 32 2010-06-15 95.15 -6.6 -1.7 -3.2 0.5 5.6 11.2 13.5 25 Stats show % change in S&P 500 N-Days after event 25 Source: S&P Dow Jones Indices 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

75 75

50 50

25 25

0 0 Source: Ned Davis Research, Inc. 2018-09-14 = 58.8 NDR Multi-Cap Equity Series % of Stocks Above Their 10-Day Moving Averages S45 © 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 TECHNICAL Long-term trend indicators have not broken.

S&P 500 Index vs. Moving Average Slope Daily Data 2008-09-12 to 2018-09-14 S&P 500 Index (2018-09-14 = 2,904.98) Current Siignall: Bulllliish (2016-07-22,, Gaiin/Loss: 33..6%) 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 All price, total return, and performance data are in local currency. Source: S&P Dow Jones Indices S&P 500 Index (126-Day Moving Averag… (2018-09-14 = 2756.24)

2,600 2,600 2,400 2,400 2,200 2,200 2,000 2,000 1,800 1,800 1,600 1,600 1,400 1,400 1,200 1,200 1,000 1,000 800 800 Source: S&P Dow Jones Indices 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Current value is 0.00% away from peak. S&P 500 Index Performance S&P 500 Index Performance Full History: 1979-11-16 to 2018-09-14 Chart View: 2008-09-12 to 2018-09-14 Bullish when 126-Day smoothing Moving Average Slope % Gain/ % of Moving Average Slope % Gain/ % of rises by 2.5% or more. Indicator is Annum Time Indicator is Annum Time Bullish 10.82 79.02 Bullish 11.42 80.57 Bearish when 126-Day smoothing Bearish 2.22 20.98 Bearish -1.55 19.43 falls by 2.5% or more. Buy/Hold = 8.95% Gain/Annum Buy/Hold = 8.77% Gain/Annum

S61

NED DAVIS RESEARCH GROUP Please see important disclosures at the end of this report. 19 NED DAVIS RESEARCH 3600 VIEW OF U.S. STOCK MARKET SEPTEMBER 2018

Category Conclusion Comment

Good EPS growth, but Fundamentals Neutral mostly priced in

Solid economy + modest Macro Bullish inflation uptick

Sentiment Neutral Pessimism not extreme

LT technicals positive; Technicals Bullish watch breadth for thrust

Bottom Line

NED DAVIS RESEARCH GROUP Please see important disclosures at the end of this report. 20 BOTTOM LINE Watch long-term technicals and interest rates.

NDR U.S. STOCK MARKET MODEL

LONG TERM

SHORT TERM

NED DAVIS RESEARCH GROUP Please see important disclosures at the end of this report. 21 NED DAVIS RESEARCH 3600 VIEW OF U.S. STOCK MARKET SEPTEMBER 2018

Category Conclusion Comment

Good EPS growth, but Fundamentals Neutral mostly priced in

Solid economy + modest Macro Bullish inflation uptick

Sentiment Neutral Pessimism not extreme

LT technicals positive; Technicals Bullish watch breadth for thrust

Positive technicals Bottom Line Bullish deciding factor

NED DAVIS RESEARCH GROUP Please see important disclosures at the end of this report. 22 Ned Davis Research Group

Q & A

NED DAVIS RESEARCH GROUP Please see important disclosures at the end of this report. 23 NDR HOUSE VIEWS (Updated August 16, 2018)

Consistent with our Global Balanced Account Model, NDR recommends GLOBAL ASSET ALLOCATION marketweight allocation to stocks, bonds and cash in balanced portfoli- os. While cyclical risks have increased, the secular bull market in equities Stocks (55%) remains intact, supported by accommodative monetary policies globally Bonds (35%) – equities have produced double-digit per annum returns since the secular Cash (10%) bull started in 2009. Benchmark – Stocks (55%), Bonds (35%), Cash (10%) EQUITIES – REGIONAL RELATIVE ALLOCATION EQUITY ALLOCATION: U.S. (64%) U.S. – The U.S. is overweight in our seven-region global allocation Canada (4%) • Paciﬁ c ex. Japan (3%) • Japan (7%) framework. On an absolute basis, the cyclical bull remains intact, U.K. (4%) • Europe ex. U.K. (9%) • Emerging Markets (9%) but risks have increased. We favor Growth and quality Dividend Benchmark – U.S. (52.7%), Europe ex. U.K. (15.0%), Emerging Markets (11.8%), Japan (7.8%), U.K. (5.7%), Pacific ex. Japan Payers, and are neutral on small/large. (3.9%), Canada (3.1%) EUROPE – We remain underweight Europe ex. U.K. based on its GLOBAL BOND ALLOCATION regional equity model weighting and its relative weakness. Japan (30%) EMERGING MARKETS – We are underweight Emerging Markets in U.K. (5%) • Europe (30%) our seven-region framework. As we watch China’s transition to a U.S. (35%) more mature growth profile, we are overweight select markets in Benchmark – U.S. (48%), Europe (28%), Japan (18%), U.K. (6%) emerging Asia and Europe. MACRO: U.S. BONDS – 90% OF BENCHMARK DURATION ECONOMY – The global economy is on solid footing, but is show- U.S. ALLOCATION ECONOMIC SUMMARY September 17, 2018 ing signs of being in late cycle as momentum likely peaked in late 2017. Recession probability for the U.S. remains minimal in the Growth next six to nine months. Major risks include heightened trade war Stocks (55%) • Bonds (35%) • Cash (10%) GLOBAL ECONOMY tensions, tighter monetary policy, a sharp slowdown in China, and Large-Cap • Small-Cap Above Trend (3.7%) political dysfunction in the U.S. and Europe. Value FIXED INCOME – We are at 90% of benchmark duration. We main- Benchmark – Stocks (55%), Bonds (35%), Cash (10%) tain our curve flatteners and remain overweight credit. U.S. ECONOMY SECTORS ENERGY – We believe crude oil is in a secular bull market. However, Above Trend (2.9%) due to this summer’s soft inventory and physical market weakness, Consumer Staples (12%) • Health Care (17%) • Utilities (4%) we are tactically neutral. Industrials (7%) • Materials (1%) U.S. INFLATION GOLD – Long-term outlook remains bullish, but trend has turned Benchmark - Technology (24.5%), Health Care (13.9%), Financials downward. We are neutral. (14.1%), Consumer Discretionary (12.9%), Consumer Staples (8.4%), Moderate (2.4%) Industrials (9.9%), Energy (5.8%), Utilities (2.9%), Real Estate (2.8%), Materials (2.9%), Telecom Services (1.9%)

NED DAVIS RESEARCH GROUP Please see important disclosures at the end of this report. 24 ED CLISSOLD, CFA Chief U.S. Strategist

Ed Clissold, CFA, is the Chief U.S. Strategist for Ned Davis Research Group. He and his team are responsible for the firm’s U.S. equity, style, sector and equity theme analysis. They do so via a combination of a top-down analysis of the macroeconomic and fundamental environments and a bottom-up analysis of factors specific to the asset class, market cap, style, sector, or theme. He and his team also provide in-depth macro research on fundamental topics such as earnings, dividends, and cash flow. [email protected] Ed writes several U.S. Strategy publications, which provide an intermediate-term outlook on U.S. markets via a combination of top-down and bottom-up analyses. He also writes a quarterly @edclissold Benchmarks report, which analyzes the attribution of returns across asset classes, sectors, market cap, and styles. www.linkedin.com/in/edclissold

Ed’s market commentary is often quoted in The Wall Street Journal, Barron’s, and other financial publications.

Ed has held a number of other positions since joining the firm in 2002, including Global Equity Strategist, Senior Global Analyst in the Global Asset Allocation group, and Analyst in the Custom Research Services department. Previously, Ed worked at Strong Capital Management and as a Market Strategist at J.C. Bradford & Co.

Ed is a CFA charterholder, a magna cum laude graduate in Economics from Transylvania University, and has earned his Masters in Business Administration in Finance, with distinction, from Indiana University (Kelley). 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. Venice, FL 34285 Technical H (941) 412-2300 C S A entiment RO NEW YORK PP ° A 1120 Avenue of the Americas 360 6th fl oor New York, NY 10036 (646) 810-7270 Important Information and Disclaimers BOSTON Ned Davis Research, Inc. (NDR), any NDR affi liates or employees, or any third-party data provider, shall not have any liability for any loss sustained by anyone who has relied on the information 745 Atlantic Ave contained in any NDR publication. In no event shall NDR, any NDR affi liates or employees, or any third-party data provider, be liable to any party for any direct, indirect, incidental, exemplary, Boston, MA 02110 compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profi ts and opportunity costs) in connection with (617) 279-4860 any use of the information contained in this document even if advised of the possibility of such damages. The data and analysis contained in NDR’s publications are provided “as is” and without warranty of any kind, either expressed or implied. The information is based on data believed to be reliable, ATLANTA but it is not guaranteed. NDR DISCLAIMS ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY, SUITABILITY 400 Northridge Road OR FITNESS FOR A PARTICULAR PURPOSE OR USE. Suite 515 NDR’s reports refl ect opinions of our analysts as of the date of each report, and they will not necessarily be updated as views or information change. All opinions expressed therein are subject to Atlanta, GA 30350 change without notice, and you should always obtain current information and perform due diligence before trading. NDR or its affi liated companies or their respective shareholders, directors, offi cers (678) 303-0097 and/or employees, may have long or short positions in the securities discussed in NDR’s publications and may purchase or sell such securities without notice. SAN FRANCISCO NDR uses and has historically used various methods to evaluate investments which may, at times, produce contradictory recommendations with respect to the same securities. When evaluating 50 California Street the results of prior NDR recommendations or NDR performance rankings, one should also consider that NDR may modify the methods it uses to evaluate investment opportunities from Suite 1500 time to time, that model results do not impute or show the compounded adverse eff ect of transaction costs or management fees or refl ect actual investment results, that other San Francisco, CA 94111 less successful recommendations made by NDR are not included with these model performance reports, that some model results do not refl ect actual historical recommendations, (415) 277-5477 and that investment models are necessarily constructed with the benefi t of hindsight. Unless specifi cally noted on a chart, report, or other device, all performance measures are purely hypothetical, and are the results of back-tested methodologies using data and analysis over time periods that pre-dated the creation of the analysis and do not refl ect tax LONDON consequences, execution, commissions, and other trading costs. For these and for many other reasons, the performance of NDR’s past recommendations and model results are not a 29 Ludgate Hill guarantee of future results. London Using any graph, chart, formula, model, or other device to assist in deciding which securities to trade or when to trade them presents many diffi culties and their eff ectiveness has signifi cant EC4M 7NX limitations, including that prior patterns may not repeat themselves continuously or on any particular occasion. In addition, market participants using such devices can impact the market in a way +44 (0) 20 7779-8682 that changes the eff ectiveness of such devices. NDR believes no individual graph, chart, formula, model, or other device should be used as the sole basis for any investment decision and suggests that all market participants consider diff ering viewpoints and use a weight of the evidence approach that fi ts their investment needs. Any particular piece of content or commentary may or may not be HONG KONG representative of the NDR House View, and may not align with any of the other content or commentary that is provided in the service. Performance measures on any chart or report are not intended 38/F Hopewell Centre to represent the performance of an investment account or portfolio, as some formulas or models may have superior or inferior results over diff ering time periods based upon macro-economic or 183 Queen’s Road East investment market regimes. NDR generally provides a full history of a formula or model’s hypothetical performance, which often refl ects an “all in” investment of the represented market or security Wanchai during “buy”, “bullish”, or similar recommendations. This approach is not indicative of the intended usage of the recommendation in a client’s portfolio, and for this reason NDR does not typically +852 3416 6676 display returns as would be commonly stated when reporting portfolio performance. Clients seeking the usage of any NDR content in a simulated portfolio back-test should contact their account representative to discuss testing that NDR can perform using the client’s specifi c risk tolerances, fees, and other constraints. NDR’s reports are not intended to be the primary basis for investment decisions and are not designed to meet the particular investment needs of any investor. The reports do not address the suitability of any particular investment for any particular investor. The reports do not address the tax consequences of securities, investments, or strategies, and investors should consult their tax advisors before making investment decisions. Investors should seek professional advice before making investment decisions. The reports are not an off er or the solicitation of an off er to buy or to sell a security. Further distribution prohibited without prior permission. Full terms of service, including copyrights, terms of use, and disclaimers are available at https://www.ndr.com/web/ndr/terms-of- service. For data vendor disclaimers, refer to www.ndr.com/vendorinfo. Copyright 2018 (c) Ned Davis Research, Inc. All rights reserved.