Global Market Insights Strategy team

Americas Europe Asia

Dr. David Kelly, CFA Karen Ward Tai Hui

New York London Hong Kong

David Lebovitz Gabriela Santos Hugh Gimber, CFA Vincent Juvyns Marcella Chow Shogo Maekawa
New York New York London Luxembourg Hong Kong Tokyo

Jack Manley Meera Pandit, CFA Tilmann Galler, CFA Ian Hui
New York New York Frankfurt Hong Kong
Max McKechnie
London Chaoping Zhu, CFA
Shanghai

Jordan Jackson Stephanie Aliaga Maria Paola Toschi Adrian Tong

New York New York Milan Hong Kong

Natasha May Arthur Jiang

London Shanghai

Mary Park Durham Nimish Vyas Elena Domecq

New York New York Madrid Jennifer Qiu
Hong Kong

Marina Valentini
Sao Paulo
Agnes Lin
Brandon Hall Kathleen Clum Zara Nokes Lucia Gutierrez Mellado Taipei Kerry Craig, CFA
Sahil Gauba
New York New York London Madrid Melbourne
Mumbai
S&P 500 Price Index Jan. 3, 2022
4,800 P/E (fwd.) = 21.4x Jun. 30, 2023
4,797 P/E (fwd.) = 19.1x
4,500 Characteristic 3/24/2000 10/9/2007 2/19/2020 1/3/2022 6/30/2023 4,450

Index Level 1,527 1,565 3,386 4,797 4,450

4,200
P/E Ratio (fwd.) 25.2x 15.1x 19.2x 21.4x 19.1x +114%
3,900 Dividend Yield 1.4% 1.9% 1.9% 1.3% 1.6%
-25% +24%
3,600 10-yr. Treasury 6.2% 4.7% 1.6% 1.6% 3.8% Feb. 19, 2020
P/E (fwd.) = 19.2x Oct. 12, 2022
3,386 P/E (fwd.) = 15.2x
3,300
3,577
3,000

2,700
+401% -34%
2,400

2,100 Mar. 23, 2020

Oct. 9, 2007
Mar. 24, 2000 P/E (fwd.) = 13.3x
P/E (fwd.) = 15.1x
1,800 P/E (fwd.) = 25.2x 2,237
1,565
1,527
1,500
+106% -49% +101%
1,200
-57%
Dec. 31, 1996 Oct. 9, 2002 Mar. 9, 2009
900 P/E (fwd.) = 10.4x
P/E (fwd.) = 15.9x P/E (fwd.) = 14.1x
741 777 677
600
'96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22
S&P 500 Index: Forward P/E ratio
28x
Std. dev. Over-
Valuation measure Description Latest 25-year avg.*
/under-Valued
26x P/E Forward P/E 19.13x 16.79x 0.71
CAPE Shiller's P/E 30.79x 27.81x 0.47
Div. Yield Dividend yield 1.59% 1.98% 1.15
24x
P/B Price to book 3.84x 3.10x 0.91
P/CF Price to cash flow 14.74x 11.24x 1.59
22x EY Spread EY minus Baa yield -0.54% 0.31% 0.45

20x
+1 Std. dev.: 20.10x

18x
25-year average: 16.79x

16x
Jun. 30, 2023:
14x 19.13x

-1 Std. dev.: 13.47x

12x

10x

8x
'98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 '22
Forward P/E and subsequent 1-yr. returns Forward P/E and subsequent 5-yr. annualized returns
S&P 500 Total Return Index S&P 500 Total Return Index
60% 60%

Jun. 30, 2023: 19.1x

40% 40%
Jun. 30, 2023: 19.1x

20% 20%

0% 0%

-20% -20%

-40% -40%

R² = 5% R² = 33%

-60% -60%
8.0x 11.0x 14.0x 17.0x 20.0x 23.0x 26.0x 8.0x 11.0x 14.0x 17.0x 20.0x 23.0x 26.0x
Valuation dispersion between the 20th and 80th percentile of S&P 500 stocks

35x

30x
25-yr. average Current
Median S&P 500 P/Es 16.0x 18.0x
Valuation spread 11.7x 17.3x
25x

20x

15x

10x

5x
'96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22
S&P 500 earnings per share S&P 500 year-over-year operating EPS growth
Index annual operating earnings, USD Annual growth broken into revenue, changes in profit margin & changes in share count
$300 100%
Share of EPS growth 2023* Avg. '01-'22
$275 Margin 8.1% 4.1%
80% Revenue 2.4% 4.0%
Consensus analyst estimates 70%
$250 Share count 0.2% 0.3%
Earnings recessions
Total EPS 10.8% 8.4%
$225 60%
47%

$200
40%
2023
$175
24%
22%
19% 19% 17%
$150 20% 13%
15% 15% 15%
11% 11%
5% 6%
4%
$125 0%
0%
$100 -6% -5%
-11%

$75 -20%
-22%

$50 -31%
-40%
-40%
$25

$0 -60%
'88 '91 '94 '97 '00 '03 '06 '09 '12 '15 '18 '21 '24 '01 '03 '05 '07 '09 '11 '13 '15 '17 '19 '21 '23
S&P 500 profit margins S&P 500 operating margins by sector
Quarterly operating earnings/sales Current operating margins versus historical range**
14%
S&P 500
1Q23:
11.6%*
Real Estate
12%
Recession Utilities

10% Comm. Services

Tech.
8%
Financials

Health Care
6% Range since 4Q10
Cons. Staples 1Q23*

4% Cons. Disc.

Industrials

2%
Materials

Energy
0%
'92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 '22 0% 6% 12% 18% 24% 30% 36%
Value vs. Growth relative valuations S&P 500 operating leverage by sector
Rel. fwd. P/E ratio of Value vs. Growth, 1997 - present Impact on operating income from a 1% rise in revenues
1.40
Energy 8.4x
Recession Growth cheap/Value
expensive
1.20 Real Estate 1.9x

Materials 1.7x

1.00
Financials 1.6x

Utilities 1.5x
0.80

Health Care 1.3x

Long-term avg.*:0.71
0.60
Industrials 1.3x
Value cheap/Growth
expensive Jun. 30, 2023:
Cons. Disc. 1.1x
0.54
0.40
Forward P/E Div. yield** Comm. Services 0.9x Value
Long- Long- Growth
Style Current Current
term avg.* term avg.*
0.20 Tech. 0.7x
Value 14.48x 14.09x 2.40% 2.59%
Growth 27.01x 20.79x 0.82% 1.34%
Cons. Staples -0.2x
0.00
'97 '99 '01 '03 '05 '07 '09 '11 '13 '15 '17 '19 '21 -2.0x 0.0x 2.0x 4.0x 6.0x 8.0x 10.0x
P/E ratio of the top 10 and remaining stocks in the S&P 500 Weight of the top 10 stocks in the S&P 500
Next 12 months, 1996 - present % of market capitalization of the S&P 500
49x 36%
Current Average % of avg. Jun. 30, 2023: 31.7%
32%
Top 10 29.3x 20.1x 145%
44x Remaining stocks 17.8x 15.7x 113% 28%
S&P 500 19.1x 16.5x 116%
24%
39x
20%

16%
34x
12%
'96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 '22

29x
Earnings contribution of the top 10 in the S&P 500
Based on last 12 months’ earnings
36%
24x Jun. 30, 2023: 21.5%
32%

28%
19x
24%

14x 20%

16%

9x 12%
'96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 '22 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 '22
Sector composition Percent of unprofitable companies in the Russell 2000
% of index market capitalization 1Q98 – 4Q22, pro-forma EPS
55%
28.3%
Info. Tech.
13.7% 50%

13.4% 45%
Health Care
16.9%
40%
12.4% 4Q22:
Financials 35% 41.6%
15.1%
30%
10.7%
Cons. Discretionary 25%
10.6%

8.5% 20%
Industrials
17.4% 15%
8.4% '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 '22
Comm. Svcs.
2.5%
Interest rate coverage ratio
6.7% EBIT/interest expense on debt, monthly, LTM, 1998-present
Cons. Staples
3.4%
12x
4.1% Large cap Large cap May 2023: 9.2x
Energy 10x
6.8%
Small cap Small cap
2.6% 8x
Utilities
3.0%
6x
Average: 6.3x
2.5%
Materials
4.6% 4x
May 2023: 2.6x
2.5% 2x
Real Estate Average: 2.1x
6.1%
0x
0% 5% 10% 15% 20% 25% 30% 35% 40% '98 '01 '04 '07 '10 '13 '16 '19 '22
 10-year annualized YTD Current P/E vs. 20-year avg. P/E

Value Blend Growth Value Blend Growth Value Blend Growth

14.5 19.1 27.0
Large

Large

Large
9.2% 12.9% 15.7% 5.1% 16.9% 29.0%
13.7 15.5 18.7

14.3 16.4 26.0

Mid

Mid

Mid
9.0% 10.3% 11.5% 5.2% 9.0% 15.9%
14.5 16.4 20.4
Small

Small

Small
14.9 21.2 36.9
7.3% 8.3% 8.8% 2.5% 8.1% 13.6%
16.8 21.4 22.9

Since market peak (February 2020) Since market low (March 2020) Current P/E as % of 20-year avg. P/E
Value Blend Growth Value Blend Growth Value Blend Growth
Large

Large

Large
23.5% 38.8% 47.9% 99.8% 109.7% 115.7% 105.7% 123.1% 144.2%
Mid

Mid

Mid
22.6% 24.6% 21.4% 116.7% 108.6% 88.8% 98.6% 100.4% 127.6%
Small

Small

Small
20.2% 16.6% 10.2% 111.3% 96.5% 79.0% 89.0% 99.3% 160.9%
 Cons. Comm. Real Health Cons. S&P 500
Energy Materials Financials Industrials Disc. Tech. Services* Estate Care Staples Utilities Index
S&P weight 4.1% 2.5% 12.4% 8.5% 10.7% 28.3% 8.4% 2.5% 13.4% 6.7% 2.6% 100.0%

Weight
Russell Growth weight 0.5% 0.7% 6.4% 6.0% 16.0% 43.3% 10.7% 1.0% 11.0% 4.4% 0.1% 100.0%
Russell Value weight 7.9% 4.8% 20.1% 13.5% 5.3% 9.0% 5.1% 4.9% 15.8% 8.4% 5.2% 100.0%
Russell 2000 weight 6.8% 4.6% 15.1% 17.4% 10.5% 13.7% 2.5% 6.1% 16.9% 3.4% 3.0% 100.0%
QTD -0.9% 3.3% 5.3% 6.5% 14.6% 17.2% 13.1% 0.3% 3.0% 0.5% -2.5% 8.7%
YTD -5.5% 7.7% -0.5% 10.2% 33.1% 42.8% 36.2% 1.5% -1.5% 1.3% -5.7% 16.9%

Return
Since market peak
76.3% 47.4% 16.8% 35.7% 30.6% 77.1% 15.6% -7.8% 35.4% 28.9% 4.3% 38.8%
(February 2020)
Since market low
300.0% 130.7% 104.7% 132.7% 91.3% 157.2% 61.8% 48.7% 87.8% 69.7% 62.0% 109.7%
(March 2020)
Beta to S&P 500 1.3 1.1 1.1 1.1 1.2 1.1 1.0* 0.8 0.8 0.6 0.5 1.0

β
Correl. To Treas. Yields 0.0 -0.5 -0.3 -0.5 -0.6 -0.7 -0.8 -0.6 -0.4 -0.4 -0.5 -0.6

% ρ
Foreign % of sales 37.8 55.2 21.3 32.3 34.3 57.6 42.8 15.9 35.7 42.0 1.8 39.5
NTM earnings growth -15.1% -6.9% 4.1% 13.1% 21.1% 8.4% 17.4% 2.5% -0.9% 6.1% 7.4% 6.1%

EPS
20-yr. avg. 99.9% 15.4% 20.7% 14.1% 17.0% 13.1% 10.3%* 6.8% 8.1% 7.7% 4.4% 11.1%
Forward P/E ratio 10.7x 17.5x 13.4x 18.8x 26.9x 27.6x 17.2x 16.6x 17.2x 20.0x 17.0x 19.1x

P/E
20-yr. avg. 13.6x 14.8x 12.5x 16.3x 19.3x 17.9x 18.7x* 16.8x 15.0x 17.4x 15.5x 15.5x
Buyback yield 5.0% 2.4% 2.8% 2.5% 1.9% 2.0% 4.1% -1.7% 1.6% 1.2% -1.1% 2.2%

Bbk
20-yr. avg. 1.7% 0.9% 0.4% 2.2% 2.4% 3.0% 1.6% -1.4% 2.0% 1.8% -0.8% 1.8%
Dividend yield 3.4% 2.0% 2.0% 1.8% 0.9% 0.9% 0.9% 3.9% 1.8% 2.7% 3.5% 1.6%

Div
20-yr. avg. 2.8% 2.4% 2.3% 2.2% 1.4% 1.2% 1.2% 3.9% 1.9% 2.8% 3.9% 2.1%
S&P intra-year declines vs. calendar year returns
Despite average intra-year drops of 14.3%, annual returns were positive in 32 of 43 years
40%
34%
31%
30% 29%
30% 26% 27% 26% 27% 26% 27% YTD
26%
23%
20% 20% 19%
20% 17% 16% 16%
15% 15% 14%
12% 13% 13%
11%
9% 10%
10% 7%
4% 4%
2% 3%
1%
0%
0%
-2% -1%
-3% -3%
-10% -7% -7%-6%-6%-5% -6% -6%
-7% -5%
-10%
-8% -8%-8%
-9%
-8% -8%-7%-8% -7% -8%
-9% -10% -10% -10% -11%
-11%
-13% -12% -13% -12%
-14%
-20% -17% -17% -16%
-18% -17% -19%
-20% -19% -19% -20%
-23%
-25%
-30% -28%
-30%
-34% -34% -34%
-40% -38%

-50%
-49%

-60%
'80 '85 '90 '95 '00 '05 '10 '15 '20
Return needed to reach January 2022 peak of 4,797 Bull and bear markets
S&P 500 level as of 6/30/2023 is 4,450

Bull m arkets Bear m arkets

1-yr 9.4% 9.4% Bull begin Duration Market Duration

Bull return Bear return*
date (m onths) peak (m onths)*

Jul 1926 152% 37 Sep 1929 -86% 32

Mar 1935 129% 23 Mar 1937 -60% 61

2-yrs 5.4% 11.1%
Apr 1942 158% 49 May 1946 -30% 36

Jun 1949 267% 85 Aug 1956 -22% 14

Oct 1960 39% 13 Dec 1961 -28% 6

3-yrs 4.1% 12.9% Oct 1962 76% 39 Feb 1966 -22% 7

Oct 1966 48% 25 Nov 1968 -36% 17

X% Implied avg. annualized total return
May 1970 74% 31 Jan 1973 -48% 20
X% Implied cumulative total return
Mar 1978 62% 32 Nov 1980 -27% 20
4-yrs 3.5% 14.7%
Aug 1982 229% 60 Aug 1987 -34% 3

Oct 1990 417% 113 Mar 2000 -49% 30

Oct 2002 101% 60 Oct 2007 -57% 17

5-yrs 3.1% 16.5%
Mar 2009 401% 131 Feb 2020 -34% 1

Mar 2020 114% 21 Jan. 2022** -25% 9

0% 2% 4% 6% 8% 10% Averages 162% 51 - -41% 20

April 1960 – February 1961 December 1969 – November 1970 November 1973 – March 1975
140 7.5% 150 6% 175 9.5%

150 8.5%
120 6.5% 130 5% 7.5%
125
6.5%
100 5.5% 110 4%
100 5.5%
October 1960 June 1970 September 1974
80 4.5% 90 3% 75 4.5%
-18 -14 -10 -6 -2 2 6 10 14 18 -18 -14 -10 -6 -2 2 6 10 14 18 -18 -14 -10 -6 -2 2 6 10 14 18

January 1980 – July 1980 July 1981 – November 1982 July 1990 – March 1991
145 8% 170 11% 145 7.5%

125 150 10% 135 7.0%

7%
125 6.5%
105 130 9%
115 6.0%
6%
85 110 8% 105 5.5%
March 1980 July 1982
October 1990
65 5% 90 7% 95 5.0%
-18 -14 -10 -6 -2 2 6 10 14 18 -18 -14 -10 -6 -2 2 6 10 14 18 -18 -14 -10 -6 -2 2 6 10 14 18

March 2001 – November 2001 December 2007 – June 2009 March 2020 – April 2020
200 6.0% 215 10.5% 200
15%
180 5.5% 195 9.5% 180 March 2020
March 2020
175 8.5% 160 12%
160 5.0%
155 7.5% 140 9%
140 October 4.5%
135 6.5% 120
2002
120 4.0% 115 February 5.5% 6%
2009
100
100 3.5% 95 4.5%
80 3%
-30 -26 -22 -18 -14 -10 -6 -2 2 6 -18 -14 -10 -6 -2 2 6 10 14 18
-18 -14 -10 -6 -2 2 6 10 14 18
Unemployment Rate Recession
S&P 500 Total Return Market Low
Real GDP Components of GDP
Trillions of chained (2012) dollars, seasonally adjusted at annual rates 1Q23 nominal GDP, USD trillions
$21 $28
3.9% Housing
GDP (%) 2Q22 3Q22 4Q22 1Q23
$20 13.4% Investment ex-housing
Q/Q saar -0.6 3.2 2.6 2.0
Y/Y 1.8 1.9 0.9 1.8 $23
$19
17.5% Gov't spending

$18 $18
Trend growth:
2.0%
$17

$13
$16

$15 68.3% Consumption

$8

$14

$3
$13

$12
-3.0% Net exports
'01 '03 '05 '07 '09 '11 '13 '15 '17 '19 '21 -$2
Variables used by the NBER in making recession determination*
% change month-over-month
2019 2020 2021 2022 2023

Nov

Nov

Nov

Nov
Aug

Aug

Aug
Dec

May

Dec

May

Dec

May

Dec

May
Jan
Feb

Jun

Sep

Jan
Feb

Jun

Sep

Jan
Feb

Jun

Sep

Jan
Feb
Oct

Oct

Oct

Oct
Mar

Mar

Mar

Mar
Apr

Apr

Apr

Apr
Jul

Jul

Jul
Real personal incom e less transfers

Nonfarm payroll em ploym ent

Household survey em ploym ent

Real consum er spending

Real w holesale + retail sales

Industrial production

% change, last six months

2%

1% 0.7%
1.2% 1.4% 1.3%
0%
-0.1%
-1%
-2.4%
-2%

-3%
Real personal income less Nonfarm payroll employment Household survey employment Real consumer spending Real wholesale + retail sales Industrial production
transfers
Residential investment as a % of GDP Business fixed investment as a % of GDP
Quarterly, seasonally adjusted Quarterly, seasonally adjusted
7% 16%
Recession
6% 15%
1Q23: 13.3%
14%
5%
13%
4% Average: 12.8%
Average: 4.4% 12%
3% 11%
1Q23: 3.9%
2% 10%
'68 '73 '78 '83 '88 '93 '98 '03 '08 '13 '18 '23 '68 '73 '78 '83 '88 '93 '98 '03 '08 '13 '18 '23

Light vehicle sales Total business inventory/sales ratio

Mil vehicles, seasonally adjusted ann. rate Days of sales, monthly, seasonally adjusted
20 55
53
18 51
16 49
47
14 45
Average: 14.8m 43
May 2023: Average: 43.0 days
12 41
15.0m
10 39
37 Apr. 2023: 42.6 days
8 35
'76 '81 '86 '91 '96 '01 '06 '11 '16 '21 '81 '86 '91 '96 '01 '06 '11 '16 '21
Profit growth and capital expenditures Capital spending intentions over the next 6 months
Year-over-year % Average of regional Fed surveys***, diffusion index, quarterly, SA
90% 20% 35 15%
Regional Fed surveys,
future capex intentions
70% 15%
10%
25
50%
10%
5%
30% 15
5%

10% 0%

0% 5
-10%
-5%
-5%
-30% -5
-10%
-10%
-50%
-15
-15%
-70% -15%
Real nonresidential private
Operating EPS** Nom inal capital fixed investment, y/y%
expenditures*
-90% -20% -25 -20%
'89 '92 '95 '98 '01 '04 '07 '10 '13 '16 '19 '22 '04 '06 '08 '10 '12 '14 '16 '18 '20 '22
Housing inventories Single-family housing starts
Inventory of new and existing single family homes for sale, thous, SA* Seasonally adjusted annual rate (SAAR), thous houses
4,500 2,000
4,000 1,800

3,500 1,600
1,400
3,000
Average: 2,379 1,200
2,500
1,000
2,000 Average: 1,015
800
1,500 600
May 2023: 1,319 May 2023:
1,000 400 997
500 200
'82 '85 '88 '91 '94 '97 '00 '03 '06 '09 '12 '15 '18 '21 '59 '63 '67 '71 '75 '79 '83 '87 '91 '95 '99 '03 '07 '11 '15 '19 '23

Rental vacancy rate Multi-family housing starts

Percent Total multi-family, SAAR, thous houses
12% 1,200
11%
1,000
10%
800
9%
May 2023: 634
8% 600
Average: 7.3% Average: 418
7%
400
6%
1Q23: 6.4% 200
5%
4% 0
'56 '60 '64 '68 '72 '76 '80 '84 '88 '92 '96 '00 '04 '08 '12 '16 '20 '59 '63 '67 '71 '75 '79 '83 '87 '91 '95 '99 '03 '07 '11 '15 '19 '23
The 2023 federal budget Federal deficit and net interest outlays
CBO Baseline forecast, USD trillions % of GDP, 1973-2033, CBO Baseline Forecast
$7.0 -15%
Forecast
Total spending: $6.2tn Total deficit or surplus
-11%
$6.0
Other: $834bn (13%)
Borrowing: $1,410bn (23%) -7%
Net interest outlays
$5.0 Net int.: $640bn (10%)
Non-defense Other: $251bn (4%) -3%
disc.: $932bn
$4.0 (15%) Social
insurance: 1% Primary deficit or surplus
Defense: $1,562bn (25%)
$891bn (14%)
$3.0 5%
Corporate: $475bn (8%) '73 '78 '83 '88 '93 '98 '03 '08 '13 '18 '23 '28 '33
Social
Security:
$2.0 $1,336bn (21%) Federal net debt (accumulated deficits)
Incom e: % of GDP, 1940 – 2033, CBO Baseline Forecast, end of fiscal year
$1.0 Medicare & $2,523bn (41%) 140%
Medicaid: 2033:
$1,588bn (26%) 118.2%
120%
2023:
$0.0 98.0%
Total government spending Sources of financing 100%

CBO's Baseline economic assumptions 80%

2023 '24-'25 '26-'27 '28-'33 Forecast
60%
Real GDP grow th 0.3% 1.9% 2.4% 1.9%
10-year Treasury 3.8% 3.8% 3.8% 3.8% 40%
Headline inflation (CPI) 5.7% 2.8% 2.1% 2.2%
Unem ploym ent 4.3% 4.9% 4.5% 4.5% 20%
'40 '48 '56 '64 '72 '80 '88 '96 '04 '12 '20 '28
Consumer balance sheet Household debt service ratio
1Q23, USD trillions, not seasonally adjusted Debt payments as % of disposable personal income, SA
$180 14%
3Q07 Peak $85.1tn 4Q07: 13.2%
Total assets: $168.5tn
1Q09 Low $73.7tn 13%
$160
12%
1Q80:
Homes: 27% 11% 10.6%
$140 2Q23**:
10% 9.7%

$120 Other tangible: 5% 9%

Deposits: 9% 8%
'80 '85 '90 '95 '00 '05 '10 '15 '20
$100

Flows into early delinquencies

Pension funds: 18%
$80 % of balance delinquent 30+ days
Other non-revolving: 2% 16%
Revolving*: 6% 14%
$60 Auto loans: 7% 12%
Other liabilities: 10%
10%
$40 Student debt: 9%
8%
Other financial assets: 41%
6% Loans 1Q23
Total liabilities: $19.6tn Auto 6.9%
$20 4%
Credit card 6.5%
2%
Mortgages: 66% Student loan 1.1%
$0 0%
Assets Liabilities '03 '05 '07 '09 '11 '13 '15 '17 '19 '21 '23
Personal saving rate Household excess savings
Personal savings as a % of disposable personal income, annual Trillions of USD
Peak excess savings:
18% 7.0 $2.1tn 2.3

Accumulated excess savings

6.0

Personal Savings (SAAR)

Personal savings
1.8
16% 5.0
1.3
4.0
0.8
14% 3.0
Excess savings
remaining: $0.4tn 0.3
2.0
12% -0.2
1.0
Pre-pandemic trend
2023 YTD: 4.3% 0.0 -0.7
10% '18 '19 '20 '21 '22 '23

Average: 8.9% Revolving consumer credit outstanding

8% % of disposable income, SAAR
10%

6% 9%

8%
4%
Apr. 2023: 6.3%
7%

2% 6%

5%
0%
4%
'00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 '22
Asset exposure by bank size Important market interest rates
% of total loans and leases, domestically chartered commercial banks Monthly
100% 6%
Jun. 2023
Other**: 7%
5% 3-m onth T-bill 5.3%
90% Other**: 19% Governm ent m oney m arket fund 4.9%
4% Bank 6-m onth CD 2.2%
Bank savings account 0.4%
80% 3% Bank interest checking account 0.1%
Commercial
real estate: Commercial
70% 13% real estate: 2%
44%
1%
60% Consumer:
21% 0%
Apr '21 Aug '21 Dec '21 Apr '22 Aug '22 Dec '22 Apr '23
50%
Consumer: Bank deposits by bank size
40% 10%
Residential Trillions of USD
real estate*: 12.0 6.2
30% 24% Residential Large banks Sm all banks
real estate*: 11.5
21% 5.8
20% 11.0

10.5 5.4
10% C&I: 23%
C&I: 17%
10.0
5.0
0% 9.5
Large Small
Top 25 banks by All banks outside 9.0 4.6
dom estic assets top 25 Jan '21 May '21 Sep '21 Jan '22 May '22 Sep '22 Jan '23 May '23
Consumer Sentiment Index and subsequent 12-month S&P 500 returns
120
Avg. subsequent 12-mo. S&P 500 returns
9 sentiment peaks +3.5% Jan. 2000: -2.0%
9 sentiment troughs +24.1% Jan. 2004:
110
+4.4%
Feb. 2020:
Aug. 1972: Mar. 1984: +13.5% +29.0%
-6.2% Jan. 2007:
Jan. 2015: -2.7%
100 -4.2%
Apr.
May 1977: +1.2% 2021:
-1.2%
90

Average: 85.0
80

Mar. 2003:
+32.8% Oct. 2005:
70
+14.2% Apr. 2020:
+43.6%
Jun. 2023:
60 Oct. 1990: +29.1% 64.4

Feb. 1975:
+22.2% Nov. 2008: Aug. 2011:
50
May 1980: Sentiment cycle turning point and subsequent +22.2% +15.4%
12-m onth S&P 500 Index return Jun. 2022: +17.6%
+20.0%

40
'71 '73 '75 '77 '79 '81 '83 '85 '87 '89 '91 '93 '95 '97 '99 '01 '03 '05 '07 '09 '11 '13 '15 '17 '19 '21 '23
JOLTS job openings* JOLTS quits
Total job openings, thousands, seasonally adjusted Total nonfarm quits, thousands, seasonally adjusted
14,000 5,000
Recession
Mar. 2022: Apr. 2023: 3,793
12,027 4,000
12,000
3,000

10,000 2,000
Apr. 2023:
10,103
1,000
8,000 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 '22

JOLTS layoffs
Total nonfarm layoffs, thousands, seasonally adjusted
6,000
13,500
4,000

3,500
4,000
3,000

2,500
2,000 2,000

1,500
Apr. 2023: 1,581
0 1,000
'73 '76 '79 '82 '85 '88 '91 '94 '97 '00 '03 '06 '09 '12 '15 '18 '21 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 '22
Nonfarm payroll gains Labor force participation
Month-over-month change and 3mo. rolling average, SA % of civilian noninstitutional population, SA
1000 84% 41.0%
25-54 Years
900
May '23 83% 40.5%
800
Payroll gain 339K
700 3mo. avg 283K 82% 40.0%
600
81% 39.5%
500
400 80% 39.0%
300
79% 38.5%
200
100 78% 38.0%
55+ Years
0
77% 37.5%
Sep '21 Jan '22 May '22 Sep '22 Jan '23 May '23
'16 '17 '18 '19 '20 '21 '22 '23

Key labor market indicators

2020 2021 2022 2023
May

Nov

May

Nov

May

Nov

May
Aug

Aug

Aug
Dec

Dec

Dec
Jan
Feb

Jun

Sep

Jan
Feb

Jun

Sep

Jan
Feb

Jun

Sep

Jan
Feb

Jun
Mar
Apr

Mar
Apr

Mar
Apr

Mar
Apr
Oct

Oct

Oct
Jul

Jul

Jul
Initial jobless claims

Continuing jobless claims

Challenger layoffs

Jobs plentiful vs. hard to get

ISM services employment

ISM manufacturing employment

Small business hiring plans (incr-decr)

Civilian unemployment rate and year-over-year wage growth
Private production and non-supervisory workers, seasonally adjusted, percent
16%
50-year avg. Apr. 2020: 14.7%
Unemployment rate 6.2%
14%
Wage growth 4.0%

12%
Nov. 1982: 10.8%
Oct. 2009: 10.0%
10%
May 1975: 9.0%

Jun. 1992: 7.8%

8%

Jun. 2003: 6.3% May 2023: 5.0%

6%

4%

2%
May 2023: 3.7%

0%
'72 '74 '76 '78 '80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 '22
CPI and core CPI
% change vs. prior year, seasonally adjusted
15%
50-yr. avg. Apr. 2023 May 2023
Recession Headline CPI 3.9% 5.0% 4.1%
Core CPI 3.9% 5.5% 5.3%
12% Food CPI 3.9% 7.6% 6.7%
Energy CPI 4.6% -4.9% -11.3%
Headline PCE deflator 3.4% 4.3% 3.8%
Core PCE deflator 3.4% 4.7% 4.6%
9%

6%

3%

0%

-3%
'73 '75 '77 '79 '81 '83 '85 '87 '89 '91 '93 '95 '97 '99 '01 '03 '05 '07 '09 '11 '13 '15 '17 '19 '21 '23
Consumer Price Index, components
m/m % change, seasonally adjusted
2021 2022 2023
Weight Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May
Headline CPI, y/y 100.0 5.3% 5.2% 5.2% 5.4% 6.2% 6.9% 7.2% 7.6% 8.0% 8.5% 8.2% 8.5% 8.9% 8.4% 8.2% 8.2% 7.8% 7.1% 6.4% 6.3% 6.0% 5.0% 5.0% 4.1%

Core CPI, y/y 79.6 4.4% 4.2% 3.9% 4.0% 4.6% 5.0% 5.5% 6.1% 6.4% 6.5% 6.1% 6.0% 5.9% 5.9% 6.3% 6.6% 6.3% 6.0% 5.7% 5.5% 5.5% 5.6% 5.5% 5.3%

Core svcs. ex-housing PCE, y/y* - 4.2% 4.4% 4.4% 4.3% 4.4% 5.0% 5.0% 4.9% 4.8% 4.7% 4.5% 4.5% 4.6% 4.0% 4.2% 4.5% 4.7% 4.4% 4.3% 4.7% 4.8% 4.6% 4.7% 4.6%

Headline CPI, m/m 100.0 0.8% 0.4% 0.4% 0.4% 0.9% 0.8% 0.8% 0.6% 0.7% 1.0% 0.4% 0.9% 1.2% 0.0% 0.2% 0.4% 0.5% 0.2% 0.1% 0.5% 0.4% 0.1% 0.4% 0.1%

Core CPI, m/m 79.6 0.7% 0.3% 0.2% 0.3% 0.7% 0.6% 0.7% 0.6% 0.5% 0.3% 0.5% 0.6% 0.6% 0.3% 0.6% 0.6% 0.3% 0.3% 0.4% 0.4% 0.5% 0.4% 0.4% 0.4%

Core svcs. ex-housing PCE, m/m* - 0.4% 0.5% 0.3% 0.2% 0.2% 0.6% 0.5% 0.2% 0.3% 0.5% 0.3% 0.3% 0.6% -0.1% 0.5% 0.5% 0.4% 0.3% 0.4% 0.6% 0.3% 0.3% 0.4% 0.2%

Energy 6.9 1.5% 1.7% 2.8% 1.5% 3.6% 2.6% 2.4% 0.8% 2.7% 8.2% -1.0% 3.4% 6.9% -4.7% -3.9% -1.7% 1.7% -1.4% -3.1% 2.0% -0.6% -3.5% 0.6% -3.6%

Gasoline 3.3 2.5% 2.5% 4.5% 1.5% 4.1% 4.2% 3.8% -0.3% 4.7% 13.2% -3.1% 3.2% 10.3% -8.1% -8.4% -4.2% 3.4% -2.3% -7.0% 2.4% 1.0% -4.6% 3.0% -5.6%

Electricity 2.5 0.0% 0.2% 0.7% 1.0% 1.6% 0.7% 0.9% 2.7% -0.3% 1.7% 0.9% 1.3% 1.5% 1.5% 1.2% 0.8% 0.5% 0.5% 1.3% 0.5% 0.5% -0.7% -0.7% -1.0%

Utility Gas 0.8 1.2% 2.0% 1.6% 2.2% 6.7% 0.5% 0.1% 0.5% 2.0% 0.6% 2.5% 7.2% 7.5% -3.8% 3.5% 2.2% -3.7% -3.4% 3.5% 6.7% -8.0% -7.1% -4.9% -2.6%

Food 13.5 0.7% 0.6% 0.4% 0.9% 0.9% 0.8% 0.6% 0.8% 1.0% 0.9% 0.8% 1.1% 1.0% 1.1% 0.8% 0.8% 0.7% 0.6% 0.4% 0.5% 0.4% 0.0% 0.0% 0.2%

Food at home 8.7 0.8% 0.5% 0.4% 1.2% 1.0% 1.0% 0.6% 0.9% 1.3% 1.3% 0.9% 1.3% 1.0% 1.3% 0.8% 0.7% 0.5% 0.6% 0.5% 0.4% 0.3% -0.3% -0.2% 0.1%

Food away from home 4.8 0.7% 0.8% 0.4% 0.5% 0.8% 0.6% 0.6% 0.7% 0.4% 0.3% 0.6% 0.7% 0.9% 0.7% 0.9% 0.9% 0.9% 0.5% 0.4% 0.6% 0.6% 0.6% 0.4% 0.5%

Core goods 21.3 1.9% 0.3% 0.3% 0.3% 1.3% 1.1% 1.4% 0.9% 0.3% -0.4% 0.1% 0.6% 0.6% 0.1% 0.4% 0.0% -0.1% -0.2% -0.1% 0.1% 0.0% 0.2% 0.6% 0.6%

Apparel 2.6 0.6% 0.0% 0.3% -0.5% 1.0% 0.7% 0.9% 0.7% 0.6% 0.3% -0.1% 0.4% 0.7% -0.1% 0.3% 0.0% -0.2% 0.1% 0.2% 0.8% 0.8% 0.3% 0.3% 0.3%

New vehicles 4.3 1.6% 1.4% 1.2% 1.3% 1.5% 1.6% 1.8% 0.3% 0.1% 0.1% 0.4% 0.6% 0.5% 0.5% 0.8% 0.7% 0.6% 0.5% 0.6% 0.2% 0.2% 0.4% -0.2% -0.1%

Used cars 2.6 9.1% -0.4% -1.3% -0.5% 3.1% 3.2% 3.9% 1.4% -0.6% -3.6% -0.7% 1.9% 0.5% -0.8% -0.2% -1.1% -1.7% -2.0% -2.0% -1.9% -2.8% -0.9% 4.4% 4.4%

Medical care commod 1.5 -0.4% 0.2% -0.2% 0.3% 0.6% 0.1% 0.0% 0.9% 0.3% 0.2% 0.1% 0.3% 0.4% 0.6% 0.2% -0.1% 0.0% 0.2% 0.1% 1.1% 0.1% 0.6% 0.5% 0.6%

Core services 58.3 0.3% 0.3% 0.1% 0.2% 0.4% 0.4% 0.4% 0.4% 0.5% 0.6% 0.6% 0.6% 0.6% 0.4% 0.6% 0.8% 0.5% 0.5% 0.6% 0.5% 0.6% 0.4% 0.4% 0.4%

Shelter 34.6 0.4% 0.5% 0.2% 0.4% 0.4% 0.5% 0.4% 0.3% 0.6% 0.5% 0.5% 0.6% 0.6% 0.6% 0.7% 0.7% 0.7% 0.6% 0.8% 0.7% 0.8% 0.6% 0.4% 0.6%

Rent of primary res. 7.5 0.2% 0.2% 0.3% 0.4% 0.4% 0.4% 0.4% 0.5% 0.6% 0.4% 0.6% 0.6% 0.8% 0.7% 0.7% 0.8% 0.7% 0.8% 0.8% 0.7% 0.8% 0.5% 0.6% 0.5%

OER 25.4 0.3% 0.3% 0.3% 0.4% 0.4% 0.4% 0.4% 0.5% 0.5% 0.5% 0.5% 0.6% 0.7% 0.6% 0.7% 0.8% 0.6% 0.7% 0.8% 0.7% 0.7% 0.5% 0.5% 0.5%

Medical care services 6.5 -0.1% 0.1% 0.2% 0.0% 0.6% 0.5% 0.5% 0.5% 0.1% 0.6% 0.5% 0.4% 0.7% 0.4% 0.7% 0.8% -0.4% -0.5% 0.3% -0.7% -0.7% -0.5% -0.1% -0.1%

Transportation services 5.9 0.9% -0.8% -0.7% -0.9% 0.0% 1.2% 0.5% 0.7% 1.1% 2.1% 2.2% 1.6% 1.8% -0.4% 1.0% 1.9% 0.6% 0.3% 0.6% 0.9% 1.1% 1.4% -0.2% 0.8%
Contributors to headline CPI inflation Contributors to core services ex-shelter CPI inflation*
Contribution to y/y % change in CPI, non-seasonally adjusted Contribution to y/y % change in custom CPI index, non-seasonally adj.
10% 10%
Energy New and used vehicles Other services
9.1% Other Food at hom e Education and com m. services
9% 9%
8.6% 8.5% Restaurants, hotels and transp. Recreation services
8.3% 8.2%
Shelter Airline fares
8% 7.7% 8%
Transportation services (ex-airfares)
7.1%
Medical services
7% 7% 6.6%
6.5% 6.4% 6.4% 6.3% 6.4% 6.3%
6.0% 6.1%
5.7% 5.9%
6% 5.0% 6%
5.5% 5.3% 5.4% 5.0%
4.9%
4.0%
5% 5% 4.6%

4% 4%

3% 3%

2% 2%

1% 1%

0% 0%

-1% -1%
May '22 Jul '22 Sep '22 Nov '22 Jan '23 Mar '23 May '23 May '22 Jul '22 Sep '22 Nov '22 Jan '23 Mar '23 May '23
The U.S. dollar The U.S. trade balance
U.S. Dollar Index Current account balance, % of GDP
130 -7%
-6%
-5%
120
-4%
1Q23: -3.3%
Sep. 2022:
-3%
112.1
-2%
110
-1%
Jun. 30, 2023:
102.9 0%
'98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 '22
100

Developed markets interest rate differentials

90 Difference between U.S. and international 10-year yields*
3%

80 2%

1%
70 Jun. 30, 2023: 1.6%
0%

60 -1%
'98 '01 '04 '07 '10 '13 '16 '19 '22 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 '22
Change in production and consumption of liquid fuels Price of oil
Production, consumption and inventories, millions of barrels per day WTI crude, nominal prices, USD/barrel
Production 2019 2020 2021 2022 2023* Growth since '19 $160
Jul. 3, 2008:
U.S. 19.5 18.6 19.0 20.2 21.3 8.8% $145.29
OPEC 34.6 30.7 31.7 34.2 33.5 -3.2%
$140
Russia 11.5 10.5 10.8 10.9 10.7 -6.7%
Mar. 8, 2022:
Global 100.3 93.9 95.7 99.9 101.4 1.1% $123.7
Consumption
$120
U.S. 20.5 18.2 19.9 20.3 20.4 -0.5% Jun. 13, 2014:
$106.91
China 14.0 14.4 15.3 15.2 16.0 13.8%
Global 100.9 91.6 97.1 99.4 101.0 0.1% $100
Inventory Change -0.6 2.3 -1.4 0.4 0.4
Oct. 3, 2018:
U.S. crude oil inventories and rig count** $80 $76.41
Million barrels, number of active rigs
1,300 2,250
Active rigs $60
1,200 Jun. 30,
1,750 2023:
1,100 $70.64
1,250 $40
1,000
750 Feb. 12, 2009:
900 $33.98 Feb. 11, 2016:
$20 $26.21
250
800
Inventories (incl. SPR)
Apr. 21, 2020: $11.57
700 -250 $0
'13 '14 '15 '16 '17 '18 '19 '20 '21 '22 '23 '03 '05 '07 '09 '11 '13 '15 '17 '19 '21 '23
Federal funds rate expectations
FOMC and market expectations for the federal funds rate
8%
Federal funds rate FOMC June 2023 forecasts
Percent
FOMC year-end estimates
Long
7% 2023 2024 2025
Market expectations run*
FOMC long-run projection* Change in real GDP, 4Q to 4Q 1.0 1.1 1.8 1.8

6% Unemployment rate, 4Q 4.1 4.5 4.5 4.0

Headline PCE inflation, 4Q to 4Q 3.2 2.5 2.1 2.0 5.60%
5.13%
Core PCE inflation, 4Q to 4Q 3.9 2.6 2.2
5%
5.38% 4.60%

4.16%
4% 3.94%

3% 3.40%
2.50%

2%

1%

0%
'99 '01 '03 '05 '07 '09 '11 '13 '15 '17 '19 '21 '23 '25 Long run
Nominal and real U.S. 10-year Treasury yields
20%

Sep. 30, 1981:

15.84%
Average
15% (1958 - present) Jun. 30, 2023
Nominal yields 5.76% 3.81%
Real yields 2.09% -1.52%
Inflation 3.68% 5.33%

Nominal 10-year U.S. Treasury yield

10%

5% Jun. 30, 2023:

3.81%

Real 10-year U.S. Treasury yield

0%

Jun. 30, 2023:

-1.52%
-5%
'58 '61 '64 '67 '70 '73 '76 '79 '82 '85 '88 '91 '94 '97 '00 '03 '06 '09 '12 '15 '18 '21
 Yield Return Impact of a 1% rise or fall in interest rates
2023 Avg. Correlation Correlation Total return, assumes a parallel shift in the yield curve
U.S. Treasuries 6/30/2023 12/31/2022
YTD Maturity to 10-year to S&P 500
2Y UST 6.8%
3.0%
2-Year 4.87% 4.41% 0.56% 2 years 0.73 -0.15

5Y UST 8.6%
5-Year 4.13% 3.99% 0.66% 5 0.93 -0.13
-0.3%

10Y UST 12.0%

10-Year 3.81% 3.88% 1.78% 10 1.00 -0.13 -4.3%

10Y TIPS 11.0%

10-Year TIPS* 1.60% 1.53% 2.21% 10 0.78 0.31 -6.9%

30Y UST 21.4%

30-Year 3.85% 3.97% 3.49% 30 0.93 -0.17 -13.7%

U.S. Aggregate 11.1%

Sector -1.5%

IG Corps 12.6%
U.S. Aggregate 4.81% 4.68% 2.09% 8.6 0.86 0.22 -1.7%

Convertibles 10.2%
IG Corps 5.48% 5.42% 3.21% 11.1 0.54 0.47 6.4%

U.S. HY 12.0%
Convertibles 7.87% 7.58% 8.39% - -0.13 0.87
5.0%

Municipals 9.6%
U.S. HY 8.50% 8.96% 5.38% 5.1 -0.09 0.74 -2.5%

Municipals 3.52% 3.55% 2.67% 13.1 0.54 0.21 MBS 10.8%

-1.3%
MBS 4.78% 4.71% 1.87% 7.8 0.78 0.14 ABS 1% fall 8.3%
2.8%
ABS 6.17% 5.89% 2.38% 3.5 0.07 0.08 1% rise 13.6%
Leveraged Loans
8.7%
Leveraged Loans 11.16% 11.41% 6.54% 2.4 -0.33 0.60 -20% -10% 0% 10% 20% 30%
U.S. Treasury yield curve
6.0%

5.5% Yield range over past 10 years

5.4%

5.0% 4.9%
4.8%
4.5%
4.7% 4.1% 4.1%
4.4% 4.0% Dec. 31, 2022 4.0%
4.2% 3.9%
4.0%
4.0% 4.0% 4.1%
3.8% Jun. 30, 2023 3.9%

3.0%

1.9% 1.9%
2.0% Dec. 31, 2021
1.4% 1.5%
1.3%
1.0%
1.0% 0.7%

0.4%

0.2%
0.0%
3m 1y 2y 3y 5y 7y 10y 20y 30y
Default rate and spread-to-worst
Percent
20%

Long-run avg. Jun. 30, 2023

16%
Default rate 3.55% 2.41%
Spread-to-worst 5.68% 4.34%
Recovery rate 40.20% 32.40%

12%

Recession

8%

4%

0%
'90 '93 '96 '99 '02 '05 '08 '11 '14 '17 '20 '23
Yield-to-worst across fixed income sectors
Percent, past 10 years Axis
8.0% 16.0%
10-year range 10-year median Current
7.0% 14.0%

6.0%
6.0% 11.2% 12.0%
5.5%

4.8% 5.5%
5.0% 10.0%

8.4% 8.3% 8.5%

4.0% 4.4% 4.4% 7.2% 8.0%

3.9% 3.2% 6.3% 6.1%
2.8% 5.7% 5.8% 6.0%
3.0% 6.4%

5.1%
2.0% 1.7% 4.0%
1.5% 4.5%

1.0% 2.0%
1.0%

0.0% 0.0%
U.S. Municipals* IG corps MBS ABS Euro IG EMD ($) EMD (LCL) EM Corp Euro HY U.S. HY Leveraged
Treasuries Loans
Developed market central bank bond purchases Historical policy rates and forward curves
USD billions, 12-month rolling flow Target policy rates and market implied forward rates
$6,000 7%
Forecast*

$5,000 Fed 6%
BoJ
ECB
$4,000 5%
BoE
Total
$3,000 4%

$2,000 3%

$1,000 2%

$0 1%

-$1,000 0%

Fed ECB BoE BoJ

-$2,000 -1%
'16 '17 '18 '19 '20 '21 '22 '23 '24 '22 '23 '24 '25 '26
 Yield 2023 Return Global bond market
Correlation USD trillions
Aggregates 6/30/2023 12/31/2022 Local USD Duration
to U.S. 10yr $140
12/31/1989 12/30/2022
U.S. 4.81% 4.68% 2.09% 2.09% 6.3 years 0.91 $130
U.S. 57.5% 38.6%
$120 Dev. ex-U.S. 41.3% 34.6%
Gbl. ex-U.S. 3.22% 3.13% - 0.98% 7.10 0.58
EM 1.2% 26.9%
$110
Japan 0.60% 0.75% 3.14% -5.84% 9.40 0.62
$100
Germ any 3.35% 3.22% 1.47% 3.73% 6.20 0.49
$90
UK 4.99% 4.29% -3.13% 2.38% 8.00 0.49 EM: $35tn
$80
Italy 3.99% 4.10% 4.32% 6.64% 6.10 0.36
$70
China 2.74% 2.94% 2.91% -1.52% 5.90 0.55
$60
Developed
Sector ex-U.S.: $47tn
$50

Euro Corp. 4.44% 4.32% 2.18% 4.46% 4.5 years 0.42 $40

Euro HY 8.29% 8.32% 4.79% 7.12% 3.10 0.01 $30

$20
EMD (USD) 8.36% 8.55% - 4.09% 6.00 0.31 U.S.: $51tn
$10
EMD (LCL) 6.32% 6.86% 5.73% 7.79% 5.00 0.20
$0
EM Corp. 7.23% 7.28% - 3.64% 4.90 0.22 '89 '92 '95 '98 '01 '04 '07 '10 '13 '16 '19 '22
Muni tax-equivalent and Treasury yield curves State and local and federal net debt
8.0% % of GDP, 1930-2022, end of fiscal year
120%
FY22:
100% 97.1%

7.0% 80%
Federal debt
60%

6.0% 40% FY22:

6.0% State and local debt 14.4%
AAA Muni tax-equivalent yield curve 20%
5.6%
5.5%
5.4% 0%
5.3% '30 '36 '42 '48 '54 '60 '66 '72 '78 '84 '90 '96 '02 '08 '14 '20
5.0% 5.1%

4.9% 4.8% Muni and corporate default rates

4.4% 4.3% % of issuers defaulting within 10 years, 1970-2021
4.3%
4.5% U.S. Treasury yield curve 60%

4.0% 4.1%
Municipals 49.0%
50%
4.0% 4.1% Corporates
3.8% 3.9% 40%
33.4%
30%
23.7%
3.0%
20% 14.8% 16.7%

10% 3.4% 3.4%

0.3% 0.8% 2.0%
0.0% 0.0% 0.1% 1.1%
2.0% 0%
3m 1y 2y 3y 5y 7y 10y 20y 30y Aaa Aa A Baa Ba B Caa-C
Bloomberg U.S. Aggregate intra-year declines vs. calendar year returns
Despite average intra-year drops of 3.3%, annual returns positive in 42 of 47 years
40%

33

30%

22

20% 19
16 15 16
15 15
12
10 10 10 YTD
10% 8 9 9 8 9
8 7 8 8
6 7 7
5 6 6
4 4 4 4 4
3 3 3 2 3 4
1 2 2
1 0
0%
-1 -2
-1
-2 -2 -2 -2 -2 -2 -2 -3 -1 -2 -2 -3 -2 -2 -3 -2 -2 -2 -2 -2 -2 -1 -2 -1 -2 -2 -2
-4 -4 -3 -4 -3 -3 -3
-4 -4 -4 -4
-5 -5 -5 -5 -5 -5 -4
-7 -7
-10%
-9

-13

-17
-20%
'76 '81 '86 '91 '96 '01 '06 '11 '16 '21
Returns 2023 2022 15-years Weights in MSCI All Country World Index
% global market capitalization, float adjusted
Local USD Local USD Ann. Beta
Em erging
m arkets
Regions 11% Europe
ex-UK
U.S. (S&P 500) - 16.9 - -18.1 8.8 0.9 12%

AC World ex-U.S. 10.1 9.9 -9.2 -15.6 2.0 1.0 Pacific 3%

EAFE 12.6 12.1 -6.5 -14.0 2.3 1.0 Canada 3%

United States
Europe ex-UK 13.8 16.0 -12.2 -17.3 2.4 1.2 62%

Emerging markets 5.8 5.1 -15.2 -19.7 1.0 1.1

Selected Countries Revenue exposure vs. country of listing

% of total revenue from home countries
Japan 24.0 13.2 -4.1 -16.3 2.5 0.7
80%
United Kingdom 2.6 8.4 7.2 -4.8 1.4 1.0
66%
France 16.5 19.1 -6.9 -12.7 2.8 1.2 59%
60%
Canada 6.1 8.6 -5.8 -12.2 3.0 0.7 47%

Germany 16.2 18.8 -16.5 -21.6 0.9 1.3 40% 35%

China -4.3 -5.4 -20.6 -21.8 0.6 1.0

20%
20%
India 4.4 5.3 3.0 -7.5 2.4 1.2

Korea 19.4 14.6 -24.4 -28.9 1.6 1.3

0%
Brazil 7.0 17.1 8.6 14.6 -2.1 1.4 UK Europe ex-UK Japan U.S. EM
U.S. dollar and relative international equity returns Currency impact on international returns
Real broad effective exchange rate, MSCI World ex-U.S. vs. S&P 500* MSCI All Country World ex-U.S. Index, total return
60%
135
Subsequent cumulative relative
Mar. 1985: out/underperformance of international
130 equity vs. U.S. equity through following 41.4%
+33% 42.1%
peak/trough
125 40%
17.1%
27.2% 27.8%
120
Feb. 2002: 21.4% 22.1%
Oct. 2022: 15.8%
+71% 7%** 17.1% 17.4%
115 20%
11.6% 11.1% 8.3%
9.9%

110 5.0%

105 0%

100 -5.3%
-3.4%
-13.3% -13.8%
95 -20% -15.6%

90
Oct. 1978:
-85%
85 -40%
Aug. 1992: Local currency return
-157% Currency return
80 -45.2%
Jul. 2011: U.S. dollar return
-225%
75 -60%
'74 '78 '82 '86 '90 '94 '98 '02 '06 '10 '14 '18 '22 '03 '05 '07 '09 '11 '13 '15 '17 '19 '21 '23
MSCI EAFE and MSCI USA relative performance
U.S. dollar, total return, cumulative outperformance
300%
299%
(5.6 yrs) 277%
(14.2 yrs)
250%
U.S. outperformance 220%
EAFE outperformance (6.2 yrs)

200%

150%

80% 89% 87%

100% (3.9 yrs)
(2.5 yrs) (2.0 yrs) 65%
60% (7.2 yrs)
(4.7 yrs) 36%
28% (1.4 yrs)
50%
(3.3 yrs)
1%
(1.6 yrs)

0%

-50%
'71 '74 '77 '80 '83 '86 '89 '92 '95 '98 '01 '04 '07 '10 '13 '16 '19 '22
International: Price-to-earnings discount vs. U.S. International: Difference in dividend yields vs. U.S.
MSCI All Country World ex-U.S. vs. S&P 500, next 12 months MSCI All Country World ex-U.S. minus S&P 500, next 12 months
10% 2.0%
20-yr. avg. P/E Current P/E
ratio ratio
S&P 500 16.4x 19.1x
5%
ACWI ex-U.S. 13.1x 12.9x
1.8%

0% +2 Std. dev.: 1.7%

1.6%
-5%
+1 Std. dev.: -7.3%
Jun. 30,
+1 Std. dev.: 1.4% 2023:
-10% 1.7%
1.4%
Average: -15.7%
-15%
Average: 1.2%
1.2%
-20%
-1 Std. dev.: -24.1%
-25% 1.0%

-1 Std. dev.: 1.0%

-30%
-2 Std. dev.: -32.6%
0.8%
Jun. 30,
-35%
2023:
-32.6%

-40% 0.6%
'03 '05 '07 '09 '11 '13 '15 '17 '19 '21 '23 '03 '05 '07 '09 '11 '13 '15 '17 '19 '21 '23
Global earnings estimates Global valuations
Jun. 2003 = 100, next 12 months consensus estimates, U.S. dollars Current and 25-year next 12 months price-to-earnings ratio
500 37x
46x
Japan Current
12/31/2021
450 China
33x
Recession
EM 25-year range
400 Europe 25-year average
29x
U.S.
350

25x
300
21.3x

250 21x
19.1x

200
17x 15.3x
14.9x
150
12.6x 12.5x
13x 14.5x

100 12.5x
12.4x
9x 10.2x
50

0 5x
'03 '05 '07 '09 '11 '13 '15 '17 '19 '21 '23 U.S. Japan Europe EM China
Regional and style leadership International growth sectors vs. U.S.
Sep. 2000 = 100, total return, U.S. dollars Total return, U.S. dollar, Dec. 31, 2014 = 100
530 500
Index % Tech % Cyclicals* Europe Renewable Energy
MSCI ACWI ex-U.S. 12% 47% Europe Biotech
S&P 500 28% 27% 450 Asia Tech ex-Japan
Global Value 10% 47%
450 Europe Luxury Goods
Global Growth 37% 18%
U.S. Growth
400

370 350
2008 - 2021:
U.S. outperformed
2000 - 2007: International: 274%
International 300
outperformed Growth
290 outperformed
U.S.: 81%
Value: 143% 250
Value
outperformed
Growth: 52%
210 200

150
130
100

50 50
'00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 '22 '14 '15 '16 '17 '18 '19 '20 '21 '22
Global Composite (manufacturing & services combined) Purchasing Managers’ Index, quarterly
2023
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 May Jun

Global 54.4 52.1

Manufacturing 49.6 48.8

Services 55.5 53.5

DM 53.7 -

EM 55.6 -

U.S. 54.3 53.0

Japan 54.3 52.1

UK 54.0 52.8
Developed

Euro Area 52.8 49.9

Germany 53.9 50.6

France 51.2 47.2

Italy 52.0 49.7

Spain 55.2 52.6

China 55.6 52.5

Emerging

India 61.6 59.4

Brazil 52.3 51.5

Year-over-year headline inflation by country and region, quarterly
2023
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Apr May

Global 4.7% 4.2%

DM 5.6% 4.9%

EM 3.4% 3.2%

U.S. 4.9% 4.0%

Canada 4.4% 3.4%

Japan 3.5% 3.2%

UK 8.7% 8.7%
Developed

Euro Area 6.9% 6.1%

Germany 7.1% 6.0%

France 5.9% 5.1%

Italy 8.2% 7.6%

Spain 4.1% 3.1%

Greece 3.0% 2.8%

China 0.1% 0.2%

Indonesia 4.3% 4.0%

Korea 3.7% 3.3%

Emerging

Taiwan 2.5% 2.2%

India 4.7% 4.3%

Brazil 4.2% 3.9%

Mexico 6.3% 5.8%

Growth of the middle class Regional contribution to middle class growth: 2023 to 2030
Percent of total population Millions of people
100% 1,400

34 8 -1
1995 2023F 2030F
1,200 47
79% 79% 71
80%
75% Rest of
72% Asia, 168
1,000

61%
60% 800 China,
57%
304
51%

41% 600
40%
40% 38%
34%
30% 400
India,
642
20%
200

4%
1% 0% 0
Asia Pacific Middle East Sub-Saharan Central and North Europe
0% and North Africa South America
India Indonesia China Brazil Mexico Africa America
China real GDP contribution Monetary stimulus: Reserve requirement ratio
Year-over-year % change for GDP, contribution to GDP for components 26%
15% Large banks Small and medium banks
2Q22 3Q22 4Q22 1Q23 22%
9.4%
Investm ent 0.3% 0.8% 3.9% 1.6%
10.6% Consum ption -0.9% 2.2% 0.2% 3.0% 18%
Net exports 1.0% 1.0% -1.2% -0.1%
9.5%
Total GDP 0.4% 3.9% 3.0% 4.5% 14%
10%
8.0%
8.4%
6.7% 3.9% 7.9% 7.8%
10%
7.4% 6.9%
7.0% 6.8%
6.9% 1.7%
6%
6.0%
3.3%
4.1% 3.3%
1.6% 3.1% '09 '11 '13 '15 '17 '19 '21 '23
2.9%
2.7%
5% 1.7% 4.5%
Fiscal stimulus: Fiscal deficit*
4.9%
3.0%
1.6% % GDP
6.3% 4.9% 2.2% 0%
5.4% 5.1%
4.4% 4.5% 3.9% 4.3% 3.5% 1.5%
3.9% 4.2% -2%
1.8% 3.0%
1.0% -4%
0.2% 0.8% 0.6% 1.8%
0.6%
0% 0.3% -6%
-0.7% -0.8% -0.5% 0.5% -0.1%
-4.0%-1.2% -0.3%-0.1% -0.2%
-8%
-10%
-12%
-11.5%
-14%
-16%
-5%
-18%
'10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22 '23F
Eurozone unemployment rate and wage growth Government capital spending
Year-over-year Year-over-year change, 3-year moving average
13% 5% 20%
Unemployment rate Wage growth
12% Forecast*
1Q23: 4.3% 4%
11% 15%

10% 3%
10%
9% 2%
8%
1% 5%
7%
May 2023: 6.5%
6% 0%
'98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 '22
0%

Eurozone interest rate and inflation expectations

5y5y swaps -5%
6%
France
5% -10% Italy
Interest rate expectations
4% Spain
3% -15%
Inflation expectations
2%

1% -20%
0%

-1% -25%
'07 '09 '11 '13 '15 '17 '19 '21 '23 '94 '97 '00 '03 '06 '09 '12 '15 '18 '21 '24
 U.S.
Large Corp. Hedge Private Ann.
Cap EAFE EME Bonds HY Munis Currcy. EMD Cmdty. REITs funds equity Gold Volatility

U.S. Large Cap 1.00 0.88 0.79 0.26 0.87 0.35 -0.46 0.72 0.41 0.76 0.83 0.80 0.11 15%

EAFE 1.00 0.89 0.28 0.85 0.43 -0.63 0.77 0.45 0.61 0.80 0.79 0.24 15%

EME 1.00 0.31 0.83 0.44 -0.69 0.80 0.49 0.54 0.77 0.77 0.39 18%

Bonds 1.00 0.38 0.85 -0.35 0.66 -0.21 0.42 -0.02 0.13 0.58 4%

Corp. HY 1.00 0.46 -0.50 0.87 0.50 0.69 0.79 0.75 0.29 8%

Munis 1.00 -0.39 0.75 -0.13 0.54 0.13 0.26 0.51 4%

Currencies 1.00 -0.59 -0.41 -0.22 -0.31 -0.56 -0.56 6%

EMD 1.00 0.27 0.64 0.56 0.60 0.51 8%

Commodities 1.00 0.34 0.64 0.58 0.29 17%

REITs 1.00 0.60 0.61 0.20 16%

Hedge funds 1.00 0.80 0.03 5%

Private equity 1.00 0.09 8%

Gold 1.00 15%

 Alternatives and portfolio risk/return
Annualized volatility and returns, 1989 – 3Q22
10%
40% Equities 50% Equities
30% Bonds 20% Bonds 80% Equities
30% Equities 30% Alts 30% Alts 20% Bonds
40% Bonds
30% Alts
9%
Annualized returns

60% Equities
40% Bonds
8%

40% Equities
Portfolio allocation Volatility Annualized returns
60% Bonds 40 Equities/60 F.I. 6.84% 7.25%
7% 60 Equities/40 F.I. 9.70% 8.16%
80 Equities/20 F.I. 12.83% 8.94%
30 Alts/30 Equities/40 F.I. 6.55% 8.41%
30 Alts/40 Equities/30 F.I. 8.02% 8.87%
30 Alts/50 Equities/20 F.I. 9.56% 9.30%

6%
6% 7% 8% 9% 10% 11% 12% 13%
Annualized volatility
U.S. real estate cap rate spreads U.S. vacancy rates by property type
Transaction based, spread to 10y UST, 4-quarter rolling average Percent
5% 18%
Apartment Office
Industrial Retail
16%

4%
14%

12%

3%
10%
Average: 2.8%

8%
2%

6%

4%
Mar. 2023:
1%
1.2%

2%

0%
0%
'00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 '22
'98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 '22
Number of listed U.S. companies* and market cap. Private vs. public equity sector weights
Number, S&P 500 market capitalization in USD trillions
9,000 45
# of listed companies Market cap.
12.1%
Tech
Apr. 2023: 35.8%
8,000 $34.8tn 40

Apr. 2023: 20.6%

7,000 35 Health Care
5,955 16.5%

6,000 30 14.5%
Industrials
13.2%
5,000 25
15.3%
Cons. Disc.
11.0%
4,000 20

14.6%
Financials
3,000 15 7.6%

2,000 10 2.0% Russell 2000

Comm. Services
6.3% U.S. private equity

1,000 5
14.3%
Other**
2.8%
0 0
'91 '95 '99 '03 '07 '11 '15 '19 '23 0% 10% 20% 30% 40%
Equity, interest rate and foreign exchange volatility Hedge funds and volatility
Z-score, 4-week moving average, 2007 - present Average monthly hedge fund returns by VIX level, 1990 - present
6 1.5%

1.1% 1.1%
5 FX
1.0%
Interest rate 0.8%
Equity 0.6%
4 0.7%
0.5%
0.5%
3 -0.1%
0.5%
0.3% 0.4%
0.2%
0.0% 0.1%
2
-0.3% -0.4%
-0.7%
1
-0.5% -0.3%

Alpha
0 Beta -0.4%

-1.0%
-1 -1.0%

-2 -1.5%
10-15 15-20 20-25 25-30 30-35 >35
'07 '09 '11 '13 '15 '17 '19 '21 '23
 2008 - 2022
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 YTD Ann. Vol.
Fixed EM Sm all Sm all EM Large Sm all Large Large
REITs REITs REITs REITs REITs Cash REITs Com dty. REITs
Incom e Equity Cap Cap Equity Cap Cap Cap Cap
5.2% 79.0% 27.9% 8.3% 19.7% 38.8% 28.0% 2.8% 21.3% 37.8% 1.8% 31.5% 20.0% 41.3% 16.1% 16.9% 8.8% 23.4%
High Sm all Fixed High Large Large Large High DM Fixed EM Large DM Sm all Sm all
Cash REITs Cash
Yield Cap Incom e Yield Cap Cap Cap Yield Equity Incom e Equity Cap Equity Cap Cap
1.8% 59.4% 26.9% 7.8% 19.6% 32.4% 13.7% 1.4% 14.3% 25.6% 0.0% 28.7% 18.7% 28.7% 1.5% 12.1% 7.2% 23.2%
Asset DM EM High EM DM Fixed Fixed Large Large Sm all Large High Sm all EM
REITs Com dty. REITs
Alloc. Equity Equity Yield Equity Equity Incom e Incom e Cap Cap Cap Cap Yield Cap Equity
-25.4% 32.5% 19.2% 3.1% 18.6% 23.3% 6.0% 0.5% 12.0% 21.8% -4.0% 25.5% 18.4% 27.1% -12.7% 8.1% 6.6% 23.0%
High Large DM Asset Asset Sm all High DM Asset Sm all Fixed Asset Asset
REITs Com dty. Cash Com dty. Com dty.
Yield Cap Equity Alloc. Alloc. Cap Yield Equity Alloc. Cap Incom e Alloc. Alloc.
-26.9% 28.0% 16.8% 2.1% 17.9% 14.9% 5.2% 0.0% 11.8% 14.6% -4.1% 22.7% 10.6% 14.8% -13.0% 7.8% 6.1% 20.2%
Sm all Sm all Large Sm all High Sm all DM EM Asset Large Asset DM Asset Asset High High DM
Cash
Cap Cap Cap Cap Yield Cap Equity Equity Alloc. Cap Alloc. Equity Alloc. Alloc. Yield Yield Equity
-33.8% 27.2% 15.1% 0.1% 16.3% 7.3% 4.9% -0.4% 11.6% 14.6% -4.4% 19.5% 8.3% 13.5% -13.9% 5.2% 5.4% 20.0%
Large High Asset Large Asset High Asset EM Fixed DM DM EM Fixed Large
Com dty. REITs Cash REITs
Cap Yield Alloc. Cap Alloc. Yield Alloc. Equity Incom e Equity Equity Equity Incom e Cap
-35.6% 26.5% 14.8% -0.7% 16.0% 2.9% 0.0% -2.0% 8.6% 10.4% -5.8% 18.9% 7.5% 11.8% -14.0% 5.1% 2.7% 17.7%
Large Asset Asset Sm all Asset High High Asset Sm all High High High Large DM High
Cash REITs REITs
Cap Alloc. Alloc. Cap Alloc. Yield Yield Alloc. Cap Yield Yield Yield Cap Equity Yield
-37.0% 25.0% 13.3% -4.2% 12.2% 0.0% 0.0% -2.7% 8.3% 8.7% -11.0% 12.6% 7.0% 1.0% -18.1% 3.0% 2.3% 13.0%
DM DM Fixed Fixed EM Sm all Fixed Fixed Fixed EM EM Asset
REITs Com dty. Com dty. Cash Cash Cash
Equity Equity Incom e Incom e Equity Cap Incom e Incom e Incom e Equity Equity Alloc.
-37.7% 18.9% 8.2% -11.7% 4.2% -2.0% -1.8% -4.4% 2.6% 3.5% -11.2% 8.7% 0.5% 0.0% -19.7% 2.3% 1.0% 12.4%
DM Fixed Fixed EM DM EM DM DM Fixed Sm all Fixed Fixed
Com dty. Cash Com dty. Com dty. Com dty. Cash
Equity Incom e Incom e Equity Equity Equity Equity Equity Incom e Cap Incom e Incom e
-43.1% 5.9% 6.5% -13.3% 0.1% -2.3% -4.5% -14.6% 1.5% 1.7% -13.4% 7.7% -3.1% -1.5% -20.4% 2.1% 0.6% 4.2%
EM EM EM EM
Cash Cash Com dty. Com dty. Com dty. Com dty. Cash Cash Cash REITs REITs Com dty. Com dty. Cash
Equity Equity Equity Equity
-53.2% 0.1% 0.1% -18.2% -1.1% -9.5% -17.0% -24.7% 0.3% 0.8% -14.2% 2.2% -5.1% -2.2% -24.9% -7.8% -2.6% 0.4%
Asset class valuations
Z-scores based on 25-year average valuation measures*
12/31/2021 Current
3

1.98
2
1.50 1.49
1.22 1.13
1.00 0.94
0.82 0.95
1
0.42 0.51

0.10
0.68
0
0.05 0.23

-0.33
-0.50 -0.46
-1 -0.65
-0.94

-2
Spread-
Yield-to- Yield-to- Fwd. Yield-to- Fwd. Fwd. Fwd. Fwd.
P/B to-
worst** worst** P/E worst** P/E P/E P/E P/E
worst**
-3
Treasuries U.S. Core DM Equity EM Equity Munis*** U.S. Small U.S. Value U.S. High U.S. Large U.S. Growth
Bond ex-U.S. Cap Yield Cap
60/40 annual return decomposition
Total returns, 1950 – present
40%

32
30
30% 28 28
26
25 25 24
22
21 20 21 21 21 YTD
19 19 19
18
20% 17 17 17
14 15 15
13 13 13 13 14
12 12 12 11
1112 11
10 10
11 11 11
8 8 8 8
10% 7 7
6 6 6
4 4 4 4
3 2
2 1
-1 0
0%

0 -3
-3
-4 -3 -1
-10% -4
-7 -8

-13 -9
-16
-20% -17

Equity return Fixed income return 60/40 calendar year return -20

-30%
'50 '53 '56 '59 '62 '65 '68 '71 '74 '77 '80 '83 '86 '89 '92 '95 '98 '01 '04 '07 '10 '13 '16 '19 '22
Range of stock, bond and blended total returns
Annual total returns, 1950-2022
60%
Annual avg. Growth of $100,000 over
50% total return 20 years
Stocks 11.1% $818,078
47% Bonds 5.5% $292,662
40% 43% 50/50 portfolio 8.7% $527,055

30% 33%
28%
20% 23% 21%
19% 17%
16% 16%
10% 14%
12%
1% 6% 5%
0%
1% 2% 1%
-3% -2% -1%
-13%
-10% -15%

-20%

-30%
-39%
-40%

-50%
1-yr. 5-yr. 10-yr. 20-yr.
rolling rolling rolling
20-year manager return dispersion and growth of capital
By asset type, annualized total returns, growth of $1,000 invested 20 years ago*
14%

Growth of $1,000 invested with top decile manager

12% $9,053
Growth of $1,000 invested with bottom decile manager

$6,748 $6,722 $6,625

10% $6,168
$5,961

$4,469
8%
$4,876
$4,498
$3,985 $4,141 $3,514
6% $3,524 $3,600
$2,853

$2,672 $2,242 $2,601

4%
$1,770
$1,986
$1,483 $1,664
2%

$1,331
$1,230
0%
Large- Mid- Small- Large Large Foreign EM Ultrashort Short-Term Interm. Multi- High
Cap Cap Cap Growth Value Large Equity Bond Bond Core + Bond sector Yield
Blend Blend Blend Blend Bond
Investment opportunities outside of CDs
Peak 6-month certificate of deposit (CD) rate during previous rate hiking cycles and subsequent 12-month total returns
40%
38%
Peak CD rate
6-month CDs
30% Bloomberg U.S. Agg
30%
27% U.S. High Yield
24%
S&P 500
21%
19% 18% 19%
20%

12% 13%
12%

10% 9%
8%
6%
4%

0%
0%
-2%

-10%
-11%

-20%
Jun. '84 - Jun. '85 Mar. '89 - Mar. '90 Dec. '94 - Dec. '95 May '00 - May '01 Jun. '06 - Jun. '07 Jun. '19 - Jun. '20

1984 1989 1994 2000 2006 2019

Asset allocation: Corporate DB plans vs. endowments Corporate pension liabilities and 10-year UST yield
$2.4 0%
35.2% 1%
Equities $2.0
32.1% Liabilities ($tn) 2%
$1.6
9.0% 3%
Fixed Income $1.2
49.9% 4%
10yr UST (inv.)
$0.8
5%
18.0%
Hedge Funds $0.4
3.8% 6%

$0.0 7%
12.3% '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 '22
Private Equity
4.3% Pension return assumptions
10%
5.4% Endowments S&P 500 companies
Real Estate
3.7% Corporate DB plans State & local governments
9%

15.7% 8%
Other Alternatives
3.3%
7%

4.4%
Cash 6%
2.9%
5%
0% 10% 20% 30% 40% 50% 60% '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20
 Fixed income:
All indexes are unmanaged and an individual cannot invest directly in an index. Index returns do not
include fees or expenses. The Bloomberg 1-3 Month U.S. Treasury Bill Index includes all publicly issued zero-coupon US Treasury Bills that
have a remaining maturity of less than 3 months and more than 1 month, are rated investment grade, and have $250
Equities: million or more of outstanding face value. In addition, the securities must be denominated in U.S. dollars and must be
The Dow Jones Industrial Average is a price-weighted average of 30 actively traded blue-chip U.S. stocks. fixed rate and non convertible.
The MSCI ACWI (All Country World Index) is a free float-adjusted market capitalization weighted index that is The Bloomberg Global High Yield Index is a multi-currency flagship measure of the global high yield debt market.
designed to measure the equity market performance of developed and emerging markets. The index represents the union of the US High Yield, the Pan-European High Yield, and Emerging Markets (EM) Hard
The MSCI EAFE Index(Europe, Australasia, Far East)is a free float-adjusted market capitalization index that is Currency High Yield Indices. The high yield and emerging markets sub-components are mutually exclusive. Until
designed to measure the equity market performance of developed markets, excluding the US & Canada. January 1, 2011, the index also included CMBS high yield securities.
The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to The Bloomberg Municipal Index: consists of a broad selection of investment-grade general obligation and revenue
measure equity market performance in the global emerging markets. bonds of maturities ranging from one year to 30 years. It is an unmanaged index representative of the tax-exempt
bond market.
The MSCI Europe Index is a free float-adjusted market capitalization index that is designed to measure
developed market equity performance in Europe. The Bloomberg US Dollar Floating Rate Note (FRN) Index provides a measure of the U.S. dollar denominated
floating rate note market.
The MSCI Pacific Index is a free float-adjusted market capitalization index that is designed to measure equity
market performance in the Pacific region. The Bloomberg US Corporate Investment Grade Index is an unmanaged index consisting of publicly issued US
Corporate and specified foreign debentures and secured notes that are rated investment grade (Baa3/BBB or higher)
The Russell 1000 Index® measures the performance of the 1,000 largest companies in the Russell 3000. by at least two ratings agencies, have at least one year to final maturity and have at least $250 million par amount
The Russell 1000 Growth Index® measures the performance of those Russell 1000 companies with higher outstanding. To qualify, bonds must be SEC-registered.
price-to-book ratios and higher forecasted growth values. The Bloomberg US High Yield Index covers the universe of fixed rate, non-investment grade debt. Eurobonds and
The Russell 1000 Value Index® measures the performance of those Russell 1000 companies with lower price- debt issues from countries designated as emerging markets (sovereign rating of Baa1/BBB+/BBB+ and below using
to-book ratios and lower forecasted growth values. the middle of Moody’s, S&P, and Fitch) are excluded, but Canadian and global bonds (SEC registered) of issuers in
non-EMG countries are included.
The Russell 2000 Index® measures the performance of the 2,000 smallest companies in the Russell 3000
Index. The Bloomberg US Mortgage Backed Securities Index is an unmanaged index that measures the performance of
investment grade fixed-rate mortgage backed pass-through securities of GNMA, FNMA and FHLMC.
The Russell 2000 Growth Index® measures the performance of those Russell 2000 companies with higher
price-to-book ratios and higher forecasted growth values. The Bloomberg US TIPS Index consists of Inflation-Protection securities issued by the U.S. Treasury.
The Russell 2000 Value Index® measures the performance of those Russell 2000 companies with lower price- The J.P. Morgan Emerging Market Bond Global Index(EMBI)includes U.S. dollar denominated Brady bonds,
to-book ratios and lower forecasted growth values. Eurobonds, traded loans and local market debt instruments issued by sovereign and quasi-sovereign entities.
The Russell 3000 Index® measures the performance of the 3,000 largest U.S. companies based on total market The J.P. Morgan Domestic High Yield Index is designed to mirror the investable universe of the U.S. dollar domestic
capitalization. high yield corporate debt market.
The Russell Midcap Index® measures the performance of the 800 smallest companies in the Russell 1000 The J.P. Morgan Corporate Emerging Markets Bond Index Broad Diversified (CEMBI Broad Diversified)is an
Index. expansion of the J.P. Morgan Corporate Emerging Markets Bond Index (CEMBI). The CEMBI is a market
capitalization weighted index consisting of U.S. dollar denominated emerging market corporate bonds.
The Russell Midcap Growth Index ® measures the performance of those Russell Midcap companies with
higher price-to-book ratios and higher forecasted growth values. The stocks are also members of the Russell The J.P. Morgan Emerging Markets Bond Index Global Diversified (EMBI Global Diversified) tracks total returns
1000 Growth index. for U.S. dollar-denominated debt instruments issued by emerging market sovereign and quasi-sovereign entities:
Brady bonds, loans, Eurobonds. The index limits the exposure of some of the larger countries.
The Russell Midcap Value Index ® measures the performance of those Russell Midcap companies with lower
price-to-book ratios and lower forecasted growth values. The stocks are also members of the Russell 1000 Value The J.P. Morgan GBI EM Global Diversified tracks the performance of local currency debt issued by emerging
index. market governments, whose debt is accessible by most of the international investor base.
The S&P 500 Index is widely regarded as the best single gauge of the U.S. equities market. The index includes The U.S. Treasury Index is a component of the U.S. Government index.
a representative sample of 500 leading companies in leading industries of the U.S. economy. The S&P 500
Index focuses on the large-cap segment of the market; however, since it includes a significant portion of the total
value of the market, it also represents the market.
Other asset classes: Investments in emerging markets can be more volatile. The normal risks of investing in foreign countries are heightened when
The Alerian MLP Index is a composite of the 50 most prominent energy Master Limited Partnerships (MLPs) that provides investing in emerging markets. In addition, the small size of securities markets and the low trading volume may lead to a lack of
investors with an unbiased, comprehensive benchmark for the asset class. liquidity, which leads to increased volatility. Also, emerging markets may not provide adequate legal protection for private or
foreign investment or private property.
The Bloomberg Commodity Index and related sub-indices are composed of futures contracts on physical commodities and
represents twenty two separate commodities traded on U.S. exchanges, with the exception of aluminum, nickel, and zinc The price of equity securities may rise, or fall because of changes in the broad market or changes in a company’s financial
condition, sometimes rapidly or unpredictably. These price movements may result from factors affecting individual companies,
The Cambridge Associates U.S. Global Buyout and Growth Index® is based on data compiled from 1,768 global (U.S. & ex sectors or industries, or the securities market as a whole, such as changes in economic or political conditions. Equity securities
–U.S.) buyout and growth equity funds, including fully liquidated partnerships, formed between 1986 and 2013. are subject to “stock market risk” meaning that stock prices in general may decline over short or extended periods of time.
The CS/Tremont Hedge Fund Index is compiled by Credit Suisse Tremont Index, LLC. It is an asset-weighted hedge fund Equity market neutral strategies employ sophisticated quantitative techniques of analyzing price data to ascertain information
index and includes only funds, as opposed to separate accounts. The Index uses the Credit Suisse/Tremont database, which about future price movement and relationships between securities, select securities for purchase and sale. Equity Market
tracks over 4500 funds, and consists only of funds with a minimum of US$50 million under management, a 12-month track Neutral Strategies typically maintain characteristic net equity market exposure no greater than 10% long or short.
record, and audited financial statements. It is calculated and rebalanced on a monthly basis, and shown net of all performance
fees and expenses. It is the exclusive property of Credit Suisse Tremont Index, LLC. Global macro strategies trade a broad range of strategies in which the investment process is predicated on movements in
underlying economic variables and the impact these have on equity, fixed income, hard currency and commodity markets.
The HFRI Monthly Indices (HFRI) are equally weighted performance indexes, utilized by numerous hedge fund managers as a
benchmark for their own hedge funds. The HFRI are broken down into 4 main strategies, each with multiple sub strategies. All International investing involves a greater degree of risk and increased volatility. Changes in currency exchange rates and
single-manager HFRI Index constituents are included in the HFRI Fund Weighted Composite, which accounts for over 2200 differences in accounting and taxation policies outside the U.S. can raise or lower returns. Some overseas markets may not be
funds listed on the internal HFR Database. as politically and economically stable as the United States and other nations.
The NAREIT EQUITY REIT Index is designed to provide the most comprehensive assessment of overall industry performance, There is no guarantee that the use of long and short positions will succeed in limiting an investor's exposure to domestic
and includes all tax-qualified real estate investment trusts (REITs) that are listed on the NYSE, the American Stock Exchange stock market movements, capitalization, sector swings or other risk factors. Using long and short selling strategies may have
or the NASDAQ National Market List. higher portfolio turnover rates. Short selling involves certain risks, including additional costs associated with covering short
positions and a possibility of unlimited loss on certain short sale positions.
The NFI-ODCE, short for NCREIF Fund Index -Open End Diversified Core Equity, is an index of investment returns reporting
on both a historical and current basis the results of 33 open-end commingled funds pursuing a core investment strategy, some Merger arbitrage strategies which employ an investment process primarily focused on opportunities in equity and equity
of which have performance histories dating back to the 1970s. The NFI-ODCE Index is capitalization-weighted and is reported related instruments of companies which are currently engaged in a corporate transaction.
gross of fees. Measurement is time-weighted. Mid-capitalization investing typically carries more risk than investing in well-established "blue-chip" companies. Historically,
Definitions: mid-cap companies' stock has experienced a greater degree of market volatility than the average stock.
Investing in alternative assets involves higher risks than traditional investments and is suitable only for sophisticated investors. Price to forward earnings is a measure of the price-to-earnings ratio (P/E) using forecasted earnings. Price to book value
Alternative investments involve greater risks than traditional investments and should not be deemed a complete investment compares a stock's market value to its book value. Price to cash flow is a measure of the market's expectations of a firm's
program. They are not tax efficient and an investor should consult with his/her tax advisor prior to investing. Alternative future financial health. Price to dividends is the ratio of the price of a share on a stock exchange to the dividends per share
investments have higher fees than traditional investments and they may also be highly leveraged and engage in speculative paid in the previous year, used as a measure of a company's potential as an investment.
investment techniques, which can magnify the potential for investment loss or gain. The value of the investment may fall as well Real estate investments may be subject to a higher degree of market risk because of concentration in a specific industry, sector
as rise and investors may get back less than they invested. or geographical sector. Real estate investments may be subject to risks including, but not limited to, declines in the value of real
Bonds are subject to interest rate risks. Bond prices generally fall when interest rates rise. estate, risks related to general and economic conditions, changes in the value of the underlying property owned by the trust and
defaults by borrower.
Investments in commodities may have greater volatility than investments in traditional securities, particularly if the instruments
involve leverage. The value of commodity-linked derivative instruments may be affected by changes in overall market Relative Value Strategies maintain positions in which the investment thesis is predicated on realization of a valuation
movements, commodity index volatility, changes in interest rates, or factors affecting a particular industry or commodity, such discrepancy in the relationship between multiple securities.
as drought, floods, weather, livestock disease, embargoes, tariffs and international economic, political and regulatory Small-capitalization investing typically carries more risk than investing in well-established "blue-chip" companies since smaller
developments. Use of leveraged commodity-linked derivatives creates an opportunity for increased return but, at the same companies generally have a higher risk of failure. Historically, smaller companies' stock has experienced a greater degree of
time, creates the possibility for greater loss. market volatility than the average stock.
Derivatives may be riskier than other types of investments because they may be more sensitive to changes in economic or
market conditions than other types of investments and could result in losses that significantly exceed the original investment.
The use of derivatives may not be successful, resulting in investment losses, and the cost of such strategies may reduce
investment returns.
Distressed Restructuring Strategies employ an investment process focused on corporate fixed income instruments, primarily
on corporate credit instruments of companies trading at significant discounts to their value at issuance or obliged (par value) at
maturity as a result of either formal bankruptcy proceeding or financial market perception of near term proceedings.
The Market Insights program provides comprehensive data and commentary on global markets without reference to products. Designed as a tool to help clients understand the markets and support investment
decision-making, the program explores the implications of current economic data and changing market conditions.
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Furthermore, the J.P. Morgan Asset Management Market Insights and Portfolio Insights programs, as non-independent research, have not been prepared in accordance with legal requirements designed to promote the
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Prepared by: David P. Kelly, Jordan K. Jackson, David M. Lebovitz, John C. Manley, Meera Pandit, Gabriela D. Santos, Stephanie Aliaga, Sahil Gauba, Nimish Vyas, Mary Park Durham, and Brandon Hall.
Unless otherwise stated, all data are as of June 30, 2023 or most recently available.
Guide to the Markets – U.S.
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