bob doll, jan 2014 - confidence returns

8132019 Bob Doll Jan 2014 - Confidence Returns

httpslidepdfcomreaderfullbob-doll-jan-2014-confidence-returns 112NOT FDIC INSURED NO BANK GUARANTEE MAY LOSE VALUE

T983141983150 P983154983141983140983145983139983156983145983151983150983155

2013

The Year in Review | Economic improvement and market performancestayed on track against political and fiscal forces PAGE 3

Scorecard | The predictions with the largest impact on the economy andmarkets led the way while a few missed the mark PAGE 4

By the Numbers | The annual roundup of markets provides a snapshotof performance PAGE 6

2014Outlook | The forecast includes moderate economic growth and potentialincreases in corporate revenues earnings and reinvestment PAGE 7

Ten Predictions | Featuring the new list of predictions for the economyand financial markets PAGE 8

Key Themes for InvestorsPlan for the year by evaluating your portfolio in relation to goals such aslong-term growth diverse income sources and risk management PAGE 11

Robert C Doll CFA Chief Equity Strategist

Senior Portfolio Manager

Bob Doll serves as a leading

member of the equities investing

team for Nuveen Asset Management

providing reasoned analysis through

ongoing market commentary and

equity portfolio management Bob

manages the Large Cap Equity Series

and is co-manager of the Stable

Growth strategy

2014 Confidence Begins to ReturnLifting the Economy and Equities

INVESTMENT PERSPECTIVES AND MARKET OUTLOOK JANUARY 2014


httpslidepdfcomreaderfullbob-doll-jan-2014-confidence-returns 212

2

1 Source Morningstar Direct as of 123113 As represented by the SampP 500 Index and the MSCI World ex-US Index2 Source FactSet as of 123113

As we begin the year we wanted to share our reflections on 2013 as well as

important themes we see for 2014

2013 was a historic and breakout year for global equitymarkets Despite ongoing headwinds from slow growth fiscal and political

uncertainty and fragile economies around the world US and non-US

markets increased 32 and 22 respectively1 US equities hit 45 all-time

highs during the year beating prior bull run periods2

Europe and Asia struggled with political and financial turmoil However

Europersquos improving GDP in the second half provided promise for exiting

recession In Japan Abenomics became a positive influence on the economy

as deflationary pressures declined The economy in China started to stabilize

from monetary easing and supply side reforms

Federal Reserve (Fed) stimulus continued although historically low rates

began to rise and caused challenges for fixed income investors The tide

appears to be turning against fixed income markets as the Fed begins

reversing its easy money stance now that the economy is meeting the

required conditions for GDP growth job growth and low inflation

2014 should enable US and global economies to ascend afteryears of sub-par growth Financial risks are slowly receding and positive

developments include GDP trends federal deficit decreases stronger

household finances housing rebound and additional corporate spendingMonetary accommodation remains critical to protecting the nascent

trajectory and better growth will require increases in revenues and earnings

while keeping inflation in check

Equities will need to address bubble fears Although equity markets could be

choppy as markets adjust to higher valuations and prepare for Fed tapering

further progress is supported by the potential for business investment and

hiring As a result investors may be ready to put cash to work

We appreciate your continued support and wish you success and prosperity

in the year to come

Best Regards

Robert C Doll CFA

Follow BobDollNuveenon Twitter



3

A Memorable Year Finishes Strong

Economic growth was slow but stable during a year in which the federal

government shutdown lasted for 16 days and Detroit filed for bankruptcy Te

unemployment rate fell to the lowest in five years from 79 to approximately 70

as a result of modest job growth and declining labor participation (a 35-year low) 1

A significant US economic headwind was fiscal tightening through a substantial

tax increase and spending restraint (sequestration) Tis may have cost the economy

nearly 15 growth An encouraging bipartisan deal helped fund the government

through spending reductions

Monetary policy was supportive of global growth In late spring the Fed

contemplated tapering its fixed income purchases causing a 100-basis point rise

in interest rates2 and creating turmoil in India and Brazil Although global growth

was softer than expected equity markets performed well Emerging markets

experienced weakness in growth commodity prices credit and liquidity Europe

began to emerge from recession with reduced tail risks Japan benefited from

monetary and fiscal policy stimulus and China engineered a successful soft landing

despite remaining imbalances

Our 2013 theme of a muddle-through economy and grind-higher equity market

was influenced by equity valuation (PE) expansion perhaps because of reduced

uncertainty and rising confidence We see these economic factors continuing into

2014 as we move forward with our predictions for the year

2013 HIGHLIGHTShellip

J Modest economic improvementJ Declining (but still high)

unemployment

J Corporate profitability

J Record equity market gains

J Reduced investor uncertainty

hellipAND LOWLIGHTS

n Muddle-through economy

n Political and economic turmoilin the US Eurozone Japanand China

n Government shutdown and fiscalpolicy disputes

n Mediocre revenues and earnings

1 Source Bureau of Labor Statistics ldquoThe Employment Situation ndash November 2013rdquo December 6 20132 Source Bloomberg as of 71213

THE YEAR IN REVIEW

2013



4

We close the year in a similar position as where we started but with forwardmomentum Continued headwinds meant an extended muddle-through

economy and grind-higher equity market US political and financial conflict

was the lead story and investor concerns surfaced as interest rates increased

substantially for the first time in years Leading economic indicators began to

turn positive suggesting US and global growth may improve somewhat

1 The US economycontinues to muddlethrough with nominalgrowth below 5 for theseventh year in a row

Real GDP in the US for the third quarter was 20 with inflation (CPI) at 12 equating

to nominal growth of 321 The consensus estimate for final 2013 real GDP is 17 with

nominal growth of 321 A stopstart economy existed throughout the year with damp-

ening factors such as slow real wage growth consumer and capital spending weakness

the federal government sequestration and falling inflation

2 Europe begins to exitrecession by the end ofyear as the ECB easesand financial stresseslessen

During the third quarter Europe began to emerge from recession GDP trends were less

negative with each consecutive quarter this year1 For the first half of the year Eurozone

real GDP was -06 third quarter real GDP was -04 and consensus estimates for the

fourth quarter were +041 The European Central Bank (ECB) eased monetary policy

with lower interest rates in early November to further enable the recovery Financial

pressures and credit risks have declined

3 The US yield curvesteepens as financialrisks recede and defla-tionary threats lessen

The US yield curve steepened as financial system uncertainty declined the growth

outlook improved and the world began slowly healing Skepticism remained but global

economic conditions were moderately positive Interest rates fluctuated based on Fed

announcements the delay in timing for tapering and the eventual reduction of its asset

purchases in December On December 31 2012 the yield difference between the 90-day

T-bill and the 10-year US Treasury bond was 17 (01 versus 18) The gap widened

to 30 (00 versus 30) on December 31 20131

4 US stocks record a newall-time high as stocksadvance for the fifth

year in a row

US equities increased 324 year-to-date and the SampP 500 reached multiple new

all-time highs during the year eclipsing prior bull market run-ups in 2000 and 2007 2

Roughly 475 of the 500 stocks in the SampP recorded advances3 The PE ratio continued

to rise as has been the case since the end of 20112

although earnings growth has beenmediocre Stocks performed well in large part because of injections of central bank

liquidity declining tail risks and a slowly improving economy

5 Emerging marketequities outperformdeveloped marketequities

Emerging market economies began to perform better in the third quarter and advanced

19 during the fourth quarter2 But emerging markets underperformed overall for the

year The first half performance slump was based on weakness in global growth and

commodities as well as liquidity issues

Overall Scoring

Correct 7

Half Correct 1 (x 5)

Wrong 2

Total 75 10

SCORECARD

2013



5

1 Bloomberg as of 1231132 Source Morningstar Direct as of 1231133 Source FactSet as of 1231134 Source Morningstar Direct as of 1231135 Source Bank of AmericaMerrill Lynch as of 113013

6 Source Bloomberg Morgan Stanley Cyclicals Index as of123113

7 Source FactSet GICSreg sectors as of 1231138 Source Bloomberg and Jefferies 2013 consensus estimates

as of 1231139 Source Congressional Budget Office ldquoMonthly Budget

ReviewmdashSummary for Fiscal Year 2013rdquo November 7 2013

6 After two years ofunderperformance USmultinationals out-perform domestically-focused companies

Previously multinational companies lagged because of concerns in emerging markets

and Europe but this reversed in the third quarter US multinationals or US compa-

nies in the SampP 500 with the highest percentage of foreign exposure had the largest

improvement in earnings revisions this year US multinationals gained 306 year to

date and US companies with only domestic exposure increased 2685

7 Large-cap stocksoutperform small-capstocks and cyclicalcompanies outperformdefensive companies

Large-cap stocks performed differently this year than we expected Large-caps trailed fothe year and increased 331 versus small-caps which increased 388 (as measured

by the Russell indices) In part this is related to the fact that US equities with generally

smaller market capitalizations outperformed their non-US counterparts

On the positive side cyclical sectors have been stronger since the second quarter

and increased 340 for the year6 Cyclicals such as industrials and consumer discre-

tionary outperformed and defensive companies in the telecom and utilities sectors

underperformed7

8 Dividends increase ata double-digit rate aspayout ratios rise

Dividends grew faster than earnings and payout ratios moved up Dividends increased

108 year-over-year The dividend payout ratio (defined as DividendsNet Income)

increased from 319 as of 123112 to 330 as of 1231138

Corporations have beenreluctant to reinvest and have been returning dividends to shareholders But with cash

near all-time highs payout ratios may have additional room to run

9 A nascent US manu-facturing renaissancecontinues fueled bycheap natural gas

The latest US manufacturing figures from the Institute for Supply Management

(ISM) rose to 573 in November from 564 in October indicating economic activity is

strengthening The US has the benefit of cheap natural gas versus big industrial export

competitive countries like Japan Germany and Korea We believe 2013 was the begin-

ning of positive developments for US manufacturing and energy

10 The US governmentpasses a $2ndash3 trillion

ten-year budget deal

The federal government budget deficit was $680 billion in fiscal year 2013 which was

$409 billion less than the deficit in fiscal year 20129 Progress was based on modest rev-

enue increases expense cuts from the sequester and acrimony between the two parties inthe absence of an agreement until December We are encouraged by the solid progress

that was made with the new budget agreement which sets spending figures into 2015

SCORECARD

2013

ldquoPositive trends emerged for GDP growth and labor markets

with healthy corporate and investor balance sheets while theUS government took steps toward resolving budget issuesrdquo



6

In 2013 continued Fed monetary support bolstered the US economy and politicalturmoil dominated Abundant liquidity did not prompt inflation or widespread

risky bubbles We began the year with overhang from the fiscal cliff moved into

sequestration the government shutdown and finally arrived at a two-year federal

budget deal to outline savings measures and prevent additional fiscal strife Tanks

in large part to solid but slow earnings growth and strong cash flow yields US

stocks closed the year with strong gains

CLOSING AVERAGE ANNUAL

AS OF 123113 PRICE RETURNS1

Dow Jones Industrial Average 16577 265

SampP 500 Index 1848 324 Nasdaq Composite 4177 401

Outside of the United States markets in Europe and Asia began to stabilize Also

the ECB delivered a surprise rate cut in November signaling both a clear divergence

from the Fed and continued policy support Te UK market ended up 2162

Japan created an aggressive combination of monetary policy along with deliber-

ately lowering its currency helping to create a shift to a net contributor to global

GDP Japanese markets increased 305 for the year and China declined -10 2

Emerging markets performance improved and turned slightly positive during the

second half of the year but ended -23 over the 12 months2

In bond markets the Fed experimented with rate increases and tapering 10-year

reasury rates ranged from 17 to 30 over the course of the year3 Te Barclays

US Aggregate Bond Index posted a -20 return for the year Cash investments (as

represented by the 3-Month reasury Bill) ended 2013 at 01

2013 RECAP

AVERAGE ANNUAL RETURNS

90-Day Treasury Bills 01

10-Year US Treasury -85

High Yield Corporate Bonds 74

US Equities 324

Developed Market Equities

(Excluding US) 216

Emerging Markets -23

Source Morningstar Direct as of 123113

Past performance is no guarantee of future resultsIndex performance is shown for illustrative purposesonly It is not possible to invest directly in an index

90-Day Treasury Bills BofAML US Treasury Bill3 Month Index 10-Year US Treasury USTreasury T-Bill Constant Maturity Rate 10 Yr IndexHigh Yield Corporate Bonds Barclays US HY 2Issuer Capped Index US Equities SampP 500 IndexDeveloped Markets (Excluding US) MSCI Worldex US Index Emerging Markets MSCI EmergingMarkets Index See page 12 for index definitions

BY THE NUMBERS

2013

1 Source Morningstar Direct as of 1231132 Source Bloomberg as of 123113 UK FTSE 100 Index Japan Nikkei 225 Index China Shanghai Stock Exchange

Composite Index3 Source FactSet as of 123113



7

Economic Progress Leads Revenueand Earnings Growth

We expect economic growth will be broader and stronger yet remain moderate for

the United States and around the world Macroeconomic risks are diminishing as

economies improve which may help reduce fear and strengthen confidence US

fiscal drag is lessening Europe is emerging from recession Japanrsquos deflationary

headwinds are diminishing and China is showing signs of stabilization Improving

sentiment for US corporations along with strengthening consumption should lead

to an increase in capital spending and a relatively stronger growth trajectory Tis

transition to self-sustaining growth should provide the necessary acceleration inrevenue and earnings growth

Fed tapering will likely be slow and incremental with US and global monetary

policy geared toward stimulating growth As a result we anticipate the bond

market will continue to experience a gradual climb in interest rates We believe

rising bond yields are not a headwind for equities as long as economic conditions

continue to improve Skepticism about the durability of the equity rally exists as

many argue that stocks have become expensive and profit margins are unsustainably

high We do not think these potential headwinds will prevent gains but instead

limit them and perhaps cause volatility Inflation is unlikely to be a problem anddeflation is a threat in Europe Equities are vulnerable to a correction given recent

strength and some technical deterioration but we continue to favor a moderate

pro-growth equity posture

Te US equity market should continue to grind higher as a result of central bank

liquidity modest economic acceleration quiet inflation and an improving fiscal

situation We expect the US and global economies to improve in 2014 encouraging

acceptable growth in revenue and earnings Te gradual improvement is not likely to

threaten the unprecedented global monetary experiment that has helped underpin

the rise in equity valuations Even though equities may still advance run-ups since2009 and throughout 2013 have reduced our forward view for annual returns to

mid- to high-single digits We prefer companies with positive free cash flow profiles

low valuations economic sensitivity andor above average secular growth

2014 POSITIVE SIGNALShellip

J Major economies improvingsimultaneously

J US government fiscal progress

J Central bank liquidity

J Companies poised to increasespending

hellipBUT POTENTIAL HEADWINDS

n Growth not strong yet

n Fragile recovery in Europeand China

n Interest rate increases

n Equity valuation increases

OUTLOOK

2014



8

Confidence Begins to Return Lifting the Economyand Equities

Beginning the year without major clouds on the horizon we are encouraged

by a strengthening global economic recovery Fed tapering represents a belief

in stronger economic conditions and a possible source of volatility Central

banks remain committed to monetary reflation We anticipate economic

power and financial wealth will continue to shift from developed countries to

emerging markets that we believe now set the pace for global growth

1 The US economy grows 3as housing starts surpass onemillion and private employmenthits an all-time high

After several false starts the economic recovery that started in mid-2009 will likely show

some broader and stronger growth in 2014 Hopeful signs include housing recovery

falling oil prices acceptable job growth easing lending standards low inflation very

high net worth rising capital expenditures less fiscal drag and improving non-US

growth These forces should result in stronger housing starts and an all-time high in

private employment However obstacles to growth also exist high levels of uncertainty

continued high unemployment mediocre real wage growth a low savings rate

declining refinancing and the potential for prolonged deleveraging

2 10-year Treasury yields movetoward 35 as the FederalReserve completes tapering andholds short-term rate near zero

We expect the bear market in bonds will continue as interest rates slowly normalize

While the Fed has indicated it will keep policy rates anchored close to zero the long-

awaited tapering process should be completed during the year The inflation rate is a

big question for the bond market economy and overall markets Inflation is not likely

to rise significantly and it could make a bottom by the end of 2014 From a very low

level of interest rates not much capital depreciation in bonds (caused by rising rates) is

required to offset coupon earned with the potential for negative total returns for many

parts of the fixed income market

3US equities record anothergood year despite enduring a10 correction

After very strong performance in 2013 equities may have already taken 2014 returns

Accordingly while we think equities can experience further upside we expect gains

to be less ebullient and more volatile With the significant rise in valuation levels (PE

ratios) in 2013 we expect that market gains will depend more on earnings growth than

further multiple expansion Expectations of high single digit or low double-digit gains

are not unreasonable but we also think a noticeable pullback is likely to be caused by

overbought and deteriorating technical conditions We would use corrections as buying

opportunities since most fundamentals continue to improve

TEN PREDICTIONS

2014



9

4 Cyclical stocks outperformdefensive stocks

After a long run of defensive stock leadership cyclical stocks asserted themselves in

2013 For earnings and valuation reasons we expect cyclicals to continue to outperform

Cyclical sectors include consumer discretionary energy financials industrials materials

and technology Defensive sectors include consumer staples healthcare telecom

and utilities Stronger US economic growth a rise in capital expectations and some

improvement in non-US economies should also support this conclusion When

analyzing companies we currently prefer free cash flow yield to dividend yield and

dividend growth over dividend yield

5 Dividends stock buy-backscapex and MampA all increase at adouble-digit rate

Corporations have amassed high levels of cash with strong cash flow and may have

underleveraged balance sheets along with potential places to use the cash With reduced

uncertainty and improving confidence we anticipate that more cash will be ldquoput to workrdquo

in 2014 As a result we think dividends share buy-backs capital expenditures and merg-

ers and acquisitions will experience noticeable increases Dividends and buy-backs have

been increasing in recent years but we expect surplus cash to spread to businesses rein-

vestment (capex) and buying the company ldquodown the streetrdquo Pent-up demand and aging

facilities equipment and technology also argue for increases in these key areas

6 The US dollar appreciates asUS energy and manufacturingtrends continue to improve

Currency direction is one of the most difficult areas in the capital markets to get right

Along with improved and broadened growth as well as technical support we believe

the developing US energy and manufacturing stories are positive for the dollar

Abundant cheap natural gas and increasing energy production are already providing a

positive impact on the US trade deficit and promise to enhance US job additions and

economic growth Increasing desire by US and non-US companies to manufacture in

the United States for labor cost infrastructure and stability reasons has a similar con-

structive dollar impact

7Gold falls for the second yearand commodity prices languish

In our opinion the mystery is not that gold finally came down but rather that it took so

long The preoccupation with gold was originally based on concerns about the viability

of the financial system and inflation fears from excess liquidity being pumped into the

system Neither of those circumstances occurred but gold traded above $1500 per

ounce before falling last year Now added headwinds put pressure on goldrsquos alluremdash

improving global growth a reduction in systemic threats some rise in real interest

rates and likely dollar improvement Also the lack of strong global economic growth

and abundant supply for many commodities argues for trendless but relatively volatile

commodity prices

ldquoProspects of modest economic improvement moderateglobal monetary stimulus and rising corporate sentiment

should support growthrdquo

SEIZING THE OPPORTUNITIES

TEN PREDICTIONS

2014



10

8 Municipal bonds led by highyield outperform taxable bondcounterparts

Municipal bond mutual funds experienced record weeks of outflows in 2013 And

while municipal fundamentals are arguably mixed our contention is that the pricing of

municipal relative to taxable fixed income securities more than take that into account

Rising interest rates (prediction 2) create a headwind for fixed income but we believe

the tax-exempt market (especially high yield) is positioned for outperformance The

difficulties in Detroit and Puerto Rico have created an interesting opportunity for

municipal bond investors We believe the fall of 2013 was a turning point for state and

local governments as politicians and unions began to agree to certain reduced pension

benefits Government receipt and outlay patterns also improved

9 Active managers outperformindex funds

Recent years have been disappointing for active managersrsquo abilities to outperform

benchmarks With the broadening of the equity market and the reduction of

correlations the ability of active managers to outperform may increase Whether or

not the number of managers outperforming crosses 50 is debatable but support for

that outcome seems to be increasing As cheap stocks outperform expensive ones and

companies with improving fundamentals outperform companies with deteriorating

fundamentals active managers have a better chance to outperform A reduction in the

number of active players may also reduce the competitive landscape somewhat

10Republicans increase their leadin the House but fall short ofcapturing the Senate

Washington DC was front and center in 2013 with mixed consequences We believea dovish Fed and declining federal budget deficit make the Washington backdrop at

worst benign and more likely constructive for investors The ldquosmall ballrdquo deal between

Democrat Patty Murray and Republican Paul Ryan will likely reduce the negative focus on

fiscal policy The November mid-term elections will soon dominate with the likelihood of

Republicans slightly increasing their lead in the House of Representatives and increas-

ing representation but failing to control the Senate Other key issues may include the

improved economic outlook fiscal restraint Obamacare and the loss of global prestige

ldquoSustainable equity appreciation will require stronger economic

growth and a subsequent increase in corporate earningsrdquo

ASSESSING T HE RISKS

TEN PREDICTIONS

2014



11

Matching Goals to Investments

Early in the year is often the time to review investment goals and

adjust asset allocation decisions with your financial advisor Consider

the following areas as you assess your portfolio

3 Actively pursue equities Te equity bull market remains intact but could show

future signs of slowing We believe investors seeking long-term capital appreciation

should make strategic equity investments part of an overall diversified portfolio

Some of the current risks include modest economic growth the potential for a

setback outside the US Fed policy decisions equity valuations and slower earn-

ings One way to ease back into equities is through regular consistent investing or

dollar cost averaging

3 Focus on companies with free cash flow Using free cash flow companies can raisedividends buy back shares invest in their businesses engage in MampA activity hire

workers or increase capacity Corporations have record high corporate cash levels

and low dividend payout ratios Companies paying dividends generally exhibit lower

price swings during market volatility Sustainable increasing dividends can provide

income help hedge against inflation and offer potential for price appreciation Also

corporate sentiment appears to be improving signaling a potential increase in capital

expenditures for reinvestment and growth supporting appreciation over time

3 Put long-term growth to work Historically growth companies that have consis-

tently and strongly outperformed consensus earnings expectations have enjoyed

price appreciation Many higher growth companies are trading at moderate valua-tions relative to their growth rates We believe that stocks with strong sustainable

growth characteristics will be rewarded In addition companies that exhibit above-

average long-term growth rates should be able to withstand market competition

and dynamics to help provide solid performance over time

3 Recognize credit research as a competitive advantage As economic growth slowly

stabilizes and markets wrestle with changing monetary policy prudent interest rate

risk management and disciplined security selection can provide differentiation We

believe investors will benefit from research-driven security selection across invest-

ment grade and high yield corporate bonds the financial sector of the investment

grade universe BBB and lower rated municipal bonds the preferred securitiessector and emerging markets corporate bonds

3 Evaluate the role liquid alternatives can play For many investors risk management

has replaced relative return as a top priority Alternative assets such as non-traditional

or flexible fixed income real assets or real estate can introduce diversified sources of

risk return and income to a portfolio Alternative strategies such as equity longshort

or absolute return have historically had low correlation to long-only benchmark-

oriented stock and bond investments

KEY THEMES FOR INVESTORS

2014

Characteristics we look for when

evaluating companies

Free cash flow can provideflexibility to raise dividends buyback shares and reinvest in thebusiness

Low valuations help to properlyaddress riskreward trade-offs

Economic sensitivity and above-

average secular growth may helpinsulate against market fluctuations

Dividend yield is one component of performance and should not be the only consideration for investment Dividends are notguaranteed and will fluctuate



Nuveen Investments | 333 West Wacker Drive | Chicago IL 60606 | 8007528700 | nuveencom

RISKS AND OTHER IMPORTANT CONSIDERATIONSThe opinions expressed by the author are for informational purposes only as of the date of writing and may change at any time based on market or other conditions and may notcome to pass These views may differ from other investment professionals at Nuveen Investments and are not intended to be relied upon as investment advice or recommenda-tions does not constitute a solicitation to buy or sell securities and should not be considered specific legal investment or tax advice The information provided does not take intoaccount the specific objectives financial situation or particular needs of any specific person All investments carry a certain degree of risk and there is no assurance that an invest-ment will provide positive performance over any time period Past performance is no guarantee of future results Prices of equity securities may decline significantly over shortor extended periods of time Typically as interest rates rise bond prices fall Credit risk arises from an issuerrsquos ability to make interest and principal payments when due as well asthe prices of bonds declining when an issuerrsquos credit quality is expected to deteriorate Investments in below investment grade or high yield securities are subject to liquidity riskand heightened credit risk Non-US investments involve risks such as currency fluctuation political and economic instability lack of liquidity and differing legal and accountingstandards These risks are magnified in emerging markets

Nuveen Asset Management LLC is a registered investment adviser and an affiliate of Nuveen Investments Inc

copy2014 Nuveen Investments Inc All rights reserved

What Differentiates Nuveen Investments

G983157983145983140983145983150983143 983145983150983158983141983155983156983151983154983155 983156983144983154983151983157983143983144 983139983151983149983152983148983141983160 983143983148983151983138983137983148 983149983137983154983147983141983156983155 983145983155 983137 983152983154983145983158983145983148983141983143983141 983137983155 983159983141983148983148 983137983155 983137 983154983141983155983152983151983150983155983145983138983145983148983145983156983161mdash

we share a strong sense of duty as we strive to go beyond the expected

Industry LeadershipSince 1898

John Nuveen built a firm with brickand mortar stabilitymdasha steadfastpresence in changing markets

Focused Expertise fromIndependent Affiliates

Nuveenrsquos multi-affiliate modeldelivers excellence across assetclasses through focused teams ofinvestment experts

Deep Commitment to Advisors and Investors

Our goal is simple to deliver lastingvalue by aligning outstandingpeople and relevant insights witheach relationship

Nuveen Asset Management delivers global multi-asset class solutionsas one of Nuveen Investments seven independent affiliates

Building upon its leadership in municipal bonds Nuveen Asset Management

manages $118 billion in assets with diverse investment capabilities

Municipal and Taxable Fixed Income Fundamental Equities Real Assets Asset Allocation and Non-Traditional Strategies

As of 93013

3

For more information or to subscribe please visit nuveencom Follow BobDollNuveenon Twitter

INDEX DEFINITIONS

The Barclays Corporate High Yield 2 Issuer Capped Index tracks the performance of US non-investment-grade bonds and limits each issuer to 2 of the index TheBarclays US

Aggregate Bond Index represents securities that are SEC-registered taxable and dollar denominated The index covers the US investment grade fixed rate bond market with indexcomponents for government and corporate securities mortgage pass-through securities and asset-backed securities The BofA Merrill Lynch 3-Month US Treasury Bill Index is anunmanaged index of Treasury securities maturing in 90 days that assumes reinvestment of all income TheFTSE 100 Index is a capitalization-weighted index of the 100 most highlycapitalized companies traded on the London Stock Exchange The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measureequity market performance of emerging markets TheMSCI World Index ex-US is a free float-adjusted market capitalization weighted index that is designed to measure the equitymarket performance of developed markets minus the United States The Nikkei 225 Index is a price-weighted average of 225 top-rated Japanese companies listed in the FirstSection of the Tokyo Stock Exchange The SampP 500 Index is a capitalization-weighted index of 500 stocks designed to measure the performance of the broad domestic economy TheShanghai Stock Exchange Composite is a capitalization-weighted index that tracks the daily price performance of all A-shares and B-shares listed on the Shanghai Stock ExchangeThe US Treasury T-Bill Constant Maturity Rate 10 Yr Index is published by the Federal Reserve Board based on the average yield of a range of Treasury securities all adjusted to theequivalent of a 10-year maturity



2

1 Source Morningstar Direct as of 123113 As represented by the SampP 500 Index and the MSCI World ex-US Index2 Source FactSet as of 123113

As we begin the year we wanted to share our reflections on 2013 as well as

important themes we see for 2014

2013 was a historic and breakout year for global equitymarkets Despite ongoing headwinds from slow growth fiscal and political

uncertainty and fragile economies around the world US and non-US

markets increased 32 and 22 respectively1 US equities hit 45 all-time

highs during the year beating prior bull run periods2

Europe and Asia struggled with political and financial turmoil However

Europersquos improving GDP in the second half provided promise for exiting

recession In Japan Abenomics became a positive influence on the economy

as deflationary pressures declined The economy in China started to stabilize

from monetary easing and supply side reforms

Federal Reserve (Fed) stimulus continued although historically low rates

began to rise and caused challenges for fixed income investors The tide

appears to be turning against fixed income markets as the Fed begins

reversing its easy money stance now that the economy is meeting the

required conditions for GDP growth job growth and low inflation

2014 should enable US and global economies to ascend afteryears of sub-par growth Financial risks are slowly receding and positive

developments include GDP trends federal deficit decreases stronger

household finances housing rebound and additional corporate spendingMonetary accommodation remains critical to protecting the nascent

trajectory and better growth will require increases in revenues and earnings

while keeping inflation in check

Equities will need to address bubble fears Although equity markets could be

choppy as markets adjust to higher valuations and prepare for Fed tapering

further progress is supported by the potential for business investment and

hiring As a result investors may be ready to put cash to work

We appreciate your continued support and wish you success and prosperity

in the year to come

Best Regards

Robert C Doll CFA

Follow BobDollNuveenon Twitter



3
























unemployment




hellipAND LOWLIGHTS






THE YEAR IN REVIEW

2013



4




























year in a row












Overall Scoring

Correct 7


Wrong 2

Total 75 10

SCORECARD

2013



5



















underperformed7



















SCORECARD

2013





6























2013 RECAP





US Equities 324


(Excluding US) 216





BY THE NUMBERS

2013





7






































OUTLOOK

2014



8



































TEN PREDICTIONS

2014



9





































commodity prices




TEN PREDICTIONS

2014



10































TEN PREDICTIONS

2014



11






































2014















G983157983145983140983145983150983143 983145983150983158983141983155983156983151983154983155 983156983144983154983151983157983143983144 983139983151983149983152983148983141983160 983143983148983151983138983137983148 983149983137983154983147983141983156983155 983145983155 983137 983152983154983145983158983145983148983141983143983141 983137983155 983159983141983148983148 983137983155 983137 983154983141983155983152983151983150983155983145983138983145983148983145983156983161mdash












As of 93013

3


INDEX DEFINITIONS





3
























unemployment




hellipAND LOWLIGHTS






THE YEAR IN REVIEW

2013



4




























year in a row












Overall Scoring

Correct 7


Wrong 2

Total 75 10

SCORECARD

2013



5



















underperformed7



















SCORECARD

2013





6























2013 RECAP





US Equities 324


(Excluding US) 216





BY THE NUMBERS

2013





7






































OUTLOOK

2014



8



































TEN PREDICTIONS

2014



9





































commodity prices




TEN PREDICTIONS

2014



10































TEN PREDICTIONS

2014



11






































2014















G983157983145983140983145983150983143 983145983150983158983141983155983156983151983154983155 983156983144983154983151983157983143983144 983139983151983149983152983148983141983160 983143983148983151983138983137983148 983149983137983154983147983141983156983155 983145983155 983137 983152983154983145983158983145983148983141983143983141 983137983155 983159983141983148983148 983137983155 983137 983154983141983155983152983151983150983155983145983138983145983148983145983156983161mdash












As of 93013

3


INDEX DEFINITIONS





4




























year in a row












Overall Scoring

Correct 7


Wrong 2

Total 75 10

SCORECARD

2013



5



















underperformed7



















SCORECARD

2013





6























2013 RECAP





US Equities 324


(Excluding US) 216





BY THE NUMBERS

2013





7






































OUTLOOK

2014



8



































TEN PREDICTIONS

2014



9





































commodity prices




TEN PREDICTIONS

2014



10































TEN PREDICTIONS

2014



11






































2014















G983157983145983140983145983150983143 983145983150983158983141983155983156983151983154983155 983156983144983154983151983157983143983144 983139983151983149983152983148983141983160 983143983148983151983138983137983148 983149983137983154983147983141983156983155 983145983155 983137 983152983154983145983158983145983148983141983143983141 983137983155 983159983141983148983148 983137983155 983137 983154983141983155983152983151983150983155983145983138983145983148983145983156983161mdash












As of 93013

3


INDEX DEFINITIONS





5



















underperformed7



















SCORECARD

2013





6























2013 RECAP





US Equities 324


(Excluding US) 216





BY THE NUMBERS

2013





7






































OUTLOOK

2014



8



































TEN PREDICTIONS

2014



9





































commodity prices




TEN PREDICTIONS

2014



10































TEN PREDICTIONS

2014



11






































2014















G983157983145983140983145983150983143 983145983150983158983141983155983156983151983154983155 983156983144983154983151983157983143983144 983139983151983149983152983148983141983160 983143983148983151983138983137983148 983149983137983154983147983141983156983155 983145983155 983137 983152983154983145983158983145983148983141983143983141 983137983155 983159983141983148983148 983137983155 983137 983154983141983155983152983151983150983155983145983138983145983148983145983156983161mdash












As of 93013

3


INDEX DEFINITIONS





6























2013 RECAP





US Equities 324


(Excluding US) 216





BY THE NUMBERS

2013





7






































OUTLOOK

2014



8



































TEN PREDICTIONS

2014



9





































commodity prices




TEN PREDICTIONS

2014



10































TEN PREDICTIONS

2014



11






































2014















G983157983145983140983145983150983143 983145983150983158983141983155983156983151983154983155 983156983144983154983151983157983143983144 983139983151983149983152983148983141983160 983143983148983151983138983137983148 983149983137983154983147983141983156983155 983145983155 983137 983152983154983145983158983145983148983141983143983141 983137983155 983159983141983148983148 983137983155 983137 983154983141983155983152983151983150983155983145983138983145983148983145983156983161mdash












As of 93013

3


INDEX DEFINITIONS





7






































OUTLOOK

2014



8



































TEN PREDICTIONS

2014



9





































commodity prices




TEN PREDICTIONS

2014



10































TEN PREDICTIONS

2014



11






































2014















G983157983145983140983145983150983143 983145983150983158983141983155983156983151983154983155 983156983144983154983151983157983143983144 983139983151983149983152983148983141983160 983143983148983151983138983137983148 983149983137983154983147983141983156983155 983145983155 983137 983152983154983145983158983145983148983141983143983141 983137983155 983159983141983148983148 983137983155 983137 983154983141983155983152983151983150983155983145983138983145983148983145983156983161mdash












As of 93013

3


INDEX DEFINITIONS





8



































TEN PREDICTIONS

2014



9





































commodity prices




TEN PREDICTIONS

2014



10































TEN PREDICTIONS

2014



11






































2014















G983157983145983140983145983150983143 983145983150983158983141983155983156983151983154983155 983156983144983154983151983157983143983144 983139983151983149983152983148983141983160 983143983148983151983138983137983148 983149983137983154983147983141983156983155 983145983155 983137 983152983154983145983158983145983148983141983143983141 983137983155 983159983141983148983148 983137983155 983137 983154983141983155983152983151983150983155983145983138983145983148983145983156983161mdash












As of 93013

3


INDEX DEFINITIONS





9





































commodity prices




TEN PREDICTIONS

2014



10































TEN PREDICTIONS

2014



11






































2014















G983157983145983140983145983150983143 983145983150983158983141983155983156983151983154983155 983156983144983154983151983157983143983144 983139983151983149983152983148983141983160 983143983148983151983138983137983148 983149983137983154983147983141983156983155 983145983155 983137 983152983154983145983158983145983148983141983143983141 983137983155 983159983141983148983148 983137983155 983137 983154983141983155983152983151983150983155983145983138983145983148983145983156983161mdash












As of 93013

3


INDEX DEFINITIONS





10































TEN PREDICTIONS

2014



11






































2014















G983157983145983140983145983150983143 983145983150983158983141983155983156983151983154983155 983156983144983154983151983157983143983144 983139983151983149983152983148983141983160 983143983148983151983138983137983148 983149983137983154983147983141983156983155 983145983155 983137 983152983154983145983158983145983148983141983143983141 983137983155 983159983141983148983148 983137983155 983137 983154983141983155983152983151983150983155983145983138983145983148983145983156983161mdash












As of 93013

3


INDEX DEFINITIONS





11






































2014















G983157983145983140983145983150983143 983145983150983158983141983155983156983151983154983155 983156983144983154983151983157983143983144 983139983151983149983152983148983141983160 983143983148983151983138983137983148 983149983137983154983147983141983156983155 983145983155 983137 983152983154983145983158983145983148983141983143983141 983137983155 983159983141983148983148 983137983155 983137 983154983141983155983152983151983150983155983145983138983145983148983145983156983161mdash












As of 93013

3


INDEX DEFINITIONS










G983157983145983140983145983150983143 983145983150983158983141983155983156983151983154983155 983156983144983154983151983157983143983144 983139983151983149983152983148983141983160 983143983148983151983138983137983148 983149983137983154983147983141983156983155 983145983155 983137 983152983154983145983158983145983148983141983143983141 983137983155 983159983141983148983148 983137983155 983137 983154983141983155983152983151983150983155983145983138983145983148983145983156983161mdash












As of 93013

3


INDEX DEFINITIONS



bob doll, jan 2014 - confidence returns

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