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Oppenheimer funds are distributed by OppenheimerFunds Distributor, Inc., 225 Liberty Street, New York, NY 10281-1008© 2018 OppenheimerFunds Distributor, Inc. All rights reserved.
Shares of Oppenheimer funds are not deposits or obligations of any bank, are not guaranteed by any bank, are not insured by the FDIC or any other agency and involve investment risks, including the possible loss of the principal amount invested.
Navigating the Changing Tides in Global Growth:Challenges and Opportunities
Brian LevittOppenheimerFunds, Inc.April 26, 2018
2
$10,000
$100,000
$1,000,000
$10,000,000
0
10
20
30
40
50
60
70
80
90%
Gallup Poll Presidential Approval Ratings and Dow Jones Industrial Average Growth of $100,000
Our Political Views are Immaterial to this Conversation
Source: Gallup 1/31/17. The Presidential Approval ratings were introduced in the late 1930s to gauge public support for the President of the United States during their term. For illustrative purposes only and not intended as investment advice. See page 87 for index definitions. Past performance does not guarantee future results.
1961 1963 1969 1977 1981 1989 1993 2001 20091974 2017
Log Scale
3
Hating the Government is Not an Investment Strategy
Source: Gallup 1/31/17. The Presidential Approval ratings were introduced in the late 1930s to gauge public support for the President of the United States during their term. For illustrative purposes only and not intended as investment advice. See page 27 for index definitions. Past performance does not guarantee future results.
2.4%
7.2%
11.0%
-13.8%-16%-14%-12%-10%
-8%-6%-4%-2%0%2%4%6%8%
10%12%
> 65 50 to 65 36 to 50 < 35Presidential Approval Ratings
16% of time 39% of time 38% of time
7% of time
Gallup Poll Presidential Approval Ratings and Dow Jones Industrial Average Returns
4
Agenda
1. Cycle is Getting Older
2. Equities Are the Asset Class of Choice
3. Growth in a Slow Growth World
4. Low Interest Rates for the Long Term
5. Case for International (EM in Particular) is Strong
The Cycle is Getting Older
6
This Cycle is the 2nd Longest on Record
Sources: Bloomberg, 12/1/17.
1974-1980
1987-2000
2009-Current1982-1987
2002-20071949-1956
S&P 500 IndexPrice to Peak Earnings Ratio for Cycles Longer than 50 MonthsEach data point represents the price of the S&P 500 Index divided by the highest level of earnings achieved in that cycle. The price to peak earnings ratio is used to smooth earnings fluctuations.
0
5
10
15
20
25
30
1 5 9 13 17 21 25 29 33 37 41 45 49 53 57 61 65 69 73 77 81 85 89 93 97 101
105
109
113
117
121
125
129
133
137
141
145
x
7
Sources: Bloomberg, 3/16/18
The Yield Curve Is Flattening
-450-375-300-225-150
-750
75150225300375450
1967
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
2017
10-Year U.S. Treasury Rate minus 1-Year U.S. Treasury Rate
8
Sources: Bloomberg, 3/16/18
Markets Tend to do Well Until the Recession
14.6%
22.6%
-2.4%
7.2%
30.2%
-0.1%-5%
0%
5%
10%
15%
20%
25%
30%
35%
75 bps Wide to 0 bps 75 bps Wide to Beginning ofRecession
During Official Recession
AverageMedian
S&P 500 Index
9
End of Cycle DashboardIF
Source of chart data: Bloomberg, 12/31/17. Index definitions can be found on page 25. Past performance does not guarantee future results.
… U.S. and/or European inflation increases more rapidly … The 10-year U.S. Treasury rate falls and the yield curve flattens
… High yield credit spreads widen … The U.S. Dollar strengthens vs Emerging Market currencies
0
500
1000
1500
2000
1994 1999 2004 2009 2014
U.S. Credit Spreads (BPS)
0%
1%
2%
3%
4%
5%
1997 2002 2007 2012 2017
U.S. Wage Growth Y/Y (Avg Hr Earnings)E.U. Wage Growth Y/Y (Hr Comp)
75
85
95
105
2014 2015 2016 2017
DXY Index
0%
2%
4%
6%
8%
1995 1998 2001 2004 2007 2010 2013 2016
Federal Funds Rate Target 10-Year Treasury Yield
Equities Still our Asset Classof Choice
11
The Global Macro Backdrop is Sound
Percent of Countries’ Gross Domestic Product Growing Above Their Long-Term Average
0
10
20
30
40
50
60
70
80%
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017Q3
Perc
ent o
f Cou
ntrie
s Ab
ove
Thei
r Lon
g-Te
rm A
vera
ge
59%of World
73%of World
Sources: Bloomberg, Haver, OppenheimerFunds, 12/31/17. Past performance does not guarantee future results.
12
Monetary Policy Around the World is Easy
Last Rate Move: Easing or TighteningTightening
Easing
Sources: Bloomberg, Federal Reserve 12/31/17.
13
This is Not 1999Nasdaq: Price to Sales of Top 10 Names by Market Capitalization
Source: FactSet, 12/31/17. Company logos are for illustrative purposes only and are not intended as investment advice. The mention of specific companies does not constitute a recommendation on behalf of any fund or OppenheimerFunds, Inc. Past performance does not guarantee future results.
December 1999 March 2018
27.3
32.0
26.5
9.3
3.9
17.2
5.5
9.2
36.6
0
5
10
15
20
25
30
35
40x
3.8 4.37.1
13.2
7.1
3.8 4.72.0 2.5
15.5
11.8
0
5
10
15
20
25
30
35
40x190.2
Average: 35.8xMedian: 21.9x
Average: 6.9xMedian: 4.7x
Growth in a Slow Growth World
15
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
2001 2003 2005 2007 2009 2011 2013 2015 2017
Recessions Unemployed Workers Job Openings
The Labor Market Is Already TightTotal Unemployment and Job Openings
Cap-ex Cycle Has Already TurnedNonresidential Fixed Investment (% of GDP)
New Higher Trend Growth is Unlikely
Thou
sand
s of
Peo
ple
10.9
12.6
10
11
12
13
14
15%
1990 1994 1998 2002 2006 2010 2014 2018
Perc
ent o
f Gro
ss D
omes
tic P
rodu
ct
Sources: Bureau of Labor Statistics (Left chart) and Bureau of Economic Analysis (Right chart), 12/31/17. Past performance does not guarantee future results.
16
Finding Growth in a Slow Growth World
Source: Global Insights, Statista Market Analytics, US Telecom Broadband association, UN Population Bureau, Boston Consulting Group, Brookings Institute, international monetary fund 12/31/16. Forecasts may not be achieved. For illustrative purposes only not intended as investment advice.
17.916.7
20.7
4.5
18.5
6.47.6
2.7 2.2
5.7
0.0
5.0
10.0
15.0
20.0
25.0
China India United States Eurozone Brazil
Projected Annualized 5 Year GrowthRateProjected Annualized 5 Year GDPGrowth
Data Generation: USA Middle Class Consumption: BrazilAutomobile Sales: IndiaMobile Phones: China Aging Populations: Europe%
Low for Long
18
IMF Gross National Savings as a % of GDP by CountryHighest Savers & U.S. and European Union
Global Household SavingsComparison to Global Market Cap andGlobal Sovereign Debt
1. High Savings Rates Overseas
Source: International Monetary Fund, 2016
Qatar49%
Kuwait45%
China45%
Iran42%
Singapore37%
Saudi Arabia35%
Azerbaijan34%
Oman33%
Norway29%
South Korea29%
UAE28%
Malaysia28%
Japan27%
Indonesia25%
Trilli
ons
$0
$20
$40
$60
$80
$100
$120
$140
$160
$180
Global HouseholdSavings
Global MarketCapitalization
Global SovereignDebt
19
0
10
20
30
40
50
60
Ethi
opia
Nig
eria
Paki
stan
Philli
ppin
esEg
ypt
Bang
lade
shSo
uth
Afric
aSa
udi A
rabi
aIn
dia
Peru
Mex
ico
Mal
aysi
aIra
nC
olom
bia
Indo
nesi
aVi
etna
mTu
rkey
Arge
ntin
aBr
azil
Chi
leSi
ngap
ore
Irela
ndC
hina
Thai
land
U.S
.Au
stra
liaN
orw
ayR
ussi
aTa
iwan
Pola
ndU
.K.
Fran
ceSo
uth
Kore
aSw
eden
Cze
ch R
epub
licH
unga
ryPo
rtuga
lC
anad
aSw
itzer
land
Spai
nH
ong
Kong
Gre
ece
Italy
Ger
man
yJa
pan
2016 2050
Source: Ned Davis Research, 2016
2. The World is Aging
Case for International Is Strong
21
EM Business Activity Heat MapInflation Falling in Emerging MarketsConsumer Price Index
-2
-1
0
1
2
3
4
5
6
7
8%
2009 2010 2011 2012 2013 2014 2015 2016 2017
Y/Y
Perc
ent C
hang
e
U.S. Consumer Price Index EM Consumer Price Index
Sources: Bloomberg, Haver, Markit, OppenheimerFunds, 11/30/17. Business activity = Composite (manufacturing + services) Purchasing Managers Index (PMI). As shown in left chart, Taiwan and South Korea are displayed with manufacturing PMIs because service PMIs do not exist for those economies.
Above 52 51-52 50-51 47-50 < 47
EM InflationFalling
U.S. Inflation Rising
EM
EM Growth Will Be Stronger and Deeper Than DM Growth
22
Price-to-Sales Ratio:MSCI Emerging Markets Index / MSCI World Index
Emerging Market Business Activity andEquity Returns
Sources: Bloomberg, OppenheimerFunds, 12/31/17. Note: P/S = price-to-sales ratio. Shaded areas denote global all-industry contractions. SD = standard deviation. Seepage 25 for index definitions. Past performance does not guarantee future results.
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8x
Rel
ativ
e P/
S R
atio
-100
-80
-60
-40
-20
0
20
40
60
80
100%
35
40
45
50
55
60
65
2006 2008 2010 2012 2014 2016 2018
Year-Over-Year Percent C
hange
Diff
usio
n In
dex
EM Composite PMI (Left-Axis) MSCI EM Index (Right-Axis)
Average
EM rich,DM cheap
EM cheap,DM rich
1995 1998 2001 2004 2007 2010 2013 2016 2019
Expansion
Contraction
CorrelationCoefficient
0.81
EM Equities Will Likely Outperform DM Equities
23
Average Real Yield of Emerging Market 10-Year Bonds EM Local Currency Real Yields
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5%
2012 2013 2014 2015 2016 2017
Perc
ent
Taper Tantrum
First Fed Rate Hike
Source: Bloomberg, 12/31/17. Countries included in the average real yield calculations are India, Russia, China, Mexico, Indonesia, Turkey and Brazil. Real yields are the nominal yield of a country’s sovereign bond minus the year-over-year change in their respective consumer price index. Past performance does not guarantee future results.
Nominal 10-Year Sovereign Bond RateReal 10-Year Sovereign Bond RateConsumer Price Index Year-over-Year Percent Change
Brazil
Poland
Russia
2.81%7.56%
10.36%
India4.88%
2.26%7.14%
2.00%1.34%
3.34%
2.49%5.05%
7.54%
EM Bonds Will Likely Provide a Better Risk-Return Profile than U.S. Corporates
24
Price-to-Sales Ratio:MSCI Europe Index / MSCI USA Index EU Business Activity and Equity Returns
Sources: Bloomberg, OppenheimerFunds, 12/31/17. Note: P/S = price-to-sales ratio. Shaded areas denote global all-industry contractions. SD = standard deviation. Seepage 25 for index definitions. For illustrative purposes only. Past performance does not guarantee future results.
Average
Europe rich,U.S. cheap
Europe cheap,U.S. rich
Expansion
Contraction 0.50
0.55
0.60
0.65
0.70
0.75
0.80
0.85x
1999 2003 2007 2011 2015 2019
Rel
ativ
e P/
S R
atio
-100
-80
-60
-40
-20
0
20
40
60
80
100%
35
40
45
50
55
60
65
1998 2002 2006 2010 2014 2018
Year-Over-Year Percent C
hange
Diff
usio
n In
dex
EU Composite PMI (Left-Axis) MSCI Europe Index (Right-Axis)
European Equities Will Likely Outperform U.S. Equities
25
Index DefinitionsThe S&P 500 Index is a market capitalization weighted index of the 500 largest domestic U.S. Stocks.The MSCI World Index is designed to measure the equity market performance of developed markets and includes the U.S., Eurozone area, Japan and Canada.The MSCI Emerging Market Index is designed to measure the equity market performance of the emerging markets.The Commodity Research Bureau (“CRB”) Raw Commodity Index is designed to measure the price performance of raw input commodities and includes the prices of various metals, textiles and fibers.The MSCI World ex. US Index is designed to measure the performance of developed market equities excluding the United StatesThe MSCI Europe Index is designed to measure the performance of European equity markets.Russell 1000 Value Index is designed to measure the 1,000 largest value stocks in the US stock marketRussell 1000 Growth Index is designed to measure the 1,000 largest growth stocks in the US marketRussell 3000 Value Index is designed to measure all 3,000 value stocks in the US stock marketRussell 3000 Growth Index is designed to measure all 3,000 growth stocks in the US marketThe Russell 2000 Index is designed to measure the performance of domestic small capitalization stocks in the USAGross Domestic Product (GDP) is a measure of all of the goods and services produced within an economy during a year. The Economist Big Mac Index is based on the theory of purchasing-power parity (PPP), the notion that in the long run exchange rates should move towards the rate that would equalize the prices of an identical basket of goods and services (in this case, a burger) in any two countries therefore identifying whether a currency is over or under valued.MSCI EM Currency Index is a measure of a basket of emerging market currencies against the United States dollarMarkit Emerging Markets Manufacturing Purchasing Managers Index is designed to measure the relative optimism of purchasing managers in the manufacturing sector across all emerging market s and indicates the economic conditions of an economy.The Fed Funds Rate is the benchmark short-term interest rate level set by the Federal Open Market CommitteeIndices are unmanaged and cannot be purchased directly by investors. Index performance is shown for illustrative purposes only and does not predict or depict the performance of any investment. Past performance does not guarantee future results.
26
DisclosuresShares of Oppenheimer funds are not deposits or obligations of any bank, are not guaranteed by any bank, are not insured by the FDIC or any other agency, and involve investment risks, including the possible loss of the principal amount invested.These views represent the opinions of OppenheimerFunds, Inc. and are not intended as investment advice or as a prediction of the performance of any investment. These views are as of the open of business on December 31, 2017, and are subject to change on the basis of subsequent developments.Equities are subject to market risk and volatility; they may gain or lose value. Fixed-income investing entails credit and interest rate risks. Bonds are exposed to credit and interest rate risk. When interest rates rise, bond prices generally fall, and a fund’s share prices can fall. Investments in securities of growth companies may be especially volatile. Foreign investments may be volatile and involve additional expenses and special risks, including currency fluctuations, foreign taxes and geopolitical risks. Emerging and developing markets may be especially volatile. Eurozone investments may be subject to volatility and liquidity issues. The mention of specific countries, regions, or sectors does not constitute a recommendation by any particular fund or by OppenheimerFunds, Inc. This material is provided for general and education purposes only, is not intended to provide legal or tax advice, and is not for use to avoid penalties that may be imposed under U.S. federal tax laws. OppenheimerFunds is not undertaking to provide impartial investment advice or to provide advice in a fiduciary capacity. Contact your attorneyor other advisor regarding your specific legal, investment or tax situation.Before investing in any of the Oppenheimer funds, investors should carefully consider a fund’s investment objectives, risks, charges and expenses. Fund prospectuses and summary prospectuses contain this and other information about the funds, and may be obtained by asking your financial advisor, visiting oppenheimerfunds.com or calling 1 800 CALL OPP (225 5677). Read prospectuses and summary prospectuses carefully before investing.Oppenheimer funds are distributed by OppenheimerFunds Distributor, Inc.225 Liberty Street, New York, NY 10281-1008© 2018 OppenheimerFunds Distributor, Inc. All rights reserved.
December 31, 2017TH0118.001.0118