table of contents - amazon s3...u.s. small cap growth 11.39 28.48 28.48 u.s. small cap value 8.49...

2

Table of contentsMARKET SUMMARY 3Performance overview across equity, fixed income, and real asset markets

MACRO ECONOMY 8Global growth expectations and key economic variables

EQUITIES 17Insight into the global equity markets through market dynamics and fundamentals

FIXED INCOME 27Major themes in the investment grade and high yield fixed income markets

REAL ASSETS 36A focus on the main drivers of the real estate and commodity markets

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MACROECONOMY

FIXED INCOME

EQUITIES

REAL ASSETS

MARKET SUMMARY

MARKET SUMMARY

MARKET SUMMARYPerformance overview across equity, fixed income, and real asset markets

MACROECONOMY

EQUITIES

REAL ASSETS

FIXED INCOME

4

State of the market

MARKET SUMMARY

MACROECONOMY

EQUITIES

REAL ASSETS

FIXED INCOME

Source: Morningstar. GICS sectors are subsets of the S&P 500 Index. U.S. Large Cap Growth: Russell 1000 Growth Index, U.S. Large Cap Value: Russell 1000 Value Index, U.S. Mid Cap Growth: Russell Mid Cap Growth Index, U.S. Mid Cap Value: Russell Mid Cap Value Index, U.S. Small Cap Growth: Russell 2000 Value Index, U.S. Small Cap Growth:Russell 2000 Value Index, International Equities: MSCI ACWI ex-USA Index, Global Equities: MSCI ACWI Index, Developed Market Equities: MSCI World Index, Emerging Market Equities: MSCI EM Index, U.S. Broad Market: BBG Barclays U.S. Aggregate, U.S. Treasury: BBG Barclays U.S. Treasury Index, U.S. TIPS: BBG Barclays U.S. Treasury TIPS Index, Municipals: BBG Barclays Municipal Bond Index, High Yield Municipals: BBG Barclays HY Muni Index, Agency MBS: BBG Barclays U.S. MBS-Agency Fixed Rate Index, Commercial MBS: BBG Barclays CMBS ERISA Eligible Index, ABS: BBG Barclays ABS Index, Investment Grade Corporates: BBG Barclays U.S. Corp IG Index, High Yield: BBG Barclays U.S. High Yield Corporate Index, Leveraged Loans: Credit Suisse Leveraged Loan Index, International Bonds (Unhedged): BBG Barclays Global Aggregate ex-U.S., International Bonds (Hedged): BBG Barclays Global Aggregate ex-U.S. Hedged USD, Global Bonds: BBG Barclays Global Aggregate, Emerging Market Local: JPM EMBI Global Diversified, Emerging Market Hard Currency: JP Morgan GBI-EM Global Diversified Index.Past performance does not guarantee future results. Data as of 12/31/2019.

U.S. Equity Market Cap Performance (%)

Quarter YTD One Year

U.S. Large Cap Growth 10.62 36.39 36.39U.S. Large Cap Value 7.41 26.54 26.54U.S. Mid Cap Growth 8.17 35.47 35.47U.S. Mid Cap Value 6.36 27.06 27.06U.S. Small Cap Growth 11.39 28.48 28.48U.S. Small Cap Value 8.49 22.39 22.39

International/Global Equity Performance (%)


Global equities 8.95 26.60 26.60Developed market equities 8.56 27.67 27.67Emerging market equities 11.84 18.42 18.42

International equities 8.92 21.51 21.51

U.S. Equity Sector Performance (%)


S&P 500 9.07 31.49 31.49Consumer Discretionary 4.47 27.94 27.94

Consumer Staples 3.51 27.61 27.61Energy 5.49 11.81 11.81

Financials 10.47 32.13 32.13Health Care 14.37 20.82 20.82

Industrials 5.53 29.37 29.37Technology 14.40 50.29 50.29

Materials 6.38 24.58 24.58Real Estate -0.54 29.01 29.01

Communication Services 9.00 32.69 32.69Utilities 0.75 26.35 26.35

Fixed Income Sector Performance (%)


Global Bonds 0.49 6.84 6.84U.S. Broad Market 0.18 8.72 8.72

U.S. Treasuries -0.79 6.86 6.86U.S. TIPS 0.79 8.43 8.43

Municipals 0.74 7.54 7.54High Yield Municipals 0.90 10.68 10.68

Agency MBS 0.71 6.35 6.35CMBS -0.33 8.29 8.29

ABS 0.39 4.53 4.53Inv. Grade Corporate 1.18 14.54 14.54

High Yield 2.61 14.32 14.32Leveraged Loans 1.68 8.17 8.17

International Bonds (Unhedged) 0.67 5.09 5.09International Bonds (Hedged) -1.11 7.57 7.57

Emerging Hard Currency 1.81 15.04 15.04Emerging Local Currency 5.20 13.47 13.47

5

State of the market

MARKET SUMMARY

MACROECONOMY

EQUITIES

REAL ASSETS

FIXED INCOME

Source: Morningstar. All Commodities: Bloomberg Commodity, Agriculture: Bloomberg Sub Agriculture, Corn: Bloomberg Sub Corn, Soybeans: Bloomberg Sub Soybeans, Energy: Bloomberg Sub Energy, Brent Oil: Bloomberg Sub Brent Crude, WTI Oil: West Texas Crude Int Oil BL, Natural Gas: Bloomberg Sub Natural Gas, Industrial Metals: Bloomberg Sub Industrial Metals, Copper: Bloomberg Sub Copper, Aluminum: Bloomberg Sub Aluminum, Livestock: Bloomberg Sub Livestock, Live Cattle: Bloomberg Sub Live Cattle, Precious Metals: Bloomberg Sub Precious Metals, Gold: LMBA Gold Price PM USD, Silver: Bloomberg Sub Silver, Softs: Bloomberg Sub Softs, Sugar: Bloomberg Sub Sugar, Coffee: Bloomberg Sub Coffee. Softs includes Cocoa, Coffee, Cotton, and Sugar. U.S. Real Estate: FTSE EPRA/NAREIT United States, International Real Estate: FTSE EPRA/NAREIT Global Ex U.S., Developed Real Estate: FTSE EPRA/NAREIT Developed, Emerging Real Estate: FTSE EPRA/NAREIT Emerging, Global Real Estate: FTSE EPRA/NAREIT Global TR USD, Preferreds: S&P Preferred Stock Index, Convertibles: BofAML U.S. Convertible Index, U.S. Dollar: ICE USD Spot Index. Index returns based on total return calculations. Past performance does not guarantee future results. Data as of 12/31/2019.

Commodity Performance (%)


All Commodities 4.42 7.69 7.69Energy 5.82 11.78 11.78

Brent Oil 16.20 35.57 35.57WTI Oil 13.03 35.42 35.42

Natural Gas -17.23 -37.24 -37.24Grains 3.55 -1.12 -1.12

Corn -1.95 -5.21 -5.21Soybeans 2.63 -0.57 -0.57

Industrial Metals -0.25 6.98 6.98Copper 8.50 7.27 7.27

Aluminum 5.00 -3.78 -3.78Livestock 0.15 -5.99 -5.99

Live Cattle 9.27 1.18 1.18Precious Metals 3.72 17.02 17.02

Gold 1.98 18.43 18.43Silver 4.96 13.87 13.87

Softs 13.94 4.26 4.26Sugar 6.52 1.92 1.92Coffee 24.84 12.19 12.19

Real Estate Performance (%)


Global Real Estate 3.51 23.58 23.58Developed 1.96 23.06 23.06Emerging 17.72 27.78 27.78

U.S. Real Estate -0.96 24.34 24.34International Real Estate 8.07 23.01 23.01

Hybrid & Currency Performance (%)


Preferreds 2.26 17.64 17.64Convertibles 7.38 23.15 23.15U.S. Dollar -3.01 0.22 0.22

Meeting Date 25-50 50-75 75-100 100-125 125-150 150-175 175-200

1/29/2020 - - - - - 95.3% 4.7%

3/18/2020 - - - - 4.5% 91.0% 4.5%

4/29/2020 - - - 0.4% 11.7% 83.8% 4.1%

6/10/2020 - - 0.0% 1.4% 18.2% 76.7% 3.7%

7/29/2020 - 0.0% 0.2% 3.2% 24.6% 68.7% 3.3%

9/16/2020 0.0% 0.0% 0.7% 6.9% 32.1% 57.5% 2.8%

Fed Funds Rate

6

Market Movers: 4Q 2019

MACROECONOMY

MARKET SUMMARY

EQUITIES

REAL ASSETS

FIXED INCOME

A year with strong gains across markets outshined 2018 losses

Source: FactSet. Data as of 12/31/2019..

Source: FactSet. Data as of 12/31/2019.

Source: Morningstar. U.S. Equities: S&P 500 Index, Global Equities: MSCI ACWI Index, International Equities: MSCI ACWI ex-USA Index, Emerging Market (EM) Equities: MSCI EM Index, U.S. Bonds: BBG Barclays U.S. Aggregate, Global Bonds: BBG Barclays Global Aggregate, International Bonds: BBG Barclays Global Aggregate ex-U.S, EM Bonds: JP Morgan GBI-EM Global Diversified Index. High Yield: BBG Barclays U.S. High Yield Corporate Index, U.S. Real Estate: FTSE EPRA/NAREIT United States, Global Real Estate: FTSE EPRA/ NAREIT Global TR USD, WTI Crude Oil: West Texas Crude Int Oil BL, Gold: LMBA Gold Price PM USD. Past performance does not guarantee future results. Data as of 12/31/2019.

1.88

-0.02

0.78

-0.23

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

2014 2015 2016 2017 2018 2019

Glo

bal 1

0-Y

ear B

ond

Yie

lds

U.S. Japan UK Germany

Rates have risen recently on trade optimism Markets pricing in a Fed “on hold” in 2020 with potential for a rate cut in the second half of the year

Current Rate

31.526.6

21.5 18.4

8.7 6.8 5.113.5 14.3

24.3 23.635.4

18.4

-4.4-9.4

-14.2 -14.6

0.0-1.2 -2.1

-6.2-2.1 -3.9 -5.5

-25.3

-0.9

U.S.Equities

GlobalEquities

InternationalEquities

EM Equity U.S. Bonds GlobalBonds

InternationalBonds

EM Bonds High Yield U.S. RealEstate

Global RealEstate

WTI CrudeOil

Gold

Retu

rn (%

)

2019 2018

Presenter

Presentation Notes

Within Manufacturing, a measure above 50 is considered expansionary. Inflation can be measured in many ways. We’ve used a measure considered “headline inflation.” CPI measures the price for a basket of all goods, while Core CPI measures for all these goods excluding food and energy which tend to be more volatile.

7

Market Movers: 4Q 2019

Source: FactSet. Data as of 12/31/2019.Source: Bloomberg. Data as of 12/31/2019.

MACROECONOMY

MARKET SUMMARY

EQUITIES

REAL ASSETS

FIXED INCOME

40

45

50

55

60

65

70

Jan-17 Jul-17 Jan-18 Jul-18 Jan-19 Jul-19

Glo

bal M

anuf

actu

ring

PMIs

Eurozone JapanUK U.S.China Germany

Global manufacturing activity has been improving

Source: FactSet. Data as of 12/31/2019. Source: FactSet. Data as of 12/31/2019.

Recent economic data slightly missing market expectations

-100

-80

-60

-40

-20

0

20

40

60

80

100

2016 2017 2018 2019 2019

Citi

Econ

omic

Sur

pris

e In

dex

Market earnings estimates revised downward

0%

5%

10%

15%

20%

25%

30%

35%

0

10

20

30

40

50

60

1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019

% N

egat

ive

Yie

ldin

g De

bt

Mar

ket V

alue

Deb

t ($

trillio

n)

Bloomberg Barclays Global Aggregate Index% Negative Yielding Debt

Negative yielding debt on the rise globally

-6

-4

-2

0

2

4

6

8

10

2015 2016 2017 2018 2019

3-M

onth

S&P

500

Rev

isio

ns to

NTM

EP

S Es

timat

es

Presenter

Presentation Notes


MACROECONOMY

MARKET SUMMARY

MACRO ECONOMYGlobal growth expectations and key economic variables

EQUITIES

REAL ASSETS

FIXED INCOME

9

Global growth expectationsFORECAST AND ACTUAL REAL GDP GROWTH (%)

Source: Bloomberg. Consensus expectations are created by Bloomberg and are comprised of the estimates of a number of market economists. Any projections or forecasts presented herein are subject to change without notice. Data as of 12/31/2019.

MACROECONOMY

MARKET SUMMARY

EQUITIES

REAL ASSETS

FIXED INCOME

2013 2014 2015 2016 2017 2018 2019 2020Estimate Estimate

World 3.5 3.6 3.5 3.3 3.6 3.7 3.0 3.1

Developed economies 1.5 2.1 2.5 1.8 2.4 2.3 1.8 1.5

United States 1.8 2.5 2.9 1.6 2.4 2.9 2.3 1.8

Eurozone -0.2 1.4 2.1 1.9 1.2 1.8 1.2 1.0

Japan 2.0 0.4 1.3 0.6 0.7 0.7 0.9 0.3

United Kingdom 2.0 2.9 2.3 1.8 1.3 1.4 1.3 1.0

Emerging economies 5.2 4.6 4.4 4.4 4.8 5.0 4.4 4.5

China 7.8 7.3 6.9 6.7 6.2 6.6 6.1 5.9

India 5.5 6.4 7.4 8.2 7.0 7.4 5.6 5.1

Brazil 3.0 0.5 -3.5 -3.3 2.2 1.2 1.1 2.1

Russia 1.8 0.7 -2.5 0.3 1.5 1.8 1.2 1.7

Mexico 1.4 2.3 2.6 2.3 1.6 2.1 0.0 1.1

-3

-2

-1

0

1

2

3

4

5

6

2013 2014 2015 2016 2017 2018 2019 2020

Act

ual a

nd e

xpec

ted

GDP

gro

wth

EM U.S. Eurozone Japan UK

-0.5

0

0.5

1

1.5

2

2.5

3

2013 2014 2015 2016 2017 2018 2019

Cent

ral b

ank

rate

s (%

)

U.S. Eurozone

Japan UK

10

The global economyGlobal growth past cycle peaks

Central banks in varying stages of fiscal policy

Source: Bloomberg. Data as of 12/31/2019.

Source: Federal Reserve Bank of St. Louis, FRED and Bank of England. Assets converted to USD at month-end rates. Data as of 12/31/2019.



MACROECONOMY

MARKET SUMMARY

Estimate

Central bank balance sheets no longer in expansion mode

-4

-2

0

2

4

6

2013 2014 2015 2016 2017 2018 2019

CPI

(% c

hang

e, Y

oY)

U.S. Europe Japan UK

EQUITIES

REAL ASSETS

FIXED INCOME

Fed

BoE

ECB

BoJ

$0

$2

$4

$6

$8

$10

$12

$14

$16

$18

2006 2008 2010 2012 2014 2016 2018

Cent

ral b

ank

asse

ts (U

SD b

illion

s)

Inflation ticked up in developed markets

Developed Quarter(%)

YTD (%)

One Year (%)

Three Year(%)

Five Year(%)

Ten Year (%)

Australian dollar 4.73 -0.45 -0.45 -2.27 -14.12 -21.79

British pound 7.76 4.06 4.06 7.97 -14.89 -18.01

Canadian dollar 1.78 4.93 4.93 3.49 -10.54 -18.92

Euro 2.56 -2.20 -2.20 7.25 -7.32 -21.70

Japanese yen -0.79 1.04 1.04 8.23 10.28 -14.34

Swedish krona 5.48 -5.27 -5.27 -2.42 -16.64 -23.54

Swiss franc 2.78 1.55 1.55 5.89 2.87 7.10

Cumulative

11

Global currenciesCURRENCY RETURNS VS. U.S. DOLLAR (%)

MACROECONOMY

MARKET SUMMARY


EQUITIES

REAL ASSETS

FIXED INCOME

Emerging Quarter(%)

YTD (%)

One Year (%)

Three Year(%)

Five Year(%)

Ten Year (%)

Brazilian real 3.20 -3.87 -3.87 -18.47 -34.05 -56.72

Chinese yuan 2.66 -1.22 -1.22 -0.26 -10.88 -1.95

Hong Kong dollar 0.66 0.51 0.51 -0.44 -0.47 -0.48

Indian rupee -0.41 -2.73 -2.73 -4.41 -11.68 -34.82

Mexican peso 4.75 3.83 3.83 9.55 -22.06 -30.83

Russian ruble 5.26 12.46 12.46 -1.17 -5.38 -51.55

Singapore dollar 2.90 1.29 1.29 7.79 -1.52 4.38

South African rand 9.53 2.82 2.82 -1.89 -17.35 -47.16

South Korean won 3.71 -3.49 -3.49 4.47 -4.94 0.67

Taiwanese dollar 3.35 2.25 2.25 7.39 5.45 6.49

Turkish lira -3.83 -11.46 -11.46 -40.45 -60.76 -74.82

Cumulative

1.41

0.79 0.54 0.610.89 0.98

0.72 1.02 0.930.68 0.66 0.63 0.59 0.58 0.57

3.97

3.50

2.97 2.882.69 2.47

2.55

2.792.68

2.342.75 2.93 2.96 3.03 3.04

2010 2015 2020

Contribution of advanced economies

Contribution of emerging markets

World GDP growth

1.991.61

1.00

1.171.49 2.88

0.00

1.00

2.00

3.00

4.00

5.00

6.00

1980s 1990s 2000s

GDP

gro

wth

(%)

12

Emerging marketsEmerging markets increasingly the largest driver of global growth

Source: International Monetary Fund (IMF), World Economic Outlook Database. Data as of 10/31/2019.

MACROECONOMY

MARKET SUMMARY

EQUITIES

REAL ASSETS

FIXED INCOME

-4

-2

0

2

4

6

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

% c

hang

e, Y

oY

CPI CORE CPI

0

2

4

6

8

10

12

12

13

14

15

16

17

18

19

20

2007 2009 2011 2013 2015 2017

Unem

ployment (%

)

Rea

l GD

P (T

rillio

ns o

f dol

lars

)

Real GDP

Unemployment Rate (rhs)

45

47

49

51

53

55

57

59

61

63

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Inde

x le

vel

ISM ManufacturingISM Non-Manufacturing

13

The U.S. economyEconomy continues to expand Housing prices remain trending lower

Manufacturing and Non-Manufacturing on downward trend Inflation inched upward

Source: U.S. Bureau of Economic Analysis, U.S. Bureau of Labor Statistics, retrieved from FRED. Real GDP and Employment indexed to Q4 2007. Data as of 9/30/2019.

Source: U.S. Bureau of Economic Analysis, retrieved from FRED. CPI and PCE Core Indices based on prices for all items except food and energy. Data as of 11/30/2019.


Source: S&P Dow Jones Indices LLC, retrieved from FRED, S&P Corelogic Case-Schiller U.S. National Home Price Index. Data as of 10/31/2019.

MACROECONOMY

MARKET SUMMARY

EQUITIES

REAL ASSETS

FIXED INCOME-15

-10

-5

0

5

10

15

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

% c

hang

e, Y

oY

Presenter

Presentation Notes


14

Recession indicators: Still blinking greenYield curve slightly steepened recently

Initial jobless claims continue to decline

MACROECONOMY

MARKET SUMMARY

EQUITIES

REAL ASSETS

FIXED INCOME

200250300350400450500550600650700

1976 1982 1988 1994 2000 2006 2012 2018

Thou

sand

sRecessionJobless claims

Source: QMA, Federal Reserve Bank of St. Louis, FRED. Data as of 12/31/2019.

High yield spreads near this cycle’s lows

Source: QMA, Bloomberg. Data as of 12/31/2019.

Source: QMA, Federal Reserve Bank of St. Louis, FRED. Data as of 12/31/2019.

Leading Indicators Index trending upward

Source: QMA, Thomson Reuters Datastream. Data as of 11/30/2019.

-4

-3

-2

-1

0

1

2

3

4

5

1976 1982 1988 1994 2000 2006 2012 2018

Spre

ad (%

)

Recessionary Periods

Spread between 2Y and 10YU.S. Treasuries

20

30

40

50

60

70

80

90

100

110

120

1976 1982 1988 1994 2000 2006 2012 2018

Inde

x Le

vel

Recession

Leading IndicatorsIndex

02468

101214161820

1994 1997 2000 2003 2006 2009 2012 2015 2018

Opt

ion

adju

sted

spr

ead

(bps

) Recessionary periods

0

0.5

1

1.5

2

2.5

3

2019 2020 2021 2022 Longer Term

Fed

fund

s ra

te (%

)

FOMC "dots" median

Fed funds futures

15

U.S. rates

Yield curve steepened after recent Fed rate cuts

Fed dots and market expectations diverge Low rates are the norm, not the anomaly

Source: Bloomberg. Data as of 12/31/2019. Basis point change calculations may be subject to rounding errors.

Source: Bloomberg, FOMC. Dots refers to the estimates for the fed funds rate by members of the Federal Open Market Committee. Data as of Fed mtg: 12/11/2019.

MACROECONOMY

MARKET SUMMARY

EQUITIES

REAL ASSETS

FIXED INCOME

0

2

4

6

8

10

12

14

16

Long

-term

U.S

. gov

't int

eres

t rat

es (%

)

AnomalyNormal Range

0.0

0.5

1.0

1.5

2.0

2.5

3.0

1M 3M 6M 1Y 2Y 3Y 5Y 7Y 10Y 30Y

U.S.

Tre

asur

y bo

nd y

ield

s (%

)

CurrentLast quarter

Spread2s/10s 1M 3M 6M 1Y 2Y

Current 0.35 1.48 1.55 1.59 1.60 1.57Last quarter 0.04 1.88 1.83 1.83 1.77 1.63∆ Bps 31 -40 -27 -23 -17 -5

Short-Term Rates

3Y 5Y 7Y 10Y 30YCurrent 1.61 1.69 1.83 1.92 2.39Last quarter 1.56 1.55 1.62 1.67 2.11∆ Bps 5 15 22 25 28

Intermediate/Long Rates

Source: Bloomberg, PGIM Fixed Income. Reflects period from 1875 to 2019.

-$880-$780-$680-$580-$480-$380-$280-$180-$80$20

1980 1984 1988 1992 1996 2000 2004 2008 2012 2016

Curr

ent a

cct b

alan

ce ($

B)

50

70

90

110

130

150

170

1980 1985 1990 1995 2000 2005 2010 2015

U.S.

Dol

lar

Inde

x

16

U.S. dollar trendsU.S. dollar decline still overarching trend

Source: Bloomberg. ICE USD Spot Index. Data as of 12/31/2019.

Concurrent twin deficits for an extended period could result in bear market for U.S. dollar

Source: Organization for Economic Co-operation and Development, retrieved from Federal Reserve Bank of St. Louis, FRED, World Bank. Data as of 12/31/2018.

While current account remains in deficit

Total U.S. debt continues to grow

A current account deficit means that imports are greater than exports, which generally leads to less demand for USD and potentially less tax revenue for the U.S.

Growing government debt could become unsustainable, exacerbated by the reduced tax income available to repay the debt. Eventually the U.S. could be forced to use inflation to reduce debt, which would decrease the value of the currency.

-$2

$3

$8

$13

$18

$23

1980 1984 1988 1992 1996 2000 2004 2008 2012 2016

Tota

l pub

lic d

ebt (

$T)

MACROECONOMY

MARKET SUMMARY

EQUITIES

REAL ASSETS

FIXED INCOME

EQUITIESInsight into the global equity markets through market dynamics and fundamentals

MACROECONOMY

MARKET SUMMARY

EQUITIES

REAL ASSETS

FIXED INCOME

18

Source: Morningstar. Three-, five-, and ten-year returns are annualized. U.S. Large Cap Growth: Russell 1000 Growth Index, U.S. Large Cap Value: Russell 1000 Value Index, U.S. Mid Cap Growth: Russell Mid Cap Growth Index, U.S. Mid Cap Value: Russell Mid Cap Value Index, U.S. Small Cap Growth: Russell 2000 Value Index, U.S. Small Cap Growth: Russell 2000 Value Index. GICS sectors are subsets of the S&P 500 Index. Correlations based on 10 years of data. Past performance does not guarantee future results. Data as of 12/31/2019.

Performance summary: U.S. equitiesANNUAL RETURNS AND CORRELATIONS FOR MAJOR U.S. EQUITY MARKET CAPS AND SECTORS (%)

U.S. Equity Market Cap Performance (%) Correlations


Three Year

Five Year

Ten Year w/10Y UST w/S&P 500

U.S. Large Cap Growth 10.62 36.39 36.39 20.49 14.63 15.22 -0.39 0.98U.S. Large Cap Value 7.41 26.54 26.54 9.68 8.29 11.80 -0.52 0.98U.S. Mid Cap Growth 8.17 35.47 35.47 17.36 11.60 14.24 -0.41 0.95U.S. Mid Cap Value 6.36 27.06 27.06 8.10 7.62 12.41 -0.45 0.95U.S. Small Cap Growth 11.39 28.48 28.48 12.49 9.34 13.01 -0.46 0.89U.S. Small Cap Value 8.49 22.39 22.39 4.77 6.99 10.56 -0.51 0.87

U.S. Equity Sector Performance (%) Correlations


Three Year

Five Year


S&P 500 9.07 31.49 31.49 15.27 11.70 13.56 -0.47 1.00Consumer Discretionary 4.47 27.94 27.94 16.63 13.12 17.18 -0.40 0.93

Consumer Staples 3.51 27.61 27.61 9.89 8.31 12.13 -0.06 0.69Energy 5.49 11.81 11.81 -3.22 -1.85 3.32 -0.48 0.78

Financials 10.47 32.13 32.13 11.98 11.17 12.26 -0.65 0.88Health Care 14.37 20.82 20.82 16.23 10.31 14.76 -0.25 0.79

Industrials 5.53 29.37 29.37 10.73 9.48 13.45 -0.48 0.93Technology 14.40 50.29 50.29 27.66 20.20 17.50 -0.39 0.88

Materials 6.38 24.58 24.58 9.59 7.07 9.13 -0.45 0.88Real Estate -0.54 29.01 29.01 11.82 8.64 13.45 0.06 0.63

Communication Services 9.00 32.69 32.69 4.65 7.91 9.65 -0.08 0.52Utilities 0.75 26.35 26.35 13.82 10.29 11.80 0.28 0.29

MACROECONOMY

MARKET SUMMARY

EQUITIES

REAL ASSETS

FIXED INCOME

19

Source: Morningstar. Three-, five-, and ten-year returns are annualized. Global Equities: MSCI ACWI NR Index, Developed Market Equities: MSCI WorldNR Index, Emerging Market Equities: MSCI EM NR Index, International Equities: MSCI ACWI ex-U.S. NR Index, S&P/TSX (Canada): S&P Toronto Stock Exchange Index, CAC 40 (France): Euronext Paris CAC 40 Index, Dax (Germany): Deutsche Boerse AG German Stock Index, FTSE 100 (UK): Financial Times Stock Exchange 100, Hang Seng (Hong Kong): Hang Seng HIS TR HKD, Nikkei 225 (Japan): Nikkei 225 Average TR JPY, China: CSI 300 TR CNY, India: S&P BSE SENSEX TR INR, Brazil: BM&FBOVESPA Ibovespa IBOV TR BRL, Russia: MICEX PR RUB, Mexico: S&P/BMV IPC PR MXN. Correlations based on 10 years of data. Past performance does not guarantee future results. Data as of 12/31/2019.

Performance summary: Global equitiesANNUAL RETURNS AND CORRELATIONS FOR MAJOR GLOBAL EQUITY MARKETS (%) International/Global Equity Performance (%) Correlations


Three Year

Five Year


Global equities 8.95 26.60 26.60 12.44 8.41 8.79 -0.43 0.96Developed market equities 8.56 27.67 27.67 12.57 8.74 9.47 -0.45 0.97Emerging market equities 11.84 18.42 18.42 11.57 5.61 3.68 -0.28 0.75

International equities 8.92 21.51 21.51 9.87 5.51 4.97 -0.38 0.86Americas

S&P/TSX (Canada) 2.26 20.96 20.96 6.52 5.91 ― ― ―Europe

CAC 40 (France) 5.41 29.24 29.24 9.56 9.45 6.96 -0.42 0.78DAX (Germany) 6.61 25.48 25.48 4.89 6.20 8.32 -0.44 0.80FTSE 100 (UK) 2.68 17.32 17.32 6.23 7.09 7.39 -0.39 0.82

Asia/PacificHang Seng (Hong Kong) 8.35 13.04 13.04 12.63 7.44 6.29 -0.25 0.68

Nikkei 225 (Japan) 8.93 20.72 20.72 9.53 8.35 10.50 -0.36 0.69Emerging Markets

China 7.43 39.19 39.19 9.71 5.14 3.41 -0.27 0.45India 6.81 15.66 15.66 17.13 9.87 10.53 -0.11 0.50Brazil 10.41 31.58 31.58 24.29 18.25 5.36 -0.22 0.46

Russia 10.44 28.55 28.55 10.91 16.88 ― ― ―Mexico 1.23 4.56 4.56 -1.56 0.18 3.09 -0.28 0.62

MACROECONOMY

MARKET SUMMARY

EQUITIES

REAL ASSETS

FIXED INCOME

20

Equity markets at a glanceANNUAL RETURNS FOR MAJOR EQUITY MARKETS (%)

Source: Morningstar. U.S. Equities: S&P 500 Index, U.S. Large Cap Growth: Russell 1000 Growth Index, U.S. Large Cap Value: Russell 1000 Value Index, U.S. Mid Cap Growth:Russell Mid Cap Growth Index, U.S. Mid Cap Value: Russell Mid Cap Value Index, U.S. Small Cap Growth: Russell 2000 Value Index, U.S. Small Cap Growth: Russell 2000 Value Index, International Equities: MSCI ACWI ex-U.S. NR Index, Global Equities: MSCI ACWI NR Index, Developed Market Equities: MSCI WorldNR Index, Emerging Market Equities: MSCI EM NR Index. Past performance does not guarantee future results. Data as of 12/31/2019.

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 201978.51

Emerging Market Equity

29.09US Small Cap

Growth

2.64US Large Cap

Growth

18.51US Mid Cap

Value

43.30US Small Cap

Growth

14.75US Mid Cap

Value

5.67US Large Cap

Growth

31.74US Small Cap

Value

37.28Emerging

Market Equity

-1.51US Large Cap

Growth

36.39US Large Cap

Growth46.29

US Mid Cap Growth

26.38US Mid Cap

Growth

2.11US Equity

18.22Emerging

Market Equity

35.74US Mid Cap

Growth

13.69US Equity

1.38US Equity

20.00US Mid Cap

Value

30.21US Large Cap

Growth

-4.38US Equity

35.47US Mid Cap

Growth41.45

International Equities

24.75US Mid Cap

Value

0.39US Large Cap

Value

18.05US Small Cap

Value

34.52US Small Cap

Value

13.45US Large Cap

Value

-0.2US Mid Cap

Growth

17.34US Large Cap

Value

27.19International

Equities

-4.75US Mid Cap

Growth

31.49US Equity

37.21US Large Cap

Growth

24.50US Small Cap

Value

-1.38US Mid Cap

Value

17.51US Large Cap

Value

33.48US Large Cap

Growth

13.05US Large Cap

Growth

-0.87Developed

Market Equities

11.96US Equity

25.27US Mid Cap

Growth

-8.27US Large Cap

Value

28.48US Small Cap

Growth

34.63Global Equities

18.88Emerging

Market Equity

-1.65US Mid Cap

Growth

16.83International

Equities

33.46US Mid Cap

Value

11.90US Mid Cap

Growth

-1.38US Small Cap

Growth

11.32US Small Cap

Growth


-8.71Developed

Market Equities

27.67Developed

Market Equities34.47

US Small Cap Growth

16.71US Large Cap

Growth

-2.91US Small Cap

Growth


32.53US Large Cap

Value

5.60 US Small Cap

Growth

-2.36Global Equities

11.19Emerging

Market Equity

22.40Developed

Market Equities

-9.31US Small Cap

Growth

27.06US Mid Cap

Value34.21

US Mid Cap Value

15.51US Large Cap

Value

-5.50US Small Cap

Value

16.00US Equity

32.39US Equity

4.94Developed

Market Equities

-3.83US Large Cap

Value

7.86Global Equities

22.17US Small Cap

Growth


26.6Global Equities

29.99Developed

Market Equities

15.06US Equity

-5.54Developed

World Equities

15.83Developed

Market Equities

26.68Developed

Market Equities

4.22US Small Cap

Value

-4.78US Mid Cap

Value

7.51Developed

Market Equities

21.83US Equity

-12.29US Mid Cap

Value

26.54US Large Cap

Value

26.46US Equity



15.81US Mid Cap

Growth


4.16Global Equities

-5.66International

Equities

7.33US Mid Cap

Growth

13.66US Large Cap

Value

-12.86US Small Cap

Value

22.39US Small Cap

Value20.58

US Small Cap Value

11.76Developed

Market Equities

-13.71International

Equities

15.26US Large Cap

Growth

15.29International

Equities

-2.19Emerging

Market Equity

-7.47US Small Cap

Value

7.08US Large Cap

Growth

13.34US Mid Cap

Value

-14.2International

Equities

21.51International

Equities19.69

US Large Cap Value

11.15International

Equities

-18.42Emerging

Market Equity

14.59US Small Cap

Growth

-2.60Emerging

Market Equity

-3.87International

Equities

-14.92Emerging

Market Equity

4.50International

Equities

7.84US Small Cap

Value

-14.58Emerging

Market Equity

18.42Emerging

Market Equity

MACROECONOMY

MARKET SUMMARY

EQUITIES

REAL ASSETS

FIXED INCOME

21

Source: Morningstar. GICS sectors are subsets of the S&P 500 Index. Past performance does not guarantee future results. Data as of 12/31/2019.

Equity sectors at a glanceANNUAL RETURNS FOR U.S. EQUITY SECTORS (%)

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

61.72Info. Tech.

32.32Real Estate

19.91Utilities

28.82Financials

43.08Consumer

Discretionary

30.19Real Estate

10.11Consumer

Discretionary

27.36Energy

38.83Info. Tech.

6.47Health Care

50.29Info. Tech.

48.59Materials

27.66Consumer

Discretionary

13.99Consumer

Staples

23.92Consumer

Discretionary

41.46Health Care

28.98Utilities

6.89Health Care

23.49Comm. Services

23.84Materials

4.11Utilities

32.69Comm. Services

41.30Consumer

Discretionary

26.73Industrials

12.73Health Care

19.74Real Estate

40.68Industrials

25.34Health Care

6.60Consumer

Staples

22.80Financials

22.98Consumer

Discretionary

0.83Consumer

Discretionary

32.13Financials

27.10Real Estate

22.20Materials

11.39Real Estate

18.31Comm. Services

35.63Financials

20.12Info. Tech.

5.92Info. Tech.

18.86Industrials

22.18Financials

-0.29Info. Tech.

29.37Industrials

20.93Industrials

20.46Energy

6.27Comm. Services

17.89Health Care

28.43Info. Tech.

15.98Consumer

Staples

4.68Real Estate

16.69Materials

22.08Health Care

-2.22Real Estate

29.01Real Estate

19.70Health Care

18.97Comm. Services

6.13Consumer

Discretionary

15.35Industrials

26.14Consumer

Staples

15.20Financials

3.40Comm. Services

16.29Utilities

21.03Industrials

-8.38Consumer

Staples

27.94Consumer

Discretionary

17.22Financials

14.11Consumer

Staples

4.72Energy

14.97Materials

25.6Materials

9.83Industrials

-1.53Financials

13.85Info. Tech.

13.49Consumer

Staples

-12.53Comm. Services

27.61Consumer

Staples

14.89Consumer

Staples

12.13Financials

2.41Info. Tech.

14.82Info. Tech.

25.07Energy

9.68Consumer

Discretionary

-2.53Industrials

6.03Consumer

Discretionary

12.11Utilities

-13.03Financials

26.35Utilities

13.82Energy

10.19Info. Tech.

-0.59Industrials

10.76Consumer

Staples

13.21Utilities

6.91Materials

-4.85Utilities

5.38Consumer

Staples

10.85Real Estate

-13.29Industrials

24.58Materials

11.91Utilities

5.46Utilities

-9.75Materials

4.61Energy

11.47Comm. Services

2.99Comm. Services

-8.38Materials

3.39Real Estate

-1.01Energy

-14.70Materials

20.82Health Care

8.93Comm. Services

2.90Health Care

-17.06Financials

1.29Utilities

1.60Real Estate

-7.78Energy

-21.12Energy

-2.69Health Care

-1.25Comm. Services

-18.10Energy

11.81Energy

MACROECONOMY

MARKET SUMMARY

EQUITIES

REAL ASSETS

FIXED INCOME

22

Source: Bloomberg. Shiller Cyclically Adjusted Price to Earnings Ratio of the S&P 500 Index. Long-term average calculated from 1924 to present. Data as of 12/31/2019.

U.S. equity valuations above long-term averageCAPE above its long-term historical average

0

5

10

15

20

25

30

35

40

45

50

1924 1934 1944 1954 1964 1974 1984 1994 2004 2014

Shille

r Cy

clic

ally

Adj

uste

d Pr

ice

to E

arni

ngs

Ratio

Shiller Cyclically Adjusted P/E: 30

Long-Term Average: 18

Black Tuesday

Black Monday

Dot-Com Bubble

FinancialCrisis

1966 Bear Market

MACROECONOMY

MARKET SUMMARY

EQUITIES

REAL ASSETS

FIXED INCOME

-20%

-10%

0%

10%

20%

30%

40%

50%

S&P

500

earn

ings

gro

wth

23

U.S. equity market fundamentals

U.S. profit margins historically high Corporate debt levels remain low

Source: FactSet. S&P 500 Index earnings growth, year over year. Data as of 12/31/2019.

Source: Board of Governors of the Federal Reserve System (U.S.), Nonfinancial Corporate Business; Credit Market Debt as a Percentage of the Market Value of Corporate Equities, retrieved from FRED, Federal Reserve Bank of St. Louis. Data as of 12/31/2018.

Source: U.S. Bureau of Economic Analysis, retrieved from FRED, Federal Reserve Bank of St. Louis. Data as of 9/30/2019.

4%

5%

6%

7%

8%

9%

10%

11%

1947 1957 1967 1977 1987 1997 2007 2017

Corp

orat

e pr

otits

as

% o

f GDP

Corporate profits as % of GDP

Pre-1990s average

Post-1990s average

30

40

50

60

70

80

90

100

1947 1957 1967 1977 1987 1997 2007 2017

Debt

as

perc

ent o

f equ

ity (%

)

Earnings growth expected to pick up next year

MACROECONOMY

MARKET SUMMARY

EQUITIES

REAL ASSETS

FIXED INCOME

Higher earnings growth expectations for most sectors

Source: FactSet. S&P 500 Index sub-sectors. Growth calculated year over year.Data as of 12/31/2019.

-30%

-20%

-10%

0%

10%

20%

30%

Con

s. S

tapl

es

Con

s. D

isc

Ener

gy

Fina

ncia

ls

Hea

lth C

are

Indu

stria

ls

Info

. Tec

h.

Mat

eria

ls

Com

m S

ervi

ces

Utili

ties

S&P

500

Rea

l Est

ate

Gro

wth

in e

arni

ngs

per s

hare 2019 2020E

10

12

14

16

18

20

22

U.S. GlobalEquities

DevelopedMarkets

Emerging Markets

P/E

ratio

Current

10-year average

24

Global equity earnings & valuationsValuations higher than historical averages

Source: FactSet. Bloomberg. U.S.: S&P 500, Global Equities: MSCI ACWI, Developed Markets: MSCI World, Emerging Markets: MSCI EM. Data as of 12/31/2019.

Above-average earnings growth expected internationally

Source: FactSet. Earnings growth, year over year. U.S.: S&P 500, Global Equities:MSCI ACWI, Developed Markets: MSCI World, Emerging Markets: MSCI EM. Data as of 12/31/2019.

MACROECONOMY

MARKET SUMMARY

EQUITIES

REAL ASSETS

FIXED INCOME

0%

2%

4%

6%

8%

10%

12%

14%

16%

U.S. GlobalEquities

DevelopedMarkets

EmergingMarkets

Earn

ings

gro

wth

'20 est.

10-year average

25

DividendsHistorical dividend contribution

Source: Bloomberg. Returns for the S&P 500 Index. Data as of 12/31/2019.

12-month global equity dividend yields


3.0%

13.5%

4.4%1.6%

12.9%15.3%

-2.7%

11.2%6.3%

5.4%

3.3%

4.2%

4.3%

2.6%

1.8%

2.3%

-5%

0%

5%

10%

15%

20%

25%

1940s 1950s 1960s 1970s 1980s 1990s 2000s 2010s

Ave

rage

ann

ual r

etur

n

Dividend return Price return

3.34%

3.37%

2.64%

2.36%

1.82%

MSCI World ex-US

MSCI EAFE

MSCI EM

MSCI World

S&P 500MACRO

ECONOMY

MARKET SUMMARY

EQUITIES

REAL ASSETS

FIXED INCOME

-55%

-35%

-15%

5%

25%

45%

1981 1986 1991 1996 2001 2006 2011 2016

S&P

500

Inde

x re

turn

Annual return Largest decline during calendar year

8

20

32

44

56

68

80

1990 1992 1995 1998 2001 2004 2007 2010 2013 2016 2019

Vol

atilit

y In

dex

leve

l (V

IX)

26

VolatilityVolatility below long-term average

Volatility may bring opportunity: Years with large drawdowns will often end in positive returns

Source: Bloomberg. CBOE Volatility Index. Data as of 12/31/2019.

Source: Bloomberg. S&P 500 Index. Data as of 12/31/2019.

8

13

18

23

28

33

38

43

12/2014 12/2015 12/2016 12/2017 12/2018 12/2019

VIX Index (US)Average: 19.1Current: 13.8

MACROECONOMY

MARKET SUMMARY

EQUITIES

REAL ASSETS

FIXED INCOME

FIXED INCOMEMajor themes in the investment grade and high yield fixed income markets

MACROECONOMY

MARKET SUMMARY

EQUITIES

REAL ASSETS

FIXED INCOME

28

Performance summary: Fixed incomeRETURNS AND CORRELATIONS FOR MAJOR FIXED INCOME SECTORS

Source: Morningstar. U.S. Broad Market: BBG Barclays U.S. Aggregate, U.S. Treasury: BBG Barclays U.S. Treasury Index, U.S. TIPS: BBG Barclays U.S. Treasury TIPS Index, Municipals: BBG Barclays Municipal Bond Index, High Yield Municipals: BBG Barclays HY Muni Index, Agency MBS: BBG Barclays U.S. MBS-Agency Fixed Rate Index, Commercial MBS: BBG Barclays CMBS ERISA Eligible Index, ABS: BBG Barclays ABS Index, Investment Grade Corporates: BBG Barclays U.S. Corp IG Index, High Yield: BBG Barclays U.S. High Yield Corporate Index, Leveraged Loans: Credit Suisse Leveraged Loan Index, International Bonds (Unhedged): BBG Barclays Global Aggregate ex-U.S., International Bonds (Hedged): BBG Barclays Global Aggregate ex-U.S. Hedged USD, Global Bonds: BBG Barclays Global Aggregate, Emerging Market Local: JPM GBI-EM Global Diversified TR, Emerging Market Hard Currency: JP Morgan EMBI Global Diversified Index. Correlations calculated over the last 10 years. Past performance does not guarantee future results. Correlations based on 10 years of data. Data as of 12/31/2019.

MACROECONOMY

MARKET SUMMARY

EQUITIES

REAL ASSETS

FIXED INCOME

Fixed Income Sector Performance (%)


Three Year

Five Year

Ten Year

Correlation with 10Y UST

Global Bonds 0.49 6.84 6.84 4.27 2.31 2.48 0.44U.S. Broad Market 0.18 8.72 8.72 4.03 3.05 3.75 0.92

U.S. Treasuries -0.79 6.86 6.86 3.31 2.36 3.13 0.98U.S. TIPS 0.79 8.43 8.43 3.32 2.62 3.36 0.70

Municipals 0.74 7.54 7.54 4.72 3.53 4.34 0.77High Yield Municipals 0.90 10.68 10.68 8.34 5.93 7.15 0.61

Agency MBS 0.71 6.35 6.35 3.25 2.58 3.15 0.81CMBS -0.33 8.29 8.29 4.09 3.31 5.54 0.47

ABS 0.39 4.53 4.53 2.61 2.22 2.72 0.79Inv. Grade Corporate 1.18 14.54 14.54 5.92 4.60 5.54 0.67

High Yield 2.61 14.32 14.32 6.37 6.13 7.57 -0.18Leveraged Loans 1.68 8.17 8.17 4.48 4.54 5.18 -0.39

International Bonds (Unhedged) 0.67 5.09 5.09 4.36 1.62 1.50 0.24International Bonds (Hedged) -1.11 7.57 7.57 4.38 3.87 4.29 0.77

Emerging Hard Currency 1.81 15.04 15.04 6.69 6.24 6.90 0.25Emerging Local Currency 5.20 13.47 13.47 7.03 2.78 2.71 0.01

29

Fixed income sectors at a glanceANNUAL RETURNS FOR MAJOR FIXED INCOME SECTORS (%)

MACROECONOMY

MARKET SUMMARY

EQUITIES

REAL ASSETS

FIXED INCOME

Source: Morningstar. U.S. Broad Market: BBG Barclays U.S. Aggregate, U.S. Treasury: BBG Barclays U.S. Treasury Index, U.S. TIPS: BBG Barclays U.S. Treasury TIPS Index, Municipals: BBG Barclays Municipal Bond Index, High Yield Municipals: BBG Barclays HY Muni Index, Agency MBS: BBG Barclays U.S. MBS-Agency Fixed Rate Index, Commercial MBS: BBG Barclays CMBS ERISA Eligible Index, ABS: BBG Barclays ABS Index, Investment Grade Corporates: BBG Barclays U.S. Corp IG Index, High Yield: BBG Barclays U.S. High Yield Corporate Index, Leveraged Loans: Credit Suisse Leveraged Loan Index, International Bonds: BBG Barclays Global Aggregate ex-U.S., Global Bonds: BBG Barclays Global Aggregate, Emerging Market Local: JPM GBI-EM Global Diversified TR, Emerging Market Hard Currency: JP Morgan EMBI Global Diversified Index. Past performance does not guarantee future results. Data as of 12/31/2019.

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

58.21High Yield

20.40CMBS

13.56US TIPS

18.14HY Municipals

7.44High Yield

13.84HY Municipals

3.30Municipals

17.13High Yield

15.21EM Local Curr.

4.76HY Municipals

15.04EM Hard Curr.

44.87Loans

15.68EM Local Curr.

10.70Municipals

17.44EM Hard Curr.

6.15Loans

9.05Municipals

1.81HY Municipals

10.15EM Hard Curr.

10.51International

Bonds

1.77ABS

14.54Inv. Grade Corporate

32.74HY Municipals

15.12High Yield

9.81US Treasuries

16.76EM Local Curr.

0.23CMBS


1.51Agency MBS

9.94EM Local Curr.

10.26EM Hard Curr.

1.28Municipals

14.32High Yield

29.82EM Hard Curr.

12.24EM Hard Curr.

9.25HY Municipals

15.81High Yield

-0.27ABS

7.43EM Hard Curr.

1.25ABS

9.88Loans

9.69HY Municipals

1.14Loans

13.47EM Local Curr.

28.45CMBS

9.98Loans



-1.41Agency MBS

6.08Agency MBS

1.18EM Hard Curr.


7.50High Yield

0.99Agency MBS

10.68HY Municipals

24.71ABS


7.84US Broad

Market

9.66CMBS

-1.53Inv. Grade Corporate

5.97US Broad

Market

0.97CMBS

4.68US TIPS

7.39Global Bonds

0.86US Treasuries

8.72US Broad

Market

21.98EM Local Curr.

7.79HY Municipals

7.35EM Hard Curr.

9.43Loans

-2.02US Broad

Market

5.05US Treasuries

0.84US Treasuries

3.32CMBS


0.78CMBS

8.43US TIPS


6.54US Broad

Market

6.23Agency MBS

6.98US TIPS

-2.55Municipals

3.86CMBS

0.55US Broad

Market

2.99HY Municipals

5.45Municipals

0.01US Broad

Market

8.29CMBS

12.91Municipals

6.31US TIPS

6.02CMBS

6.78Municipals

-2.60Global Bonds

3.64US TIPS

-0.38Loans

2.65US Broad

Market

4.25Loans

-1.20Global Bonds

8.17Loans

11.41US TIPS

5.87US Treasuries

5.64Global Bonds

4.32Global Bonds

-2.75US Treasuries

2.45High Yield


2.09Global Bonds

3.54US Broad

Market

-1.26US TIPS

7.54Municipals

7.53International

Bonds

5.85ABS

5.14ABS

4.21US Broad

Market

-3.08International

Bonds

2.06Loans

-1.44US TIPS

2.03ABS

3.35CMBS

-2.08High Yield

6.86US Treasuries

6.93Global Bonds

5.54Global Bonds

4.98High Yield

4.09International

Bonds

-5.25EM Hard Curr.

1.88ABS

-3.15Global Bonds

1.67Agency MBS

3.01US TIPS

-2.15International

Bonds

6.84Global Bonds

5.93US Broad

Market

5.37Agency MBS

4.36International

Bonds

3.66ABS

-5.51HY Municipals

0.59Global Bonds

-4.47High Yield

1.49International

Bonds

2.47Agency MBS


6.35Agency MBS

5.89Agency MBS

4.95International

Bonds

1.82Loans

2.59Agency MBS

-8.61US TIPS

-3.08International

Bonds

-6.02International

Bonds

1.04US Treasuries

2.31US Treasuries

-4.26EM Hard Curr.

5.09International

Bonds

-3.57US Treasuries

2.38Municipals

-1.75EM Local Curr.

1.99US Treasuries

-8.98EM Local Curr.

-5.72EM Local Curr.

-14.92EM Local Curr.

0.25Municipals

1.55ABS

-6.21EM Local Curr.

4.53ABS

0.0

1.0

2.0

3.0

0

100

200

300

400

500

600

700

800

2007 2009 2011 2013 2015 2017

Upgrade/Downgrade ratio

Num

ber

of u

pgra

des

and

dow

ngra

des Downgrades

UpgradesUpgrade/Downgrade ratio (rhs)

-200

0

200

400

600

800

1000

1200

1400

1600

1800

2007 2009 2011 2013 2015 2017 2019

Opt

ion

adju

sted

spr

ead

(bps

) US Agg: 39 bpsIG Corporate: 90 bpsMBS: 39 bpsCMBS: 72 bps

30

Credit

Source: Bloomberg. IG Corporate: Bloomberg Barclays U.S. Aggregate Corporate Index, MBS: BBG Barclays U.S. MBS-Agency Fixed Rate Index, CMBS: BBG Barclays CMBSERISA Eligible Index. Data as of 12/31/2019.

Leverage standards looser overall but within normal range Upgrade/Downgrade ratio ends lower

Investment grade credit spreads narrowed during quarter

Source: Bloomberg, Chicago Fed National Financial Conditions Leverage Subindex. Data as of 12/31/2019.

MACROECONOMY

MARKET SUMMARY

EQUITIES

REAL ASSETS

FIXED INCOME

0

50

100

150

200

Dec-15 Dec-16 Dec-17 Dec-18 Dec-19

-3

-2

-1

0

1

2

3

4

'74 '77 '80 '83 '86 '89 '92 '95 '98 '01 '04 '07 '10 '13 '16 '19

Inde

x le

vel

Normal range

Source: Bloomberg. Includes investment grade and high yield issuers. When ratio is above blue dotted line, there are more upgrades than downgrades. Ratio below: more downgrades than upgrades. Data as of 12/31/2019.

0

500

1000

1500

Dec-15 Dec-16 Dec-17 Dec-18 Dec-19

High yield: 336 bpsBB: 182 bpsB: 324 bpsCCC and Below: 869 bps

0%

2%

4%

6%

8%

10%

12%

14%

1998 2001 2004 2007 2010 2013 2016 2019

Par

wei

ghte

d de

faul

t rat

e

Bank loans: 1.6%Loan average: 2.9%

0%

2%

4%

6%

8%

10%

12%

1998 2001 2004 2007 2010 2013 2016 2019

Par

wei

ghte

d de

faul

t rat

e

High yield bonds: 2.6%

Bond average: 3.1%

0

1000

2000

3000

1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

Opt

ion

Adj

uste

d Sp

read

(bps

)

31

Leveraged credit

Source: Bloomberg. Bloomberg Barclays U.S. HY Corporate Index, BB, B, and CCC and below are subsets of this index. Data as of 12/31/2019.

High yield default rates remain below long-term average

Source: JP Morgan. Data as of 12/31/2019.

Bank loan default rates remain below long-term average

Below investment grade spreads fell during quarter

Source: JP Morgan. Data as of 12/31/2019.

MACROECONOMY

MARKET SUMMARY

EQUITIES

REAL ASSETS

FIXED INCOME

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18

32

Mortgage-backed securities

Source: Spreads, Bloomberg as of 12/31/2019. Federal Reserve data, www.federalreserve.gov. QE1 (11/2008-3/2010) Federal Reserve bought $1.25 trillion of agency MBS. QE2 (11/2010-6/2011) Federal Reserve did not buy additional agency MBS. QE3 (9/2012-12/2013) Federal Reserve bought $620 billion of agency MBS.

Fed QE programs helped push agency MBS spreads below historical average

Source: SIFMA as of 12/31/2018.

Low supply supports non-agency MBS sector, but makes meaningful positions more challengingTotal non-agency MBS debt outstanding ($B) Total non-agency MBS gross issuance ($B)

-$0.5 T

$0.0 T

$0.5 T

$1.0 T

$1.5 T

$2.0 T

-50 bps

0 bps

50 bps

100 bps

150 bps

200 bps

'06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19

Federal Reserve agency MBS ownership (rhs)Agency MBS spreadsAverage MACRO

ECONOMY

MARKET SUMMARY

EQUITIES

REAL ASSETS

FIXED INCOME

http://www.federalreserve.gov/

1.872.01

2.62

3.80

1.791.92

2.51

3.64

1.571.69

1.92

2.39

0

1

2

3

4

2Y 5Y 10Y 30Y

Yiel

d (%

)

Maturity

Old tax rate (43.4%)

New tax rate (40.8%)

U.S. Treasury bonds

33

Municipal bonds

Source: Bloomberg. Tax rates from top tax bracket include 3.8% ACA add-on tax for net investment income. Data as of 12/31/2019.

Municipal bond yields remain attractive even at new rates

MACROECONOMY

MARKET SUMMARY

EQUITIES

REAL ASSETS

FIXED INCOME

34

Yield and return by duration

MACROECONOMY

MARKET SUMMARY

EQUITIES

REAL ASSETS

FIXED INCOME

Source: Bloomberg, Federal Reserve, PGIM as of 12/31/19. Short-term rates: Fed Funds rate. Long-term rates: 10-year U.S. Treasury. Short Duration Bonds: Bloomberg Barclays 1-3 Gov’t/Credit Index. Intermediate Duration Bonds: Bloomberg Barclays U.S. Aggregate Bond Index.

After nearly a decade, cash and long-term bonds offer similar yields

Total return (%) for short and intermediate duration bonds versus cash after Fed stops raising rates

Source: Bloomberg, as of 12/31/19.

-1012345678

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Yie

ld (%

)

Cash (3-month Treasury bill) 10-Year Treasury

Rate hike period

Date of final rate hike

Short-term rates

Long-term rates 1-Year 2-Year 3-Year 4-Year 5-Year 1-Year 2-Year 3-Year 4-Year 5-Year

1988-1989 2/24/1989 -150 -84 1.23 1.73 2.71 2.91 2.72 3.91 4.1 4.58 5.81 5.021994-1995 2/1/1995 -75 -208 4.42 1.89 1.87 1.73 0.92 11.16 4.34 4.69 4.25 1.941999-2000 5/16/2000 -250 -91 4.27 3.8 4.23 3.14 2.52 7.28 5.93 7.5 5.1 5.072004-2006 6/26/2006 0 -9 0.08 1.63 2.44 2.73 2.53 0.86 2.33 3.285 4.77 4.63

Average -119 -98 2.50 2.26 2.81 2.63 2.17 5.80 4.18 5.01 4.98 4.17

∆ in yield after 12 months (bps) Intermediate Duration BondsShort-Duration BondsAverage annual % excess return over cash following final rate hike each cycle

2.50 2.262.81 2.63

2.17

5.80

4.185.01 4.98

4.17

1-Year 2-Year 3-Year 4-Year 5-Year

Short-Duration Bonds Intermediate Duration Bonds

Majority of global debt originates outside of the U.S.

Source: BIS as of 12/31/2019.

35

Global bonds


GOVERNMENT BOND YIELDS (%)

Attractive real yields in emerging markets


Developed 2Y 5Y 10Y

Australia 0.92 0.99 1.37

Canada 1.69 1.68 1.70

France -0.59 -0.30 0.12

Germany -0.60 -0.47 -0.19

Italy -0.47 0.68 1.41

Japan -0.13 -0.13 -0.02

Switzerland -0.73 -0.62 -0.47

Spain -0.39 -0.77 0.47

U.S. 1.57 1.69 1.92

U.K. 0.53 0.60 0.82

Country10-Year

Yield Inflation

Rate Real Yield (10-Year) Brazil 6.76% 3.27%South Africa 9.03% 3.60%Russia 6.41% 4.48%Indonesia 7.06% 3.03%India 6.56% 8.61%U.S. 1.92% 2.05%

3.49%

5.43%

1.93%

4.03%

-2.05%

-0.13%

34%

44%

22%U.S.: $40.1T

Non-U.S. Dev: $51.3T

Non-U.S. EM: $25.2T

Emerging 2Y 5Y 10Y

Brazil 4.92 6.33 6.76

China 2.63 2.91 3.14

India 5.80 6.46 6.56

Indonesia 5.77 6.44 7.06

Malaysia 3.00 3.19 3.31

Mexico 6.71 6.75 6.89

Russia 5.61 6.10 6.41

South Africa 6.79 7.24 9.03

South Korea 1.37 1.47 1.67

Turkey 11.78 11.57 12.21

MACROECONOMY

MARKET SUMMARY

EQUITIES

REAL ASSETS

FIXED INCOME

REAL ASSETSA focus on the main drivers of the real estate and commodity markets

MACROECONOMY

MARKET SUMMARY

EQUITIES

REAL ASSETS

FIXED INCOME

Performance summary: Real assets

37

Source: Morningstar. All Commodities:Bloomberg Commodity, Agriculture: Bloomberg Sub Agriculture, Corn: Bloomberg Sub Corn, Soybeans: Bloomberg Sub Soybeans, Energy: Bloomberg Sub Energy, Brent Oil: Bloomberg Sub Brent Crude, WTI Oil: WTexas Crude Int Oil, Natural Gas: Bloomberg Sub Natural Gas, Industrial Metals: Bloomberg Sub Industrial Metals, Copper: Bloomberg Sub Copper, Aluminum: Bloomberg Sub Aluminum, Livestock: Bloomberg Sub Livestock, Live Cattle: Bloomberg Sub Live Cattle, Precious Metals: Bloomberg Sub Precious Metals, Gold: LMBA Gold Price PM USD, Silver: Bloomberg Sub Silver, Softs: Bloomberg Sub Softs. Softs includes Cocoa, Coffee, Cotton, and Sugar, Sugar: Bloomberg Sub Sugar, Coffee: Bloomberg Sub Coffee, U.S. Real Estate: FTSE EPRA/NAREIT United States, International Real Estate: FTSE EPRA/NAREIT Global Ex U.S., Developed Real Estate: FTSE EPRA/NAREIT Developed, Emerging Real Estate: FTSE EPRA/NAREIT Emerging, Global Real Estate: FTSE EPRA/NAREIT Global USD. Past performance does not guarantee future results. Data as of 12/31/2019.

ANNUAL RETURNS FOR MAJOR COMMODITY AND REAL ESTATE SECTORS (%)

Commodity Performance (%)


Three Year

Five Year

Ten Year

All Commodities 4.42 7.69 7.69 -0.94 -3.92 -4.73Energy 5.82 11.78 11.78 -2.26 -7.87 -11.69

Brent Oil 16.20 35.57 35.57 9.64 -2.09 -3.39WTI Oil 13.03 35.42 35.42 4.39 2.72 -2.58

Natural Gas -17.23 -37.24 -37.24 -26.39 -23.37 -27.18Grains 3.55 -1.12 -1.12 -6.07 -8.87 -4.60

Corn -1.95 -5.21 -5.21 -7.35 -10.33 -5.78Soybeans 2.63 -0.57 -0.57 -6.92 -4.59 1.46

Industrial Metals -0.25 6.98 6.98 3.67 -0.46 -3.55Copper 8.50 7.27 7.27 2.95 -1.11 -2.96

Aluminum 5.00 -3.78 -3.78 1.60 -2.37 -5.98Livestock 0.15 -5.99 -5.99 -0.57 -5.52 -1.80

Live Cattle 9.27 1.18 1.18 4.24 -2.11 1.31Precious Metals 3.72 17.02 17.02 7.40 3.74 2.09

Gold 1.98 18.43 18.43 9.75 4.66 3.37Silver 4.96 13.87 13.87 2.66 1.49 -0.51

Softs 13.94 4.26 4.26 -11.61 -6.77 -5.60Sugar 6.52 1.92 1.92 -17.46 -8.02 -10.07Coffee 24.84 12.19 12.19 -11.52 -14.10 -9.03


Three Year

Five Year

Ten Year

Global Real Estate 3.51 23.58 23.58 10.32 6.94 8.91Developed 1.96 23.06 23.06 9.31 6.53 9.25Emerging 17.72 27.78 27.78 19.88 10.65 ―

U.S. Real Estate -0.96 24.34 24.34 7.49 6.60 11.60International Real Estate 8.07 23.01 23.01 13.07 7.26 7.16

MACROECONOMY

MARKET SUMMARY

EQUITIES

REAL ASSETS

FIXED INCOME

Real asset sectors at a glance

38

ANNUAL RETURNS FOR MAJOR REAL ASSET SECTORS (%)

Source: Morningstar. All Commodities: Bloomberg Commodity, Energy: Bloomberg Sub Energy, Precious Metals: Bloomberg Sub Precious Metals, Industrial Metals: Bloomberg Sub Industrial Metals, Agriculture: Bloomberg Sub Agriculture, Livestock: Bloomberg Sub Livestock, U.S. Real Estate: FTSE EPRA/NAREIT United States, International Real Estate: FTSE EPRA/NAREIT Global Ex U.S., Global Real Estate: FTSE EPRA/NAREIT Global. Indices are total return, USD. Past performance does not guarantee future results. Data as of 12/31/2019.

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

79.98Industrial Metals

59.90Softs

7.75US Real Estate

38.98International Real Estate

5.20Energy

30.43US Real Estate

3.04US Real Estate



-1.71Livestock

24.34US Real Estate


42.66Precious Metals

4.56Precious Metals

29.85Global Real

Estate

2.46US Real Estate

14.73Global Real

Estate

-0.41Global Real

Estate

16.27Energy


-3.87US Real Estate

23.58Global Real

Estate

44.24Softs

30.28Grains

-2.30Livestock

18.25Grains

2.24Global Real

Estate

11.56Livestock

-3.50International Real Estate

13.16Softs

15.01Global Real

Estate

-4.57Precious Metals


41.25Global Real

Estate

28.09US Real Estate

-8.14Global Real

Estate

17.98US Real Estate



-9.85Softs

11.77All Commodities


-5.5Grains



20.03Global Real

Estate

-13.32All Commodities

6.29Precious Metals

-3.54Livestock



9.50Precious Metals

6.36Livestock

-5.55Global Real

Estate

11.78Energy

28.61US Real Estate


-13.97Softs



-6.87Industrial Metals

-18.83Livestock

7.55US Real Estate

3.91US Real Estate


7.69All Commodities



-14.41Grains



-9.37Grains

-19.42Grains

4.62Global Real

Estate

1.70All Commodities



-1.65Grains


-15.97Energy

-3.54Livestock

-16.86Softs

-10.10Softs



-4.31Energy

-12.7Energy

4.26Softs

-5.30Energy

9.27Livestock


-9.36Energy

-16.90Grains



-5.63Livestock

-11.31Grains


-1.12Grains

-15.07Livestock

-10.55Energy


-22.39Softs


-39.34Energy

-38.87Energy

-5.88Grains

-14.80Softs

-22.26Softs

-5.99Livestock

MACROECONOMY

MARKET SUMMARY

EQUITIES

REAL ASSETS

FIXED INCOME

0

5

10

15

20

25

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

Perc

ent (

%)

REIT Income Return Inflation

14

15

16

17

18

'10 '12 '14 '16 '18

Office

Real estate

39

Job growth and city migration driving demand

Real estate has historically outpaced inflation

Source: Bloomberg. Vacancy rates are for the U.S. Metro Total. Data as of 9/30/2019. Source: Bureau of Labor Statistics via FRED, World Bank. Data as of 12/31/2018. Urban population as percent of total in U.S.

Source: Morningstar, FRED. REIT income return: FTSE NAREIT All Equity REITs Index. Inflation: CPI All Urban Consumers. Data as of 12/31/2019.

Supply down significantly from start of decade

9.2

9.4

9.6

9.8

10.0

10.2

10.4

10.6

10.8

11.0

11.2

'10 '12 '14 '16 '18

Vac

ancy

rate

(%)

Retail

4

4.5

5

5.5

6

6.5

7

'10 '12 '14 '16 '18

Residential

626466687072747678808284

20

40

60

80

100

120

140

160

1960 1970 1980 1990 2000 2010

Urban population as % of totalNo

n-fa

rm p

ayro

ll (m

illion

s)

Job growth

Urban populationas % of total (rhs)

MACROECONOMY

MARKET SUMMARY

EQUITIES

REAL ASSETS

FIXED INCOME

Commodities

40


Gold above long-term average

65

70

75

80

85

90

95

100

105

1994 1997 2000 2003 2006 2009 2012 2015 2018Wor

ld e

nerg

y su

pply

and

dem

and

(Mbp

d)

Demand

Supply

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

1980 1985 1990 1995 2000 2005 2010 2015

Gol

d sp

ot p

rice

(USD

per

troy

oz.

)

MACROECONOMY

MARKET SUMMARY

EQUITIES

REAL ASSETS

FIXED INCOME

Global oil demand higher than supply

0

20

40

60

80

100

120

140

160

1993 1998 2003 2008 2013 2018

WTI

Cru

de O

il (U

SD p

er b

arre

l)

Crude oil prices above long-term average

Source: EIA, Bloomberg. Total world energy supply and demand in thousand barrels per day (mbpd). Data as of 12/31/2019.


Index definitions

41

BANK OF AMERICA MERRILL LYNCH EUROPEAN CURRENCY HIGH YIELD EX-FINANCE 2% CONSTRAINED INDEX tracks the performance of EUR- and GBP-denominated below-investment-grade corporate debt publicly issued in the eurobond, sterling domestic, or euro domestic markets. Qualifying securities must have a below-investment-grade rating and an investment-grade country of risk. The index contains all non-financial securities but caps issuer exposure at 2%. BANK OF AMERICA MERRILL LYNCH U.S. CONVERTIBLE INDEX consists of convertible bonds traded in the U.S. dollar-denominated investment-grade and non-investment grade convertible securities sold into the U.S. market and publicly traded in the United States. The Index constituents are market value-weighted based on the convertible securities prices and outstanding shares, and the underlying index is rebalanced daily.BANK OF AMERICA MERRILL LYNCH U.S. HIGH YIELD INDEX is unmanaged and tracks the performance of below-investment-grade U.S.-dollar-denominated corporate bonds. BLOOMBERG BARCLAYS ABS INDEX is a subset of the Bloomberg Barclays U.S. Aggregate. The index includes only the asset-backed securities that are part of the larger index.BLOOMBERG BARCLAYS CMBS: ERISA ELIGIBLE INDEX is a subset of the Bloomberg Barclays U.S. Aggregate and includes investment-grade CMBS securities that are ERISA eligible under the underwriter’s exemption. It is the only CMBS sector that is included in the U.S. Aggregate Bond Index. BLOOMBERG BARCLAYS EURO CORPORATE BOND INDEX (UNHEDGED) is a broad-based benchmark that measures the investment grade, euro-denominated, fixed rate corporate bond market. Inclusion is based on the currency denomination of a bond and not the country of risk of the issuer. The Euro Corporate Index is a subset of Barclays broader-based flagship indices, such as the Euro Aggregate and the multi-currency Global Aggregate Index. BLOOMBERG BARCLAYS GLOBAL AGGREGATE BOND INDEX is an unmanaged index of global investment-grade fixed income markets. The three major components of this index are the U.S. Aggregate, the Pan European Aggregate, and the Asian Pacific Aggregate indices. The index also includes Eurodollar and Euro-yen corporate bonds, Canadian government, agency and corporate securities. BLOOMBERG BARCLAYS GLOBAL AGGREGATE EX USD BOND INDEX is an unmanaged index of global investment-grade fixed income markets excluding the U.S. The two major components of this index are the Pan European Aggregate, and the Asian Pacific Aggregate indices. The index also includes eurodollar and euro-yen corporate bonds, and Canadian government, agency, and corporate securities. BLOOMBERG BARCLAYS GLOBAL AGGREGATE EX-USD HEDGED USD BOND INDEX is an unmanaged index of global investment-grade fixed income markets excluding the U.S. and is hedged back to the U.S. dollar. The two major components of this index are the Pan European Aggregate, and the Asian Pacific Aggregate indices. The index also includes eurodollar and euro-yen corporate bonds, Canadian government, agency, and corporate securities. BLOOMBERG BARCLAYS HIGH YIELD MUNICIPAL BOND INDEX measures the non-investment grade and non-rated U.S. dollar-denominated, fixed rate, tax-exempt bond market within the 50 United States and four other qualifying regions (Washington D.C., Puerto Rico, Guam, and the Virgin Islands). The index allows state and local general obligation, revenue, insured, and pre-refunded bonds, however, historically the index has been comprised of mostly revenue bonds. The U.S. Municipal High Yield Index is a stand-alone index with no crossover into other Bloomberg Barclays taxable indices, such as the U.S. High Yield Index.BLOOMBERG BARCLAYS MUNICIPAL BOND INDEX is an unmanaged index of over 39,000 long-term investment-grade municipal bonds, and Bloomberg Barclays Non-Investment-Grade Municipal Bond Index, an unmanaged index of non-rated or Ba1- or below-rated municipal bonds. BLOOMBERG BARCLAYS TIPS INDEX measures the performance of U.S. Treasury Inflation Protected Securities (TIPS) and is selected by a market value process.BLOOMBERG BARCLAYS U.S. AGGREGATE BOND INDEX represents securities that are SEC-registered, taxable, and dollar-denominated. It covers the U.S. investment-grade, fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities. BLOOMBERG BARCLAYS U.S. CORPORATE BOND INDEX: This unmanaged index is the corporate component of the U.S. Credit Index and covers publicly issued U.S. corporate and specified foreign debentures and secured notes that meet the specified maturity, liquidity, and quality requirements. The corporate sectors are Industrial, Utility, and Finance, which include both U.S. and non-U.S. corporations. The non-corporate sectors are Sovereign, Supranational, Foreign Agency, and Foreign Local Government. BLOOMBERG BARCLAYS U.S. CORPORATE INVESTMENT GRADE BOND INDEX is an unmanaged index considered representative of publicly issued, fixed-rate,nonconvertible, investment-grade debt securities. This index is a component of the Bloomberg Barclays U.S. Aggregate Index.

Index definitions

42

BLOOMBERG BARCLAYS U.S. GOVERNMENT BOND INDEX comprises the U.S. Treasury and U.S. Agency Indices. The index includes U.S. dollar-denominated, fixed rate, nominal U.S. Treasuries and U.S. agency debentures (securities issued by U.S. government-owned or government-sponsored entities, and debt explicitly guaranteed by the U.S. government). The U.S. Government Index is a component of the U.S. Government/Credit and U.S. Aggregate Indices, and eligible securities also contribute to the multi-currency Global Aggregate Index.BLOOMBERG BARCLAYS U.S. HIGH YIELD INDEX covers the USD-denominated, non-investment grade, fixed rate, taxable corporate bond market. Securities are classified as high yield if the middle rating of Moody’s, Fitch, and S&P is Ba1/BB+/BB+ or below. A small number of unrated bonds are included in the index. The index excludes emerging markets debt.BLOOMBERG BARCLAYS U.S. HIGH YIELD BB INDEX is a subset of the Bloomberg Barclays U.S. High Yield Index which contains only BB rated debt.BLOOMBERG BARCLAYS U.S. HIGH YIELD B INDEX is a subset of the Bloomberg Barclays U.S. High Yield Index which contains only B rated debt.BLOOMBERG BARCLAYS U.S. HIGH YIELD CCC AND BELOW INDEX is a subset of the Bloomberg Barclays U.S. High Yield Index which contains only CCC and below rated debt.BLOOMBERG BARCLAYS U.S. HIGH YIELD ENERGY INDEX is a subset of the Bloomberg Barclays U.S. High Yield Index which contains only bonds in the energy sector.BLOOMBERG BARCLAYS U.S. HIGH YIELD EX-ENERGY INDEX is a subset of the Bloomberg Barclays U.S. High Yield Index which contains all bonds in the index except those in the energy sector.BLOOMBERG BARCLAYS LONG U.S. CORPORATE INDEX includes dollar-denominated debt from U.S. and non-U.S. industrial, utility, and financial institutions issuers with a duration of 10+ years. BLOOMBERG BARCLAYS LONG U.S. TREASURIES INDEX includes all publicly issued, U.S. Treasury securities that have a remaining maturity of 10 or more years, are rated investment grade, and have $250 million or more of outstanding face value. BLOOMBERG BARCLAYS U.S. MBS–AGENCY FIXED RATE INDEX. This index is a subset of the Bloomberg Barclays U.S. Aggregate and is comprised of publicly issued debt of U.S. government agencies, quasi-federal corporations, and corporate or foreign debt guaranteed by the U.S. government (such as USAID securities).BLOOMBERG BARCLAYS U.S. TREASURY BOND INDEX: This index is a subset of the Bloomberg Barclays U.S. Aggregate and is an unmanaged index of public obligations of the U.S. Treasury with a remaining maturity of one year or more. BLOOMBERG BARCLAYS U.S. TREASURY U.S. TIPS INDEX: An unmanaged index that consists of inflation-protected securities issued by the U.S. Treasury.BLOOMBERG COMMODITY INDEX is composed of futures contracts and reflects the returns on a fully collateralized investment in the BCOM. This combines the returns of the BCOM with the returns on cash collateral invested in 13 week (3 Month) U.S. Treasury Bills. BLOOMBERG SUB AGRICULTURE INDEX: Formerly known as Dow Jones-UBS Agriculture Subindex, the index is a commodity group subindex of the Bloomberg Commodity Index. It is composed of futures contracts on coffee, corn, cotton, soybeans, soybean oil, soybean meal, sugar, and wheat. It reflects the return of underlying commodity futures price movements only and is quoted in USD.BLOOMBERG SUB CORN INDEX is a commodity group subindex of the Bloomberg CI composed of futures contracts on Corn. It reflects the return of underlying commodity futures price movements only and is quoted in USD.BLOOMBERG SUB SOYBEANS INDEX is a commodity group subindex of the Bloomberg CI composed of futures contracts on Soybeans. It reflects the return of underlying commodity futures price movements only and is quoted in USD.BLOOMBERG SUB ENERGY INDEX is a commodity group subindex of the Bloomberg CITR. The index is composed of futures contracts on crude oil, heating oil, unleaded gasoline and natural gas. It reflects the return of underlying commodity futures price movements only and is quoted in USD.BLOOMBERG SUB BRENT CRUDE INDEX: Formerly known as Dow Jones-UBS Brent Crude Subindex Total Return (DJUBCOT), the index is a single commodity index composed of futures contracts on Brent crude. The index is part of the Bloomberg CITR family. It reflects the return of underlying commodity futures price movements only and is quoted in USD.BLOOMBERG SUB NATURAL GAS INDEX: Formerly known as Dow Jones-UBS Natural Gas Subindex Total Return (DJUBNGTR), the index is a single commodity subindex of the Bloomberg CI composed of futures contracts on Natural Gas. It reflects the return of underlying commodity futures price movements only and is quoted in USD.BLOOMBERG SUB INDUSTRIAL METALS INDEX: Formerly known as Dow Jones-UBS Industrial Metals Subindex (DJUBSIN), the index is composed of futures contracts on aluminum, copper, nickel, and zinc. It reflects the return of underlying commodity futures price movements only and is quoted in USD.BLOOMBERG SUB COPPER INDEX: Formerly known as Dow Jones-UBS Copper Subindex (DJUBSHG), the index is a commodity group subindex of the Bloomberg CI composed of futures contracts on Copper. It reflects the return of underlying commodity futures price movements only and is quoted in USD.

Index definitions

43

BLOOMBERG SUB ALUMINUM INDEX: Formerly known as Dow Jones-UBS Aluminum Subindex (DJUBSAL), the index is a commodity group subindex of the Bloomberg CI composed of futures contracts on Aluminum. It reflects the return of underlying commodity futures price movements only and is quoted in USD.BLOOMBERG SUB LIVESTOCK INDEX: A commodity group subindex of the Bloomberg CI composed of futures contracts on livestock. It reflects the return of underlying commodity futures price movements only and is quoted in USD.BLOOMBERG SUB LIVE CATTLE INDEX: Formerly known as Dow Jones-UBS Live Cattle Subindex Total Return (DJUBLCTR), the index is a single commodity subindex of the Bloomberg CI composed of futures contracts on Live Cattle. It reflects the return of underlying commodity futures price movements only and is quoted in USD.BLOOMBERG SUB PRECIOUS METALS INDEX: Formerly known as Dow Jones-UBS Precious Metals Subindex Total Return (DJUBPRTR), the index is a commodity group subindex of the Bloomberg CITR. The index is composed of futures contracts on gold and silver. It reflects the return on fully collateralized futures positions and is quoted in USD.BLOOMBERG SUB SILVER INDEX: Formerly known as Dow Jones-UBS Silver Subindex Total Return (DJUBSIT), the index is a single commodity index composed of futures contracts on silver. The index is part of the Bloomberg CITR family. It reflects the return of underlying commodity futures price movements only and is quoted in USD.BLOOMBERG SUB SOFTS INDEX: Formerly known as Dow Jones-UBS Softs Subindex Total Return (DJUBSOTR), the index is a commodity group subindex of the Bloomberg CI. It is composed of futures contracts on coffee, cotton and sugar. It reflects the return of fully collateralized futures price movements only and is quoted in USD.BLOOMBERG SUB SUGAR INDEX: Formerly known as Dow Jones-UBS Sugar Subindex Total Return (DJUBSBTR), the index is a single commodity subindex of the Bloomberg CI composed of futures contracts on Sugar. It reflects the return of underlying commodity futures price movements only and is quoted in USD.BLOOMBERG SUB COFFEE INDEX: Formerly known as Dow Jones-UBS Coffee Subindex Total Return (DJUBKCTR), the index is a single commodity subindex of the Bloomberg CI composed of futures contracts on Coffee. It reflects the return of underlying commodity futures price movements only and is quoted in USD.BM&F BOVESPA INDEX is composed exclusively of shares and units representing shares of BM&FBOVESPA-listed issuers that meet the inclusion criteria.CBOE VOLATILITY INDEX (VIX) is a key measure of market expectations of near-term volatility conveyed by S&P 500 stock index option prices. CHICAGO FED NATIONAL FINANCIAL CONDITIONS LEVERAGE SUBINDEX provides a comprehensive weekly update on U.S. financial conditions in money markets, debt and equity markets, and the traditional and “shadow” banking systems. Positive values of the NFCI indicate financial conditions that are tighter than average, while negative values indicate financial conditions that are looser than average. The three subindexes of the NFCI (risk, credit and leverage) allow for a more detailed examination of the movements in the NFCI. The leverage subindex consists of debt and equity measures. Increasing risk, tighter credit conditions and declining leverage are consistent with tightening financial conditions.CITI ECONOMIC SURPRISE INDEX (EM-Emerging Market and DM-Developed Market) are data series that measure how economic data releases have fared relative to market expectations. A positive reading means that data releases have been stronger than expected and a negative reading means that data releases have been worse than expected. CREDIT SUISSE HEDGE FUND INDEX is an asset-weighted hedge fund index diversified across ten style based sectors, including convertible arbitrage, dedicated short bias, emerging markets, equity market neutral, event driven, fixed income arbitrage, global macro, managed futures, long/short equity, and multi-strategy.CREDIT SUISSE LEVERAGED LOAN INDEX: This index represents the investable universe of the U.S.-dollar-denominated leveraged loan market. The federal funds rate is the interest rate banks charge each other for overnight loans. CREDIT SUISSE WESTERN EUROPEAN LEVERAGED LOAN INDEX is a representative, unmanaged index of tradable, floating rate senior secured loans designed to mirror the investable universe of the European leveraged loan market. The Index return does not reflect the impact of principal repayments in the current month. CONSUMER PRICE INDEX (CPI) is a measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food, and medical care.CONFERENCE BOARD LEADING ECONOMIC INDICATOR INDEX (LEI) is essentially a composite average of ten individual leading indicators of peaks and troughs in the business cycle. They are constructed to summarize and reveal common turning point patterns in economic data in a clearer and more convincing manner than any individual component – primarily because they smooth out some of the volatility of individual components.CPI CORE PRICE INDEX is similar to the Consumer Price Index, but tracks the prices of all items except for food and energy.CSI 300 is a capitalization-weighted stock market index designed to replicate the performance of 300 stocks traded in the Shanghai and Shenzhen stock exchanges. DEUTSCHE BOERSE AG GERMAN STOCK INDEX (DAX): The German Stock Index is a total return index of 30 selected German blue chip stocks traded on the Frankfurt Stock Exchange. The equities use free float shares in the index calculation. The DAX has a base value of 1,000 as of December 31, 1987. As of June 18, 1999 only XETRA equity prices are used to calculate all DAX indices.

Index definitions

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EURO STOXX BANKS INDEX tracks supersectors of the relevant benchmark index. Companies are categorized according to their primary source of revenue. EURO STOXX 50 INDEX provides a blue-chip representation of supersector leaders in the Eurozone. The index covers 50 stocks from 12 Eurozone countries: Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain. EURO STOXX 50 VOLATILITY (VSTOXX) INDEX is based on EURO STOXX 50 real-time options prices and is designed to reflect the market expectations of near-term up to long-term volatility by measuring the square root of the implied variance across all options of a given time to expiration. EURONEXT PARIS CAC 40: The CAC 40, the most widely used indicator of the Paris market, reflects the performance of the 40 largest equities listed in France, measured by free-float market-capitalization and liquidity. The index was developed with a base level of 1000 as of December 31, 1987.FTSE 100 INDEX is a capitalization-weighted index of the 100 most highly capitalized companies traded on the London Stock Exchange. The equities use an investibility weighting in the index calculation. The index was developed with a base level of 1000 as of December 30, 1983.FTSE EPRA/NAREIT DEVELOPED is a composite of the existing EPRA Europe Index, EPRA/NAREIT North America Index, and EPRA/NAREIT Asia Index. The index contains publicly quoted real estate companies that meet the EPRA Rules in 25 countries throughout Europe, North America, and Asia. The index was developed with a base value of 1000 as of December 31, 1999.FTSE EPRA/NAREIT EMERGING is an extension to the FTSE EPRA/NAREIT GLOBAL Index Series. This index has been designed to support the development of index-linked products.FTSE EPRA/NAREIT GLOBAL is designed to track the performance of listed real estate companies and REITS in both developed and emerging markets. By making the index constituents free-float adjusted, liquidity, size and revenue screened, the series is suitable for use as the basis for investment products, such as derivatives and Exchange Traded Funds (ETFs).FTSE EPRA/NAREIT GLOBAL EX U.S. is designed to track the performance of listed real estate companies and REITS in both developed and emerging markets excluding the United States. By making the index constituents free-float adjusted, liquidity, size and revenue screened, the series is suitable for use as the basis for investment products, such as derivatives and Exchange Traded Funds (ETFs).FTSE EPRA/NAREIT UNITED STATES is a subset of the EPRA/NAREIT Global Index and the EPRA/NAREIT North America Index and contains publicly quoted real estate companies that meet the EPRA Ground Rules. EPRA/NAREIT Index series is seen as the representative benchmark for the real estate sector.FTSE NAREIT ALL REIT TOTAL RETURN INDEX is a free-float adjusted, market capitalization-weighted index of U.S. Equity REITs. Constituents of the Index include all tax-qualified REITs with more than 50 percent of total assets in qualifying real estate assets other than mortgages secured by real property.HONG KONG HANG SENG INDEX is a free-float capitalization-weighted index of a selection of companies from the Stock Exchange of Hong Kong. The components of the index are divided into four subindices: Commerce and Industry, Finance, Utilities, and Properties. The index was developed with a base level of 100 as of July 31, 1964.ICE DOLLAR INDEX SPOT RATE indicates the general international value of the USD. This is done by averaging the exchange rates between the USD and major world currencies. The ICE computes this by using the rates supplied by some 500 banks.ISM MANUFACTURING INDEX is based on a survey of over 300 manufacturing firms and monitors employment, production, inventory, new orders, and supplier deliveries. It is conducted by the Institute of Supply Management.ISM NON-MANUFACTURING INDEX is conducted by the Institute of Supply Management and surveys more than 400 non-manufacturing firms. The index acts as a measure of national economic conditions.JP MORGAN CORPORATE EMERGING MARKETS BOND INDEX BROAD DIVERSIFIED (GBI-EM) is a global benchmark for U.S.-dollar-denominated corporate emerging markets bonds. JP MORGAN EMERGING LOCAL MARKETS INDEX PLUS tracks total returns for local-currency-denominated money market instruments in 24 emerging markets countries. JP MORGAN EMERGING MARKETS BOND INDEX GLOBAL DIVERSIFIED is an unmanaged index of emerging market debt, including USD-denominated Brady bonds, Eurobonds, and traded loans issued by sovereign and quasi-sovereign entities. It limits the weights of those index countries with larger debt stocks by including only a specified portion of these countries’ eligible current face amounts of debt outstanding. LIBOR is a benchmark rate that some of the world’s leading banks charge each other for short-term loans.

Index definitions

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LMBA GOLD PRICE PM USD provides the evening result of the LMBA Gold price auction. The LBMA Gold price auction takes place twice daily by ICE Benchmark Administration (IBA) at 10:30 and 15:00 with the price set in U.S. dollars per fine troy ounce. These prices are internationally regarded as the pricing mechanism for a variety of precious metal transactions and products. MICEX 10 is an unweighted price index that tracks the ten most liquid Russian stocks listed on Moscow Exchange.MSCI ALL COUNTRY WORLD INDEX (ACWI) is a market capitalization weighted index designed to provide a broad measure of equity-market performance throughout the world. The MSCI ACWI is maintained by Morgan Stanley Capital International, and is comprised of stocks from both developed and emerging markets. MSCI EAFE is designed to represent the performance of large and mid-cap securities across 21 developed markets, including countries in Europe, Australasia and the Far East, excluding the U.S. and Canada. The Index is available for a number of regions, market segments/sizes and covers approximately 85% of the free float-adjusted market capitalization in each of the 21 countries. MSCI EMERGING MARKETS is an equity index covering 23 countries representing 10% of world market capitalization. The Index is available for a number of regions, market segments/sizes and covers approximately 85% of the free float-adjusted market capitalization in each of the 23 countries. MSCI EMERGING MARKET SMID CAP INDEX captures mid and small cap representation across 23 Emerging Markets countries. The index covers approximately 29% of the free float-adjusted market capitalization in each country.MSCI EUROPE EX-UK INDEX captures large and mid cap representation across 14 Developed Markets (DM) countries in Europe. The index covers approximately 85% of the free float-adjusted market capitalization across European Developed Markets excluding the UK.MSCI FRANCE is designed to measure the performance of the large and mid cap segments of the French market. The index covers about 85% of the equity universe in France.MSCI GERMANY is designed to measure the performance of the large and mid cap segments of the German market. The index covers about 85% of the equity universe in Germany.MSCI ITALY is designed to measure the performance of the large and mid cap segments of the Italian market. The index covers about 85% of the equity universe in Italy.MSCI JAPAN is designed to measure the performance of the large and mid cap segments of the Japanese market. The index covers about 85% of the free float-adjusted market capitalization in Japan.MSCI SPAIN is designed to measure the performance of the large and mid cap segments of the Spanish market. The index covers about 85% of the equity universe in Spain.MSCI UK is designed to measure the performance of the large and mid cap segments of the UK market. The index covers about 85% of the free float-adjusted market capitalization in the UK.MSCI WORLD EX-U.S. captures large and mid cap representation across 22 of 23 Developed Markets (DM) countries--excluding the United States. The index covers approximately 85% of the free float-adjusted market capitalization in each country.MSCI WORLD is a broad global equity benchmark that represents large and mid-cap equity performance across 23 developed markets countries. It covers approximately 85% of the free float-adjusted market capitalization in each country. MSCI World benchmark does not offer exposure to emerging markets.NASDAQ COMPOSITE INDEX is a broad-based capitalization-weighted index of stocks in all three NASDAQ tiers: Global Select, Global Market and Capital Market. The index was developed with a base level of 100 as of February 5, 1971.NIKKEI 225: The Nikkei-225 Stock Average is a price-weighted average of 225 top-rated Japanese companies listed in the First Section of the Tokyo Stock Exchange. The Nikkei Stock Average was first published on May 16, 1949, where the average price was ¥176.21 with a divisor of 225. PERSONAL CONSUMPTION INDEX is a measure of price changes in consumer goods and services. Personal consumption expenditures consist of the actual and imputed expenditures of households.RUSSELL 1000 Index consists of the 1,000 largest securities in the Russell 3000 Index, which is composed of the 3,000 largest U.S. securities, as determined by total market capitalization. RUSSELL 1000 VALUE INDEX measures the performance of those Russell 1000 companies with lower price-to-book ratios and lower forecasted growth values.RUSSELL 1000 GROWTH INDEX measures the performance of those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values. RUSSELL TOP 200 INDEX is composed of the 200 largest U.S. securities, as determined by total market capitalization.RUSSELL 2000 INDEX measures the performance of the 2,000 smallest companies in the Russell 3000 Index.

Index definitions

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RUSSELL MID CAP INDEX A market capitalization weighted index representing the smallest 800 companies in the Russell 1000 Index. The average Russell Midcap Index member has a market cap of $8 billion to $10 billion, with a median value of $4 billion to $5 billion. The index is reconstituted annually so that stocks that have outgrown the index can be removed and new entries can be added.S&P/BMV IPC seeks to measure the performance of the largest and most liquid stocks listed on the Bolsa Mexicana de Valores.S&P 500® INDEX (STANDARD & POOR’S 500® INDEX) (registered trademark of McGraw-Hill Financial) is an unmanaged index of 500 common stocks of large U.S. companies, weighted by market capitalization. It gives a broad look at how U.S. stock prices have performed. S&P 500 CONSUMER STAPLES INDEX comprises those companies included in the S&P 500 that are classified as members of the Global Industry Classification Standard (GICS) consumer staples sector.S&P 500 CONSUMER DISCRETIONARY INDEX comprises those companies included in the S&P 500 that are classified as members of the Global Industry Classification Standard (GICS) consumer discretionary sector.S&P 500 ENERGY INDEX comprises those companies included in the S&P 500 that are classified as members of the Global Industry Classification Standard (GICS) energy sector.S&P 500 FINANCIALS INDEX comprises those companies included in the S&P 500 that are classified as members of the Global Industry Classification Standard (GICS) financials sector.S&P 500 HEALTH CARE INDEX comprises those companies included in the S&P 500 that are classified as members of the Global Industry Classification Standard (GICS) health care sector.S&P 500 INDUSTRIALS INDEX comprises those companies included in the S&P 500 that are classified as members of the Global Industry Classification Standard (GICS) industrials sector.S&P 500 MATERIALS INDEX comprises those companies included in the S&P 500 that are classified as members of the Global Industry Classification Standard (GICS) materials sector.S&P 500 REAL ESTATE comprises those companies included in the S&P 500 that are classified as members of the Global Industry Classification Standard (GICS) real estate sector.S&P 500 TECHNOLOGY INDEX comprises those companies included in the S&P 500 that are classified as members of the Global Industry Classification Standard (GICS) technology sector.S&P 500 COMMUNICATION SERVICES INDEX comprises those companies included in the S&P 500 that are classified as members of the Global Industry Classification Standard (GICS) communication services sector.S&P 500 UTILITIES INDEX comprises those companies included in the S&P 500 that are classified as members of the Global Industry Classification Standard (GICS) utilities sector.S&P BSE SENSEX is a free-float market-weighted stock market index of 30 well-established and financially sound companies listed on Bombay Stock Exchange.S&P CORELOGIC CASE SHILLER U.S. NATIONAL HOME PRICE INDEX is a composite of single-family home price indices for the nine U.S. Census divisions and is calculated monthly. It is included in the S&P CoreLogic Case-Shiller Home Price Index Series which seeks to measure changes in the total value of all existing single-family housing stock.S&P DEVELOPED PROPERTY INDEX defines and measures the investable universe of publicly traded property companies domiciled in developed markets. The companies in the index are engaged in real estate related activities, such as property ownership, management, development, rental and investment.S&P GLOBAL INFRASTRUCTURE INDEX is designed to track 75 companies from around the world chosen to represent the listed infrastructure industry while maintaining liquidity and tradability. To create diversified exposure, the index includes three distinct infrastructure clusters: energy, transportation, and utilities. S&P PREFERRED STOCK INDEX is designed to serve the investment community's need for an investable benchmark representing the U.S. preferred stock market. Preferred stocks are a class of capital stock that pays dividends at a specified rate and has a preference over common stock in the payment of dividends and the liquidation of assets.S&P/CASE SHILLER 20-CITY COMPOSITE HOME PRICE INDEX seeks to measures the value of residential real estate in 20 major U.S. metropolitan areas: Atlanta, Boston, Charlotte, Chicago, Cleveland, Dallas, Denver, Detroit, Las Vegas, Los Angeles, Miami, Minneapolis, New York, Phoenix, Portland, San Diego, San Francisco, Seattle, Tampa and Washington, D.C. S&P/TSX (TORONTO STOCK EXCHANGE) COMPOSITE INDEX is a capitalization-weighted index designed to measure market activity of stocks listed on the TSX. This index does not contain investment trusts. SHILLER CYCLICALLY ADJUSTED PRICE TO EARNINGS RATIO is a valuation measure usually applied to the U.S. S&P 500 equity market. It is defined as price divided by the average of ten years of earnings (moving average), adjusted for inflation. THOMSON REUTERS/CORE COMMODITY CRB INDEX is a commodity futures price index.

Terminology

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CORRELATION describes the way two securities move in relation to each other and can take a value anywhere between positive and negative 1. A correlation of +1 means the two securities move in unison, a correlation of zero indicates the two securities do not move together at all, and a correlation of -1 means the two securities move exactly opposite of each other. CREDIT SPREADS are the difference in yield between a treasury and a non-treasury security which are identical outside of credit rating.DIVIDEND YIELD is how much a company pays out in dividends each year relative to its share price.EARNINGS GROWTH (next 12 months): Growth in earnings per share using forecasted earnings growth for the next 12 months.EARNINGS PER SHARE (EPS) is a company’s profit divided by the number of shares of common stock outstanding.EBIT (EARNINGS BEFORE INTEREST AND TAXES) is an indicator of a company's profitability, calculated as revenue minus expenses, excluding tax and interest. It is also referred to as "operating earnings", "operating profit" and "profit before interest and taxes.”FEDERAL OPEN MARKET COMMITTEE (FOMC) is a branch of the Federal Reserve Board which is charged with setting monetary policy. The committee is comprised of a seven-member board of governors and the five presidents of the regional reserve banks.INTERNATIONAL MONETARY FUND (IMF) is an organization of 189 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world.MARKET CAPITALIZATION refers to a company’s total dollar market value of shares outstanding and represents a company’s size. Typically public companies are divided into groups by size of market capitalization: Large Cap, Mid Cap, and Small Cap, though there is no set standard dollar amount defining these groups. Large Cap refers to companies with the highest dollar value of shares outstanding, generally over $10 Billion. Mid Cap refers to companies between about $2 billion and $10 billion outstanding and Small Cap refers to those companies with less than $2.5 billion outstanding.MBPD stands for Thousands of Barrels Per Day and is a unit of measurement of crude oil and petroleum production and consumption. NON-FARM PAYROLL is a monthly statistic collected and reported by the U.S. Bureau of Labor Statistics which represents the total number of paid workers of any business in the United States. The figure excludes general government employees, private household employees, non-profit employees who provide assistance to individuals, and farm employees.OPTION ADJUSTED SPREAD (OAS) is the difference between a bond’s yield and the rate of return for a similar maturity, risk free security after adjusting for options.ORGANIZATION OF PETROLEUM EXPORTING COUNTRIES (OPEC) is a union of oil-producing countries that regulates the amount of oil each country produces.PRICE TO EARNINGS (P/E) RATIO is a company’s share price divided by its earnings per share. PERSONAL CONSUMPTION EXPENDITURES reflects monthly Personal Income and Outlays data which are published by the U.S. Bureau of Economic Analysis. Personal consumption expenditures include consumer spending for all goods and services.PROFIT MARGIN is the amount by which revenue from sales exceeds costs in a business.REAL GROSS DOMESTIC PRODUCT (GDP) reflects the value of all goods and services produced by an economy in a given year, expressed in base-year prices. The measure is inflation-adjusted.REAL PERSONAL CONSUMPTION EXPENDITURES measures the price changes in consumer goods and services.UP OR DOWN REVISION is the number of stocks on which analysts had to revise their earnings expectations upward divided by the number of stocks on which analysts had to revise their earnings expectations downward in a particular earnings reporting season. When the ratio is greater than 1, it describes an environment in which companies are more profitable than expected. When the ratio is less than 1, corporate profitability is underperforming expectations.URBAN POPULATION refers to people living in urban areas as defined by national statistical offices. The data is collected and smoothed by United Nations Population Division.YIELD CURVE is a curve on a graph in which the yield of fixed-interest securities is plotted against the length of time they have to run to maturity.

Disclosures

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All data as of cover date unless otherwise specified.

The indices are unmanaged and are provided for informational purposes only. Investors cannot directly invest in an index.Past performance is no guarantee of future results.

The views expressed herein are those of PGIM Investments professionals at the time the comments were made and may not be reflective of their current opinions and are subject to change without notice. Neither the information contained herein nor any opinion expressed shall be construed to constitute investment advice or an offer to sell or a solicitation to buy any securities mentioned herein. This commentary does not purport to provide any legal, tax, or accounting advice.

Certain information in this commentary has been obtained from sources believed to be reliable as of the date presented; however, we cannot guarantee the accuracy of such information, assure its completeness, or warrant such information will not be changed. The information contained herein is current as of the date of issuance (or such earlier date as referenced herein) and is subject to change without notice.

Any projections or forecasts presented herein are subject to change without notice. Actual data will vary and may not be reflected here. Projections and forecasts are subject to high levels of uncertainty. Accordingly, any projections or forecasts should be viewed as merely representative of a broad range of possible outcomes. Projections or forecasts are estimated, based on assumptions, and are subject to significant revision and may change materially as economic and market conditions change.

© 2020 Morningstar, Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Morningstar category definitions included in disclosures.

The Global Industry Classification Standard (“GICS”) was developed by and is the exclusive property and a service mark of MSCI, Inc. (“MSCI”) and Standard & Poor’s, a division of The McGraw-Hill Companies, Inc. (“S&P”). GICS classifications and related GICS information are provided “as is” with no express or implied warranties.

Frank Russell Company (“FRC”) is the source and owner of the Russell Index data contained or reflected in this material and all trademarks and copyrights related thereto. The presentation may contain confidential information and unauthorized use, disclosure, copying, dissemination or redistribution is strictly prohibited. This is a presentation of the Russell Index data. Frank Russell Company is not responsible for the formatting or configuration of this material or for any inaccuracy in presentations thereof.

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PGIM is a Prudential Financial company. © 2020 Prudential Financial, Inc. and its related entities. PGIM and the PGIM logo are service marks of Prudential Financial, Inc. and its related entities, registered in many jurisdictions worldwide.

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