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Review of Performance Year to Date —1

Where are We in the U.S. Economic C2

Divergent Monetary Policy — Using Th3 Divergent Monetary Policy — Using Th3

Market Risks — Kryptonite Caution4

Global Fixed Income — Time to Put on t5

U.S. Equities — Same Bat Time, Same Ba6

Global Equities — Batman..Beware of th7

U.S. Dollar — Solving the Riddler’s Dollar8

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Deutsche Bank Wealth Management 4Q16 Market OutlookLarry V. Adam, CIO and Chief In

Past performance is not indicative of future returns.

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Cycle? — A “Superman” Economy?

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nvestment Strategist – Wealth Management - Americas1

State Compensation Insurance Fund Investment Committee - November 17, 2016 Open Agenda Item 4 - Market Outlook and Economic Update

Review of Performance Ye1

A Review of Asset Class Performance in

Some “Blockbuster” Performance

30.0%

35.0% Equities: LATAM outperforms on crude oil rebound.

Sectors: Cyclical Sectors O3Q16

15.0%

20.0%

25.0%

5.0%

10.0%

-10.0%

-5.0%

0.0%

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Footnotes: Data as of September 30, 2016. Sorted by year to date returns.Source: FactSet, Deutsche Bank Wealth Management.

ar to Date

n 3Q16 and YTD

Outperform in MLPs Maintain Strong Recovery

Commodities: Rebound Continues

Fixed Income: “Carry” on

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Where are We in the U.S. E2

A “Superman” Economy?

U.S. Europe

Withholding Tax Receipts German Exports Orders

Jobless Claims Credit Impulse

Belgium ManufacturingISM Production

Commercial & Industrial Loans

Belgium Manufacturing Survey

Consumer SentimentLoans

New Vehicle Sales Inflation

U.S. growth should modestly accelerate in the next 12 months as headwinds

fade, consumer spending is boosted by a strong labor market and relatively low

interest rates support housing and

Consumption and government should be the drivers of growth in 2016 and

2017 with limited Brexit fall out effects. ECB should remain accommodative as

inflation remains low



Source: Deutsche Bank Wealth Management.

business investment. inflation remains low.

Economic Cycle?

ChinaJapan

Electricity DemandCore Machinery Orders

Cement OutputPMI Manufacturing/Services

Housing Prices

Retail Sales

Average Real Earnings

Consumer Confidence

InflationInflation

China’s economy appears to be stabilizing with little probability of a hard landing. The PBOC will keep the door

open for additional policy action if warranted

Growth is expected to be muted in 2016 and 2017 suggesting that fiscal stimulus

will need to accompany aggressive monetary stimulus. The BoJ will likely need to cut rates at least once more

nvestment Strategist – Wealth Management - Americas 3

warranted. and increase their purchase program.


Where are We in the U.S. Econ

Employment Conditions Solid

Faster than Trend Growth…..

$1,800,000

$2,000,000

$2,200,000

$2,400,000

450 000

500,000

550,000

600,000

650,000

700,000

Employment Conditions SolidJobless claims at the lowest level since 1973 and withheld tax receipts growing

at a record high suggest ongoing improvement in the labor market.

'99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16$1,000,000

$1,200,000

$1,400,000

$1,600,000

200,000

250,000

300,000

350,000

400,000

450,000

(MSUM 1Y) Withheld Income & Employment Taxes in millions - U S (Left)(MSUM 1Y) Withheld Income & Employment Taxes, in millions U.S. (Left)(MOV 4W) Initial Jobless Claims - United States (Right)

Vehicle Sales Strong

Footnotes: Data is weekly and as of September 30, 2016.Source: FactSet, Deutsche Bank Wealth Management.

Vehicle sales have naturally slowed from their recent peak but still remain near the highest levels since 2005.



Footnotes: Data as of September 2016.Source: FactSet, Deutsche Bank Wealth Management.

nomic Cycle?

Manufacturing Stabilizing

60

70

80

Manufacturing StabilizingThere are signs of stabilization in manufacturing as the broad ISM Index and ISM

production subcomponent have both moved back in expansionary territory.

20

30

40

50

ISM Production

ISM Index

Jan-00 Dec-02 Nov-05 Oct-08 Sep-11 Aug-14

Footnotes: Data as of September 2016.Source: Bloomberg Finance LP, Deutsche Bank Wealth Management.

According to the Senior Loan Officer Survey, banks have

Lending Stalling?

been tightening lending standards for three consecutive quarters and there has been less demand for loans for two

consecutive quarters.


Footnotes: Data as of 2Q16.Source: FactSet, Deutsche Bank Wealth Management.



More Powerful than Other Economies…

U.S. Economy Resilient – Entering the E

4.0%

5.0%

6.0%

1.0%

2.0%

3.0%

-2.0%

-1.0%

0.0%

11 11 11 12 12 12 12 13 13 13

Eurozone

China

2Q1

3Q1

4Q1

1Q1

2Q1

3Q1

4Q1

1Q1

2Q1

3Q1

Japan

UK

Brazil



Footnotes: Data is most recent data as of October 4, 2016. Red squares indicate when GData Source: FactSet, Deutsche Bank Wealth Management.

nomic Cycle?

.

Eighth Year of Expansion

U.S. GDP (QoQ Annualized)

13 14 14 14 14 15 15 15 15 16 16

4Q1

1Q1

2Q1

3Q1

4Q1

1Q1

2Q1

3Q1

4Q1

1Q1

2Q1


DP was negative.

5



Current Expansion vs History

Able to Leap Tall Buildings in a Single B

Current Expansion vs. History

80

100

120

140

s

Economic Expansion (AVG) Economic Expansion

0

20

40

60

80

# of

Mon

ths

1938

-194

5

1945

-194

8

1949

-195

3

1954

-195

7

1958

-196

0

1961

-196

9

1970

-197

3

1975

-198

0

1980

-198

1

1982

-199

0

1991

-200

1

2001

-200

7

2009

-Pre

sent

*

— By the end of 2016, the current expansion will be 91 months, well above the historical average of 60 months and the fourth longest in history.



Footnotes: Time period reflects 1938 to present. Current expansion is using June 2009-Dec 2016.Source: NBER, Deutsche Bank Wealth Management.

nomic Cycle?

Slow Growth or Recession Ahead?

ound….

15%

20%

25%Average GDP Growth vs. Pre-Cris Peak (up to

2Q16)

Slow Growth or Recession Ahead?

0%

5%

10%U.S.

Germany

Japan

FranceEurozone

-10%

-5%

0 1 2 3 4 5 6 7 8

# of Years

— The recovery after the “Great Recession,” has significantly lagged the recovery seen in prior recessions.

— In fact, the U.S. economy is ~10% above its pre-crisis GDP, vs. 22% for previous recoveries.GDP, vs. 22% for previous recoveries.

— However, the U.S. recovery has been significantly stronger than Eurozone and Japan.


Footnotes: Data as of 2Q16. *Average recessions are 1973, 1981, 1990 and 2001. Source: Bloomberg Finance LP, Deutsche Bank Wealth Management.



Analyzing Historic

Remember, Even Superman Gets Tired

% of Time in Cycle Business Cycle S&P 500 ReturnAverage S&P 500

P/E

17%

Recession -14.7% 13.31

17%

Current Cycle -25.2% 16.18

13%

Recovery 25.1% 15.90

Current Cycle 23 2% 16 62Current Cycle 23.2% 16.62

22%

Expansion 8.9% 18.36

Current Cycle 10.2% 15.39

48%

Late Cycle 5.9% 16.74

Current Cycle 8.2% 18.11

ReturnsP/Es

Footnotes: Table is using eight economic cycles from 1953 to present. Current cycle is frothrough 9/30/2016. Recession is quarter prior to start of recession to the trough in real GDExpansion is from recovery to first rate hike Late cycle is first rate hike to next recession

Returns tend to slow in

late cycle.

contract as the cycle

matures.



Expansion is from recovery to first rate hike. Late cycle is first rate hike to next recession. current cycle began 12/31/2015, data annualized as of 9/30/2016 where applicable.Source: Bloomberg Finance LP, FactSet, Deutsche Bank Wealth Management.

nomic Cycle?

al Economic Cycles

Earnings GrowthAverage Real Fed

FundsAverage Real 10 YR

YieldAverage Real GDP

10Year Treasury Return

-20.1% 0.7% 1.8% -1.7% 10.7%

-15.0% -1.0% 0.8% -2.2% 8.5%

7.5% 0.6% 2.3% 3.7% 11.2%

25 5% 0 5% 2 6% 2 7% 4 5%25.5% -0.5% 2.6% 2.7% 4.5%

17.5% 0.6% 2.5% 4.3% 11.1%

5.5% -1.4% 0.7% 2.1% 4.9%

8.5% 1.8% 2.3% 4.1% 4.7%

1.1% -0.6% 0.5% 2.2% 9.6%

Earnings Fed “Real”

om 2007 to 9/30/2016. All available data, returns and estimates for current cycle are DP. Recovery is from trough in real GDP to when real GDP surpasses prior cycle peak.

1980 and 1981 1982 recessions are treated as one economic cycle Late cycle in

growth cut nearly in

half in late cycle.

Fed starts raising rates.

Real Treasury

yields stabilize.

GDP growth slows.

Bond returns slow.


1980 and 1981 -1982 recessions are treated as one economic cycle. Late cycle in

7


Divergent Monetary Polic3

Central Bank Playbook: Using Their X-Ray A

Fed ECBFed ECB

Tightening Policy Easing PolicyBase case is two rate hikes over the

next 12 months, with one by December 2016 and another by

September 2017.

Following the extension of QE earlier this year, the ECB is in wait and see

mode. We anticipate the ECB to prolong QE from Mar ’17 to Sep ‘17

and remain open to another rate cut if warranted (not our base case

scenario).

2 0%

2.5%

3.0%

3.5%

0.0%

0.5%

1.0%

1.5%

2.0%

2016 2017 2018

While we anticipate two Fed rate hikes over the next 12 months, the trajectory of Fed rate

hikes continue to move lower.

While the ECB is in wait and see mode, low inflation and a stubbornly strong Euro

increases the probability of more monetary policy over the next 12 months.

2016 2017 2018

Dec-15 Mar-16 Jun-16 Sep-16



Footnotes: Data is most recent as of September 30, 2016.Source: FactSet, Deutsche Bank Wealth Management.

policy over the next 12 months.

cy Abilities

BOJ BoEBOJ BoE

Easing Policy Easing PolicyBase case is that the BoJ will increase

their QE program and announce additional measures (fiscal and

monetary), all in an effort to steepen the yield curve.

Base case is for one rate cut over the next 12 months due to Brexit fallout.

1.2

1.4

1.6

1.8

e te

rms

1 3%

1.5%

1.8%

2.0%

0.0

0.2

0.4

0.6

0.8

1.0

in p

erce

ntag

e

0.3%

0.5%

0.8%

1.0%

1.3%

2016 2017

As Japanese economic growth continues to disappoint, the Japanese yield curve has

flattened to the lowest level in years. The BoJannounced yield curve targeting in the

As the U.K. economy is expected to be significantly impacted by the Brexit, we expect the BoE to cut interest rates one time over the

next 12 months.

Sep-00 Nov-04 Jan-09 Mar-13

Japan Yield Curve 10YR - 2YR

2016 2017

UK Growth Forecasts


announced yield curve targeting in the attempt to steepen the yield curve.

next 12 months.


Divergent Monetary PolicyWhy the Fed is Walking a Fine Line

Job Gains and Tightening CyclesJob Gains and Tightening Cycles

2,500

3,000

3,500

h ad

ditio

n of

in

thou

sand

s)

First Rate Hike

Payroll gains have slowed but have been much higher than historically seen ahead

of a tightening cycle.

1,000

1,500

2,000

-12 -9 -6 -3 0 3 6 9 12

rolli

ng 1

2 m

onth

nonf

arm

pay

rolls

(

December 2015 Rate HikeAverage of all Tightening Cycles

Core CPI and Tightening Cycles

Footnotes: Average is 15 tightening cycles since 1955. Recent as of August 2016.Source: Bloomberg Finance LP, Deutsche Bank Wealth Management.

9 6 3 0 3 6 9

# of Months

5.0%First Rate Hike

Core inflation is significantly lower than has historically been seen in tightening cycles, but is

gradually moving higher.2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

r C

hang

e in

Cor

e C

PI

First Rate Hike

0.0%

0.5%

1.0%

1.5%

2.0%

-12 -10 -8 -6 -4 -2 0 2 4 6 8 10 12

Yea

r ov

er Y

ear

# of Months

Average all Tightening Cycles

December 2015 Tightening Cycle



Footnotes: Average is 14 tightening cycles since 1958. Recent as of August 2016.Source: Bloomberg Finance LP, Deutsche Bank Wealth Management.

ISM and Tightening Cycles

53

55

57

59

61 First Rate Hike

ISM and Tightening Cycles

45

47

49

51

53

-12 -9 -6 -3 0 3 6 9 12

# of Months

Average all Tightening Cycles

December 2015 Tightening Cycle

ISM was much weaker leading into the recent

tightening cycle than history but is improving.

# of Months

GDP and Tightening Cycles

Footnotes: Average is 15 tightening cycles since 1955. 3 Mo Moving Average of ISM. Recent as of September 2016.Source: Bloomberg Finance LP, Deutsche Bank Wealth Management.

5.0%

First Rate Hike

Whil GDP h hi i ll2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

ter

Ave

rage

of Y

oY R

eal

GD

P

While GDP has historically accelerated through the first rate hike, real GDP has been slowing

in this tightening cycle.

0.0%

0.5%

1.0%

1.5%

2.0%

-4 -3 -2 -1 0 1 2 3 4

Tra

iling

4 Q

uart

# of Quarters

December 2015 Tightening CycleAverage all Tightening Cycles


Footnotes: Average is 15 tightening cycles since 1955. Recent as of 2Q16.Source: Bloomberg Finance LP, Deutsche Bank Wealth Management.

# of Quarters


Market Risks - Kryptonite C4

EuroStoxx Limited Response

Fading Impact of QE (and Aggressive Mo

3,600

3,800

4,000

C t R t

Announce QE

Cut Rates

EuroStoxx Limited Response

3,000

3,200

3,400

Cut Rates;Increase &Expand QE

1/15 4/15 7/15 10/15 1/16 4/16 7/16 10/162,600

2,800

Euro STOXX 50 - Price

— The positive impact of aggressive central bank measures on equity prices is losing its lasting effects.



Footnotes: Data as of October 3, 2016. Annotations are strictly ECB actions.Source: FactSet, Deutsche Bank Wealth Management.

Caution

Currency Conundrum

onetary Policy)

Currency Conundrum

123

128 BoJ ExpandsQE Program BoJ Expands

QE Program

ECB Cuts Rates BoJAnnounces Yield Curve

Control

113

118FOMCRaisesRates

ECBAnnounces

QE

103

108

1/4/13 7/8/13 1/9/14 7/13/14 1/14/15 7/18/15 1/19/16 7/22/16

Average Trade Weighted EUR & JPY (Index)

ECB CutsRates:

Raises QE

— Despite aggressive easing and the expansion of their balance sheets, the Trade Weighted Euro and JPY have rallied 5% and 19% year to date, respectively.

e age ade e g ted U & J ( de )


Footnotes: Data is weekly and as of September 30, 2016.Source: Bloomberg Finance LP, Deutsche Bank Wealth Management.


Market Risks - Kryptonite Ca

Limited Ability for Fiscal Stimulus

Fading Impacts of QE (with Limited Fisca

100

120

140

GD

P

Limited Ability for Fiscal Stimulus

20

40

60

80

Gro

ss D

ebt

as %

0

20

Italy Portugal France Spain Ireland Germany

2014 2015 2016 2017

— Many European governments have limited ability to use fiscal stimulus as a way to boost their economies.

— This is due to the fact that they are exceeding the debt to GDP limitations set by the Maastricht Treaty.

— According to the criteria, each member state must not have more than 60% of debt to GDP.



Footnotes: Data as of 2015. Estimates as of April 2016. Ranked according to 2017. Source: IMF, Deutsche Bank Wealth Management.

autional Flexibility)

Economies in “NIRP”*Economies in NIRP

-0.2%

-0.1%

0.0%

-0.6%

-0.5%

-0.4%

-0.3%

-0.8%

-0.7%

Switzerland Sweden Europe Denmark Japan

Central Bank/Deposit Rates

— Another way to try to boost growth has been to drive short term interest rates into negative territory to entice investors to move to risky assets and spark lending.

Footnotes: Data as of October 4, 2016. *NIRP stands for negative interest rate policy. Switz Sweden Denmark and Japan are central bank rates Europe is overnight deposit


Switz., Sweden, Denmark and Japan are central bank rates. Europe is overnight deposit rate.Source: Bloomberg Finance LP, Deutsche Bank Wealth Management.


Market Risks - Kryptonite Ca

P/E Tailwind Turns into Headwind

Normalizing Monetary Policy

P/E Tailwind Turns into Headwind

— The U.S. equity market has seen valuations supported by the expansion of the Fed balance sheet.

— As the Fed continues down its path of normalization, P/E expansion is unlikely.



Footnotes: Data as of September 30, 2016. Source: FactSet, Deutsche Bank Wealth Management.

aution

Late Cycle Set Back?Late Cycle Set Back?

105

110 First Rate Hike

90

95

100

85

90

-252 -216 -180 -144 -108 -72 -36 0 36 72 108 144 180 216 252

Average S&P 500 Return 2015

— Historically, the S&P 500 tends to peak ~ nine months after the Fed starts their tightening cycle.

— In fact, from nine months after the tightening cycle to one year later, the S&P 500 only returns, on average, 0.2%.

If hi i id h S&P 00 b id h h— If history is a guide, the S&P 500 can be sideways through 4Q16.


Footnotes: Data as of.October 3, 3016. Average tightening cycles from 1955-2004. Source: Bloomberg Finance LP, Deutsche Bank Wealth Management.


Market Risks - Kryptonite Cauti

GDP Cycle

Market and Economic Performance in El

GDP Cycle

5678910

2 0%

2.5%

3.0%

3.5%

4.0%

4.5%Nine of the 14 recessions

since 1929 have started in the first year of a Presidential

term.

01234

0.0%

0.5%

1.0%

1.5%

2.0%

Year 1 Year 2 Year 3 Year 4

Average GDP in Presidential Cycle (LHS) # of Times Recession Started (RHS)

Footnotes: Time period reflects 1929-2015.Source: Bloomberg Finance LP, Deutsche Bank Wealth Management.

Equities in Open Election Underperform

Average GDP in Presidential Cycle (LHS) # of Times Recession Started (RHS)

The S&P 500 in a year of an open election (8 8% y p (occurrences) has underperformed all election years by

852 bps.

-2%

0%

2%

4%

6%

8%

-6%

-4%

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

S&P 500 Performance in Years of Open Elections

S&P 500 Performance in All Elections Years



Footnotes: Time period reflects 1933-2015.Source: FactSet, Deutsche Bank Wealth Management.

ion

Eighth Year vs Fourth Year of Cycle

lection Cycle

Eighth Year vs. Fourth Year of Cycle

5%

10%

15% The S&P 500 in the eighth year (8 occurrences) of a presidential cycle has underperformed the fourth year

by 1716 bps.

-10%

-5%

0%

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov DecJan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Year 4 Year 8

Footnotes: Time period reflects 1933-2015. Eight occurrances.Source: Bloomberg Finance LP, Deutsche Bank Wealth Management.

— The U.S. Presidential election has often been an inflection point for both the S&P 500 and economic growth.

— For example, going back to 1929, nine of the 14 recessions have started in the first year of a Presidential term.

— In addition, the S&P 500 tends to underperform in the fourth quarter of an open election year.



Market Risks - Kryptonite Cauti

Equities “Stretched”

Expensive Valuations….I am Batman!

Equities Stretched

— Equity valuations (trailing P/E of the S&P 500) are trading well above their historical average.

— In fact, over the past 10 years the S&P 500 P/E (LTM) has been lower than its current level, 97% of the time.*



Footnotes: Data is as of October 3, 2016. *Current level used is 18.5x LTM as of October 3, 2016.Source: FactSet, Deutsche Bank Wealth Management.

ion

Interest Rates at Record LowsInterest Rates at Record Lows

— Fixed income yields look expensive as they hover near record lows. Since 1960, the 10 year Treasury yield has been higher than its current level 99% of the time.

— In fact, the 10 year yield recently fell below the year over year f PCE f th fi t ti i S t b 2012pace of core PCE for the first time since September 2012.

— This is a rare occurrence and has only happened in two other instances since 1960.


Footnotes: Data as of October 3, 2016.Source: FactSet, Deutsche Bank Wealth Management.


Global Fixed Income5

Lower U S Supply

Time to Put on the Cape…and Use Intel

Lower U.S. Supply

$1,500,000

$2,000,000 estimate

$-

$500,000

$1,000,000

in m

illio

ns

$(500,000)

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

U.S. Treasury Net Issuance

— Due to sequestration and better tax revenue, the U.S. budget deficit should continue to shrink in 2016 and 2017.

— This should reduce the amount of Treasury issuance in 2016 to the lowest level (~$325 billion) since 2007 and down to $225 billion in 2017.



Footnotes: Data as of Septembe 30, 2016. Estimate as of October 2016.Source: Bloomberg Finance LP, Deutsche Bank Global Markets, Deutsche Bank Wealth Management.

At a Time When Yield is Needed

lect!

At a Time When Yield is Needed

Switz. Japan Germ. France Swed. Italy Spain U.S. Port. UK

3 Mo -0.96% -0.40% -0.80% -0.68% -0.75% -0.39% -0.58% 0.33% -0.04% 0.32%

2 YR -0.95% -0.28% -0.68% -0.63% -0.67% -0.10% -0.23% 0.82% 0.42% 0.12%

3 YR -0.97% -0.27% -0.69% -0.60% -0.51% 0.03% -0.13% 0.94% 1.01% 0.12%

5 YR -0.85% -0.23% -0.55% -0.41% -0.35% 0.31% 0.10% 1.23% 1.95% 0.23%

7 YR 0 75% 0 22% 0 44% 0 23% 0 20% 0 69% 0 33% 1 51% 2 52% 0 44%7 YR -0.75% -0.22% -0.44% -0.23% -0.20% 0.69% 0.33% 1.51% 2.52% 0.44%

10 YR -0.54% -0.07% -0.05% 0.27% 0.21% 1.31% 0.98% 1.68% 3.39% 0.78%

30 YR -0.02% 0.46% 0.53% 1.05% 0.42% 2.37% 2.10% 2.41% 4.32% 1.51%

— This lower issuance is coinciding with the ECB’s aggressive monetary policy which makes the need for yield even greater.


Footnotes: Data as of October 4, 2016.Source: Bloomberg Finance LP, Deutsche Bank Wealth Management.


Global Fixed Income

ECB Absorbs Europe Supply

Holy Supply/Demand Imbalance, Batma

ECB Absorbs Europe Supply

The ECB will purchase ~293% of

Country Cap Key (%) Implied Buying (billion EUR)

Net Issuance (billion EUR)

Germany 25.6 309.6 -19.3

France 20.1 262.6 89.0

Italy 17.5 250.5 220.6

Spain 12.6 177.6 104.1 293% of the expected net issuance through its

asset purchase program.

Netherlands 5.7 69.8 5.5

Belgium 3.5 50.4 4.3

Austria 2.8 40.3 0.8

Portugal 2.5 36.0 13.8

Finland 1.8 25.1 13.5Ireland 1.6 23.0 18.8

Slovakia 1.1 15.8 0.9

Slovenia 0.5 7.1 3.1


Amount of Negative Yielding Debt

Slovenia 0.5 7.1 3.1

Others 4.7 67.7

Total 100 1335.5 455.1

$16.1 T< 0%26.1%

$16.5 T> 2%25 5%

Breaking Down Sovereign Debt Interest Rate Ranges

Total Global SovereignDebt:$63T as of October 4, 2016

g g

Almost 30% of the total Global sovereign debt is yielding less than zero.

26.1%

$17.6 T0% to 1%

27.9%

$9.3 t1% to 2%

14.8%

25.5%




Strong Participation in Auctions

n!

50

60

70

80

ge

term

s

Strong Participation in AuctionsIndirect bidders (foreign central banks) of 10 YR U.S. Treasuries

remains well above average at auction.

20

30

40

50

Jul-11 May-12 Mar-13 Jan-14 Nov-14 Sep-15 Jul-16

In p

erce

nta

g

10YR I di t Bidd P ti i ti % f Bidd A t A t d10YR Indirect Bidder Participation % of Bidder Amount Accepted

(5YR AVG) 10YR Indirect Bidder Participation % of Bidder Amount Accepted

Footnotes: Data as of September 2016.Source: Bloomberg Finance LP, Deutsche Bank Wealth Management.

Inflows into U.S. Bonds

0

200

400

600

800

Flows into U.S. bonds have increased while funds have moved out of Europe and Japan.

-800

-600

-400

-200

Dec-09 Sep-10 Jun-11 Mar-12 Dec-12 Sep-13 Jun-14 Mar-15 Dec-15

United States Euro Area Japan


Footnotes: Data as of July 2016.Source: Bloomberg Finance LP, Deutsche Bank Wealth Management.

United States Euro Area Japan


Global Fixed Income

Combing the Field for Yield

Convertibles *Convertibles

Historically, convertibles have a high correlation to equities.

Emerging Market Selective

Footnotes: Data is monthly and as of September 2016. *Check marks indicate favored sectors.Source: FactSet, Deutsche Bank Wealth Management.

Emerging markets offer attractive carry over sovereigns. However, with spreads near their historical

average, selectivity is important.



Footnotes: Data as of October 4, 2016. Source: FactSet, Deutsche Bank Wealth Management.

Investment Grade *Investment Grade

Current = 138 bps

12 month target = 115 bps

High Yield Selective


10%

15%

20%

25%High yield debt may already be

reflecting the estimated improvement in the default rate

over the next 12 months.

0%

5%

Jan-00 Oct-02 Jul-05 Apr-08 Jan-11 Oct-13 Jul-16

U.S. Speculative Grade Default RateHigh Yield Spreads (in percentage terms)


Footnotes: Data is default rate estimates per Moody‘s as of August 2016. Current spreads is as of October 3, 2016.Source: FactSet, Moody‘s, Deutsche Bank Wealth Management.


U.S. Equities6

Bull Market Trudges On

Same Bat Time, Same Bat Channel!

Bull Market Trudges On

400

450

500

550 2009 2002

1987 1982

1974 1957

1949 1942

Average Bull Market

200

250

300

350

400 Average Bull Market

100

150

200

1 2 3 4 5 6 7 8 9 10

Number of Years

— The current bull market is the strongest at this juncture (~8 years) and is the second longest bull market in history.



Footnotes: Time period reflects all bull markets from 1942 to present. Current bull market is taken from March 9, 2009 and current data as of October 3, 2016.Source: FactSet, Deutsche Bank Wealth Management.

As Volatility Picking UpAs Volatility Picking Up

35

40

45

10

15

20

25

30

5

10

Dec-90 Mar-94 May-97 Aug-00 Oct-03 Jan-07 Mar-10 May-13 Aug-16

Rolling 1 YR Average of VIX Index

(AVG) Rolling 1 YR Average of VIX Index

— As the bull market matures, the historically low environment of volatility is likely to reverse.

— In fact, the rolling one year average VIX Index has increased ~20% from its October 2014 lowincreased ~20% from its October 2014 low.




U.S. Equities

Valuations Stretched

What is the Appropriate P/E?

Valuations Stretched

— The trailing P/E (18.6x LTM) of the S&P 500 is well above average (15 6x LTM) and above our 12 month targetaverage (15.6x LTM) and above our 12 month target (17.25x LTM).

— We arrive at an estimated P/E range by using a variety of economic factors that can drive P/Es.

— What is important to note is that when using our estimated p grange, history suggests that returns are likely to be below average.




What’s the Appropriate P/E?What s the Appropriate P/E?Factor Mean P/E Median P/E

Direction From Current Level (17.8x)

Consumer Confidence 20.5x 19.1x Expansion

Earnings Volatility 17.4x 16.8x Contraction

Real Interest Rate 14 5X 15 5X ContractionReal Interest Rate 14.5X 15.5X Contraction

Earnings Growth 16.2x 16.8x Contraction

GDP 16.0x 16.2x Contraction

Govt Budget Balance 15.1x 16.4x Contraction

Demographics <15x <15x Contraction

Suggested Range 16.25x 17.25x Contraction

12.0%

14.0% Price Return 12 Months Later

Returns to be More Muted

Footnotes: Time period reflects 4Q63-1Q16. All analysis most recent as of September 2016. Source: FactSet, Deutsche Bank Wealth Management.

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

urn

12 M

onth

s La

ter Average

-4.0%

-2.0%

0.0%

Under 10 10-12 12-14 14-16 16-18 18-20 20+

Pric

e R

etu

P/E Range (LTM)

F A i 12 h f ll Ti i d fl


Footnotes: Average is average 12 months return of all years. Time period reflects January 1945 – September 2016.Source: FactSet, Deutsche Bank Wealth Management.


U.S. Equities

Earnings Trough?

With No P/E Expansion, Looking for Earn

8.7%

6.7% 6.8%

14.4%

7%

12%

th (

%)

Earnings Trough?

1.5%0.1%

-0.2%

-3.3%

5 7%

-1.4% -0.8%-3%

2%

Yea

r-ov

er-Y

ear

Gro

wt

-5.7%-8%

3Q14

4Q14

1Q15

2Q15

3Q15

4Q15

1Q16

2Q16

3Q16

4Q16

1Q17

Y

S&P 500 Earnings Growth (YoY)

— The S&P 500 is experiencing its first earnings recession (at least two consecutive quarters of negative earnings growth) since 2009 as earnings have declined on a year over year basis for four consecutive quarters (not including 3Q16).

— Given that earnings typically beat estimates by ~3-5%, it is likely that the earnings recession ended in 2Q16.y g



Footnotes: Data as of October 4, 2016.Source: FactSet, Deutsche Bank Wealth Management. .

nings to Turn Around

Fading Earnings Drags

40.0%

60.0%

80.0%

Fading Earnings Drags

-40.0%

-20.0%

0.0%

20.0%

-60.0%4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17

Crude Oil (Average YoY) Dollar Index (Average YoY)

— The deterioration in energy prices and strong rally in the gy p g ydollar have had major impacts on earnings during the recent earnings recession.

— However, these drags should begin to fade as we move through 2016 and into 2017.

Footnotes: Data is estimates as of October 2016


Footnotes: Data is estimates as of October 2016.Source: Bloomberg Finance LP, Deutsche Asset Management, Deutsche Bank Wealth Management.


U.S. Equities

Sector

Scale Green (Most Attractive)

Grey (Neutral) Red (Least Attractive)

From a fundamental pe

Cyclicals vs. Defensives — Cyclicals Cat

Technology

From a fundamental pework to increase produFrom a valuation persp(to the S&P 500) basis

Cons. DiscretionaryConsumer discretionarsolid confidence and lo

Cyclicals

HealthcareIncreased volumes andelection year politics popotential buying opport

IndustrialsGradual improvement and better valuations mspending could benefit

REITsREITs should benefit fenvironment and attrac

FinancialsFinancials may be chayield curves and negat

Stabilization in oil priceEnergy ($55/bbl). Expect M&A

momentum, oil prices m

Cons. StaplesStaples may benefit asattractive and a strong

MaterialsLess attractive valuatiocompaniescompanies.

UtilitiesUtilities should be negaattractive valuations.

TelecomTelecom should be negattractive valuations. P

Defensives



Source: Deutsche Bank Wealth Management.

Rationale Subsector in Focus

erspective capex spending should increase as companies

tch the Economic Upswing

erspective, capex spending should increase as companies uctivity. Dividend growth and buybacks have been steady. pective, valuations are attractive on an absolute and relative s.

Hardware, software, security

ry should benefit from increased job creation, wage increases, ower commodity prices.

Focus on internet (e.g. online retailers). Another way to gain

"volume exposure" is via transactions (e.g. credit cards in

t h l /fi i l t )technology/financial sectors).

d positive demographics should support healthcare but ose a modest headwind. Evaluate periods of weakness as tunities.

Biotech

in the global economy, increased transportation in the U.S. may benefit Industrials. In addition, any increase in defense t the sector.

Transportation, Machinery, Aerospace, Defense

rom a gradual increase in growth, low interest rate ctive yield.

Apartments, Hotels, Self Storage

allenged in the near term due to margin compression given flat tive interest rates.

Money centers, life insurers, asset managers.

es is underway, we expect modest upside over next 12 mosA and modest dividend cuts. However, as the dollar gains may face renewed pressure.

MLPs

s the global economy improves. However, valuations look less er dollar may weigh on prices.

ons and strength in the dollar should weigh on mining

atively impacted by a modest rise in interest rates and less

gatively impacted by modestly rising interest rates and less Pricing wars among large providers may present challenges.


Bottom Line:

• Favor Cyclicals versus Defensives


U.S. Equities

Average S&P 500 Return by Party

Which Party Does the Equity Market Fav

Average S&P 500 Return by Party

2 9%

10.5%

64.0%

66.0%

68.0%

70.0%

72.0%

6 0%

8.0%

10.0%

12.0%

2.9%

54.0%

56.0%

58.0%

60.0%

62.0%

0.0%

2.0%

4.0%

6.0%

Republican Democrat

— Historically, the equity market favors Democrats over Republicans.

Average Annual S&P 500 Return by Presidential Party (LHS)

% of Time Positive (RHS)

— However, it is important to remember that these historical differences can be explained by the sharp decline seen in the Herbert Hoover (Republican) administration which took place in the Great Depression. President Clinton (Democrat) was a beneficiary of the dotcom bubble.

— In addition, equity returns tend to be the lowest in year four of a Presidential cycle.



Footnotes: Time period reflects 1930-2015.Source: Bloomberg Finance LP, FactSet, Deutsche Bank Wealth Management.

vor?

Average Annual S&P 500 by PresidentAverage Annual S&P 500 by President

6.7% 9.5% 12.9%7.0%

0.9%5.3%

11.6% 14.8% 17.7%

1.1%7.4%

-20.0%-10.0%

0.0%10.0%20.0%30.0%

-29.2%-40.0%-30.0%

Hoo

ver

Roo

seve

lt

Tru

man

Eis

henh

ower

nned

y/Jo

hnso

n

Nix

on/F

ord

Car

ter

Rea

gan

Bus

h S

r.

Clin

ton

Bu

sh J

r.

Oba

ma

A A l S&P 500 R t b P id t

S&P 500 in Presidential Cycle

Footnotes: Data is 1930-2015. Price return only. Annual growth.Source: FactSet, Bloomberg Finance LP, Deutsche Bank Wealth Management.

Ke Average Annual S&P 500 Return by President

14 8% 90 0%16 0%

5.7%

7.3%

14.8%

5.6%30 0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

0.0%

10.0%

20.0%

30.0%

0.0%

2.0%

4.0%

6.0%

Year 1 Year 2 Year 3 Year 4

Aevrage S&P 500 Return in Presidential Term (LHS) % of Time Positive (RHS)


Footnotes: Time period reflects 1929 to 2015. Source: FactSet, Deutsche Bank Wealth Management.


U.S. Equities

“Consensus” Thinking May Be a Trick

Sectors and Presidential Party

S&P 500Consumer

DiscretionaryConsumer

StaplesEnergy Financia

Truman 8.2% -3.3% 7.6% 13.6% 8.5%

Eisenhower 11.4% -4.8% 18.6% 8.9% 8.2%

Kennedy/Johnson 7.8% -13.1% 3.9% 10.5% 6.7%

Nixon/Ford -0.7% -2.4% 8.3% -1.0% -1.6%

Carter 6.5% 7.4% -4.9% 19.5% 5.0%

Reagan 10.2% -8.5% 15.6% 6.6% 0.4%

George Bush Sr. 11.5% -22.1% 19.8% 5.7% 4.8%g

Bill Clinton 15.2% 13.2% 10.0% 11.7% 19.2%

George Bush Jr. -6.2% -5.0% 1.0% 5.9% -12.5%

Barack Obama 9 9% 17 9% 10 3% 1 3% 4 3%

F t t Ti i d fl t l ti f 1945 t 2012 R d i bli bl i d

Barack Obama 9.9% 17.9% 10.3% 1.3% 4.3%

Average Republican 5.3% -8.6% 12.7% 5.2% -0.1%

Average Democrat 9.5% 4.4% 5.4% 11.3% 8.7%



Footnotes: Time period reflects elections from 1945 to 2012. Red is republican, blue is dereturns may differ from annual returns per year on prior page (page 24).Source: FactSet, Deutsche Bank Wealth Management.

ls Healthcare Industrials Info Tech Materials Telecom Utilities

1.7% 8.8% 12.2% 11.8% -0.2% 6.6%

19.9% 13.4% 35.8% 10.0% 10.4% 10.4%

10.5% 7.3% 16.4% 2.7% 2.4% 4.5%

5.2% 0.1% -1.5% 4.5% -1.1% -4.8%

4.5% 6.7% 1.3% -2.2% -4.1% 1.0%

16.7% 7.9% 7.3% 12.6% 13.2% 10.5%

18.4% 8.6% 3.1% 4.7% 9.9% 9.4%

18.0% 15.4% 29.5% 4.2% 12.0% 6.5%

-3.8% -5.1% -12.5% 1.7% -9.6% -3.7%

13 0% 9 9% 14 3% 7 4% 5 3% 6 6%

t R t i f l ti d t th d i t th did t l i ffi

13.0% 9.9% 14.3% 7.4% 5.3% 6.6%

11.3% 5.0% 6.4% 6.7% 4.6% 4.3%

9.5% 9.6% 14.7% 4.8% 3.1% 5.0%


emocrat. Return is from election day to the day prior to the candidate leaving office so

23


U.S. Equities

The Growth vs. Value Debate

Fed Tightening CyclesFed Tightening Cycles

0.7% 0.7%

2.3%

1.2%

1.0%

1.5%

2.0%

2.5%Growth stocks tend to outperform value stocks in the three, six, nine and 12 month time frame after

the Fed starts raising rates.

-0.5%

0.7% 0.7%

-1.0%

-0.5%

0.0%

0.5%

1.0%

+1am +3am +6am +9am +12am

Footnotes: Time period reflects tightening cycles since 1976. Total return.Source: FactSet, Deutsche Bank Wealth Management.

Growth Performance vs. Value Following Fed Tightening Cycle

Earnings Favor Growth over Value

11.2% 10.4% 9.7%

0.0%

5.0%

10.0%

15.0%

gEarnings growth is more favorable for growth over value.

-0.2% -0.9% -1.6%-0.7% -1.9% -2.9%

-10.0%

-5.0%

S&P 500 Growth S&P 500 S&P 500 Value

3 Mo Change to Next 12 Mo Earnings 6 Mo Change to Next 12 Mo Earnings

LTM Earnings Growth NTM Earnings Growth Estimate



g g

Footnotes: Data as of September 30, 2016.Source: FactSet, Deutsche Bank Wealth Management

Growth vs Value and GDP7.3%

3.8%

40%50%60%70%80%90%

0%2%4%6%8%

10%

th O

utpe

rfor

ms

alue

ance

vs.

Val

ue

man

ce

Growth vs. Value and GDPGiven our outlook for growth between

1.5-2.5%, history suggests growth stocks outperform value by, on

average, 3.8%.

-6.1%

-2.4%

0%10%20%30%40%

-8%-6%-4%-2%0%

1.5% or Less 1.5-2.5% 2.5%-3.5% 3.5% or More % T

ime

Gro

wt

Va

Gro

wth

Per

form

aP

erfo

rm

Annual GDP

(AVG) S&P 500 Growth Performance vs S&P 500 Value (Total Return) (LHS)% Time Growth Outperforms Value (RHS)

Footnotes: Time period reflects 1976-2015.Source: FactSet, Deutsche Bank Wealth Management.

Sector CompositionpGrowth tends to have more exposure into the sectors we

favor than value (e.g. tech and healthcare).

0 0%

10.0%

20.0%

30.0%

40.0%

0.0%In

fo T

ech

Con

s.

Dis

cret

iona

ry

Hea

lth C

are

Con

s. S

tapl

es

Indu

stria

ls

Rea

l Est

ate

Fin

anci

als

Mat

eria

ls

Ene

rgy

Tel

ecom

Util

ties

% in S&P 500 Growth % in S&P 500 Value


Footnotes: Data is as of October 4, 2016.Source: FactSet, Deutsche Bank Wealth Management.


Global Equities7

Valuations Attractive

Batman….Beware of the Trap!


— Relative to the S&P 500, the MSCI EAFE P/E is trading at or below the lower end of its long term average range.




Attractive vs BondsAttractive vs. Bonds

90%

100% 100%

80%

100%

120%

54%

20%

40%

60%

80%

0%U.S. UK EuroStoxx 50 Nikkei 225

% of Companies Paying Dividend Yield over 10YR Sovereign Yield

— Relative to bonds, most major developed Indices have a significant amount (or all) of stocks in their Indices paying a dividend yield above their comparable 10 year sovereign bond yield.


Footnotes: Data as of October 5, 2016. EuroStoxx 50 uses 10YR German Bund as comparable.Source: Bloomberg Finance LP, Deutsche Bank Wealth Management.


Global EquitiesBatman…Beware of the Trap!

Central Bank Stimulus

$4,000

$5,000

$6,000 Japan Balance Sheet (in USD)

ECB Balance Sheet (in USD)

Fed Balance Sheet

Central Bank Stimulus

$0

$1,000

$2,000

$3,000

Lackluster growth and slowing inflation has forced many central banks to increase their

balance sheets. $0Dec-06 Sep-08 Jun-10 Mar-12 Dec-13 Sep-15 Jun-17

Footnotes: Data as of September 30, 2016.Source: Bloomberg Finance LP, Deutsche Bank Wealth Management.


Japanese equities look attractive on a relative basis versus global equities.




BoJ Support to Equity MarketBoJ Support to Equity Market

2.0%

2.5%

3.0%

3.5%The BoJ has been the most active. By adding the purchase of equity ETFs, the BoJ owns ~3% of the entire market cap

of the MSCI Japan

0.0%

0.5%

1.0%

1.5%

Dec-10 Jan-12 Feb-13 Mar-14 Apr-15 May-16

Footnotes: Data is as of August 2016.Source: Bloomberg Finance LP, Deutsche Bank Wealth Management.

Beware of JPY

BoJ Holdings of ETFs as % of Total MSCI Japan Market Cap (in USD)

However, strength in the JPY (vs. USD) may threaten the earnings outlook for Japanese

equities.




Global Equities

Risks Clouding Europe

Batman…Beware of the Near Term Risk

Risks Clouding EuropeLooming Risks for Europe

Earnings Uncertainty Banking Crisis

Stubbornly Strong EURO Central Bank Credibility/Error

Italian Referendum (October) Debt Spiral

France Elections (Apr/May 2017) "Brexit" Fallout

German Elections (Aug/Oct 2017) Terrorism

Immigration Crisis Global Slowdown

Italian Fears Heating Up

Footnotes: Data as of October 2016.Source: FactSet, Deutsche Bank Wealth Management.

Immigration Crisis Global Slowdown

200 The Italian referend m is the most important political

120

140

160

180

200

in b

ps

The Italian referendum is the most important political event before year end and we have seen the markets

reflect the uncertainty in the credit default swap market.

80

100

120

Sep-15 Oct-15 Dec-15 Jan-16 Mar-16 Apr-16 Jun-16 Jul-16 Sep-16

Italy 5YR CDS




Financials and Flat Yield Curves

ks

Financials and Flat Yield Curves

1.75%

2.25%

2.75%

100

105

110

115

0.75%

1.25%

80

85

90

95

MSCI Europe Financials Earnings Estimates Next 12 Mos (RHS)

Average Yield Curve (10-2YR, Germany, Italy, Spain, France) (LHS)

Negative interest rates and a flat yield curve is damaging the

banking sector.


Valuation Discount May LingerWhile al ations ers s the U S are attracti eWhile valuations versus the U.S. are attractive, European equities may continue to trade at a discount to U.S. equities due to overwhelming

near term risks.


Footnotes: Estimates as of October 4, 2016.Source: FactSet, Deutsche Bank Wealth Management.


Global Equities

Growth Premium No More

Robin, the Boy Wonder, Continues to Str

80

100120

140160

3.0%

4.0%

5.0%

6.0%

7.0%

Growth Premium No More

-20

020

4060

-1.0%

0.0%

1.0%

2.0%

3.0%

4Q03

1Q05

2Q06

3Q07

4Q08

1Q10

2Q11

3Q12

4Q13

1Q15

Average EM Growth Premium (LHS)

(AVG) Average EM Growth Premium (LHS)

MSCI EM (local) - S&P 500 Index (RHS)

— EM growth surpassed DM growth from 4Q03 – 1Q15, however, i th th th diff ti l h b ti fsince then, the average growth differential has been negative for

four consecutive quarters.

— In fact, according to the IMF, the 2016 growth difference should be the smallest level (2.1%) since 2000.

— Lastly given our expectation for the dollar to regain momentumLastly, given our expectation for the dollar to regain momentum,the negative correlation between the dollar and emerging markets may put pressure on prices.

Footnotes: Data as of 1Q16. Growth premium is year over year real GDP. Developed



market is equally weighted (U.S., UK, Europe and Japan). EM countries are equally weighted (Brazil, Russia, India, China, Korea, Taiwan, South Africa). Source: Bloomberg LP, FactSet, Deutsche Bank Wealth Management. .

Premium to Remain Narrow

ruggle

4

6

8

term

s

Growth Differential 2011 Forecast2012 Forecast 2013 Forecast2014 Forecast 2015 Forecast2016 forecast

Premium to Remain Narrow

0

2

4

in p

erce

ntag

e

-21980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013 2016 2019

Footnotes: Projections as of April 2016 IMF World Economic Outlook Report.Source: FactSet, Deutsche Bank Wealth Management.

Cautious on Emerging Marketsr


Footnotes: Data is weekly and as of September 30, 2016.Source: FactSet, Deutsche Bank Wealth Management.


Global Equities

Asia and Latam Fair Valued

Remember Robin, Always Look Both Wa

Asia and Latam Fair Valued

— EM valuations for Asia relative to Latam are fair valued.




Earnings Uncertainty

ays

Earnings Uncertainty

90

100

110

60

70

80

D it th t bili ti i dit i i

50Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16

EM Latin America Asia ex Japan

— Despite the stabilization in commodity prices, since September 2014, earnings have been revised down by 34% in Latin America, 24% in the MSCI EM Index and 17% in Asia ex Japan.




Is There Room for the Do8

Pullbacks are Expected

Solving the Riddler’s Dollar Dilemma

Pullbacks are ExpectedPeak Date Trough Date Peak Trough Pull Back Total Days

6/5/1979 7/24/1979 97.43 93.59 -3.94% 49

11/13/1979 1/7/1980 98.37 94.30 -4.14% 55

4/7/1980 7/10/1980 102.98 92.25 -10.42% 94

8/4/1981 11/30/1981 114.00 103.64 -9.09% 118

4/8/1982 5/7/1982 114.94 110.26 -4.08% 29

7/7/1982 7/23/1982 120.33 116.01 -3.59% 16

8/12/1982 8/24/1982 120.27 116.23 -3.36% 12

11/8/1982 1/10/1983 123.36 113.80 -7.75% 63

8/11/1983 10/7/1983 124.88 120.19 -3.76% 57

1/11/1984 3/6/1984 126.06 119.90 -4.89% 55

11

10/16/1984 11/7/1984 136.77 131.61 -3.77% 22

Average for First Strengthening Cycle -5.34% 51.85/23/1995 5/26/1995 82.36 79.89 -3.00% 3

9/19/1995 9/22/1995 86.38 83.75 -3.04% 3

4/28/1997 5/21/1997 95.27 91.34 -4.12% 23

8/25/1998 1/11/1999 103.28 93.79 -9.19% 139

7/12/1999 10/15/1999 100 63 94 37 6 22% 958 7/12/1999 10/15/1999 100.63 94.37 -6.22% 95

5/17/2000 6/19/2000 103.69 99.23 -4.30% 33

11/24/2000 1/3/2001 108.19 102.52 -5.24% 40

7/5/2001 9/19/2001 110.88 105.86 -4.52% 76

Average for Second Strengthening Cycle -4.96% 51.510/4/2011 10/27/2011 73.75 69.69 -5.51% 23

1/13/2012 2/9/2012 74 26 71 92 3 16% 27

8

1/13/2012 2/9/2012 74.26 71.92 -3.16% 27

7/12/2012 9/14/2012 75.77 71.81 -5.23% 64

5/22/2013 6/14/2013 78.09 75.11 -3.82% 23

7/9/2013 10/22/2013 78.66 74.55 -5.23% 105

3/13/2015 5/13/2015 93.37 87.60 -6.18% 61

1/19/2016 5/2/2016 95.80 87.71 -8.49% 103

Average for Current Cycle -5.37% 58.0

7



Footnotes: Data as of July 15, 2016. Source: FactSet, Deutsche Bank Wealth Management.

g y

ollar to Run?

Pullbacks in Indexed CyclesPullbacks in Indexed Cycles

130140150160170180 Denotes 3-5% pullback

Denotes >5% pullback

100110120

1 49 97 145

193

241

289

337

385

433

481

529

577

625

673

721

769

817

865

913

961

1009

1057

1105

1153

1201

1249

1297

1345

1393

1441

1489

1537

1585

1633

1681

1978-1985

135140145

100105110115120125130

1 49 97 45 93 41 89 37 85 33 81 29 77 25 73 21 69 17 65 13 61 09 57 05 53 01 49 97 45 93 41 89 37 85 33 81

120125130135140

145

4 9 14 19 24 28 33 38 43 48 52 57 62 67 72 76 81 86 91 96 100

105

110

115

120

124

129

134

139

144

148

153

158

163

168

1995-2002

Building a base

100105110

115120

1 49 97 145

193

241

289

337

385

433

481

529

577

625

673

721

769

817

865

913

961

1009

1057

1105

1153

1201

1249

1297

1345

1393

1441

1489

1537

1585

1633

1681

2011-Present


2011-Present

30

Footnotes: Data as of September 30, 2016. Source: FactSet, Deutsche Bank Wealth Management.


Is There Room for the Dollar

Current Run in Dollar On Par

Historically the Dollar is in Line, but Tech

Current Run in Dollar On Par

140

150

160

170+67%

+43%

100

110

120

130

1 226 451 676 901 1126 1351 1576

+32%

No Friends Left

Footnotes: Data as of September 30, 2016.Source: FactSet, Deutsche Bank Wealth Management.

Nov 76 Nov 82 Aug 86 Sep 92 Nov 98 Jun 03

1 226 451 676 901 1126 1351 1576

1978-1985 1995-2002 2011 - Present

Nov 76 May 81

Nov 82 Aug 84

Aug 86 May 89

Sep 92 Feb 95

Nov 98 May 00

Jun 03 Jun 06

2016

JPN Yes No Yes No No Yes Easing

EU Yes Yes Yes No Yes Yes Easing

CAN Yes Yes Yes Yes Yes Yes No

GBR Yes Yes Yes Yes No Yes Easing

CHE Y N Y N Y Y NCHE Yes No Yes No Yes Yes No

AUD Yes Yes Yes Yes Yes Yes No

NZL N/A N/A N/A Yes Yes Yes Easing

SWE Yes Yes Yes Yes Yes Yes No

NOR Yes Yes Yes No Yes Yes Easing

Total 8 6 8 5 7 9 0



Footnotes: Data as of October 3, 2016.Source: Deutsche Bank Global Markets, Deutsche Bank Wealth Management.

Total 8 6 8 5 7 9 0

to Run?

Rate Differentials Favor Dollar

hnicals Pose a Risk

Rate Differentials Favor Dollar


Key Technicals Remain Intact


Footnotes: Data as of October 3, 2016Source: FactSet, Deutsche Bank Wealth Management.


Commodities – Finding a B9

The “Dark Knight” Commodity Rises

Crude Oil Bucking Seasonal TrendCrude Oil Bucking Seasonal Trend

10%

20%

30%

40%

50%

10%

15%

20%

-40%

-30%

-20%

-10%

0%

-10%

-5%

0%

5%


— Crude oil was resilient in 3Q16, bucking a seasonal trend of declining in the second half of the year in recent years.


Cumulative Performance During the Year

10 year Average (LHS) 2016 (RHS) 2015 (LHS)

g y y

— The resiliency was largely in part due to an announced production cut by OPEC and strength in U.S. gasoline consumption.

— As U.S. production has come offline, global demand is t d t d l thi t f th fi t ti iexpected to exceed supply this quarter for the first time since

4Q13 in 2017.

— Going forward as the supply/demand imbalance narrows in 2017, we expect crude oil to move modestly higher to $55/barrel over the next 12 months.



Footnotes: Data as of September 30, 2016.Source: FactSet, Deutsche Bank Wealth Management. .

Balance

U S Production StabilizingU.S. Production Stabilizing

-12% decline

3 0

Supply/Demand Imbalance Waning

Footnotes: Data as of September 23, 2016.Source: FactSet, Deutsche Bank Wealth Management.

0 50.00.51.01.52.02.53.0

Bar

rels

/day

EIA estimatesOversupply

-2.0-1.5-1.0-0.5

1Q08

3Q08

1Q09

3Q09

1Q10

3Q10

1Q11

3Q11

1Q12

3Q12

1Q13

3Q13

1Q14

3Q14

1Q15

3Q15

1Q16

3Q16

1Q17

3Q17

Mill

ion

B

EIA Global Supply/Demand Imbalance

Undersupply


pp y

32



Commodities – Finding a Balan

Rig Count Turnaround

The “Dark Knight” Commodity Rises

50%

-40%

-30%

-20%

-10%

0%1 6 11 16 21 26 31 36 41 46 51 56 61 66 71 76 81 86 91 96 101

Rig Count Turnaround

-90%

-80%

-70%

-60%

-50%

Reduction in Baker Hughes Oil Rigs

12/14/1990 8/8/1997 11/7/2008 10/10/2014

— Following the largest reduction in rig counts on record (-78%), rig counts have now risen for 14 consecutive weeksweeks.

— While oil prices have declined, so have costs for U.S. oil producers as oil extraction costs have fallen 20% YoY.

— As production slowly comes offline and demand (particularly U.S. gasoline demand) remains near record (p y g )highs, we expect crude oil prices to gradually rise to $55 over the next 12 months.



Footnotes: Data as of September 30, 2016.Source: FactSet, Deutsche Bank Wealth Management. .

nce

Oil Production Costs FallingOil Production Costs Falling

$100

$120

$140

$160

20%

40%

60%

80%

100%

$20

$40

$60

$80

-80%

-60%

-40%

-20%

0%

Jan-06 May-07 Sep-08 Jan-10 May-11 Sep-12 Jan-14 May-15

Summer Driving Season Ending

Footnotes: Data as of August 2016.Source: St. Louis Federal Reserve, Deutsche Bank Wealth Management.

300

YoY Decline in PPI Oil Extraction Costs (LHS) WTI Crude Price (RHS)

250

260

270

280

290

300

of M

iles

210

220

230

240


Bill

ions

o

Min 10 Yr Range 2015 2016 (YTD) 10 Year Average


Footnotes: Data as of July 2016.Source: Department of Transportation, Deutsche Bank Wealth Management.


Commodities – Finding a Balan

Gold Speculative Demand Rising

Not a “Golden” Opportunity

Gold Speculative Demand Rising

1600

1800

2000

70

75

80

85

90

800

1000

1200

1400

45

50

55

60

65

70

— On increased volatility following the Brexit vote, speculative demand for Gold ETFs rose to the highest level since July 2013 Fund flows have been a key driver

Feb-09 Jan-10 Dec-10 Nov-11 Oct-12 Sep-13 Aug-14 Jul-15 Jun-16

Gold ETF Holdings (LHS, in millions) Gold Price (RHS, $/oz)

level since July 2013. Fund flows have been a key driver to gold’s performance.

— Falling real interest rates have also boosted demand for gold. As we expect a limited rise in rates over the next 12 months, gold should remain range bound.

— However, as the Dollar continues to strengthen, gold could come under pressure due to its negative 20 year correlation (-.45) to the dollar.



Footnotes: Data as of September 30, 2016.Source: Bloomberg Finance LP, Deutsche Bank Wealth Management. .

nce

Real Interest Rates Driving DemandReal Interest Rates Driving Demand-3%

-2%

-1%1,600

1,700

1,800

1,900

2,000

'11 '12 '13 '14 '15 '16

0%

1%

2%

3% 1,000

1,100

1,200

1,300

1,400

1,500

Gold Price (Right)

0 4

Dollar Poses a Challenge


Gold - Price (Right)U.S. 10 Year Treasury Yield (inverted) (Left)

-0.4

-0.2

0

0.2

0.4

-0.8

-0.6

Softs Energy Grains Precious Metals

Bloomberg Commodity

Index

Industrial Metals

20 Year Correlation to the Dollar


Footnotes: Data as of October 3, 2016. Data is daily 20 year correlation.Source: FactSet, Deutsche Bank Wealth Management.


Come Together: Collide or 10

"The World has Been so Caught up With What He Can Do

EconomyCentral Bank

P liU.S. Dollar St th

ValuatiEconomyPolicy Strength

Valuati

U.S. Equities + / / -

International Equities / + / /

Treasuries - / / -

+ + / /Credit + + / /

Commodities / / - /

Dollar + + / +



Footnotes: Data is as of October 4, 2016. *Batman versus Superman movie.Source: Deutsche Bank Wealth Management.

Collaborate

o, that No-one Has Asked What He Should Do.“*

ons Summary Rationaleons Summary Rationale

/Favor Large Cap, Select Cyclicals over Defensives,

Dividend growth stocks; Favorite sectors = Tech, Consumer Discretionary, Healthcare and Industrials

/ No clear delineation between DM and EM. Favor U.S. and Japan over Europe. Favor Asia over Latam.

- Neutral Duration

+ Favor Credit over Treasuries (Investment Grade; Select+ Favor Credit over Treasuries (Investment Grade; Select High Yield and Hard Currency EM Debt)

- Avoid Raw Commodities. Recommend Income Producing Real Assets (MLPs).

+ Dollar over Select Developed Currencies (e.g. EUR and GBP). Hedge select International Exposure.



Multi Asset Investment CommitOctober 2016GDP Growth 2016 2017in % Currencies CurrentWorld 3.3% 3.4%USA 1 8% 1 9% EUR USD 1 12USA 1.8% 1.9% EUR vs. USD 1.12Euroland 1.5% 1.2% USD vs. JPY 102.85UK 1.8% 0.8% EUR vs CHF 1.09Japan 0.5% 0.7% GBP vs USD 1.28China 6.3% 6.0% USD vs CNY* 6.67

Inflation 2016 2017Commodities Current

in %USA (core PCE) 1.6% 1.8% Oil (WTI) in USD 49USA (core PCE) 1.6% 1.8% Oil (WTI) in USD 49

Euroland 0.2% 1.5% Gold in USD 1270UK 0.7% 2.4%

Japan -0.2% 0.2% Equities Current

China 2.0% 1.5%

USA (S&P 500) 2150

Curr Acct Balance 2016 2017Euroland (Euro Stoxx 50) 3030

in % of GDP Germany (DAX) 10620

USA -2.7% -2.9% UK (FTSE 100) 7074

Euroland 2.9% 2.7% MSCI Japan (JPY) 804UK -5.5% -4.5% Asia ex Japan (MSCI in USD) 558

Japan 2.8% 2.5% Latin America (MSCI in USD) 2421China 2.5% 2.5%

Sovereign Rates CurrentFiscal Balance 2016 2017in % of GDP USA 1 69%in % of GDP USA 1.69%

USA -2.8% -3.0% Euroland (German Bund) -0.05%

Euroland -1.9% -1.9% UK 0.68%UK -3.5% -4.0% Japan -0.08%

Japan -6.0% -5.2%China -2.4% -2.5%

CreditCurrentCoupon

Key Interest Rates Current1 12 Mo Forecast Barclays U.S. High Yield 6.54%

Footnotes: Macro estimates are according to Deutsche Asset Management and are as of t d f l t t l th 3 P/E d EPS f t di t D t h A t M

Key Interest Rates Current(Sept 2017) JPM GBI- EM Global Diversified (Local)

USA (Fed funds) 0.25%-0.50% 0.75-1.00% JPM EMBIG (EM Broad Index) (Hard Currenc

Euroland (Refi rate) 0.00% 0.00%UK (Repo rate) 0.25% 0.10%

Japan (O/N call rate) 0.00% 0.00%



stands for last twelve months. 3 P/E and EPS forecasts are according to Deutsche Asset Myield move. 5 High yield spread is high yield versus five year Treasury. 6 Next 3% move inSource: FactSet, Deutsche Asset Management, Deutsche Bank Wealth Management.

ttee Forecasts

1 12 Month Forecast (Sept 2017)

12 Month Return (Sept 2017)

1 08 3 2%1.08 -3.2%100.00 -2.8%

1.10 0.5%1.25 -2.0%6.90 3.4%



55 13.0%55 13.0%

1375 8.3%

1Dividend

YieldP/E (LTM)2 NTM P/E

Forecast3NTM EPS Forecast3

12 Month Forecast (Sept 2017)


2.1% 18.56 17.25 127 2190 3.9%

3.6% 14.04 13.50 224 3050 4.2%2.7% 13.65 13.00 821 10700 0.8%

3.6% 18.00 14.75 434 6400 -6.0%

2.3% 15.02 14.75 56 820 4.2%2.5% 14.50 13.75 41 560 2.8%

2.9% 17.29 13.50 180 2400 2.0%



1 80% 0 8%1.80% 0.8%

0.25% -2.7%

1.30% -4.3%-0.10% -0.3%

t n1 Yield

Current Spread5

12-Month (Price Return Estimate)

12 Month Return

6.10% 468 -1.7% 4.8%

September 2016. U.S. GDP is 4Q over 4Q. 1 Current as of October 4, 2016. 2 LTM M t d D t h B k W lth M t 4 Di ti i i b d i

6.18%

cy) 329


Management and Deutsche Bank Wealth Management. 4 Direction in sovereign bonds is n credit is return move.

36


Important Information

Investment Strategy GroupLarry Adam, CFA®, CIMA®CIO & Chief Investment StrategistTelephone (410) 895-4135

Megan HornemanInvestment StrategTelephone (410) 8Important Information Telephone (410) 895 4135

Facsimile (410) [email protected]

Telephone (410) 8Facsimile (410) 89megan.horneman@

This document has been prepared for informational purposes only and is not an offinto any transaction relating to the products and services described herein. Before have made an independent assessment of the appropriateness of the transaction inp pp pand level of risk tolerance, and you should consult your legal and tax advisers to deprovide accounting, tax or legal advice. Investing in financial markets involves a sudescribed herein will be achieved. Investment losses may occur, and investors couprepared and is based on information from sources believed to be reliable, no repreamend the information provided herein, and information is subject to change withouits future performance. The price or value of investments to which this commentaryany products and services mentioned are not guaranteed by the FDIC (or by any gany products and services mentioned are not guaranteed by the FDIC (or by any g

This document contains “forward-looking statements”- that is, statements related toexpected future business and financial performance, and often contain words suchstatements by their nature address matters that are, to different degrees, uncertainthe behavior of financial markets, including fluctuations in interest and exchange raand further deterioration of the capital markets; the commercial and consumer credstrategic actions, including acquisitions and dispositions; future integration of acqui

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Bonds are subject to interest rate risk. When interest rates rise, bond prices fall; gealso be subject to call risk, which is the risk that the issuer will redeem the debt at idebt instruments may fluctuate, and proceeds from sales prior to maturity may be m

“

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ngist895-4148

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[email protected]

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ve to be politically or economically unstable. Furthermore, in the case of investments in affect the value of the investments and any restrictions imposed to prevent capital flight


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Investment Strategy Group

Larry Adam, CFA®, CIMA®CIO & Chief Investment Strategist

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Important InformationCIO & Chief Investment StrategistTelephone (410) 895-4135Facsimile (410) [email protected]

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333 Bush Street 104 Date: Nove mber 4, 2016 · 2016. 10. 31. · Footnotes: Data is weekly and as of September 30, 2016. Source: FactSet, Deutsche Bank Wealth Management. Vehicle