Allianz Global Investors

New Regimes for a

Changed World

Steven R. Malin

Director – Senior Investment

Strategist

Global Economics & Strategy 115779

February 2017

For Investment Professional Use Only – Not for distribution to the public

This material contains the current opinions of the presenter, which are subject to change without notice. This material does not represent a recommendation of

any particular security, strategy or investment product. Allianz Global Investors Distributors LLC, 1633 Broadway, New York, NY 10019-7585, us.allianzgi.com.

2

John Kenneth Galbraith

“There are two kinds of forecasters: those who

don’t know, and those who don’t know they

don’t know.”

3

Our economic forecasts in a nutshell

Source: AllianzGI Economics & Strategy.

US 2016 2017

GDP 1.6% 2.3%

CPI 1.3% 2.6%

EMU 2016 2017

GDP 1.7% 1.7%

CPI 0.2% 1.6%

JPN 2016 2017

GDP 1.0% 1.3%

CPI -0.1% 0.9%

CHN 2016 2017

GDP 6.7% 6.5%

CPI 2.0% 2.4%

UK 2016 2017

GDP 2.0% 1.6%

CPI 0.7% 2.6%

4

Broad-based cyclical recovery of the world economy forges

ahead at the start of the year

Note: The world macro breadth indices track the direction of 226 global, regional and country macro data (173 growth and 53 inflation indicators) on a monthly basis. The monthly change of the index is scaled from -1 to

1, with a value of 1 (-1) implying an increase (decrease) of all respective data. Source: Allianz Global Investors Global Economics & Strategy, Bloomberg, Datastream.

Ongoing improvement of global macro data flow... ...driven by industrialized and emerging countries

The world economy has continued to shrug off heightened political uncertainties in the aftermath of the US elections and remains on track of above-

potential growth in early 2017. Driven by both industrialized and emerging countries, global macro data improved again last month after already

posting the strongest quarterly momentum in almost seven years in December. The reflation trend proceeded as well, as inflation data picked up

further in the developed world. Despite this very favorable near-term cyclical backdrop, structural headwinds (low productivity, demographics) are

expected to prevail in the medium term.

-0.4

-0.2

0.0

0.2

0.4

2012 2013 2014 2015 2016 2017

ch

an

ge (

mo

m)

World macro breadth index (growth)

-6

-4

-2

0

2

4

-2

-1

0

1

2

3

2010 2011 2012 2013 2014 2015 2016 2017

index

Developed economies macro breadth index (growth)

Emerging economies macro breadth index (growth, rs)

5

John Kenneth Galbraith

“All successful revolutions are the kicking in of

a rotten door.”

6

Is the US on the brink of recession? Most indicators are

flashing “no”

Source: AllianzGI Economics & Strategy, FactSet as of 2/6/17. Forecasts, estimates and certain other information contained herein are based upon proprietary research. Forecasts and estimates have certain inherent

limitations, and are not intended to be relied upon as advice or interpreted as a recommendation

Recession Odds

Leading Indicators

Industrial Prod-uction

Mfg SectorServices Sector

Business Invent-ories

Mfg & Trade Sales

Comm-ercial Real

Estate

Residen-tial

Housing

Consumer Spending

Auto SalesPersonal Incomes

Hiring Conditions

Employ-ment Cycle

Corporate Earnings

Equity Returns

Yield CurveHigh Yield Spreads

Interbank Risk

Credit Conditions

Leverage Conditions

Jan-17 #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A

Dec-16 #N/A #N/A

Nov-16Oct-163Q162Q161Q16

2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001 #N/A

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The US economic backdrop remains relatively robust, with continued broad-based growth over the last few months. Only a few key

indicators are flashing warning signs and, of those, industrial production and auto sales have recently flipped from red to yellow. While

the current expansion is the third-longest in US history, it is notable that recoveries don’t usually die of old age, and the next recession

does not yet appear imminent.

7

US Q4 GDP growth slowing due to negative net-exports –

inventories with a positive contribution – favorable outlook

on Q1

Source: Bloomberg

US: Contribution to growth

US GDP showed a slow down in Q4. The driving factor was the negative contribution from net-exports which had

supported GDP before. In Q1, a re-acceleration in growth is the most likely outcome.

8

US: Slowing consumption but higher investment dynamism

Source: Bloomberg, Datastream

Private consumption with lower momentum … …. but signs of higher investment dynamism

While consumption is loosing momentum there are some signs that core investment is gaining traction.

9

John Kenneth Galbraith

“All of the great leaders have had one

characteristic in common: it was the willingness

to confront unequivocably the major anxiety of

their people in their time. This, and not much

else, is the essence of leadership.”

10

Europe is not running short of political risks as 2017 “election

super cycle” is looming

Source: AllianzGI Global Economics & Strategy, AllianzGI Global Capital Markets & Thematic Research. As of February 6, 2017.

EMU member state

EU, non-EMU member state

EU member state with an opt-out

Eurozone

Refugee crisis. Terror fears. Growing anti-

establishment and centrifugal political forces.

Portugal

How stable is the minority government?

Repeated budget clash with Brussels likely

due to lacking budget discipline

Spain

New minority government tolerated by socialists

might prove unstable. Repeated budget clash with

Brussels likely due to lacking budget discipline.

Catalonia‘s independence aspirations

France

Reform fatigue. Slowdown of fiscal

consolidation. Rise of Front National.

Presidential elections (23 Apr / 7 May) and

parliamentary elections (11 / 18 June 2017)

UK

Paralyzing political uncertainty after Brexit

“leap in the dark”. Will Supreme Court judgment

weaken govt.’s position on “hard” Brexit?

Another independence referendum for Scotland?

Italy

Referendum defeat, Italy to keep lame-duck

administration. Premature snap elections? New electoral

law key to political tail risk given rise of euro-sceptic M5S.

NPL / Bad bank problems. Fiscal consolidation fatigue.

Finland

FIXIT movement: Will the British

vote provide tailwind for a Finnish

referendum?

Greece

Fragile government despite recent

cabinet reshuffle. Huge pending

reform agenda. Negotiations on

second ESM review yet to be

finalized. Unresolved fiscal

sustainability issue despite

prospective short-term relief

measures. IMF participation in third

programme still uncertain

Germany

Political backlash against government’s refugee

policies. Rise of right-wing populist AfD.

General elections on 24 Sep 2017

Hungary/Poland

Nationalist / Anti-EU governments

Continued conflict over Ukraine

Netherlands

General elections (15 Mar 2017).

Islam critic PVV as strongest force

in parliament?

11

Political unrest finally gets noticed

Western power no longer translates into Western

influence

Institutional and cultural frameworks have

become dysfunctional

The nature of conflict has changed

Western political uncertainty has increased

dramatically for reasons that go well beyond

globalization and technological change

12

Skepticism about political institutions has been on the rise not

only, but particularly in France, where just one quarter trusts

the EU

1) The Standard Eurobarometer was established in 1974. Each survey consists of approximately 1000 face-to-face interviews per country. Reports are published twice yearly. Latest data as of December 2016 (Autumn

Survey). Sources: European Commission, GESIS – Leibniz Institute for the Social Sciences, AllianzGI Global Capital Markets & Thematic Research.

Eurobarometer 1: “How much trust do you have in the European

Union?”, % of “tend to trust it”

Eurobarometer: “Tend to trust” vs. “tend not to trust” for

selected countries, autumn 2016 (%), change since 2006 (ppts)

EU average

France26%

36%

Skepticism about political institutions has been on the rise since the financial and European debt crisis. In France, according to the

latest Eurobarometer survey published in December 2016, the positive image of the EU has lost ground by 14 %-points since the end of

2006. Only 26 % of the French vs. 36 % of Europeans trust the EU while 65 % (54 %) “tend not to trust” Brussels. Additionally, the

proportion of the French who trust their national parliament (19 % vs. 32 %) and government (17 % vs. 31 %) is exceptionally low.

13

Quo vadis, Europe, given increasing centrifugal forces?

1) as suggested in “The Five Presidents’ Report: Completing Europe’s Economic and Monetary Union”, see https://ec.europa.eu/priorities/sites/beta-political/files/5-presidents-report_en.pdf, which lays down a roadmap

to deepen the Economic and Monetary Union in two stages as of July 2015 (“deepening by doing”) and complete it by 2025 (“completing EMU”) at the latest. Sources: German Council of Economic Experts, EU, Allianz

Global Investors GmbH.

At the 25th anniversary of Maastricht, Europe finds itself

at political crossroads: four major scenarios are

imaginable

Strengthening subsidiarity is key to regain support for

the integration process

More integration desirable / feasible:

• Defense, asylum policy, internal security

• Single market / capital markets union

• Climate policy

An “ever closer union”1, i.e.

more integration, combined with

greater democratic

accountability and legitimacy

A “muddling

through”, with

the status quo

continuing

A “coalition of the

willing”, resulting in a

core and/or multi-

speed Europe

A fall-back to

nationalism and a

further disintegration

of the EU and

subsequently the

Eurozone

National responsibilities:

Fiscal

policy+

Social

policy

Labour

market

policy

+

Reinvigorate principle of subsidiarity

14

Michael Moore

“People are upset. They’re angry at the system

and they see President Trump – not so much

that they agree with him – but they see him as a

human Molotov cocktail that they can toss into

the system with Brexit and blow it up, send a

message.”

15

Portions of President Trump’s “Contract with the

American Voter”

Seven actions to protect American workers

Renegotiate and withdraw from NAFTA

Withdrawal from TPP

Label China “a currency manipulator” and bring cases

at WTO

Identify and end abuses by foreign trading partners

Allow road-blocked energy infrastructure projects

Lift restrictions on production of energy reserves

Redirect funding for climate change programs to US

infrastructure projects

Middle class tax relief and simplification

35% tax cut for family with two children

Reducing number of marginal tax brackets from 7 to 3

Simplification of the Internal Revenue Code

Business tax rate lowered from 35% to 15%

Repatriation of overseas corporate profits at a 10% tax rate

16

President Trump

“The final key to the way I promote is bravado. I

play to people’s fantasies. People may not

always think big themselves, but they still can

get very excited by those who do. That’s why a

little hyperbole never hurts.”

17

Middle-class wealth is not growing

0

20

40

60

80

100

120

1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012

Perc

ent of to

tal household

wealth

Income group

and quintile Current

President

Trump’s

proposal Tax cut

in dollars Percentage decline

Below 24,800

(0-20%) 540 430 110

24,800-48,400

(20-40%) 2,040 2,640 400

48,400-83,300

(40-60%) 8,920 7,910 1,010

83,300-143,100

(60-80) 19,360 17,330 2,030

143,100-699,000

(80-99%) 54,370 47,540 6,830

699,000 and above

(top 1%) 797,410 582,720 214,690

As of December 31, 2012.

Sources: Saez and Zucman, 2016; Allianz Global Investors.

Sources: Tax Policy Center; Allianz Global Investors. As of December 2, 2016. Each income

quintile comprises 65 million persons. Federal taxes include individual and corporate

income taxes, payroll taxes for Social Security and Medicare, the estate tax and excise

taxes.

The decline of middle class wealth in the US

Wealth share of the bottom 90% of households is declining

persistently

Federal taxes under President Trump's plan

Average federal taxes decline most in the lowest and upper quintiles

20.4%

13.2%

11.3%

10.5%

12.6%

26.9%

Pensions

Business assets

Equities and fixed claims net

of non-mortgage debt

Housing net of mortgages

18

US federal revenue and a long-term view of spending

Sources: US Congressional Budget Office; US Office of Management and Budget; Federal Reserve Bank of St. Louis FRED; Allianz Global Investors.

Individual income tax revenues are projected to soar

US federal revenues, by source

Mandatory spending comprises ever-growing share of the budget

Long-term view of spending and revenues (percent of GDP)

9.6

5.8

1.6

1.3

0

2

4

6

8

10

12

1966 1971 1976 1981 1986 1991 1996 2001 2006 2011 2016 2021 2026

Perc

ent of G

DP

Actual Projected

Individual

Income Taxes

Payroll Taxes

Corporate

Income Taxes

Other Revenue

Sources

2.6

4.4

4.9

5.9

0.1

2.5

5.6

6.6

1.8

2.9

2.8

2.5

7.5

5.2

3.2

2.6

4.0

3.5

3.3

2.6

1.2

3.2

1.4

3.0

1966

1991

2016

2026

Social

Security

Major Health

Care Programs Other Defense Nondefense

Mandatory Spending Discretionary Spending Net Interest

17.2

21.7

21.2

23.1

16.7

17.3

18.3

18.2

-0.5

-4.4

-2.9

-4.9

1966

1991

2016

2026

Total Outlays Total Revenues Deficit

19 Sources: US Congressional Budget Office; Allianz Global Investors.

There are many possible paths for a tax bill to become law. This flowchart illustrates a common path.

How a tax bill becomes a law

Tax bill introduced and considered

by House Ways & Means Committee

Sent to House for vote

Bill not passed Bill passed

Sent to Senate and referred to Senate Finance

Committee; SFC alters House version of bill

SFC version of bill sent to Senate floor for vote

Bill not passed Bill passed

Bill goes to Joint Conference Committee (House &

Senate version combined into compromise legislation)

Bill goes to House & Senate for vote

Bill passed, sent to President

President vetoes bill President signs bill into law

Bill goes back to Congress where Congress must pass

bill with two-thirds majority to overrule President’s veto

20

John D. Rockefeller

“Capital and labor are both wild forces which

require intelligent legislation to hold them in

restriction.”

21

0

20

40

60

80

100

120

140

160

180

200

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

2009

2011

2013

2015

Num

ber

of C

ode o

f F

edera

l R

egula

tio

ns p

ages (

thousands)

Regulations have expanded over the long-run,

but less so recently

Sources: George Washington University; Allianz Global Investors.

Code of federal regulations

From 1975 to 2015

Federal register pages published

From 1936 to 2015

0

10

20

30

40

50

60

70

80

90

100

1936

1939

1942

1945

1948

1951

1954

1957

1960

1963

1966

1969

1972

1975

1978

1981

1984

1987

1990

1993

1996

1999

2002

2005

2008

2011

2014

Num

ber

of F

edera

l R

egis

ter

pages (

thousands)

22

Paul Volcker

“A nation’s exchange rate is the single most

important price in the economy, it will influence

the entire range of individual prices, imports

and exports, and even the level of economic

activity. So it is hard for any government to

ignore large swings in its exchange rate.”

23

-2

0

2

4

6

8

10

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016

Perc

ent change a

nnualiz

ed

Growth in world trade

Growth in world GDP

Average Growth

in World Trade

(1978-2007)

World trade and protectionism

Sources: OECD; Allianz Global Investors. As of December 9, 2016.

World trade volumes are exceptionally weak

even as protectionism rises

GDP volumes measured at PPP exchange rates. World trade volumes measured at market exchange rates in

US dollars. World trade average growth figure for 2014 is a four-year average to remove the rebound following

the Global financial Crisis.

95

230

315

545

680

862

952

1,091

1,198

0

200

400

600

800

1,000

1,200

1,400

2008 2009 2010 2011 2012 2013 2014 2015 2016H1

Num

ber

of tr

ade

-restr

ictive m

easure

s

Trade restrictions rising in G-20 countries

24

US exports and imports/dependency on US trade

Sources: US Census Bureau; OECD; World Bank; US Department of Commerce; Federal Reserve Bank of New York; Allianz Global Investors as of September 30, 2016.

As of September 30, 2016.

US total imports and exports

US trade volumes have grown dramatically

Dependency on US trade

Developed and emerging economies trade heavily with the US

0.0

4

0.1

1 0.2

2

0.2

2

0.3

9

0.5

8

0.7

8 0.9

1

1.2

9

1.5

1

0.0

4

0.1

0

0.2

5 0.3

4

0.5

0

0.7

5

1.2

3

1.7

0

1.9

4

2.2

7

0.00

0.50

1.00

1.50

2.00

2.50

1970 1975 1980 1985 1990 1995 2000 2005 2010 2015

Trilli

ons o

f U

S d

olla

rs

Exports

Imports Deficit SurplusCNY

JPY

DEU MXN

IREVND

KRWITLINR

MYRCAD

HKDNLD

UAEBEL

AUD

ARS BRLGBP

0.0%

0.5%

1.0%

1.5%

-7.5% -5.0% -2.5% 0.0% 2.5% 5.0% 7.5% 10.0% 12.5%

Perc

ent of U

S G

DP

Percent of local GDP

25

Vladimir Putin

“We have every reason to say, and I note this

with great satisfaction, that a truly friendly

relationship has evolved with China, and in

many key areas these relations, without any

exaggeration, have a strategic character. As we

say, [this is] the strategic character of [a]

privileged partnership.”

26

Igniting a trade war looks easier than getting

tax/infrastructure stimulus

Source: AllianzGI Economics & Strategy, FactSet as of 2/6/17. Forecasts, estimates and certain other information contained herein are based upon proprietary research. Forecasts and estimates have certain inherent

limitations, and are not intended to be relied upon as advice or interpreted as a recommendation.

Might Need Congress

• Deport criminal illegal immigrants

• Renegotiate NAFTA

• Impose tarrifs on corporate

inversion abusers

Needs Congress Support

• Enact tax reform

• Enact $1 trillion infrastracture

plan

• Enact security bill

• Repeal Obamacare

• Build a wall along the Mexico

border

President Trump is making quick progress on his campaign pledges, particularly ones that don‘t need

Congressional assistance

Doesn‘t Need Congress

• Penalize nations engaged in

trade abuses

• Halt „terror“ immigration

• Nominate Supreme Court justice

• Designate China „currency

manipulator“

• Undo federal regulations

• Rescind environmental

regulations

• End payments to UN Green

Climate Fund

President Trump’s campaign rhetoric should be taken seriously. He appears to be a man of his word when it comes to

acting on his campaign promises. This will create winners and losers across areas touched by US policy.

27

Ultra-easy monetary policy: Peak liquidity in 2018 ?

Legend: AllianzGI, Bloomberg, Datastream, calculations based on current USD; estimates for 2017 onwards

G5 monetary base as % of world GDP

0

5

10

15

20

25

2006 2008 2010 2012 2014 2016 2018 2020

% o

f n

om

ina

l w

orld

GD

P

US Eurozone Japan UK China

With the ECB reducing its monthly bond purchases from spring 2017 onwards, the BoJ switching to a reactive monetary policy

approach (yield curve targeting) and the Fed possibly starting to no longer reinvest maturing bonds, we don’t rule out a peak in global

macro liquidity in 2018. The market seems to be discounting this development already.

28

BoJ: Monetary financing through the backdoor. JGB liquidity

and bank profitability concerns explain switch to yield

curve targeting

Sources: AlllianzGI, Bloomberg, Datastream, national statistics, data as of 12/2016.

Sovereign bonds on central banks’ balance sheets as %

of outstanding sovereign debt

Japanese yield curve vs. banks’ price-to-book ratio

ECB

BoJ

Fed

BoE

10y/2y JGB curve Banks’ P/B

No changes to BoJ policy regime expected.

29

ECB: Tapering has started (in all but name). Expect more

to come

Sources: AllianzGI, Eurostat, ECB forecasts for 2017 to 2019.

Euro area: real GDP and (core) CPI (y/y), in % Euro area: private sector credit growth (y/y), in %

real GDP

CPI

Core CPI

loans to companies

loans to private h’holds

Expect “proper” tapering to start in 2018.

30

January PMI composite: Price pressure is mounting on the

producer level

Source: AllianzGI Global Economics & Strategy, Bloomberg

Eurozone PMI Composite: Price PressureUS PMI Composite: Price Pressure

Japan PMI Composite: Price Pressure UK PMI Composite: Price Pressure

31

Gap between headline and core inflation rates has closed

Sources: AllianzGI, national statistics, data as of 4Q 2016, estimates until 2017.Legend: calculations based on data for G20 countries.

Global inflation (y/y), in % Global output gap, as % of GDP

32

Earnings revisions clearly stabilizing – supportive for now

Past performance is not a reliable indicator of future results. Forecasts are not a reliable indicator of future results.

Earnings revisions momentum (ratio of up/down estimates, 3months moving average)

Underlying factors for earnings are improving and so are earnings revisions. Earnings should be a key driver of equity

returns in 2017, even if ambitious estimates are not fully met.

33

2017 Earnings Outlook: Better than the years before –

Unlikely it’s enough to meet Estimates around 11+%

Source: AllianzGI Economics & Strategy

Supporting & Weighing Factors on US Earnings for 2017

US

Tax Cuts

Fiscal Spending / Deregulation

Recovery in EnergyRising USD

Declining Margins on rising Unit

Labour Cost

EU

Lower EUR ???

Recovery in EnergyPolitical troubles ?

Recovery in Energy,

possibly Banks

1st Spill-over of US

stimulus

Cash Repatriation = Buybacks

The majority of factors points to an improving earnings picture. This should be a positive impulse for equities, even though

consensus estimates might not be fully met (again).

34

US: Profitability measures about to peak

Source: Worldscope (via Datastream), AllianzGI Economics & Strategy

Return on Equity vs. Labor Share Net Profit Margin vs. Unit Labor Costs (smoothed)

After almost a decade of a rising profit share in the US, the tide seems to turn in favour of labour income. Low productivity combined

with (slightly) rising hourly wages keeps unit labour cost rising which means falling profit margins. Good for the US consumer, less good

for the equity holder. After almost a decade of a rising profit share in the US, the tide seems to turn in favor of labor income. Low

productivity combined with (slightly) rising hourly wages keeps unit labor cost rising which means falling profit margins. Good for the US

consumer, less good for the equity holder.

35

John Kenneth Galbriath

In any case, no one of any intelligence should take a

job on the Federal Reserve Board because there can

be few posts of such unrivaled dullness, and the

choice as between unintelligent men does not matter

greatly. The only attraction to the post is its service to

personal vanity. It takes a certain amount of time and

energy to master the intricacies of monetary policy.

Those who have done so (and also those who have

not) think their knowledge important. They are

pleased to have the recognition. Being close to large

sums of money adds to the feeling of importance.

36

-6

-4

-2

0

2

4

6

8

10

12

-6

-4

-2

0

2

4

6

8

Mar2002

Dec2002

Sep2003

Jun2004

Mar2005

Dec2005

Sep2006

Jun2007

Mar2008

Dec2008

Sep2009

Jun2010

Mar2011

Dec2011

Sep2012

Jun2013

Mar2014

Dec2014

Sep2015

Jun2016

Perc

ent c

hange a

nnualiz

ed

P

erc

ent

Real effective federal funds rate (left axis)

Productivity (right axis)

Sources: Federal Reserve Bank of St. Louis FREDF; Allianz Global Investors. As of December 9, 2016.

Negative real interest rates did not propel US nonfarm productivity gains

US monetary policy and economic well-being

37

Alan Greenspan

“I don’t think it’s possible for the Fed to end

easy-money policies in a trouble-free manner.

Recent episodes in which Fed officials hinted at

a shift toward higher interest rates have

unleashed significant volatility in markets, so

there is no reason to suspect that the actual

process of boosting rates would be any

different. I think that the real pressure is going

to occur not by the initiation by the Federal

Reserve, but by the markets themselves.”

38

A structurally low growth environment due to weak

demographics and low productivity growth

Source: AllianzGI, UN Population Division, estimates for 2015 onwards, Conference Board

Working age population average annual growth rate in % Labor productivity per hour worked average annual

growth rate in %

-1

-0.5

0

0.5

1

1.5

1975-85 1985-95 1995-2005 2005-15 2015-25

Japan USA Europe

-0.5

0

0.5

1

1.5

2

2.5

1990-98 1999-06 2007-13 2014 2015 2016

Japan US Euro area UK

The world economy is facing constraints on the supply side with demographics and productivity trends being weak globally.

39

Yanis Varoufakis

“Regular crises perpetuate the past by

reinvigorating cycles which started long ago. In

contrast, (capital-c) Crises are the past’s death

knell. They function like laboratories in which

the future is incubated….Once they strike, the

past ceases to be a reliable predictor of the

future and a brave new world is born.”

40

Technological change may yet be the biggest driver of productivity

Heed what the 2016 World Economic Forum in Davos called “the Fourth Industrial Revolution”

Deception

Democratization

Digitalization

Dematerialization

Demonetization

Disruption

41

Alan Greenspan

“But how do we know when irrational

exuberance has unduly escalated asset values,

which then become subject to unexpected and

prolonged contractions?”

42

Act: Long risk for the moment

Long risky assets due to cyclical improvements despite medium term concerns on

Politics or Valuations

Commodities remain in a difficult situation fighting oversupply,

but recent tendencies to stabilise on the back of OPEC agreement

and global cyclical recovery

Gold downgraded to neutral due to trends in real interest rates

Defensive on duration globally, US interest rates rising

inflation linked bonds in the US as a tactical position

1

2

3

4

5

43

Our tactical asset allocation recommendations

Source: AllianzGI, recommendations can change on a regular basis. Latest score table available. Yellow indicates change from last week, direction of yellow markers indicates direction of last change. All scores reflect

expected performance in local currency. We assume no obligation to update any forward-looking statement.

10.02.2017

Asset Class Index

- + - + - + - + - +S&P 500 1 1 1 1 1 1 1 1

Euro Stoxx 50 1 1 1 1 1 1 1

FTSE 100 1 1 1

TOPIX 1 1 1 1 1 1

MSCI EM 1 1 1 1 1 1 1

MSCI World 1 1 1 1

JPM US Got 1 1 1 1 1 1 1 1 1

JPM EUR Govt IG 1 1 1 1 1 1 1

JPM UK Govt 1 1 1 1

JPM Japan Govt 1 1 1 1

JPM EM Bonds (USD) 1 1 1 1 1

JPM EM Bonds (local) 1 1 1 1

JPM EMU Peripherals 1 1 1

IG Credit US 1 1

IG Credit Euro

HY US 1 1 1

HY Euro 1 1 1 1 1 1

Bloomberg Commodity 1 1 1 1 1 1

Gold Spot 1

EPRA/NAREIT Dev. (USD) 1 1

VSTOXX 1 1 1

JPY USD 1 1 1 1

JPYEUR 1

USDEUR 1 1 1 1

GBPEUR 1 1 1

Yellow indicates change from last week, direction of yellow markers indicates direction of last change

All scores reflect expected performance in local currency

Equities

Bonds

Credit

Alternatives

FX

Scores as of

Trend ScoreEconomic

Score

Valuation

Score

Single Asset

Class Score

Portfolio

Weight

Under / Over

User guide:

Score can be positive (right

from the red neutral line, max.

+4) or negative (left, max. -4).

Scores for trend, economics

and valuation are determined

across asset classes as a

starting point for

determination of single asset

class scores.

Single asset class scores

should be interpreted as an

assessment of the absolute

attractiveness of an asset

class compared to its historic

risk/return profile.

The portfolio score (right

column) is the result of an

optimization process and

should be interpreted as

active weights which sum up

to zero across a multi asset

portfolio.