Brian Belski Chief Investment Strategist, BMO Capital Markets

25 years in the investment industry• Including BMO, Merrill Lynch, Oppenheimer, Piper Jaffray

Appears regularly on multiple national financial news networks

Named the most accurate strategist on Wall Street according to a 2004 poll conducted by USA Today

His forecast for the US stock market in 2012 was within one point while his 2014 forecast missed by less than 9 points

Nick Roccanova, CFA

Sr. Investment Strategist

BMO Capital Markets Corp.

(212) 885-4179

nicholas.roccanova@bmo.com

Ryan Bohren, CFA

Investment Strategist

BMO Nesbitt Burns Inc.

(416) 359-4993

ryan.bohren@bmo.com

Brian G. Belski

Chief Investment Strategist

BMO Capital Markets Corp.

(212) 885-4151 / (416) 359-5761

brian.belski@bmo.com

Andrew Birstingl

Assoc. Investment Strategist

BMO Capital Markets Corp.

(212) 885-4172

Andrew.birstingl@bmo.com

October 1, 2018

BMO Investment Strategy

Overview

US Strategy Overview

OVERWEIGHT • Communications Services • Financials • Industrials • Materials

MARKET WEIGHT • Consumer Discretionary • Energy • Health Care • Information Technology

UNDERWEIGHT • Consumer Staples • Real Estate • Utilities

Overweight Analysis > Underweight Rhetoric S&P 500 Targets: Best Case: 3,250; $170 Base Case: 2,950; $158 Bear Case: 2,200; $140

Overview: We remain steadfast and consistent in our call that has been in place since 2009 that US stocks are in the midst of a 20- to 25-year bull market …

• Given the hatred, distrust, discord, and fear associated with equity investing, Corporate America, and especially anything to do with financial services, this remains the most doubted and hated bull market IN HISTORY = investors are so afraid to be wrong, they DO NOT want to be right.

• Reluctance to believe in the underlying fundamental trend has now become commonplace, with the vast majority of headlines being dominated by viewpoints focused on forecasting the end of this bull market and the start of a recession.

• Fundamental Realities = earnings growth is strong and stable; cash flow is steady; valuation should stagnate; interest rates remain near historic lows; GDP growth is positive – irrespective of actual federal policy changes.

• Increased Volatility = Investors should focus on fundamentals and stock picking rather than market rhetoric.

Styles/Themes = Large Cap > Small Cap; Value > Growth; Dividend Growth and High Quality Overall

Sector Opinions

Rinse and Repeat – Lack of Fundamental Change Equates

to Another Year of Price Gains for S&P 500 in 2018

2018 S&P 500 Target Scenarios

Scenario Scenario Scenario Scenario

Bull Case 3,250 $170

Corporate reinvestment and consumer spending accelerates: EPS growth surprises to the upside vs. current expectations

offsetting higher interest rates valuation impact Risk premiums drop sharply Revision trends accelerate to the upside

Base Case 2,950 $158

Steady as she goes, with bumps in between: Risk premiums remain largely static and path of interest rates

grinds higher, but slower than expected EPS growth matches current optimistic expectations providing a

layer of support Policy questions/debate persist creating periods of elevated

volatility surrounding the rhetoric

Bear Case 2,200 $140

Fundamental momentum stalls leading to market consolidation: Rhetoric wins and nothing gets done in DC Strong growth rebound does not materialize + higher interest

rates = double whammy of earnings disappointment and multiple contraction

Source: BMO Capital Markets Investment Strategy Group, Bloomberg.

US Charts

Earnings Growth is Strong

11.3%

7.0%

0%

2%

4%

6%

8%

10%

12%

10%+ EPS Gr All other

Calendar Year S&P 500 EPS Growth

S&P 500 Average Calendar Year Return annual data beginning 1950

Source: BMO Investment Strategy Group, Bloomberg, FactSet, IBES.

5x

10x

15x

20x

25x

30x

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

S&P 500 NTM P/E Ratio

+/- one std. dev.

-1.9%-2.5%-1.4%

0.8%

5.1%

8.4%9.4%

11.3%

14.5%

16.9%

20.3%21.8%

16.9%15.3%

13.0%

11.0%

-5%

0%

5%

10%

15%

20%

25%

1Q16

2Q16

3Q16

4Q16

1Q17

2Q17

3Q17

4Q17

1Q18

2Q18

3Q18

4Q18

1Q19

2Q19

3Q19

4Q19

S&P 500 Trailing 4 Quarter EPS Growthshaded columns represent bottom up estimate

7.6%7.0%

6.6%

0%

2%

4%

6%

8%

10%

12%

Since 1990 Since 2000 Since 2008

S&P 500 Average EPS Growth by Time Span

4Q19 Estimated Growth

Update on the Secular Bull Market

Source: BMO Investment Strategy Group, Bloomberg, FactSet

-15%

-10%

-5%

0%

5%

10%

15%

20%

1938

1941

1944

1947

1950

1953

1957

1960

1963

1966

1969

1972

1976

1979

1982

1985

1988

1991

1995

1998

2001

2004

2007

2010

2014

2017

2020

2023

2026

S&P 500 Annualized 10-Year Holding Period Price Returns

Secular Bull Markets

?

Post-Correction Performance

Start Date End Date

Duration

(days) Decline +3M +6M +12M

6/12/1950 7/17/1950 35 -14.0% 19.2% 29.2% 31.4%

1/5/1953 9/14/1953 252 -14.8% 8.7% 17.5% 37.7%

8/2/1956 2/12/1957 194 -14.8% 9.9% 9.3% -3.4%

8/3/1959 9/28/1960 422 -13.6% 10.1% 22.7% 26.9%

8/22/1962 10/23/1962 62 -10.5% 22.7% 30.0% 36.5%

5/13/1965 6/28/1965 46 -9.6% 10.8% 12.2% 5.0%

9/25/1967 3/5/1968 162 -10.1% 13.9% 14.8% 13.7%

4/28/1971 8/9/1971 103 -10.7% 1.0% 12.9% 18.5%

9/8/1971 11/23/1971 76 -11.0% 16.9% 21.8% 29.7%

11/7/1974 12/6/1974 29 -13.6% 28.7% 42.3% 33.5%

7/15/1975 9/16/1975 63 -14.1% 8.3% 22.9% 28.3%

9/21/1976 3/6/1978 531 -19.4% 15.4% 21.3% 12.6%

9/12/1978 11/14/1978 63 -13.6% 6.9% 6.0% 11.8%

10/5/1979 11/7/1979 33 -10.2% 16.4% 7.3% 29.3%

2/13/1980 3/27/1980 43 -17.1% 18.1% 28.6% 37.1%

10/11/1983 7/24/1984 287 -13.2% 13.1% 19.5% 29.6%

2/2/1994 4/4/1994 61 -8.9% 1.7% 3.6% 15.1%

2/18/1997 4/11/1997 52 -9.6% 24.3% 31.1% 50.6%

7/17/1998 8/31/1998 45 -19.3% 21.6% 29.4% 37.9%

11/27/2002 3/11/2003 104 -14.7% 24.6% 26.9% 38.2%

2/11/2004 8/12/2004 183 -8.2% 11.4% 13.4% 15.7%

4/23/2010 7/2/2010 70 -16.0% 12.1% 23.0% 31.0%

4/29/2011 10/3/2011 157 -19.4% 16.2% 28.6% 32.0%

10/28/2011 11/25/2011 28 -9.8% 17.9% 13.7% 21.6%

4/2/2012 6/1/2012 60 -9.9% 10.1% 10.8% 27.6%

9/14/2012 11/15/2012 62 -7.7% 12.3% 22.6% 32.9%

5/21/2015 2/11/2016 266 -14.2% 12.9% 19.5% 26.6%

1/26/2018 2/8/2018 13 -10.2% 3.5% 10.7%

Average 13.9% 19.7% 26.2%

S&P 500 Correction History (since 1950): Excluding Bear Markets

Performance Post-Correction

Overwhelming Proof That Stocks Can Overcome Corrections During a Calendar Year

21.8%

-6.6%-11.8%

9.1%10.8%

-29.7%

31.5%

1.1%

12.3%

25.8%

-6.6%-1.5%

31.0%26.7%

9.0%12.8%

0.0%

13.4%8.3%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

1950

1953

1962

1965

1971

1974

1975

1978

1979

1980

1990

1994

1997

1998

2004

2010

2011

2012

avera

ge

S&P 500 Average Calendar Year Returnyears where correction starts and ends between Jan-Dec; bear

markets excluded

Source: BMO Investment Strategy Group, Bloomberg, FactSet.

Yield Curve Fears Are a Bit Premature

Flattening Yield Curve Trend Has Largely Been in Place Since the End of 2013

Source: BMO Investment Strategy Group, Bloomberg, FRB.

-2.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

1979

1981

1982

1983

1984

1985

1986

1988

1989

1990

1991

1992

1993

1995

1996

1997

1998

1999

2000

2002

2003

2004

2005

2006

2007

2009

2010

2011

2012

2013

2014

2016

2017

2018

Yield Curve Slope: 10Yr minus 2Yr Constant Maturity Treasury Notes

Recession 10s/2s Yield Curve Average

A Flattening Yield Curve Has Been Better for Stocks

12.3%

7.9%

0%

2%

4%

6%

8%

10%

12%

14%

Flatter Steeper

Yield Curve Difference

S&P 500 Average Returnbased on Y/Y difference in 10s/2s yield curve

monthly data beginning 1980

7.7%8.8%

29.3%

11.4%

14.3%

0%

5%

10%

15%

20%

25%

30%

35%

9/77-8/78 9/88-12/88 3/97-5/98 5/05-1/06 Average

50bps to 0bps Flattening Period for 10/2s Yield Curve

S&P 500 Annualized Return When 10/2s Yield Curve Flattens from 50bps to 0bps

Stock Performance Has Been Better During a Flattening Yield Curve vs Steepening

Stocks Can Still Perform During Later Parts of Yield Curve Flattening Cycles

Source: BMO Investment Strategy Group, Bloomberg, FRB.

Consensus Remains Stuck: Global Growth

Prolonged Periods of US Stock Outperformance Have Actually Been the Norm, Not the Exception

Source: BMO Investment Strategy Group, Bloomberg

0.4

0.5

0.6

0.7

0.8

0.9

1.0

1.1

1.2

1.3

1.41970

1971

1973

1975

1977

1979

1981

1982

1984

1986

1988

1990

1992

1993

1995

1997

1999

2001

2003

2004

2006

2008

2010

2012

2014

2015

2017

S&P 500 vs. MSCI World

VIX vs Price Recovery

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

3 Months 6 Months 9 Months 12 Months

Average S&P 500 Holding Period Returns Following a Parabolic Spike in the VIX

Source: BMO Investment Strategy Group, FactSet, CBOE.

0

10

20

30

40

50

60

70

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

CBOE Market Volatility Index (VIX)based on monthly periods since 1990

VIX Average

0

5

10

15

20

25

30

35

40

9/

17

10/

17

10/

17

11/

17

12/

17

1/

18

2/

18

3/

18

4/

18

5/

18

6/

18

7/

18

8/

18

CBOE Market Volatility Index (VIX)based on daily periods over one year

VIX Average

Active Investing Renaissance Is Upon Us

64.5%

29.4% 28.4%

39.4%

49.5%

18.3%

44.0%

28.4%

49.5%

0%

10%

20%

30%

40%

50%

60%

70%

2009 2010 2011 2012 2013 2014 2015 2016 2017

% of Fund Managers Outperforming Benchmarkbased on top 100 Large-Cap US mutual funds by AUM

% OP Average Since 1990

10.5%

3.3%2.6%

3.2%3.8%

2.5%3.3%

3.8%

4.6%

0%

2%

4%

6%

8%

10%

12%

2009 2010 2011 2012 2013 2014 2015 2016 2017

Average Alpha By Outperforming Fund Managersbased on top 100 Large-Cap US mutual funds by AUM

Source: BMO Investment Strategy Group, Bloomberg.

US Sector Opinion Summary

Sector Opinion Index

Weight

Target Weight

Comments

Communications Services OW 10.1% 11% Attractive overall fundamental backdrop, highlighted by reasonable valuations, attractive earnings growth expectations, and substantial price upside

Financials OW 13.8% 17% Negative implications of excess regulation are finally unwinding; still broadly under-

owned.

Industrials OW 9.6% 11% Consistent earnings and operating metrics are attractive; potential CAPEX is a game

changer.

Materials OW 2.5% 3% Time to build again; traditional metals have cash and pay dividends; ↑ inflation is also a

tailwind.

Consumer Discretionary MW 10.2% 10% Unwind of traditional retail is just beginning; focus on earnings stability and cash; avoid

value traps

Energy MW 5.9% 6% Embrace the range; global growth improving but inventory remains robust; own cash flow.

Health Care MW 14.6% 14% Strong outperformance in 2017 and stretched valuations call for a breather; own products.

Information Technology MW 21.1% 21% Very consensus long and now the largest % of SPX by a long shot; own staple-ish tech.

Consumer Staples UW 6.7% 5% Overcapacity applying pressure on traditional earnings consistency; old rules do not apply

Real Estate UW 2.7% 1% Rising interest rates and outsized portfolio positions the past several years is not a good

combination

Utilities UW 2.8% 1% Valuations are expensive and cash flow growth is decelerating; tough to keep up with dividends

Source: BMO Capital Markets Investment Strategy Group.

Key: OW: Overweight, MW: Market Weight, UW: Underweight

Canadian Strategy Overview

MUNDANE IS GOOD S&P/TSX Targets: Best Case: 19,000; $1,030 Base Case: 17,600; $980 Bear Case: 14,500; $850

Overview: Canadian investors are likely faced with many of the same issues that befuddled them in 2017 …

• Earnings Growth: Beat expectations; Valuation: Multiples expanded to historical averages

• BoC and Interest Rates: Underestimated growth, yet dovish attitudes and fears persist

• Economy: GDP went from 1.5% in 2016 to 3.0% now expected in 2017; but forecasts are decelerating to 2.2% in 2018.

• Policy: Still waiting for the US to implement anything, whilst NAFTA, tariffs and carbon taxing fears are lingering overhead.

• Investor Sentiment: Extremely negative institutions; skittish private clients.

• Housing: Has not crashed; Oil: Stuck within a range; Gold: No momentum.

In other words – CUE THE BROKEN RECORD = Another year of SURPRISINGLY positive returns.

Sector Opinions

OVERWEIGHT • Energy • Financials • Industrials

MARKET WEIGHT • Communication Services • Consumer Discretionary • Consumer Staples • Information Technology • Materials

UNDERWEIGHT • Health Care • Real Estate • Utilities

As the US Rinses and Repeat, Canada Is Likely Set to Pete

and Repeat in 2018

2018 S&P/TSX Target Scenarios

Scenario Scenario Scenario Scenario

Bull Case 19,000 $1030

EM and China growth accelerates sharply; US CAPEX and consumer spending accelerates Commodity Prices surge, oil breaks out of range, propelling even

further positive EPS growth surprise. Revision trends accelerate to the upside. Risk premiums down sharply

Base Case 17,600 $980

Steady as she goes, with bumps in between. Earnings recovery matches expectations, with non-energy trade

rebounding on US growth. Oil prices remain tied to supply, metals trend higher with global

growth Risk premiums trend lower, as market rationalizes improving

global outlook

Bear Case 14,500 $850

EM and China growth stalls; US stimulus measures hit stumbling blocks Global QE re-accelerates, negative interest rate speculation

dominates. Expected rebound in earnings does not materialize as Energy

prices remain near low end of range and trade remains weak. Risk premiums rise.

Source: BMO Capital Markets Investment Strategy Group, Bloomberg.

Canadian Charts

Mundane Is Good

Source: BMO Investment Strategy Group, Bloomberg, FactSet, IBES.

5x

10x

15x

20x

25x

30x

35x

40x

1956

1959

1962

1965

1968

1971

1974

1977

1980

1983

1986

1989

1992

1995

1998

2001

2004

2007

2010

2013

2016

2019

S&P/TSX LTM P/E Ratio

+/- one std. dev.

0.2

0.3

0.4

0.5

0.6

0.7

0.8

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

1992 1995 1998 2001 2004 2007 2010 2013 2016

S&P/TSX - % EPS Surprise vs Revision Composite

% EPS Surprise (LTM) Revisions Composite (3m Avg)

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

35%

40%

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

Return on Equity and Blended EPS Growth: S&P/TSXBlended EPS Growth: LTM & NTM

ROE

Blended Growth

TSX + SPX and US/CDN GDP = increasingly correlated

TSX vs SPX Correlations Are Rebounding From Election Lows

Economic Correlation Remains Strong

Source: BMO Investment Strategy Group, Bloomberg, FactSet, IBES.

40%

50%

60%

70%

80%

90%

100%

CDN vs US Real GDP Growth - 10-Year Rolling Correlation

40%

45%

50%

55%

60%

65%

70%

75%

80%

85%

90%

12/95 12/97 12/99 12/01 12/03 12/05 12/07 12/09 12/11 12/13 12/15 12/17

S&P/TSX vs S&P 500 - 1-Year Rolling Correlation on Daily Returns

TSX vs Global Markets Chart

Global Market Price Performance (Year-to-Date)

Source: BMO Investment Strategy Group, Bloomberg, FactSet, IBES.

-0.4%

8.8%

15.2%

10.9%

-4.9%

-4.6%

1.5%

-5.4%

-4.7%

-1.2%

4.0%

-8.4%

2.1%

-9.2%

4.5%

-2.2%

-5.5%

-15% -10% -5% 0% 5% 10% 15% 20% 25%

S&P/TSX

S&P 500

NASDAQ

Russell 2000

STOXX Europe 50

FTSE 100

France CAC 40

Germany DAX

Swiss SMI

MSCI Pacfic

Japan Nikkei

Hang Seng

Australia ASX

Korea KOSPI 100

MSCI World

MSCI EAFE

MSCI Emerging Markets

Local Currency

$CAD

Canadian Fear Factors: NAFTA

US Canada Mexico NAFTA US Trade Balance - -18 -71 -89

Energy - -54 16 -38 Ex. Energy - 37 -87 -50

US Exports - 300 314 614

CDN Exports 282 - 6 288 MEX Exports 243 27 - 270

Steel and Aluminum Exports (% of all Exports) US Exports - 8 7 15 (3%) CDN Exports 11 - 1 12 (4%)

MEX Exports 3 0 - 3 (1%)

NAFTA Is Important to All Three Countries (2017 Trade in Goods Statistics, billions of US$)

CAD Depreciation Would Likely Offset Impact of Higher Tariffs

Source: BMO Investment Strategy Group, Haver, Statistics Canada, FRB, US Census Bureau

-0.4

-0.3

-0.2

-0.1

0

0.1

0.2

0.3

0.4

0.5

-0.4

-0.3

-0.2

-0.1

0

0.1

0.2

0.3

0.4

0.5

1989 1992 1995 1998 2001 2004 2007 2010 2013 2016

CAD vs Non-Energy Exports

%y/y change in Non-Energy Exports %y/y change in CAD

Corr: 0.26

Canadian Fear Factors: End of the Commodity Super Cycle

57-70 71-79 80-98 99-10 11-current

MSCI World 2.3% 11.4% 0.1% 7.6% S&P 500 5.0% 1.8% 13.7% 0.2% 10.4% S&P/TSX ex Big 3 Sectors 5.4% 6.5% 9.7% 3.8% 9.9% S&P/TSX 3.8% 7.5% 6.9% 6.3% 2.5% COND 9.0% 7.1% 10.0% 1.5% 11.1% CONS 7.0% 5.2% 12.1% 8.4% 13.3%

ENRS 2.9% 16.7% 0.5% 15.8% -3.6% FINL 4.1% 5.8% 10.3% 6.4% 6.7% HLTH 11.0% -4.5% 0.7% INDU 6.6% 8.2% 5.9% 4.7% 12.2% INFT 12.1% -6.3% 5.4%

MATR 2.9% 3.9% 2.8% 12.7% -7.0% TELS 0.2% 3.1% 9.2% 5.6% 6.8% UTIL 4.5% 3.9% 6.1% 5.5% 0.4%

-1

0

1

2

3

4

5

6

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

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21

20

22

World: GDP growth(IMF: WEO April 2018 data & forecasts)

Average('90 to 06)

TSX Performance vs. Global Markets During Commodity Cycles

Source: BMO Investment Strategy Group, FactSet, IMF, FT/LME, EIA. * Sum of Aluminum, Aluminum alloy, Copper, Lead, Nickle, Tin and Zinc Warehouse stocks.

4000

5000

6000

7000

8000

9000

10000

11000

12000

0

1000000

2000000

3000000

4000000

5000000

6000000

7000000

8000000

9000000

83 86 89 92 95 98 01 04 07 10 13 16

Commodity Supply Dynamics

LME: Base Metal Warehouse Stock (Metic Tons)*

US Crude Oil Production (kbbl/d)

10%

20%

30%

40%

50%

60%

70%

2/

56

2/

59

2/

62

2/

65

2/

68

2/

71

2/

74

2/

77

2/

80

2/

83

2/

86

2/

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2/

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2/

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2/

98

2/

01

2/

04

2/

07

2/

10

2/

13

2/

16

S&P/TSX Non-Big Three Sector Weight

WTI and Gas prices

Source: BMO Investment Strategy Group, Haver, EIA.

0

2

4

6

8

10

12

Natural Gas, Henry Hub, LA ($/mmbtu)

0

20

40

60

80

100

120

140

160

Domestic Spot Market Price: West Texas Intermediate, Cushing ($/Barrel)

Canadian Fear Factors: The Perennial Consumer Debt and

Housing Crisis

Source: BMO Investment Strategy Group, Haver, Statistics Canada, FRB, Teranet-National Bank HPI. * Using Statistics Canada methodology to reconcile Canadian-US measures

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

35%

1999 2002 2005 2008 2011 2014 2017

Home Price Index: Toronto and Vancouver(%y/y)

Vancouver Toronto

5%

6%

7%

8%

9%

10%

11%

12%

13%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

3/

90

3/

91

3/

92

3/

93

3/

94

3/

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3/

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3/

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11

3/

12

3/

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3/

14

3/

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3/

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3/

17

3/

18

Canadian Income Growth vs Unemployment Rate

Compensation of Employees (SAAR,%y/y) (L)Unemployment Rate (R)

2

4

6

8

10

12

14

16

18

3/

90

3/

91

3/

92

3/

93

3/

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3/

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3/

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3/

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3/

17

3/

18

Canadian Household Debt Servicing Costs

Debt Service Ratio (SAAR, Ratio)Debt Service Ratio, Interest Only (SAAR, Ratio)Conventional Mortgage Lending Rate: Five Year Term (%)

Rate From 5-years Ago

60%

80%

100%

120%

140%

160%

180%9/

91

9/

92

9/

93

9/

94

9/

95

9/

96

9/

97

9/

98

9/

99

9/

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9/

10

9/

11

9/

12

9/

13

9/

14

9/

15

9/

16

9/

17

9/

18

Household Debt to Disposable Income*

Canada

USA

Canadian Sector Opinion Summary

Sector Opinion Index

Weight

Target

Weight Comments

Energy OW 18.9% 21% Improved global demand and tightening global supply capacity = higher range for Energy

prices

Financials OW 34.5% 37% Less regulation and higher yields = major positive; focus on companies with scale (esp.

wealth mgmt.)

Industrials OW 10.4% 11% Focus on the rails, select manufacturers and waste companies – especially those

leveraged to the US

Communication Services MW 5.2% 5.5% Our favourite yield play

Consumer Discretionary MW 4.5% 5% Consumer is clearly stretched; better wage growth could provide a boost

Consumer Staples MW 3.5% 3.5% A bit expensive, but still very stable in terms of earnings growth, especially relative to the

US

Materials MW 10.4% 11% Improved global growth providing commodity support, but momentum has slowed

Information Technology MW 4.1% 4% Prefer the US and/or software names with strong cash flow

Health Care UW 1.8% 0% Prefer the US

Real Estate UW 3.1% 1% Performance is much more closely tied to the US Fed versus BoC, which is a near-term

negative

Utilities UW 3.8% 1% Rising yields and expensive valuations are a tough combination

Source: BMO Capital Markets Investment Strategy Group.

Key: OW: Overweight, MW: Market Weight, UW: Underweight

Implementation Strategies

US Quality Theme US High Quality Theme Screen

Investment Strategy Portfolios: US Equity PLUS portfolio

Large Cap Canadian PLUS Portfolio

US Large Cap Disciplined Value Portfolio

North American Dividend Growth Portfolio

US Strategy Portfolios: US Tactical Equity Portfolio

US Dividend Growth Portfolio

Canadian Strategy Portfolios: Large Cap Canadian Portfolio

Canadian Anything But the Big 3 Portfolio

Recent Investment Strategy Publications

US Strategy Commentary September 27, 2018: Realizing Our Base Case

September 21, 2018: Overweight the Communication Services Sector

September 10, 2018: Mapping Out S&P GICS Sector Changes

August 22, 2018: Defensive Rotation No Obstacle Yet

August 22, 2018: Perspective on the Bull Market Anniversary (Snapshot)

August 2, 2018: The Myth of Narrow Market Breadth (Snapshot)

July 11, 2018: Negative Speculation Obscuring Positive Realities

June 28, 2018: Six Considerations for the Next Six Months (Snapshot)

June 20, 2018: Ease the Tension With Quality

June 14, 2018: Rhetoric Overshadowing Market Realities (Snapshot)

May 31, 2018: European Woes Providing a Financials Buying Opportunity

May 17, 2018: Weakness in Industrials Likely a Fad, Not a Trend (Snapshot)

May 10, 2018: Energy Ignition Lacks Fundamental Legitimacy

May 4, 2018: Peak Earnings Banter Is More Pique Than Substance

April 19, 2018: End of the Bull Market Discussions Becoming Ubiquitous (Snapshot)

April 12, 2018: Five Investing Topics to Consider (Snapshot)

March 22, 2018: Not a Tech Wreck, Just a Reality Check

March 8, 2018: Remaining Patient With Consumer Discretionary

Special Reports November 17, 2017: 2018 Market Outlook

US Strategy Monthly September 6, 2018: US Chartbook

September 6, 2018: US Factor Profiles

Canadian Strategy Monthly September 6, 2018: Canadian Chartbook

September 6, 2018: Canadian Factor Profiles

Canadian Strategy Snapshots September 27, 2018: Achieving Our Base Case

September 21, 2018: Market Weight the Communication Services Sector

September 10, 2018: Implications of GICS Sector Reclassification on S&P/TSX

August 30, 2018: NAFTA Watch – Common Sense Prevails

August 22, 2018: Emerging Market Doldrums and the TSX

Portfolio Strategy October 1, 2018: Top 15 Fundamental Lists/Changes

October 1, 2018: BMO Research Model Portfolios

October 1, 2018: Investment Strategy Portfolios

October 1, 2018: US Strategy Portfolios

July 6, 2018: Investment Strategy Portfolios - 2Q Review

BMO Investment Strategy Group

Brian G. Belski Chief Investment Strategist US, Canadian & Portfolio Strategy 212.885.4151 416.359.5761 brian.belski@bmo.com

Brian, Chief Investment Strategist and leader of the Investment Strategy Group, provides strategic investment and portfolio management advice to both institutional and private clients. Brian’s group produces several investment strategy publications on a regular basis, with particular focus on both the U.S. and Canadian equity markets. In his more than 28 years in the investment industry, Brian has held various senior strategy and research roles, including positions at Oppenheimer & Company, Merrill Lynch, and Piper Jaffray. Brian is frequently quoted in the financial press, including regular appearances on CNBC, Bloomberg, and BNN, and is renowned for his accuracy as a strategist. Brian holds a B.Sc. degree from St. Cloud State University and splits his time between the BMO offices in New York and Toronto.

Nick Roccanova, CFA Sr. Investment Strategist US & Portfolio Strategy 212.885.4179 nicholas.roccanova@bmo.com

Nick is the senior US Investment Strategist and is responsible for all facets of developing and providing research and analysis within the Investment Strategy Group. His analysis focuses on traditional macroeconomic and fundamental methods, but he has also developed expertise in econometric and quantitative modeling. In his nearly 20 years in the investment industry, Nick has held various senior research roles, including positions at Merrill Lynch and Oppenheimer & Company. He has been a Senior Investment Strategist advising institutional and private clients since 2004. Nick holds B.S. and MBA degrees from St. John’s University and is a CFA charterholder.

Ryan Bohren, CFA Investment Strategist Canadian & Portfolio Strategy 416.359.4993 ryan.bohren@bmo.com

Ryan is the Canadian Investment Strategist, provides strategic and analytical support within the Investment Strategy Group, with a focus on Canadian equity markets. Ryan has over 10-years of investment industry experience, including various research roles at TD Securities, Connor Clark and Lunn Investment Management and Merrill Lynch. He is a CFA charterholder and has a master’s in financial economics from the University of Toronto.

BMO Target Performance History

Year Initial Estimate Revised Estimate Actual Close % From Target

1425 1426 0.1%

(April 23, 2012)

1575 1800 1848 2.7%

(December 1, 2012) (September 12, 2013)

1900 2050 2059 0.4%

(December 1, 2013) (September 14, 2014)

2250 2044 -9.2%

(December 1, 2014)

2100 2250 2239 -0.5%

(November 25, 2015) (September 22, 2016)

2350 2600 2674 2.8%

(November 15, 2016) (September 6, 2017)

Year Initial Estimate Revised Estimate Actual Close % From Target

12,200 12434 1.9%

(September 10, 2012)

12,900 13,100 13622 4.0%

(December 1, 2012) (October 1, 2013)

13,575 14,500 14632 0.9%

(December 1, 2013) (September 2, 2014)

15,600 14,300 13010 -9.0%

(December 1, 2014) (November 25, 2015)

15,300 15288 -0.1%

(November 25, 2015)

16,000 16209 1.3%

(November 18, 2016)

2017

2017

S&P 500 Target vs Actual

2012

2013

2014

2015

2015

2012

2013

2014

S&P/TSX Target vs Actual

2016

2016

Source: BMO Investment Strategy Group.