ab

Chief Investment OfficeGlobal Wealth Management

US edition

Monthly Investment Guide July 2018

UBS House View

Preparing for the second half

House View Website: Visit our mobile-friendly website, ubs.com/houseview, to experience our monthly publication online.

This month’s Feature article reviews the first half of 2018, while also highlighting some key themes that we’ll be watching in the second half of the year, including trade tensions, the risk of an overheating US economy, and growth prospects for China and the Eurozone. As global growth has shifted toward a more US-biased make-up, we are taking action to guard against the risk of continued US dollar strength. In addition to reducing our FX strategy underweight to the US dollar, we also trim our tactical overweight to emerging market (EM) assets – this latter trade is the subject of our In Context article.

Transitioning to a longer-term perspective, our Top Themes section takes another look at our Enabling technologies theme. In particular, we highlight some of the debate held during the business and innovation panels at our CIO Global Forum events in Dallas and New York City. While we acknowledge that there are fears and risks associated with innovation, history teaches us that the benefits of new technologies like artificial intelligence will likely overshadow their short-term disruptions.

This month’s Bull Market Monitor confirms that US GDP growth is accelerating, with upbeat sentiment, solid consumer spending, and strong growth in business investment. And despite the fact that the US unemployment rate now sits at one of its lowest in decades, wage growth remains modest and core inflation is still moving slowly toward the Fed’s target. As a result, we reiterate our view that the bull market won’t end any time soon.

Regards,

Mike Ryan

Dear reader,

Monthly House View client call:July 5, 20181:00 PM ET

Dial In: 1-877-200-4456Passcode: 46502#

This pivot to planning symbol throughout the report and our website will lead you to related guidance based on our Liquidity. Longevity. Legacy. framework.

For more, please visit our website.

This report has been prepared by UBS AG, UBS Switzerland AG, and UBS Financial Services Inc. Please see important disclaimers and disclosures at the end of this document.

Access our report in a monthly email or on our new House View website at ubs.com/houseview

Mike Ryan, CFAChief Investment Officer Americas, Global Wealth Management

July 2018 UBS HOUSE VIEW 1 of 40

CIO Preferences

02 Feature

08 In context

10 Bull market monitor

11 Questions we’re tracking

12 Top themes

14 Global outlook

22 Key forecasts

23 Asset allocation

Also in this report

This is a visual summary of our preferences. For the full detailed asset allocations see page 23.

underweight neutral overweight

Total equities - page 16

Global

US large-cap growth

US large-cap value

US mid-cap

US small-cap

Int’l developed market

Emerging market

Total bonds - page 18

US government

10-year Treasury

US municipal

US investment grade corporate

US high yield

Int’l developed market

Emerging market

EM hard currency

Overweight Tactical recommendation to hold more of the asset class than specified in the moderate risk strategic asset allocation (see page 23).

Underweight Tactical recommendation to hold less of the asset class than specified in the moderate risk strategic asset allocation (see page 23).

Neutral Tactical recommendation to hold the asset class in line with its weight in the moderate risk strategic asset allocation (see page 23).

Month-to-month changeMonth-to-month change

2 of 40 UBS HOUSE VIEW July 2018

FEATURE

Preparing for the second halfAt the start of the year, my inbox was full of questions about Catalonia, Saudi Arabia, and President Donald Trump. Six months on and it’s volatility, Italy, North Korea…and President Trump. (Some of) the narratives may have changed, but the sense of trepidation hasn’t. At half time in the 2018 World Cup of investing, we ask ourselves: What’s working well? What isn’t? And what are our tactics for the second half?

Our overweight position in global equities relative to bonds delivered positive performance. Despite a bumpy first half, at the time of writing, global stocks have returned 1%, while our corresponding bond underweights are relative underperformers. Global corporate earnings growth (9% in the first half alone) has been strong enough to boost global equities while higher interest rates weighed on bond prices.

Diversifying our risk across markets gave us a smoother ride than concentrating in local markets (Fig. 1): Global equities suffered just two days of greater than 2% drawdowns vs. eight days for US stocks, six days for Chinese equities, and 17 days for Brazilian shares. Beyond stocks and bonds, diversification also paid off. Hedge funds delivered attractive risk-adjusted returns and helped insulate investors from positively correlated moves in equity and bond returns.

Some of our FX strategy positions, for example our overweight to the British pound and Japanese yen, and our tactical overweight to emerging market (EM) local currency bonds at the start of the year, performed well. Canadian equities also outperformed Swiss stocks after we highlighted this relative opportunity last month.

We didn’t, however, anticipate the appreciation of the US dollar. The US dollar index has rallied 3.3% this year and 7.4% since its February low, hurting our long EURUSD position and our overweights in EM equities, EM currencies, and EM sovereign bonds. And while our FX strategy overweight in the Swedish krona relative to the Norwegian krone didn’t work out, we were correct to warn against “investment” in Bitcoin, which has plunged 53% this year.

Overall, with modestly positive equity performance and negative bond performance, moderate-risk balanced portfolios are broadly flat year-to-date.

In May, we published our note Volatility is back. Are you prepared? Since then, Italian elections; turmoil in Turkey, Brazil and Argentina; and renewed fears about protectionism have kept uncertainty high. As we look ahead to the second half, conditions look ripe for volatility to continue. Even if some individual political concerns fade, from September on central banks will be withdrawing liquidity from markets, slowly removing a major suppressant of volatility in recent years. And this is happening at the same time as fears mount over US economic overheating, rising protectionism, and disappointing Eurozone growth, as I discuss more in this letter.

Nonetheless, global growth looks to be robust enough for stocks to continue their rise. A strong US labor market should underpin consumption and drive business investment. Eurozone growth has moderated, but we believe it remains solid. We expect China to maintain its controlled expansion. And with global earnings growth (9%) outpacing this year’s equity market returns (1%), valuations have improved at the margin.

Investors will need to prepare for this environment by staying invested to benefit from economic growth, but also diversifying globally, considering hedging, limiting

Overall, with modestly positive equity performance and negative bond performance, moderate-risk portfolios are broadly flat year-to-date.

Follow me on LinkedIn linkedin.com/in/markhaefele

Follow me on Twittertwitter.com/UBS_CIO

Pivot to planningAre you trying to time markets, or investing strategically to meet your objectives?

Mark HaefeleGlobal Chief Investment OfficerWealth Management

July 2018 UBS HOUSE VIEW 3 of 40

FEATURE

exposure to high-yield credit, and seeking assets less correlated to market volatility, such as hedge funds or those supported by secular growth drivers.

Our positioning as we enter the second half matches this approach. We hold a tactical overweight in global equities but prepare for volatility with overweight positions in 10-year US Treasuries. In our FX strategy we overweight the Japanese yen against the US dollar. For investors who can implement options, we also recommend considering a small allocation to put option strategies tied to the S&P 500 as a direct hedge against equity market risk. We underweight US government bonds. And, for investors who can handle illiquidity, hedge funds can offer performance that is less correlated to overall market moves.

There are also shifts in global dynamics we need to account for in our tactical positioning. The period of synchronized global growth underway for the past year looks to be giving way to a period of more US-biased global growth. With this shift, we want to avoid being underweight US dollars and avoid large overweights in emerging market assets. To account for this, we make four changes. In our FX strategy, we close our overweight to the Canadian dollar vs. the US dollar. In our tactical asset allocation, we close our overweight to EM equities and halve our overweight to EM hard-currency bonds – thus reducing the size of our underweight to US government bonds. We also close our preference for Canadian equities vs. Swiss equities, following the strong recent performance.

Key themes for the second halfHow far will US protectionism go, and what will its impact be?This month the Trump administration announced levies on USD 50bn worth of Chinese imports; threatened duties on USD 200bn more; and imposed tariffs on steel and aluminum from the EU, Canada, and Mexico. President Trump also leveled accusations of dishonesty and weakness at the Canadian prime minister and criticized the German chancellor, all while entering into a dialogue with the North Korean leader he frequently referred to as “little rocket man.”

We think protectionism bears monitoring in the next six months. To date, the tariffs imposed are not economically significant. And trade disputes so far only involve the US – other countries have not slapped tariffs on one another. The US also accounts for just 13% of world imports, down from 18% at its peak in 2000. The current US strategy, implemented and contemplated, amounts to a tax on the US consumer.

But the retaliatory actions mean the situation continues to escalate, even if we know it can change with a tweet. China does not buy enough goods from the US to retaliate

We enter the second half overweight global equities but are also preparing for continuing volatility.

To date, tariffs are not economically significant, but the situation continues to escalate.

Jan Feb Mar Apr May Jun

20

15

–10

10

–5

0

5

Diversification has served investors well in the first half of 2018 Total return in %, local currency

Source: Bloomberg, UBS, as of 19 June 2018

Figure 1

MSCI All Country World MSCI US MSCI Switzerland MSCI China MSCI Brazil

Read more on ubs.com/houseview

4 of 40 UBS HOUSE VIEW July 2018

FEATURE

much further with goods tariffs and so may consider broadening the dispute to include services, further restrictions on US company operations in China, currency devaluation, or reserve management, although this would likely be a last resort. NAFTA negotiations are also uncertain as relations between the US and Canadian leaders have cooled.

We mitigate the risk of further negative headlines around trade with some countercyclical positions, such as our overweight in 10-year US Treasuries, which would stand to benefit should a trade war or other disruptions arise, but we will continue to monitor negotiations to determine whether further changes in our positioning are warranted.

Key indicators: US tariffs, NAFTA negotiations, retaliatory measures from China and Europe, exchange rates between USD and key trading partners, trade balance data.

Will tight US labor markets spark higher US inflation and rates?The latest US labor market data shows that there are now more job vacancies than there are unemployed people (Fig. 3).

A key question for the second half will be whether US economic strength will translate into greater wage growth, higher inflation, and more than the four rate hikes we currently project for the next 12 months. Much faster rate hikes by the Federal Reserve would effectively bring forward the end of the global economic cycle.

A key question for the second half is whether a tight labor market will translate into higher wage growth and inflation.

100,000

–100,0000

–200,000

–900,000

–300,000

–800,000–700,000

–500,000–600,000

–400,000

2014

2011

2008

2005

2002

1999

1996

1993

1990

1987

1984

1981

1978

1975

1972

1969

1966

1963

1960

2017

The US trade deficit has ballooned since the 1980s US trade goods deficit, in USD millions

Source: US Census Bureau, UBS, as of June 2018

Figure 2

Goods deficit

2001 2002 2003 2004 2005 2006 2007 20092008 2010 2011 2012 2013 2014 2015 2016 2017 2018

16,000

14,000

0

2000

12,000

4000

6000

8000

10,000

There are more job openings than unemployed people in the US US job vacancies vs. unemployment, in thousands

Source: Bloomberg, UBS, as of June 2018

Figure 3

Job openings Number of unemployed people

July 2018 UBS HOUSE VIEW 5 of 40

FEATURE

For the moment, there are few signs that inflation is rising markedly. Though the most recent consumer price index (CPI) reading increased 2.8% year-over-year, a six-year high, core inflation was a more moderate 2.2%.

But with the US economy expanding above its long-term trend (we estimate growth of 2.8% this year and 3% next vs. trend growth of around 1.8%), we will need to be watchful for a sharper uptick in wages and inflation.

For now, we remain comfortable with our positioning in the context of this uncertainty. An environment in which US growth is strong enough to keep unemployment falling and wages rising should support corporate earnings growth and equities, at least initially.

Key indicators: US core PCE, US core CPI, US wage growth, 5-year inflation breakevens, Fed dots, Fed funds futures, Fed communications

Will China maintain its robust growth? China’s economy flirted with the high end of the government’s target of “around 6.5%” GDP growth, reaching 6.8% in the first quarter.

The question now is whether this rate is sustainable. China alone accounts for around one-third of global GDP growth, so concerns about its economy could affect earnings prospects for companies around the world.

Some slowdown is inevitable. Construction spending may cool if property sales slow and developer financing tightens. Infrastructure investment is weakening. And regulatory tightening (to encourage needed deleveraging) has led to a drop in new credit creation: In May, total social financing growth recorded a historical low at 10.3% year-over-year, from 12% a year ago (Fig. 4). The trade dispute with the US poses another downside risk.

Our base case is that this growth slowdown will be controlled. We expect cuts to the reserve requirement ratio (RRR) if necessary, and the government has the scope for fiscal stimulus if the economy decelerates more abruptly than expected. Overall, we forecast 6.6% growth this year but will continue to monitor the data.

Key indicators: Construction spending, property sales, fixed asset investment, retail sales, total social financing.

Some slowdown in Chinese growth is inevitable, but our base case is that it will be controlled.

2008 2009 2010 2011 20132012 2015 20162014 2017 2018

40

35

0

25

30

5

10

15

20

4000

3500

0

2500

3000

500

1000

1500

2000

Chinese infrastructure investment and credit growth are falling Total social financing (in CNYbn) and fixed asset investment (as % of GDP)

Source: Bloomberg, UBS, as of June 2018

Figure 4

Fixed asset investment (le axis) Total social financing (right axis)

6 of 40 UBS HOUSE VIEW July 2018

FEATURE

Can the Eurozone sustain growth after quantitative easing?The European Central Bank (ECB) announced last week that it will end quantitative easing (QE) by the end of the year, by which point it will have been buying bonds for 46 months and have purchased EUR 2.6tr in assets (Fig. 5).

The question now is whether the Eurozone can maintain its growth rates. The end of QE could translate into higher borrowing costs, reduced business investment, and slower growth. And it comes at a time when investors are already feeling nervous about political developments, following the formation of a populist government in Italy and challenges to Chancellor Angela Merkel in Germany.

Our base case is that consumer and business confidence will keep economic growth sound. But as we await further data, we hold a neutral stance on Eurozone equities in our global tactical asset allocation. We also remain cautious on euro-denominated high-yield bonds, which could encounter a lack of demand when ECB purchases stop.

Key indicators: Eurozone PMIs and CPI data, Spanish and Italian borrowing costs, euro-denominated sub-investment-grade yields, Eurozone bank lending data.

Tactical asset allocationOverall, it is hard to be too negative on global equities at this point. The world economy is still set for its fastest year of growth since 2011 at 4.1%, global corporate earnings are slated to increase 15% this year, and even the relatively highly valued US stock market has a 4.4% trailing risk premium over bonds, vs. a long-term average of 3.2% since the 1960s.

We also shouldn’t forget the ideas I discussed in a previous letter, “The Galton Board,” that what can at first look like risk may ultimately produce positive results. For example, higher US wage growth needn’t trigger inflation if it is accompanied by greater productivity. Trade negotiations could lead to market-friendly outcomes, like China’s agreement to strengthen intellectual property protections in May. A Eurozone expanding without stimulus would be better equipped to respond to economic challenges. And an absence of bad news out of China would mean another USD 460bn added to world economic output in the second half alone, equivalent to an economy the size of Portugal and Greece put together.

As such, we maintain a moderate overweight in equities relative to US government bonds.

Will the withdrawal of QE put an end to the Eurozone recovery?

250

200

150

–100

100

–50

0

50

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Central banks will be withdrawing liquidity by end-2018 Monthly net securities purchases by the world’s major central banks (in USDbn)

Note: Includes securities purchases of the ECB, Federal Reserve, Bank of England and Bank of Japan (financed by central bank money creation). 3-month moving average until end of 2019.Source: Haver Analytics, UBS, as of June 2018.

Figure 5

BoE Fed BoJ ECB Total

July 2018 UBS HOUSE VIEW 7 of 40

FEATURE

To account for the risks discussed earlier in this letter, we also hold several positions that will help cushion our portfolio against equity market volatility:

• We overweight the 10-year US Treasury vs. cash. US Treasuries typically reduce volatility in a portfolio during equity market corrections. While rapid Fed rate hikes are a risk to this position, last week’s Fed meeting suggests this risk is limited, and historically the 10-year yield has priced in the full series of rate hikes relatively early in the cycle.

• We overweight the Japanese yen (JPY) vs. the US dollar in our FX strategy. The position also provides an effective cushion during periods of global risk aversion, since Japanese investors, who hold a large positive net foreign asset position, typically pull funds back home in such an environment. And regardless of the risk backdrop, we believe the JPY is undervalued vs. the USD, with our purchasing power parity estimate at USDJPY 74 compared to the spot rate of 110 at present.

We also need to account for shifts in global growth dynamics. Growth momentum in the US is holding up and economic data has surprised to the upside at a time when the rest of the world has been going through a softer patch. In this environment, we want to avoid being underweight the US dollar, and avoid large overweights in EM assets. So we make four changes this month:

• We close our overweight in EM equities. The MSCI EM Index has been constrained by a 7% rebound in the trade-weighted US dollar, pressuring central banks in emerging markets to tighten monetary policy and presenting a headwind to the region’s economic growth. Although the growth outlook remains positive overall, first-quarter growth figures were disappointing, notably in South Africa and Brazil, and business sentiment, as measured by purchasing managers’ indexes, is falling.

• We halve our overweight in USD-denominated EM sovereign bonds. The asset class offers an attractive yield of 6.5%, 3.5% over duration-equivalent US Treasuries, but weaker relative economic momentum and heightened political risk in Mexico, Turkey, and Brazil present a risk, as do trade tensions between the US, Mexico, and China.

• We close our FX strategy overweight in the Canadian dollar (CAD) vs. the USD. The Bank of Canada has been slower than we expected to signal tighter monetary policy, while the US is set to deliver close to 4% annualized growth for the second quarter. The CAD is also likely to be held back in the near term by uncertainty over the outlook for NAFTA.

• We close our preference for Canadian equities vs. Swiss equities. Since we highlighted this preference within international developed market equities last month, MSCI Canada has returned around 2%, while the Swiss market has fallen around 3%.

Mark HaefeleChief Investment OfficerGlobal Wealth Management

We overweight the 10-year US Treasury vs. cash.

We overweight the Japanese yen (JPY) vs. the US dollar in our FX strategy.

We close our overweight in emerging market equities.

We halve our overweight in USD-denominated EM sovereign bonds.

We close our FX strategy overweight in the Canadian dollar (CAD) vs. the USD.

We close our preference for Canadian equities vs. Swiss equities.

8 of 40 UBS HOUSE VIEW July 2018

IN CONTEXT

Pivot to planningHow can I protect against poor-performing asset classes?

Alejo CzerwonkoEmerging Markets Strategist, Global Wealth Management Chief Investment Office

Jorge Mariscal Chief Investment Officer Emerging Markets, Global Wealth Management

After a strong 2017, emerging market (EM) stocks have been underperforming their US counterparts this year. There has been plenty of noise and uncertainty surrounding emerging markets lately. On the political front, elections took place recently in Malaysia, Russia, and Colombia. Turkey will hold a vote this coming weekend, and Mexico and Brazil will elect their presidents in July and October, respectively. The outcomes of these elections may not be market friendly. Argentina was forced to seek IMF assistance after its currency went into free fall recently, and the central banks of Turkey, India, and Indonesia had to sharply raise their policy rates to fend off pressure on their currencies. Brazil, Mexico, and South Africa, also under FX market pressure, may have to follow suit. To some extent, given the diversity of EM countries and asset classes, volatile and diverging economic and political cycles come with the territory of investing in emerging markets. But is there something more pervasive that could lead to old-style contagion among emerging markets?

What has changed?On the EM economic front, there has been some loss of momentum lately. While on average, EM PMIs are still in expansion territory and China grew faster than expected in the first quarter of this year, the last three months (March, April, and May) saw consecutive declines in activity indicators for emerging markets on aggregate, and the latest China domestic credit indicators point to a cooling off in the months ahead.

The mighty dollarEmerging markets are not alone in facing an economic soft patch. Europe and Japan have also reported disappointing growth expectations lately. The synchronized global recovery has gone awry. It is only in the US where economic growth has been accelerating, owing largely to the Trump administration’s fiscal stimulus measures in the form of tax cuts and increased spending. The new constellation of growth paths has resulted in the first major headwind for emerging markets: US dollar strength. On a trade-weighted basis, the USD appreciated some 7.6% between end-January and 19 June, while the dollar-denominated EM equity benchmark, the MSCI EM Index, dropped 13.4%. Our analysis shows a remarkably stable negative correlation between the USD and EM equities over the last 11 years (see Fig. 1).

A more hawkish FedThe strong US economy and the country’s very low unemployment rate, combined with high energy and other commodity prices, have reinforced the Federal Reserve’s concern about a potential increase in inflation pressures. As a result, not only has the Fed’s tightening cycle been confirmed, the market has also moved in the past few months to increase the speed and the length of the cycle. This has resulted in an increase in EM funding costs in international markets. In turn, this has put pressure on local yield curves, uncovering acute financing vulnerabilities in countries like Argentina and Turkey, which have sizable current account deficits. Severe financing vulnerabilities are not the norm in

Tactical retreat from EM assets

July 2018 UBS HOUSE VIEW 9 of 40

IN CONTEXT

Source: UBS, Bloomberg, as of June 2018

MSCI EM Index (total ret.), lhs USTWD (inv), rhs

500

300

400

100

200

0

600

100

110

105

120

125

115

130

90

95

2017

2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

2018

Fig. 1: EM equity performance has been negatively correlated to the US trade-weighted dollar in the last decadeMSCI EM Index and US Trade Weighted Dollar Index

Source: UBS, Bloomberg, as of June 2018

US High-yield EM USD bonds

8

10

4

2

6

0

12

Dec

-17

Jun-

18

Jun-

17

Dec

-16

Jun-

16

Dec

-15

Jun-

15

Dec

-14

Jun-

14

Dec

-13

Jun-

13

Fig. 2: EM USD bonds now offer similar yields to US high-yield, but with a higher credit quality profileYields, in %, for the Bloomberg Barclays US Corporate High-yield Index and the EM USD Aggregate Index

Watch the In Context video on ubs.com/houseview

emerging markets; on aggregate, current account positions have improved and hard currency sovereign debt as a percentage of GDP is manageable. Still, the fear that other currencies may come under pressure if the USD appreciates further and rates rise more than expected has increased risk aversion to EM assets in general.

From trade threats to warsThe third headwind to emerging markets is a sharp increase in the risk of trade protectionism. On 18 June, President Trump called for a list of USD 200bn of Chinese products that will be hit with a 10% tariff. He also threatened to increase that amount by another USD 200bn if China retaliates. The end result could be tariffs on USD 450bn worth of Chinese goods – the amount is very close to China’s exports to the US in 2017. This move was in response to China’s decision on 15 June to retaliate to the US’s imposition of tariffs on USD 50bn of imports from China. While Latin America and EMEA came under pressure due to the two headwinds described above, the Asian markets and economies remained rather resilient. The increased intensity of trade hostility between the US and China could now threaten emerging Asia as well.

Where do we go from here?Our house view continues to assume robust global economic

growth of around 4% this year and next. This includes a recovery in Europe, Japan, and most emerging economies. In the base case, we also see a moderate and smooth path for Fed hikes, largely in line with what the markets are already discounting: two more 25bps hikes this year and three in 2019. Finally, our view assumes a rational resolution of the disputes between the US and its trade partners. This could lead to an upside of around 15% in EM equities and mid-to-high single-digit returns for EM hard currency bonds. However, we recognize that the risk that our assumptions may take longer than expected to materialize has increased. As the short-term outlook has become cloudier, we are closing our tactical overweight on EM equities in our global and dedicated EM portfolios but we will look for an opportunity to re-enter once the global headwinds mentioned above diminish and stabilize. We are also reducing the size of our overweight on EM hard currency bonds.

That said, we do not recommend abandoning these asset classes, as the long-term outlook for emerging markets remains solid due to secular growth, attractive valuations, and pension funds’ and institutional investors’ structural under-exposure to EM assets. Therefore, portfolios already under-allocated to emerging markets need no further reduction in exposure.

10 of 40 UBS HOUSE VIEW July 2018

Cycle statusWe characterize the US business cycle as currently in the mid-to-late cycle stage. GDP growth is likely to exceed 3% through year-end,

well above potential growth estimated at 1.6%. The labor market is tight, though wage growth is below 3% and inflation is right near the Fed’s 2% target. Thus, the economy is warm but not hot, though clearly on a path to overheating. Meanwhile, financial conditions remain accommodative: The federal funds rate is still below neutral, credit conditions are loose, and a flattening yield curve is not yet worrying. Overall, it’s hard to see the expansion ending any time soon. But monetary policy could be restrictive by this time next year and fiscal policy will be contractionary in 2020 based on current law, raising risks to the cycle two years out.

What’s new?The US economy continues to reaccelerate, with UBS estimating that 2Q GDP growth is now tracking at 3.8%. Manufacturing

surveys remain at elevated levels, while consumer spending and business investment both continue to pick up. The unemployment rate fell to 3.8% in May, but wage growth remains in a narrow range around 2.7%. Inflation continues to rise slowly toward the 2% target for core personal consumption expenditures (PCE). The Fed hiked rates 25 basis points (bps) in June, as expected, and is now anticipating four rate hikes this year, up from three. But interest rates and credit spreads are largely unchanged over the past month, keeping financial conditions generally loose. Consequently, we didn’t change the score for any of the Bull Market Monitor indicators this month.

What are we watching?With US growth looking very solid, we’re watching for signs that the economy is overheating and for consequences of escalating

trade tensions. Inflation pressures are building since there is little spare capacity in the economy. The risk is that inflation overshoots 2% and rises to 2.5%, forcing the Fed to raise rates faster than expected. The USD 50bn in tariffs on imports from China should reduce growth by about 0.1% and lift inflation by even less than that, but those impacts will be larger if tariffs are imposed on an additional USD 200bn or more of imports.

What are the investment implications?The reflationary growth environment that we expect for the rest of this year supports our tactical global equity overweight, as well

as our preference for value over growth among US large-cap equities. The acceleration in US growth hasn’t been matched in Europe and emerging markets, which has led to further US dollar strength. This divergence in cycles, and the risk that this continues, contributed to our decision to close our tactical overweight to emerging market (EM) equities and reduce the overweight to EM USD-based sovereign bonds.

Overheating indicators

Labor market

Weak Tight

Growth (relative to potential)

Below Above

Inflation (relative to 2%)

Below Above

Financial indicators

Credit conditions

Loose Tight

Monetary policy

Accommodative Restrictive

Yield curve

Steep Inverted

Overall: mid-to-late cycle

Early Late

Key cycle indicatorsThe cycle indicators are evaluated to gauge whether the economy is overheating and if financial conditions are becoming restrictive for growth. These determine our overall assessment of where we are in the cycle.

Each indicator is evaluated relative to a neutral level that is sustainable over time in order to determine whether the economy is at risk of overheating or if financial conditions will start to restrict growth.

BULL MARKET MONITOR

Bull market monitorEquity bull markets rarely end without a recession. Other catalysts are often a factor, but the business cycle is the one constant in the evolution of bull and bear markets. It is therefore necessary to track key attributes of the business cycle to gauge how the expansion is evolving and calculate the risks of a recession.

For information on the methodology behind the Bull Market Monitor, see the report How much longer? Introducing the Bull Market Monitor published 25 May 2018

July 2018 UBS HOUSE VIEW 11 of 40

Questions we’re trackingWill US protectionism spark a trade war?The focus of trade frictions between the US and its major trading partners has recently shifted away from China and back on to Canada, Mexico, and the EU. The threat of retaliation to US metals tariffs has been followed by a public rift among the G7 countries. While US actions have reawakened fears of a global trade war and we are watchful for signs of escalation, our base case is that simmering trade frictions won’t boil over into a full-scale trade dispute.

Pivot to planning What is your investment horizon?

Are central banks taking away the punchbowl?The European Central Bank (ECB) announced that it will end its quantitative easing (QE) program this year and the Federal Reserve recently raised interest rates by another 25 basis points (bps) while passively unwinding its balance sheet. The Bank of Japan is now the only major central bank yet to announce an end to QE. But the ECB’s decision is data-dependent and rates are likely on hold until the end of summer 2019, while the Fed remains on a gradual normalization path. At this pace, the withdrawal of monetary accommodation is unlikely to unsettle global markets, in our view.

Pivot to planning Do you have a plan for your short-term and long-term goals?

What are the real risks to the business cycle?In the age of 24/7 news, there is rarely a shortage of concerning headlines. But investors would do well to ignore most of the “noise”—even if it temporarily moves markets—and focus on monitoring genuine risks to the business cycle. We believe the Middle East, North Korea, and Italy pose only remote threats to the cycle but the risks of faster Federal Reserve tightening and rising protectionism are more genuine threats.

Pivot to planning How can investors deal with uncertainty?

Are you prepared for the return of volatility?A semblance of calm has returned to markets. The VIX index of implied volatility has moved back below its 200-day moving average and risk assets were not unsettled by a further Fed rate hike and the ECB announcing an end to QE. Even so, we don’t expect a return to the ultra-low volatility that prevailed last year. A wide range of risks—from a global trade war to rising US inflation—is likely to ensure choppier markets, but investors should not retreat to cash. Instead we recommend staying invested while managing risks.

Pivot to planning Does your portfolio have a Liquidity buffer?

Can emerging markets power ahead this year?Emerging markets (EM) are under pressure. The JPM EM Currency Index is down nearly 10% since mid-February, with the Turkish lira and Argentine peso hitting fresh lows. EM equities have also fallen nearly 12% from their all-time high in January. But the long-term outlook for emerging markets remains positive. We expect GDP growth to rise from 5.2% in 2017 to 5.4% in 2018; inflation remains relatively subdued, meaning that growth-harming rate rises can be avoided in many cases. Profit growth remains solid, with MSCI EM earnings per share set to rise 8–12% this year, and valuations look attractive vs. developed markets. As long as the US dollar and US government bond yields are rising, though, emerging markets may face headwinds in the short term.

Pivot to planning How can I position my assets in the face of uncertainty?

June was characterized by an abundance of geopolitical headlines. The month started with Italy’s populist M5S and Lega parties forming a coalition government, sparking a sell-off in Italian government bonds.

Fears of a trade war continued to loom, starting with the White House ending exemptions for tariffs on steel and aluminum from Canada, Mexico, and the EU. Tensions between the US and key allies flared further following the G7 summit as President Trump engaged in harsh back-and-forth rhetoric with Canadian Prime Minister Justin Trudeau. Later in the month, Trump announced the US would impose an additional 10% of tariffs on USD 200bn of Chinese products after China countered the administration’s initial tariffs of USD 50bn.

President Trump met with North Korean leader Kim Jong-un at a historic US-North Korea summit in Singapore on 12 June. A joint statement from the two leaders included pledges to establish diplomatic relations, seek peace, and for the US to provide security guarantees to North Korea.

June also highlighted the move toward monetary policy normalization around the globe. On 14 June, the European Central Bank announced that it intends to halt quantitative easing in December but expects to keep interest rates on hold through at least the summer of 2019. In the US, the Federal Reserve announced its second interest rate hike this year.

Despite these headlines, financial markets were largely unscathed throughout the month and the VIX index of implied volatility was below 13 as of this writing.

Month in review

12 of 40 UBS HOUSE VIEW July 2018

TOP THEMES

We know that technological innovation is unfolding at breakneck speed but the scope of its influence on the economy and our lives is difficult to grasp. As a result, we tend to look to the realm of science fiction, including binge-worthy television series such as HBO’s Westworld and Netflix’s Black Mirror, as we formulate a future world view. Yet these fanciful and rather dystopian dramas envision a future that for many people stokes anxiety about what is to come, including fears of being replaced in the workforce by robots and losing our privacy and control. While it is true that new technologies often come with new challenges, the far-reaching benefits of innovation often outweigh its disruptive effects over the long term.

This age-old debate around the relative good or evil resulting from technological advancement was at center-stage during the recent Global CIO Forums in Dallas and New York City. In particular, there were opposing viewpoints offered around whether artificial intelligence (AI) and automation would be more harmful than beneficial to society in an ever-changing world. On the risk side, job loss for low- and mid-skilled workers, whose roles can be easily automated, and the resulting rise in income inequality, were of chief concern. Data protection and consumer privacy risks in a digital world were also top-of-mind.

While we acknowledge these risks, we believe that many of the fears are overblown. AI, for example, is powering solutions to some of the problems it creates—a preview that, on balance, short-term frictions should actually lead to long term improvements for society, another key focus of the CIO Forums. A few examples include:

• AI is improving efficiency in existing healthcare systems, enabling self-monitoring and allowing for early diagnosis of medical conditions. Based on genetic data of tumor cells, IBM’s Watson was able to review and provide treatment recommendations in ten minutes while human experts took close to 160 hours.1

• The Japanese government has started to introduce technologies to support their aging population and workforce and combat an economic slowdown, e.g., robotic arms that allow elderly farmers to continue picking fruit in old age, and the development of robots that will help seniors perform their daily household tasks.2

• Developers have created individualized education systems using AI. These systems respond to the needs of students by repeating topics they have not yet mastered, allowing them to move at their own pace. Improvements to education could help to alleviate job loss from the automation of low- and mid-skilled jobs.3

• Renewable energy companies are using AI for energy forecasting, efficiency, and accessibility. Xcel, an energy provider in Colorado, is using an AI-based data mining method to forecast weather with more accuracy and detail. This allows for more efficient management of energy that is generated by renewable energy sources.4

• AI-based cybersecurity technology is being developed to automate processes to detect, analyze, and defend against attacks and breaches. SparkCognition, a security firm, has developed the first AI-powered cognitive antivirus system called DeepArmour.5

While still in early stages, the exact future of AI and automation remains uncertain; however, we are certain that the scope of their impact will be vast. Since 2000, the number of active US startups developing AI systems has increased 14 times, and the annual venture capital investment into these startups has increased six times.6 Similar to previous industrial revolutions, we are aware that advances in this technology will cause societal disruptions, such as dislocations in the labor market. However, on balance, we believe that further integration of AI and automation will largely supplement and support humans in advancing society. AI and automation are segments of a broader group of enabling technologies that we believe will create new possibilities across multiple industries for decades to come.

The brighter side of innovation

Andrew LeeHead of Sustainable and Impact Investing Americas

We would like to thank UBS Graduate Training Program analyst Anthony Marcozzi for his contributions to this article.

1 Your future doctor may not be human. This is the ride of AI in medicine, Futurism, January 31, 20182 Japan’s Bold Steps, The Globe and Mail, November 12, 20173 10 Roles for Artificial Intelligence in Education, TeachThought, September 4, 20174 Artificial Intelligence for Energy Efficiency and Renewable Energy, TechEmergence, November 16, 20175 Artificial Intelligence and Its Impact on Cyber Security, InfoSec Intitute, May 1, 20176 AI Index, 2017 Annual Report, November 2017

Laura Kane, CFA, CPAHead of Investment Themes Americas

Read more on ubs.com/houseview

July 2018 UBS HOUSE VIEW 13 of 40

TOP THEMES

TechnologyAutomation and robotics A fourth industrial revolution is underway, which we believe will transform the future of manufacturing.

Digital dataCompanies that both enable digital data and invest its infrastructure will likely continue strong earnings growth over the coming years.

E-commerce E-commerce is altering the global retail landscape and omnichannel companies should lead the way forward.

Enabling technologiesWe identify five enabling technologies that should offer solid long-term growth amid irreversible technological disruption.

FintechThe global fintech industry is at an inflection point and set to drive a major digital transformation in the financial services industry.

Mass transit rail Rapid urbanization in Asia will strain mass transit systems, providing opportunities for infrastructure investment over the long term.

Medical devices The medical device industry has matured but opportunities exist for increased penetration in emerging markets (EMs) where affordability is on the rise.

Oncology Advances in cancer therapeutics will create new multi-billion dollar opportunities for successful drugs.

Security and safety Growing trends such as urbanization, digital data growth, and increased regulation support demand for security and safety.

Smart Mobility Global urbanization will call for structural changes in technology that will alter the way we “consume” mobility in the coming decades.

Resources Agricultural yield The world faces a growing food production crisis as the global population increases. Companies that help to boost agricultural yields stand to benefit.

Clean air and carbon reduction Rising populations and urbanization are fueling the need for clean-air technologies. Solution providers targeting emissions reductions stand to benefit.

Energy efficiency Stricter regulation and corporate competition to improve product efficiency are driving demand for energy-efficiency solutions.

North American energy independence As North America trends toward energy independence, we believe certain energy-related sectors stand to benefit.

Renewables Increasing energy demand from urbanization and population growth will benefit renewable energy as lower costs drive competitiveness with fossil fuels.

Waste management and recycling Low waste treatment rates in EMs offer big catch-up potential that could lead to extraordinary growth rates.

Water scarcity Water scarcity is one of the biggest risks to mankind. If limited water resources can be better harnessed, the benefits could be enormous.

Society Education services With limits to many governments’ education resources, there is increased opportunity for the private education market.

Emerging market healthcare An aging EM population requires stepped-up investment in healthcare. We believe global healthcare companies can benefit.

Emerging market infrastructure Growing urbanization and high economic growth rates will drive demand for infrastructure investment in EMs.

Generics As healthcare costs grow, government policy and demographics will be important drivers of increased generic drug sales.

Obesity Urbanization and rising per-capita GDP in EMs will contribute to an ever-greater prevalence of global obesity.

Retirement homes A larger population of seniors and evolving social trends support opportunity in retirement homes investment.

Retirement planning Changing demographics are increasing demand for retirement planning, benefiting wealth and asset managers.

Silver spendingAs the global population ages, those 55 and older are expected to account for an ever-increasing proportion of consumer spending.

Fixed incomeBeyond benchmarkBy diversifying fixed-income exposure investors can avoid the shortcomings of heavily government-weighted taxable fixed-income benchmarks.

MLP bonds Master limited partnership bonds offer attractive coupon income relative to other investment-grade sectors.

Mortgage IOsMortgage Interest only (MIOs) offer the opportunity to benefit from rising interest rates along with attractive yields and high credit quality.

US senior loansSenior loans offer attractive floating-rate coupons with low correlation to other asset classes and lower volatility than high-yield bonds.

Yield for the short end Short-end corporate bonds offer attractive current yield without taking on excessive credit or interest-rate risk.

EquityBusiness spending reboundAfter a prolonged period of muted investment spending, catalysts are in place for a rebound in business spending over the coming quarters.

New Commodity producersCommodity producers tend to outperform in a maturing economic cycle.

Rewarding experiencesConsumers are increasingly spending more on experiences vs. goods.

Event-driven strategiesEquity-driven strategies can represent attractive ways to capitalize on companies’ corporate actions.

Finding value in EMRecovering EM economic growth and higher commodity prices should support EM value outperformance.

Restructuring and turnarounds Certain companies undergoing restructuring may outperform the broader market in the coming years.

Equity–ESGGender lens Evidence suggests that gender-diverse companies are more profitable and tend to outperform their less-diverse peers.

Sustainable value creation in EMIncorporating environmental, social, and corporate governance considerations into EM equity investment decisions may provide a competitive edge.

CommoditiesA precious basket Amid market volatility, a weaker US dollar, and accelerating economic activity we advise investors to hold real assets such as precious metals. KEY

Sustainable longer-term investment theme Longer-term investments = Multi-business cycle Shorter-term investments = Current business cycle

Themes universe For guidance on how to invest in each of the themes on this page, please contact your Financial Advisor.

Click any theme title to go to the full report.

14 of 40 UBS HOUSE VIEW July 2018

Global economic outlookGrowth has been somewhat softer than expected so far this year in many countries, with European countries in particular disappointing. Trade friction has created uncertainty and is a negative for business investment, but we expect a full-blown trade war to be avoided. We still forecast global growth to exceed 4% this year. US growth has picked up recently as fiscal stimulus kicks in. Inflation has risen to the Fed’s 2% target and we expect the Fed to continue gradually hiking rates in the quarters ahead.

Central bank policyBrian Rose, PhD Senior Economist Americas

Ricardo Garcia-SchildknechtEconomist

House ViewProbability: 75%

Policies tighten gradually Signals from the Federal Reserve suggest another two interest-rate hikes this year, to take the federal funds rate to 2.5%. Additional fiscal stimulus at a time of full employment is a concern for the medium-term interest-rate outlook. The Fed continues to reduce liquidity supply, with the intention of matching a decline in liquidity demand in the economy. The ECB is still buying bonds in spite of rising economic growth, employment, inflation, and bank lending. Its current asset purchases of EUR 30bn a month are set to end by the end of this year. The Bank of England’s language does not remove the possibility of an increase later this year.

Positive scenarioProbability: 10%

Policy remains accommodativeThe Fed falls further behind the curve as US inflation surprises higher, with real interest rates slipping more rapidly. The ECB reverses its tone and puts a stronger emphasis on the potential to ease policy further. The Bank of Japan (BoJ) comes under pressure to engineer currency depreciation.

Negative scenarioProbability: 15%

More rapid policy tighteningThe inflationary effect of a tighter US labor market and fiscal stimulus leads to a stronger Fed response and a combination of tight monetary policy and loose fiscal policy. Increased labor costs and commodity price pressures lead to higher European inflation, signaling a more rapid monetary policy tightening.

KEY FINANCIAL MARKET DRIVERS

Real GDP growth in % Inflation in %2017F 2018F 2019F 2017F 2018F 2019F

US 2.3 2.8 3.0 2.1 2.5 2.1

Canada 3.0 3.2 3.7 1.6 2.2 2.2

Brazil 0.9 2.2 2.7 3.4 3.5 4.0

Japan 1.7 1.5 1.1 0.5 1.2 2.1

Australia 2.2 2.8 2.8 1.9 2.1 2.1

China 6.9 6.6 6.4 1.6 2.4 2.2

India 6.7 7.3 7.5 3.6 4.9 4.1

Eurozone 2.5 2.2 2.0 1.5 1.7 1.6

Germany 2.5 2.2 2.1 1.7 1.9 1.5

France 2.3 1.9 2.0 1.2 2.1 1.6

Italy 1.6 1.4 1.2 1.3 1.2 1.0

Spain 3.0 2.8 2.3 2.0 1.9 1.6

UK 1.8 1.4 1.2 2.7 2.4 2.3

Switzerland 1.1 2.4 1.9 0.5 0.8 0.9

Russia 1.5 1.7 1.8 3.7 2.8 5.1

World 3.9 4.1 4.0 2.7 3.1 2.9

Source: Reuters EcoWin, IMF, UBS, as of 20 June 2018Note: In developing the CIO economic forecasts, CIO economists work in collaboration with economists employed by UBS Investment Research. Forecasts and estimates are current only as of the date of this publication, and may change without notice.

Global growth in 2018 expected to be 4.1 %

July 2018 UBS HOUSE VIEW 15 of 40

29 June 2018Personal income and spending for MayThe improving labor market and tax cuts support income. Spending appears to be picking up after softness early in the year. The core personal consumption expenditures deflator, the Fed’s preferred inflation measure, should be near the Fed’s 2% target.

2 July 2018ISM Manufacturing for JuneThe ISM Manufacturing PMI rebounded in May and continues to indicate strength. Manufacturing output dropped in May but the trend remains positive.

5 July 2018ISM Nonmanufacturing for JuneThe ISM Nonmanufacturing PMI provides a timely snapshot of current economic conditions. We will look at details of the report for signs of increasing inflationary pressure.

6 July 2018Labor report for JuneWhile the market tends to focus on the headline increase in nonfarm payrolls, we are more interested in measures such as the unemployment rate and earnings to gauge how much slack is left in the labor market.

12 July 2018CPI for JuneHigher energy prices pushed headline inflation up to a six-year high of 2.8% in May. The market will focus on core inflation, which excludes food and energy, since it is a better indicator of the underlying trend.

Key dates Political risksPaul Donovan Global Chief Economist, WM

House ViewProbability: 70%

Trade concerns are likely to remain the main near-term political focus. The costs of trade protection so far are not especially visible to US consumers. For the most part, US trade taxes should not impact the overall volume of global trade – trade patterns may be redistributed, but not reduced. However, extending trade protection into a trade war would be a more obvious tax on US consumers and have domestic political implications. The EU/UK trade negotiations are likely to be complex and lengthy.

Positive scenarioProbability: 10%

The sharp improvement in labor market conditions for low-skilled workers leads to wage hikes that either are accompanied by better credit access or compensate for the loss of credit access since 2008; this eases income and consumption inequality. Governments and economists successfully communicate the net economic benefits of global trade and diversity.

Negative scenarioProbability: 20%

Nationalist tendencies appear encouraged by single-issue politics and social media. Traditional party structures fail to address the demands of large sections of the electorate, encouraging populism. Political outcomes are increasingly unpredictable as opinion polls offer even less guidance. Trade protectionism escalates as political nationalism is prioritized over economic benefit. Lower income groups’ standards of living are hurt by populist policies and rising food and energy prices, fueling further demands for radical and unpredictable change.

US profit growth remains robustJeremy Zirin, CFAHead, Investment Strategy, WMA

David Lefkowitz, CFASenior Equity Strategist

House ViewProbability: 60%

Earnings growth on solid footing The US earnings growth outlook remains healthy, driven by solid US consumer spending, secular growth drivers in tech, steady gains in US manufacturing activity, higher oil prices (which support the energy sector), and a more favorable environment for financials. Leading indicators of profit growth, such as bank lending standards and capital spending intentions, remain supportive. The tax reform package is icing on the cake on top of this favorable backdrop. Tax reform should boost profits by 8% in 2018, thanks to a lower tax rate and the redeployment of overseas cash into higher-returning assets. 1Q EPS growth of 23% was nearly seven percentage points higher than consensus expectations and three percentage points better than our estimates. Even excluding tax reform benefits, growth of 15% was very solid. Early indications suggest that 2Q EPS growth will be similar to 1Q.

Positive scenarioProbability: 20%

Fiscal policy boosts earnings more than expectedCorporate tax reform and increased government spending generate even faster-than-expected profit growth. Higher interest rates and deregulation further boost financial sector earnings. Investment spending picks up.

Negative scenarioProbability: 20%

Downturn in sentiment Trade and geopolitical tensions flare up, depressing business and consumer sentiment. Wage pressures, without improving consumer and business demand, hurt profit margins and earnings growth rates. Declines in long-term interest rates pressure financial sector earnings.

16 of 40 UBS HOUSE VIEW July 2018

ASSET CLASSES OVERVIEW

Equities ex-US have generally declined over the past month, as the stronger US dollar and rising trade tensions have weighed on markets. Global economic fundamentals are solid, but the growth slowdown in Europe and emerging markets that began a few months ago hasn’t reversed yet. We expect it will, which should drive earnings higher. Thus, we remain overweight global equities. However, the Federal Reserve raising interest rates and ongoing trade tensions could lead to greater market volatility.

Equities

Eurozone neutral

We are neutral on Eurozone equities. The economic backdrop in the region has softened further, but remains on a solid footing. Acknowledging this, the ECB said its bond purchasing program will conclude in December, but hasn’t committed to an end of its negative interest rate policy. This led to some support for equities due to a lower euro. Still, the lower economic trajectory and uncertainties arising from trade policies between the EU and the US, and political uncertainties within the union, are negative factors. Our most preferred sectors are energy, industrials, and consumer discretionary.

UK neutral

We are neutral on UK equities. Forward valuation is in-line with the long-term average, so performance should be driven by earnings growth. Consensus forecast is 10% earnings growth for MSCI UK this year. Due to base effects, UK equities no longer benefit from currency effects despite the recent GBP weakness, but they may get a boost from recovering oil prices. A bit more upside is possible if commodity prices stay at current levels through year-end. The 30% of the FTSE 100 with domestic exposure may remain hampered by the UK economy struggling to rebound after a weak first quarter.

Emerging markets neutral

We have turned neutral on emerging market (EM) equities as we close our long position against US government bonds. US-China trade tensions, rising US bond yields, and USD strength are straining the short-term outlook. Following the recent deterioration in high-frequency macro indicators, we expect the negative earnings momentum to accelerate, creating downside risk to consensus earnings estimates of 13.5% in the next year. EM equities are trading close to 13x 12-month trailing P/E, a 5% premium to their 10-year average but about a 25% discount to their developed market counterparts.

EURO STOXX (index points, current: 383) Six-month target

House view 400

Positive scenario 450

Negative scenario 325

MSCI EM (index points, current: 1093) Six-month target

House view 1135 Positive scenario 1300

Negative scenario 1000

Japan neutral

We are neutral on Japanese equities. Despite better-than-expected FY17 earnings, Japan has been underperforming global equities this year due to concerns about JPY appreciation, the political scandal involving Prime Minister Shinzo Abe, and US-China trade friction. Because of a stronger JPY and a high base of comparison, we expect FY18 earnings (ending March 2019) to fall 4% after rising 21% in FY17. We prefer banks, high-dividend stocks, and companies that benefit from higher inflation.

TOPIX (index points, current: 1753) Six-month target

House view 1825

Positive scenario 2000

Negative scenario 1550

Jeremy Zirin, CFA; David Lefkowitz, CFA; Markus Irngartinger, PhD, CFA; Edmund Tran

FTSE 100 (index points, current: 7627) Six-month target

House view 8000

Positive scenario 8750

Negative scenario 6500

Note: Current values as of 20 June 2018

July 2018 UBS HOUSE VIEW 17 of 40

US equities – styleGrowth stocks have been US market leaders once again in 2018. This has largely been due to the outsized outperformance of the technology sector and other mega-cap, tech-exposed growth stocks in the consumer discretionary sector. However, valuations for growth stocks have become increasingly stretched relative to value stocks. Stronger performance for financials and energy, which we expect, should be the catalyst for a rotation into value.

US equities overview neutral

Strong domestic economic growth and surging corporate profits should drive US equity prices higher over the last six months of 2018. Tensions around trade between the US and China have escalated, but we still expect any potential tariffs to have only a modest impact on the real economy. Interest rate hikes by the Fed have been commensurate with improving growth prospects and rates remain low by historical standards. US equity valuations appear fair in the context of healthy growth and moderate, albeit rising, inflation. We forecast 2018 S&P 500 earnings per share (EPS) of USD 158 (up 19%) and 2019 EPS of USD 167 (up 6%). Our six-month S&P 500 price target is 2,900.

US equities – sectorsThe technology and consumer discretionary sectors have been market leaders thus far in 2018. We are neutral on tech after closing our long-standing overweight stance in March of this year. We are also neutral on the consumer discretionary sector given healthy consumer spending offset by high valuations. We favor beneficiaries of rising interest rates and improving global growth, such as financials, energy and materials. Energy stocks appear particularly attractively valued. Despite significant year-to-date underperformance, we remain underweight utilities and consumer staples.

US equities – sizeSmaller-size segments of the US equity market derive a greater percentage of their earnings from domestic sources relative to larger companies. Therefore, escalating fears regarding global trade combined with the recent divergence between the strong domestic economy and more sluggish global growth have boosted the relative performance of small-caps. We are skeptical that these performance drivers will continue and remain neutral on US small- and mid-caps.

Earnings continue to climb despite trade frictions

Source: Factset, UBS, as of 20 June 2018

S&P 500 next 12-month consensus EPS estimates, in USD

160

120

130

150

140

170

201720162015 2018

Potential for financials to “catch-up” to 10-year Treasury yield

Source: Bloomberg, UBS, as of 20 June 2018

10-year Treasury yield and S&P 500 financials performance relative to the market, indexed

2.5

1.0

1.5

2.0

3.0

3.5

96

75

82

89

103

110

20192018201720162015

10yr Treasury yield (in %, LHS)

S&P 500 financials relative to S&P 500 (RHS)

US equitiesFollowing the extreme market volatility and associated 11% correction in February, US stocks have trended higher thus far during the second quarter. Economic growth has accelerated in 2Q after yet another seasonal winter soft patch. Corporate earnings growth surged in the first quarter and strength in corporate profits should persist throughout 2018. Inflation and interest rates have increased but current levels do not appear high enough to threaten the economic expansion. We favor the financials, energy, and materials sectors.

S&P 500 (index points, current: 2767) Six-month target

House view 2900 Positive scenario 3200

Negative scenario 2350

Note: Current values as of 20 June 2018

18 of 40 UBS HOUSE VIEW July 2018

ASSET CLASSES OVERVIEW

Long-term rates have remained in a narrow range since February, while shorter-term rates continue to rise, pricing further Fed hikes. Yields dipped in late May, if only temporarily, responding to a flare-up in Italian political risk. Inflation is close to the Fed’s target but shows no sign of accelerating in a concerning manner. Capacity constraints mean that the Fed will continue its gradual hiking cycle as long as the economic outlook remains healthy. We believe the US rate cycle has been largely priced and think the 10-year US Treasury yield is attractive. We see risk to the upside should the market price a greater probability of higher inflation. Downside risks include escalating trade tensions and a slowing economy.

Bonds

Government bonds underweight

The 10-year Treasury has remained in a tight range of 2.75–3% over the past several weeks, even with the recently heightened trade tensions. After a stronger-than-expected employment and retail sales number the increase in 10-year yields has been dampened by an increased need for safe haven assets. Although Treasury yields may not be on the move, the shape of the yield curve continues to flatten to year-to-date lows with the 2y/10y spread falling to 35 basis points (bps).

Emerging market bonds overweight1

EM credit has been hit by USD strength and higher US Treasury yields, concerns about external vulnerabilities in select countries, signs of softer growth, and trade tensions. Year-to-date, the asset class posted low-to-mid negative single-digit returns as spreads widened. Downside risks have risen, but we see room for moderate spread tightening over the next six months, on stable-to-improving fundamentals, supportive commodities pricing conditions, and our belief that the external backdrop will remain benign. We advise investors to be overweight in EM sovereign credit, and neutral in EM corporate credit in globally diversified portfolios.

US investment-grade corporate bonds neutral

We remain neutral on IG bonds. Rising Treasury yields and slightly wider credit spreads have resulted in a –3.1% year-to-date return. IG index spreads at 121bps are at the upper end of CIO’s 120bps target range, while IG yields at 4.05% remain at multi-year highs. We continue to favor financials (US banks) over non-financials due to their strong credit profiles and shorter duration. IG corporates with short maturities (1–3 years) provide attractive yield of 3.2% relative to their short duration of only 1.9 years.

US 10-YEAR YIELD (current: 2.9%) Six-month target

House view 3.0%

Positive scenario 2.0–2.2%

Negative scenario 3.2–3.3%

EMBIG div / CEMBI div SPREAD* (current: 363bps / 309bps) Six-month target

House view 290bps /265bps Positive scenario 240bps / 230bps

Negative scenario 450bps / 480bps

*JPMorgan Emerging Market Bond Index Global / JPMorgan Corporate Emerging Bond Index 1 Our emerging market bond overweight is to EM hard-currency bonds.

US IG SPREAD (current: 124bps*) Six-month target

House view 100–120bps Positive scenario 90bps

Negative scenario 275bps*Data based on ICE BAML IG corporate index

US high-yield corporate bonds neutral

We are neutral on USD HY bonds. At 334bps US HY spreads are approaching tights experienced earlier in January 2018 and leave limited opportunity for further compression. US economic fundamentals remain resilient and the trailing 12-month default rate was 1.4% in April, near a four-year low. We expect the default rate to remain broadly steady over the next 12 months. We continue to favor senior loans that should benefit as coupon income increases due to rising LIBOR levels.

Leslie Falconio; Kathleen McNamara, CFA, CFP; Barry McAlinden, CFA; Philipp Schoettler; Frank Sileo, CFA

USD HY SPREAD (current: 334bps*) Six-month target

House view 380–420bps Positive scenario 300bps

Negative scenario 1100bps

*Data based on ICE BAML High Yield indices

Note: Current values as of 20 June 2018

July 2018 UBS HOUSE VIEW 19 of 40

Preferred securitiesRate volatility continues weighing on preferreds, but a wave of redemptions has boosted USD 25 pars. For USD 1,000 pars, the prevalence of fixed-to-floating (F2F) rate coupons has helped, but those with longer first call dates have been weaker. Long-dated calls provide more call protection but also more rate sensitivity. Yield spreads nearing historical lows, coupled with the sector’s duration, lead to a cautious outlook. We expect preferreds to track a “two steps forward, one step back” performance pattern. We favor F2Fs with near-dated calls as well as those with high reset spreads.

Municipal bonds neutral

We anticipate favorable supply/demand dynamics to represent an important tailwind for munis this summer. Reinvestment demand is expected to peak in July. Thus far in 2018, tax-exempt paper (–0.4%) has held up better than US Treasury securities (–2.5%) and investment-grade corporate debt (–3.7%). We attribute this outperformance from tax-exempt munis in large part to tight new issue supply. The pace of new municipal bond sales has declined by about 17% compared to the same time in 2017. Current AAA 10-year muni-to-Treasury yield ratio: 85.1% (last month: 83.2%).

High-yield spreads trend lower in 2018

Source: Factset, UBS, as of 18 June 2018

High-yield spreads (in bps, lhs) and HY 10-year average and median spreads (in bps, rhs)

950

200

450

700

1,200

1,950

584

530

548

566

602

620

638

1,700

1,450

2,200

Jun-18Jun-16Jun-14Jun-12Jun-10Jun-08

HY spread (bp, LHS) Median spread (bp, RHS)

HY Avg spread (bp, RHS)

Non-US developed fixed income neutral

Over the past month, interest rates fell across most developed markets, resulting in modest positive returns. Yields fell after global trade and geopolitical tensions escalated. We expect them to stay in their recent ranges in the near term. Non-US bond yields remain at very unattractive levels. We do not recommend a strategic asset allocation position on the asset class.

Additional US taxable fixed income (TFI) segments

Mortgage-backed securities MBS spreads have remained within a 3bps range the entire month of June as the AAA credit rating has outweighed the decline in yields and increase in volatility. We anticipate MBS spreads to widen in the second half of the year as the Fed begins to increase the monthly caps on the balance sheet roll off from USD 12bn to USD 16bn. Although anticipated, CIO does anticipate slight spread widening to compensate for the extra supply, especially if volatility continues on its upward trend. Current spread is +80.5bps to the 5-year and 10-year Treasury blend (vs. +78bps last publication).

Agency bondsCallable and step-up agency debt remain the favored sector within the asset class. Overall, CIO does not see a lot of relative value within agency debt and prefers the higher spread assets such as mortgage-backed securities (MBS). Although the recent uncertainty abroad has increased volatility and the recent demand for safe havens, investing in a AAA asset class such as MBS offers better risk/reward than the lack of spread in the agency debt market. With a –0.56% total rate of return year-to-date, the asset class offers little in yield and potential carry into the end of the year. Current spread is +6bps to the 5-year (vs. +5bps last month).

Treasury inflation-protected securities (TIPS)The markets’ perception of future inflation has remained surprisingly steady over the past month. The 5-year break-even inflation rate has remained within a 3bps range around 2.08%. Although the CPI number proved better than anticipated the markets have recently witnessed a small correction in the price of WTI crude oil. CIO’s outlook for commodities remains positive and prices should drift slightly higher. Although an overall positive for TIPS we remain neutral 5-year TIPS vs. a US Treasury underweight. The current 5-year breakeven inflation rate is 2.08% (2.1% last month).Note: Current values as of 20 June 2018

UBS CIO interest rate forecasts versus the forward curve

US 19-Jun-18 UBS 6m Forward curve 6m UBS 12m

Forward curve 12m

USD 3m LIBOR 2.33 2.60 2.58 3.10 3.00

USD 2Y Treas. 2.54 2.80 2.89 2.90 2.80

USD 5Y Treas. 2.77 2.80 2.86 2.90 2.91

USD 10Y Treas. 2.89 2.90 2.95 3.00 2.97

USD 30Y Treas 3.03 3.20 3.05 3.20 3.06

Curve: 2y/10y spread (bp) 0.35 0.10 0.06 0.10 0.17

Source: Bloomberg, UBS, as of 19 June 2018

20 of 40 UBS HOUSE VIEW July 2018

ASSET CLASSES OVERVIEW

Broad commodity indices are up 3–5% year-to-date (total return). After a flat 1Q, base metals, energy, and livestock prices have moved up in 2Q. The performance of agricultural commodities has been very mixed this year, while precious metal prices have modestly declined on average. Over the next six months, we expect energy and industrial metal prices to rise further. The latest sanctions on Iran and Venezuela should weigh on oil supply, and economic activity is showing signs of strength. These two factors should keep crude oil and industrial metal markets in deficit. Alongside rising inflation expectations, which should support investor demand for real assets, stronger economic growth outside the US should reverse USD strength in 2H18. This not only supports industrial metals and energy, but helps precious metals and adds favorably to the asset class’s investment picture.

Commodities and other asset classesDominic Schnider, CFA, CAIA; Giovanni Staunovo; Thomas Veraguth; Wayne Gordon

Commodities neutral

Precious metals Gold is broadly flat for the year, as early gains have been eroded by unexpected broad US dollar strength. However, over the long term, we maintain that gold will be a valuable portfolio hedge. For investors with an affinity for real assets and an ability to cope with gold’s volatility of 10–20%, our analysis shows that adding the yellow metal helps reduce portfolio volatility. We expect gold to trade around USD 1,375/oz over six and 12 months.

GOLD (current: USD 1268/oz) Six-month target

House view USD 1375/oz

Positive scenario USD 1475/oz

Negative scenario USD 1250/oz

Crude oil Already in free-fall due to underinvestment and mismanagement, the addition of US financial sanctions will likely keep Venezuela’s production on a downtrend, sliding toward 1mpbd by year-end from 1.4mbpd today. Meanwhile, we expect Iranian crude exports to drop by up to 0.5mbpd in 4Q18 from 2.5mbpd currently. To offset these declines, OPEC and its allies are likely to announce (on 22–23 June) a gradual 0.5mbpd increase in crude production in 2H18. But as this would still leave the oil market in deficit this year, we expect oil prices (Brent) to move into a USD 80–85/bbl band in 2H18.

BRENT (current: USD 75/bbl) Six-month target

House view USD 80/bbl Positive scenario USD 90-100/bbl

Negative scenario USD 60-65/bbl

Agriculture On the agricultural side, the long-awaited USDA World Agricultural Supply & Demand Estimates (WASDE) containing forecasts for 2018–19 were most supportive for grains, in our view, as crop losses in Brazil and Argentina clearly weighed on global 2018–19 beginning inventories. Corn and soybeans showed tightening global inventories-to-use ratios, while wheat’s balance sheet looked broadly unchanged on a year-on-year basis.

Other asset classesListed real estate We anticipate earnings growth of 7.1% p.a. (excluding EM), fueled by internal growth and weak but positive rental reversion. Companies are focused on portfolio optimization, repositioning and reducing financing costs. Earnings growth next year will likely weaken. The cycle is slowly maturing since peaking in 2015, based on transaction volumes and the end of the cyclical global cap-rate compression. Higher capitalization rates may hurt capital values amid a lack of faster rental growth.

RUGL Index (current: USD 4991) Six-month target

House view USD 4800 Positive scenario USD 5000

Negative scenario USD 4600

Note: Current values as of 20 June 2018

Base metals Base metals are a purer play on our global economic expectations: Above-trend growth with the soft patch in Europe and Japan reversing, while Chinese manufacturing and construction activity holds up. Price support for base metals from constrained supply—China’s environment and capacity focus—should be less of a price driver in 2H18.

July 2018 UBS HOUSE VIEW 21 of 40

USD underweight We continue to believe that the USD

will maintain a secular path that leads it from strong overvaluation toward fair value and that undervalued currencies such the JPY, and eventually even the euro, will catch up. We expect the twin US trade and budget deficits to weigh on the USD in the long run.

EUR neutral The European Central Bank (ECB) announcement

that it will probably end quantitative easing (QE) at the end of this year weakened the euro and did not lead to a taper-tantrum-like appreciation. The ECB drove markets, but also said that its policy is, more than ever, driven by incoming data. With the euro weak currently, we expect European data to improve quickly and the ECB to turn more hawkish. Consequently, our expected euro appreciation later this year would be like a natural correction from the current trough.

GBP neutral Sterling has become very cheap again, and a rate

hike by the Bank of England later this year cannot be ruled out. However, Brexit uncertainty has risen again due to political quarrels. In our base case of no cliff-edge Brexit, we expect GBPUSD to rise to 1.46 in six months due to investors shifting from their heavy positioning in USD into GBP.

CHF neutral USDCHF has risen rapidly with US interest rates

surprising to the upside and the euro being under pressure. We can see that USDCHF moves are less pronounced than EURUSD ones. Whenever the euro suffers a larger bout of weakness, the USD and the CHF appreciate. Therefore, we expect USDCHF to remain caught in a broad 0.95–1.00 range.

Foreign exchangeThomas Flury, Strategist

We close our long CAD vs. short USD position as trade challenges distract from an otherwise positive Canadian trend. We keep our long JPY vs. short USD position.

UBS CIO FX forecasts

3M 6M 12M PPP*

EURUSD 1.20 1.25 1.30 1.29

USDJPY 107 103 100 74

USDCAD 1.30 1.28 1.25 1.20

AUDUSD 0.79 0.79 0.79 0.71

GBPUSD 1.36 1.42 1.48 1.61

NZDUSD 0.71 0.71 0.71 0.59

USDCHF 0.98 0.96 0.94 0.94

EURCHF 1.17 1.20 1.22 1.21

GBPCHF 1.33 1.36 1.39 1.51

EURJPY 128 129 130 96

EURGBP 0.88 0.88 0.88 0.80

EURSEK 10.20 10.20 10.20 9.39

EURNOK 9.40 9.40 9.60 10.19

Source: Thomson Reuters, UBS, as of 19 June 2018 Note: Past performance is not an indication of future returns.*PPP = Purchasing Power Parity

JPY overweight The Bank of Japan will have to lean toward

policy normalization in 2H18, laying the foundations for further JPY recovery. The conditions for JPY strength in 2018 are similar to those seen in the EUR in 2017, when the currency rebounded sharply despite the central bank being at an early stage of tightening. We expect USDJPY to test the 2018 low around 105 in the coming months.

Other developed market currencies neutral Continued US trade policy worries have made

investors sell the loonie lately. But the Canadian economy is showing signs of resurgent strength despite trade uncertainties. The Bank of Canada, facing sustained above-target inflation, became more hawkish by dropping its cautious stance on future rate hikes. This, and likely supported oil prices in the next six months, speak for a gradually lower USDCAD.

ASSET CLASSES OVERVIEW

22 of 40 UBS HOUSE VIEW July 2018

Overweight

Neutral

Underweight

Key forecasts As of 20 June 2018

6-month forecast

Asset class TAA1

Change this

month Benchmark Value m/m perf.

in %2 House View Positive

scenarioNegative scenario

EQUITIES

US – S&P 500 2767 2.0% 2900 3200 2350

Eurozone – Euro Stoxx 383 -3.1% 400 450 325

UK – FTSE 100 7627 -1.9% 8000 8750 6500

Japan – Topix 1753 -3.4% 1825 2000 1550

Switzerland SMI 8558 -4.3% 8900 9800 8000

Emerging Markets MSCI EM 1093 -3.8% 1135 1300 1000

BONDS

US Government bonds 10yr Treasury yield 2.9% 0.9% 3.0% 2.0-2.2% 3.2-3.3%

US Corporate bonds – BAML IG spread 124 bps 0.5% 100-120 bps 90 bps 275 bps

US High-yield bonds – BAML US HY spread 334 bps 0.9% 380-420 bps 300 bps 1100 bps

EM Sovereign EMBI Diversified spread 363 bps -0.3% 290 bps 240 bps 450 bps

EM Corporate – CEMBI Diversified spread 309 bps -1.9% 265 bps 230 bps 480 bps

OTHER ASSET CLASSES

Gold – Spot price 1268 /oz. -1.9% 1375/ oz. 1475/ oz. 1250/ oz.

Brent crude oil – Spot price 74.7 /bbl. -4.8% 80.0 /bbl. 90-100 /bbl. 60-65 /bbl.

Listed real estate – RUGL Index 4991 3.2% 4800 5000 4600

CURRENCIES Currency pair

USD NA NA NA NA NA

EUR – EURUSD 1.16 -1.7% 1.25 NA NA

GBP – GBPUSD 1.32 -2.2% 1.42 NA NA

JPY – USDJPY 110 -0.4% 103 NA NA

CHF – USDCHF 1.00 -0.2% 0.96 NA NA

Source: Bloomberg, UBS1 TAA = Tactical asset allocation, 2 Month over monthNote: Current values as of 20 June 2018. Currency values as of 19 June 2018.Past performance is no indication of future performance. Forecasts are not a reliable indicator of future performance.

July 2018 UBS HOUSE VIEW 23 of 40

DETAILED ASSET ALLOCATION

Taxable ultra high net worth investorwith non-traditional assets

Investor risk profile

Conservative Moderately conservative

Moderate Moderately aggressive

Aggressive

Dir

ecti

on

al c

han

ge

All figures in %

Str

ateg

ic a

sset

a

lloca

tion

Tac

tical

dev

iatio

n

Cha

nge1

Cur

rent

allo

catio

n2

Str

ateg

ic a

sset

a

lloca

tion

Tac

tical

dev

iatio

n

Cha

nge1

Cur

rent

allo

catio

n2

Str

ateg

ic a

sset

a

lloca

tion

Tac

tical

dev

iatio

n

Cha

nge1

Cur

rent

allo

catio

n2

Str

ateg

ic a

sset

a

lloca

tion

Tac

tical

dev

iatio

n

Cha

nge1

Cur

rent

allo

catio

n2

Str

ateg

ic a

sset

a

lloca

tion

Tac

tical

dev

iatio

n

Cha

nge1

Cur

rent

allo

catio

n2

Cash 3.0 –1.0 2.0 3.0 –1.5 1.5 3.0 –2.0 1.0 3.0 –2.0 1.0 3.0 –2.0 1.0

p Fixed Income 56.0 +0.0 +0.5 56.0 47.0 +0.0 +1.0 47.0 30.0 +0.0 +1.0 30.0 19.0 +0.0 +1.0 19.0 5.0 +0.0 +1.0 5.0

p US Fixed Income 54.0 –1.0 +1.5 53.0 45.0 –1.0 +2.5 44.0 28.0 –1.5 +2.5 26.5 17.0 –1.5 +2.5 15.5 5.0 –1.5 +2.5 3.5

US Gov't 2.0 –2.0 0.0 2.0 –2.0 0.0 2.0 –2.0 0.0 2.0 –2.0 0.0 0.0 +0.0 0.0

p US Gov't 10 year 0.0 +1.0 +1.0 1.0 0.0 +1.0 +1.0 1.0 0.0 +0.5 +0.5 0.5 0.0 +0.5 +0.5 0.5 0.0 +0.0 0.0

p US Municipal 48.0 +0.0 +0.5 48.0 39.0 +0.0 +1.5 39.0 24.0 +0.0 +2.0 24.0 13.0 +0.0 +2.0 13.0 5.0 –1.5 +2.5 3.5

US IG Corp 4.0 +0.0 4.0 2.0 +0.0 2.0 0.0 +0.0 0.0 0.0 +0.0 0.0 0.0 +0.0 0.0

US HY Corp 0.0 +0.0 0.0 2.0 +0.0 2.0 2.0 +0.0 2.0 2.0 +0.0 2.0 0.0 +0.0 0.0

q Int'l Fixed Income 2.0 +1.0 –1.0 3.0 2.0 +1.0 –1.5 3.0 2.0 +1.5 –1.5 3.5 2.0 +1.5 –1.5 3.5 0.0 +1.5 –1.5 1.5

Int'l Developed Markets 0.0 +0.0 0.0 0.0 +0.0 0.0 0.0 +0.0 0.0 0.0 +0.0 0.0 0.0 +0.0 0.0

Emerging Markets 2.0 +0.0 2.0 2.0 +0.0 2.0 2.0 +0.0 2.0 2.0 +0.0 2.0 0.0 +0.0 0.0

q EM Hard Currency 0.0 +1.0 –1.0 1.0 0.0 +1.0 –1.5 1.0 0.0 +1.5 –1.5 1.5 0.0 +1.5 –1.5 1.5 0.0 +1.5 –1.5 1.5

q Equity 16.0 +1.0 –0.5 17.0 25.0 +1.5 –1.0 26.5 37.0 +2.0 –1.0 39.0 48.0 +2.0 –1.0 50.0 62.0 +2.0 –1.0 64.0

Global Equity 0.0 +1.0 1.0 0.0 +1.5 1.5 0.0 +2.0 2.0 0.0 +2.0 2.0 0.0 +2.0 2.0

US Equity 10.0 +0.0 10.0 14.0 +0.0 14.0 20.0 +0.0 20.0 27.0 +0.0 27.0 35.0 +0.0 35.0

US Large cap Growth 3.5 –0.5 3.0 5.0 –1.0 4.0 7.0 –1.0 6.0 9.5 –1.0 8.5 12.0 –1.0 11.0

US Large cap Value 3.5 +0.5 4.0 5.0 +1.0 6.0 7.0 +1.0 8.0 9.5 +1.0 10.5 12.0 +1.0 13.0

US Mid cap 2.0 +0.0 2.0 2.0 +0.0 2.0 4.0 +0.0 4.0 5.0 +0.0 5.0 7.0 +0.0 7.0

US Small cap 1.0 +0.0 1.0 2.0 +0.0 2.0 2.0 +0.0 2.0 3.0 +0.0 3.0 4.0 +0.0 4.0

q International Equity 6.0 +0.0 –0.5 6.0 11.0 +0.0 –1.0 11.0 17.0 +0.0 –1.0 17.0 21.0 +0.0 –1.0 21.0 27.0 +0.0 –1.0 27.0

Int'l Developed Markets 6.0 +0.0 6.0 8.0 +0.0 8.0 12.0 +0.0 12.0 15.0 +0.0 15.0 19.0 +0.0 19.0

q Emerging Markets 0.0 +0.0 –0.5 0.0 3.0 +0.0 –1.0 3.0 5.0 +0.0 –1.0 5.0 6.0 +0.0 –1.0 6.0 8.0 +0.0 –1.0 8.0

Commodities 0.0 +0.0 0.0 0.0 +0.0 0.0 0.0 +0.0 0.0 0.0 +0.0 0.0 0.0 +0.0 0.0

Non-traditional 25.0 +0.0 25.0 25.0 +0.0 25.0 30.0 +0.0 30.0 30.0 +0.0 30.0 30.0 +0.0 30.0

Hedge Funds 10.0 +0.0 10.0 10.0 +0.0 10.0 10.0 +0.0 10.0 5.0 +0.0 5.0 0.0 +0.0 0.0

Private Equity 10.0 +0.0 10.0 10.0 +0.0 10.0 15.0 +0.0 15.0 20.0 +0.0 20.0 25.0 +0.0 25.0

Private Real Estate 5.0 +0.0 5.0 5.0 +0.0 5.0 5.0 +0.0 5.0 5.0 +0.0 5.0 5.0 +0.0 5.0

CIO tactical deviation legend: Overweight Underweight Neutral. Change legend: p Upgrade q Downgrade for moderate risk profile 1 Change is the difference between the tactical deviation column in the previous month and the current month.2 The current allocation column is the sum of the strategic asset allocation and the tactical deviation columns.Source: UBS and WMA AAC, 21 June 2018. See the Performance Measurement and Appendix sections of the UBS House View: Investment Strategy Guide for performance measurement details and information regarding sources of strategic asset allocations and their suitability, investor risk profiles, and the interpretation of the suggested tactical deviations from the strategic asset allocations.

24 of 40 UBS HOUSE VIEW July 2018

DETAILED ASSET ALLOCATION

Taxable ultra high net worth investorwithout non-traditional assets

Investor risk profile

Conservative Moderately conservative

Moderate Moderately aggressive

Aggressive

Dir

ecti

on

al c

han

ge

All figures in %

Str

ateg

ic a

sset

a

lloca

tion

Tac

tical

dev

iatio

n

Cha

nge1

Cur

rent

allo

catio

n2

Str

ateg

ic a

sset

a

lloca

tion

Tac

tical

dev

iatio

n

Cha

nge1

Cur

rent

allo

catio

n2

Str

ateg

ic a

sset

a

lloca

tion

Tac

tical

dev

iatio

n

Cha

nge1

Cur

rent

allo

catio

n2

Str

ateg

ic a

sset

a

lloca

tion

Tac

tical

dev

iatio

n

Cha

nge1

Cur

rent

allo

catio

n2

Str

ateg

ic a

sset

a

lloca

tion

Tac

tical

dev

iatio

n

Cha

nge1

Cur

rent

allo

catio

n2

Cash 5.0 –1.0 4.0 5.0 –1.5 3.5 5.0 –2.0 3.0 5.0 –2.0 3.0 5.0 –2.0 3.0

p Fixed Income 79.0 +0.0 +0.5 79.0 63.0 +0.0 +1.0 63.0 46.0 +0.0 +1.0 46.0 27.0 +0.0 +1.0 27.0 10.0 +0.0 +1.0 10.0

p US Fixed Income 77.0 –1.0 +1.5 76.0 61.0 –1.0 +2.5 60.0 44.0 –1.5 +2.5 42.5 25.0 –1.5 +2.5 23.5 10.0 –1.5 +2.5 8.5

US Gov't 17.0 –2.0 +1.5 15.0 2.0 –2.0 0.0 2.0 –2.0 0.0 2.0 –2.0 0.0 5.0 –3.5 +1.5 1.5

p US Gov't 10 year 0.0 +1.0 1.0 0.0 +1.0 +1.0 1.0 0.0 +0.5 +0.5 0.5 0.0 +0.5 +0.5 0.5 0.0 +2.0 +1.0 2.0

p US Municipal 56.0 +0.0 56.0 55.0 +0.0 +1.5 55.0 40.0 +0.0 +2.0 40.0 21.0 +0.0 +2.0 21.0 5.0 +0.0 5.0

US IG Corp 4.0 +0.0 4.0 2.0 +0.0 2.0 0.0 +0.0 0.0 0.0 +0.0 0.0 0.0 +0.0 0.0

US HY Corp 0.0 +0.0 0.0 2.0 +0.0 2.0 2.0 +0.0 2.0 2.0 +0.0 2.0 0.0 +0.0 0.0

q Int'l Fixed Income 2.0 +1.0 –1.0 3.0 2.0 +1.0 –1.5 3.0 2.0 +1.5 –1.5 3.5 2.0 +1.5 –1.5 3.5 0.0 +1.5 –1.5 1.5

Int'l Developed Markets 0.0 +0.0 0.0 0.0 +0.0 0.0 0.0 +0.0 0.0 0.0 +0.0 0.0 0.0 +0.0 0.0

Emerging Markets 2.0 +0.0 2.0 2.0 +0.0 2.0 2.0 +0.0 2.0 2.0 +0.0 2.0 0.0 +0.0 0.0

q EM Hard Currency 0.0 +1.0 –1.0 1.0 0.0 +1.0 –1.5 1.0 0.0 +1.5 –1.5 1.5 0.0 +1.5 –1.5 1.5 0.0 +1.5 –1.5 1.5

q Equity 16.0 +1.0 –0.5 17.0 32.0 +1.5 –1.0 33.5 49.0 +2.0 –1.0 51.0 68.0 +2.0 –1.0 70.0 85.0 +2.0 –1.0 87.0

Global Equity 0.0 +1.0 1.0 0.0 +1.5 1.5 0.0 +2.0 2.0 0.0 +2.0 2.0 0.0 +2.0 2.0

US Equity 10.0 +0.0 10.0 20.0 +0.0 20.0 28.0 +0.0 28.0 40.0 +0.0 40.0 46.0 +0.0 46.0

US Large cap Growth 3.5 –0.5 3.0 7.0 –1.0 6.0 10.0 –1.0 9.0 14.0 –1.0 13.0 16.0 –1.0 15.0

US Large cap Value 3.5 +0.5 4.0 7.0 +1.0 8.0 10.0 +1.0 11.0 14.0 +1.0 15.0 16.0 +1.0 17.0

US Mid cap 2.0 +0.0 2.0 4.0 +0.0 4.0 5.0 +0.0 5.0 8.0 +0.0 8.0 9.0 +0.0 9.0

US Small cap 1.0 +0.0 1.0 2.0 +0.0 2.0 3.0 +0.0 3.0 4.0 +0.0 4.0 5.0 +0.0 5.0

q International Equity 6.0 +0.0 –0.5 6.0 12.0 +0.0 –1.0 12.0 21.0 +0.0 –1.0 21.0 28.0 +0.0 –1.0 28.0 39.0 +0.0 –1.0 39.0

Int’l Developed Markets 6.0 +0.0 6.0 9.0 +0.0 9.0 15.0 +0.0 15.0 20.0 +0.0 20.0 28.0 +0.0 28.0

q Emerging Markets 0.0 +0.0 –0.5 0.0 3.0 +0.0 –1.0 3.0 6.0 +0.0 –1.0 6.0 8.0 +0.0 –1.0 8.0 11.0 +0.0 –1.0 11.0

Commodities 0.0 +0.0 0.0 0.0 +0.0 0.0 0.0 +0.0 0.0 0.0 +0.0 0.0 0.0 +0.0 0.0

CIO tactical deviation legend: Overweight Underweight Neutral. Change legend: p Upgrade q Downgrade for moderate risk profile 1 Change is the difference between the tactical deviation column in the previous month and the current month.2 The current allocation column is the sum of the strategic asset allocation and the tactical deviation columns.Source: UBS and WMA AAC, 21 June 2018. See the Performance Measurement and Appendix sections of the UBS House View: Investment Strategy Guide for performance measurement details and information regarding sources of strategic asset allocations and their suitability, investor risk profiles, and the interpretation of the suggested tactical deviations from the strategic asset allocations.

July 2018 UBS HOUSE VIEW 25 of 40

DETAILED ASSET ALLOCATION

Taxable ultra high net worth investoryield-focused

Investor risk profile

Conservative Moderately conservative

Moderate Moderately aggressive

Aggressive

Dir

ecti

on

al c

han

ge

All figures in %

Str

ateg

ic a

sset

a

lloca

tion

Tac

tical

dev

iatio

n

Cha

nge1

Cur

rent

allo

catio

n2

Str

ateg

ic a

sset

a

lloca

tion

Tac

tical

dev

iatio

n

Cha

nge1

Cur

rent

allo

catio

n2

Str

ateg

ic a

sset

a

lloca

tion

Tac

tical

dev

iatio

n

Cha

nge1

Cur

rent

allo

catio

n2

Str

ateg

ic a

sset

a

lloca

tion

Tac

tical

dev

iatio

n

Cha

nge1

Cur

rent

allo

catio

n2

Str

ateg

ic a

sset

a

lloca

tion

Tac

tical

dev

iatio

n

Cha

nge1

Cur

rent

allo

catio

n2

Cash 3.0 –1.0 2.0 3.0 –1.0 2.0 3.0 –1.0 2.0 3.0 –1.0 2.0 3.0 –1.0 2.0

p Fixed Income 65.0 +0.0 +0.5 65.0 56.0 –0.5 +1.0 55.5 43.0 –1.0 +1.0 42.0 30.0 +0.5 +2.5 30.5 12.0 +0.5 +2.5 12.5

p US Fixed Income 61.0 –1.0 +1.5 60.0 48.0 –1.5 +2.5 46.5 32.0 –2.5 +2.5 29.5 22.0 –1.0 +4.0 21.0 10.0 –1.0 +4.0 9.0

p US Gov't 25.0 –2.0 +1.5 23.0 15.0 –3.0 +2.0 12.0 6.0 –4.5 +1.5 1.5 3.0 –3.0 0.0 3.0 –3.0 0.0

p US Gov't 10 year 0.0 +1.0 1.0 0.0 +1.5 +0.5 1.5 0.0 +2.0 +1.0 2.0 0.0 +2.0 +2.0 2.0 0.0 +2.0 +2.0 2.0

US Municipal 23.0 +0.0 23.0 14.0 +0.0 14.0 6.0 +0.0 6.0 3.0 +0.0 +2.0 3.0 3.0 +0.0 +2.0 3.0

US IG Corp 4.0 +0.0 4.0 4.0 +0.0 4.0 4.0 +0.0 4.0 0.0 +0.0 0.0 0.0 +0.0 0.0

US HY Corp 9.0 +0.0 9.0 15.0 +0.0 15.0 16.0 +0.0 16.0 16.0 +0.0 16.0 4.0 +0.0 4.0

q Int'l Fixed Income 4.0 +1.0 –1.0 5.0 8.0 +1.0 –1.5 9.0 11.0 +1.5 –1.5 12.5 8.0 +1.5 –1.5 9.5 2.0 +1.5 –1.5 3.5

EM Local Currency 0.0 +0.0 0.0 3.0 +0.0 3.0 6.0 +0.0 6.0 6.0 +0.0 6.0 2.0 +0.0 2.0

q EM Hard Currency 4.0 +1.0 –1.0 5.0 5.0 +1.0 –1.5 6.0 5.0 +1.5 –1.5 6.5 2.0 +1.5 –1.5 3.5 0.0 +1.5 –1.5 1.5

q Equity 12.0 +1.0 –0.5 13.0 21.0 +1.5 –1.0 22.5 34.0 +2.0 –1.0 36.0 47.0 +0.5 –2.5 47.5 62.0 +0.5 –2.5 62.5

Global Equity 0.0 +1.0 1.0 0.0 +1.5 1.5 0.0 +2.0 2.0 0.0 +0.5 –1.5 0.5 0.0 +0.5 –1.5 0.5

US Equity 6.0 +0.0 6.0 11.0 +0.0 11.0 16.0 +0.0 16.0 21.0 +0.0 21.0 24.0 +0.0 24.0

US Large cap Growth 2.0 –0.5 1.5 3.0 –1.0 2.0 4.0 –1.0 3.0 6.0 –1.0 5.0 6.0 –1.0 5.0

US Large cap Value 4.0 +0.5 4.5 8.0 +1.0 9.0 12.0 +1.0 13.0 15.0 +1.0 16.0 18.0 +1.0 19.0

q International Equity 6.0 +0.0 –0.5 6.0 10.0 +0.0 –1.0 10.0 18.0 +0.0 –1.0 18.0 26.0 +0.0 –1.0 26.0 38.0 +0.0 –1.0 38.0

Int’l Developed Value 6.0 +0.0 6.0 10.0 +0.0 10.0 15.0 +0.0 15.0 21.0 +0.0 21.0 29.0 +0.0 29.0

q Emerging Markets 0.0 +0.0 –0.5 0.0 0.0 +0.0 –1.0 0.0 3.0 +0.0 –1.0 3.0 5.0 +0.0 –1.0 5.0 9.0 +0.0 –1.0 9.0

Yield Assets 20.0 +0.0 20.0 20.0 +0.0 20.0 20.0 +0.0 20.0 20.0 +0.0 20.0 23.0 +0.0 23.0

Senior Loans 6.0 +0.0 6.0 4.0 +0.0 4.0 2.0 +0.0 2.0 0.0 +0.0 0.0 0.0 +0.0 0.0

Preferreds 10.0 +0.0 10.0 7.0 +0.0 7.0 7.0 +0.0 7.0 5.0 +0.0 5.0 2.0 +0.0 2.0

MLPs 4.0 +0.0 4.0 7.0 +0.0 7.0 9.0 +0.0 9.0 12.0 +0.0 12.0 16.0 +0.0 16.0

US Real Estate 0.0 +0.0 0.0 2.0 +0.0 2.0 2.0 +0.0 2.0 3.0 +0.0 3.0 5.0 +0.0 5.0

CIO tactical deviation legend: Overweight Underweight Neutral. Change legend: p Upgrade q Downgrade for moderate risk profile 1 Change is the difference between the tactical deviation column in the previous month and the current month. 2 The current allocation column is the sum of the strategic asset allocation and the tactical deviation columns.Source: UBS and WMA AAC, 21 June 2018. See the Performance Measurement and Appendix sections of the UBS House View: Investment Strategy Guide for performance measurement details and information regarding sources of strategic asset allocations and their suitability, investor risk profiles, and the interpretation of the suggested tactical deviations from the strategic asset allocations.

26 of 40 UBS HOUSE VIEW July 2018

DETAILED ASSET ALLOCATION

Tax-exempt institutional investorwith non-traditional assets

Investor risk profile

Conservative Moderately conservative

Moderate Moderately aggressive

Aggressive

Dir

ecti

on

al c

han

ge

All figures in %

Str

ateg

ic a

sset

a

lloca

tion

Tac

tical

dev

iatio

n

Cha

nge1

Cur

rent

allo

catio

n2

Str

ateg

ic a

sset

a

lloca

tion

Tac

tical

dev

iatio

n

Cha

nge1

Cur

rent

allo

catio

n2

Str

ateg

ic a

sset

a

lloca

tion

Tac

tical

dev

iatio

n

Cha

nge1

Cur

rent

allo

catio

n2

Str

ateg

ic a

sset

a

lloca

tion

Tac

tical

dev

iatio

n

Cha

nge1

Cur

rent

allo

catio

n2

Str

ateg

ic a

sset

a

lloca

tion

Tac

tical

dev

iatio

n

Cha

nge1

Cur

rent

allo

catio

n2

Cash 3.0 –1.0 2.0 3.0 –1.5 1.5 3.0 –2.0 1.0 3.0 –2.0 1.0 3.0 –2.0 1.0

p Fixed Income 55.0 +0.0 +0.5 55.0 41.0 +0.0 +1.0 41.0 29.0 +0.0 +1.0 29.0 16.0 +0.0 +1.0 16.0 9.0 +0.0 +1.0 9.0

p US Fixed Income 50.0 –1.0 +1.5 49.0 39.0 –1.0 +2.5 38.0 27.0 –1.5 +2.5 25.5 14.0 –1.5 +2.5 12.5 9.0 –1.5 +2.5 7.5

p US Gov't 36.0 –2.0 +1.5 34.0 28.0 –2.5 +2.5 25.5 18.0 –3.5 +2.5 14.5 11.0 –3.5 +2.5 7.5 9.0 –3.5 +2.5 5.5

US Gov't 10 year 0.0 +1.0 1.0 0.0 +1.5 1.5 0.0 +2.0 2.0 0.0 +2.0 2.0 0.0 +2.0 2.0

US Municipal 0.0 +0.0 0.0 0.0 +0.0 0.0 0.0 +0.0 0.0 0.0 +0.0 0.0 0.0 +0.0 0.0

US IG Corp 9.0 +0.0 9.0 7.0 +0.0 7.0 6.0 +0.0 6.0 0.0 +0.0 0.0 0.0 +0.0 0.0

US HY Corp 5.0 +0.0 5.0 4.0 +0.0 4.0 3.0 +0.0 3.0 3.0 +0.0 3.0 0.0 +0.0 0.0

q Int'l Fixed Income 5.0 +1.0 –1.0 6.0 2.0 +1.0 –1.5 3.0 2.0 +1.5 –1.5 3.5 2.0 +1.5 –1.5 3.5 0.0 +1.5 –1.5 1.5

Int'l Developed Markets 0.0 +0.0 0.0 0.0 +0.0 0.0 0.0 +0.0 0.0 0.0 +0.0 0.0 0.0 +0.0 0.0

Emerging Markets 5.0 +0.0 5.0 2.0 +0.0 2.0 2.0 +0.0 2.0 2.0 +0.0 2.0 0.0 +0.0 0.0

q EM Hard Currency 0.0 +1.0 –1.0 1.0 0.0 +1.0 –1.5 1.0 0.0 +1.5 –1.5 1.5 0.0 +1.5 –1.5 1.5 0.0 +1.5 –1.5 1.5

q Equity 12.0 +1.0 –0.5 13.0 26.0 +1.5 –1.0 27.5 38.0 +2.0 –1.0 40.0 51.0 +2.0 –1.0 53.0 58.0 +2.0 –1.0 60.0

Global Equity 0.0 +1.0 1.0 0.0 +1.5 1.5 0.0 +2.0 2.0 0.0 +2.0 2.0 0.0 +2.0 2.0

US Equity 8.0 +0.0 8.0 13.0 +0.0 13.0 19.0 +0.0 19.0 25.0 +0.0 25.0 28.0 +0.0 28.0

US Large cap Growth 3.0 –0.5 2.5 4.5 –1.0 3.5 6.5 –1.0 5.5 8.5 –1.0 7.5 9.5 –1.0 8.5

US Large cap Value 3.0 +0.5 3.5 4.5 +1.0 5.5 6.5 +1.0 7.5 8.5 +1.0 9.5 9.5 +1.0 10.5

US Mid cap 2.0 +0.0 2.0 3.0 +0.0 3.0 4.0 +0.0 4.0 5.0 +0.0 5.0 6.0 +0.0 6.0

US Small cap 0.0 +0.0 0.0 1.0 +0.0 1.0 2.0 +0.0 2.0 3.0 +0.0 3.0 3.0 +0.0 3.0

q International Equity 4.0 +0.0 –0.5 4.0 13.0 +0.0 –1.0 13.0 19.0 +0.0 –1.0 19.0 26.0 +0.0 –1.0 26.0 30.0 +0.0 –1.0 30.0

Int'l Developed Markets 4.0 +0.0 4.0 9.0 +0.0 9.0 13.0 +0.0 13.0 18.0 +0.0 18.0 21.0 +0.0 21.0

q Emerging Markets 0.0 +0.0 –0.5 0.0 4.0 +0.0 –1.0 4.0 6.0 +0.0 –1.0 6.0 8.0 +0.0 –1.0 8.0 9.0 +0.0 –1.0 9.0

Commodities 0.0 +0.0 0.0 0.0 +0.0 0.0 0.0 +0.0 0.0 0.0 +0.0 0.0 0.0 +0.0 0.0

Non-traditional 30.0 +0.0 30.0 30.0 +0.0 30.0 30.0 +0.0 30.0 30.0 +0.0 30.0 30.0 +0.0 30.0

Hedge Funds 13.0 +0.0 13.0 13.0 +0.0 13.0 13.0 +0.0 13.0 10.0 +0.0 10.0 0.0 +0.0 0.0

Private Equity 10.0 +0.0 10.0 11.0 +0.0 11.0 12.0 +0.0 12.0 15.0 +0.0 15.0 25.0 +0.0 25.0

Private Real Estate 7.0 +0.0 7.0 6.0 +0.0 6.0 5.0 +0.0 5.0 5.0 +0.0 5.0 5.0 +0.0 5.0

CIO tactical deviation legend: Overweight Underweight Neutral. Change legend: p Upgrade q Downgrade for moderate risk profile 1 Change is the difference between the tactical deviation column in the previous month and the current month.2 The current allocation column is the sum of the strategic asset allocation and the tactical deviation columns.Source: UBS and WMA AAC, 21 June 2018. See the Performance Measurement and Appendix sections of the UBS House View: Investment Strategy Guide for performance measurement details and information regarding sources of strategic asset allocations and their suitability, investor risk profiles, and the interpretation of the suggested tactical deviations from the strategic asset allocations.

July 2018 UBS HOUSE VIEW 27 of 40

DETAILED ASSET ALLOCATION

Tax-exempt institutional investorwithout non-traditional assets

Investor risk profile

Conservative Moderately conservative

Moderate Moderately aggressive

Aggressive

Dir

ecti

on

al c

han

ge

All figures in %

Str

ateg

ic a

sset

a

lloca

tion

Tac

tical

dev

iatio

n

Cha

nge1

Cur

rent

allo

catio

n2

Str

ateg

ic a

sset

a

lloca

tion

Tac

tical

dev

iatio

n

Cha

nge1

Cur

rent

allo

catio

n2

Str

ateg

ic a

sset

a

lloca

tion

Tac

tical

dev

iatio

n

Cha

nge1

Cur

rent

allo

catio

n2

Str

ateg

ic a

sset

a

lloca

tion

Tac

tical

dev

iatio

n

Cha

nge1

Cur

rent

allo

catio

n2

Str

ateg

ic a

sset

a

lloca

tion

Tac

tical

dev

iatio

n

Cha

nge1

Cur

rent

allo

catio

n2

Cash 5.0 –1.0 4.0 5.0 –1.5 3.5 5.0 –2.0 3.0 5.0 –2.0 3.0 5.0 –2.0 3.0

p Fixed Income 79.0 +0.0 +0.5 79.0 63.0 +0.0 +1.0 63.0 46.0 +0.0 +1.0 46.0 27.0 +0.0 +1.0 27.0 10.0 +0.0 +1.0 10.0

p US Fixed Income 74.0 –1.0 +1.5 73.0 58.0 –1.0 +2.5 57.0 42.0 –1.5 +2.5 40.5 24.0 –1.5 +2.5 22.5 10.0 –1.5 +2.5 8.5

p US Gov't 35.0 –2.0 +1.5 33.0 25.0 –2.5 +2.5 22.5 16.0 –3.5 +2.5 12.5 7.0 –3.5 +2.5 3.5 5.0 –3.5 +1.5 1.5

US Gov't 10 year 0.0 +1.0 1.0 0.0 +1.5 1.5 0.0 +2.0 2.0 0.0 +2.0 2.0 0.0 +2.0 +1.0 2.0

US Municipal 0.0 +0.0 0.0 0.0 +0.0 0.0 0.0 +0.0 0.0 0.0 +0.0 0.0 0.0 +0.0 0.0

US IG Corp 34.0 +0.0 34.0 28.0 +0.0 28.0 21.0 +0.0 21.0 12.0 +0.0 12.0 5.0 +0.0 5.0

US HY Corp 5.0 +0.0 5.0 5.0 +0.0 5.0 5.0 +0.0 5.0 5.0 +0.0 5.0 0.0 +0.0 0.0

q Int'l Fixed Income 5.0 +1.0 –1.0 6.0 5.0 +1.0 –1.5 6.0 4.0 +1.5 –1.5 5.5 3.0 +1.5 –1.5 4.5 0.0 +1.5 –1.5 1.5

Int'l Developed Markets 0.0 +0.0 0.0 0.0 +0.0 0.0 0.0 +0.0 0.0 0.0 +0.0 0.0 0.0 +0.0 0.0

Emerging Markets 5.0 +0.0 5.0 5.0 +0.0 5.0 4.0 +0.0 4.0 3.0 +0.0 3.0 0.0 +0.0 0.0

q EM Hard Currency 0.0 +1.0 –1.0 1.0 0.0 +1.0 –1.5 1.0 0.0 +1.5 –1.5 1.5 0.0 +1.5 –1.5 1.5 0.0 +1.5 –1.5 1.5

q Equity 16.0 +1.0 –0.5 17.0 32.0 +1.5 –1.0 33.5 49.0 +2.0 –1.0 51.0 68.0 +2.0 –1.0 70.0 85.0 +2.0 –1.0 87.0

Global Equity 0.0 +1.0 1.0 0.0 +1.5 1.5 0.0 +2.0 2.0 0.0 +2.0 2.0 0.0 +2.0 2.0

US Equity 10.0 +0.0 10.0 18.0 +0.0 18.0 26.0 +0.0 26.0 35.0 +0.0 35.0 45.0 +0.0 45.0

US Large cap Growth 3.5 –0.5 3.0 6.5 –1.0 5.5 9.0 –1.0 8.0 12.0 –1.0 11.0 16.0 –1.0 15.0

US Large cap Value 3.5 +0.5 4.0 6.5 +1.0 7.5 9.0 +1.0 10.0 12.0 +1.0 13.0 16.0 +1.0 17.0

US Mid cap 2.0 +0.0 2.0 3.0 +0.0 3.0 5.0 +0.0 5.0 7.0 +0.0 7.0 8.0 +0.0 8.0

US Small cap 1.0 +0.0 1.0 2.0 +0.0 2.0 3.0 +0.0 3.0 4.0 +0.0 4.0 5.0 +0.0 5.0

q International Equity 6.0 +0.0 –0.5 6.0 14.0 +0.0 –1.0 14.0 23.0 +0.0 –1.0 23.0 33.0 +0.0 –1.0 33.0 40.0 +0.0 –1.0 40.0

Int’l Developed Markets 6.0 +0.0 6.0 10.0 +0.0 10.0 17.0 +0.0 17.0 24.0 +0.0 24.0 29.0 +0.0 29.0

q Emerging Markets 0.0 +0.0 –0.5 0.0 4.0 +0.0 –1.0 4.0 6.0 +0.0 –1.0 6.0 9.0 +0.0 –1.0 9.0 11.0 +0.0 –1.0 11.0

Commodities 0.0 +0.0 0.0 0.0 +0.0 0.0 0.0 +0.0 0.0 0.0 +0.0 0.0 0.0 +0.0 0.0

CIO tactical deviation legend: Overweight Underweight Neutral. Change legend: p Upgrade q Downgrade for moderate risk profile 1 Change is the difference between the tactical deviation column in the previous month and the current month.2 The current allocation column is the sum of the strategic asset allocation and the tactical deviation columns.Source: UBS and WMA AAC, 21 June 2018. See the Performance Measurement and Appendix sections of the UBS House View: Investment Strategy Guide for performance measurement details and information regarding sources of strategic asset allocations and their suitability, investor risk profiles, and the interpretation of the suggested tactical deviations from the strategic asset allocations.

28 of 40 UBS HOUSE VIEW July 2018

DETAILED ASSET ALLOCATION

Tax-exempt institutional investoryield-focused

Investor risk profile

Conservative Moderately conservative

Moderate Moderately aggressive

Aggressive

Dir

ecti

on

al c

han

ge

All figures in %

Str

ateg

ic a

sset

a

lloca

tion

Tac

tical

dev

iatio

n

Cha

nge1

Cur

rent

allo

catio

n2

Str

ateg

ic a

sset

a

lloca

tion

Tac

tical

dev

iatio

n

Cha

nge1

Cur

rent

allo

catio

n2

Str

ateg

ic a

sset

a

lloca

tion

Tac

tical

dev

iatio

n

Cha

nge1

Cur

rent

allo

catio

n2

Str

ateg

ic a

sset

a

lloca

tion

Tac

tical

dev

iatio

n

Cha

nge1

Cur

rent

allo

catio

n2

Str

ateg

ic a

sset

a

lloca

tion

Tac

tical

dev

iatio

n

Cha

nge1

Cur

rent

allo

catio

n2

Cash 3.0 –1.0 2.0 3.0 –1.0 2.0 3.0 –1.0 2.0 3.0 –1.0 2.0 3.0 –1.0 2.0

p Fixed Income 65.0 +0.0 +0.5 65.0 56.0 –0.5 +1.0 55.5 43.0 –1.0 +1.0 42.0 30.0 –1.0 +1.0 29.0 12.0 –1.0 +1.0 11.0

p US Fixed Income 60.0 –1.0 +1.5 59.0 46.0 –1.5 +2.5 44.5 32.0 –2.5 +2.5 29.5 22.0 –2.5 +2.5 19.5 10.0 –2.5 +2.5 7.5

p US Gov't 30.0 –2.0 +1.5 28.0 16.0 –3.0 +2.0 13.0 10.0 –4.5 +1.5 5.5 5.0 –4.5 +0.5 0.5 5.0 –4.5 +0.5 0.5

p US Gov't 10 year 0.0 +1.0 1.0 0.0 +1.5 +0.5 1.5 0.0 +2.0 +1.0 2.0 0.0 +2.0 +2.0 2.0 0.0 +2.0 +2.0 2.0

US Municipal 0.0 +0.0 0.0 0.0 +0.0 0.0 0.0 +0.0 0.0 0.0 +0.0 0.0 0.0 +0.0 0.0

US IG Corp 18.0 +0.0 18.0 16.0 +0.0 16.0 6.0 +0.0 6.0 2.0 +0.0 2.0 0.0 +0.0 0.0

US HY Corp 12.0 +0.0 12.0 14.0 +0.0 14.0 16.0 +0.0 16.0 15.0 +0.0 15.0 5.0 +0.0 5.0

q Int'l Fixed Income 5.0 +1.0 –1.0 6.0 10.0 +1.0 –1.5 11.0 11.0 +1.5 –1.5 12.5 8.0 +1.5 –1.5 9.5 2.0 +1.5 –1.5 3.5

EM Local Currency 2.0 +0.0 2.0 5.0 +0.0 5.0 6.0 +0.0 6.0 6.0 +0.0 6.0 2.0 +0.0 2.0

q EM Hard Currency 3.0 +1.0 –1.0 4.0 5.0 +1.0 –1.5 6.0 5.0 +1.5 –1.5 6.5 2.0 +1.5 –1.5 3.5 0.0 +1.5 –1.5 1.5

q Equity 12.0 +1.0 –0.5 13.0 21.0 +1.5 –1.0 22.5 34.0 +2.0 –1.0 36.0 47.0 +2.0 –1.0 49.0 62.0 +2.0 –1.0 64.0

Global Equity 0.0 +1.0 1.0 0.0 +1.5 1.5 0.0 +2.0 2.0 0.0 +2.0 2.0 0.0 +2.0 2.0

US Equity 6.0 +0.0 6.0 10.0 +0.0 10.0 15.0 +0.0 15.0 19.0 +0.0 19.0 24.0 +0.0 24.0

US Large cap Growth 2.0 –0.5 1.5 3.0 –1.0 2.0 4.0 –1.0 3.0 5.0 –1.0 4.0 6.0 –1.0 5.0

US Large cap Value 4.0 +0.5 4.5 7.0 +1.0 8.0 11.0 +1.0 12.0 14.0 +1.0 15.0 18.0 +1.0 19.0

US Mid cap 0.0 +0.0 0.0 0.0 +0.0 0.0 0.0 +0.0 0.0 0.0 +0.0 0.0 0.0 +0.0 0.0

US Small cap 0.0 +0.0 0.0 0.0 +0.0 0.0 0.0 +0.0 0.0 0.0 +0.0 0.0 0.0 +0.0 0.0

q International Equity 6.0 +0.0 –0.5 6.0 11.0 +0.0 –1.0 11.0 19.0 +0.0 –1.0 19.0 28.0 +0.0 –1.0 28.0 38.0 +0.0 –1.0 38.0

Int’l Developed Value 6.0 +0.0 6.0 11.0 +0.0 11.0 16.0 +0.0 16.0 22.0 +0.0 22.0 29.0 +0.0 29.0

q Emerging Markets 0.0 +0.0 –0.5 0.0 0.0 +0.0 –1.0 0.0 3.0 +0.0 –1.0 3.0 6.0 +0.0 –1.0 6.0 9.0 +0.0 –1.0 9.0

Yield Assets 20.0 +0.0 20.0 20.0 +0.0 20.0 20.0 +0.0 20.0 20.0 +0.0 20.0 23.0 +0.0 23.0

Senior Loans 6.0 +0.0 6.0 4.0 +0.0 4.0 2.0 +0.0 2.0 0.0 +0.0 0.0 0.0 +0.0 0.0

Preferreds 10.0 +0.0 10.0 7.0 +0.0 7.0 6.0 +0.0 6.0 4.0 +0.0 4.0 2.0 +0.0 2.0

MLPs 4.0 +0.0 4.0 7.0 +0.0 7.0 10.0 +0.0 10.0 13.0 +0.0 13.0 16.0 +0.0 16.0

US Real Estate 0.0 +0.0 0.0 2.0 +0.0 2.0 2.0 +0.0 2.0 3.0 +0.0 3.0 5.0 +0.0 5.0

CIO tactical deviation legend: Overweight Underweight Neutral. Change legend: p Upgrade q Downgrade for moderate risk profile 1 Change is the difference between the tactical deviation column in the previous month and the current month. 2 The current allocation column is the sum of the strategic asset allocation and the tactical deviation columns.Source: UBS and WMA AAC, 21 June 2018. See the Performance Measurement and Appendix sections of the UBS House View: Investment Strategy Guide for performance measurement details and information regarding sources of strategic asset allocations and their suitability, investor risk profiles, and the interpretation of the suggested tactical deviations from the strategic asset allocations.

July 2018 UBS HOUSE VIEW 29 of 40

DETAILED ASSET ALLOCATION

All equity and all fixed income models

Publication note The All Equity and All Fixed Income portfolios complement our balanced portfolios and offer more granular implementation of our House View. While we generally do not recommend that investors hold portfolios consisting of only stocks or only bonds, the All Equity and All Fixed Income portfolios can be used by investors who want to complement their existing holdings.

In the All Equity portfolio, tactical tilts will be based on the corresponding tilts to the Equity asset classes in our balanced portfolio (moderate risk profile, taxable without alternative investments). The amount of cash in the All Equity portfolio will vary one-for-one with the overall overweight/underweight on equities in the balanced portfolio, subject to a 3% maximum tilt from the 5% cash allocation. This allows us to use the cash allocation to express a tactical preference between stocks and fixed income. A special feature of the All Equity portfolio is that it includes “carveouts”: 3% allocations to our preferred sectors within US large-caps as well as our preferred countries within both international developed markets and the emerging markets. A maximum of two sectors/countries of each type may be selected for carve-outs.

The All Fixed Income portfolios include both taxable and non-taxable versions. In addition to the fixed income asset classes in the balanced portfolios, the non-taxable version incorporates an additional allocation to Mortgage Backed Securities. Tactical tilts will be based on the corresponding tilts to the Fixed Income asset classes in our balanced portfolios (moderate risk profile without alternative investments, taxable or non-taxable respectively), but only when there is a preference between the fixed income asset classes. For example, an overweight on high-yield corporate bonds offset by an underweight on government bonds in the balanced portfolio would be applied to the All Fixed Income portfolios. However, an overweight on US equities versus US government bonds in the balanced portfolio would not be reflected in the All Fixed Income portfolios. Further, the tilts in the All Fixed Income portfolios will typically be scaled up to twice the size of the tilts in the balanced portfolio.

All equity All fixed income, taxable

All fixed income, non-taxable

All figures in % S

trat

egic

ass

et

allo

catio

n

Tac

tical

dev

iatio

n

Cha

nge1

Cur

rent

allo

catio

n2

Str

ateg

ic a

sset

a

lloca

tion

Tac

tical

dev

iatio

n

Cha

nge1

Cur

rent

allo

catio

n2

Str

ateg

ic a

sset

a

lloca

tion

Tac

tical

dev

iatio

n

Cha

nge1

Cur

rent

allo

catio

n2

Cash 5.0 –2.0 +1.0 3.0 5.0 –3.0 2.0 5.0 –3.0 2.0

Fixed Income 0.0 +0.0 0.0 95.0 +3.0 98.0 95.0 +3.0 98.0

US Fixed Income 0.0 +0.0 0.0 92.5 +0.0 +3.0 92.5 89.0 +0.0 +3.0 89.0

US Gov't 0.0 +0.0 0.0 19.0 –4.0 +2.0 15.0 33.0 –4.0 +2.0 29.0

US Gov't 10 year 0.0 +0.0 0.0 0.0 +4.0 +1.0 4.0 0.0 +4.0 +1.0 4.0

US MBS 0.0 +0.0 0.0 0.0 +0.0 0.0 9.0 +0.0 9.0

US Municipal 0.0 +0.0 0.0 71.0 +0.0 71.0 0.0 +0.0 0.0

US IG Corp 0.0 +0.0 0.0 0.0 +0.0 0.0 41.0 +0.0 41.0

US HY Corp 0.0 +0.0 0.0 2.5 +0.0 2.5 6.0 +0.0 6.0

Int’l Fixed Income 0.0 +0.0 0.0 2.5 +3.0 –3.0 5.5 6.0 +3.0 –3.0 9.0

Int'l Developed Markets 0.0 +0.0 0.0 0.0 +0.0 0.0 0.0 +0.0 0.0

Emerging Markets 0.0 +0.0 0.0 2.5 +0.0 2.5 6.0 +0.0 6.0

EM Hard Currency 0.0 +0.0 0.0 0.0 +3.0 –3.0 3.0 0.0 +3.0 –3.0 3.0

Equity 95.0 +2.0 –1.0 97.0 0.0 +0.0 0.0 0.0 +0.0 0.0

Global Equity 0.0 +2.0 2.0 0.0 +0.0 0.0 0.0 +0.0 0.0

US Equity 53.0 +0.0 53.0 0.0 +0.0 0.0 0.0 +0.0 0.0

US Large cap Growth 7.0 –1.0 6.0 0.0 +0.0 0.0 0.0 +0.0 0.0

US Large cap Value 7.0 +1.0 8.0 0.0 +0.0 0.0 0.0 +0.0 0.0

US Large-cap total market 23.0 +0.0 23.0 0.0 +0.0 0.0 0.0 +0.0 0.0

US Mid cap 10.0 +0.0 10.0 0.0 +0.0 0.0 0.0 +0.0 0.0

US Small cap 6.0 +0.0 6.0 0.0 +0.0 0.0 0.0 +0.0 0.0

International Equity 42.0 +0.0 –1.0 42.0 0.0 +0.0 0.0 0.0 +0.0 0.0

Int'l Developed Markets 30.0 +0.0 30.0 0.0 +0.0 0.0 0.0 +0.0 0.0

Emerging Markets 12.0 –3.0 –1.0 9.0 0.0 +0.0 0.0 0.0 +0.0 0.0

China 0.0 +3.0 3.0 0.0 +0.0 0.0 0.0 +0.0 0.0

Commodities 0.0 +0.0 0.0 0.0 +0.0 0.0 0.0 +0.0 0.0

CIO tactical deviation legend: Overweight Underweight Neutral.1 Change is the difference between the tactical deviation column in the previous month and the current month.2 The current allocation column is the sum of the strategic asset allocation and the tactical deviation columns.Source: UBS and WMA AAC, 21 June 2018. See the Performance Measurement and Appendix sections of the UBS House View: Investment Strategy Guide for performance measurement details and information regarding sources of strategic asset allocations and their suitability, investor risk profiles, and the interpretation of the suggested tactical deviations from the strategic asset allocations.

30 of 40 UBS HOUSE VIEW July 2018

DETAILED ASSET ALLOCATION

All equity and all income, yield-focused

Publication note The All Equity and All Fixed Income portfolios complement our balanced portfolios and offer more granular implementation of our House View. While we generally do not recommend that investors hold portfolios consisting of only stocks or only bonds, the All Equity and All Fixed Income portfolios can be used by investors who want to complement their existing holdings.

In the All Equity portfolio, tactical tilts will be based on the corresponding tilts to the Equity asset classes in our balanced portfolio (moderate risk profile, taxable without alternative investments). The amount of cash in the All Equity portfolio will vary one-for-one with the overall overweight/underweight on equities in the balanced portfolio, subject to a 3% maximum tilt from the 5% cash allocation. This allows us to use the cash allocation to express a tactical preference between stocks and fixed income. A special feature of the All Equity portfolio is that it includes “carveouts”: 3% allocations to our preferred sectors within US large-caps as well as our preferred countries within both international developed markets and the emerging markets. A maximum of two sectors/countries of each type may be selected for carve-outs.

The All Fixed Income portfolios include both taxable and non-taxable versions. In addition to the fixed income asset classes in the balanced portfolios, the non-taxable version incorporates an additional allocation to Mortgage Backed Securities. Tactical tilts will be based on the corresponding tilts to the Fixed Income asset classes in our balanced portfolios (moderate risk profile without alternative investments, taxable or non-taxable respectively), but only when there is a preference between the fixed income asset classes. For example, an overweight on high-yield corporate bonds offset by an underweight on government bonds in the balanced portfolio would be applied to the All Fixed Income portfolios. However, an overweight on US equities versus US government bonds in the balanced portfolio would not be reflected in the All Fixed Income portfolios. Further, the tilts in the All Fixed Income portfolios will typically be scaled up to twice the size of the tilts in the balanced portfolio.

All equity All income, taxable All income, non-taxable

All figures in % S

trat

egic

ass

et

allo

catio

n

Tac

tical

dev

iatio

n

Cha

nge1

Cur

rent

allo

catio

n2

Str

ateg

ic a

sset

a

lloca

tion

Tac

tical

dev

iatio

n

Cha

nge1

Cur

rent

allo

catio

n2

Str

ateg

ic a

sset

a

lloca

tion

Tac

tical

dev

iatio

n

Cha

nge1

Cur

rent

allo

catio

n2

Cash 3.0 –1.0 2.0 3.0 –1.0 2.0 3.0 –1.0 2.0

Fixed Income 0.0 +0.0 0.0 77.0 +1.0 78.0 77.0 +1.0 78.0

US Fixed Income 0.0 +0.0 0.0 58.0 –2.0 +3.0 56.0 58.0 –2.0 +3.0 56.0

US Gov't 0.0 +0.0 0.0 13.0 –6.0 +2.0 7.0 18.0 –6.0 +2.0 12.0

US Gov't 10 year 0.0 +0.0 0.0 0.0 +4.0 +1.0 4.0 0.0 +4.0 +1.0 4.0

US MBS 0.0 +0.0 0.0 0.0 +0.0 0.0 5.0 +0.0 5.0

US Municipal 0.0 +0.0 0.0 30.0 +0.0 30.0 0.0 +0.0 0.0

US IG Corp 0.0 +0.0 0.0 0.0 +0.0 0.0 20.0 +0.0 20.0

US HY Corp 0.0 +0.0 0.0 15.0 +0.0 15.0 15.0 +0.0 15.0

Int’l Fixed Income 0.0 +0.0 0.0 19.0 +3.0 –3.0 22.0 19.0 +3.0 –3.0 22.0

EM Local Currency 0.0 +0.0 0.0 10.0 +0.0 10.0 11.0 +0.0 11.0

EM Hard Currency 0.0 +0.0 0.0 9.0 +3.0 –3.0 12.0 8.0 +3.0 –3.0 11.0

Equity 77.0 +1.0 78.0 0.0 +0.0 0.0 0.0 +0.0 0.0

Global Equity 0.0 +1.0 +1.0 1.0 0.0 +0.0 0.0 0.0 +0.0 0.0

US Equity 39.0 +0.0 39.0 0.0 +0.0 0.0 0.0 +0.0 0.0

US Large cap Growth 7.0 –1.0 6.0 0.0 +0.0 0.0 0.0 +0.0 0.0

US Large cap Value 32.0 +1.0 33.0 0.0 +0.0 0.0 0.0 +0.0 0.0

International Equity 38.0 +0.0 –1.0 38.0 0.0 +0.0 0.0 0.0 +0.0 0.0

Int'l Developed Value 28.0 +0.0 28.0 0.0 +0.0 0.0 0.0 +0.0 0.0

Emerging Markets 10.0 –3.0 –1.0 7.0 0.0 +0.0 0.0 0.0 +0.0 0.0

China 0.0 +3.0 3.0 0.0 +0.0 0.0 0.0 +0.0 0.0

Commodities 0.0 +0.0 0.0 0.0 +0.0 0.0 0.0 +0.0 0.0

Non-traditional 0.0 +0.0 0.0 0.0 +0.0 0.0 0.0 +0.0 0.0

Senior Loans 0.0 +0.0 0.0 15.0 +0.0 15.0 15.0 +0.0 15.0

Preferreds 0.0 +0.0 0.0 5.0 +0.0 5.0 5.0 +0.0 5.0

MLPs 16.0 +0.0 16.0 0.0 +0.0 0.0 0.0 +0.0 0.0

US Real Estate 4.0 +0.0 4.0 0.0 +0.0 0.0 0.0 +0.0 0.0

CIO tactical deviation legend: Overweight Underweight Neutral.1 Change is the difference between the tactical deviation column in the previous month and the current month.2 The current allocation column is the sum of the strategic asset allocation and the tactical deviation columns.Source: UBS and WMA AAC, 21 June 2018. See the Performance Measurement and Appendix sections of the UBS House View: Investment Strategy Guide for performance measurement details and information regarding sources of strategic asset allocations and their suitability, investor risk profiles, and the interpretation of the suggested tactical deviations from the strategic asset allocations.

July 2018 UBS HOUSE VIEW 31 of 40

In order to create the analysis shown, the rates of return for each asset class are combined in the same proportion as the asset allocations illustrated (e.g., if the asset allocation indicates 40% equities, then 40% of the results shown for the allocation will be based upon the estimated hypothetical return and standard deviation assumptions shown below).

You should understand that the analysis shown and assumptions used are hypothetical estimates provided for your general information. The results are not guarantees and pertain to the asset allocation and/or asset class in general, not the performance of specific securities or investments. Your actual results may vary significantly from the results shown in this report, as can the performance of any individual security or investment.

Portfolio analyticsThe portfolio analytics shown for each risk profile’s benchmark allocations are based on estimated forward-looking return and standard deviation assumptions (capital market assumptions), which are based on UBS proprietary research. The development process includes a review of a variety of factors, including the return, risk, correlations and historical performance of various asset classes, inflation and risk premium. These capital market assumptions do not assume any particular investment time horizon. Please note that these assumptions are not guarantees and are subject to change. UBS has changed its risk and return assumptions in the past and may do so in the future. Neither UBS nor your Financial Advisor is required to provide you with an updated analysis based upon changes to these or other underlying assumptions.

Risk Profile ==>> Conservative

Moderately conservative

Moderate

Moderately aggressive

Aggressive

Taxable with non-traditional assets

Estimated Return 4.7% 5.3% 6.6% 7.6% 8.7%

Estimated Risk 5.3% 6.7% 8.9% 10.8% 13.1%

Taxable without non-traditional assets

Estimated Return 2.9% 3.9% 5.0% 6.2% 7.2%

Estimated Risk 4.0% 6.1% 8.5% 11.2% 13.6%

Non-taxable with non-traditional assets

Estimated Return 5.0% 5.8% 6.6% 7.6% 8.5%

Estimated Risk 5.1% 7.0% 8.9% 11.0% 12.4%

Non-taxable without non-traditional assets

Estimated Return 3.5% 4.4% 5.4% 6.5% 7.3%

Estimated Risk 4.5% 6.5% 8.8% 11.6% 13.6%

Asset Class Capital Market Assumptions

Annual total return Annual risk

US Cash 2.1% 0.5%

US Government Fixed Income 1.9% 4.0%

US Municipal Fixed Income 1.8% 4.1%

US Corporate Investment-Grade Fixed Income 2.8% 5.0%

US Corporate High-Yield Fixed Income 4.8% 9.2%

International Developed Markets Fixed Income 1.8% 7.9%

Emerging Markets Fixed Income 4.2% 10.5%

US Large-cap Equity 7.1% 15.7%

US Mid-cap Equity 7.6% 18.3%

US Small-cap Equity 7.8% 20.1%

International Developed Markets Equity 9.4% 16.5%

Emerging Markets Equity 8.8% 24.1%

Commodities 4.4% 19.2%

Hedge Funds 5.5% 6.7%

Private Equity 12.0% 12.7%

Private Real Estate 9.8% 10.5%

DETAILED ASSET ALLOCATION

32 of 40 UBS HOUSE VIEW July 2018

DETAILED ASSET ALLOCATION

Additional asset allocation models

International developed markets (non-US) fixed income module, in %

Benchmark CIO GWM tactical deviation2 Current allocation3

allocation1 Previous Current

EMU / Eurozone 42.0 +0.0 +0.0 42.0

UK 9.0 +0.0 +0.0 9.0

Japan 32.0 +0.0 +0.0 32.0

Other 17.0 +0.0 +0.0 17.0

Source: UBS, as of 21 June 2018.

Footnotes1 For the first table on this page, the benchmark allocation is based on S&P 500 weights. For the second and third tables on this page, the benchmark allocation refers to a moderate risk profile and represents the relative market capitalization weights of each country or region.

2 See “Deviations from strategic asset allocation or benchmark allocation” in the appendix for an explanation regarding the interpretation of the suggested tactical deviations from benchmark. The “current” column refers to the tactical deviation that applies as of the date of this publication. The “previous” column refers to the tactical deviation that was in place at the date of the previous edition of UBS House View or the last UBS House View Update.

3 The current allocation column is the sum of the CIO GWM tactical deviation columns and (the S&P 500 benchmark allocation for the first table on this page) (the benchmark allocation for the second and third tables on this page).

US equity sector allocation, in %

For US equity subsector recommendations please see the “Equity Preference List” for each sector. These reports are published on a monthly basis and can be found on the Online Services website in the Research > Equities section.

S&P 500 CIO GWM tactical deviation2 CurrentBenchmark Numeric Symbol allocation3

allocation1 Previous Current Previous Current

Consumer Discretionary 13.3 +0.0 +0.0 n n 13.3

Consumer Staples 6.8 -1.0 -1.0 – – 5.8

Energy 6.1 +1.0 +1.0 + + 7.1

Financials 14.0 +1.0 +1.0 + + 15.0

Healthcare 14.1 -1.0 -1.0 – – 13.1

Industrials 9.6 +0.0 +0.0 n n 9.6

Information Technology 26.1 +0.0 +0.0 n n 26.1

Materials 2.6 +1.0 +1.0 + + 3.6

Real Estate 2.7 +0.0 +0.0 n n 2.7

Telecom 1.8 +0.0 +0.0 n n 1.8

Utilities 2.8 -1.0 -1.0 – – 1.8

NOTE: The benchmark allocations, as well as the tactical deviations, are intended to be applicable to the US equity portion of a portfolio across investor risk profiles.Source: UBS, as of 21 June 2018.

International developed markets (non-US) equity module, in %

Benchmark CIO GWM tactical deviation2 Current allocation3

allocation1 Previous Current

EMU / Eurozone 28.0 +0.0 +0.0 28.0

UK 17.0 +0.0 +0.0 17.0

Japan 22.0 +0.0 +0.0 22.0

Australia 7.0 +0.0 +0.0 7.0

Canada 9.0 +8.0 +0.0 9.0

Switzerland 8.0 -8.0 +0.0 8.0

Other 9.0 +0.0 +0.0 9.0

Source: UBS, as of 21 June 2018.

July 2018 UBS HOUSE VIEW 33 of 40

The performance calculations shown in Table A commence on 25 January 2013, the first date upon which the Investment Strategy Guide was published following the release of the new UBS WMA strategic asset allocation (SAA) models. The performance is based on the SAA without non-traditional assets for a moderate risk profile investor, and the SAA with the tactical shift (see detailed asset allocation tables where the SAA with the tactical shift is referred to as “current allocation”). Performance is calculated utilizing the returns of the indices identified in Table B as applied to the respective allocations in the SAA and the SAA with the tactical shift. For example, if US mid-cap equity is allocated 10% in the SAA and 12% in the SAA with the tactical shift, the US mid-cap equity index respectively contributed to 10% and 12% of the results shown. Prior to 25 January 2013, CIO Wealth Management published tactical asset allocation recommendations in the Investment Strategy Guide using a different set of asset classes and sectors. The performance of these tactical recommendations is reflected in Table C of the February 2017 House View Investment Strategy Guide.

The performance attributable to the CIO GWM tactical deviations is reflected in the column in Table A labeled “Excess

Tactical asset allocation performance measurement

return,” which shows the difference between the performance of the SAA and the performance of the SAA with the tactical shift. The “Information ratio” is a risk-adjusted performance measure, which adjusts the excess returns for the tracking error risk of the tactical deviations. Specifically the information ratio is calculated as the ratio of the annualized excess return over a given time period and the annualized standard deviation of daily excess returns over the same period. Additional background information regarding the computation of the information ratio figures provided below are available upon request.

The calculations assume that the portfolios are rebalanced upon publication of the models in the CIO Letter or House View Update. The computations assume portfolio rebalancing upon such intra-month changes as well. Performance shown is based on total returns, but does not include transaction costs, such as commissions, fees, margin interest, and interest charges. Actual total returns adjusted for such transaction costs will be reduced. A complete record of all the recommendations upon which this performance report is based is available from UBS Financial Services Inc. upon written request. Past performance is not an indication of future results.

Table A: Moderate taxable risk profile performance measurement (25 January 2013 to present) – See NOTE next page

SAA SAA withtactical shift

Excessreturn

Information ratio

(annualized)

Russell 3000stock index

(total return)

Barclays CapitalUS Aggregate bondindex (total return)

25 January 2013 to 31 March 2013 0.79% 0.83% 0.04% 0.9 5.59% 0.11%

2Q 2013 -2.18% -2.14% 0.04% 0.3 2.69% -2.33%

3Q 2013 3.60% 3.86% 0.26% 2.4 6.35% 0.57%

4Q 2013 3.05% 3.23% 0.18% 2.9 10.10% -0.14%

1Q 2014 2.56% 2.53% -0.03% -0.2 1.97% 1.84%

2Q 2014 3.44% 3.49% 0.05% 0.3 4.87% 2.04%

3Q 2014 -1.54% -1.71% -0.16% -1.2 0.01% 0.17%

4Q 2014 0.47% 0.73% 0.26% 1.3 5.24% 1.79%

1Q 2015 1.38% 1.69% 0.31% 2.1 1.80% 1.61%

2Q 2015 -0.18% -0.19% -0.01% -0.1 0.14% -1.68%

3Q 2015 -4.67% -5.08% -0.41% -2.4 -7.25% 1.23%

4Q 2015 1.61% 1.67% 0.06% 0.5 6.27% -0.57%

1Q 2016 2.11% 1.72% -0.39% -3.7 0.97% 3.03%

2Q 2016 2.81% 2.88% 0.08% 1.1 2.63% 2.21%

3Q 2016 2.50% 2.60% 0.10% 1.5 4.40% 0.46%

4Q 2016 -1.33% -1.13% 0.21% 3.4 4.21% -2.98%

1Q 2017 3.93% 4.07% 0.14% 2.5 5.74% 0.82%

2Q 2017 3.01% 3.11% 0.10% 1.6 3.02% 1.45%

3Q 2017 3.07% 3.18% 0.11% 2.1 4.57% 0.85%

4Q 2017 3.14% 3.25% 0.12% 3.3 6.34% 0.39%

2018 year to date 0.70% 0.49% -0.21% -1.1 5.31% -2.01%Since inception (25 January 2013) 31.73% 32.76% 1.03% 0.4 106.48% 8.97%

Source: UBS, as of 20 June 2018Note: Performance after 27 February 2017 based on updated SAA weights as shown in Table B

PERFORMANCE MEASUREMENT

34 of 40 UBS HOUSE VIEW July 2018

PERFORMANCE MEASUREMENT

Table B: SAA for moderate risk profile investor, and underlying indices (all figures in %)

25 Jan 2013 to presentPrevious SAA weights(25 Jan 2013 – 27 Feb 2017)

New SAA weights(27 Feb 2017 onward)

US cash (Barclays Capital US Treasury – Bills [1–3 M]) 0.0 5.0

US Large-Cap Growth (Russell 1000 Growth) 7.0 10.0

US Large-Cap Value (Russell 1000 Value) 7.0 10.0

US Mid-Cap (Russell Mid Cap) 6.0 5.0

US Small-Cap (Russell 2000) 3.0 3.0

International Dev. Equities (MSCI EAFE) 10.0 15.0

Emerging Markets Equities (MSCI EMF) 7.5 6.0

US Government Fixed Income (BarCap US Agg Government) 5.0 2.0

US Municipal Fixed Income (BarCap Municipal Bond) 35.0 40.0

US Investment-Grade Fixed Income (BarCap US Agg Credit) 3.0 0.0

US Corporate High-Yield Fixed Income (BarCap US Agg Corp HY) 4.0 2.0

International Dev. Fixed Income (BarCap Global Agg xUS) 4.0 0.0

Emerging Markets Fixed Income (50% BarCap EM Gov and 50% BarCap Global EM (USD)) 3.5 2.0

Commodities (Dow Jones-UBS Commodity Index) 5.0 0.0

Additional indices

US Gov't 10 year (Bloomberg Barclays US Treasury Bellwethers 10 Year)

US TIPS (Bloomberg Barclays US Inflation Linked Bonds 1-10 Year)

US MBS (Bloomberg Barclays US MBS)

EM Local Currency FI (Bloomberg Barclays Emerging Markets Local Currency)

EM Hard Currency FI (Bloomberg Barclays EM Hard Currency Aggregate)

Global Equity (MSCI All Country World)

Int'l Developed Value (MSCI EAFE Value)

Senior Loans (S&P/LSTA U.S. Leveraged Loan 100)

Preferreds (BofA Merrill Lynch Fixed Rate Preferred Securities)

MLPs (Alerian MLP)

US Real Estate (FTSE NAREIT Equity REIT)

International Dev. Fixed Income (BarCap Global Agg xUS)

Emerging Markets Fixed Income (50% BarCap EM Gov and 50% BarCap Global EM (USD))

Commodities (Dow Jones-UBS Commodity Index)

Tactical asset allocation performance measurement

Table A NOTE Historical performance measurement

Prior to 25 January 2013, CIO GWM published tactical asset allocation recommendations in the Investment Strategy Guide using a different set of asset classes and sectors. The performance of these tactical recommendations is reflected in Table C of the February 2017 House View Investment Strategy Guide. You can obtain a copy of the February 2017 House View from Online Services, or from your UBSFS financial advisor.

July 2018 UBS HOUSE VIEW 35 of 40

APPENDIX

Global Investment Process and Committee descriptionThe UBS investment process is designed to achieve replicable, high-quality results through applying intellectual rigor, strong process governance, clear responsibility, and a culture of challenge.

Based on the analyses and assessments conducted and vetted throughout the investment process, the Chief Investment Officer (CIO) formulates the UBS Wealth Management Investment House View (e.g., overweight, neutral, underweight stances for asset classes and market segments relative to their benchmark allocation) at the Global Investment Committee (GIC). Senior investment professionals from across UBS, complemented by selected external experts, debate and rigorously challenge the investment strategy to ensure consistency and risk control.

Global Investment Committee compositionThe GIC comprises nine members, representing top market and investment expertise from across all divisions of UBS:

• Mark Haefele (Chair)• Jorge Mariscal• Mike Ryan• Simon Smiles• Min Lan Tan• Themis Themistocleous• Paul Donovan• Bruno Marxer (*)• Andreas Koester

Investment committeeWMA Asset Allocation Committee descriptionWe recognize that a globally derived house view is most effective when complemented by local perspective and application. As such, UBS has formed a Wealth Management Americas Asset Allocation Committee (WMA AAC). WMA AAC is responsible for the development and monitoring of UBS WMA’s strategic asset allocation models and capital market assumptions. The WMA AAC sets parameters for the CIO GWM Investment Strategy Group to follow during the translation process of the GIC’s House Views and the incorporation of US-specific asset class views into the US-specific tactical asset allocation models.

WMA Asset Allocation Committee compositionThe WMA Asset Allocation Committee comprises nine members:

• Mike Ryan • Michael Crook • Brian Rose• Jeremy Zirin• Jason Draho• Tom McLoughlin• Leslie Falconio• Laura Kane• David Lefkowitz

This report contains statements that constitute “forward-looking state-ments,” including but not limited to statements relating to the current and expected state of the securities market and capital market assump tions. While these forward-looking statements represent our judg ments and future expectations concerning the matters discussed in this document, a number of risks, uncertainties, changes in the market, and other important factors could cause actual developments and results to differ materially from our expectations. These factors include, but are not limited to (1) the extent and nature of future developments in the US market and in other market segments; (2) other market and macro-economic developments,

including movements in local and international securities markets, credit spreads, currency exchange rates and interest rates, whether or not arising directly or indirectly from the current mar ket crisis; (3) the impact of these developments on other markets and asset classes. UBS is not under any obligation to (and expressly disclaims any such obligation to) update or alter its forward-looking statements whether as a result of new information, future events, or otherwise.

Cautionary statement regarding forward-looking statements

*Business area outside of the Chief Investment Office

36 of 40 UBS HOUSE VIEW July 2018

APPENDIX

Explanations about asset classes

Scale for tactical deviation charts

Symbol Description/Definition Symbol Description/Definition Symbol Description/Definition

+ moderate overweight vs. benchmark – moderate underweight vs. benchmark n neutral, i.e., on benchmark

++ overweight vs. benchmark – – underweight vs. benchmark n/a not applicable

+++ strong overweight vs. benchmark – – – strong underweight vs. benchmark

Source: UBS

Sources of strategic asset allocations and investor risk profilesStrategic asset allocations represent the longer-term allocation of assets that is deemed suitable for a particular investor. The strategic asset allocation models discussed in this publication, and the capital market assumptions used for the strategic asset allocations, were developed and approved by the WMA AAC.

The strategic asset allocations are provided for illustrative purposes only and were designed by the WMA AAC for hypothetical US investors with a total return objective under five different Investor Risk Profiles ranging from conservative to aggressive. In general, strategic asset allocations will differ among investors according to their individual circumstances, risk tolerance, return objectives and time horizon. Therefore, the strategic asset allocations in this publication may not be suitable for all investors or investment goals and should not be used as the sole basis of any investment decision. Minimum net worth requirements may apply to allocations to non-traditional assets. As always, please consult your UBS Financial Advisor to see how these weightings should be applied or modified according to your individual profile and investment goals.

The process by which the strategic asset allocations were derived is described in detail in the publication entitled “Strategic Asset Allocation (SAA) Methodology and Portfolios.” Your Financial Advisor can provide you with a copy.

Deviations from strategic asset allocation or benchmark allocationThe recommended tactical deviations from the strategic asset allocation or benchmark allocation are provided by the Global Investment Committee and the Investment Strategy Group within CIO Global Wealth Management. They reflect the short- to medium-term assessment of market opportunities and risks in the respective asset classes and market segments. Positive/zero/negative tactical deviations correspond to an overweight/neutral/underweight stance for each respective asset class and market segment relative to their strategic allocation. The current allocation is the sum of the strategic asset allocation and the tactical deviation.

Note that the regional allocations on the Equities and Bonds pages in UBS House View are provided on an unhedged basis (i.e., it is assumed that investors carry the underlying currency risk of such investments) unless otherwise stated. Thus, the deviations from the strategic asset allocation reflect the views of the underlying equity and bond markets in combination with the assessment of the associated currencies. The detailed asset allocation tables integrate the country preferences within each asset class with the asset class preferences in UBS House View.

Asset allocation does not assure profits or prevent against losses from an investment portfolio or accounts in a declining market.

Statement of riskEquities - Stock market returns are difficult to forecast because of fluctuations in the economy, investor psychology, geopolitical conditions and other important variables.

Fixed income - Bond market returns are difficult to forecast because of fluctuations in the economy, investor psychology, geopolitical conditions and other important variables. Corporate bonds are subject to a number of risks, including credit risk, interest rate risk, liquidity risk, and event risk. Though historical default rates are low on investment grade corporate bonds, perceived adverse changes in the credit quality of an issuer may negatively affect the market value of securities. As interest rates rise, the value of a fixed coupon security will likely decline. Bonds are subject to market value fluctuations, given changes in the level of risk-free interest rates. Not all bonds can be sold quickly or easily on the open market. Prospective investors should consult their tax advisors concerning the federal, state, local, and non-U.S. tax consequences of owning any securities referenced in this report.

Preferred securities - Prospective investors should consult their tax advisors concerning the federal, state, local, and non-U.S. tax consequences of owning preferred stocks. Preferred stocks are subject to market value

fluctuations, given changes in the level of interest rates. For example, if interest rates rise, the value of these securities could decline. If preferred stocks are sold prior to maturity, price and yield may vary. Adverse changes in the credit quality of the issuer may negatively affect the market value of the securities. Most preferred securities may be redeemed at par after five years. If this occurs, holders of the securities may be faced with a reinvestment decision at lower future rates. Preferred stocks are also subject to other risks, including illiquidity and certain special redemption provisions.

Municipal bonds - Although historical default rates are very low, all municipal bonds carry credit risk, with the degree of risk largely following the particular bond’s sector. Additionally, all municipal bonds feature valuation, return, and liquidity risk. Valuation tends to follow internal and external factors, including the level of interest rates, bond ratings, supply factors, and media reporting. These can be difficult or impossible to project accurately. Also, most municipal bonds are callable and/or subject to earlier than expected redemption, which can reduce an investor’s total return. Because of the large number of municipal issuers and credit structures, not all bonds can be easily or quickly sold on the open market.

July 2018 UBS HOUSE VIEW 37 of 40

APPENDIX

AppendixEmerging Market InvestmentsInvestors should be aware that Emerging Market assets are subject to, among others, potential risks linked to currency volatility, abrupt changes in the cost of capital and the economic growth outlook, as well as regulatory and sociopolitical risk, interest rate risk and higher credit risk. Assets can sometimes be very illiquid and liquidity conditions can abruptly worsen. CIO GWM generally recommends only those securities it believes have been registered under Federal US registration rules (Section 12 of the Securities Exchange Act of 1934) and individual State registration rules (commonly known as “Blue Sky” laws). Prospective investors should be aware that to the extent permitted under US law, CIO GWM may from time to time recommend bonds that are not registered under US or State securities laws. These bonds may be issued in jurisdictions where the level of required disclosures to be made by issuers is not as frequent or complete as that required by US laws.

For more background on emerging markets generally, see the CIO GWM Education Notes “Investing in Emerging Markets (Part 1): Equities,” 27 August 2007, “Emerging Market Bonds: Understanding Emerging Market Bonds,” 12 August 2009 and “Emerging Markets Bonds: Understanding Sovereign Risk,” 17 December 2009.

Investors interested in holding bonds for a longer period are advised to select the bonds of those sovereigns with the highest credit ratings (in the investment-grade band). Such an approach should decrease the risk that an investor could end up holding bonds on which the sovereign has defaulted. Subinvestment-grade bonds are recommended only for clients with a higher risk tolerance and who seek to hold higher-yielding bonds for shorter periods only.

Nontraditional AssetsNontraditional asset classes are alternative investments that include hedge funds, private equity, real estate, and managed futures (collectively, alternative investments). Interests of alternative investment funds are sold only to qualified investors, and only by means of offering documents that include information about the risks, performance and expenses of alternative investment funds, and which clients are urged to read carefully before subscribing and retain. An investment in an alternative investment fund is speculative and involves significant risks. Specifically, these investments (1) are not mutual funds and are not subject to the same regulatory requirements as mutual funds; (2) may have performance that is volatile, and investors may lose all or a substantial amount of their investment; (3) may engage in leverage and other speculative investment practices that may increase the risk of investment loss; (4) are long-term, illiquid investments; there is generally no secondary market for the interests of a fund, and none is expected to develop; (5) interests of alternative investment funds typically will be illiquid and subject to restrictions on transfer; (6) may not be required to provide periodic pricing or

valuation information to investors; (7) generally involve complex tax strategies and there may be delays in distributing tax information to investors; (8) are subject to high fees, including management fees and other fees and expenses, all of which will reduce profits.

Interests in alternative investment funds are not deposits or obligations of, or guaranteed or endorsed by, any bank or other insured depository institution, and are not federally insured by the Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other governmental agency. Prospective investors should understand these risks and have the financial ability and willingness to accept them for an extended period of time before making an investment in an alternative investment fund, and should consider an alternative investment fund as a supplement to an overall investment program.

In addition to the risks that apply to alternative investments generally, the following are additional risks related to an investment in these strategies:

• Hedge Fund Risk: There are risks specifically associated with investing in hedge funds, which may include risks associated with investing in short sales, options, small-cap stocks, “junk bonds,” derivatives, distressed securities, non-US securities and illiquid investments.

• Managed Futures: There are risks specifically associated with investing in managed futures programs. For example, not all managers focus on all strategies at all times, and managed futures strategies may have material directional elements.

• Real Estate: There are risks specifically associated with investing in real estate products and real estate investment trusts. They involve risks associated with debt, adverse changes in general economic or local market conditions, changes in governmental, tax, real estate and zoning laws or regulations, risks associated with capital calls and, for some real estate products, the risks associated with the ability to qualify for favorable treatment under the federal tax laws.

• Private Equity: There are risks specifically associated with investing in private equity. Capital calls can be made on short notice, and the failure to meet capital calls can result in significant adverse consequences including, but not limited to, a total loss of investment.

• Foreign Exchange/Currency Risk: Investors in securities of issuers located outside of the United States should be aware that even for securities denominated in US dollars, changes in the exchange rate between the US dollar and the issuer’s “home” currency can have unexpected effects on the market value and liquidity of those securities. Those securities may also be affected by other risks (such as political, economic or regulatory changes) that may not be readily known to a US investor.

38 of 40 UBS HOUSE VIEW July 2018

APPENDIX

Research publications from Chief Investment Office UBS Global Wealth Management, formerly known as CIO Wealth Management Research, are published by UBS Global Wealth Management, a Business Division of UBS AG or an affiliate thereof (collectively, UBS). In certain countries UBS AG is referred to as UBS SA. This publication is for your information only and is not intended as an offer, or a solicitation of an offer, to buy or sell any investment or other specific product. The analysis contained herein does not constitute a personal recommendation or take into account the particular investment objectives, investment strategies, financial situation and needs of any specific recipient. It is based on numerous assumptions. Different assumptions could result in materially different results. We recommend that you obtain financial and/or tax advice as to the implications (including tax) of investing in the manner described or in any of the products mentioned herein. Certain services and products are subject to legal restrictions and cannot be offered worldwide on an unrestricted basis and/or may not be eligible for sale to all investors. All information and opinions expressed in this document were obtained from sources believed to be reliable and in good faith, but no representation or warranty, express or implied, is made as to its accuracy or completeness (other than disclosures relating to UBS). All information and opinions as well as any prices indicated are current only as of the date of this report, and are subject to change without notice. Opinions expressed herein may differ or be contrary to those expressed by other business areas or divisions of UBS as a result of using different assumptions and/or criteria. At any time, investment decisions (including whether to buy, sell or hold securities) made by UBS and its employees may differ from or be contrary to the opinions expressed in UBS research publications. Some investments may not be readily realizable since the market in the securities is illiquid and therefore valuing the investment and identifying the risk to which you are exposed may be difficult to quantify. UBS relies on information barriers to control the flow of information contained in one or more areas within UBS, into other areas, units, divisions or affiliates of UBS. Futures and options trading is considered risky. Past performance of an investment is no guarantee for its future

performance. Some investments may be subject to sudden and large falls in value and on realization you may receive back less than you invested or may be required to pay more. Changes in FX rates may have an adverse effect on the price, value or income of an investment. This report is for distribution only under such circumstances as may be permitted by applicable law.

Distributed to US persons by UBS Financial Services Inc. or UBS Securities LLC, subsidiaries of UBS AG. UBS Switzerland AG, UBS Deutschland AG, UBS Bank, S.A., UBS Brasil Administradora de Valores Mobiliarios Ltda, UBS Asesores Mexico, S.A. de C.V., UBS Securities Japan Co., Ltd, UBS Wealth Management Israel Ltd and UBS Menkul Degerler AS are affiliates of UBS AG. UBS Financial Services Incorporated of Puerto Rico is a subsidiary of UBS Financial Services Inc. UBS Financial Services Inc. accepts responsibility for the content of a report prepared by a non-US affiliate when it distributes reports to US persons. All transactions by a US person in the securities mentioned in this report should be effected through a US-registered broker dealer affiliated with UBS, and not through a non-US affiliate. The contents of this report have not been and will not be approved by any securities or investment authority in the United States or elsewhere. UBS Financial Services Inc. is not acting as a municipal advisor to any municipal entity or obligated person within the meaning of Section 15B of the Securities Exchange Act (the “Municipal Advisor Rule”) and the opinions or views contained herein are not intended to be, and do not constitute, advice within the meaning of the Municipal Advisor Rule.

UBS specifically prohibits the redistribution or reproduction of this material in whole or in part without the prior written permission of UBS. UBS accepts no liability whatsoever for any redistribution of this document or its contents by third parties.

Version as per April 2018.

© UBS 2018. The key symbol and UBS are among the registered and unregistered trademarks of UBS. All rights reserved.

Disclaimer

July 2018 UBS HOUSE VIEW 39 of 40

Global Investment CommitteeThe House View Investment Strategy guide reflects the views of the UBS Global Investment committee (GIC). The GIC comprises nine members, representing top market and investment expertise from across all divisions of UBS:

Publication detailsPublisherUBS Financial Services Inc. CIO Global Wealth Management 1285 Avenue of the Americas, 20th Floor New York, NY 10019

This report was published on 22 June 2018

Lead authors Mark Haefele Mike Ryan

Alejo Czerwonko Paul DonovanJason DrahoLeslie FalconioThomas FluryRicardo Garcia- SchildknechtWayne GordonMarkus IrngartingerLaura KaneDavid Lefkowitz

Jorge Mariscal Barry McAlindenKathleen McNamaraBrian RoseDominic SchniderPhilipp SchoettlerFrank SileoGiovanni Staunovo Thomas VeraguthJustin WaringJeremy Zirin

EditorKate Hazelwood

Project Management Paul Leeming John Collura Matt Siegel

Desktop PublishingCognizant GroupBasavaraj Gudihal Srinivas Addugula Pavan Mekala Virender Negi

*Business areas distinct from Chief Investment Office

Global Investment Committee (GIC)

Paul DonovanMark Haefele (Chair) Andreas KoesterMin Lan TanMike Ryan

New York

London

Zurich

Singapore

Mexico City

Madrid

Sao Paulo

Hong Kong

Tokyo

Jorge MariscalBruno Marxer*Simon SmilesThemis Themistocleous

Authors (in alphabetical order)

ab

©2018 UBS Financial Services Inc. All rights reserved. Member SIPC. All other trademarks, registered trademarks, service marks and registered service marks are of their respective companies.

UBS Financial Services Inc. www.ubs.com/financialservicesinc

UBS Financial Services Inc. is a subsidiary of UBS AG.