US, by style US, by style US, by style US, by style

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1 Trend Macrolytics, LLC Donald Luskin, Chief Investment Officer Thomas Demas, Managing Director Michael Warren, Energy Strategist Data Insights: Global Equity Risk Premia Wednesday, December 12, 2017 Global leader-board: by equity risk premium, value, and growth Best Worst Rank Equity risk premium Forward PE ratio Fwd earnings upgrade rate Fwd sales upgrade rate By SD from crisis era mean Trailing 90 days, AR Trailing 90 days, AR By country By country By country By country 1 Korea: KOSPI Russia: MICEX 6.6 Japan: Nikkei +28% Turkey: Istanbul +25% 2 Brazil: Bovespa Turkey: Istanbul 8.1 India: SENSEX +26% Japan: Nikkei +20% 3 Turkey: Istanbul Korea: KOSPI 9.2 Korea: KOSPI +26% HK: Hang Seng +18% 4 Taiwan:TWSA HK: Hang Seng 11.9 Brazil: Bovespa +25% Korea: KOSPI +18% 5 Indonesia:JCI Brazil: Bovespa 12.2 Canada:TSX +20% Russia: MICEX +14% 6 Italy: MIB China: Shanghai SE 13.0 Turkey: Istanbul +20% France: CAC +14% 7 Australia: ASE Spain: IBEX 13.4 Italy: MIB +19% Taiwan:TWSA +13% 8 Spain: IBEX Italy: MIB 13.5 Indonesia:JCI +18% US: S&P % 9 Japan: Nikkei Taiwan:TWSA 13.6 Netherlands: AEX +16% Indonesia:JCI +9% 10 Germany: DAX Germany: DAX 13.6 HK: Hang Seng +15% Australia: ASE +8% 11 France: CAC UK: FTSE 14.3 Taiwan:TWSA +12% Brazil: Bovespa +6% 12 Russia: MICEX France: CAC 14.8 US: S&P % Canada:TSX +6% 13 UK: FTSE Indonesia:JCI 15.7 Russia: MICEX +10% Netherlands: AEX +3% 14 HK: Hang Seng Netherlands: AEX 16.0 UK: FTSE +10% India: SENSEX +3% 15 Canada:TSX Australia: ASE 16.1 Australia: ASE +9% UK: FTSE +2% 16 China: Shanghai SE Canada:TSX 16.2 France: CAC +7% Spain: IBEX +1% 17 Netherlands: AEX Japan: Nikkei 17.7 China: Shanghai SE +6% China: Shanghai SE -1% 18 India: SENSEX India: SENSEX 18.3 Spain: IBEX +5% Germany: DAX -2% 19 US: S&P US: S&P Germany: DAX +2% Italy: MIB -21% US, by style US, by style US, by style US, by style 1 S&P Midcap S&P 500 Value 16.1 S&P Midcap +16% S&P 500 Growth +12% 2 S&P Smallcap S&P S&P 500 Growth +14% S&P Smallcap +11% 3 S&P 500 Value S&P Midcap 19.5 S&P % S&P % 4 S&P S&P 500 Growth 20.7 S&P Smallcap +11% S&P 500 Value +8% 5 S&P 500 Growth S&P Smallcap 20.8 S&P 500 Value +9% S&P Midcap +5% US, by sector US, by sector US, by sector US, by sector 1 Telecom Telecom 12.8 Energy +83% Telecom +39% 2 Materials Financial 15.1 Info Tech +29% Materials +19% 3 Consumer Disc Health Care 16.7 Materials +19% Info Tech +18% 4 Consumer Stap Materials 18.2 Financial +8% Energy +12% 5 Financial Info Tech 18.5 Consumer Stap +7% Financial +11% 6 Info Tech Utilities 18.6 Health Care +4% Consumer Disc +8% 7 Health Care Industrial 19.2 Telecom +4% Consumer Stap +7% 8 Industrial Consumer Stap 19.8 Utilities +3% Industrial +6% 9 Utilities Consumer Disc 20.4 Consumer Disc +3% Health Care +5% 10 Energy Energy 25.6 Industrial -9% Utilities -2% Copyright 2017 Trend Macrolytics LLC. All rights reserved. This document is not to be forwarded to individuals or organizations not authorized by Trend Macrolytics LLC to receive it. For information purposes only; not to be deemed to be recommendations for buying or selling specific securities or to constitute personalized investment advice. Derived from sources deemed to be reliable, but no warranty is made as to accuracy.

2 Equity risk premium: forward earnings yield minus bond yield, July 2007 to current Standard deviations from crisis-era mean First, High, Low, Last US by style (vs 30y Treasury) US by S&P 500 sector Canada, Europe (vs 10y gov) Pacific/EM (vs 10y gov) S&P Consumer Disc Canada TSX Japan: Nikkei 0.15 S&P 500 (vs 10Y) Consumer Stap UK: FTSE Australia: ASE 0.28 S&P 500 (vs. Corp) -0.5 Energy Germany: DAX 0.14 China: Shanghai SE S&P 500 Growth Financial France: CAC 0.02 Hong Kong: Hang Seng -0.1 S&P 500 Value -0.6 Health Care Netherlands: AEX Korea: KOSPI 1.19 S&P Midcap Industrial Italy: MIB 0.29 Taiwan: TWSE 0.48 S&P Smallcap Info Tech Spain: IBEX 0.24 Indonesia: JCI 0.44 Snapple-0.86 Materials EABank: STOXX FR10Y India: SENSEX Brazil: Bovespa (v. 3yr) 1.09 Turkey: Istanbul (v 7yr) 0.74 Russia: MICEX

3 EPS: forward consensus, bottom-up, July 2007 to current First, High, Low, Last US by style US by S&P 500 sector Canada, Europe Pacific/EM S&P 500 Consumer Discretionary Canada: TSX Japan: Nikkei Consumer Staples UK: FTSE Australia: ASE Energy Germany: DAX China: Shanghai SE S&P 500 Growth Financial France: CAC Hong Kong: Hang Seng S&P 500 Value Health Care Netherlands: AEX Korea: KOSPI S&P Midcap Industrial Italy: MIB Taiwan: TWSE S&P Smallcap Information Technology Spain: IBEX Indonesia: JCI Snapple Materials EA Banks: STOXX India: SENSEX Brazil: Bovespa Turkey: Istanbul Russia: MICEX 3

4 P/E ratio: forward consensus, bottom-up, July 2007 to current First, High, Low, Last US by style US by S&P 500 sector Canada, Europe Pacific/EM S&P 500 Consumer Discretionary Canada: TSX Japan: Nikkei Consumer Staples UK: FTSE Australia: ASE Energy Germany: DAX China: Shanghai SE S&P 500 Growth Financial France: CAC Hong Kong: Hang Seng S&P 500 Value Health Care Netherlands: AEX Korea: KOSPI S&P Midcap Industrial Italy: MIB Taiwan: TWSE S&P Smallcap Information Technology Spain: IBEX Indonesia: JCI Snapple Materials EA Banks: STOXX India: SENSEX Brazil: Bovespa Turkey: Istanbul Russia: MICEX 4

5 Benchmark bond yields, July 2007 to current First, High, Low, Last US Canada, Europe Pacific/EM 30-year Treasury Canada 10-year govt Japan: 10-year govt 10-year Treasury UK: 10-year govt Australia: 10-year govt Moody's Corporate Avg Germany: 10-year govt China: 10-year govt France: 10-year govt Hong Kong: 10-year govt Netherlands: 10-year govt Korea: 10-year govt Italy: 10-year govt Taiwan: 10-year govt Spain: 10-year govt Indonesia: 10-year govt India: 10-year govt Brazil: 3-year govt Turkey: 7-year govt Russia: 10-year govt 5

6 Daily S&P 500 equity risk premium in the crisis era --- Crisis era mean --- Pre-crisis mean Trendlines 8% 7% 6% 5% S&P 500 ERP Jun Mean ERP Oct Pre-crisis mean ERP Aug % 3% 2% S&P 500 market cap difference between the means: 25.5% 1% 0% Jul 2007 Jul 2008 Jul 2009 Jul 2010 Jul 2011 Jul 2012 Jul 2013 Jul 2014 Jul 2015 Jul 2016 Jul 2017 Versus 30-year Treasury Source: Bloomberg, NBER, TrendMacro calculations A century-plus of the monthly S&P 500 equity risk premium Feb % Yield-cap era Aug Oct % 5% Decade mean S&P 500 Equity Risk Premium 10-year moving average MA from 1900 Oct Jun Mar Crisis mean BushObama years Pre-crisis mean 0% QE era Post-1961 mean Jun 27, 2016 ReaganClinton years JohnsonNixonCarter years -5% Versus 30-year Treasury Source: Various, TrendMacro calculations 6