Thoughts on U.S. Equities Growth vs. Value. September 2016

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1 Thoughts on U.S. Equities Growth vs. Value September 201

2 Historical Returns From Growth And Value As of June 30, 201 ANNUALIZED RETURNS FROM RUSSELL GROWTH AND RUSSELL VALUE INDEXES Annualized Returns Russell 00 Growth Russell 00 Value Years Long-standing academic and empirical support for value Long term returns from value has dominated growth Growth oriented index has delivered stronger returns over the past decade Shorter-term returns heavily influenced by both cyclical and structural factors Past performance is not a reliable indicator of future performance. 2

3 Historically, Growth/Value Relative Returns Streams Have Been Cyclical And Persisting As of August 31, 201 RUSSELL 00 GROWTH VS. RUSSELL 00 VALUE Rolling 3 year Return Difference 80% 0% Growth Outperformed 0% 20% 0% -20% -0% -0% Value Outperformed -80% Post Financial Crisis of 2007/2008, Growth investing has been in favor as investors have sought secular growth due to slow economic growth Past performance is not a reliable indicator of future performance. 3

4 Despite Strong Relative Performance, Growth Still Is Relatively Cheap As of August 31, 201 VALUATION PREMIUM: GROWTH VS. VALUE Based on 1 Year Forward P/E Ratio 0% Russell 00 Growth/Value Long Term Median 50% Value Undervalued 0% 30% 20% % Growth Undervalued 0% Past performance is not a reliable indicator of future performance. Price-to-Earning Ratio (12 Months Forward) is a valuation measure calculated by dividing the price of a stock by the analysts forecast for the next 12 months expected earnings. The ratio is a measure of how much investors are willing to pay for the company s future earnings. The higher the P/E, the more investors are paying for a company s earnings growth in the next 12 months.

5 Growth Value Sector Exposures Differ Greatly Sector weights as of August 31, SECTOR COMPOSITION OF RUSSELL 00 GROWTH AND RUSSELL 00 VALUE INDEXES 31 Value Growth Percent Technology 5 21 Consumer Discretionary Health Care 9 Consumer Staples Materials Industrials Telecom Utilities Energy Financials Strong Growth Strong Value Numbers may not total due to rounding. 5

6 In Conclusion: Expect continued leadership reversals from growth and value Resist the temptation to try and time turn Consider balanced exposure to the full range of the US equity market

7 Important Information The views contained in this presentation are those of the T. Rowe Price Asset Allocation Committee only and may not reflect the opinion of all T. Rowe Price portfolio managers. The views contained herein are as of June 30, 201 and are subject to change. Under no circumstances should this material, in whole or in part, be copied, redistributed, or shown to any person without prior consent from T. Rowe Price. This material does not constitute a distribution, offer, invitation, recommendation, or solicitation to sell or buy any securities. This material does not constitute investment advice and should not be relied upon as such. Any performance shown in this presentation is index performance. Index performance is for illustrative purposes only and is not indicative of any T. Rowe Price investment product. Investors cannot invest directly in an index. Past performance is not indicative of future results. Risks: All investments are subject to risk, including the possible loss of principal. Fixed-income securities are subject to credit risk, liquidity risk, call risk, and interest-rate risk. As interest rates rise, bond prices generally fall. Investments in high-yield ( junk ) bonds involve greater risk of price volatility, illiquidity, and default than higher-rated debt securities. Foreign investments can be riskier than U.S. investments due to the adverse effects of currency exchange rates, differences in market structure and liquidity, as well as specific country, regional, and economic developments. These risks are generally greater for investments in emerging markets. U.S. Treasury securities are backed by the full faith and credit of the U.S. Government. Frank Russell Company ( Russell ) is the source and owner of the Russell Index data contained or reflected in these materials and all trademarks and copyrights related thereto. Russell is a registered trademark of Russell. Russell is not responsible for the formatting or configuration of this materials or for any inaccuracy in T. Rowe Price Associates presentation thereof. T. ROWE PRICE, INVEST WITH CONFIDENCE and the Bighorn Sheep design are, collectively and/or apart, trademarks or registered trademarks of T. Rowe Price Group, Inc. T. Rowe Price Investment Services, Inc. T. ROWE PRICE, INVEST WITH CONFIDENCE and the Bighorn Sheep design are, collectively and/or apart, trademarks or registered trademarks of T. Rowe Price Group, Inc. in the United States, European Union, and other countries. This material is intended for use only in select countries. 201-US /1 7