U.S. Economic Outlook: Where Innovation equals Opportunity. Jeff Korzenik Chief Investment Strategist

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1 U.S. Economic Outlook: Where Innovation equals Opportunity Jeff Korzenik Chief Investment Strategist

2 Where are we in the Business Cycle? Source: Bloomberg, The National Bureau of Economic Research 2

3 Where are we in the Business Cycle? Recession Current Phase of the Business Cycle 3

4 Industrial Capacity and the Business Cycle 4

5 A Question of Capacity 5

6 Have we Underinvested? Highest Level Since

7 A New Labor Landscape 7

8 Waiting to Work or Just Waiting First Month Months 2 4 After Month 16 After 16 Months: Unemployed (25.1%) Already Unemployed for More or Equal to 27 Weeks Not Employed at all During Months 2 4 (66.5%) Employed in at Least 1 Month (23.0%) After 16 Months: Employed (19.4%) After 16 Months: Not in Labor Force (22.1%) After 16 Months: Unemployed (3.9%) After 16 Months: Employed (15.0%) After 16 Months: Not in Labor Force (4.1%) Not in Labor Force During Months 2 4 Months (10.5%) After 16 Months: Unemployed (1.4%) After 16 Months: Employed (1.9%) After 16 Months: Not in Labor Force (7.2%) Source: Brookings Institute 8

9 What does it mean for Interest Rates? 9

10 Implications for Equity Investors Source: Bloomberg, Department of Transportation & Strategas 10

11 Implications for Equity Investors Recession Current Phase of the Business Cycle Technolog Basic Materials Discretionary y Industrials Energy Consumer Staples Healthcare Utilities Finance 11

12 Historical Context: Virtuous Long Cycles Source: OECD, Bloomberg 12

13 The Global Context: Developed World Source: Bloomberg 13

14 The Global Context: Developing World Source: Bloomberg 14

15 Global Risks Source: PFC Energy, The Economist Global Oil Production Production per Day Global Total 84,820,000 Country Barrels Share of World Production Russia 10,900, % Saudi Arabia 9,900, % United States 8,453, % Iran 4,231, % China 4,073, % Canada 3,592, % Iraq 3,400, % UAE 3,087, % Venezuela 3,023, % Mexico 2,934, % Kuwait 2,682, % Brazil 2,633, % Nigeria 2,525, % Norway 1,998, % Algeria 1,885, % Angola 1,840, % Kazakhstan 1,635, % Qatar 1,631, % UK 1,099, % Source: Bloomberg 15

16 Unintended Consequences Pages in the Federal Register 16

17 Unexpected Positives 17

18 Unexpected Positives GDP = G + I + C + NX Y=AK α L 1 α G=Government, I=Investment, C=Consumption, NX=Net Exports K=Stock of capital, L=Labor Force, A=Productivity 18

19 Unexpected Positives Driverless Cars Innovative Delivery Techniques Internet of Things 19

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21 Disclosures & Definitions Opinions are provided by Fifth Third Private Bank. This information is intended for educational purposes only and does not constitute the rendering of investment advice or a specific recommendation on investment activities and trading. The mention of any specific security does not constitute a solicitation or an offer to buy or sell any security. This information is current as of the date of this presentation and is subject to change at any time, based on market and other conditions. The Standard & Poor's 500 Stock Index is a composite of the 500 largest companies in the United States and it used as a measure of the overall U.S. stock market. The Consumer Price Index (CPI) is one of the most widely recognized price measures for tracking the price of a market of goods and services purchased by individuals. The weights of components are based on consumer spending patterns U.S. Treasury notes are issued with maturities of one to 10 years in denominations beginning at $1,000. Investors purchase bills at a discounted price from their face value. At maturity, the Treasury redeems the bills at full face value. The difference between the discounted price paid and the face value of the bill when it is redeemed is its return. U.S. GDP (Gross Domestic Product) is the total market value of all final goods and services produced in a country in a given year, equal to total consumer, investment and government spending, plus the value of exports, minus the value of imports CRB/Reuters Futures Price Index is an equal-weighted geometric average of commodity price levels relative to the base year average price. Indexes are unmanaged and do not incur investment management fees. You cannot invest directly in an index. Past performance is no guarantee of future results. Ned Davis Research Charts, Bloomberg Charts and FactSet Charts are used with permissions. The Organisation for Economic Co-Operation and Development leading indicators is designed to provide early signals of turning points in business cycles. The National Association of REALTORS Housing Affordability Index is based on the relationship between median home price, median family income and average mortgage interest rate. Purchasing Managers Index PMI is an indicator of the economic health of the manufacturing sector. The PMI index is based on five major indicators: new orders, inventory levels, production, supplier deliveries and the employment environment. Fifth Third Private Bank is a division of Fifth Third Bank offering banking, investment and insurance products and services. Fifth Third Bancorp provides access to investments and investment services through various subsidiaries. Investments, investment services and insurance: Are Not FDIC Insured Offer Not Bank Guaranteed May Lose Value Are Not Insured by Any Federal Government Agency Are Not a Deposit Insurance Products are made available through Fifth Third Insurance Agency, Inc. 21