2018 Outlook The Ride Isn t Over Yet, But We re Getting Closer

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1 218 Outlook The Ride Isn t Over Yet, But We re Getting Closer Not FDIC Insured May Lose Value Not Bank Guaranteed OppenheimerFunds is not undertaking to provide impartial investment advice or to provide advice in a fiduciary capacity.

2 OppenheimerFunds Letter to Investors Are we there yet? It s the question many parents hear from their children on long family road trips. Inevitably the answer is no. The children typically follow up with Are we getting closer? to which the reply is invariably, yes. Investors are asking very similar questions about the business cycle. Are we there yet? We believe the current macro regime, like all others, will end when 1) valuations are at preposterous levels, 2) the Federal Reserve (Fed) is aggressively tightening policy, and/or 3) the U.S. economy is rolling over. We are not there yet. Are we getting closer? Yes. The unemployment rate is low, wages have trended higher, credit spreads are historically tight, and policy rates in 218 are poised to move higher. Still, 218 is poised to be a good year for risk assets, in our view. The major economies of the world are expanding in unison. Policymakers can still truncate this cycle with further monetary policy tightening, but modest inflation globally remains the saving grace. Emerging market growth in 218 is likely to be stronger and more widespread than in the developed world. China could be a phenomenal long-term story as the country transitions from growth at any cost to higher-quality growth. Importantly, growth in the emerging markets is likely to be less dependent on China as current recoveries in regions such as Latin America gather momentum. In the U.S., growth will be modest as the Fed continues to tighten policy. Expect market volatility to pick up if/when the Fed decides to press too hard. In a slower growth environment investors are likely to continue to favor true growth companies. Market leadership could shift to the more value-oriented, cyclical segments of the market if fiscal stimulus is successful. Alas, fiscal stimulus at this stage of the cycle is unlikely to lead to sustained higher growth. Europe and Japan, in a year or two s time, may be dealing with the same issues as in the U.S. (tightening policy, aging credit cycle), but for now are the beneficiaries of positive credit growth and rising earnings. We are not there yet. In 218 the cycle will continue but the risks are rising. Equities, globally, continue to be the asset class of choice. 218 Outlook Our Macro Views 1. The cycle continues, and it s synchronized. 2. Emerging market economic growth will be stronger than developed market growth. 3. The U.S. tax bill will not produce meaningfully higher sustained growth. 4. Policy-driven market volatility returns but the Fed ultimately backs down. Our Investment Views 1. Stocks will outperform bonds, again. 2. Emerging market equities will outperform developed market equities. 3. European equities will outperform U.S. equities. 4. U.S. growth stocks will outperform U.S. value stocks again. 5. The U.S. dollar will be stable or weaker. 6. Emerging market local bonds will offer a better risk and return profile than U.S. corporate bonds. 7. The best-case scenario for U.S. high-yield bonds will be coupon-like returns. Krishna Memani Chief Investment Officer 2

3 The Right Way to Invest 218 Outlook Three Scenarios with Distinct Probabilities Jun. 215 Feb. 216 Mar. 216 Dec. 216 Jan. 217 Current Fed Raises Rates Market Leadership U.S. Dollar Assets Long-Duration Bonds Market Leadership U.S. Dollar Assets Small-Cap Stocks Value Stocks Market Leadership Non-Dollar Assets Intl./EM Assets U.S. Large-Cap Growth Stocks Tighter Policy Cycle Ends Probability: Low 218 U.S. Sustained Above-Trend Growth Probability: Low Moderate U.S. Growth EM Macro Outperformance Probability: High The broad equity market has surged to new highs over the past eight years but with the inevitable fits and starts and divergent market leadership at different points in the cycle. There are three primary scenarios for 218 with distinct probabilities: 1) A more hawkish Fed could repeat the mistakes of early 216 and risk curtailing the cycle. 2) Corporate tax cuts could sustain U.S. growth at a higher level, supporting the more cyclical segments of the U.S. market. We assign low probabilities to those two scenarios for reasons we lay out in the following pages. We believe the highest probability is a continuation of the market leadership of 217. Economic growth is likely to be deepest and broadest in the emerging markets, a trend that also favors European companies. For the U.S., the prospect of fiscal stimulus looms but a sustained shift to higher trend growth is unlikely with the economy already close to full employment. Our base case outlook calls for continued moderate U.S. growth, a trend that would continue to favor growth strategies in the U.S. Source: Chart is for illustrative purposes only, OppenheimerFunds, Inc. 3

4 Macro Views OppenheimerFunds Global Growth 1. The Cycle Continues, and It s Synchronized Percent of Countries Gross Domestic Product Growing Above Their Long-Term Average 8% 7 59% of World 61% of World 6 Percent of Countries Above Their Long-Term Average The big macro story heading into 218 is the synchronized growth taking place in most countries of the world. Despite concerns about the age of the current cycle, the macro backdrop is as good as it has been in a number of quarters. Of the 96 countries we measured, more than 6% are experiencing GDP growth above their long-term trend. The measure last dipped in 211 during the European sovereign debt crisis and was recovering by 213 driven by renewed and sustained growth in the developed world. Currently, a good portion of the rate of change is being driven by recoveries in the emerging markets, in stark contrast to the sharp slowdown in emerging markets in 216. The current trend has also favored European export-driven economies such as Germany. Sources: Bloomberg, Haver, OppenheimerFunds, 1/31/17. Past performance does not guarantee future results. 4

5 The Right Way to Invest Macro Views EM Growth 2. EM Growth Will Likely Be Stronger than DM Growth EM Business Activity Heat Map Inflation Falling in Emerging Markets Consumer Price Index 8% Y/Y Percent Change EM Inflation Falling US Inflation Rising EM Above < U.S. Consumer Price Index EM Consumer Price Index 217 In our view, the emerging market economies, in aggregate, are well positioned to produce deeper and stronger growth in 218 than are the developed markets. The heat map shows that most of the emerging market economies are currently in expansionary territory. Declining inflation in many emerging economies provides cover for policymakers to provide accommodative monetary policy to support the expansions. While it is likely that Chinese growth will moderate in the year ahead, this is a byproduct of a prolonged shift towards a more sustainable growth model and should be viewed favorably at this stage of China s development. Fortunately, at this point in the cycle the emerging markets are less dependent on Chinese growth. We note the positive momentum in the Latin American economies and oil-producing countries such as Russia as they recover from sharp downturns in prior years. Sources: Bloomberg, Haver, Markit, OppenheimerFunds, 1/31/17. Business activity = Composite (manufacturing + services) Purchasing Managers Index (PMI). As shown in left chart, Taiwan and South Korea are displayed with manufacturing PMIs because service PMIs do not exist for those economies. 5

6 Macro Views OppenheimerFunds Chinese Growth The China Story Becomes More Phenomenal Size of Chinese Cities Compared to Countries Share of Chinese Nominal GDP by Sector 55% 5 Growth at any cost Manufacturing Services Reform Nominal GDP: $11T 218 Growth*: 6.5% Manufacturing Services China s transition to a more mature service-led economy is continuing unabated. The naysayers can point to a number of cities, each staggering in size and as large as many individual countries, as a signal that Chinese policymakers continue to double down on their desire to sustain growth at any cost. However, the focus on the investment side of the economy misses the larger story. More than half of Chinese growth is now service driven. The focus of the government, in the aftermath of the 19th Communist Party, now shifts from Deng Xiaoping s growth at any cost to Xi Jinping s reform-driven sustainable growth model. The transition will likely include reforms of the social safety net and the state-owned enterprises, and a recapitalization of the banking system. In our view, China is transitioning to a slower and more sustainable economic model and a potential phenomenal investing backdrop. If anything, we are even more optimistic now about China in 218 and beyond. Sources: China National Bureau of Statistics and Haver Analytics, 9/3/17. *Estimate. 6

7 The Right Way to Invest Macro Views U.S. Growth 3. The U.S. Tax Bill Will Likely Not Produce Higher Sustained Growth The Labor Market Is Already Tight Total Unemployment and Job Openings 16, Cap-ex Cycle Has Already Turned Nonresidential Fixed Investment (% of GDP) 15% 14, Thousands of People 12, 1, 8, 6, 4, 2, Recessions 25 NEED WORK 27 Unemployed Workers Job Openings 215 Local Store HELP WANTED 217 Percent of Gross Domestic Product Since the 216 election, there has been heightened expectations that an appropriate mix of fiscal stimulus and deregulation can return U.S. trend growth to the days of yore. It is conceivable that the tax plan could bring forward business hiring and accelerate business investment. However, we have tempered our expectations. The jobs market is already tight (left chart) and capital expenditures as a percent of GDP have already recovered from the 216 energy-driven downturn and is above average (right chart). The likelihood of prolonged higher sustained growth at this point in the cycle is low. Paradoxically, a tax cut could provide a sugar rush to growth, only to bring forward tightening and curtail the cycle. Sources: Bureau of Labor Statistics (Left chart) and Bureau of Economic Analysis (Right chart), 9/3/17. 7

8 Macro Views OppenheimerFunds U.S. Monetary Policy 4. Policy-Driven Market Volatility Returns but the Fed Ultimately Backs Down Federal Funds Rate vs. 1-Year U.S. Treasury Yield 8% U.S. Wage and Inflation Growth 16% Year-Over-Year Percent Change U.S. monetary policy normalization has been and should continue to be gradual Jerome Powell Federal Funds Rate Target 1-Year Treasury Yield Fed Funds Rate: Median Projection of FOMC Members U.S. Average Hourly Earnings (Production and Nonsupervisory Workers) Consumer Price Index The selection of Jerome Powell as the next Fed Chair was a clear signal to the markets that the administration is comfortable with a continuation of the slow, gradual normalization of monetary policy. This has rightfully been viewed by the markets favorably. Still, similar to early 216, market volatility is likely to increase in 218 as the Fed prepares to raise rates three times in 218, a prospect that would further flatten the yield curve. In 216, the Fed ultimately backed down and will likely do so again in 218. As long as wage growth and inflation remain benign, the Fed will have the necessary cover to tighten at a gradual pace and the current cycle will continue. A meaningful pickup in U.S. inflation would change our outlook. Sources: Bureau of Labor Statistics, U.S. Federal Reserve and Bloomberg, 1/31/17. 8

9 The Right Way to Invest Investment Views Asset Allocation Asset Class Views Favored Equity Segments Developed Markets EM Emerging Markets U.S. International Growth G Value Favored Fixed Income Segments Developed Markets EM Emerging Markets Corporate Credit Treasuries Long Duration Short Duration Sources: Chart is for illustrative purposes only, OppenheimerFunds, Inc. These views represent the opinions of OppenheimerFunds and are not intended as investment advice or to predict or depict the performance of any investment. These views are as of the open of business on December 5, 217, and are subject to change. 9

10 Investment Views Cross-Asset Valuations 1. Stocks Will Likely Outperform Bonds; Valuations Are Currently More Attractive Outside U.S. OppenheimerFunds Risk Premia of Select Asset Classes vs. Long-Term Average Risk Premia of Select Regions vs. Long-Term Average Expensive Cheap Expensive Cheap Discount 1 Discount Discount/Premium in Basis Points Relative to Long-Term Mean Premium Discount/Premium in Basis Points Relative to Long-Term Mean Premium 2 High Yield Bonds vs. U.S. Treasury Investment Grade vs. U.S. Treasury S&P 5 Index vs. U.S. Treasury 2 Emerging Markets vs. Developed Equity Emerging Markets vs. U.S. Equity Developed ex-u.s. Equity vs. U.S. Equity We believe equities remain the asset class of choice. U.S. stock valuations, although elevated from a historical perspective, are still cheap relative to bonds. The risk in U.S. credit (high-yield bonds, investment-grade corporate bonds) is higher than it is in U.S. equities. Spreads are already tight as flows into U.S. credit have been robust. Corporate bonds will be the first to roll over when the U.S. cycle ultimately concludes. For now, U.S. credit should be viewed as an income-generating investment. Further price appreciation is unlikely. International equities remain cheap relative to the U.S. Developed market equities ex-u.s. have become more attractively valued as the earnings cycle in Europe and Japan has materialized. Emerging market equities continue to represent attractive valuations compared to the U.S. Sources: Bloomberg, FactSet, Credit Suisse and Barclays, 1/31/17. Asset classes are represented by the following indices (in the order they appear on the chart): Left chart: Credit Suisse High Yield Bond Index current spread over Treasuries difference from its long-term average, Bloomberg Barclays U.S. Aggregate Bond Index current option-adjusted spread difference from its long-term average, S&P 5 Index vs. U.S. Treasuries is calculated as the S&P 5 Index earnings yield and the current yield on U.S. Treasuries relative to their long-term average. Right chart: Developed ex-u.s. premium is calculated by taking the earnings yield of the MSCI World ex. U.S. Index and the S&P 5 Index earnings yield and then comparing its current difference to its long-term average. Emerging markets vs. U.S. equity is calculated by comparing the current MSCI Emerging Markets Index Earnings Yield to the MSCI USA Index earnings yield and subtracting it from the long-term average. Emerging Markets premium is calculated by taking the MSCI Emerging Markets Index and subtracting its earnings yield from the MSCI USA and MSCI Europe Index to determine the current risk premium. Index definitions can be found on page 19. All long-term measures are since index inception or 2 years. Past performance does not guarantee future results. 1

11 The Right Way to Invest Investment Views EM Equities 2. EM Equities Will Likely Outperform DM Equities Price-to-Sales Ratio: MSCI Emerging Markets Index / MSCI World Index Emerging Market Business Activity and Equity Returns Relative P/S Ratio 1.8x EM rich, DM cheap EM cheap, DM rich Standard Deviation Average 1 Standard Deviation Diffusion Index Expansion Contraction EM Composite PMI (Left-Axis) Correlation Coefficient MSCI EM Index (Right-Axis) 1% Year-Over-Year Percent Change Since 213, emerging market stocks, on a price-to-sales basis, have been trading at a discount relative to the developed world. The gap between EM and DM valuations partially closed in 217 but emerging markets remain cheaper on a relative basis. Valuations should not be viewed in isolation. The leading indicators of the broad emerging markets, as represented by the Composite Purchasing Managers Index, are improving (typically a harbinger of sound equity returns). In addition, inflation has generally fallen across the emerging markets, enabling policymakers in many countries including Brazil, Chile, India, Indonesia, Russia, South Africa and others, to ease monetary conditions. Sources: Bloomberg, OppenheimerFunds, 9/3/17. Note: P/S = price-to-sales ratio. Shaded areas denote global all-industry contractions. SD = standard deviation. See page 19 for index definitions. Past performance does not guarantee future results. 11

12 Investment Views OppenheimerFunds European Equities 3. European Equities Will Likely Outperform U.S. Equities Price-to-Sales Ratio: MSCI Europe Index / MSCI USA Index EU Business Activity and Equity Returns Relative P/S Ratio.85x Europe rich, USA cheap +1 Standard Deviation Average 1 Standard Deviation Diffusion Index Expansion Contraction 1% Year-Over-Year Percent Change Europe cheap, USA rich Shaded areas represent recessions EU Composite PMI (Left-Axis) MSCI Europe Index (Right-Axis) Currently, European stocks, on a price-to-sales basis, are as cheap relative to U.S. stocks as they have been in over a decade. Valuations should not be viewed in isolation. The macroeconomic and policy backdrop matters. Leading indicators of the European economy, as represented by the Composite Purchasing Managers Index, are improving (typically a harbinger of sound equity returns) and the European Central Bank is currently maintaining easy policy accommodations. Sources: Bloomberg, OppenheimerFunds, 9/3/17. Note: P/S = price-to-sales ratio. Shaded areas denote global all-industry contractions. SD = standard deviation. See page 19 for index definitions. For illustrative purposes only. Past performance does not guarantee future results. 12

13 The Right Way to Invest Investment Views U.S. Style 4. U.S. Growth Stocks Will Likely Outperform U.S. Value Stocks Again U.S. Treasury Yield Curve vs. U.S. Value/Growth U.S. Growth vs. Value Average Performance in Flattening and Steepening U.S. Treasury Yield Curve Regimes Since 8 Spread (Percentage Points) 3.5% Value Outperformed Growth Outperformed Ratio Russell 3 Growth Index vs. Russell 3 Value Index Excess Returns 2% We think we re here! Yield Curve (Left) Russell 3 Value/Growth (Right) Flattening U.S. Treasury Yield Curve Steepening U.S. Treasury Yield Curve Here s a simple rule of thumb: if the yield curve is steepening (real economic growth and inflation climbing), investors may consider buying value-oriented companies (read: financials, industrials). If the yield curve is flattening (tighter policy, slowing growth), consider paying up for growth wherever you can find it, including across all market capitalizations. We have primarily been in the buy growth in a slow growth world environment since the financial crisis. Currently, value stocks are trading cheap to growth stocks but in order for value to consistently outperform growth there would likely need to be a sustained increase in trend U.S. growth and a steeper U.S. yield curve, neither of which we believe is forthcoming. For more details on our global equity views, please see our Equity Strategy Playbook. Please visit oppenheimerfunds.com for more information. Sources: Bloomberg, OppenheimerFunds, 9/3/17. Note: Shaded areas denote periods of growth outperformance. See page 19 for index definitions. Past performance does not guarantee future results. 13

14 Investment Views OppenheimerFunds Currencies 5. The U.S. Dollar Will Likely Be Stable or Weaker Currency Undervaluation Against the USD on a Purchasing Power Parity Basis Turkey Mexico UK Switzerland Japan South Africa Australia Canada Europe India Russia Brazil China Thailand Cheap vs. USD 2 25 The U.S. dollar, on a trade-weighted basis, weakened in 217 as growth outside of the United States generally surprised to the upside. We expect the dollar to be stable or moderately weaker in the year ahead. Even in the aftermath of a greater than 1% decline in 217, the U.S. dollar still trades expensive to most other major currencies on a purchasing power parity basis. Source: Ned Davis Research, 1/31/17. Currencies featured on the chart are based on the purchasing power parity (PPP) basis valuation relative to the U.S. dollar. Past performance does not guarantee future results. 14

15 The Right Way to Invest Investment Views EM Bonds 6. EM Bonds Will Likely Provide a Better Risk-Return Profile than U.S. Corporates Average Real Yield of Emerging Market 1-Year Bonds EM Local Currency Real Yields 3.5% Percent % 6.37% Mexico 9.88% 3.42% 2.1% Poland 6.69% 7.61% 2.7% Russia 1. First Fed Rate Hike 2.7% Brazil 3.58% India Taper Tantrum Nominal 1-Year Sovereign Bond Rate Real 1-Year Sovereign Bond Rate Consumer Price Index Year-Over-Year Percent Change The case for EM sovereign and corporate bonds is sound. Real yields remain attractive across the region, suggesting capital flows will continue to be positive even in the event of a series of Fed rate hikes. The economic backdrop is as good as it has been in a number of years and monetary policy will likely remain accommodative across much of the emerging markets as inflation has been falling. The currencies the 217 rallies in EM currencies notwithstanding remain cheap to the U.S. dollar on a purchasing power parity basis, providing another potential lever for total returns. Source: Bloomberg, 1/31/17. Countries included in the average real yield calculations are India, Russia, China, Mexico, Indonesia, Turkey and Brazil. Real yields are the nominal yield of a country s sovereign bond minus the year-over-year change in their respective consumer price index. Past performance does not guarantee future results. 15

16 Investment Views OppenheimerFunds U.S. Corporate Bonds 7. The Best Case Scenario for High-Yield Bonds Is Coupon-Like Returns, in Our View U.S. Net Lending Conditions vs. High-Yield Corporate Bond Spreads 15% 2% Net Percent of Domestic Banks 5 SUPPLY > DEMAND Option-Adjusted Spread 5 SPREADS ARE TIGHT C&I Loan Supply Minus Demand: Large and Middle-Market Firms (Left-Axis) U.S. High Yield Master II (Right-Axis) Potential return expectations on high-yield bonds come down to a simple calculation: Yield + Price Appreciation Defaults + Recovery Rates. Currently the spread of high-yield bonds stands at historically tight levels compared to 1-Year U.S. Treasuries. The time for significant price appreciation has passed. We note that the supply of C&I loans currently exceeds the demand for loans by a level that is not typical for spreads at this level. Excess supply could weigh on price. Fortunately, we do expect default levels to remain relatively low as the fundamentals of corporate borrowers high interest coverage ratios, no wall of maturities remain relatively sound. Sources: Federal Reserve Bank of St. Louis, Bank of America Merrill Lynch, 1/31/17. C&I loans are Commercial and Industrial Loans. U.S. High Yield Master Index is published by Bank of America Merrill Lynch. See page 19 for index definitions. Past performance does not guarantee future results. 16

17 The Right Way to Invest Final Thought Wide Return Dispersion Typically Presages Recession Fortunately, 217 Was a Normal Year MSCI ACWI Distribution of Monthly Total Returns MSCI ACWI Distribution of Monthly Total Returns Normal Years vs. Pre-Recession Years Return Higher Total Return Lower Total Return Normal Years Pre-Recession Years Median Distribution ( ) 217 was both a unique and a normal year. How is that possible? Global equity markets posted positive returns in every month (updated through October). That s never happened before. But as the image on the left shows, the returns of the broad global index were normally distributed with only a handful of big up days and virtually no big down days. We attribute the lack of significant drawdowns to the absence of economic and monetary policy uncertainty globally. The lack of volatility in 217 should not be cause for concern. Returns tend to be more normally distributed in the middle of cycles and less so in the days and years before recessions (see 199, 1999, and 27). Don t get us wrong. We are hard pressed to imagine returns to be so normal in 218. Tighter monetary policy in the U.S. will likely lead to greater gyrations in the markets. But don t fret. The current cycle has room to run. We believe global equities continue to be the asset class of choice. Source: FactSet, 1/31/17. See page 19 for index definitions. For illustrative purposes only. Past performance does not guarantee future results. 17

18 The Right Way to Invest OppenheimerFunds Authors Krishna Memani Chief Investment Officer, Head of Fixed Income and Portfolio Manager Krishna Memani serves as the firm s Chief Investment Officer and Head of Fixed Income as well as Portfolio Manager on the Investment Grade Debt Team. He is responsible for the portfolio management of Oppenheimer Total Return Bond Fund, Oppenheimer Corporate Bond Fund and the investment-grade portion of Oppenheimer Global Strategic Income Fund. He is also Portfolio Manager of Oppenheimer Capital Income Fund. Brian Levitt Senior Investment Strategist Talley Léger Equity Strategist Timothy Horsburgh Investment Strategist Drew Thornton Investment Strategist Ashley Oerth Investment Strategy Analyst 18

19 The Right Way to Invest Index Definitions Index Definitions The High Yield Master II Option-Adjusted Spread (OAS) is the calculated spreads between a computed OAS index of all bonds in a given rating category and a spot Treasury curve. An OAS index is constructed using each constituent bond s OAS, weighted by market capitalization. The High Yield Master II OAS uses an index of bonds that are below investment grade (those rated BB or below). The Senior Loan Officer Opinion Survey is a quarterly survey of up to 8 large domestic banks and 24 U.S. branches and agencies of foreign banks to gauge a variety of opinions surrounding credit conditions. The EM composite PMI is the Markit Emerging Markets Manufacturing Purchasing Managers Index which is designed to measure the relative optimism of purchasing managers in the manufacturing sector across all emerging markets and indicates the economic conditions of an economy. The MSCI World Index is designed to measure the equity market performance of developed markets and includes the U.S., Eurozone area, Japan and Canada. The MSCI Emerging Market Index is designed to measure the equity market performance of the emerging markets. EU Composite PMI is the European Union Purchasing Managers Index (PMI) which is a diffusion index designed to measure the manufacturing sector and services sector output of the European Union countries. MSCI USA is designed to measure the equity market performance of the entire United States equity market. The MSCI Europe Index represents the performance of large- and mid-cap equities across 15 developed countries in Europe, including Austria, Belgium, Denmark, Finland, France, Germany, Ireland, Italy, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and the United Kingdom. The Institute for Supply Management (ISM) Manufacturing Purchasing Managers Index (PMI) is a diffusion index designed to measure U.S. manufacturing output. The MSCI All-Country World Index is designed to measure the equity market performance of developed and emerging markets. The Russell 3 Growth Index measures the performance of the largest 3, U.S. companies. It includes those Russell 3 companies with higher price-to-book ratios and higher forecasted growth values. The Russell 3 Value Index measures the performance of the broad value segment of the U.S. equity universe. It includes those Russell 3 companies with lower price-to-book ratios and lower forecasted growth values. Indices are unmanaged and cannot be purchased directly by investors. Index performance is shown for illustrative purposes only and does not predict or depict the performance of any investment. Past performance does not guarantee future results. 19

20 Visit Us oppenheimerfunds.com Call Us Follow Us These views represent the opinions of OppenheimerFunds, Inc. and are not intended as investment advice or as a prediction of the performance of any investment. These views are as of the open of business on December 5, 217, and are subject to change on the basis of subsequent developments. Investing involves risk including the possible loss of principal. Asset allocation cannot eliminate the risk of fluctuating prices and uncertain returns. Equities are subject to market risk and volatility; they may gain or lose value. Fixed-income investing entails credit and interest rate risks. Bonds are exposed to credit and interest rate risk. When interest rates rise, bond prices generally fall, and a fund s share prices can fall. Below-investment-grade ( high yield or junk ) bonds are more at risk of default and are subject to liquidity risk. Foreign investments may be volatile and involve additional expenses and special risks, including currency fluctuations, foreign taxes and geopolitical risks. Emerging and developing markets may be especially volatile. The mention of specific countries, currencies, companies, or sectors does not constitute a recommendation by any particular fund or by OppenheimerFunds, Inc. Shares of Oppenheimer funds are not deposits or obligations of any bank, are not guaranteed by any bank, are not insured by the FDIC or any other agency, and involve investment risks, including the possible loss of the principal amount invested. This material is provided for general and educational purposes only, is not intended to provide legal or tax advice, and is not for use to avoid penalties that may be imposed under U.S. federal tax laws. OppenheimerFunds is not undertaking to provide impartial investment advice or to provide advice in a fiduciary capacity. Contact your attorney or other advisor regarding your specific legal, investment or tax situation. Before investing in any of the Oppenheimer funds, investors should carefully consider a fund s investment objectives, risks, charges and expenses. Fund prospectuses and summary prospectuses contain this and other information about the funds, and may be obtained by asking your financial advisor, visiting oppenheimerfunds.com or calling 1 8 CALL OPP ( ). Read prospectuses and summary prospectuses carefully before investing. Oppenheimer funds are distributed by OppenheimerFunds Distributor, Inc. 225 Liberty Street, New York, NY OppenheimerFunds Distributor, Inc. All rights reserved. AO December 5, 217