January Market Review Groundhog Day

Larry Adam, CFA, CIMA CIO Americas & Chief Investment Strategist January Market Review Groundhog Day January 2016 Highlights of the Month: U.S. 4Q15 GDP Slows to Lowest YoY Growth Since 1Q14; ISM Manufacturing Remains in Contraction for Fourth Consecutive Month. Fed Keeps Rates Unchanged; BoJ Cuts into Negative Territory, ECB Hints at Further Easing. U.S. Adds 292k Jobs in December; The Unemployment Rate Remains at the Lowest Level Since April 2008 (5.0%). 10 Year U.S. Treasury Yields Dip Below 2%; Best Month For Treasuries Since January 2015. S&P 500 Declines for Third Consecutive January; S&P 500 Posts Worst January Since 2009. Defensive Sectors Outperform. Small Cap U.S. Equities Underperform Large Cap by Widest Margin Since September 2014. Japan Posts Worst Monthly Decline Since May 2012; Yen Rises to Strongest Level Since 2014. Dow Jones Commodity Index Falls For Seventh Straight Month to Lowest Level on Record. Crude Oil Falls to Lowest Level Since 2003; Iran Oil Hits the Market as Sanctions Are Lifted. U.S. Economy: Despite Strong Consumer, Growth Slows in 4Q15. The first reading on 4Q15 U.S. GDP showed growth expanded at a slower pace than the third quarter (+0.7% QoQ vs +2.0% QoQ). While personal consumption remained strong, an inventory drawdown and weak fixed investment hampered economic growth. The Fed at the January FOMC meeting elected to keep interest rates unchanged. While monitoring economic developments abroad, the Fed remains data dependent with respect to future rate hikes. The ISM Manufacturing Index (48.2) remained in contraction territory (a level below 50) for the fourth consecutive month. The employment, prices and new export order sectors drove the weakness while new orders and production rebounded. U.S. Investment Strategy Group. Larry Adam, CFA, CIMA CIO Americas & Chief Investment Strategist Tel: (410) 895-4135 larry.v.adam@db.com The U.S. added 292k jobs in December, the third consecutive month of 200k+ job gains. The unemployment rate remained at 5.0%, the lowest level since April 2008. Headline inflation (-0.1% MoM) declined for the first time in three months led by falling food, apparel and transportation costs. Core inflation (+2.1% YoY) rose at the fastest pace since 2012. December core retail sales (ex. food, autos, gas and building materials -0.2% MoM) declined for the first time in eight months. January consumer confidence (Conference Board: 98.1) rose for the third consecutive month to a three month high. Housing data was mixed as existing (+14.7% MoM) and new (+10.8% MoM) home sales rose but starts (-2.5% MoM) and permits (-3.9% MoM) declined. Home prices rose at the fastest pace since July 2014 (+5.8% YoY). Megan Horneman Investment Strategist Tel: (410) 895-4148 megan.horneman@db.com For institutional and registered representative use. Not for public viewing or distribution. Matt Barry Investment Strategy Analyst Tel: (410) 895-4282 matt.barry@db.com

Fixed Income: Fixed Income Returns Warm Investor Portfolios in Chilly Environment. The Barclays Aggregate Index (+1.4% MoM) rallied for the first time in three months and posted its best monthly return since January 2015. Fixed income served as a flight to quality in the midst of the equity correction. U.S. Treasuries (+2.1% MoM) rallied for the first time in four months and posted the best monthly gain since January 2015. Yields declined on global growth fears, additional easing from global central banks, a shallower trajectory for Fed rate hikes and muted inflation expectations. TIPS (+1.3% MoM) rallied for the first time in three months as the drop in real yields outweighed lower inflation expectations (10 year breakeven inflation rate fell 17bps). Municipal bonds (+1.2% MoM) rallied for the seventh consecutive month. All three major municipal sectors (revenue +1.2%, GO +1.2% and high yield bonds +0.6%) rallied in January. International sovereign bonds (+0.9% USD MoM) rallied for the second consecutive month. Sovereigns benefitted from rate cuts by the BoJ and hints at further easing from the ECB. Investment grade credit (+0.4% MoM) rallied for the first time in three months. Gains were led by utilities (+2.2% MoM) and financials (+0.7% MoM) while industrials declined (-1.7% MoM). Hard currency EM bonds (-0.03% USD MoM) declined for the third consecutive month but outperformed local currency EM bonds (-0.3% QoQ) for the second time in three months. High yield credit (-1.6% MoM) declined for the seventh month in the past eight. Weakness in energy prices (makes up 10-15% of Index) continued to weigh on high yield. Equities: 2016 Begins with Chilly Returns for Equity Investors. The MSCI AC World Index (-6.0% USD MoM) declined for the third consecutive month and posted its worst monthly decline since August 2015. Equities declined on earnings uncertainty, depressed oil prices and global growth fears (particularly in China). Japan (MSCI Japan -8.2% USD MoM) posted its worst monthly decline since May 2012. Japan declined as the Yen strengthened to the highest level since November 2014. The MSCI Europe ex UK (-6.8% USD MoM) declined for the third consecutive month and posted its worst monthly decline since August 2015. Due to export sensitivity, Europe declined on global growth uncertainties. The emerging markets (MSCI EM -6.5% USD MoM) relatively outperformed the developed markets (MSCI EAFE -7.2% USD MoM) for the first time in four months. Commodity consumers (MSCI Asia ex Japan -7.6% USD MoM) underperformed commodity producers (MSCI LATAM -4.6% USD MoM) for the first time in seven months. The S&P 500 (-5.0% MoM) declined for the second consecutive month and posted its worst January since 2009. The S&P 500 fell on declining earnings, uncertainty surrounding Fed rate hikes and fears over global growth. Only three out of 10 S&P 500 sectors rallied in January. Defensive related sectors such as telecom (+6.8% MoM) and utilities (+4.9% MoM) outperformed. Small cap equities (Russell 2000-8.8% MoM) underperformed large cap equities by the widest margin since September 2014. Commodities: Dow Jones Commodities Index Slips to Lowest Level on Record. The Dow Jones UBS Commodity Index (-1.7% MoM) declined for the seventh consecutive month and fell to the lowest level on record. Commodities declined on a stronger USD and uncertainty over emerging market growth. The Trade Weighted Dollar Index (+0.8% MoM) rallied for the fourth time in five months. The Dollar rallied on diverging monetary policies as the Fed continues on the path to raise rates, while the BoJ cut interest rates into negative territory and the ECB hinted at further easing. The Dow Jones Softs Index (-9.6% MoM) declined for the first time in five months and posted its worst monthly decline since May 2012. Declines were led by sugar (-13.8% MoM) as favorable weather effects supported Brazilian sugar cane production. The Dow Jones Energy Index (-7.3% MoM) declined for the fifth consecutive month. Crude oil (-9.2% MoM) fell to the lowest level since 2003 as a continued global supply glut (particularly with the addition of Iranian oil) and strong dollar hampered prices. The Dow Jones Industrial Metals Index (-1.4% MoM) declined for the eighth time in nine months. Lead (-3.8% MoM) and copper (-3.6% MoM) led the declines as a global manufacturing slowdown hampered demand. The Dow Jones Grains Index (+2.6% MoM) rallied for the first time in four months. Gains were led by corn (+3.7% MoM), soybeans (+2.1% MoM) and wheat (+2.0% MoM). The Dow Jones Precious Metals Index (+4.8% MoM) rallied for the first time in three months and posted its best monthly gain since January 2015. Both gold (+5.3% MoM) and silver (+3.2% MoM) rallied on increased market volatility and further easing by global central banks. January 2016 Market Review 2

Fixed Income Flight to Safety Favors Fixed Income Footnote: Data as of January 31, 2016. Sorted by January returns. U.S. Equities Large Cap Outperforms Small Cap January 1 Year 3 year 5 year 10 year January 1 Year 3 year 5 year 10 year Barclays U.S. Treasury 2.1% 0.4% 2.0% 3.3% 4.4% S&P 500-5.0% -0.7% 11.3% 10.9% 6.5% Barclays U.S. Agency 1.4% 0.9% 1.6% 2.3% 3.8% Russell 1000 Value -5.2% -5.0% 8.8% 9.6% 5.2% Barclays U.S. Aggregate 1.4% -0.2% 2.1% 3.5% 4.7% Russell 1000-5.4% -1.8% 10.9% 10.7% 6.5% Barclays U.S. TIPS (1-10 YR) 1.3% -1.7% -1.3% 1.7% 3.6% Dow Jones Industrial Average -5.4% -1.7% 8.5% 9.5% 7.0% Barclays Int. Govt/Credit 1.2% 0.6% 1.6% 2.8% 4.2% Russell 1000 Growth -5.6% 1.3% 13.0% 11.7% 7.7% Barclays Municipal Bond 1.2% 2.7% 3.4% 5.8% 4.8% Russell 2000 Value -6.7% -9.9% 4.5% 6.2% 4.0% Barclays Global G7 ex U.S. 0.9% -2.2% -3.7% -1.6% 3.0% NASDAQ Composite -7.9% -0.5% 13.7% 11.3% 7.2% Barclays U.S. IG Credit 0.4% -3.3% 2.1% 4.6% 5.3% Russell 2000-8.8% -9.9% 6.1% 7.3% 4.9% Barclays Corporate High Yield -1.6% -6.6% 0.7% 4.2% 6.6% Russell 2000 Growth -10.8% -10.0% 7.7% 8.3% 5.7% Commodities Energy Once Again Underperformed International Equities EM Outperforms DM Despite Commodity Weakness January 1 Year 3 year 5 year 10 year January 1 Year 3 year 5 year 10 year Gold Futures 5.3% -12.7% -12.4% -3.5% 6.9% MSCI Latin America (USD) -4.6% -29.6% -21.4% -14.2% -0.7% DJ Precious Metals 4.8% -14.5% -15.8% -6.5% 5.5% MSCI EAFE (Local) -5.8% -3.3% 8.4% 6.7% 2.7% Trade Weighted Dollar Index 0.8% 4.9% 7.9% 5.1% 5.5% MSCI UK (USD) -6.0% -12.2% -1.5% 1.8% 1.9% DJ Industrial Metals -1.4% -23.8% -17.2% -15.3% -4.0% MSCI EM (USD) -6.5% -20.6% -8.9% -5.2% 2.2% DJ UBS Commodity -1.7% -23.4% -18.5% -14.0% -7.8% MSCI Europe ex UK (USD) -6.8% -7.2% 1.9% 2.4% 3.0% Copper -2.6% -16.8% MSCI EAFE (USD) -7.2% -8.0% 1.1% 2.0% 2.1% DJ Energy -7.3% -39.2% -29.6% -22.9% -21.4% MSCI Asia ex Japan (USD) -7.6% -17.9% -3.5% -1.3% 4.9% Light Crude Oil Futures -9.2% -30.3% -29.9% -18.3% -6.8% MSCI Japan (USD) -8.2% -1.4% 6.1% 2.8% -0.3% Equity Sectors Defensive Sectors Outperform Historical Price and Yield Levels January 1 Year 3 year 5 year 10 year Current 3 month 3 year 5 year 10 year Telecom Services 6.8% 11.6% 7.1% 10.4% 7.8% Dow Jones Industrial Avg 16466 17664 13861 11892 10865 Utilities 4.9% -2.5% 11.6% 11.9% 7.7% NASDAQ Composite 4614 5054 3142 2700 2306 Consumer Staples 0.6% 8.5% 14.0% 15.0% 11.1% Gold $1,116 $1,141 $1,662 $1,335 $571 Energy -3.0% -19.6% -6.4% -2.1% 2.4% S&P 500 1940 2079 1498 1286 1280 Information Technology -4.8% 4.8% 15.3% 11.9% 8.5% Oil $34 $47 $97 $92 $68 Consumer Discretionary -5.1% 7.8% 15.8% 16.8% 10.1% Trade Weighted Dollar Index 99.5 96.9 79.2 77.7 89.0 Industrials -5.7% -4.7% 10.3% 9.3% 6.7% P/E Next 12-months 15.5 16.5 13.2 13.2 14.9 Health Care -7.6% -2.4% 17.7% 18.3% 9.6% 30-year Treasury Yield (%) 2.76% 2.93% 3.17% 4.57% 4.68% Financials -8.9% -3.6% 9.8% 7.8% -1.7% 10-year Treasury Yield (%) 1.93% 2.15% 1.98% 3.38% 4.53% Materials -10.6% -16.5% 1.9% 2.7% 4.6% 2-year Treasury Yield (%) 0.78% 0.76% 0.27% 0.57% 4.53% January 2016 Market Review 3

Telecom Services Utilities Cons Staples Energy Info Tech Consumer Discretionary Industrials Health Care Financials Materials Key Charts January 2016 Figure 1: YoY GDP Growth Falls Below 2% for First Time Since 1Q14 Figure 2: S&P 500 Sector Performance in January 13% 9% 5% Amidst market volatility, defensive sectors outperformed in January. Despite a strong consumer, YoY U.S. GDP fell below 2% for the first time since 1Q14 due to inventory drawdowns and weak fixed investment. 1% -3% -7% -11% -15% January 2016 Returns Trailing 1-Year Return (through Janaury 31, 2016) Footnote: Data as of January 31, 2016 Figure 3: U.S. 10 Year Treasury Yield Dips Back Below 2% Footnote: Data as of January 31, 2016. Data sorted by January returns. Figure 4: Commodities Index Falls to Lowest Level on Record The 10 Year U.S. treasury yield fell to the lowest level (1.92) since April 2015. As commodities fell for the seventh consecutive month in January, the Dow Jones Commodities Index fell to the lowest level on record (since 1991). Footnote: Data as of January 31, 2016. Footnote: Data as of January 31, 2016. January 2016 Market Review 4

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