Economic & Asset Class Outlook March/April 2016 Outlook Near Term World economy — There are initial signs that U.S. manufacturing may be stabilizing with several regional surveys turning positive. While housing data is solid, consumer spending has been tepid. — In Europe, manufacturing has been positive. the labor market is improving and personal consumption is solid. However, geopolitical risks are beginning to weigh on sentiment. — Slow global growth has weighed on manufacturing and business confidence in Japan. — Emerging markets continue to be challenged by slow global trade, political headwinds and sluggish domestic demand. — Tighter financial conditions in — some areas (e.g. U.S.), weak global trade and geopolitical risks have led us to downgrade our 2016 global growth forecast (from 3.4% to 3.2%). — All developed markets were brought lower led by the U.S. (from 2.4% to 1.9% in 2016) as — an inventory drawdown, weak manufacturing and slow exports may weigh on growth this year. _ — Europe and Japan were modestly reduced but aggressive central bank policy should support growth. — EM growth should gradually recover as commodity prices find a bottom, reforms take hold and FX volatility subsides. Monetary Policy, Inflation and FX Bond markets — Slower U.S. economic growth — has resulted in the FOMC downgrading their outlook on growth, inflation and magnitude of Fed funds rate hikes in 2016. _ — The ECB will likely remain in a wait and see mode and let the aggressive actions taken at their March meeting (e.g. negative interest rates, increased OE) filter into the economy. — The PBOC and BoJ will keep - the door open to take additional stimulus measures to support growth (e.g. QE. rate cuts). - The USD should gain momentum vs. the developed markets as Fed policy diverges from other central banks. Ongoing geopolitical risks and — lower growth than originally anticipated will likely limit the Fed to r