EFTA01458595.pdf

FIX .9 Letter to investors TN. by Pt lum Irrrattincnt Atut-aas paspst.Nas Investing in binary times Port/4b ?ic-n.xfovicwn 404, Nervousness pervades the markets. China's restructuring and the central banks' policy dilemmas are unprecedented. But the reality is better than it appears to be. Investors should think twice about taking an has, in a sense, been one but not wanting autumn break. After the rather busy months to be invested either should the subsequent of August and September. the traditionally market fall really happen. turbulent October is unlikely to allow investors to catch their breath. Why are markets so Just recently, the Fed dodged the start of its unsettled? Let me try to explain. very own turnaround once again. Although its decision may have been well reasoned, the Fed This bull market has lasted for six and a half might end up as the driven. not the driver. Also, years. Some have sought and found parallels, how readily can we really wean ourselves off in terms of technical chart analysis and the easy money drug? The Fed postponement valuations, with the years of 2000 and 2007. has at least served to create such negative when stock exchanges market sentiment that were also at turning points. higher interest rates This naturally raises the Although might even, for once, be question of comparability. welcomed. Wouldn't they? Does history repeat itself, some clouds may or does it only rhyme? Investors are currently linger, the situation divided on many things: Maybe what makes those Will developed economies three periods comparable remains good. drive emerging markets is that investors each time or will the latter impede had to face unprecedented, thus incomparable the first? Will Western consumers buy situations: In 2000 investors, who had been enough to compensate for globally slack happy to pay triple-digit price-to-earnings ratios levels of investment? Will consumer gains for internet companies, saw these valuations from cheaper oil compensate for the energy collapse as concerns mounted over the real producers' woes? And, finally: is the actual economic merits of this new technology. And situation better than it appears to be? These at the end of 2007, investors were faced with questions were on the agenda of our recent the, question whether the most recant driver of quarterly strategy meeting. In our view, the growth, credit-based consumption, could ever global economic recovery is intact, despite a take up that role again. Today, the big question more muted outlook for some markets. This is is whether the Chinese authorities and central likely to open up a number of opportunities, just banks will cope with two major new challenges. in time for the traditional year-end rally. If, of On the one hand, there is a nation of over one course, history chooses to repeat itself, at least billion people which, in current U.S.-dollar in this respect. terms, has more than quadrupled its share in the global economy within the last 15 years: but Asoka Wehrmann. which has also rapidly built up debt and now Chief Investment seeks to radically change its business model. Officer of Deutsche On the other hand, there are the central banks Asset & Wealth Mallagett*.fit. which have more than tripled their balance (Deutsche AWM) sheets since the financial crisis and now have and Member of the to work out how to run them down again. Deutsche AWM Will both China and the world's central banks Executive Committee manage to meet their very different objectives? Nobody can tell. investors are faced with the dilemma of not wanting to miss any buying opportunity - and every setback since 2009 Past performance is not indicative of future returns. No assurance can be given that any forecast, investment objectives and/or expected returns will be achieved. Allocations are subject to change without notice. It is not possible to invest directly in an index. F = forecast. Forecasts are based on assumptions, estimates, opinions and hypothetical models or analyses that may prove to be incorrect. C Wo larsmooEchamiOcidavar 20i 0 CONFIDENTIAL - PURSUANT TO FED. R. GRIM. P. 6(e) DB-SDNY-0118574 CONFIDENTIAL SDNY_GM_00264758 EFTA01458595