EFTA01459016.pdf

%Tr! • FOC 1.11 TM. by pt !um Irrrattincnt Amt-des prcpx.Nas Port/Olo Letter to investors ?:c;;43cfovicwn 404, Everything remains different Markets should rise less in 2016 than they did in 2015. But there will not be much time for yawning. New opportunities will emerge for tactical investors. Twelve months ago, my predecessor, Asoka implementation. Pressure on the Fed to act Wahrmann, headlined his outlook for 2015. has also increased. Turbulent financial markets "Diversification paramount in 2015 - Capital have served to justify its inactivity in 2015. but markets will get less monetary-policy oxygen further passivity would be perceived negatively in 2015". However, he added that: "In spite of by most market players. divergent approaches, the central banks are like€y to remain supportive." How tempting it is All in all, investors remain divided on the to simply copy large parts of this text, replacing need of a Fed rate hike and the vulnerability 2015 by 2016 and betting of individual markets. on readers' memories Cheap money has found failures! But has 2015 really The Fed will, many recipients as can been so uneventful, as to be seen in the drastic leave our outlook almost whether it likes it increase in emerging- unchanged? or not, continue to markets debt, record M&A transaction volumes with Well, we still believe that no cyclical turn is in be the dominating near-record valuations, and the corresponding sight our global growth market-related near-record leverage of, for target for 2016 is even example, U.S. corporations. slightly above the 2015 topic in 2016. Moreover, towards the figure. What has changed, end of 2016, oil prices and however, are the drivers of growth: developed the U.S. labor market could result in inflation markets are catching up on emerging markets, growing higher than expectations. Many consumption and service-driven sectors are market players feel, however, reassured that the outperforming industrials, domestic markets Fed will prove responsive to market reactions. are growing taster than exports. This feeds But too much anticipated anticipation could through into our views on equities, still our eventually drive investors and central banks into preferred asset class. We favor developed losing sight of fundamentals. Which takes us markets and the healthcare, technology, back to the investment strategy for 2016. Once consumption and financial sectors. However, again. "buy and hold" is not an option since moderate price-gain expectations and high markets might depart from fundamentals every volatility might let down investors occasionally now and then. Investors must react dynamically 2016. -no time for yawning. At first sight, the globally-supportive monetary Stefan Kreuzkamp, Chief Investment environment also seems little changed. Officer and member Within the fixed-income sector, U.S. and euro of the Deutsche AWM corporate bonds therefore continue to offer Execuuw Committee opportunities. Within sovereigns we favor the Eurozone periphery. But differences do exist between 2015 and 2016 The marginal effect of further monetary easing -with the European Central Bank (ECB) already verbally preparing the ground - should lade. Furthermore, the market discounts central-bank policy initiatives at the time of their announcement, not of their 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. CIO VPaY, I Ae‘wat-InEttotw: I Out:mber 701* tittire,,.., 0 CONFIDENTIAL - PURSUANT TO FED. R. GRIM. P. 6(e) DB-SDNY-0119212 CONFIDENTIAL SDNY_GM_00265396 EFTA01459016