EFTA01458601.pdf

tbrul pattellf Focal bt Pt Irrrattincrit vuWC iii ,ti nasat,lass paspactios favtir..^ Hr:. >roviclyi newt Long or short, Larry Adam? Six market views from our Chief Investment Officer for Wealth Management in the Americas and Chief Investment Strategist for Deutsche AWM Americas Will equity-market investors have to learn to live with volatility? Are you still broadly positive on U.S. high yield? WS We still expect modestly rising equity markets but also 1.003 Global growth concerns and low oil prices have cast a be€ieve that volatility is here to stay- the events of the last few shadow over U.S. high yield in 2015. In particular, parallels have months have demonstrated how equity-market reversals can been drawn to the telecoms defaults of 1998/99. But the two quickly erode year-to-date gains. Equity valuation multiples periods are not totally comparable. Energy has a €ess significant also tend to decline after the Fed rate hike and we think that weight in the index now than telecoms did then. High volumes of valuations will gradually move back towards historical averages. new issues in recent years have also helped push out near-term So opportunities wi€l exist but investors will have to €earn to eve maturities and have decreased current refinancing risks. This is with some sharp upward and downward market moves. certainly one to monitor, but we remain broadly positive on U.S. high-yield debt Are emerging markets likely to remain particularly vulnerable? n Emerging markets were expected to suffer in the run up to Will the euro's role as a funding currency continue? any Fed rate-hike decision and they have. But less expected was Mal Over the last year, markets have realized that the ECB's how tears about Chinese growth would spill over into a more long-term commitment to a very dovish monetary policy general concern about the long-term health of emerging markets makes the euro an attractive funding currency. As a result, a concern compounded by the impact of low commodity even increased market concerns over Greece earlier this year prices on certain economies. The implication is that even if the were supportive. With ECB quantitative easing (OE) expected future path of Fed policy becomes much clearer, emerging to continue tor some time, the euro's role as a funding currency markets problems will not be resolved quickly and they will will continue. However, it is still not clear whether the euro remain vulnerable to reversals. would remain a genuine safe-haven currency through a period of deeper financial stress. The U.S dollar would probably reassert Will China's impact on developed equity markets vary? its historical safe-haven role, helped by the depth and liquidity of geal i he U.S. has the least exposure with an estimated 3% the U.S. Treasury market. of profits of companies in the S&P 500 Index related to China. Germany and Japan are more exposed, with around 20% of represeraa a pOrotra, JtiVever index profits linked to China. Here, some cut in eamings-per- neprevont; a neaativo anama share estimates looks prudent in response to China's troubles. But all calculations as to the impact of various Chinese growth scenarios must be speculative as we cannot anticipate the second-round effects or the possible policy responses. Will core sovereign bonds always be a safe haven? Nothing should ever be taken for granted. Consider for example how there was only a small decline in German sovereign-bond yields earlier this year in response to a sharp equity-market correction. High measures of va€ue at risk (VaR) Past performance is not indicative of future returns. meant that switching into bonds did riot help portfolio managers No assurance can be given that any forecast, investment reduce risk; they may also have been put off by negative yields. objectives and/or expected returns will be achieved. Allocations Other issues may also come into play in other sovereign-bond are subject to change without notice. Forecasts are based on markets -for example, concerns over Chinese sales of U.S. assumptions, estimates, opinions and hypothetical models that Treasuries in an attempt to preserve the value of the Chinese may prove to be incorrect. Yuan. ..:K)Wria I afrao.na Edraon 0ckto, 291& itta .14..... 013 CONFIDENTIAL - PURSUANT TO FED. R. GRIM. P. 6(e) DB-SDNY-0118584 CONFIDENTIAL SDNY_GM_00264768 EFTA01458601