Portfolio Manager Larry Puglia, CFA, discusses his perspective on the current U.S. equity market and what investors could expect to see in 2017.

1. U.S. EQUITY
Larry Puglia, CFA, CPA
Portfolio Manager
November 17, 2016
2017 Global Market Outlook Press Briefing

2. 2
U.S. Equity Outlook
ENVIRONMENT
 Stock valuations are reasonable relative to 25-year averages for many measures—
current forward price-to-earnings (P/E) is 16.8x
 Stocks have overcome significant periods of volatility and large intra-year declines
 Value has outperformed growth, especially in small-/mid-cap area
 Dividend yield is near an all-time high relative to 10-year Treasury yield
 Growth relative to value commands a smaller-than-average premium among large-caps
 Balance sheets, buybacks, and dividends remain quite strong, but leverage is increasing for many small-caps
LOOKING AHEAD
 Rising interest rates can be accompanied by rising stock prices, especially when yields are less than 5%
 Defensive low-volatility sectors (utilities, telecom and consumer staples) have outperformed, but this trend
may be changing
 Russell 1000 Growth, Russell Midcap Growth, and Russell 2000 Value appear to have the most attractive valuations
 Information technology and health care are the industry sectors with the most attractive valuations
 S&P 500 earnings should rebound in 2017 and 2018, reflecting a sharp improvement in energy; however, analyst
projections have not been accurate, so some caution is warranted
 Earnings dispersion by industry is notable, with information technology and health care screening well
As of September 30, 2016
Russell Investment Group is the source and owner of the trademarks, service marks, and copyrights related to the Russell indexes. Russell® is a trademark
of Russell Investment Group.

3. 3
8x
10x
12x
14x
16x
18x
20x
22x
24x
26x
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016
S&P 500 Valuation Measures
As of September 30, 2016
Sources: FactSet, Federal Reserve Board, Robert Shiller, Standard & Poor’s, and J.P. Morgan Asset Management.
Price-to-earnings ratio is price divided by consensus analyst estimates of earnings per share (EPS) for the next 12 months. Shiller’s P/E uses trailing 10 years of
inflation-adjusted earnings as reported by companies. Dividend yield is calculated as the next 12-month consensus dividend divided by most recent price. Price-to-
book ratio is the price divided by book value per share. Price-to-cash flow ratio is price divided by NTM (next 12 months) cash flow. Earnings yield (EY) minus Baa
yield is the forward earnings yield (consensus analyst estimates of earnings per share over the next 12 months divided by price) minus the Moody’s Baa seasoned
corporate bond yield. Standard deviation over-/undervalued is calculated using the average and standard deviation over 25 years for each measure.
*Price/Cash flow is a 20-year average due to cash flow data availability.
S&P 500 INDEX: FORWARD P/E RATIO
+1 Std. dev.: 19.1x
25-year average: 15.9x
-1 Std. dev.: 12.7x
16.8x
Valuation
Measure Description Latest
25-Year
Avg.*
Std. Dev. Over-
/Undervalued
P/E Forward P/E 16.8x 15.9x 0.3
CAPE Shiller’s P/E 26.6 25.9 0.1
Div. Yield Dividend yield 2.2% 2.0% -0.4
P/B Price-to-book 2.6 2.9 -0.3
P/CF* Price-to-cash flow 11.7 11.4 0.1
EY Spread EY minus Baa yield 1.7% -0.4% -1.1

4. 4
Market Volatility
As of September 30, 2016
Past performance cannot guarantee future results.
Sources: FactSet, Standard & Poor’s, and J.P. Morgan Asset Management; (Bottom) Chicago Board Options Exchange. Drawdowns are calculated as the prior peak
to the lowest point. Guide to the Markets—U.S. Data are as of September 30, 2016.
1,000
1,200
1,400
1,600
1,800
2,000
2,200
2010 2011 2012 2013 2014 2015 2016
MAJOR PULLBACKS DURING CURRENT MARKET CYCLE
S&P 500 Stock Index
10
20
30
40
50
2010 2011 2012 2013 2014 2015 2016
Jul. 2, 2010:
-16.0%
Oct. 3, 2011:
-19.4%
Jun. 1, 2012:
-9.9%
Jun. 24, 2013:
-5.8%
Oct. 15, 2014:
-7.4%
Aug. 25, 2015:
-12.4%
Feb. 11, 2016:
-13.3%
2010 2011 2012 2013 2014 2015 2016
2010 2011 2012 2013 2014 2015 2016
Jul. ’10:
Flash Crash,
BP oil spill,
Europe/Greece
Oct. ’11:
U.S. downgrade,
Europe/periphery
stress
Jun. ’12:
Euro double dip Jun. ’13:
Taper Tantrum
Oct. ’14:
Global
slowdown
fears, Ebola
Aug. ’15:
Global slowdown
fears, China, Fed
uncertainty
Feb. ’16:
Oil, U.S.
recession
fears, China
VIX
’08 Peak
Average
Latest
LEVEL
80.9
18.1
13.3
VOLATILITY
VIX Index

5. 5
Annual Returns and Intra-year Declines
As of September 30, 2016
Past performance cannot guarantee future results.
Sources: FactSet, Standard & Poor’s, and J.P. Morgan Asset Management.
Returns are based on price index only and do not include dividends. Intra-year drops refers to the largest market drops from a peak to a trough during the year. For
illustrative purposes only. Returns shown are calendar year returns from 1980 to 2015, except for 2016, which is year-to-date. Guide to the Markets—U.S. Data are
as of September 30, 2016.
S&P 500 INTRA-YEAR DECLINES VS. CALENDAR-YEAR RETURNS
Despite average intra-year drops of 14.2%, annual returns positive in 27 of 36 years
26
-10
15
17
1
26
15
2
12
27
-7
26
4
7
-2
34
20
31
27
20
-10
-13
-23
26
9
3
14
4
-38
23
13
0
13
30
11
-1
6
-17 -18 -17
-7
-13
-8 -9
-34
-8 -8
-20
-6 -6 -5
-9
-3
-8
-11
-19
-12
-17
-30
-34
-14
-8 -7 -8
-10
-49
-28
-16
-19
-10
-6 -7
-12 -11
-60%
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
1980 1985 1990 1995 2000 2005 2010 2015

6. 6
U.S. Markets: Small-Cap Growth
Leads in Q3
As of September 30, 2015
Past performance cannot guarantee future results.
Sources: FactSet, Russell Indexes, and Standard & Poor’s.
3.5% 3.9% 4.6% 16.2% 15.4% 13.8%
4.4% 4.6% 17.3% 11.2%
8.9% 9.0% 9.2% 18.8% 15.5% 12.1%
THIRD QUARTER ONE YEAR
RUSSELL 1000 VALUE S&P 500
RUSSELL 1000
GROWTH RUSSELL 1000 VALUE S&P 500
RUSSELL 1000
GROWTH
RUSSELLMIDCAP
GROWTH
RUSSELL 2000 VALUE RUSSELL 2000 RUSSELL 2000
GROWTH
RUSSELL 2000 VALUE RUSSELL 2000 RUSSELL 2000
GROWTH
<-10% -5% to -10% 0% to -5% 0% to +5% +5% to +10% >+10%SCALE:
RUSSELLMIDCAP
VALUE

7. 7
U.S.: Dividend Yields Relative to Bond
Yields Have Reached Extreme Levels
As of September 30, 2016
Past performance cannot guarantee future results.
Sources: FactSet, Standard & Poor’s, and T. Rowe Price.
The S&P 500 dividend yield is currently 1.28 times as large as the 10-year U.S. Treasury yield. This is the
eleventh-largest ratio in the history of our data set, which goes back to March 1990. A ratio of greater than
one (i.e., S&P dividend yield >10-year U.S. Treasury yield) has only occurred in 9.2% of the observations.
7
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
YieldRatio
Range of Observations
March 1990 to September 2016
S&P 500 DIVIDEND YIELD/
10-YEAR U.S. TREASURY YIELD
Sep. 30, 2016:
1.28
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
1990 1993 1996 1999 2002 2005 2008 2011 2014
Yield
S&P 500 DIVIDEND YIELD VS.
10-YEAR TREASURY YIELD
March 1990–September 2016
S&P 500 Dividend Yield
10-Year U.S. Treasury Yield

8. 8
U.S.: Large-Cap Growth Stocks Are Commanding a
Smaller-Than-Average Premium
Past performance cannot guarantee future results.
Chart is shown for illustrative purposes only and does not represent the performance of any specific security.
Source: FactSet and Russell Indexes.
-10%
10%
30%
50%
70%
90%
110%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
VALUATION PREMIUM: GROWTH VS. VALUE
Based on One-Year Forward P/E Ratio, January 2005‒September 2016
Russell 1000 Growth/Value Long Term Median
Russell 2000 Growth/Value Long Term Median

9. 9
U.S.: Leverage Has Increased
Past performance cannot guarantee future results.
Chart is shown for illustrative purposes only and does not represent the performance of any specific security.
Sources: FactSet and Standard & Poor’s.
2
4
6
8
10
12
14
16
18
20
CASH AS % OF MARKET
CAPITALIZATION
January 1995–March 2016
S&P 500 Large Cap
S&P 600 Small Cap
50
60
70
80
90
100
110
1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015
TOTAL DEBT AS %
OF TOTAL EQUITY
January 1995–September 2016
S&P 500 Large Cap
S&P 600 Small Cap
As a result of historically low borrowing costs,
corporations have been increasing debt and buying
back stock.
Corporate management has favored returning cash
to shareholders through share repurchases and
dividends, but ample capital remains for capex and
merger-and-acquisition activity.

10. 10
U.S.: Buybacks and Dividends
Remain Strong
Chart is shown for illustrative purposes only and does not represent the performance of any specific security.
Sources: FactSet and Standard & Poor’s.
0%
1%
2%
3%
4%
5%
6%
7%
8%
DividendandBuybackYield
S&P 500 TRAILING 12-MONTH
DIVIDEND AND BUYBACK YIELD
January 2005–September 2016
S&P 500 Buyback Yield
S&P 500 Dividend Yield
25
30
35
40
15
20
25
30
35
40
45
50
PayoutRatio(%)
DividendsPerShare(USD$)
S&P 500 PAYOUT RATIO AND
DIVIDENDS PER SHARE
June 1995–September 2016
S&P 500 Dividends Per Share (L)
S&P 500 Dividend Payout Ratio (R)
Dividend yield plus buyback yield remains near 5%,
which is attractive relative to the yields available on
many fixed income securities.
Higher payout ratios and dividends suggest that
managements are choosing to return capital to
shareholders rather than reinvest.

11. 11
0% 2% 4% 6% 8% 10% 12% 14% 16%
Interest Rates and Equities
As of September 30, 2016
Past performance cannot guarantee future results.
Sources: FactSet, Standard & Poor’s, Federal Reserve Board, and J.P. Morgan Asset Management.
Returns are based on price index only and do not include dividends. Markers represent monthly 2-year correlations only. Guide to the Markets—U.S. Data are as of
September 30, 2016.
-0.8
-0.6
-0.4
-0.2
0.0
0.2
0.4
0.6
0.8
CorrelationCoefficient
10-year Treasury Yield
CORRELATIONS BETWEEN WEEKLY STOCK RETURNS
AND INTEREST RATE MOVEMENTS
Weekly S&P 500 returns, 10-year Treasury yield, rolling 2-year correlation, May 1963–September 2016
When yields are below 5%,
rising rates have historically
been associated with rising
stock prices
Positive
relationship
between
yield
movements
and stock
returns
Negative
relationship
between yield
movements and
stock returns

12. 12
U.S. Sectors: Higher-Yielding Sectors
Give Back Some Gains in Q3
As of September 30, 2016
Past performance cannot guarantee future results.
Sources: Standard & Poor’s, FactSet, and T. Rowe Price.
12
3.9
-5.6
12.9
3.7 4.1
2.3
-5.9
-2.6
0.9
2.9
4.6
15.4
26.8
22.8 22.2
19.7
19.0
17.4
15.8
10.7
9.6
7.4
-10
-5
0
5
10
15
20
25
30
Return(%)
Quarter
One Year
Heath Care
15%
Telecom
3%
Discretionary
13%
Utilities
3%
Technology
22%
Staples
10%
Financials
13%
Materials
3%
Industrials
10%
Energy
8%
S&P 500 INDEX WEIGHTS

13. 13
9
12
15
18
21
24
27
30
Russell 1000 Russell 1000
Value
Russell 1000
Growth
Russell
Midcap
Russell
Midcap Value
Russell
Midcap Growth
Russell 2000 Russell 2000
Value
Russell 2000
Growth
Price-to-EarningsMultiple
FORWARD PRICE-TO-EARNINGS (P/E) RATIOS*
September 2001–September 2016
Current Average High** Low
U.S.: Valuations Appear Slightly
Elevated Relative to History
Sources: FactSet, Russell Indexes, and T. Rowe Price.
*P/E ratios are based on FactSet market aggregates.
**In some cases, the 15-year high may be too extreme to appear on the chart.
PAST 15 YEARS
P/E Ratios (1-Year Forward)
by Russell Style Indexes
Current
September 30, 2016 Average High Low
Current Valuation to
15-Year Average
Russell 1000 17.03 15.58 23.42 10.81 9%
Russell 1000 Value 15.82 13.85 18.71 9.79 14%
Russell 1000 Growth 18.42 17.84 31.43 11.37 3%
Russell Midcap 18.12 16.44 22.30 10.48 10%
Russell Midcap Value 16.75 14.74 17.58 10.33 14%
Russell Midcap Growth 20.06 19.45 40.82 10.64 3%
Russell 2000 22.31 20.24 27.27 14.15 10%
Russell 2000 Value 17.53 16.57 22.89 12.21 6%
Russell 2000 Growth 30.51 27.44 78.91 16.77 11%

14. 14
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
Energy Materials Consumer
Discretionary
Industrials Information
Technology
Financials Consumer
Staples
Health Care Telecom. Utilities
Price-to-EarningsMultiple
RelativetoS&P500
RELATIVE FORWARD PRICE-TO-EARNINGS (P/E) RATIOS
September 1996–September 2016
Current
Average
High*
Low
PAST 20 YEARS
U.S.: Defensive Sectors Appear Expensive
Sources: FactSet, Standard & Poor’s, and T. Rowe Price. Chart is shown for illustrative purposes only and does not represent the performance of any specific security.
*In some cases, the 20-year high may be too extreme to appear on the chart.
P/E Ratios (1-Year
Forward) by Sector
Current
September 30, 2016
Relative to
S&P 500 Average High Low
Current Valuation to
20-Year Average
Energy 55.53 3.31 1.01 4.59 0.64 228%
Materials 16.70 1.00 0.98 1.72 0.43 1%
Consumer Discretionary 17.76 1.06 1.13 1.31 0.85 -6%
Industrials 16.61 0.99 1.02 1.19 0.80 -3%
Information Technology 16.96 1.01 1.27 2.10 0.94 -20%
Financials 12.20 0.73 0.78 1.16 0.53 -7%
Consumer Staples 19.95 1.19 1.17 1.44 0.74 2%
Health Care 15.11 0.90 1.08 1.47 0.75 -17%
Telecom 13.58 0.81 1.04 1.54 0.74 -22%
Utilities 17.24 1.03 0.87 1.25 0.49 18%

15. 15
U.S.: Earnings Expected to
Rebound in 2017
Past performance cannot guarantee future results.
Institutional Brokers’ Estimate System (IBES) estimate.
Sources: FactSet and Standard & Poor’s.
-1.8
32.4
25.1
18.6
12.7
7.1
-19.7
-39.2
75.5
17.4
4.5 4.0
6.7
-5.1
-1.2
13.2
11.9
-60
-40
-20
0
20
40
60
80
100
Percent(%)
S&P 500 INDEX EARNINGS PER
SHARE GROWTH
2000–2018E
-1.5
4.4
10.6
13.1
11.3
7.3
9.0
-12.8
7.8
10.1
3.0
2.1
3.3
-2.4
2.0
5.8
5.4
-15
-10
-5
0
5
10
15
20
Percent(%)
S&P 500 INDEX
REVENUE GROWTH
2000–2018E
Earnings growth is expected to remain in negative
territory in 2016, but a strong rebound is predicted
for 2017.
Analysts also expect revenue growth to recover, but
less dramatically.

16. 16
U.S.: Earnings and Margin Weakness
Driven by the Energy Sector
Past performance cannot guarantee future results.
EBITDA = earnings before interest, taxes, depreciation, and amortization.
Chart is shown for illustrative purposes only and does not represent the performance of any specific security.
Sources: FactSet and Standard & Poor’s.
15
16
17
18
19
20
21
2014 2015 2016
EBITDAMargin(%)
EBITDA MARGINS
January 2011‒September 2016
S&P 500
S&P 500 ex. Energy
S&P 500 Energy
4.01
6.69
-5.06
-3.75
7.50
8.38
0.36
2.80
-6
-4
-2
0
2
4
6
8
10
2013 2014 2015 YTD 2016
CalendarYearEPSGrowth(%)
EARNINGS PER SHARE GROWTH
As of October 7, 2016
S&P 500
S&P 500 ex. Energy

17. 17
U.S.: Forward Earnings Estimates Have
Deteriorated Rapidly Amid Oil Weakness
Chart is shown for illustrative purposes only and does not represent the performance of any specific security.
Sources: FactSet and Standard & Poor’s.
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
$40
$60
$80
$100
$120
$140
$160
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
EarningsPerShare
S&P 500 EARNINGS PER SHARE (EPS) AND ESTIMATE PATHS
2006‒2017, in U.S. dollars
Actual EPS Results
Estimate Paths, Odd Years
Estimate Paths, Even Years
Each line represents the path of earnings estimates for that calendar year at the date represented on the
horizontal axis. As indicated in the chart, forward estimates usually are revised downward as time passes.
This was particularly true during 2014, when oil prices fell sharply.

18. 18
U.S.: Significant Dispersion by Sector
As of September 30, 2016
Past performance cannot guarantee future results.
Sources: Standard & Poor’s and FactSet.
S&P 500
Sector
Annualized
5-Year
Return
Annualized
5-Year
Revenue
Growth
Trailing
12-Months
Dividend
Yield
12-Months
Forward
P/E Ratio
Consumer
Discretionary
20.10% 7.88% 1.45% 17.8
Health Care 20.02% 7.20% 1.63% 15.1
Information
Technology
18.08% 4.08% 1.45% 17.0
Industrials 17.54% 3.78% 2.20% 16.6
Financials 17.37% 4.26% 1.87% 12.2
Staples 15.42% 3.89% 2.57% 19.9
Materials 12.71% -1.08% 2.14% 16.7
Telecom 12.30% 1.16% 4.57% 13.6
Utilities 12.09% -2.37% 3.44% 17.2
Energy 5.96% -11.45% 2.90% 55.5
65%
43%
42%
34%
-10%
0%
10%
20%
30%
40%
50%
60%
70%
80%
2008Q1
2013Q2
2013Q3
2013Q4
2014Q1
2014Q2
2014Q3
2014Q4
2015Q1
2015Q2
2015Q3
2015Q4
2016Q1
2016Q2
2016Q3(E)
2016Q4(E)
2017Q1(E)
2017Q2(E)
2017Q3(E)
2017Q4(E)
CumulativeGrowthinOperatingEarningsPerShare
EARNINGS GROWTH BY SECTOR
2010‒2017E
S&P 500 Health Care and Information Technology
S&P 500 Financials and Utilities
S&P 500 Consumer Discretionary and Consumer Staples
S&P 500 Energy, Industrials, and Materials
2013Q1

19. 19
U.S. Equity Outlook
ENVIRONMENT
 Stock valuations are reasonable relative to 25-year averages for many measures—
current forward price-to-earnings (P/E) is 16.8x
 Stocks have overcome significant periods of volatility and large intra-year declines
 Value has outperformed growth, especially in small-/mid-cap area
 Dividend yield is near an all-time high relative to 10-year Treasury yield
 Growth relative to value commands a smaller-than-average premium among large-caps
 Balance sheets, buybacks, and dividends remain quite strong, but leverage is increasing for many small-caps
LOOKING AHEAD
 Rising interest rates can be accompanied by rising stock prices, especially when yields are less than 5%
 Defensive low-volatility sectors (utilities, telecom and consumer staples) have outperformed, but this trend
may be changing
 Russell 1000 Growth, Russell Midcap Growth, and Russell 2000 Value appear to have the most attractive valuations
 Information technology and health care are the industry sectors with the most attractive valuations
 S&P 500 earnings should rebound in 2017 and 2018, reflecting a sharp improvement in energy; however, analyst
projections have not been accurate, so some caution is warranted
 Earnings dispersion by industry is notable, with information technology and health care screening well
As of September 30, 2016

20. 20
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21. THANK YOU.