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January 14, 2016

Global equity markets have gotten off to an abysmal start to 2016. An unpleasant storm of investor anxieties (new and old) have caused most equity markets to endure one of the worst starts to a calendar year. Concerns over China’s economic deceleration, falling commodity prices, declining corporate earnings expectations, strong U.S. dollar headwinds and geopolitical tensions have served as the backdrop to start 2016. Indeed, volatility measures have picked up and we expect this to continue for the year with equity prices remaining choppy. Looking ahead, the pace of U.S. monetary policy (interest rate hikes) and the uncertainty of the upcoming presidential election could cause further market nervousness. From a fundamental perspective, valuations now appear more reasonable with the S&P 500 Index currently trading at a forward price-earnings multiple of 15.5 times, and an expected full-year 2016 earnings per share (EPS) rise of approximately 7 percent.

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