William kennedy

Global Investment Outlook – A U.S. Perspective Global Interdependence Center Central Banking Series - Singapore February 20, 2017

Bill Kennedy, CFA Chief Investment Officer

Cyclical Economic Activity Is Beating Expectations

Citigroup Economic Surprise Index 50 25 0 -25 -50 Jan-13

Jul-13

Jan-14

Jul-14

Jan-15 DM

Jul-15

Jan-16

Jul-16

Jan-17

EM Source: Citi Research, Bloomberg, Fieldpoint Private

Please See Important Disclosures in Back of Presentation

2

Forward-Looking Economic Indicators are Turning Positive

Source: Strategas Please See Important Disclosures in Back of Presentation

3

13-Years Without a Pay Raise

Source: Hoisington Investment Management, Quarterly Review and Outlook – 4Q2016 Please See Important Disclosures in Back of Presentation

4

Spike in Interest Rates Cyclical and Structural % Attribution to Nominal Yield Increase (Jul – Dec, 2016) 100%

80%

11%

Growth

24%

Inflation

14%

64%

Structural

70%

16%

60%

40%

20%

0%

5-yr Treasury Note Yield Change in Term Premium

10-yr Treasury Note Yield

Change in Inflation Premium

Change in Real Yield

Source: FRBNY, Bloomberg, Fieldpoint Private Please See Important Disclosures in Back of Presentation

5

Investment Outlook Depends on Perspective

Please See Important Disclosures in Back of Presentation

6

Investment Risks Depend on Perspective

Source: World Economic Forum Please See Important Disclosures in Back of Presentation

7

Higher Discount Rates = Lower Asset Values

Higher discount rates decrease valuations

Building blocks of the discount rate EQUITY CREDIT SOVEREIGN

Discount Rate

Asset Fair Value Real policy rate

Inflation premium

Term premium

Credit risk premium

Equity risk premium

Source: PIMCO, Fieldpoint Private

Please See Important Disclosures in Back of Presentation

8

Future Returns Are Highly Correlated to Starting Yields U.S. Equity Yield (adjusted) 10yr avg EPS / Price 1881-2016

15% 13% 11% 9% 7% 5% 3% 1%

1881

1896

1911

1926

1941

1956

1971

1986

2001

2016

Source: Bloomberg, Fieldpoint Private Please See Important Disclosures in Back of Presentation

9

Focus On Price, Not Predictions Asia-ex EAFE EM stocks Japan Mexico US Large Health Care US Core US Mid Germany US Small Credit (HY) Floating Rate Notes Credit (IG) AGG (US) EM Debt AGG (Global) 3-7 yr UST Cash ILS REITs TIPS Commodities Managed Futures 60/40 -2

-1

0

1

2 3 Expected Real Return (%)

4

5

6

7

Expected yields for equities include dividend yield plus adjusted earnings yield using 10yr rolling average EPS. Expected yield for fixed income includes current yield to maturity.

Bloomberg data used for current yields. Federal Reserve Bank and IMF data used for inflation expectations. Information contained herein has been obtained from sources believed to be reliable, but are not assured as to accuracy. For illustration purposes and should not be considered investment advice or a recommendation of any particular security, strategy or investment product.

Please See Important Disclosures in Back of Presentation

10

Assets Behave Differently Across Macro Regimes Regime I: Accelerating Growth & Inflation # of quarters: 23 Dollar Commodities Rates Credit Stocks Avg return

Excess Return -3.7% 9.4% 2.7% 3.9% 7.7% 4.0%

Regime II: Accelerating Growth, Decelerating Inflation # of quarters: 54 Rank 5 1 4 3 2

Regime III: Decelerating Growth, Accelerating Inflation # of quarters: 49 Dollar Commodities Rates Credit Stocks Avg return

Excess Return -0.3% 14.2% 5.3% 4.0% 2.5% 5.1%

Rank 5 1 2 3 4

Dollar Commodities Rates Credit Stocks Avg return

Excess Return 2.0% 1.5% 4.9% 6.8% 11.4% 5.3%

Rank 4 5 3 2 1

Regime IV: Decelerating Growth & Inflation # of quarters: 46 Dollar Commodities Rates Credit Stocks Avg return

Excess Return 0.9% -0.4% 8.8% 10.2% 8.3% 5.5%

Rank 4 5 2 1 3

Source: Fieldpoint Private. For illustration purposes only. Analysis based on 172 quarters of GDP and CPI (core) data and real returns by asset class. Excess returns shown based on median rolling price returns from Q4 1974 to Q3 2016.

Please See Important Disclosures in Back of Presentation

11

Major Investment Themes for 2017 1.

Deglobalization Accelerates As Populism and Protectionist Policies Spread

2.

Continued Slowdown in Trade Hurts Global Growth

3.

Fiscal Activism Will Boost U.S. GDP Growth Above the FOMC’s Baseline

4.

Inflation Will Temporarily Spike on Commodity Price Base Effects and Rising Wages

5.

Real Yields Will Rise for Structural and Cyclical Reasons

6.

The Yield Curve Steepens (Trumponomics), Then Flattens (Fed Expectations)

7.

The Dollar Appreciates as Long as Monetary Policy Divergence Exists

8.

Credit Default Cycle is Deferred Until 2018 and Credit Spreads Tighten

9.

U.S. Corporate Earnings Breakout from a Three Year Slump

10. Active Management Outperforms Passive As Cross Asset Correlations Decline

This document is distributed for informational purposes only and should not be considered as investing advice or a recommendation of any particular security, strategy or investment product. This presentation contains opinions of the author but not necessarily those of Fieldpoint Private or its subsidiaries. The author's opinions are subject to change without notice. Forward looking statements, estimates and certain information contained herein are based upon proprietary and non-proprietary research and other sources. Information contained herein has been obtained from sources believed to be reliable, but are not assured as to accuracy. No part of this presentation may be reproduced in any form, or referred to in any other publication, without express written permission of Fieldpoint Private.

Please See Important Disclosures in Back of Presentation

12

Important legal information This material is for informational purposes only and is not intended to be an offer or solicitation to purchase or sell any security or to employ a specific investment strategy. It is intended solely for the information of those to whom it is distributed by Fieldpoint Private. No part of this material may be reproduced or retransmitted in any manner without prior written permission of Fieldpoint Private. Fieldpoint Private does not represent, warrant or guarantee that this material is accurate, complete or suitable for any purpose and it should not be used as the sole basis for investment decisions. The information used in preparing these materials may have been obtained from public sources. Fieldpoint Private assumes no responsibility for independent verification of such information and has relied on such information being complete and accurate in all material respects. Fieldpoint Private assumes no obligation to update or otherwise revise these materials. This material does not purport to contain all of the information that a prospective investor may wish to consider and is not to be relied upon or used in substitution for the exercise of independent judgment. To the extent such information includes estimates and forecasts of future financial performance it may have been obtained from public or third party sources. We have assumed that such estimates and forecasts have been reasonably prepared on bases reflecting the best currently available estimates and judgments of such sources or represent reasonable estimates. Any pricing or valuation of securities or other assets contained in this material is as of date provided as prices fluctuate on a daily basis. Past performance is not a guarantee of future results. Fieldpoint Private does not provide legal or tax advice.

Nothing contained herein should be construed as tax, accounting or legal advice. Prior to investing you should consult your accounting, tax, and legal advisors to understand the implications of such an investment. You may disclose to any and all persons, without limitation of any kind, the tax treatment and tax structure of any transactions contemplated by these materials and all materials of any kind, (including opinions or other tax analyses), that are provided to you relating to such tax treatment and structure. For this purpose, the tax treatment of any transaction is the purported or claimed U.S. federal income tax treatment of the transaction and the tax structure of a transaction is any fact that may be relevant to understanding the purported or claimed U.S. federal income tax treatment of the transaction.

Are Not FDIC Insured

Are Not Bank Guaranteed

May Lose Value

Wealth management, securities brokerage and investment advisory services offered by Fieldpoint Private Bank & Trust (the “Bank”) and/or any nondeposit investment products which ultimately may be acquired as a result of the Bank’s investment advisory services: Are not deposits or other obligations of the Bank; Are not insured or guaranteed by the FDIC, any agency of the US or the Bank ; Are not a condition to the provision or term of any banking service or activity; May be purchased from any agent or company and the member's choice will not affect current or future credit decisions; and Involve investment risk, including possible loss of principal or loss of value. © 2017 Fieldpoint Private Banking Services: Fieldpoint Private Bank & Trust Registered Investment Advisors: Fieldpoint Private Securities, LLC and Fieldpoint Private Advisors, Inc. Securities: Fieldpoint Private Securities, LLC. Member FINRA, SIPC. Please See Important Disclosures in Back of Presentation

13