GLOBAL CAPITAL MARKETS OUTLOOK - …...Shadow Fed Funds Rate* Historical Monetary Policy + Fiscal...

GLOBAL CAPITAL MARKETS OUTLOOK

Third Quarter 2018

The information herein reflects prevailing market conditions and our judgments, which are subject to change, as of the date of this document. In preparing this document, we have relied upon and

assumed, without independent verification, the accuracy and completeness of all information available from public sources. Opinions and estimates may be changed without notice and involve a number

of assumptions that may not prove valid. There is no guarantee that any forecasts or opinions in this material will be realized. Information should not be construed as investment advice.

1|GCMO 3Q18

As of 30 June 2018

Past performance does not guarantee future results.

Global high yield, global corporates, and Japan and euro-area government bonds in hedged USD terms. All other non-US returns in unhedged USD terms. Emerging-market debt

returns are for dollar-denominated bonds as represented by the J.P. Morgan Emerging Markets Bond Index Global. An investor cannot invest directly in an index, and its

performance does not reflect the performance of any AllianceBernstein (AB) portfolio. The unmanaged index does not reflect the fees and expenses associated with the active

management of a portfolio.

*Real estate investment trusts. †Returns reflect HFRI index returns (see disclaimer pages for index definitions).

Source: Bloomberg Barclays, HFR, J.P. Morgan, Morningstar, MSCI, Standard & Poor’s (S&P) Dow Jones and AB

Returns in US Dollars (Percent)

2Q 2018 Returns Recap: Rising Policy Risk Drives Return Dispersion

–1.8

2.4

1.6

1.2

0.5

0.0

1.9

1.8

–1.1

–1.9

–5.2

–2.5

–6.7

–2.0

–3.2

2.7

0.4

–0.2

2.3

1.2

0.8

6.4

0.4

–0.1

0.9

0.1

–0.5

–3.5

–2.2

–8.0

–2.8

–1.3

3.4

1.7

Equities

Government Bonds

Credit

Alternative Assets

Japan

Global High-Yield

US

Euro-Area

Emerging-Market Debt

Emerging-Market

Commodities

Global REITs*

Global Corporate

Europe

World

Japan

US

Alternative

Strategies†

Long/Short Equity

Event-Driven

Relative Value

Macro

Jan–Jun 2018 Returns

(Percent) 2Q:2018 Returns

(Percent)

2|GCMO 3Q18

The Key Takeaways

Macro

Markets From beta to alpha: the great rising tide is receding...

Rising volatility, moderate returns, P/E contraction and rising dispersion drive the importance of security selection

...so focus on the better equity “boats”

For the rest of the cycle, equity returns will largely be about persistency and quality of growth, and strength of balance sheets

Don’t fight the wrong bond battles

The last thing you should worry about as rates rise is high-grade bonds. They can’t kill you; the math doesn’t allow it

Even so, core fixed-income exposure can be more efficient

Globalize rates to diversify economic-cycle risk; hedge the currency risk to remove the volatility from core

When spreads are tight relative to rates, don’t run from duration and overweight credit—balance them

Credit barbells are efficient structures and effective late-cycle navigators

Our base expectation is for moderate market returns over the next five years, but with substantial tail

risk

Portfolio construction needs to account for both—critical for those near, or early into, retirement/decumulation

As of 30 June 2018

Current analysis and forecasts do not guarantee future results.

*G3 is the US, the euro area and Japan.

Source: AB

Investors are right to be worried about rates

They drove the majority of the beta trade through valuations, net margins and share count

Fundamentally, the developed macro story is one of solid but moderating growth, rising core inflation

and rate increases/balance sheet reduction in the G3*

By the end of 2019, developed growth will be lower (but solid), core inflation at threshold and rates higher across the curve

The wild card and key source of tail risk is the impact of policy/politics on the speed/level of inflation

and rates

3|GCMO 3Q18

Left display from 1 October 2011, through 15 June 2016; right display as of 31 December 2017

Past performance and historical analysis do not guarantee future results. For illustrative purposes only

*Shadow fed funds rate as of year-end.

†T.I.N.A.: there is no alternative

Source: Bloomberg, Federal Reserve Bank of Atlanta, Federal Reserve Bank of St. Louis, Morningstar Direct, S&P and AB

...and the Asset Purchases Used to Create ThemThe Great Beta Trade Was Dominated by Rates…

1,000

1,200

1,400

1,600

1,800

2,000

2,200

2.0

2.5

3.0

3.5

4.0

4.5

5.0

11 12 13 14 15 16

Pric

e L

eve

l

US

D T

rilli

ons

S&P 500 Index

Fed Balance-Sheet

Assets (Left Scale)

–1.47 –1.43 –2.13 –2.42 0.20 0.38

Shadow Fed Funds Rate*

Historical Monetary Policy + Fiscal Expectations =

Supercharged Net Margin and Valuation Gains

Average Annualized Growth Rate (March 2009–December 2017)

2.2%

3.1%

9.1%

17.3%

GDP SalesGrowth

EPSGrowth

S&P TotalReturn

3.8%Nominal

Real

EPS:

Net Margin Gains

Share Buybacks

Valuations:

Lower Uncertainty

Present Values

T.I.N.A.†

4|GCMO 3Q18

Left displays through 31 March 2018; right display as of 30 June 2018. Historical analysis and current forecasts do not guarantee future results. Long rates are 10-year yields

unless otherwise indicated. *G7 is the US, Canada, France, Germany, Italy, Japan and UK

Source: Bloomberg, Haver Analytics, IHS Markit and AB

The Global Macro Pillars: Growth, Inflation and Policy

AB Global Economic Forecast: June 2018

Real

Growth (%) Inflation (%)

Official

Rates (%)

Long

Rates (%)

18F 19F 18F 19F 18F 19F 18F 19F

Global 3.2 3.1 2.8 2.7 2.9 3.3 3.3 3.6

Industrial

Countries2.3 2.0 1.9 2.0 1.2 1.8 2.0 2.6

Emerging

Countries4.8 4.8 4.3 3.9 6.2 6.1 5.9 5.6

US 2.5 2.0 2.3 2.3 2.4 3.4 3.3 3.8

Euro Area 2.3 2.1 1.7 1.8 0.0 0.3 0.8 1.5

UK 1.5 1.5 2.5 2.0 0.8 1.3 1.8 2.3

Japan 1.3 1.4 0.9 1.6 –0.1 0.0 0.1 0.3

China 6.5 6.3 2.3 2.3 4.4 4.4 3.5 3.3

Global Growth Solid, but Has Likely Peaked

2.0

2.5

3.0

3.5

4.0

4.5

5.0

10 11 12 13 14 15 16 17 18

G7 CPI Inflation Advances Toward 2%*

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

10 11 12 13 14 15 16 17 18

Yo

Y P

erc

en

t C

ha

ng

eY

oY

Pe

rce

nt C

ha

ng

e

Real GDP

PMI Proxy

Core

Headline

5|GCMO 3Q18

Left display through 31 March 2018; middle and right displays as of 1 June 2018

Historical analysis and current forecasts do not guarantee future results.

Source: Citigroup, Haver Analytics, IHS Markit, Thomson Reuters and AB

Jobs/Wages Fuel Consumption…and (Creeping) Inflation

Macroeconomic Cycle

Transitioning from the Sweet Spot in

2018?

Inflation Expectations Reflect

Consumption

The Ongoing US Growth Story

16

17

18

19?

15

Growth

Rising/

Inflation

Low

Growth

Low/

Inflation

Falling

Growth

Slowing/

Inflation

High 19?

Workers Living Within Their Means

Earning vs. Spending

–6

–4

–2

0

2

4

6

8

10

00 02 04 06 08 10 12 14 16

Yo

Y P

erc

en

t C

han

ge

Personal Consumption

Expenditures (PCE)

Paychecks

0.9

1.1

1.3

1.5

1.7

1.9

2.1

2.3

11 12 13 14 15 16 17 18 19 20

Pe

rce

nt

Realized

Core PCE

High of

Forecast Range

Low of

Forecast Range

Growth

High/

Inflation

Rising

6|GCMO 3Q18

Left and middle displays through 31 January 2018; right display through 30 April 2018


*Historical data exclude Ireland, where huge swings in gross fixed-capital formation have distorted the underlying trend in the components of overall euro-area demand.

†Contribution to growth

Source: Haver Analytics, IHS Markit and AB

Domestic Demand Remains Solid*… …as Wages Continue to Rise… …Leading to Increased Consumer

Confidence and Activity

Euro-Area Growth: A Challenging, Likely Trade-Related, Start to 2018

Strong Consumer Fundamentals Support Domestic Demand

–6

–4

–2

0

2

4

6

8

10

05 07 09 11 13 15 17

Yo

YP

erc

en

t C

ha

nge

–3.0

–2.0

–1.0

0.0

1.0

2.0

3.0

10 11 12 13 14 15 16 17 18

Yo

Y P

erc

en

t C

ha

nge

–2

–1

0

1

2

3

4

5

6

05 07 09 11 13 15 17

Yo

YP

erc

en

t C

ha

nge

Real

Nominal

Domestic Demand

Net Exports†

Consumer

Confidence

Consumer Credit

Growth

7|GCMO 3Q18

Left and middle displays as of 30 June 2018; right display as of 31 December 2017. Historical analysis and current forecasts do not guarantee future results. Projections of

change in real GDP and both measures of inflation are percent changes from the fourth quarter of the previous year to the fourth quarter of the year indicated. Expectations for fed

funds rate are for December 2018 and December 2019. The projections for the fed funds rate are the value of the midpoint of the projected appropriate target range for the fed

funds rate or the projected appropriate target level for the fed funds rate at the end of the specific calendar year or over the longer run. *FOMC: Federal Open Market Committee;

market expectations are the fed funds rate priced into the Fed futures market as of 13 June 2018 FOMC meeting date. †Net issuance is the budget deficit less central bank

purchases.

Source: Bloomberg, Haver Analytics, US Federal Reserve and AB

The Fed Is a Bit More Aggressive; the ECB Sets a Date

G3 Budget Deficit and Central Bank

Bond Purchases†

Central Bank Watch

Fed Funds Rate Expectations

FOMC and Market Expectations*

FOMC June 2018 Forecasts

18 19 20

Long

Run

Change in Real GDP 2.8 2.4 2.0 1.8

Unemployment Rate 3.6 3.5 3.5 4.5

PCE Inflation 2.1 2.1 2.1 2.0

2.4

3.1

2.2

2.7

2.9

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

14 15 16 17 18 19 20

Perc

ent

Fed Funds Rate

FOMC Expecations

Market Expectations

FOMC Long-Run Projection

–0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

08 09 10 11 12 13 14 15 16 17 18F19F

US

D T

rilli

ons Central Bank

Purchases

Budget Deficit

Net Issuance

The ECB Charts a Path

Asset purchases likely to end in

December

No balance-sheet unwind for an

“extended period of time after the

end of our net asset purchases…”

(Fed took 36 months)

Key policy rates expected “to

remain at their present levels at

least through the summer of

2019…” (Fed took 14 months)

8|GCMO 3Q18

Left display through 31 December 2017; right display as of 30 June 2018


*GDP is in US dollars. Germany is adjusted for the impact of reunification.

Source: Haver Analytics, World Bank and AB

2011 2018

Outright Monetary

Transactions

Long-Term

Refinancing

Operations

Quantitative

Easing

Vulnerable Country

(GDP)

Greece

($0.2 Trillion)

Italy

($1.9 Trillion)

Exposure of

European Banks to

Italy

Higher Lower

Real GDP per Capita*

This Time the ECB Has the Necessary Tools in Place to Intervene…Although Italy Is Not Greece

Populism, European-Style: Is a Full-Blown Crisis a la 2011 Coming Back?

60

70

80

90

100

110

120

130

80 85 90 95 00 05 10 15

19

99

= 1

00

Germany

Spain

France

Italy

9|GCMO 3Q18

As of 30 June 2018


Source: Haver Analytics, IHS Markit, Thomson Reuters Datastream and AB

Beyond Fundamentals: Structural and Policy-Based Inflation Tail Risk

Goods and Services Inflation

–5

–4

–3

–2

–1

0

1

2

3

4

5

93 95 97 99 01 03 05 07 09 11 13 15 17

Services

Durable Goods

Pe

rcen

t

Inflation Backdrop

Rearview

Mirror

Past 5–10

Years

Strategic

Horizon

Next 2–5

Years

Secular

Horizon

5+ Years

Demographics

Globalization/

Populism

Debt Overhang

Technology

Monetary Regime

Net Impact

10|GCMO 3Q18

Dow Jones Biggest Price Moves Were Trade (and Rates/Inflation) Driven

Wood & Metal Canaries: Inflationary Tariffs Ultimately a Tax

Tariff Dates and Summaries

22 Jan: US slaps tariffs on imported solar panels and washing machines

23 Mar: US implements tariffs on steel (25%) and aluminum (10%)

2 Apr: China implements tariffs on 128 US products

31 May: Canada announces retaliatory tariffs on US goods worth C$16.6 billion

15–16 Jun: US targets $34 billion of Chinese goods. China announces tariffs on $50 billion of US goods

18 Jun: Trump threatens to impose tariffs on $200 billion of additional Chinese goods

22 Jun: Trump threatens to impose 20% tariff on all vehicles imported from the EU

23,000

24,000

25,000

26,000

27,000

Jan 18 Feb 18 Mar 18 Apr 18 May 18 Jun 18

1

1

2

2

3

3

4

4

5

5

6

7

6

7

Left display through 30 May 2018; right display through 30 June 2018


*Import Price Index for lumber & wood in the rough; Producer Price Index three-month percent change: aluminum sheet & strip, steel mill products

Source: Bloomberg, Federal Reserve Bank of St. Louis, US Global Investors and AB

Price Impact of Tariffs*

–2

0

2

4

6

8

10

12

180

185

190

195

200

205

210

215

220

225

Nov17

Jan18

Mar18

May18

3-M

onth

Perc

ent C

hange

Index Lumber & Wood

(Left Scale)

Steel

Aluminum

11|GCMO 3Q18

Valuations Compress on Rising Uncertainty and Rates

As of 30 June 2018


Source: Bloomberg, Chicago Board Options Exchange, Cornerstone Macro, FactSet, Federal Reserve Bank of St. Louis and AB

Volatility Rising and Rates Rising

VIX vs. 10-Year Yields

Corporate-Profit Growth Is Robust

but Projected to Slow

Recent Earnings Growth (Percent)

10.9

24.3

28.9

22.0

10.79.59.9

7.4

11.6

US DevelopedMarkets ex US

EmergingMarkets

2017 2018E 2019E

The Mystery of Strong Earnings and Modest Market Returns, Part I:

~10%

boost

since

tax

cuts

Modest YTD Returns

Lower P/Es Have Offset Higher EPS

1.7%

14.0%

–12.4%

PriceReturn

ForwardEPS Change

Forward P/EChange

Glass

Half Full

Glass

Half Empty

Slowing Growth Prospects &

Higher Risks Have Contributed to

P/E Contraction This Year

Declining P/Es

Have Offset

Most of the Rise

in Earnings

2.0

2.2

2.4

2.6

2.8

3.0

3.2

0

5

10

15

20

25

30

35

40

Jan17

May17

Sep17

Jan18

May18

Perc

ent

Index L

evel

VIX

(Left Scale)

10-Year

Yields

12|GCMO 3Q18

We Were Already Paid for It. But That Doesn’t Mean the Future Is Bleak

Left and right displays as of 31 December 2017; middle display as of 1 June 2018

Historical analysis does not guarantee future results.

Source Bloomberg, Federal Reserve Bank of St. Louis, Morningstar Direct, S&P, Thomson Reuters I/B/E/S and AB

Stock Returns Have Been Resilient

in Lower-Earnings Environments

S&P 500 Average Total Return (1990–

2017)

Average Annualized Growth Rate

1 January 2017–31 December 2017

S&P 500 YoY Growth Rates

Percent

The Mystery of Strong Earnings and Modest Market Returns, Part II:

2.8%

5.8%

13.1%

21.8%

GDP SalesGrowth

EPSGrowth

S&P TotalReturn

Nominal

Real

4.7%

15.4%

9.4%

EPS Growth >10% EPS Growth <10%

–10

–5

0

5

10

15

20

25

30

1Q

:16

2Q

:16

3Q

:16

4Q

:16

1Q

:17

2Q

:17

3Q

:17

4Q

:17

1Q

:18

2Q

:18

3Q

:18E

4Q

:18E

1Q

:19E

2Q

:19E

3Q

:19E

4Q

:19E

Earnings

Revenue

13|GCMO 3Q18

Strong Earnings Growth Historically Linked to Rising

Inflationary Pressures

0

10

20

30

40

50

60

70

80

90

100

–50

–30

–10

10

30

50

70

91 93 95 97 99 01 03 05 07 09 11 13 15 17In

de

x L

eve

l

Pe

rce

nt

As of 30 June 2018


Source Bloomberg, Cornerstone Macro, Federal Reserve Bank of St. Louis, Institute for Supply Management, Morningstar Direct, S&P, Thomson Reuters I/B/E/S and AB

Rising Earnings and Inflation, Plus Fed Tightening, Equals Lower P/Es

S&P 500—

EPS Growth

(Left Scale)

ISM Manufacturing Prices

Paid Index

Fed Tightening

Rising Inflationary Pressures Have Led to Fed Tightening

and P/E Contraction

Period

31/01/94–

28/02/95

31/05/99–

31/05/00

31/05/00–

31/07/06

16/12/15–

30/06/18

Begin 14.9× 23.5× 16.5× 17.6×

End 12.6× 22.2× 14.0× 17.1×

Change –2.3 –1.3 –2.5 –0.5

Average change in P/E over the past four Fed tightening

cycles: 1.7 P/E Points

P/Es have actually declined in 8 of the past 8 Fed

tightening cycles

14|GCMO 3Q18

As of 31 December 2017. Past performance is not necessarily indicative of future results. There is no guarantee that any estimates or forecasts will be realized.

Based on AB’s estimates of the range of returns for the applicable capital markets.

The forecasted figures in the left display utilize book-value growth and price-to-book valuations as representations of earnings growth and valuation. Data do not represent past

performance and are not a promise of actual future results or a range of future results. Based on proprietary AB forecasting system. *Represents projected median compound

annual growth rates over the next 10 years. †Global stocks are modeled as 18% US diversified, 18% US value, 18% US growth, 6% US small-/mid-cap, 30% developed

international, and 10% emerging markets. ‡Probability of a 20% peak-to-trough decline in pretax, pre-cash-flow cumulative returns within the next 10 years. Because the AB

system uses annual capital-market returns, the probability of peak-to-trough losses measured on a more frequent basis (such as daily or monthly) may be understated. The

probabilities depicted above include an upward adjustment intended to account for the incidence of peak-to-trough losses that do not last an exact number of years. §Represents

projected median compound annual growth rates over the next 10 years. || 100% return-seeking allocation is all stocks; 80%/20% allocation is 80% stocks/20% bonds; 60%/40%

allocation is 60% stocks/40% bonds; 30%/70% allocation is 30% stocks/70% bonds; and 100% risk-mitigating allocation is all bonds. #Normal conditions reflect AB’s estimates of

equilibrium capital-market conditions, which are typically close to a very long-term historical average.

Source: AB

The Risk/Return Trade-Off Is More Important than Ever

Projected Median

10-Year Annualized Return§

Asset Allocation||

Probability of 20% Peak-to-Trough

Loss Within Next 10 Years‡

Median Index Return Decomposition:

Next 10 Years*

Valuation

Earnings

Growth

Dividends

Global Stocks US Stocks

2.4%

5.2%

–0.7%

6.8%

2.2%

5.9%

–2.0%

6.1%

†

100%

Risk-Mitigating

30%/70%

60%/40%

80%/20%

100%

Return-Seeking61.0%

40.0%

17.0%

<2.0%

<2.0%

6.8%

6.1%

5.3%

3.9%

2.3%

Normal# Normal#

15|GCMO 3Q18

As of 30 June 2018


Treasury (TSY) is represented by Bloomberg Barclays Global Treasury and high yield (HY) by Bloomberg Barclays Global High-Yield hedged to USD.

Source: Bloomberg Barclays and AB

Near-Term Volatility Is Likely in Rates

and Credit Markets

Government and Credit Bonds Rarely

Underperform at the Same Time

Today’s Environment Calls for a

Balanced Approach

Cloudy Outlook Warrants Balance Between Rates and Credit Risks

–20

–15

–10

–5

0

5

10

15

20

–8 –4 0 4 8

Quart

erly H

igh-Y

ield

Retu

rns (

Perc

ent)

“Normal”

TSY = Negative

HY = Positive

19% of the Time

Balance Works

“Normal”

TSY = Positive

HY = Negative

24% of the Time

Balance Works

“Good Times”

TSY = Positive

HY = Positive

51% of the Time

Balance Works

“Bad Times”

TSY = Negative

HY = Negative

5% of the Time

Balance Doesn’t

Work

Sources of Volatility:

Monetary policy normalization and

tighter liquidity in DM (rates)

Possible inflation pressures (rates

and credit)

Corporate credit continues to move

later in the credit cycle (credit)

Increased geopolitical risk, e.g.,

Italy and EM (select rates, credit)

Headlines around trade war (credit)

Global

Rates

Global

Credit

Quarterly Treasury Returns (Percent)

16|GCMO 3Q18

As of 30 June 2018. Past performance does not guarantee future results. *Bloomberg consensus forecast is for year-end 2018. It is an average of 60 forecasts from sell-side

analysts and academics. †The scenario analysis assesses the potential impact of instantaneous changes in US high-yield spreads and a parallel shift in the US Treasury yield

curve on the Bloomberg Barclays US Aggregate and US High-Yield indices. Expected returns incorporate the impact of roll and carry over the subsequent 12 months. An investor

cannot invest directly in an index, and its performance does not reflect the performance of any AB portfolio. The unmanaged index does not reflect fees and expenses associated

with the active management of a portfolio.


Putting Rising Rates in the Right Context

Big Spikes in Rates Are Sparse

Frequency of Monthly Changes in the

10-Year US Treasury Yield

Rates Have Already Risen

Meaningfully

Rising Rates Don’t Have to Derail

Bonds†

Expected Total Returns (Percent)

34%

15%

21%

11%

8%

5% 5%

De

clin

e >

10

b.p

.

Declin

e 0

–10 b

.p.

Incre

ase 0

–10 b

.p.

Incre

ase 1

0–20 b

.p.

Incre

ase 2

0–30 b

.p.

Incre

ase 3

0–40 b

.p.

Incre

ase

> 4

0 b

.p.

Historically, yield

increases of more

than 30 b.p. occurred

only 10% of the time

US

Aggregate

Change in

US High-Yield Spreads (b.p.)

–50 0 50 100

Ch

an

ge

in

US

Tre

as

ury

Yie

lds

(b

.p.) 100 –1.0 –1.4 –1.7 –2.1

50 1.3 1.0 0.6 0.3

0 3.7 3.4 3.0 2.7

US

High Yield

Change in

US High-Yield Spreads (b.p.)

–50 0 50 100

Ch

an

ge

in

US

Tre

as

ury

Yie

lds

(b

.p.) 100 5.7 4.1 2.5 0.9

50 6.9 5.3 3.8 2.1

0 8.2 6.6 5.0 3.41.8

2.0

2.2

2.4

2.6

2.8

3.0

3.2

3.4

Jun 17 Sep 17 Dec 17 Mar 18 Jun 18

Perc

ent

AB Year-End 2018 Forecast: 3.25%

(Range 3.0%–3.5%)

Bloomberg Consensus

Forecast: 3.16%*

17|GCMO 3Q18

As of 30 June 2018

Past performance does not guarantee future results.

*Bar height may differ due to rounding. Global bonds hedged is represented by Bloomberg Barclays Global Aggregate hedged to USD and US bonds by Bloomberg Barclays US

Aggregate. An investor cannot invest directly in an index, and its performance does not reflect the performance of any AB portfolio. The unmanaged index does not reflect fees and

expenses associated with the active management of a portfolio.

†B/E: break-even.


Take a World View on Interest-Rate Exposure

Global Outperforms when US Falls

Up vs. Down Capture

March 1990–June 2018 (Percent)*

2.2

–1.0

2.1

–0.7

Average QuarterlyReturn when

US Aggregate IndexWas Positive

Average Quarterly Return when

US Aggregate IndexWas Negative

US Aggregate Index Global Aggregate Index

Up Capture: 96%

Down Capture: 66%

Select Opportunities Exist in Global

Inflation-Linked Bonds

B/E Inflation for 10-Year Rates (Percent)†

0.0

0.5

1.0

1.5

2.0

2.5

Dec 13 Jun 15 Dec 16 Jun 18

US

Japan

Japan Inflation

2018 Forecast

US Inflation

2018 Forecast

Actively Managing Your Exposure to

Avoid Troubled Areas Is Key

10-Year Bond Yields (Percent)

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

Mar 18 Apr 18 May 18 Jun 18

Italy

Spain

Germany

18|GCMO 3Q18

As of 30 June 2018


Emerging Market (EM) hard currency is represented by J.P. Morgan EMBI Global; EM corporate by J.P. Morgan CEMBI Broad Diversified; and EM local currency by J.P. Morgan

GBI–EM Global Diversified. Yields are sourced from the index’s subcomponents. An investor cannot invest directly in an index, and its performance does not reflect the

performance of any AB portfolio. The unmanaged index does not reflect fees and expenses associated with the active management of a portfolio.

Source: Bloomberg, J.P. Morgan and AB

Some EM Opportunities Still Exist, but Selectivity Is Increasingly Important

Technicals Remain Constructive with

Much of Issuance Front-LoadedEM Net Issuance (USD Billions)

However, Near-Term EM Outlook

Warrants Caution

Given Recent Volatility, Valuations

Have Improved Somewhat

Rising rates in developed markets

Recent US-dollar strengthening

Increased idiosyncratic and political

risk in select countries

Trump’s trade war

Some Countries in Recent Headlines:

100

152

225

77

201

42

100

130

92

110

2015 2016 2017 YTD2018

2018Forecast

EM Corporate EM Sovereign

4.0

4.5

5.0

5.5

6.0

6.5

7.0

EM HardCurrency

EMCorp.

EM LocalCurrency

Yie

ld t

o W

ors

t

Jan 2016 Dec 2017 Jun 2018

Turkey

Argentina

Brazil

Mexico

China

19|GCMO 3Q18

Left and right displays as of 30 June 2018; middle display through 31 December 2017 (except for yield pickup, which is as of 30 June 2018)


Core Tier 1 ratios provided by Morgan Stanley European credit strategy research on western European banks.

*AB bear- and base-case 31 December 2018 forecasts for energy issuers’ net leverage ratios.

†Annualized hedging benefit uses one-month currency forwards.

Source: Bloomberg Barclays, Morgan Stanley and AB

Selectivity Within Corporate Credit Remains Critical

European Financials Benefit from

Improving Fundamentals Backdrop

Outlook Remains Constructive for

Higher-Beta Energy Names

AB Net Leverage Forecast for 2018*

BBBs Offer Relative Value and

Diversification vs. BBs

US Credit Bonds

2

3

4

5

6

7

8

Yie

ld t

o W

ors

t (P

erc

ent)

3.156

Issues

820

Issues

BBBBB

BBB Features:

Select yields similar

to BBs

Lower credit risk

Lower extension risk

Higher duration risk

30

32

34

36

38

40

42

0

2

4

6

8

10

12

14

16

06 07 08 09 10 11 12 13 14 15 16 17

Perc

entR

atio (

×)

Hedging EUR

bonds back to

USD results in

a ~2.7% yield

pickup†

Core Tier 1 Ratio

(Left Scale)

Risk-Weighted

Assets to

Total Assets

6.2×

3.1×

11.0×

4.9×

2.1×1.8×

3.8×

3.1×

B(Bear)

B(Base)

CCC(Bear)

CCC(Base)

2Q:2017 2Q:2018

Energy OAS: 407 b.p.

HY OAS: 363 b.p.

20|GCMO 3Q18

As of 30 June 2018. Historical analysis does not guarantee future results. *Bank loans are represented by the Credit Suisse Leveraged Loan Index. Loan 1 is represented by

Asurion and Loan 2 by American Airlines. †Change is calculated since July 2016. ‡Rising-rate periods defined as time periods when the 10-Year US Treasury rate increased by 20

b.p. or more. §CRT returns are represented by Mark Fontanilla & Co., LLC’s CRTx Index (Lower Mezzanine). ||CMBX yields are loss-adjusted. Correlation is the average

correlation for BBB-rated CMBX and US corporates and BB-rated CMBX and US corporates. BB corporates are represented by Bloomberg Barclays US Corporate High-Yield BB

and BBB Corporates by Bloomberg Barclays US Aggregate Corporate BBB.

Source: Bloomberg, Bloomberg Barclays, Credit Suisse, Fannie Mae, Freddie Mac, IHS Markit, Mark Fontanilla, Trepp and AB

CMBS Offer Relative Value and

Diversification Benefits||

Bank Loans Can Be Refinanced at

Lower Rates Even as LIBOR Rises*

Examples of Large Loan Issuers’ Yields

(Percent)

CRTs Beat Loans in Rising Rates‡

Returns in Rising-Rate Periods

(Percent)§

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

6.0

Jul 16 Jan 17 Jul 17 Jan 18 Jul 18

Yie

ld

Coupon

Mortgages Offer Floating Rate Exposure and Relative Value Opportunities

Loan 1

(Left Scale)

Loan 2

(Left Scale)

3-Mo.

LIBOR

4.6

1.0

7.1

5.5

2.6

–2.0

4.5

3.7

Feb 15–Jun 15

Oct 15–Dec 15

Aug 16–Jan 17

Sep 17–Apr 18

CRTs Bank Loans

Coupon/Yield

Change†:

3-Mo. LIBOR: 1.67%

Loan 1: 0.09%

Loan 2: 0.84%

0

2

4

6

8

10

12

BBB BB

Yie

lds (

Perc

ent)

US Credit CMBX

Correlation

(Between CMBX and US Credit)

0.29

21|GCMO 3Q18

As of 30 June 2018

Past performance and historical analysis do not guarantee future results.

*Based on peak-to-trough rate cycles for the corresponding periods of S&P 500. Rising-rate environments are defined as periods during which the 10-year US Treasury yield rose

by more than 70 basis points.

†Taper tantrum is from 1 May 2013, to 31 December 2013; tightening tantrum is from 5 July 2016, to 13 March 2017; tax-cut tantrum is from 7 September 2017, to 30 June 2018.

Source: Bloomberg, Bloomberg Barclays, Ned Davis Research, S&P and AB

Rising Rates Often Do Not Derail Equities, but Sectors Can Matter

Equities Have Fared Well in Rate-Hike Cycles

Change in

10-Year

Treasury

Yields (%)

2.4

7.8

3.1

2.7

1.1

1.2

2.5

1.4

0.9

2.2

1.2

1.5

1.6

1.0

1.6

0.7

1.4

Rising-

Rate

Cycles

Annualized S&P 500

Returns in Rising-Rate

Periods (Percent)*

2.1

8.7

11.9

2.3

15.7

8.3

1.1

12.9

21.0

32.1

23.2

10.9

25.4

34.8

25.3

2.5

16.1

Jan 71–Sep 75

Dec 76–Oct 81

Oct 82–Jun 84

Aug 86–Sep 87

Feb 88–Feb 89

Jul 89–Apr 90

Sep 93–Nov 94

Dec 95–Aug 96

Nov 96–Mar 97

Sep 98–Jan 00

Oct 01–Mar 02

Sep 02–Jun 06

Dec 08–Dec 09

Aug 10–Mar 11

Jul 12–Dec 13

Jan 15–Jun 15

Jul 16–Jun 18

Average 15%

Annualized Returns

During Rising-Rate

Periods

Sector Relative Performance During Past Three Rising-

Rate Tantrums (Percent)†

Sector

Taper

Tantrum

Tightening

Tantrum

Tax-Cut

Tantrum

Financials 6.2 23.5 –0.8

Cons. Disc. 5.5 –2.1 10.8

Technology 3.7 11.6 10.6

Industrials 9.3 2.2 –6.0

Telecom –19.7 –18.4 –11.4

Consumer Staples –10.1 –12.4 –16.4

Real Estate –24.7 –20.2 –9.3

Utilities –20.6 –15.6 –13.7

10-Year UST Note

Yield Change+138 b.p. +125 b.p. +82 b.p.

22|GCMO 3Q18

Left display as of 31 December 2017; middle display as of 30 June 2018; right display as of 31 December 2017. Average monthly returns of the net debt to equity factor (low

leverage to high leverage) index between 1990 and 2017 when bond yields fall or rise by greater than 10 basis points or are unchanged. The US GDP cycle is based on that

defined by the National Bureau of Economic Research. The table shows average quarterly returns of the low leverage to high leverage index in five cycles (early, mid, late

expansion and early, late recession). The GDP cycle back test is carried out between 1990 and 2012.


Source: Bernstein Research, FactSet, MSCI, National Bureau of Economic Research, Thomson Reuters I/B/E/S, Thomson Reuters DataStream and AB

Financial Strength: Vital, Attractively Valued and Resilient as Rates Rise

Performance of Low-Leverage to

High-Leverage Companies

10-Year Bond Movements: 1990–2017

Average Fall

Un-

changed Rise

Global 0.25 –0.09 0.08 0.88

Europe 0.13 0.08 0.03 0.29

US 0.16 –0.43 –0.10 1.19

Relative P/B of Low- vs. High-

Levered Stocks: Financial Strength

on Sale

Median Debt/Equity Has Climbed

S&P 500 Companies

40

45

50

55

60

65

70

75

80

85

90

02 04 06 08 10 12 14 16

Perc

ent

0

1

2

3

4

5

6

90 93 96 99 02 05 08 11 14 17

Ratio (

×)

Valuation Discounts

Global: 42%

US: 64%

US

Global

23|GCMO 3Q18

When PMIs Peak, the Stability of Growth Becomes More

Important

30

35

40

45

50

55

60

65

70

75

–50

–40

–30

–20

–10

0

10

20

30

40

85 89 93 97 01 05 09 13 17

Ind

ex L

eve

l

Growth Style Remains Relevant, and Not as Risky as You Might Think

Left display through 30 June 2018; right display as of 5 June 2018


Source: Cornerstone Macro and AB

Tech

Bubble

ISM

Manufacturing

Index

Role Reversal: Betas Then and Now

1.20

0.980.96

1.23

Highest P/E Stocks Lowest P/E Stocks

2000 2018

Ye

ar-

ove

r-Y

ea

r P

erc

en

t

S&P 500 Pure Value

vs. Pure Growth

(Left Scale)

24|GCMO 3Q18

Left display as of 30 June 2018; right display through 31 December 2017

Past performance, historical analysis and current forecasts do not guarantee future results. Not all sectors perform the same.

An investor cannot invest directly in an index, and its performance does not reflect the performance of any AB portfolio. The unmanaged index does not reflect the fees and

expenses associated with the active management of a portfolio.

*Three-month trailing average historical monthly return dispersion; S&P 500 Stock Universe (1990–2017)

Source: Bernstein Research, S&P and AB

That Could Support Active Management Outperformance

Percent of Active US Large-Cap Funds Outperforming

Benchmarks vs. US Market Dispersion (1990–2017)

0

10

20

30

40

50

60

70

80

90

0

2

4

6

8

10

12

14

16

90 92 94 96 98 00 02 04 06 08 10 12 14 16

Return Dispersion (Left Scale)

Share of US Active Funds Outperforming

Dispersions Are Rising, Especially Above Post-2010 Average

US Market Return Dispersion (Percent)*

0

2

4

6

8

10

12

14

16

18

20

90 92 94 96 98 00 02 04 06 08 10 12 14 16 18

Dispersions Are Rising, Which Bodes Well for Active Managers

Average Since 1990

Average Since 2010

Correlation: 0.49

25|GCMO 3Q18

As of 30 June 2018


*Valuation composite is one-third price/forward earnings, one-third price/book and one-third price/sales.

†Real estate sector adjusted for mortgage REITs post–GICS sector reconstitution to make it comparable with historical data.

Source: Bloomberg, FactSet, Russell Investments and AB

Small-Caps: Opportunities Remain and Be Active

Historical Percentiles

P/FE Multiple Relative to Russell 2000

13

27

54

42

7679

Industrials

Consumer Discretionary

Technology

Utilities

Healthcare

Real Estate†

Smaller-Cap Stocks Are Less Expensive than Larger Caps

Relative Valuations (Russell 2000 vs. Russell 1000)*

0.88

0.93

0.98

1.03

1.08

1.13

08 09 10 11 12 13 14 15 16 17 18

Ratio (

×)

Large-Caps

Are Cheap

Small-Caps

Are Cheap

Average

26|GCMO 3Q18

…yet the Returns of Highly Profitable US Stocks Have

Lagged Earnings

Earnings per Share (EPS) Growth and Total Return Differential

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

6.0

11 12 13 14 15 16 17

Pe

rce

nt

High-Profitability Companies—EPS Growth

S&P 500—EPS Growth

High-Profitability Companies—Return

S&P 500—Return

As of 31 December 2017

Historical analysis does not guarantee future results. Numbers may not sum due to rounding. US GDP estimate from AB economists. Organic food estimate from AB analysts,

through 2023. Automotive active safety revenues estimate from Roland Berger, through 2025. Health savings account AUM from Devenir and AB, through 2022. Private pension

AUM estimate from Citigroup, OECD and AB, through 2025. Mobile data traffic estimates from Cisco Systems, through 2021.

Calendar-year-end earnings per share growth and calendar-year total return indexed to 1.

Source: Cisco Systems, Citigroup, Devenir, OECD, Roland Berger, S&P and AB

Key Opportunities for Growth: Secular Themes and High Profitability

Growth Isn’t Always About the Economy...

Growth Rates (Percent)

High-Profitability

Companies: stock

returns have

lagged earnings

S&P 500:

stock returns

have outpaced

earnings2.3

8.0

16.0 17.0

29.0

46.0

US GDP(2018E)

OrganicFood

AutomotiveActiveSafety

Revenues

HealthSavingsAccount

AUM

PrivatePension

AUM

GlobalMobileData

Traffic

Compound Annual Growth Estimates

27|GCMO 3Q18

Left display as of 31 March 2018; right display as of 31 December 2017. Past performance and historical analysis do not guarantee future results. Historical data for

information only. Earnings yield calculated using reciprocal of P/FE (2018). US represented by S&P 500, non-US developed by MSCI EAFE and EM by MSCI Emerging Markets.

Individual stocks for which price/forward earnings (2018E) data were not available are excluded from these figures. *Universe consists of the top 1000 companies by market cap

each year through 2016 with annual rebalancing. Source: Center for Research in Security Prices, FactSet, MSCI, S&P Compustat and AB

Key to Successful Growth Investing: Beating the Fade

Companies Persisting with ≥10% Year-over-Year Earnings

Growth Rates: Top 1,000 Global Companies (1979–2017)*

Global Equities: A Broader Opportunity Set; Sustained Earnings Key

Number of Stocks with Earnings Yield Higher than 7%,

and Percentage of Index

376

64

14

1.2

2.4

2.8

0

100

200

300

400

0.0

0.5

1.0

1.5

2.0

2.5

3.0

OneYear

ThreeYears

FiveYears

Num

be

r of C

om

pa

nie

s

Exce

ss R

etu

rn (

Pe

rcen

t)

Annualized

Excess Returns

vs. MSCI World

US

156

(32%)

Non-US

Developed

371

(50%)

EM

424

(50%)

28|GCMO 3Q18

A Word About Risk

Note to All Readers: The information contained here reflects the views of AllianceBernstein L.P. or its affiliates and sources it believes are reliable as of the date

of this publication. AllianceBernstein L.P. makes no representations or warranties concerning the accuracy of any data. There is no guarantee that any projection,

forecast or opinion in this material will be realized. Past performance does not guarantee future results. The views expressed here may change at any time after

the date of this publication. This document is for informational purposes only and does not constitute investment advice. AllianceBernstein L.P. does not provide

tax, legal or accounting advice. It does not take an investor's personal investment objectives or financial situation into account; investors should discuss their

individual circumstances with appropriate professionals before making any decisions. This information should not be construed as sales or marketing material or

an offer or solicitation for the purchase or sale of any financial instrument, product or service sponsored by AB or its affiliates. Note to Canadian Readers: This

publication has been provided by AB Canada, Inc. or Sanford C. Bernstein & Co., LLC and is for general information purposes only. It should not be construed as

advice as to the investing in or the buying or selling of securities, or as an activity in furtherance of a trade in securities. Neither AB Institutional Investments nor AB

L.P. provides investment advice or deals in securities in Canada. Note to European Readers: This information is issued by AllianceBernstein Limited, a company

registered in England under company number 2551144. AllianceBernstein Limited is authorised and regulated in the UK by the Financial Conduct Authority (FCA -

Reference Number 147956). Note to Readers in Japan: This document has been provided by AllianceBernstein Japan Ltd. AllianceBernstein Japan Ltd. is a

registered investment-management company (registration number: Kanto Local Financial Bureau no. 303). It is also a member of the Japan Investment Advisers

Association; the Investment Trusts Association, Japan; the Japan Securities Dealers Association; and the Type II Financial Instruments Firms Association. The

product/service may not be offered or sold in Japan; this document is not made to solicit investment. Note to Australian Readers: This document has been

issued by AllianceBernstein Australia Limited (ABN 53 095 022 718 and AFSL 230698). Information in this document is intended only for persons who qualify as

"wholesale clients," as defined in the Corporations Act 2001 (Cth of Australia), and should not be construed as advice. Note to Singapore Readers: This

document has been issued by AllianceBernstein (Singapore) Ltd. ("ABSL", Company Registration No. 199703364C). ABSL is a holder of a Capital Markets

Services License issued by the Monetary Authority of Singapore to conduct regulated activity in fund management and dealing in securities. AllianceBernstein

(Luxembourg) S.à r.l. is the management company of the portfolio and has appointed ABSL as its agent for service of process and as its Singapore representative.

This document has not been reviewed by the MAS. Note to Hong Kong Readers: This document is issued in Hong Kong by AllianceBernstein Hong Kong

Limited (聯博香港有限公司), a licensed entity regulated by the Hong Kong Securities and Futures Commission. This document has not been reviewed by the Hong

Kong Securities and Futures Commission. Note to Readers in Vietnam, the Philippines, Brunei, Thailand, Indonesia, China, Taiwan and India: This

document is provided solely for the informational purposes of institutional investors and is not investment advice, nor is it intended to be an offer or solicitation, and

does not pertain to the specific investment objectives, financial situation or particular needs of any person to whom it is sent. This document is not an

advertisement and is not intended for public use or additional distribution. AB is not licensed to, and does not purport to, conduct any business or offer any

services in any of the above countries. Note to Readers in Malaysia: Nothing in this document should be construed as an invitation or offer to subscribe to or

purchase any securities, nor is it an offering of fund-management services, advice, analysis or a report concerning securities. AB is not licensed to, and does not

purport to, conduct any business or offer any services in Malaysia. Without prejudice to the generality of the foregoing, AB does not hold a capital-markets services

license under the Capital Markets & Services Act 2007 of Malaysia, and does not, nor does it purport to, deal in securities, trade in futures contracts, manage

funds, offer corporate finance or investment advice, or provide financial-planning services in Malaysia. Important Note For UK and EU Readers: For Professional

Client or Investment Professional use only. Not for inspection by distribution or quotation to, the general public.

29|GCMO 3Q18

Index Definitions

Following are definitions of the indices referred to in this presentation. It is important to recognize

that all indices are unmanaged and do not reflect fees and expenses associated with the active

management of a mutual fund portfolio. Investors cannot invest directly in an index, and its

performance does not reflect the performance of any AB mutual fund.

Bloomberg Barclays Global Aggregate Bond Index: Measure of global investment-grade debt from 24 local currency markets and includes treasury, government-related,

corporate and securitized fixed-rate bonds from both developed- and emerging-markets issuers.

Bloomberg Barclays Global Aggregate Corporate Bond Index: Tracks the performance of investment-grade corporate bonds publicly issued in the global market and found in

the Global Aggregate. (Represents global corporate on slide 1.)

Bloomberg Barclays Global High-Yield Bond Index: Provides a broad-based measure of the global high-yield fixed-income markets. It represents the union of the US High

Yield, Pan-European High Yield, US Emerging Markets High Yield, CMBS High Yield and Pan-European Emerging Markets High Yield indices.

Bloomberg Barclays Global High-Yield Corporate Index: A multi-currency measure of the global high yield corporate debt market. The index represents the union of the US

High Yield, the Pan-European High Yield, and the corporate sector of the Emerging Markets (EM) Hard Currency High Yield Indices. The high yield and emerging markets sub-

components are mutually exclusive. The Global High Yield Corporate Index is a component of the Global High Yield Index and subsequently a component of the Multiverse Index,

along with the Global Aggregate, Euro Treasury High Yield and EM Local Currency Government Indices.

Bloomberg Barclays Global Treasury: Euro Bond Index: Includes fixed-rate, local-currency sovereign debt that makes up the Euro Area Treasury sector of the Global

Aggregate Index. (Represents euro-area government bonds on slide 1.)

Bloomberg Barclays Global Treasury: Japan Bond Index: Includes fixed-rate, local-currency sovereign debt that makes up the Japanese Treasury sector of the Global

Aggregate Index. (Represents Japan government bonds on slide 1.)

Bloomberg Barclays US Aggregate Bond Index: A broad-based benchmark that measures the investment-grade, US dollar–denominated, fixed-rate, taxable bond market,

including US Treasuries, government-related and corporate securities, mortgage-backed securities (MBS [agency fixed-rate and hybrid ARM pass-throughs]), asset-backed

securities (ABS), and commercial mortgage-backed securities (CMBS).

Bloomberg Barclays US Corporate High-Yield Bond Index: Represents the corporate component of the Bloomberg Barclays US High Yield Index. (Represents US high

yield on slide 1.) Bloomberg Barclays US Corporate Bond Index: Measures the investment-grade, fixed-rate, taxable corporate bond market and includes USD-denominated

securities publicly issued by US and non-US industrial, utility and financial issuers.

Bloomberg Barclays US Treasury Index: Includes fixed-rate, local-currency sovereign debt that makes up the US Treasury sector of the Global Aggregate Index.

(Represents US government bonds on slide 1.)

30|GCMO 3Q18

Index Definitions (continued)

Bloomberg Barclays US Treasury Inflation-Linked Bond Index: Measures the performance of the US Treasury Inflation-Protected Securities market.

HFRI Event Driven Index: Investment managers who maintain positions in companies currently or prospectively involved in corporate transactions of a wide variety including

but not limited to mergers, restructurings, financial distress, tender offers, shareholder buybacks, debt exchanges, security issuance or other capital structure adjustments.

Security types can range from most senior in the capital structure to most junior or subordinated, and frequently involve additional derivative securities. Event Driven exposure

includes a combination of sensitivities to equity markets, credit markets and idiosyncratic, company-specific developments. Investment theses are typically predicated on

fundamental characteristics (as opposed to quantitative), with the realization of the thesis predicated on a specific development exogenous to the existing capital structure.

HFRI Equity Hedge Index: Investment managers who maintain positions both long and short in primarily equity and equity derivative securities. A wide variety of investment

processes can be employed to arrive at an investment decision, including both quantitative and fundamental techniques; strategies can be broadly diversified or narrowly

focused on specific sectors and can range broadly in terms of levels of net exposure, leverage employed, holding period, concentrations of market capitalizations and

valuation ranges of typical portfolios. Equity Hedge managers would typically maintain at least 50% exposure to, and may in some cases be entirely invested in, equities, both

long and short.

HFRI Fund Weighted Composite Index: A global, equal-weighted index of more than 2,000 single-manager funds that report to HFR Database. Constituent funds report

monthly performance net of all fees in US dollars and have a minimum of $50 million under management or 12-month track record of active performance.

HFRI Macro: Investment Managers which trade a broad range of strategies in which the investment process is predicated on movements in underlying economic variables

and the impact these have on equity, fixed income, hard currency and commodity markets. Managers employ a variety of techniques, both discretionary and systematic

analysis, combinations of top down and bottom up theses, quantitative and fundamental approaches and long and short term holding periods. Although some strategies

employ RV techniques, Macro strategies are distinct from RV strategies in that the primary investment thesis is predicated on predicted or future movements in the underlying

instruments, rather than realization of a valuation discrepancy between securities. In a similar way, while both Macro and equity hedge managers may hold equity securities,

the overriding investment thesis is predicated on the impact movements in underlying macroeconomic variables may have on security prices, as opposes to EH, in which the

fundamental characteristics on the company are the most significant are integral to investment thesis.

HFRI Relative Value: Investment Managers who maintain positions in which the investment thesis is predicated on realization of a valuation discrepancy in the relationship

between multiple securities. Managers employ a variety of fundamental and quantitative techniques to establish investment theses, and security types range broadly across

equity, fixed income, derivative or other security types. Fixed income strategies are typically quantitatively driven to measure the existing relationship between instruments

and, in some cases, identify attractive positions in which the risk adjusted spread between these instruments represents an attractive opportunity for the investment manager.

RV position may be involved in corporate transactions also, but as opposed to ED exposures, the investment thesis is predicated on realization of a pricing discrepancy

between related securities, as opposed to the outcome of the corporate transaction.

J.P. Morgan Corporate Emerging Markets Bond Index: A global, corporate emerging-market benchmark that tracks USD-denominated corporate bonds issued by emerging-

market entities.

31|GCMO 3Q18

Index Definitions (continued)

J.P. Morgan Emerging Market Bond Index Global: A benchmark index for measuring the total return performance of government bonds issued by emerging-market

countries that are considered sovereign (issued in something other than local currency) and that meet specific liquidity and structural requirements. In order to qualify for index

membership, the debt must be more than one year to maturity, have more than $500 million outstanding, and meet stringent trading guidelines to ensure that pricing

inefficiencies don’t affect the index. (Represents emerging-market debt on slide 1.)

J.P. Morgan Government Bond-Emerging Markets Global Diversified Index: A comprehensive global emerging markets index of local government bond debt. To qualify,

a country’s gross national income (GNI) per capita must be below the GNI per capita level that is adjusted yearly by the growth rate of the world GNI per capita, provided by

the World Bank, for three consecutive years.

MSCI EAFE Index: A free float–adjusted, market capitalization–weighted index designed to measure developed-market equity performance, excluding the US and Canada. It

consists of 22 developed-market country indices.

MSCI Emerging Markets Index: A free float–adjusted, market capitalization–weighted index designed to measure equity market performance in the global emerging markets. It

consists of 21 emerging-market country indices. (Represents emerging markets on slide 1.)

MSCI World Index: A market capitalization–weighted index that measures the performance of stock markets in 24 countries. (Represents World on slide 1.)

Russell 1000 Index: A stock market index that represents the highest-ranking 1,000 stocks in the Russell 3000 Index, representing about 90% of the total market

capitalization of that index.

Russell 2000 Index: Measures the performance of the small-cap segment of the US equity universe. It is a subset of the Russell 3000 Index, representing approximately 8% of

the total market capitalization of that index. It includes approximately 2,000 of the smallest securities based on a combination of their market cap and current index membership.

(Represents US small-cap on slide 1.)

S&P 500 Index: Includes a representative sample of 500 leading companies in leading industries of the US economy. (Represents US on slide 1.)

TOPIX Index: Measures stock prices at the Tokyo Stock Exchange (TSE). (Represents Japan on slide 1.)

MSCI makes no express or implied warranties or representations, and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be

further redistributed or used as a basis for other indices, any securities or financial products. This report is not approved, reviewed or produced by MSCI.

The [A/B] logo is a registered service mark of AllianceBernstein and AllianceBernstein® is a registered service mark used by permission of the owner, AllianceBernstein L.P.

© 2018 AllianceBernstein L.P. www.AllianceBernstein.com

180709164550

http://www.alliancebernstein.com/

GLOBAL CAPITAL MARKETS OUTLOOK - …...Shadow Fed Funds Rate* Historical Monetary Policy + Fiscal...

Documents

Transcript of GLOBAL CAPITAL MARKETS OUTLOOK - …...Shadow Fed Funds Rate* Historical Monetary Policy + Fiscal...