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Market Outlook and
Asset Allocation
February 2017
Multi Asset Investing
The views expressed in this presentation are those of the Multi Asset Team, and are subject to change at
any time. These views should not be relied upon as investment advice, as securities recommendations,
or as an indication of trading intent on behalf of any of Pioneer Investments’ strategies.
Page 2
ENJOY THE TRANSITION
Page 3
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
-4
-3
-2
-1
0
1
2
3
-4
-3
-2
-1
0
1
2
3
% o
f P
ote
nti
al G
DP
From DMs From EMs Global
Inflation Expected to Raise in DMClosing Output Gap
-3
-2
-1
0
1
2
3
4
5
6
Jan
-97
Fe
b-9
8
Ma
r-9
9
Ap
r-0
0
Ma
y-0
1
Jun
-02
Jul-0
3
Au
g-0
4
Se
p-0
5
Oct-
06
No
v-0
7
De
c-0
8
Jan
-10
Fe
b-1
1
Ma
r-1
2
Ap
r-1
3
Ma
y-1
4
Jun
-15
Jul-1
6
Au
g-1
7
%
US Japan Eurozone
Pioneer Investments’
Forecast
Source: Analysis by Pioneer Investments - Global Asset Allocation Research, IMF.
Data as of December 31, 2016.
Notes: Coverage: DMs – US, Eurozone, UK, Japan; EMs – China, India, Russia, Turkey, Brazil,
Mexico. Output gaps of DMs and EMs are calculated by weighted average from above
economies by each group; and then global output gap is weighted average of DMs and EMs.
Assumption: they are representative of DMs and EMs respectively.
Source: Analysis by Pioneer Investments - Global Asset Allocation Research. Thomson Reuters.
Data as of December 31, 2016.
Theme 1: Global Reflation Waves
Pioneer Investments’
Forecast
Page 4
Theme 2: Central Bank Policy Reaching a Tipping Point
Source: Pioneer Investments, February 7, 2017. Calendar dates indicate next CBs scheduled meeting. PBOC does not publish meetings schedules in advance.
FED
Two/Three hikes
expected
15
MARCH
BOE
Nimble and Willing to
Eventually Quickly Adjust
16
MARCH
ECB
Debate on Forward Guidance,
Scarcity and Economic
Momentum. Accommodative
BOJ
Focus on
Yields Targeting and
continuing QE
MARCH
169
MARCH
PBOC
Tightening Bias, Controlling
Capital Outflows, RMB and
Inflation
Page 5
Tariffs
Immigration
Trade restrictions Infrastructure spending
Tax cuts
Deregulation
Theme 3: Trump Trade
Fundamental Economic Policies Microeconomic Priorities
Source: Pioneer Investments, February 7, 2017.
Page 6
Theme 4: Emerging Markets Divergences
Emerging Markets Vulnerability Index EM: Fiscal Monitor
-15 -5 5 15
India
Peru
China
Russia
Philippines
Brazil
Mexico
Indonesia
Korea
Thailand
Malaysia
South Africa
Colombia
Chile
Czech Republic
Poland
Hungary
Turkey
Index level
Vulnerability Index January 2016
More
Vulnerable
Less
Vulnerable
Le
ss F
rag
ile
Fiscal Consolidation 2017
Turkey
Czech Republic
Russia
ChileChina
Hungary
Peru
Malaysia
South
Korea
Thailand
Mexico
Philippines
Poland
IndiaSouth Africa
Indonesia
Colombia
Brazil
70
80
90
100
110
120
130
140
-2.0-1.00.01.02.0
Revenue (%GDP)
Mo
re F
rag
ile
Fiscal Impulse 2017
Vulnerability Index takes into account: CA and Funding; External Debt and ST External Debt;
Reserve Adequacy; Domestic variables. Source: Analysis by Pioneer Investments - Global
Asset Allocation Research. January 2017 compared to January 2016. Data as of February
1, 2017.
X axis: Fiscal Impulse (IMF definition): difference of Cyclically Adjusted Primary Balance (CAPB)
between 2015 and 2016.
Y axis: Fiscal Fragility Indicator ranks the countries according to: CAPB, Gross Debt/GDP,
Expenditure/GDP, CDS, Fertility Rate, Old age dependency Ratio, Liquidity, Gov External Debt,
Reserves. Source: Analysis by Pioneer Investments - Global Asset Allocation Research. Thomson
Reuters. Data as of February 3, 2017.
Page 7
Theme 5: Top Global Hot Spots
Page 8
PLAYING ACCELERATION
Page 9
STRONGER
DM GROWTH 2 Positive on Global Equities (Japan, US, EU)
Tail Risk Hedging on Fatter Tails (USD, Gold) HEDGING RISKS5
Specific and Targeted on EM Equity, Bond, FX EM DIVERGENCES3
Navigate across the asset class spectrumSEARCH FOR
INCOME4
Investment Ideas for 2017
Negative View on Duration, Curve Steepening, BreakevenHIGHER
INFLATION1
Page 10
German Government Bond Yields Forecast
2.00%
2.41%
2.93%
3.42%
0.0%
0.1%
0.2%
0.3%
0.4%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
2Y 5Y 10Y 30Y
Yie
ld D
iffere
ntia
l
Yie
ld
Delta Yield (RHS) 1Y forward rate 2017 Target
-0.55%
0.03%
0.73%
0.0%
0.1%
0.2%
0.3%
0.4%
-1.0%
-0.5%
0.0%
0.5%
1.0%
2Y 5Y 10Y
Yie
ld D
iffere
ntia
l
Yie
ld
Delta Yield (RHS) 1Y forward rate 2017 Target
1Improving Economic Outlook: Short Duration
US Government Bond Yields Forecast
Source: Analysis by Pioneer Investments - Global Asset Allocation Research.
Yield differential between Dec 17 Forecast and 1Y forward rate. Data as of February 6, 2017.
Source: Analysis by Pioneer Investments - Global Asset Allocation Research.
Yield differential between Dec 17 Forecast and 1Y forward rate. Data as of February 6, 2017.
Page 11
Expectations Mispricing: Inflation Linkers and Curve Steepening
Breakeven Inflation US Treasury and German Bund Curve
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
10
Ye
ar
Bre
ak
eve
n I
nfl
ati
on
Germany US Japan UK
-50
0
50
100
150
200
250
300
350
2 -
10
Ye
ar
Yie
ld D
iffe
ren
tia
l in
Go
vern
me
nt
Bo
nd
s
US Curve 2-10 Year Spread
German Curve 2-10 Year Spread
1
Source: Pioneer Investments on Bloomberg data. As of February 7, 2017. Source: Pioneer Investments on Bloomberg data. As of February 7, 2017.
Page 12
Valuation
Ratios
PE 14.9 17.6 15.8 14.2 13.4 12.8 13.6 16.2 14.6
Price to Book
Value1.8 2.9 1.3 1.5 1.8 1.0 1.3 2.4 1.9
Price to SALES 1.2 2.0 0.8 1.1 0.9 0.6 1.3 2.1 1.3
Price to Cash
Flow6.7 12.5 5.4 5.8 5.6 3.8 2.8 24.7 7.6
Dividend Yield 3.4 2.1 2.0 3.4 2.6 3.9 4.0 3.5 4.0
Price to EBITDA 8.7 11.2 6.5 8.7 6.2 4.5 6.7 11.2 11.1
Very Expensive Expensive Neutral Cheap
Stronger Growth in DM – Positive on DM Equities
Equity Market Fundamentals (Forecast, horizon Dec. ’17)
Equity Market Valuations: Do They Really Matter?
Source: Analysis by Pioneer Investments - Global Asset Allocation Research on MSCI indexes.
Data as of February 2, 2017.
Source: Pioneer Investments, Bloomberg. Data available as of 1 Feb 2017. Color stands for
each market relative to their own history over a 10 year period. The price/earnings is the ratio
of market’s current share price compared to its estimated per share earnings for the current
year. The price/book value (PBV) is the ratio of market price of a company's shares (share price)
over its book value of equity. The price to sales is the ratio of the mart’s price to its revenue per
share for the trailing 12 months. The price to cash flow compares market’s price to its level of
annual cash flow. Dividend Yield is the annual dividends per share divided by the market’s
price. The price to EBITDA compares market’s price to earnings before interest, taxes,
depreciation and amortization.
2
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
US Eurozone Japan Emerging
Markets
Page 13
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
Ma
r-1
2
Jun
-12
Se
p-1
2
De
c-1
2
Ma
r-1
3
Jun
-13
Se
p-1
3
De
c-1
3
Ma
r-1
4
Jun
-14
Se
p-1
4
De
c-1
4
Ma
r-1
5
Jun
-15
Se
p-1
5
De
c-1
5
Ma
r-1
6
Jun
-16
Se
p-1
6
De
c-1
6
Ma
r-1
7
Jun
-17
Se
p-1
7
De
c-1
7
Ma
r-1
8
MSCI Em EPS Consensus exp Pioneer Forecast
Turkey
South AfricaTaiwan
Poland
India
Thailand
Czech Republic
Philippines
Malaysia
IndonesiaBrazil
China
Russia
Mexico
HungaryChile
Peru
Korea
-5
-4
-3
-2
-1
0
1
2
3
4
5
051015N
eg
ati
ve
12
M F
WD
M
acro
mo
me
ntu
m
Po
sit
ive
12
M F
WD
Ma
cro
Mo
me
ntu
mLow Fundamental Momentum High Fundamental Momentum
EM Divergences– Positive EPS Growth Offers Selective Opportunities
MSCI Emerging Market EPS Country Selection Paramount in EM Equity
Source: Analysis by Pioneer Investments - Global Asset Allocation Research. Forecast on
MSCI EM EPS in USD. Data as of January 16, 2017.
Source: Analysis by Pioneer Investments - Global Asset Allocation Research. Countries in the
top right are the most attractive. Data as of December 31, 2016.
Note: 18 Global Emerging equity markets are ranked with an overall score attributed to each
market. Overall scores are based on valuation, profitability, growth, positioning and risk,
using econometric analysis.
3
Page 14
EM Sovereign Credit
EXPENSIVE
0
50
100
150
200
250
300
CD
S 5
Yr.
Sp
rea
d, B
asis
Po
ints
Rating
AAA AA A BBB BB B
South Africa Brazil
Russia
Turkey
Hungary
Indonesia
Romania
ColombiaMexico
Philippines
Thailand
Peru
Chile
Korea
Israel
Czech Republic
Malaysia
Poland
India
CHEAP
EM Divergences – Neutral, but with Selective Opportunities
EMBI Spread
3
Source: Analysis by Pioneer Investments - Global Asset Allocation Research.
Data as of February 2, 2017.
Source: Analysis by Pioneer Investments - Global Asset Allocation Research. We consider
the median rating on External debt published by Moody, S&P and Fitch. Data as of
February 10, 2017.
Notes: we use an exponential regression in order to consider the non-linear relationship between
credit rating and spreads. The relationship allow us to estimate a “fair value” level for each spread
taking into account the credit rating of each issuer. Countries falling above the fair value line are
cheap, while the countries below are expensive.
0
100
200
300
400
500
600
700
800
2003 2005 2007 2009 2011 2013 2015 2017
Sp
rea
d B
ps
Forecast
Dec 17, 420
Page 15
Source: Bloomberg. Data as at February 7, 2017. Eurozone Bond = JPMorgan GBI Germany, Treasuries = JPMorgan GBI US, EUR IG Bonds = Barclays Pan European Aggregate Corporate Bond, US IG Bonds = Barclays US Aggregate Credit, EUR HY Bonds = Barclays
PanEuropean High Yield Bond, US HY Bonds = Barclays US Corporate High Yield, EM Bonds = JPMorgan EMBI Global, US Equities = S&P 500, Global Equities = MSCI World, European Equities = MSCI Europe, Eur High Div Equities = MSCI Europe High Dividend Yield,
Global REITs = FTSE EPRA/NAREIT Global, Global Infrastructure = Dow Jones Brookfield Global Infrastructure Index, US MLP = Alerian MLP Index. All indexes are total return in local currency. Max Drawdown is the largest 1 year decline in value registered since
December 2010 based on an analysis on monthly data. Drawdown – The peak-to-trough decline during a specific record period of an investment, fund or commodity, usually quoted as the percentage between the peak and the trough. Yield is the Yield to maturity for
bonds and the dividend yield for equities. Data represents past performance, which is no guarantee of future results. Data represents past performance, which is no guarantee of future results..Please see additional MSCI disclaimer in the Additional Notes.
Income: Broaden the Asset Class Spectrum but be Aware of Risk
Asset Classes Yields and Drawdown
0.4
2.4
1.3
3.2
4.3
5.7
5.5
2.0
2.5
3.5
5.2
4.1
3.6
6.7
-6.0
-4.8
-3.7
-5.2
-12.0
-9.7
-10.3
-16.3
-19.4
-18.8
-12.8
-19.9
-16.7
-41
-30 -25 -20 -15 -10 -5 0 5 10
Eurozone Bond
Treasuries
Eur IG Bonds
US IG Bonds
Eur HY Bonds
US HY Bonds
EM Bonds
US Equities
Global Equities
European Equities
Eur High Div Equities
Global REITs
Global Infrastructure
US MLP
Go
vt
Bo
nd
s
Co
rp &
EM
Bo
nd
sE
QU
ITY
RE
ITs
1 Year Max Drawdown (%) Current Yield (%)
-40
4
Page 16
Policy Uncertainty Index & USDVolatility in Fixed Income and Equity
5
10
15
20
25
30
35
40
50
60
70
80
90
100
110
120
VIX
Ind
exM
ove
In
de
x
Move Index (left scale) VIX Index (right scale)
50
100
150
200
250
300
350
1000
1050
1100
1150
1200
1250
1300
Bloomberg Dollar Spot Index (Left Scale)
Global Policy Uncertainty Index (Right Scale)
5
Hedging: Gold and USD May Help to Protect from Tail Risk and Market
Complacency
Source: Analysis by Pioneer Investments, Bloomberg. Data as of February 2, 2017.
Note: VIX is CBOE Volatility Index, Move Index is the Merrill Lynch Option Volatility Estimate
for the Treasury. Source: Analysis by Pioneer Investments, Bloomberg. Data as of February 2, 2017.
Page 17
ASSET CLASS
ECONOMICBACKDROP(50%)
VALUATION
(20%)
RISK SENTIMENT(20%)
TECHNICAL
(10%)ASSESSMENT
Core Government
Bonds
Core Credit
EM Bonds
Global Equity
EM Equity
Commodities
MediumPoor Good
2017 Asset Class Assessment
Source: Analysis by Pioneer Investments - Global Asset Allocation Research. Data as of February 2, 2017.
Page 18
Our New Macro and Investment Outlook Toolkit
Page 19
Disclaimer
The MSCI information may only be used for your internal use, may not be reproduced or redisseminated in any form and may not be used as a basis for or a component of
any financial instruments or products or indices. None of the MSCI information is intended to constitute investment advice or a recommendation to make (or refrain from
making) any kind of investment decision and may not be relied on as such. Historical data and analysis should not be taken as an indication or guarantee of any future
performance analysis, forecast or prediction. The MSCI information is provided on an “as is” basis and the user of this information assumes the entire risk of any use
made of this information. MSCI, each of its affiliates and each other person involved in or related to compiling, computing or creating any MSCI information (collectively,
the “MSCI Parties”) expressly disclaims all warranties (including, without limitation, any warranties of originality, accuracy, completeness, timeliness, non-infringement,
merchantability and fitness for a particular purpose) with respect to this information. Without limiting any of the foregoing, in no event shall any MSCI Party have any
liability for any direct, indirect, special, incidental, punitive, consequential (including, without limitation, lost profits) or any other damages.
Unless otherwise stated all information contained in this document is from Pioneer Investments Multi Asset Team and is as at February 2,2017.
The views expressed regarding market and economic trends are those of the author and not necessarily Pioneer Investments, and are subject to change at any time.
These views should not be relied upon as investment advice, as securities recommendations, or as an indication of trading on behalf of any Pioneer Investment product.
There is no guarantee that market forecasts discussed will be realized or that these trends will continue.
These views are subject to change at any time based on market and other conditions and there can be no assurances that countries, markets or sectors will perform as
expected. Investments involve certain risks, including political and currency risks. Investment return and principal value may go down as well as up and could result in the
loss of all capital invested.
Indices are unmanaged and their returns assume reinvestment of dividends, and unlike Fund returns, do not reflect any fees or expenses. It is not possible to invest
directly in an index.
Diversification does not guarantee a profit or protect against a loss. Unless otherwise stated, all information contained in this document is from Pioneer Investments Multi
Asset Team and is as of February 2, 2017.
This material does not constitute an offer to buy or a solicitation to sell any units of any investment fund or any service. Pioneer Investments is a trading name of the
Pioneer Global Asset Management S.p.A. group of companies.
Date of First Use: February 20 2017.