Global Markets in a Post-Election World INTL FCStone Financial Inc. FCM Division Arlan Suderman Chief Commodities Economist

DISCLAIMER ----------------------------------------------------------------------------------------------------------------------------------------------- The trading of derivatives such as futures, options, and over-the-counter (OTC) products or “swaps” may not be suitable for all investors. Derivatives trading involves substantial risk of loss, and you should fully understand those risks prior to trading. Past financial results are not necessarily indicative of future performance. All references to futures and options on futures trading are made solely on behalf of the FCM Division of INTL FCStone Financial Inc., a member of the National Futures Association (“NFA”) and registered with the U.S. Commodity Futures Trading Commission (“CFTC”) as a futures commission merchant. All references to and discussion of OTC products or swaps are made solely on behalf of INTL FCStone Markets, LLC (“IFM”), a member of the NFA and provisionally registered with the CFTC as a swap dealer IFM’s products are designed only for individuals or firms who qualify under CFTC rules as an ‘Eligible Contract Participant’ (“ECP”) and who have been accepted as customers of IFM. This material should be construed as market commentary, merely observing economic, political, and/or market conditions. It is not intended to refer to any particular trading strategy, promotional element or quality of service provided by the FCM Division of INTL FCStone Financial Inc. or IFM. Neither the FCM Division of INTL FCStone Financial Inc. nor IFM is responsible for any redistribution of this material by third parties or any trading decisions taken by persons not intended to view this material. Information contained herein was obtained from sources believed to be reliable, but is not guaranteed. These materials represent the opinions and viewpoints of the author, and do not necessarily reflect the opinions or viewpoints of the FCM Division of INTL FCStone Financial Inc. or IFM. All forecasting statements made within this material represent the opinions of the author unless otherwise noted. Factual information believed to reliable, was used to formulate these statements of opinion; but we cannot guarantee the accuracy and completeness of the information being relied upon. Accordingly, these statements do not necessarily reflect the viewpoints employed by the FCM Division of INTL FCStone Financial Inc. or IFM. All forecasts of market conditions are inherently subjective and speculative, and actual results and subsequent forecasts may vary significantly from these forecasts. No assurance or guarantee is made that these forecasts will be achieved. Any examples given are provided for illustrative purposes only, and no representation is being made that any person will or is likely to achieve profits or losses similar to those examples. Reproduction or use in any format without authorization is forbidden. © Copyright 2015. All rights reserved.

P = f ( S * D ) M Price is a Function of Supply and Demand as Modified by the Flow of Money.

Herding Theory…

Where are the Markets Going? Understanding Herding Theory & Market direction Herding Theory maintains that people buy and sell because others are buying and selling. Market Vane says: ”…trader sentiment determines the course of the markets. If enough traders are bullish, even for the wrong reasons, then prices will rise. You don’t need to know why those traders are bullish, only that they are willing to buy and drive prices higher. The Contrary can be True as Well.

Impact on Money Flow Trump Election Debt: $20 Trillion +Unfunded Mandates Black Swan – Currency, Terror? Impact on Money Flow OPEC – Crude Oil Europe/Japan Negative Rates Cheap Currencies Emerging Nations European Refugee Crisis Euro-Exit Movement

The Election that Shocked the World – Brexit 2.0 The Initial Reaction was Abrupt and Highly Volatile. Trump’s First Role was to Provide Certainty to the Markets By What He Said & Who He Put in His Cabinet. Early Signs Suggest Focus on Tax and Regulatory Reform. Fed Expects to Accelerate Monetary Tightening. Global Trade Remains the Big Question Mark!

Fed Balance Sheet Holds Near $4.5 Trillion SOURCE: Federal Reserve

Weekly Chart for Dollar Index Reflects Rising Expectations for Monetary Tightening SOURCE: Reuters Eikon

Weekly Chart for CRB Index Reflects Faltering Money Flow SOURCE: Reuters Eikon

Weekly WTI Crude Oil Chart Shows New Life From OPEC Deal SOURCE: Reuters Eikon

Historically, OPEC Wielded Influence

OPEC’s Share of Pie is Shrinking

Shale Oil Producers are Leaner & Meaner

U.S. Share of Demand Pie is Largest

Currency Exchange Rates Matter, but Crude Oil is Still Cheap Relative to Recent Levels

Year-to-Date Relative Performance Gives Insight Into Index Fund Rebalancing Index Funds Must Rebalance Accordingly in January. SOURCE: FinViz.com

DJIA Hits Record High as Money Flows Away from Bonds & Commodities SOURCE: Reuters Eikon – Weekly DJIA

- Equal to Entire Education & Protection Budgets Combined A 1% Increase in Interest Rates Adds $200 Billion to the Federal Budget – Revenues Need to Increase, Expenditures Decrease or Some Combination of the Two. - Equal to Entire Education & Protection Budgets Combined SOURCE: usgovernmentspending.com.

Inflation Expectations Rise – Pressure Fed to Accelerate Monetary Tightening

Sluggish U.S. Recovery Ready to Jump-Start?

Government Debt Rises Exponentially

Government Debt to GDP Ratio Rises

Eurozone Still has Significant Structural Problems

Euro-Area Unemployment is High

Euro-Area Battles Debt as Well

ECB Stimulus Struggles to Create Inflation

China’s Economic Growth Slows

Chinese Yuan Vulnerable to Another Sharp Devaluation

China’s Foreign Reserves Shrink

Source: U.S. Census Bureau 2013, 2014 International Data Base, U.S. population projections. An Aging World: 2015, International Population Reports By Wan He, Daniel Goodkind, and Paul Kowal; Issued March 2016; P95/16-1

Source: U.S. Census Bureau, International Data Base, 2016

Source: U.S. Census Bureau, International Data Base, 2016

Source: U.S. Census Bureau, International Data Base, 2016

Source: U.S. Census Bureau, International Data Base, 2016

Source: U.S. Census Bureau, International Data Base, 2016

Chinese Diets Shift Toward Protein

Commodity Boom Prices Stimulated Expansion in FSU & South America Growth of middle class in East Asia Demand for Meat Production requires grain/feed protein Commodity Boom Prices Stimulated Expansion in FSU & South America

Source: USDA

Take Home Message: Markets get “Trumped” Tax & Regulatory Reform Expected to Boost Corporate Profits – Money Flows to Stocks. Fed Expected to Accelerate Rate Hikes Due to More Accommodative Fiscal Policy for Stimulating Growth. Dollar Rises Due to Above, as well as due to Euro Political/Economic Instability Money Flows from Bonds & Commodities to Stocks OPEC Curtails Production with Russia for First Time Since 2001 Combined OPEC & non-OPEC Cuts Total 2.06 million barrels per day – 2% of Global Production. The Cartel has a History of non-Compliance. North American Shale Oil Producers are Leaner & Meaner Than in 2014.

Questions? THANK YOU