The Great Disappointment By Avery Shenfeld, Chief Economist & Managing Director September 2010

|2|2 The Great Disappointment

|3|3 Lopsided Growth is Nothing New

|4|4 OECD Fiscal Withdrawals

|5|5 Odds of US Recession in Coming Two Quarters

|6|6 US Savings Rate Driven by Net Worth

|7|7 US Core CPI: Slowest in a Half Century

|8|8 Change in Inflation During Deep Output Gaps Is Proportional to Initial Inflation Rate: Deflations Rare Source: A. Meier, “Still Minding the Gap—Inflation Dynamics during Episodes of Persistent Large Output Gaps”

|9|9 Inflation Below Fed Target Points to QE Ahead

| 10 Canada Comes Down to Earth

| 11 Canadian Dollar Rich Relative to Commodities

| 12 Stimulus Withdrawal a Major Drag

| 13 Unprecedented Debt: Beginning to Constrain Households?

| 14 Debt Service Burden Reflects Low Rates

| 15 House Prices Had Overshot “Fair Value” Source: IMF, CREA, CIBC Calculations

| 16 TSX Not Expensive By Most Metrics

| 17 Canadian Core CPI vs Output Gap

| 18 Economic Forecast

| 19 Interest & Exchange Rate Forecast

| 20 Summing Up Global recovery – sub-par growth, but backing off fiscal tightening and low rates prevents double dip US consumer held back by deleveraging and low income gains – need a tax cut extension Canada has a roughly half percent growth edge vs. US: 2.3% vs 1.9% next yr Bond yields will rise gradually; Treasuries outperform Canada’s Equity markets will be choppy – hit by earnings disappointments, but market is ahead of analysts in bracing for slow growth