1. 2015 economic and market outlook
Bob Robbins
Managing Principal
[Robbins Farley, LLC
Wells Fargo Advisors Financial Network
FA note: Have copies of the “2015 Economic and Market Outlook” (order number ) report available.
Welcome, and thank you for joining me. I’m [NAME], and I’m a [COMPLIANCE-APPROVED TITLE] with Wells Fargo Advisors.
FA note: You may want to include some brief biographical information. Be sure to use language approved by Communications Compliance.
Please see slides 30 and 31 for disclosures.

2. Investment Strategy Committee
Economy
U.S. equities
Fixed income
International
Gary Thayer
Chief Macro Strategist
Stuart Freeman, CFA
Chief Equity Strategist
Brian Rehling, CFA
Chief Fixed Income Strategist
Paul Christopher, CFA
Chief International Strategist
Today we’re here to discuss Wells Fargo Advisors’ outlook for Before we go any further, I want to provide a little background about the information I’m going to give you.
The individuals you see here are members of our Investment Strategy Committee, which is part of our Advisory Services Group, or ASG. ASG comprises the top strategists at Wells Fargo Advisors. Their job is to support Financial Advisors like me by staying abreast of what’s going on in the economy and the markets, using their expertise to forecast what they see for the future, and making recommendations for how they believe investors should position their portfolios.

3. A complimentary report for you
The members of the Investment Strategy Committee wrote our “2015 Economic and Market Outlook” publication, which I have for you. You’ll find the information I’m about to cover, and more, in it.
When I talk today about what “we” expect from the economy and the markets, I’m actually giving the Investment Strategy Committee’s opinions.

4. We recommend starting with a plan
It’s important you understand that Wells Fargo Advisors believes every investor should have an investment plan. And at the heart of a plan is what we have here: an asset allocation, which is nothing more than how a portfolio is divided up, or allocated, between different types of investments, or assets.
I’m showing this one just to help you visualize what an asset allocation is. The one that’s right for you would depend on a variety of factors, such as:
How much fluctuation in your investments’ value you’re comfortable with, or your risk tolerance
How long before you’re going to need to tap into your investments, or your time horizon
What your investments are currently worth and how much you’re likely to need when, for example, you retire
I’m mentioning this because we believe the information I’m about to go over regarding our 2015 outlook should be considered within the context of your overall plan. If you don’t have one or your plan is out-of-date, I can help you create or update your plan.
Does anyone have questions about asset allocation or investment planning before we move on?

5. What’s ahead for the economy?
What happens with stocks, fixed income investments, international investments, and commodities depends a great deal on the overall economy’s performance. So let’s begin our discussion there.

6. Economic outlook 2015 year-end forecasts
Unemployment
5.4%
Inflation
1.8%
Inflation-adjusted gross domestic product (GDP)
2.8%
FA note: This is the final slide of a build.
Here are a few big issues regarding the economy:
Unemployment. Currently it’s at 5.6%, which is down significantly since the end of the recession. We believe it will end 2015 only slightly lower at 5.4%.
Inflation. As measured by the Consumer Price Index (CPI), the inflation rate was only 1.6% as of the end of October. We expect it will end 2015 at an equally benign 1.8%.
Gross domestic product (GDP). We project GDP will average 2.8% in That would be better than the consensus expectation as of November for it to average 2.2% in 2014.

7. Economic outlook Consumer confidence making a comeback
One of the positive surprises in the U.S. economy in 2014 was the improvement in the labor market. Unemployment has been trending down since the end of the recession. The jobless rate dropped to less than 6.0% in late 2014 as layoffs subsided and companies added workers.
Unfortunately, many workers who lost jobs during the recession are not getting the new ones. Consequently, consumer confidence still appears to lag business confidence. But we believe 2015 will be the year when consumer attitudes finally catch up to the improvements in the U.S. economy. If that happens, we expect investor sentiment to improve at the same time.

8. Economic outlook Federal budget picture has improved
Another positive is the significant improvement in the U.S. federal budget deficit. It’s now less than 3.0% of GDP. This means the government’s total debt is rising at a slower pace than a few years ago.
The U.S. trade deficit has also improved recently as our nation produces more domestic oil and natural gas, requiring less importing of foreign energy. The decline in imports means there are fewer dollars going overseas. This, combined with increased demand for dollars as foreign investors look more favorably on the stronger U.S. economy and the decline in the federal deficit, has strengthened the dollar’s value.
We believe the last time the U.S. economy has been in a situation similar to the current environment was in That was the sixth year of a long economic expansion. It was also a period when the dollar’s value was strengthening because the U.S. economy was stronger than many foreign economies. And slow global economic growth dampened inflationary pressures. Of course, past performance does not guarantee similar results. That being said, the U.S. economy continued to expand for several more years and did not go into recession until 2001.

9. Where does the stock market go from here?
Now let’s turn our attention to what we see ahead for the U.S. equities markets.

10. U.S. equities outlook 2015 year-end forecasts
S&P 500 earnings
$128.00/share
S&P 500 index
2,150 – 2,250
FA note: This is the final slide of a build.
Here are a couple of important topics regarding the stock market:
Corporate earnings are a primary driver of stock prices; when companies’ profitability is improving, investors want to own a piece of them. We see earnings improving to $128 per share between now and the end of 2015, which compares to $120 in 2014.
Stock prices should increase when earnings improve. And in fact, our target for the S&P 500 is in the 2,150 – 2,250 range, which is an improvement from where the index ended 2014.

11. U.S. equities outlook Sectors to overweight
Industrials
Information technology
Consumer Discretionary
While we believe the market in general will go up in the coming months, more specifically, we expect these sectors will do particularly well and think investors should overweight them in their portfolios.
FA note: You may want to ask if everyone is familiar with sectors and sector weightings. If some are not, here are definitions to help explain them:
A sector is a group of securities that share certain common characteristics. The companies in a sector tend to perform similarly during different phases of the business cycle.
Sector weightings are guidance stock market strategists use to indicate how they believe investors should allocate their stock portfolios. When a strategist’s guidance is to overweight a sector, he or she believes it will perform well in the future and investors should allocate a larger percentage of their stock portfolios to that sector than its relative representation in the S&P 500 index. For example, if the Energy sector represents 11% of the S&P 500 index and a strategist’s guidance is to overweight that sector, he or she is recommending that investors allocate more than 11% of their stock portfolios to the sector. If a strategist’s guidance is to evenweight a sector, he or she believes investors’ allocation to that sector should be in line with its representation in the S&P 500. If a strategist’s guidance is to underweight a sector, he or she believes investors’ allocation to that sector should be less than its representation in the S&P 500.

12. U.S. equities outlook Sectors to evenweight
Health Care
Energy
Financials
Materials
Telecommunications
These are the sectors we believe investors should evenweight in their portfolios.

13. U.S. equities outlook Sectors to underweight
Consumer Staples
Utilities
And these are the sectors we believe investors should underweight in their portfolios.

14. U.S. equities outlook Opportunities in U.S. equities
Equity sectors – recommended portfolio weightings
As of December 2, 2014
Overweight
Consumer Discretionary
Industrials
Info. Tech.
Evenweight
Consumer Staples
Energy
Financials
Materials
Telecommunications
Underweight
Health Care
Utilities
This table, which you’ll find in your copy of our outlook report, summarizes the information I just gave you.
In general, we expect cyclically sensitive sectors, which tend to respond more to changes in the business cycle, to outperform defensive sectors, which tend to react less to business-cycle changes, during the coming months.
Source: Wells Fargo Advisors

15. What’s ahead for fixed income?
Now let’s turn our attention to what we see ahead for fixed income.

16. Fixed income outlook 2015 year-end forecasts
Target federal funds rate
0.75%
10-year Treasury yield
3.00% ‒ 3.50%
30-year Treasury yield
3.50% ‒ 4.00%
FA note: This is the final slide of a build.
Here are a couple of important issues regarding fixed income investments:
The federal funds rate – the rate banks charge each other for overnight loans – is an important interest rate benchmark. The Fed has concluded its bond-buying (quantitative easing) program, which helped keep interest rates low in an effort to stimulate the economy, and we expect the Fed will begin increasing short-term interest rates next summer. As a result, our federal funds target rate is 0.75% at year-end 2015.
Treasury yields will increase during 2015, in our opinion. We think the yield on the 10-year and 30-year Treasury bonds will end the year at 3.00% ‒ 3.50% and 3.50% ‒ 4.00%, respectively.

17. We believe yield curve will flatten
Fixed income outlook
We believe yield curve will flatten
Many fixed income investors may wonder what could happen to the yield curve if the Fed increases interest rates.
As I said, past performance is no guarantee of future results, but the yield curve flattened significantly in other periods in which the Fed increased the federal funds target rate. The flattening often occurred over a number of years, with the two-year Treasury yield moving above the 10-year Treasury yield by the end of each of the last three tightening cycles.
We think current cycle will likely follow a similar path, although we expect the curve flattening to be drawn out and occur over a number of years.
In longer maturities, we expect only modest increases in rates as the yield curve flattens. Still, investors should remember it takes only small increases in longer-term interest rates to have a significant negative price impact on long-maturity fixed income positions.

18. What about international investments?
Finally, let’s discuss our outlook for international investments.

19. International outlook 2015 year-end forecasts
MSCI EAFE Equity index
1,950 – 2,050
MSCI Emerging Market Equity index
1,050 – 1,130
FA note: This is the final slide of a build.
We believe the long-term prospects for international stocks are promising and these stocks have a role to play in many portfolios. We think the MSCI EAFE Equity index, which measures the stock markets in developed economies in Europe, Australia, Asia, and the Far East, and the MSCI Emerging Markets will both finish 2015 higher than where they ended 2014.

20. International outlook Positive growth forecasts are increasing
Concern about global economic and earnings growth coincided with weaker international markets in late However, the world economy and international markets are likely to improve in the second half of 2015, helped by a strengthening U.S. economy, lower energy prices, subdued inflation, and government stimulus in the form of exceptionally low interest rates – notably in Europe and Japan.
Manufacturers around the world appear to agree: As this chart shows, manufacturers in nearly 80 percent of non-U.S. countries surveyed expect expansion next year, a higher share than earlier in 2014.

21. International outlook What we see ahead
International equities
International bonds
Currency
Precious metals
FA note: This is the final slide of a build.
Here, in a nutshell, is what we see down the road:
International equities. The stronger U.S. economic growth and benign inflation prospects should support continued earnings gains and equity prices. By comparison, the developed and emerging market economies should generate less additional momentum, though the U.S. economy’s strength should spark faster global trade to offset much of the sluggish domestic activity.
International bonds. The slow economic pace and the hope that central banks might buy debt to stimulate their economies have reduced yields to unattractive levels in Europe, Japan, Canada, and Australia. Our advice is to allocate less than the long-term target to these markets.
Currency. The world economy is improving more slowly than the U.S. economy, and the difference should be sharpest in the first half of That difference should favor the dollar over its main competitor currencies. We expect a more mixed outlook for the dollar against emerging market currencies.
Precious metals. Precious metals look unappealing. Falling prices and geopolitical tensions have fueled physical demand, but investment demand for gold and silver is fading as U.S. interest rates rise amid low inflation.

22. What does it all mean?
That concludes our outlooks for the economy, U.S. equities, fixed income and international investments. At this point you may be wondering what you should take away from all this.

23. 2015 economic and market outlook
Forecasts
Year-end 2015
2.8% inflation-adjusted GDP
1.8% CPI inflation
5.4% Unemployment
2,150-2,250 S&P 500
3.00%-3.50% 10-year Treasury yield
Interest rates will likely increase.
The economic recovery should continue.
Inflation should remain in check.
Unemployment is likely to improve, but only slightly.
The stock market should end the year above its current level.
This slide recaps some of the major points of our 2015 outlook. Take a moment to look it over, and let me know if you have questions.

24. What should you do?
Hopefully this information has provided some investment ideas and themes that you find useful. However, before I wrap up, I’d like to recap a couple of things I said when we began.

25. We recommend starting with a plan
We believe it’s important that whatever you do with your investments based on what we’ve just discussed be done under the umbrella of an overall investment strategy, and your asset allocation should be at the heart of that strategy.

26. The Envision® process Working toward your goals
Wells Fargo Advisors uses a unique tool to help investors create their long- term plans. It’s called the Envision process. Unlike other investment- planning tools, this process helps you work toward your financial objectives by taking your life and planning your money around it. The Envision process helps you prioritize your goals, and then it recommends an asset allocation to help you work toward them.
This chart shows one of the process’s most valuable outputs. It’s called very simply the “dot,” which simply tracks the value of your investments as you work toward achieving your long-term goals.
I don’t have time to explain the details here today, but once we’ve created your Envision plan, you’ll be able to keep track of your dot as often as you like ― even daily. And as long as it stays within the “Target Zone,” in spite of the markets’ ups and downs, you should be on track toward achieving your goals. Please see me for more information about this valuable planning tool. 73 74 75 76 77 78
The Envision process uses Monte Carlo simulations, which are based on historical and hypothetical information; there is no guarantee that investments will perform in accordance with the simulated trials.
Envision® is as registered service mark of Wells Fargo & Company and used under license.
The Target Zone may help you evaluate your Recommended Plan. It does not represent a projection of future portfolio values. The Target Zone graph is shown in actual dollars, the Envision technology uses Monte Carlo simulations, which are based on historical and hypothetical information; there is no guarantee that actual future investments will perform in accordance with the simulated trials. 26

27. Remember your complimentary report
Be sure to pick up your complimentary copy of our “2015 Economic and Market Outlook.” It covers everything we’ve just discussed in much more detail and provides other valuable information.

28. How can I help?
FA note: Provide each attendee with a “Seminar Evaluation Form” e6671 on InfoMAX).
Also, I’d appreciate it if you would take a few moments to let me know whether you found this information helpful by completing this “Seminar Evaluation Form” and returning it to me. Be sure to include your phone number and let me know what would be the most convenient time for me to contact you.
Thank you for coming. 28

29. Disclosures
Wells Fargo Advisors may not offer direct investments into the products mentioned in this presentation.
There is no assurance that any of the target prices mentioned will be attained. Any market prices are only indications of market values and are subject to change.
Asset allocation and diversification do not guarantee a profit or protect against loss in a declining market.
All investing involves some degree of risk, whether it is associated with market volatility, purchasing power, or a specific security. Stocks offer long-term growth potential but may fluctuate more and provide less current income than other investments. An investment in the stock market should be made with an understanding of the risks associated with common stocks, including market fluctuations.
Investing in commodities is not suitable for all investors. Exposure to the commodities markets may subject an investment to greater share price volatility than an investment in traditional equity or debt securities. The prices of various commodities may fluctuate based on numerous factors, including changes in supply and demand relationships, weather, and acts of nature, agricultural conditions, international trade conditions, fiscal monetary and exchange control programs, domestic and foreign political and economic events and policies, and changes in interest rates or sectors affecting a particular industry or commodity. Products that invest in commodities may employ more complex strategies that may expose investors to additional risks, including futures roll yield risk.
Investing in foreign securities presents certain risks not associated with domestic investments, such as currency fluctuations, political and economic instability, and different accounting standards. This may result in greater share price volatility. These risks are heightened in emerging markets.
Investments in fixed-income securities are subject to credit and interest rate risks. Bond prices fluctuate inversely to changes in interest rates. Therefore, a general rise in interest rates can result in the decline in a bond’s price. Credit risk is the risk that an issuer will default on payments of interest and principal. This risk is higher when investing in high yield bonds, also known as junk bonds, which have lower ratings and are subject to greater volatility. All fixed income investments may be worth less than their original cost upon redemption or maturity.   
Technology and Internet-related stocks, especially of smaller, less-seasoned companies, tend to be more volatile than the overall market.

30. Index definitions
The MSCI EAFE index (Europe, Australasia, Far East) is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the U.S. and Canada. The index consists of the following 21 developed market country indexes: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, and the United Kingdom.
The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets. The index consists of the following 23 emerging market country indices: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Peru, Philippines, Poland, Qatar, Russia, South Africa, Taiwan, Thailand, Turkey, and United Arab Emirates as of June 2, 2014.
S&P 500 index is a market capitalization-weighted index composed of 500 widely held common stocks and is generally considered representative of the U.S. stock market.
An index is unmanaged and not available for direct investment.

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