1. 1 Great Rotation Or Just A Lot Of Spin? Peter Berezin Chief Strategist The Bank Credit Analyst AUDIO WEBCAST APRIL 17, 2013

2. 2 CHART 1: PLENTY OF PENT-UP DEMAND 3 2 1 0 1950196019701980199020002010 3 2 1 0 30 26 22 18 30 26 22 18 5-YEAR PERCENT CHANGE, ANNUALIZED: REAL PRIVATE-SECTOR CAPITAL STOCK* % U.S. CYCLICAL SPENDING (AS A PERCENT OF POTENTIAL GDP) % Of GDP % Of GDP * PER CAPITA. NOTE: SHADED AREAS REPRESENT NBER-DESIGNATED PERIODS OF RECESSIONS. © BCA Research 2013

3. 3 CHART 2: FISCAL ADJUSTMENT IN THE PERIPHERY: MISSION ACCOMPLISHED? 1 0 -2 2008201020122014 1 0 -2 2 0 -4 2 0 -2 -4 FISCAL IMPULSE*** % Of GDP % Of GDP GIIPS* CYCLICALLY-ADJUSTED PRIMARY BALANCE** % Of GDP % Of GDP * GDP-WEIGHTED AVERAGE OF GREECE, IRELAND, ITALY, PORTUGAL AND SPAIN. ** AS A SHARE OF POTENTIAL GDP. SOURCE: IMF. *** CHANGE IN THE PRIMARY STRUCTURAL BUDGET BALANCE AS A SHARE OF POTENTIAL GDP. SOURCE: IMF. © BCA Research 2013 Fiscal drag decreases by 1.2% of GDP in 2013 2009201120132015

4. 4 CHART 3: NET SHARE ISSUANCE REMAINS IN NEGATIVE TERRITORY 6 4 2 0 -2 -4 19901995200020052010 6 4 2 0 -2 -4 U.S. NET EQUITY ISSUANCE (AS A PERCENT OF MARKET CAP) 5-YEAR MOVING AVERAGE % SOURCE: FEDERAL RESERVE FLOW OF FUNDS. © BCA Research 2013

5. 5 CHART 4: HOUSEHOLDS STILL HOLD A LOT OF STOCK 40 30 20 10 1950196019701980199020002010 40 30 20 10 U.S. HOUSEHOLD ASSETS: DIRECTLY AND INDIRECTLY HELD EQUITIES (AS A PERCENT OF TOTAL ASSETS) % SOURCE: FEDERAL RESERVE FLOW OF FUNDS. LATEST QUARTERLY DATAPOINT REPRESENTS BCA ESTIMATE. Average © BCA Research 2013

6. 6 CHART 5: A SMALLER SHADOW BANKING SYSTEM 40 35 30 25 20 200220042006200820102012 40 35 30 25 20 30 26 22 18 30 26 22 18 BANK SAVINGS DEPOSITS % Of GDP % Of GDP U.S. REPOS* AS A PERCENT OF GDP: % Of GDP % Of GDP * SHOWN SMOOTHED. SOURCE: FEDERAL RESERVE. Down 14% of GDP Up 14% of GDP © BCA Research 2013

7. 7 CHART 6: EQUITY MUTUAL FUND CASH BALANCES ARE AT NEAR RECORD LOW LEVELS 8 7 6 5 4 3 19941998200220062010 8 7 6 5 4 3 U.S. MUTUAL FUND CASH HOLDINGS (AS A PERCENT OF ASSETS) % % SOURCE: INVESTMENT COMPANY INSTITUTE. © BCA Research 2013

8. 8 CHART 7: MARGIN DEBT IS NEAR HISTORIC HIGHS 350 300 250 200 150 100 1995200020052010 16000 14000 12000 10000 8000 6000 U.S. MARGIN DEBT (LS) WILSHIRE 5000 (RS) US$ Bn US$ Bn © BCA Research 2013