1. Marko Papic Chief Strategist Geopolitical Strategy BCA Dialogue August 2013 Webcast August 6, 2013 Ian MacFarlane Chief Strategist Global Asset Allocation

2. EM RELATIVE PERFORMANCE APPROACHING 2008 LOWS 400 300 200 100 8892962000040812 400 300 200 100 EQUITY PERFORMANCE*: EMERGING MARKETS VS DEVELOPED MARKETS * REBASED TO JAN. 1988 = 100 AND SHOWN IN COMMON CURRENCY TERMS; SOURCE: MSCI INC. (SEE COPYRIGHT DECLARATION) © BCA Research 2013

3. MIRRORS THE ECONOMY’S SWINGS 35 30 25 20 15 0406081012 35 30 25 20 15 CHINA: SOCIAL FINANCING STOCK Ann% Chg Ann% Chg © BCA Research 2013

4. RISKS ARE RISING 2 0 -2 982000020406081012 2 0 -2 2 1 0 2 1 0 300 200 100 300 200 100 BCA GLOBAL ECONOMIC SENTIMENT INDEX** Extreme Optimism Extreme Pessimism High Speculation Low Speculation U.S.: BCA EQUITY SPECULATION INDEX* U.S.: MARGIN DEBT Bn$ © BCA Research 2013

5. TOO OPTIMISTIC LONG TERM, TOO PESSIMISTIC SHORT TERM 4 2 0 -2 -4 08101214161820 4 2 0 -2 -4 U.S.: REAL EFFECTIVE FED FUNDS RATE MARKET EXPECTATION* % % * DERIVED FROM THE OIS AND CPI INFLATION SWAP CURVES. © BCA Research 2013

6. 6 GEOPOLITICS A DOWNSIDE RISK TO OIL? 100 80 60 40 20 320 280 240 200 160 120 80 OCTJANAPRJULOCTJANAPRJULOCT GOOGLE IRAN REFERENCES* (LS) IRANIAN ENRICHED URANIUM AT 20%** (RS) Kg * INDICATOR REPRESENTS NUMBER OF GOOGLE SEARCHES OF “IRAN NUCLEAR PROGRAM” RELATIVE TO PAST SEARCHES OF THE TERM. THE INDICATOR IS NORMALIZED AND MEASURED ON A 0-100 SCALE. ** SOURCE: IAEA. © BCA Research 2013

7. 7 EM POLITICAL RISKS RISING -.28 -.26 -.24 -.22 -.20 2000020406081012 4200 4000 3800 3600 3400 3200 EMERGING MARKETS*: BCA GOVERNANCE INDICATOR** (LS) GDP PER CAPITA*** (RS) Th USD * INCLUDES CHINA, BRAZIL, RUSSIA, INDIA, MEXICO, INDONESIA, TURKEY, MALAYSIA, THE PHILIPPINES, THAILAND, AND SOUTH AFRICA. ** INDICATOR IS AN EQUALLY-WEIGTHED AVERAGE OF THE FOLLOWING MEASURES: GOVERNMENT EFFECTIVENESS, VOICE AND ACCOUNTABILITY, POLITICAL STABILITY AND VIOLENCE, RULE OF LAW, AND CONTROL OF CORRUPTION. SOURCE: WORLD BANK AND BCA RESEARCH. *** WEIGHTED BY POPULATION. Emerging Markets Developed Markets 1.2 1 0.8 0.6 0.4 0.2 0 -0.2 BCA GOVERNANCE INDICATOR SHOWN USING 2011 DATA. INDICATOR IS AN EQUALLY- WEIGHTED AVERAGE OF THE FOLLOWING MEASURES: GOVERNMENT EFFECTIVENESS, VOICE AND ACOUNTABILITY, POLITICAL STABILITY AND VIOLENCE, RULE OF LAW, AND CONTROL OF CORUPTION. SOURCE: WORLD BANK AND BCA RESEARCH CALCULATIONS. © BCA Research 2013

8. 8 EUROPE: INVESTMENT OR A VALUE-TRAP? 3.5 3.0 2.5 2.0 1.5 1.0 75808590952000051015 3.5 3.0 2.5 2.0 1.5 1.0 EURO AREA: REAL EQUITY PRICES* TREND TREND +/- TWO STANDARD DEVIATIONS * DEFLATED BY CONSUMER PRICE INDEX. SHOWN AS A NATURAL LOGARITHM. TIME TREND: 1975 - PRESENT. © BCA Research 2013

9. 9 JAPAN: INVESTMENT OR A TRADE? 0 10 20 30 40 50 60 70 AVERAGE OF PAST FOUR UPPER HOUSE ELECTIONS 2013 UPPER HOUSE RESULT HOKKAIDOIWATEAOMORIKUMAMOTOMIYAGIFUKUSHIMAIBARAKITOCHIGIMIYAZAKIKAGOSHIMA LDP PERFORMANCE IN AGRICUTURAL-HEAVY PREFECTURES © BCA Research 2013

10. 10 U.S.: VOLATILITY AHEAD 220 200 180 160 140 120 10111213 45 40 35 30 25 20 15 U.S. POLICY UNCERTAINTY INDEX* (LS) VIX VOLATILITY INDEX (RS) * SOURCE: BAKER, BLOOM, AND DAVIS (2012). © BCA Research 2013