Monthly Scorecard February 4, 2015 Index Performance (Price Performance % Change) One Two 1/30/2015 Month Months Price YTD Year Years Dow (DJIA) 17,164.95 -3.69% -1.30% -3.69% 9.34% 23.84% S&P 500 1,994.99 -3.10% -1.14% -3.10% 11.92% 33.17% S&P Industrials 2,647.88 -2.45% -1.02% -2.45% 11.63% 32.70% NASDAQ 4,635.24 -2.13% -2.13% 12.95% 47.52% Russell 2000 1,165.39 -3.26% -0.69% -3.26% 3.05% 29.19% S&P/TSX Composite 14,673.48 0.28% 0.41% 0.28% 7.15% 15.67% FTSE All-Share 3,621.81 3.38% 2.52% 3.58% 10.17% German DAX 10,694.32 9.06% 14.66% 9.06% 14.91% 37.53% Hang Seng 24,507.05 3.82% 2.12% 3.82% 11.22% 3.28% 0.44% -1.96% 0.44% 5.65% 17,674.39 1.28% 7.68% 1.28% 18.50% 58.68% Index Morgan Stanley EAFE 1,782.70 Nikkei 225 One 2.52% Three 0.10% -2.99% Sector Performance (Price Performance % Change) Price Sector One Three 1/30/2015 Month Months YTD One Two Year Years Consumer Discretionary 554.79 -3.14% 2.75% -3.14% 11.30% 39.65% Consumer Staples 493.24 -1.27% 2.57% -1.27% 17.68% 29.42% Energy 557.95 -4.88% -13.00% -4.88% -8.60% -2.70% Financials 310.01 -6.99% -3.48% -6.99% 32.47% Health Care 801.26 1.17% 1.17% 23.67% 61.37% Industrials 468.53 -3.69% -1.33% -3.69% Information Technology 664.92 -3.91% -0.89% -3.91% 16.58% 41.46% Materials 299.22 -1.99% -1.70% -1.99% 7.62% 21.36% Telecommunications 149.13 -2.24% -7.27% -2.24% 0.05% -0.07% Utilities 245.77 2.34% 2.34% 23.65% 32.11% 2.88% 6.43% 9.26% 8.46% 34.94% Note: All returns are simple price appreciation. Figures shown exclude any contribution from dividends. Source: FactSet Source - FactSet Research Systems Janet Engels, Analyst RBC Capital Markets, LLC [email protected] CENTRALLY FOCUSED If January is any indication for the rest of the year, 2015 is shaping up to be the “Year of the Central Bank,” and equity markets were all over the place because of it. European outperformance was brought about by the announcement of a €1.1T asset purchasing program from the European Central Bank (ECB), Swiss markets were down more than 6% after the Swiss National Bank (SNB) announced it would remove its euro-franc limit, which sent the franc rocketing higher, and the Bank of Canada (BoC) unexpectedly cut its benchmark interest rate by 0.25% in order to try to offset the impact of lower oil prices on its economy. While the SNB and BoC moves were considered unexpected, the ECB move was a much-more-transparent process. ECB President Mario Draghi had, for months, been telegraphing an asset purchase program in order to help stimulate the eurozone economy. The only real question was surrounding the size of the quantitative easing program, and at €1.1T, it did not disappoint traders. Euro area indexes were broadly higher with Germany and France posting 9.09% and 7.76% returns, respectively. However, the euro itself slid against the dollar for most of January, down 6.6%, which means on a currency-adjusted basis the gains were still positive, but more-muted than what the headlines may have read. In the U.S., the S&P 500 was down 3.10%, with relatively broad-based weakness, as eight of the 10 equity sectors were lower. Only utilities (+2.34%) and health care (+1.17%) were higher; while financials (-6.99%), on the back of a slew of disappointing earnings reports, and energy (-4.88%), due to continued weakness in crude oil, suffered the most. January also means Q4 2014 earnings reporting season is upon us. As of January 30, 227 of the 500 companies in the S&P 500 had reported (making up roughly 61% of the market cap), and revenue and earnings growth were coming in at +1.5% and +3.3%, respectively. The impact of lower oil prices has been felt by the energy complex, with earnings revisions running at a -33.8% rate and materials (which is also commodity price sensitive) is at -5.8%. All values in U.S. dollars unless otherwise noted. Priced as of January 30, 2015, market close (unless otherwise stated). For Important Disclosures, see pages 4-5. MONTHLY SCORECARD PORTFOLIO ADVISORY GROUP Chart of the Month: Perhaps the least-surprising move from central bankers this month was the announcement of the asset purchase plan by the ECB in order to offset the two-year slide in assets. The new €1.1T (roughly $1.3T) plan would expand the ECB balance sheet to a new high, but it would not be much more than its peak level in 2012. The potential $2.6B asset holdings would also put it roughly in line with the Bank of Japan, and still significantly under the Federal Reserve. ECB Balance Sheet Remains Flexible for Asset Purchase Plan 5000 Federal Reserve Total Assets ($) 4500 BoJ Total Assets ($) 4000 ECB Total Assets ($) QE3 3500 QE2 ECB Target with QE Program 3000 2500 2000 1500 1000 500 0 2010 2011 2012 2013 2014 Source - RBC Wealth Management, Bloomberg; data through 12/31/14 January-at-a-Glance (S&P 500) 2,100 2,075 12/31 S&P 500 closed at 2058.90. 1/9 The U.S. added 252K jobs in December and unemployment fell to 5.6%, the lowest level since June 2008. 1/30 S&P 500 closed at 1994.99, a 3.10% decline. 2,050 2,025 1/21 The ECB annouced a €1.1T debt purchase program. 2,000 1,975 1,950 Dec 31 1/7 Terrorists attack 1/15 The SNB unexpectedly removed the euro-franc the Charlie Hebdo limit that had been in place since 2011. The franc office in Paris, jumped 20.9% against the euro overnight. France. Jan 07 Jan 14 Jan 21 Jan 28 Source - Bloomberg and RBC Wealth Management, data through 1/30/15 FEBRUARY 4, 2015 PAGE 2 MONTHLY SCORECARD PORTFOLIO ADVISORY GROUP World Markets – January Month-over-Month and Year-to-Date Performance U.K. FTSE All-Share M/M: +2.52% YTD: +2.52% Canada S&P/TSX M/M: +0.28% YTD: +0.28% U.S. S&P500 M/M: -3.10% YTD: -3.10% Germany DAX M/M: +9.06% YTD: +9.06% France CAC 40 M/M: +7.76% YTD: +7.76% Spain IBEX 35 M/M: +1.20% YTD: +1.20% Mexico BOLSA M/M: -5.09% YTD: -5.09% Brazil Bovespa M/M: -6.20% YTD: -6.20% Russia MICEX M/M: +17.98% YTD: +17.98% Japan Nikkei 225 M/M: +1.28% YTD: +1.28% China Shanghai M/M: -0.75% YTD: -0.75% India Sensex M/M: +6.12% YTD: +6.12% South Korea KRX100 M/M: +2.01% YTD: +2.01% Hong Kong Hang Seng M/M: +3.82% YTD: +3.82% Australia S&P/ASX 200 M/M: +3.28% YTD: +3.28% Source - FactSet Research Systems and RBC Wealth Management, 1/30/15 FEBRUARY 4, 2015 PAGE 3 MONTHLY SCORECARD PORTFOLIO ADVISORY GROUP Analyst Certification All of the views expressed in this report accurately reflect the personal views of the responsible analyst(s) about any and all of the subject securities or issuers. 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Distribution of Ratings - RBC Capital Markets, LLC Equity Research As of December 31, 2014 Investment Banking Services Rating Buy [Top Pick & Outperform] Hold [Sector Perform] Sell [Underperform] Count Percent 897 686 112 52.92 40.47 6.61 Provided During Past 12 Months Percent C ount 290 137 6 32.33 19.97 5.36 Explanation of RBC Capital Markets, LLC Equity Rating System An analyst's "sector" is the universe of companies for which the analyst provides research coverage. Accordingly, the rating assigned to a particular stock represents solely the analyst's view of how that stock will perform over the next 12 months relative to the analyst's sector average. Although RBC Capital Markets, LLC ratings of Top Pick (TP)/Outperform (O), Sector Perform (SP), and Underperform (U) most closely correspond to Buy, Hold/Neutral and Sell, respectively, the meanings are not the same because our ratings are determined on a relative basis (as described below). Ratings Top Pick (TP): Represents analyst’s best idea in the sector; expected to provide significant absolute total return over 12 months with a favorable risk-reward ratio. Outperform (O): Expected to materially outperform sector average over 12 months. Sector Perform (SP): Returns expected to be in line with sector average over 12 months. Underperform (U): Returns expected to be materially below sector average over 12 months. Risk Rating As of March 31, 2013, RBC Capital Markets, LLC suspends its Average and Above Average risk ratings. The Speculative risk rating reflects a security's lower level of financial or operating predictability, illiquid share trading volumes, high balance sheet leverage, or limited operating history that result in a higher expectation of financial and/or stock price volatility. 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