Download Secular Outlook - BMO Bank of Montreal

Global
Global Investment
Investment Forum
Forum
2014
2014 –– 2019
2019
Secular Outlook
Table
Table of
of contents
contents
Shew-stone
Shew stone paths
22}
} The
TheWest
WestRides
RidesAgain
Again
BMO
pleased
toispresent
– 2019
BMO Global
Global Asset
Asset Management
Management is(BMO
GAM)
pleasedour
to2014
present
ourGlobal
2014
Forum
Secular Outlook.
Outlook. The
The Outlook
Secular Outlook
is a product
of our
–Investment
2019 Secular
Investment
is a product
of our annual
annual
global investment
a full
and evening
of sharing,
discussion
global investment
forum; forum:
a full day
andday
evening
of sharing,
discussion
and
and
collaboration
among
organization’s
investment
leaders
and
strategists
collaboration
amongst
ourour
organization’s
investment
leaders
and
strategists
from
from around
around the
the world,
world, in
in addition
addition to
to select
select outside
outside experts.
experts.
55}
} Synchronized
SynchronizedGrowth
Growth
66}
} Broken
BrokenChina/Eurozone
China/Eurozone
88}
} Conclusion
Conclusion
This
This secular
secular (longer-term)
(longer-term) outlook
outlook informs
informs our
our strategic
strategic portfolio
portfolio allocations
allocations and
and
establishes
establishes guard
guard rails
rails for
for active
active asset
asset allocation
allocation opportunities
opportunities that
that may
may arise
arise
through
to month)
18-month)
strategy
work.
through our
our cyclical
cyclical (shorter-term/12(shorter-term/12-18
strategy
work.
Shew-Stone
Outlook,
is a reference
to an object,
like
“Shew
StonePaths,
Paths”,the
thetitle
titleofofthis
thisyear’s
year’sSecular
Outlook,
is a reference
to an object,
like a crystal
aball,
crystal
ball,
used
in the art
ancient
art ofor
scrying
or the practice
seeing
intoOur
theForum
future.
used
in the
ancient
of scrying
the practice
of seeingofthe
future.
Our
Global
Investment
Forum
served
shew
stone
and what
saw
a number
served
as this
Shew Stone
and
what as
weasaw
were
a number
of we
paths
orwere
scenarios
that of
paths
scenarios
that
couldaplay
out, each
havingThe
a decided
probability.
Thewith
three
titled
could or
play
out, each
having
decided
probability.
three titled
scenarios
their
scenarios
their respective
respectivewith
probabilities
are: probabilities are:
Rides
•• The West
The
WestAgain
Rides(60%)
Again (60%)
Growth Growth
(30%) (30%)
•• Synchronized
Synchronized
(10%) (10%)
•• Broken China/Eurozone
Broken China/Eurozone
In
Ineach
eachscenario
scenariowe
weinclude
includeaahigh
highlevel
levelsummary
summaryof
ofthe
theglobal
globalconditions
conditionsattached
attachedto
tothat
scenario
as well
metrics
important
to thetoscenario.
In addition,
for each
scenario
we
that scenario
as select
well select
metrics
important
the scenario.
In addition
for each
scenario
identify
areasareas
of investment
emphasis
and and
de-emphasis.
we identify
of investment
emphasis
de-emphasis.
The investment reach of our BMO Global Asset Management team includes: investment oversight of over $132
billion in assets, 1,000 investment related personnel spanning staff and boutiques across the U.S., Canada Europe,
Asia and Middle East. BMO Global Asset Management’s resources provide solutions for each major asset and sub
asset class, including alternatives, within and across the developed, emerging and frontier markets.
The west rides again (60%)
In The West Rides Again, growth in the U.S., which has surpassed
most of the rest of the developed world in recovering from the
crash of 2008 and the Great Recession, accelerates from its current
slow pace and reaches “normal” levels. Meanwhile, Europe grows
slowly as it emerges from the recent recession, while continuing to
wrestle with high government debt, instability caused by the euro
and demographic challenges. An initially stronger euro reduces
export competitiveness and Germany pushes back on unconventional
central bank policies intended to stimulate growth. Japan continues
current reforms, which enables the country to avoid slipping back
into recession. China’s curtailing of credit growth and a general
pullback of foreign capital inflows impairs economic growth for many
emerging-market countries, but there is no Chinese hard landing.
We believe that The West Rides Again is the most likely prospect
because the structural and demographic problems of the United
States are much less severe than those of Europe, China and Japan.
As Figures 1 and 2 indicate, population growth rates have slowed
everywhere, but U.S. demographic prospects are more favorable
than those of the rest of the developed world. Population in the U.S.
is at least moving in a positive direction; while growth is slow, at
0.7% per year, there is no comparison with southern Europe or Japan,
where populations are actually shrinking. Dependency ratios, rising
across most developed economies, are doing so more slowly in the
U.S. than in Europe and Japan, as shown in Figure 2; this trend will be
reinforced if immigration to the U.S. accelerates.
FIGURE 1
Finally, world population growth is leveling off
12,000,000
Population (thousands)
10,000,000
Growth rate (%)
Population (LHS)
Growth rate (RHS)
2.5
100
Japan
Italy
Europe
North America
Oceania
Asia
90
80
70
50
40
1980
1990
2000
2010
2020
2030
2050
While much ink has been spilled on the topic of government debt,
such debt is lower in the U.S. than in many other key countries.
Although Figure 3 shows gross debt, U.S. government debt held
by the public (the economically relevant measure) is only 73% of
Gross Domestic Product (GDP), while the corresponding number for
European countries ranges as high as 120% in Italy and averages
83% in the European Union; in Japan, it’s about 200% and rising.
In addition, the current account deficit in the U.S. fell from -60% in
2008 to -2.0% year-to-date.
FIGURE 3
Compared with many other countries, U.S. government debt
is moderate
250
Percent
244
184
143
150
1.5
132
129
106
100
98
94
92
1.0
4,000,000
2040
Source: United Nations Population Division – 2012 Revision (medium variant);
Pyrford International
200
6,000,000
Dependency ratio = population age 0-14 and
65+ divided by population age 15-64
60
2.0
8,000,000
50
87
80
34
0.5
2,000,000
0 1950
FIGURE 2
Dependency ratios are soaring, with Europe and Japan
leading the way
0
2000
2050
2100
Source: United Nations Population Division – 2012 Revision (medium variant);
Pyrford International
0.0
Japan
Greece Portugal
Italy
Ireland
U.S.
Spain
France
UK
Canada Germany Australia
Note: Figure 3 shows gross debt. Narrative in text refers to debt held by the
public (which is numerically lower)
Sources: OECD Economic Outlook – May 2013; IMF October 2013
2
And, as shown in Figure 4, deleveraging has proceeded much more
expeditiously in the U.S. than elsewhere, with improvement in both
corporate and household balance sheets.
FIGURE 4
Household deleveraging in the U.S. has brought debt-to-income
ratio back to 2003 levels
170
Percent
Canada
Australia
UK
U.S.
150
130
110
90
70
50
30
1977
1980
1983
1986
1989
1992
1995
1998
2001
2004
2007
2010
2013
Sources: Reserve Bank of Australia; Statistics Canada & Thomson Datastream
E359, E389
The West Rides Again
Over emphasize
Under emphasize
EQUITIES
Developed markets
U.S.
• Allocate across large-, mid- and • Utility and telecommunication
small-cap stocks
sectors
• Companies with improving
• Companies with debt-laden
top-line growth and margins, and balance sheets
those within cyclical sectors
Non U.S.
• Stocks with relatively cheaper
valuations and stronger growth
prospects
Emerging and
• Country selection and sector
• Markets with inflation concerns
allocation are important
• Active management over passive
• Pay attention to valuations and
look for opportunities arising
from consumption trends
frontier markets
• European Union banking sector
as they undergo stress tests and
face capital concerns
• Cautious on southern Europe
and Japan
Impact on asset class returns — Equities
In a scenario where the U.S. leads in macroeconomic performance,
U.S. equities also lead globally, with a continuation of the current
bull market. Valuation multiples have already reached respectable
– although not alarmingly – high levels, and there are fewer
opportunities for cost cutting, so further stock gains will have to be
supported by sales or revenue (“top-line”) growth. This is typical of
a later cycle bull market. Early in the bull cycle, the market recovers
powerfully from depressed levels through multiple expansion; later,
sales and earnings grow to justify the higher multiples.
Equity categories that can be expected to lead as the bull market
extends should include industrials, financials, consumer discretionary
and technology stocks; for example, industrials where capacity is
being re-utilized. Because the yield curve will probably steepen,
financials will have higher interest rates with which to attract
depositors and investors, and these companies, which have a
heavy weight in value benchmarks, could do well. With interest rates
rising, investors would do well to underweight utilities and other
interes-rate-sensitive issues, as well as companies relying on a very
low cost of capital to enhance their growth.
On a cautionary note, Figure 5 shows profit margins for the S&P 500®
over the last decade, and Figure 6 shows overall (NIPA) corporate
profits as a percentage of GDP over two-thirds of a century; both
indicators of profitability are at historic highs. Margins may revert
toward their historical average, which is a skinny 5.9% over 19522013 (not shown) and 8.3% over the last decade (as shown in
Figure 5). Companies have already aggressively cut labor costs
and other expenses, and little profit improvement can be expected
from further action along those lines. Some productivity gains
from increased automation and reduced energy costs may
support margins.
FIGURE 5
Net profit margin of S&P 500®, 2003-2013
10
Percent
S&P 500® — net margin
9
FIXED INCOME
• Shorter duration
- Global credit including U.S.
- High yield
- Emerging market debt
- Bank loans
• Intermediate to long duration
• Developed market sovereign
debt.
• Private equity
• Fixed income defensive hedges
• REITs
• Private real estate
8
7
6
ALTERNATIVES
5
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Source: Bloomberg L.P.
3
FIGURE 6
NIPA corporate profits as a percentage of GDP, 1946-2013
14
nominal GDP growth, both numbers should rise to the 4% to 5%
range in The West Rides Again scenario. (Nominal GDP growth of 5%
could consist of 2% inflation plus 3% real growth, a modest uptick
from current circumstances, so we could get to a 4% to 5% Treasury
yield pretty quickly.) A rise of that magnitude in the 10-year Treasury
yield, from the current 2.75%, would mean a capital loss of 7% for
that category of bonds. Whether Treasury bonds produce a positive
total return (including coupon income) depends on how fast interest
rates rise, but there is some likelihood that bond total returns could
be modest to negative for another year or so.
Percent
13
12
11
10
9
8
7
6
1946
1956
1966
1976
1986
1996
2006
2013
Source: Bloomberg L.P.
However, if the U.S. experiences significant top-line (sales) growth,
the task of maintaining these profit margins is less difficult. As the
U.S. gradually returns to trend GDP growth, sales growth in the
corporate sector can be expected. What we have been experiencing
since the end of the Great Recession is well below trend. When
people have more money to spend, sales, profits and stock prices
can all improve.
In The West Rides Again, European and emerging-market economies
lag the United States, but equities in these countries do not
necessarily lag. Valuations in these markets have remained more
subdued than in the U.S., where the powerful bull market seems
to be discounting strong growth in the near future. Thus, we would
recommend active management to select markets, sectors and
securities carefully. We would not necessarily underweight Europe
or emerging markets overall, but we would probably allocate away
from the more volatile markets of peripheral Europe (Italy, Spain,
Portugal, Ireland and Greece) and emerging markets with substantial
inflation concerns such as Brazil and India. In addition, with increased
urbanization, the consumer sector is likely to stay attractive.
When bonds as a general category sell off, credit spreads usually provide
some protection, and investment-grade corporate bonds are likely to
outperform Treasuries. This is especially true in a growing economy.
Unfortunately, spreads are already thin and have limited potential to
narrow further, making corporates as well as Treasuries vulnerable over
the medium term of three to five years.
Outside the U.S., in The West Rides Again scenario, we expect
interest rates to remain unchanged because of slower growth in
those regions. Thus, international bonds will outperform U.S. bonds
in local-currency terms. However, if the dollar appreciates, that
would be negative for U.S. holders of international fixed income.
Other asset classes
While commodities are known to be sensitive to changes in global
demand, changes in supply have an often-unappreciated effect. There
has been a great deal of supply expansion in the all-important energy
sector, particularly in Canada and the U.S. In a scenario where U.S. real
growth ratchets up from 2% to 3% or more, but not much improvement
takes place elsewhere, commodity prices will be flat.
However, quality private equity funds remain attractive in The West
Rides Again scenario, along with some select defensive fixed income
hedges and correctly positioned macro strategies.
If U.S. inflation remains low, rising nominal interest rates mean
higher real rates. This would cause the dollar to strengthen, which
in turn impacts international equity returns as experienced by
U.S. investors.
Fixed income
Treasury bonds will do poorly in the U.S. as the recovering economy
enables the Federal Reserve (Fed) to “taper,” and as free-market
(longer-term) interest rates rise even further than they have in
anticipation of trend growth. If one applies the rule of thumb that
nominal long-term Treasury yields are approximately equal to
4
Synchronized growth (30%)
Impact on asset class returns — Equities
In Synchronized Growth, Europe and Japan strengthen along with
the U.S., following the tendency of expansive fiscal and monetary
policies to produce positive results sooner or later. We are already
beginning to see recovery in Spain, for example, and a lessening of
euro-related tensions, in general; if a virtuous cycle develops in the
Eurozone, sovereign credit improves, people get back to work, tax
collections rise and demands for austerity wane.
“Abenomics” in Japan is an aggressive policy designed to weaken
the yen, reverse deflationary trends and prevent the country’s vast
government debt from expanding further in real terms; so far, results
have been favorable, with a weak yen boosting exports and stock
prices in 2013 and, it is hoped, beyond. However, it is still early.
Meanwhile, in this scenario, the U.S. returns toward its full growth
potential through a confluence of favorable circumstances: the bull
market in U.S. equities boosts consumer confidence and spending,
immigration reform helps to resolve the shortage of specialized
workers and Congress gets out of its own way. Free trade agreements
open up new markets for exporters and lowers costs of importers.
A Synchronized Growth scenario also hinges on emerging markets
continuing to produce macroeconomic results superior to those
of the developed world, with only a limited degree of slowing in
China. Emerging markets benefit from both renewed commodity
consumption and exports to developed countries.
Chinese growth still has to be lower than the 10% number to which
investors have become accustomed. (See Figure 7 for a recent
historical perspective.) It is simply too hard to grow anything that big
at 10%. But Chinese growth in the 7% to 8% range still represents a
huge marginal increase in demand for commodities each year and is
of major benefit to wage earners in that country, whose consumption
will reinforce growth elsewhere.
Moreover, because the Chinese economy is now so much bigger than
it used to be, 7% or 8% growth in China represents a much bigger
increment to global demand – and supply – than 10% growth did
a decade ago. (In real, purchasing-power-adjusted terms, China’s
economy in 2012 produced $12.6 trillion of goods and services,
compared with $15.9 trillion for both the U.S. and the European
Union. In 2000, the equivalent number for China, in today’s dollars,
was $3 trillion, and in 1980 it was $248 billion.)
Globally, Synchronized Growth would mean – finally! – a decisive end
to the secular global bear trend that many would argue started in
2000. Although we’ve experienced coordinated growth and a global
bull market fueled by housing and financial services in 2003-2007,
our Synchronized Growth scenario involves more diversified growth.
In such a circumstance, global equities are clearly the asset of choice,
but nearly all risk asset classes benefit from global growth and the
resulting increased appetite for risk.
Emerging-market equities, in particular, surge due to cheaper starting
valuations, higher growth and, when returns are translated into U.S.
dollars, a boost from currency appreciation. Still, not all emerging
economies are equal, and we envision a “diverging markets” world in
which active managers choose country weights that are substantially
off-index, for example, underweighting Brazil and India, which are
experiencing inflation, and overweighting non-BRIC countries.
Figure 8 shows the differential performance of major emerging
markets so far in the 21st century. Note the huge range of individualcountry returns around the index return. (The scale, or y-axis, runs
from -87.5% to +1500!) While the range has narrowed since the early
days of emerging-market investing in the 1980s and 1990s, there
has been close to a 100 percentage point difference between the
best- and worst-performing countries even in recent years. It certainly
seems worthwhile to explore active bets in such an environment.
FIGURE 8
Emerging markets: individual country equity returns versus
MSCI index
800
Percent
MSCI Emerging Markets Index
MSCI Index
700
600
500
400
300
200
100
0
-100
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
Source: FactSet
FIGURE 7
Chinese real GDP growth “collapses” toward a higher rate than
anywhere in the developed world
17.5
Annual percent change
Year over year
Quarter over quarter
15.0
12.5
10.0
7.5
5.0
2000
2002
2004
2006
2008
2010
2012
2014
Source: BCA Research, Inc.
5
Fixed income
In Synchronized Growth, inflation rates rise globally, hitting centralbank targets. In the fixed income markets, real interest rates rise
essentially everywhere, sending investment-grade bonds into a
period of negative to flat nominal returns (depending on the speed
of the rate rise). Credit spreads tighten, helping to offset some of
the damage to bond portfolio values caused by rising sovereign-debt
yields. No currency trends are discernible among the Big Four (dollar,
euro, yen, pound) but emerging-market currencies likely rise versus
the developed world.
Finally, Synchronized Growth causes commodities to be a more
attractive asset than they have been recently. Despite recent supplyside improvements, especially in the energy sector in Canada and
the U.S., commodities trend higher on resurgent demand from both
developed and emerging economies.
Other asset classes
Private equity and real assets would be large beneficiaries in a
Synchronized Growth scenario. Most “risk on” alternatives assets
would stand to benefit.
Synchronized Growth
Over emphasize
Under emphasize
U.S.
• Generally, all equities will
be positively affected in this
scenario. Allocate across large-,
mid- and small-cap stocks
• Defensive sectors
• Dividend paying companies
Non U.S.
• Generally, all equities will
be positively affected in this
scenario. Allocate across large-,
mid- and small-cap stocks
Emerging and
• Allocate to non-BRIC countries
• Markets with inflation concerns
(Brazil, Russia, India and China)
• Active management over passive
• All market capitalization ranges
• Growth as a centerpiece
• Cyclical sectors
• Commodity plays
• Opportunities arising from
consumption trends
EQUITIES
Developed markets
frontier markets
Broken China/Eurozone (10%)
In Broken China, rapid deceleration in Chinese growth is the catalyst
for continued or renewed recession in Europe and Japan, and a nearrecession in the United States. A broken China may be the result of
President Xi’s efforts to rein in China’s apparent credit expansion and
to curtail infrastructure investing.
A “broken” Chinese economy might continue to grow slowly, but in a
world that is geared up and priced for 7% or better Chinese growth,
a real GDP growth rate under 5% in that country would represent
a shriveling of demand for commodities in other emerging-market
countries, relative to expectations, and would remove upward
pressure on wages globally. We do not want China to be broken!
Broken Eurozone. The Eurozone (excepting the core northern
countries) is already pretty badly broken, but things could get worse.
A further implosion in the Eurozone region may come from social
unrest in one or more peripheral countries, causing a partial or full
breakup of the euro. Even a messy exit by one small country would
be seen as greatly increasing the likelihood of an eventual breakup
of the entire euro machinery.
Given the fragility in both Europe and China, if one negative event
occurs, it is likely to trigger another such event in the other region.
Moreover, the U.S. economy is now in its fifth year of recovery after
the Great Recession and is vulnerable to a correction. Inflated asset
prices could deflate and the correction would damage consumer and
business confidence, savings and investment.
Impact on asset class returns
The Broken China/Eurozone scenario implies that recent market
advances would be corrected and a new bear market could ensue,
not just in China and the Eurozone but in the U.S. and other
seemingly unrelated markets. The present bull market is five
years old and vulnerable to bad news. While we believe such a
scenario is unlikely (a 10% probability), it is damaging enough to
warrant some exploration.
FIXED INCOME
• Adjustable rate issues
• Shorter duration/higher quality
• Intermediate to long duration
•
•
•
•
•
• REITs
• Fixed income defensive hedges
ALTERNATIVES
Fixed income hedges
Currency long/short
Private equity
Real assets
Infrastructure
6
Equities
In this scenario, all risk assets do poorly. Europe and emerging
markets are hit the hardest. In a global bear market for risk assets,
the dollar rises due to its safe haven status, making international
asset returns even worse when converted to U.S.-dollar terms.
Broken China/Eurozone
Over emphasize
Under emphasize
U.S.
• Defensive sectors
• Stocks with lower beta or lower
volatility
• Higher dividend yielding
• Lower multiples (e.g., P/B, P/E)
•
•
•
•
Higher beta stocks
Higher volatility stocks
Cyclical sectors
Commodities
Non U.S.
• Stocks with relatively cheaper
valuations and stronger growth
prospects
•
•
•
•
European Union
Japan
Australia
Canada
EQUITIES
Developed markets
Fixed income and other asset classes
Bonds, however, become a good investment – even at today’s low
yields – because nominal interest rates do not rise; with very limited
inflation, or possibly some deflation, bondholders enjoy positive
real interest rates. This is not true of Treasury Inflation-Protected
Securities (TIPS), which rely for much of their return on an inflation
adjustment that, in this scenario, would be very small.
Cash also preserves purchasing power in this scenario, even though
central-bank easing would continue so that the long-awaited rise in
nominal yields would not materialize. One can make the case for gold
as a refuge asset in the Broken China/Eurozone scenario, but other,
non-monetary commodities will trade sharply lower.
Other asset classes
The Broken China/Eurozone scenario would most likely come down
hard on private equity, real estate, commodities and the risk on
assets, in general. True defensively positioned hedge funds would be
in a position to benefit.
Emerging and
• In general, reduce allocation to
emerging markets
• In general, reduce allocation to
frontier markets
frontier markets
FIXED INCOME
• High quality, U.S. Treasury
• Shift to intermediate and longer
term durations
• Emerging market and
lower quality debt
• High yield
• Adjustable rates
• Long/short
• Currency hedges
• Fixed income defensive hedges
•
•
•
•
ALTERNATIVES
Commodities
Real estate
Private equity
Infrastructure
7
At BMO Global Asset Management,
we follow a solutions-based
mindset with our clients. We work
to understand and establish the
appropriate investment objectives
for our clients, and then access our
global tool kit of solutions that fit
the circumstances expected but
can be adapted — should scenarios
and/or needs change.
We are proud of our worldwide
and world-class team of investment
professionals; our track record
is extraordinarily strong, as well.
A testimony to both our
performance and service is our
98% client retention rate and the
rapid rise of assets under
our oversight.
Conclusion
The first two scenarios argue for a full U.S. equity position to take advantage of the
90% likelihood that one of those two scenarios will occur. Whether to underweight
Europe or emerging markets depends on valuation. Relative to the U.S., Europe
is attractively valued but some emerging markets are even more attractively
valued. We would consider giving Europe a market weight and seeking out
selected opportunity in the emerging world, a bet that would especially benefit if
Synchronized Growth plays out.
Summing across scenarios, we expect investment-grade credit to do well in relative
terms (that is, after adjusting for the effect of duration), so that adding some credit
exposure would diversify the fixed income allocation and improve its performance.
Note that we do not recommend avoiding duration altogether because the yield
curve is steep, making duration reduction a costly decision in terms of current yield.
Most real assets do well only in the second scenario of coordinated growth. But,
if that scenario materializes, they should do extraordinarily well because they are
priced for a much more disappointing global economic outcome. Thus, one can make
a case for a modest allocation to real assets given our scenario analysis.
While always vulnerable to shocks, the world of global investments is a moderately
attractive place – equities more so than fixed income – as 2014 begins.
We hope this Secular Outlook engaged and stimulated your thinking on global
investment issues.
Investments cannot be made in an index.
This is not intended to serve as a complete analysis of every material fact regarding any company, industry or security. The opinions expressed here reflect our
judgment at this date and are subject to change. Information has been obtained from sources we consider to be reliable, but we cannot guarantee the accuracy.
This publication is prepared for general information only. This material does not constitute investment advice and is not intended as an endorsement of any
specific investment. It does not have regard to the specific investment objectives, financial situation and the particular needs of any specific person who may
receive this report. Investors should seek advice regarding the appropriateness of investing in any securities or investment strategies discussed or recommended
in this report and should understand that statements regarding future prospects may not be realized. Investment involves risk. Market conditions and trends will
fluctuate. The value of an investment as well as income associated with investments may rise or fall. Accordingly, investors may receive back less than originally
invested.
Past performance is not necessarily a guide to future performance.
BMO Global Asset Management is the brand name for various affiliated entities of BMO Financial Group that provide investment management, retirement and
trust and custody services. Certain of the products and services offered under the brand name BMO Global Asset Management are designed specifically for various
categories of investors in a number of different countries and regions and may not be available to all investors. Products and services are only offered to such
investors in those countries and regions in accordance with applicable laws and regulations. BMO Financial Group is a service mark of Bank of Montreal (BMO).
Investment products are: NOT FDIC INSURED — NO BANK GUARANTEE — MAY LOSE VALUE.
© 2014 BMO Financial Corp.
8