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Global Investment Committee Outlook
January 2012
This presentation was created
by the Global Investment Committee
and is provided to you courtesy of
[Hugo Manzano-Gomez]
Please refer to important information, disclosures and qualifications at the end of this material.
2011 - 2012 Outlook
 US and European recession, but no global recession
 Earnings expectations to come down
 Slowing inflation in both developed and developing countries
 Global policy: challenged in developed economies, better
in developing ones
 Modest US trade-weighted dollar strength; broad developed country
currencies weak to developing country currencies, especially Asia
Source: Citi Investment Research & Analysis (CIRA), Morgan Stanley & Co. Research, Morgan Stanley Smith Barney Global Investment Committee, Thomson Financial,
DataStream. Data as of December 2011.
Past performance is no guarantee of future results. This material is not a solicitation of any offer to buy or sell any security or other financial
instrument or to participate in any trading strategy.
Please refer to important information, disclosures and qualifications at the end of this material.
2
Global Investment Committee Tactical Weights
Global Asset Class
Tactical Weight
•
Cash
Overweight
•
Bonds
 Short Duration
Market weight
Overweight
•
•

Developed Sovereign
Underweight

Investment Grade
Overweight

High Yield
Underweight

Emerging Markets
Market weight
Equities
 US
Underweight
Overweight

Developed markets ex US
Underweight

Emerging Markets
Overweight
Alternative/Absolute Return
 Commodities
Market weight
Underweight

Global REITS
Underweight

Managed Futures
Overweight

Inflation-linked Securities
Underweight

Private Equity

Hedge Funds

Real Estate
{
Market weight only;
No tactical weights
Past performance is no guarantee of future results. This material is not a solicitation of any offer to buy or sell any security or other financial
instrument or to participate in any trading strategy.
Please refer to important information, disclosures and qualifications at the end of this material.
3
Global GDP and CPI Forecasts
Morgan Stanley & Co.
% Contribution to
2012 Growth
(Year-over-Year % Change)
2011F
2012F
2013F
Global GDP
3.9
3.5
3.9
Developed Economies
1.4
1.2
1.4
U.S.
Euro Area
U.K.
Japan
1.8
1.6
0.9
-0.8
2.2
-0.2
0.6
1.1
1.8
0.9
1.8
0.5
Developing Economies
6.4
5.7
Brazil
Russia
India
China
3.1
4.5
7.3
9.0
3.5
5.0
6.9
8.4
4.4
2.7
6.1
1.7
3.2
3.2
1.6
4.8
2.3
2.1
3.1
1.4
4.7
2.2
1.8
% Contribution to
2012 Growth
(Year-over-Year % Change)
2011F
2012F
2013F
Global GDP
3.0
2.5
3.1
18
Developed Economies
1.4
0.9
1.2
25
12
-1
0
2
U.S.
Euro Area
U.K.
Japan
1.8
1.5
0.9
-0.4
2.0
-1.2
0.5
1.8
1.9
-0.2
1.2
1.3
19
-9
1
7
6.2
82
Developing Economies
6.0
5.1
6.0
75
4.0
4.0
7.5
8.7
3
4
12
35
Brazil
Russia
India
China
3.2
4.0
7.1
9.1
3.5
2.5
7.0
8.4
4.5
4.2
7.7
8.6
4
2
9
34
3.9
2.4
6.2
1.6
3.2
3.0
1.6
5.3
1.9
1.8
2.9
1.3
5.3
1.7
1.7
Global Consumer Prices
Global Inflation
Developed Economies
Developing Economies
U.S. Core
U.S. CPI
Citi Investment Research & Analysis
2012F
2012F
Global Consumer Prices
Global Inflation
Developed Economies
Developing Economies
U.S. Core
U.S. CPI
Source: Morgan Stanley & Co. Research, Citi Investment Research & Analysis (CIRA), Morgan Stanley Smith Barney.
Japan GDP forecasts for 2011 and 2012 are post 3/10/11 natural disaster.
Note: Morgan Stanley regional and global forecast are GDP weighted averages, using Purchasing Power Parity estimates. That gives greater weights to developing
economies. CIRA forecasts use real GDP. Data as of December 2011.
Past performance is no guarantee of future results. This material is not a solicitation of any offer to buy or sell any security or other financial
instrument or to participate in any trading strategy.
Please refer to important information, disclosures and qualifications at the end of this material.
4
The Conference Board CEO Confidence Survey
80
80
70
70
60
60
50
50
40
40
30
30
20
20
'78
'80
'82
'84
'86
'88
'90
'92
'94
'96
'98
'00
'02
'04
'06
'08
'10
Source: FactSet, The Conference Board as of September 30, 2011
Past performance is no guarantee of future results. This material is not a solicitation of any offer to buy or sell any security or other financial
instrument or to participate in any trading strategy.
Please refer to important information, disclosures and qualifications at the end of this material.
5
US Recessions and Equity Returns
U.S. Economic Cycles and Equity Market Returns (%) Since 1902
Economic Cycle
U.S. Equity Mkt
Trough
Recession
Duration
(Months)
Market Lead to
Cycle Trough
(Months)
U.S. Equity Market %
Decline
Peak to Trough
U.S. Equity Market % Gain After Trough
Equity Trough to Prior
Recession Peak
Duration (Days)
1 Month
6 Months
12 Months
Sep-1902
-
Aug-1904
09-Nov-1903
23
10
-43
12
16
57
603
May-1907
-
Jun-1908
15-Nov-1907
13
8
-49
8
40
67
461
Jan-1910
-
Jan-1912
25-Sep-1911
24
4
-27
7
21
28
465
Jan-1913
-
Dec-1914
24-Dec-1914
23
0
-44
9
31
85
471
Aug-1918
-
Mar-1919
07-Feb-1919
7
2
-25
9
27
21
549
Jan-1920
-
Jul-1921
24-Aug-1921
18
-1
-46
11
34
56
454
May-1923
-
Jul-1924
30-Oct-1923
14
9
-18
7
5
19
149
Oct-1926
-
Nov-1927
01-Nov-1926
13
13
-12
5
9
21
59
Aug-1929
-
Mar-1933
08-Jul-1932
43
9
-85
68
64
171
742
May-1937
-
Jun-1938
31-Mar-1938
13
3
-54
15
44
29
268
Feb-1945
-
Oct-1945
26-Mar-1945
8
7
-2
9
19
35
52
Nov-1948
-
Oct-1949
13-Jun-1949
11
5
-21
9
23
42
251
177
- May-1954
14-Sep-1953
10
9
-15
4
18
38
Aug-1957
Jul-1953
-
Apr-1958
22-Oct-1957
8
6
-21
5
10
31
71
Apr-1960
-
Feb-1961
25-Oct-1960
10
4
-13
7
25
31
207
Dec-1969
- Nov-1970
26-May-1970
11
6
-35
6
23
44
261
Nov-1973
- Mar-1975
03-Oct-1974
16
6
-48
19
31
38
437
Jan-1980
-
Jul-1980
27-Mar-1980
6
4
-11
7
29
37
120
Jul-1981
- Nov-1982
12-Aug-1982
16
4
-27
18
44
58
431
Jul-1990
- Mar-1991
11-Oct-1990
8
6
-20
6
28
29
92
Mar-2001
- Nov-2001
09-Oct-2002
8
-11
-49
15
11
34
526
Dec-2007
-
Jun-2009
09-Mar-09
18
4
-56
27
31
69
??
Apr-2011
-
?
?
?
?
?
?
?
?
?
Mean
15
5
-33
13
26
47
326
Median
13
5
-27
9
26
37
268
Post World War II Mean
11
4
-29
11
25
41
257
Post World War II Median
10
5
-21
7
25
38
229
Source: Bloomberg, NBER, Morgan Stanley Smith Barney LLC. Data as of October 2011.
Past performance is no guarantee of future results. This material is not a solicitation of any offer to buy or sell any security or other financial
instrument or to participate in any trading strategy.
Please refer to important information, disclosures and qualifications at the end of this material.
6
MS Forecasts EM to Account for 80% of Global Growth
Global Real GDP Growth (%)
Forecast
Source: IMF, Haver, Morgan Stanley & Co. Research estimates. See Joachim Fels and Manoj Pradhan’s “Global Economics: Dangerously Close to Recession” dated August 17, 2011.
Note: Gray shaded areas indicate recessions, light blue shaded area represents forecast. Data as of December 2011.
Past performance is no guarantee of future results. This material is not a solicitation of any offer to buy or sell any security or other financial
instrument or to participate in any trading strategy.
Please refer to important information, disclosures and qualifications at the end of this material.
7
MSCI AC World: Weight of GEMs
Emerging Market Share of Global Equities
16%
16%
14%
14%
12%
12%
10%
10%
BRIC: 5.7%
Emerging Markets : 12.6%
8%
8%
6%
6%
4%
4%
2%
2%
0%
0%
'95
'96
'97
'98
'99
'00
'01
'02
'03
'04
'05
'06
'07
'08
'09
'10
'11
Source: MSCI, FactSet, Morgan Stanley Smith Barney LLC. Data as of December 2011.
Past performance is no guarantee of future results. This material is not a solicitation of any offer to buy or sell any security or other financial
instrument or to participate in any trading strategy.
Please refer to important information, disclosures and qualifications at the end of this material.
8
Emerging Market Equities Are Leading Global Equities
Emerging Market Equities Outperformed Developed Market Equities
In the Decade Before March 2009 Trough and Through the Last Cycle Peak in April 2011
Note: Returns are annual average and in local currency. Emerging Market equities trough: October 2008.
Source: MSCI (Investible Market Index), FactSet, Morgan Stanley Smith Barney LLC. Data as of December 2011.
Past performance is no guarantee of future results. This material is not a solicitation of any offer to buy or sell any security or other financial
instrument or to participate in any trading strategy.
Please refer to important information, disclosures and qualifications at the end of this material.
9
Global Earnings Per Share
Morgan Stanley & Co.
Citi Investment Research
& Analysis
S&P 500
Consensus
S&P 500
MSCI AC World
MSCI EM
Operating
EPS ($)
YOY
Change
(%)
Operating
EPS ($)
YOY
Change
(%)
Operating
EPS ($)
YOY
Change
(%)
Operating
EPS ($)
YOY
Change
(%)
Operating
EPS ($)
YOY
Change
(%)
2011E
97.00
14
99.25
16
97.59
14
24.99
50
89.79
40
2012E
100.00
3
101.00
2
107.30
10
27.61
11
99.00
10
2013E
103.00
3
105.50
4
119.63
11
30.85
12
110.19
11
52 Week Forward
107.24
27.60
99.01
Source: Morgan Stanley & Co. Research, CIRA, Morgan Stanley Smith Barney, Thomson Financial, Standard & Poor’s.
Data as of December 2011.
Past performance is no guarantee of future results. This material is not a solicitation of any offer to buy or sell any security or other financial
instrument or to participate in any trading strategy.
Please refer to important information, disclosures and qualifications at the end of this material.
10
Interest Rate Forecasts
Morgan Stanley & Co.
Current Rate
2Q12F
Policy Rates (%)
US
Eurozone
Japan
UK
China
0.00 – 0.25
1.00
0.10
0.50
6.56*
10-Year Government Bond Yields (%)
US
1.95
Eurozone
1.86
Japan
0.72
UK
2.04
0.08
0.50
0.05
0.50
6.56*
0.08
0.75
0.05
0.50
6.56*
Citi Investment Research & Analysis
Current Rate
2Q12F
Policy Rates (%)
US
0.00 - 0.25
0.25
Eurozone
1.00
1.00
Japan
0.10
0.10
UK
0.50
0.50
China
3.50**
3.75**
2.00
1.60
1.00
2.00
1.90
2.60
1.20
2.90
10-Year Government Bond Yields (%)
US
1.95
Eurozone
1.86
Japan
0.72
UK
2.04
2Q13F
2.15
1.50
1.05
1.85
2Q13F
0.25
0.50
0.10
0.50
4.00**
2.65
1.50
1.50
1.60
*Morgan Stanley’s current and forecast policy rate for China uses the 1-year lending rate.
**CIRA’s current and forecast policy rate for China uses the 1-year deposit rate.
Source: Morgan Stanley & Co. Research, CIRA, Bloomberg, Morgan Stanley Smith Barney LLC. Data as of December 2011.
Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or
other financial instrument or to participate in any trading strategy.
Past performance is no guarantee of future results. This material is not a solicitation of any offer to buy or sell any security or other financial
instrument or to participate in any trading strategy.
Please refer to important information, disclosures and qualifications at the end of this material.
11
Stocks vs. Bonds and Cash Valuation
Standard Deviations From Average
4
3
Equities Relatively Expensive
3
Cash Rate/Dividend Yield
Bond Yield/Dividend Yield
2
2
1
1
0
0
-1
-1
-3
'70
-2
Equities Relatively Cheap
-2
'72
'74
'76
'78
'80
'82
'84
'86
'88
'90
'92
'94
'96
'98
'00
'02
'04
'06
'08
'10
-3
'12
Note: Standard deviation is a statistical measurement that sheds light on historical volatility.
Source: CIRA, Morgan Stanley & Co. Research, Morgan Stanley Smith Barney, Thomson Financial. Data as of December 2011.
Past performance is no guarantee of future results. This material is not a solicitation of any offer to buy or sell any security or other financial
instrument or to participate in any trading strategy.
Please refer to important information, disclosures and qualifications at the end of this material.
12
US Secular Stock Bear and Bull Markets
and Inflation Since 1946
Cyclical Bear Market in Equities Is Underway
S&P 500 (log scale)
2,000
1,000
Bull 1 946 - 196 8
Av erage Annual
Total Return
Nominal = 1 4%
Re al = 11%
200
10%
Be ar 19 68 - 1982
Av erage Annual
Total Return
Nominal = 6 %
Re al = (2 )%
9%
8%
Be ar 3/200 0 -3/2009
Av erage Annual
Total Return
Nominal = (5)%
Re al = (7 )%
Co re CPI
S&P 500 Pri ce
Aug.1982
60
50
40
30
20
Bull 1 982 - 200 0
Av erage Annual
Total Return
Nominal = 1 8%
Re al = 15%
6%
5%
Mar. 2009
Mar 2000
100
7%
Bull
Dec. 1968
600
500
400
300
Core CPI (% )
4%
3%
2%
1%
0%
'4 6 '4 8 '5 0 '5 2
'5 4 '5 6 '5 8
'6 0 '6 2 '6 4
'6 6 '6 8 '7 0 '7 2
'7 4 '7 6 '7 8
'8 0 '8 2 '8 4
'8 6 '8 8 '9 0 '9 2
'9 4 '9 6 '9 8
'0 0 '0 2 '0 4
'0 6 '0 8 '1 0
'1 2
Note: Core Inflation is a 5-year moving average; headline inflation prior to 1963. Past performance is not a guarantee of future results. For illustrative purposes only and does not
reflect any specific product. The Standard & Poor’s 500 Index (S&P 500) is an unmanaged group of large company stocks. Index returns assume reinvestment of dividends and do
not reflect any fees or expenses. Cyclical Bull cycle represents March 2009 through April 2011.
Source: Morgan Stanley Smith Barney, Bloomberg, Ibbotson Associates and FactSet. Data as of December 2011.
The following disclosure pertains to Ibbotson Associates’ data on slides 13 and 14:
(c) 2012 Morningstar, Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed;
and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this
information. Past performance is no guarantee of future results.
Source: Calculated by Morgan Stanley Smith Barney LLC using data provided by Morningstar. (c) 2012 Morningstar, Inc. All rights reserved. Used with permission. This information
contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely.
Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information.
Past performance is no guarantee of future results. This material is not a solicitation of any offer to buy or sell any security or other financial
instrument or to participate in any trading strategy.
Please refer to important information, disclosures and qualifications at the end of this material.
13
US Secular Bond Bear and Bull Markets
and Inflation Since 1946
A Secular Bull Market in Bonds Started in 1981
LT Bond Yie ld (YoY%)
Core CPI (YoY%)
16
Bear 1946 - 1981
14
Bull 1981 - Present
12
Long Bond Yield
Core CPI
10
Averag e Annu al
To tal Return
No minal = 2%
Real = (2)%
8
Av erage Annual Total Return
Nominal = 12%
Real = 9%
Sept 1981
6
4
2
0
48
50
52
54
56
58
60
62
64
66
68
70
72
74
76
78
80
82
84
86
88
90
92
94
96
Source: Citi Global Weatlh Management, Bloomberg, Ibbotson and Factset.Note: Core CPI 5 YEAR ma; headline CPI prior to 1963.
98
00
02
04
06
08
10
©FactSet Research Systems
Note: Core Inflation is a 5-year moving average; headline inflation prior to 1963.
Source: Morgan Stanley Smith Barney, Ibbotson Associates and FactSet. Data as of November 2011.
Past performance is no guarantee of future results. This material is not a solicitation of any offer to buy or sell any security or other financial
instrument or to participate in any trading strategy.
Please refer to important information, disclosures and qualifications at the end of this material.
14
Global Investment Committee
Equity Strategy
 Equities expected to underperform
 Overweight Emerging Markets and U.S.
 Underweight Non-U.S. Developed Markets
 Within U.S., overweight Large Caps and growth and underweight Small and
Mid Caps and value
This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
Past performance is no guarantee of future results. This material is not a solicitation of any offer to buy or sell any security or other financial
instrument or to participate in any trading strategy.
Please refer to important information, disclosures and qualifications at the end of this material.
15
Global Investment Committee
Fixed Income Strategy
 Bonds expected to outperform stocks
 Developed country Sovereign Debt yield curves expected to flatten
 Overweight Short Duration and Global IG Corporates (Munis for U.S. clients)
 Underweight Developed Country Sovereign Debt, High Yield
 Market weight Emerging Market Debt
This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
Past performance is no guarantee of future results. This material is not a solicitation of any offer to buy or sell any security or other financial
instrument or to participate in any trading strategy.
Please refer to important information, disclosures and qualifications at the end of this material.
16
Global Investment Committee
Alternative/Absolute Return Strategy
 Overweight Managed Futures
 Underweight global REITs, Commodities, and Inflation Protected Securities
This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
Past performance is no guarantee of future results. This material is not a solicitation of any offer to buy or sell any security or other financial
instrument or to participate in any trading strategy.
Please refer to important information, disclosures and qualifications at the end of this material.
17
Glossary of Indices
CPI
In economics, a Consumer Price Index (CPI, also retail price index) is a statistical measure of a weighted average of prices of a specified set of
goods and services purchased by wage earners in urban areas. It is a price index that tracks the prices of a specified set of consumer goods and
services, providing a measure of inflation. The CPI is a fixed quantity price index and a sort of cost-of-living index. The CPI can be used to track
changes in prices of all goods and services purchased for consumption by urban households. User fees (such as water and sewer service) and sales
and excise taxes paid by the consumer are also included. Income taxes and investment items (like stocks, bonds, life insurance, and homes) are not
included. Core CPI excludes volatile food and energy prices.
MSCI EAFE
The MSCI EAFE Index (Europe, Australasia, Far East) is a free float-adjusted market capitalization index that is designed to measure developed
market equity performance, excluding the US & Canada.
MSCI World Index
The MSCI World Index is a free float-adjusted market capitalization index that is designed to measure global developed market equity performance.
As of May 2005 the MSCI World Index consisted of the following 23 developed market country indices: Australia, Austria, Belgium, Canada,
Denmark, Finland, France, Germany, Greece, Hong Kong, Ireland, Italy, Japan, Netherlands, New Zealand, Norway, Portugal, Singapore, Spain,
Sweden, Switzerland, the United Kingdom and the United States. An investment cannot be made directly in a market index.
S&P 500
Widely regarded as the best single gauge of the U.S. equities market, this world-renowned index includes a representative sample of 500 leading
companies in leading industries of the U.S. economy. Although the S&P 500 focuses on the large-cap segment of the market, with over 80%
coverage of U.S. equities, it is also an ideal proxy for the total market.
Past performance is no guarantee of future results. This material is not a solicitation of any offer to buy or sell any security or other financial
instrument or to participate in any trading strategy.
Please refer to important information, disclosures and qualifications at the end of this material.
18
Important Disclosures
This material has been prepared for informational purposes only and is not an offer to buy or sell or a solicitation of any offer to buy or sell any security or other financial instrument or to participate in
any trading strategy. This is not a research report and was not prepared by the Research Departments of Morgan Stanley & Co. LLC or Citigroup Global Markets Inc. The views and opinions
contained in this material are those of the author(s) and may differ materially from the views and opinions of others at Morgan Stanley Smith Barney LLC or any of its affiliate companies. Past
performance is not necessarily a guide to future performance.
The author(s) (if any authors are noted) principally responsible for the preparation of this material receive compensation based upon various factors, including quality and accuracy of their work, firm
revenues (including trading and capital markets revenues), client feedback and competitive factors. Morgan Stanley Smith Barney is involved in many businesses that may relate to companies,
securities or instruments mentioned in this material.
This material has been prepared for informational purposes only and is not an offer to buy or sell or a solicitation of any offer to buy or sell any security/instrument, or to participate in any trading
strategy. Any such offer would be made only after a prospective investor had completed its own independent investigation of the securities, instruments or transactions, and received all information it
required to make its own investment decision, including, where applicable, a review of any offering circular or memorandum describing such security or instrument. That information would contain
material information not contained herein and to which prospective participants are referred. This material is based on public information as of the specified date, and may be stale thereafter. We
have no obligation to tell you when information herein may change. We make no representation or warranty with respect to the accuracy or completeness of this material. Morgan Stanley Smith
Barney has no obligation to provide updated information on the securities/instruments mentioned herein.
The securities/instruments discussed in this material may not be suitable for all investors. The appropriateness of a particular investment or strategy will depend on an investor’s individual
circumstances and objectives. Morgan Stanley Smith Barney recommends that investors independently evaluate specific investments and strategies, and encourages investors to seek the advice of
a financial advisor. The value of and income from investments may vary because of changes in interest rates, foreign exchange rates, default rates, prepayment rates, securities/instruments prices,
market indexes, operational or financial conditions of companies and other issuers or other factors. Estimates of future performance are based on assumptions that may not be realized. Actual
events may differ from those assumed and changes to any assumptions may have a material impact on any projections or estimates. Other events not taken into account may occur and may
significantly affect the projections or estimates. Certain assumptions may have been made for modeling purposes only to simplify the presentation and/or calculation of any projections or estimates,
and Morgan Stanley Smith Barney does not represent that any such assumptions will reflect actual future events. Accordingly, there can be no assurance that estimated returns or projections will be
realized or that actual returns or performance results will not materially differ from those estimated herein.
This material should not be viewed as advice or recommendations with respect to asset allocation or any particular investment. This information is not intended to, and should not, form a primary
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Morgan Stanley Smith Barney and its affiliates do not render advice on tax and tax accounting matters to clients. This material was not intended or written to be used, and it cannot be
used or relied upon by any recipient, for any purpose, including the purpose of avoiding penalties that may be imposed on the taxpayer under U.S. federal tax laws. Each client should
consult his/her personal tax and/or legal advisor to learn about any potential tax or other implications that may result from acting on a particular recommendation.
International investing entails greater risk, as well as greater potential rewards compared to U.S. investing. These risks include political and economic uncertainties of foreign countries as well as the
risk of currency fluctuations. These risks are magnified in countries with emerging markets, since these countries may have relatively unstable governments and less established markets and
economies.
Alternative investments which may be referenced in this report, including private equity funds, real estate funds, hedge funds, managed futures funds, funds of hedge funds, private equity, and
managed futures funds, are speculative and entail significant risks that can include losses due to leveraging or other speculative investment practices, lack of liquidity, volatility of returns, restrictions
on transferring interests in a fund, potential lack of diversification, absence and/or delay of information regarding valuations and pricing, complex tax structures and delays in tax reporting, less
regulation and higher fees than mutual funds and risks associated with the operations, personnel and processes of the advisor.
Investing in commodities entails significant risks. Commodity prices may be affected by a variety of factors at any time, including but not limited to, (i) changes in supply and demand relationships, (ii)
governmental programs and policies, (iii) national and international political and economic events, war and terrorist events, (iv) changes in interest and exchange rates, (v) trading activities in
commodities and related contracts, (vi) pestilence, technological change and weather, and (vii) the price volatility of a commodity. In addition, the commodities markets are subject to temporary
distortions or other disruptions due to various factors, including lack of liquidity, participation of speculators and government intervention.
Past performance is no guarantee of future results. This material is not a solicitation of any offer to buy or sell any security or other financial
instrument or to participate in any trading strategy.
Please refer to important information, disclosures and qualifications at the end of this material.
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Important Disclosures
Bonds are subject to interest rate risk. When interest rates rise, bond prices fall; generally the longer a bond's maturity, the more sensitive it is to this risk. Bonds may also be subject to call risk, which
is the risk that the issuer will redeem the debt at its option, fully or partially, before the scheduled maturity date. The market value of debt instruments may fluctuate, and proceeds from sales prior to
maturity may be more or less than the amount originally invested or the maturity value due to changes in market conditions or changes in the credit quality of the issuer. Bonds are subject to the
credit risk of the issuer. This is the risk that the issuer might be unable to make interest and/or principal payments on a timely basis. Bonds are also subject to reinvestment risk, which is the risk that
principal and/or interest payments from a given investment may be reinvested at a lower interest rate.
Bonds rated below investment grade may have speculative characteristics and present significant risks beyond those of other securities, including greater credit risk and price volatility in the
secondary market. Investors should be careful to consider these risks alongside their individual circumstances, objectives and risk tolerance before investing in high-yield bonds. High yield bonds
should comprise only a limited portion of a balanced portfolio.
Interest on municipal bonds is generally exempt from federal income tax; however, some bonds may be subject to the alternative minimum tax (AMT). Typically, state tax-exemption applies if
securities are issued within one's state of residence and, if applicable, local tax-exemption applies if securities are issued within one's city of residence.
Treasury Inflation Protection Securities’ (TIPS) coupon payments and underlying principal are automatically increased to compensate for inflation by tracking the consumer price index (CPI). While
the real rate of return is guaranteed, TIPS tend to offer a low return. Because the return of TIPS is linked to inflation, TIPS may significantly underperform versus conventional U.S. Treasuries in
times of low inflation.
Equity securities may fluctuate in response to news on companies, industries, market conditions and general economic environment.
Investing in smaller companies involves greater risks not associated with investing in more established companies, such as business risk, significant stock price fluctuations and illiquidity.
Asset allocation and diversification do not assure a profit or protect against loss in declining financial markets.
The indices are unmanaged. An investor cannot invest directly in an index. They are shown for illustrative purposes only and do not represent the performance of any specific investment.
REITs investing risks are similar to those associated with direct investments in real estate: property value fluctuations, lack of liquidity, limited diversification and sensitivity to economic factors such
as interest rate changes and market recessions.
Because of their narrow focus, sector investments tend to be more volatile than investments that diversify across many sectors and companies.
Investing in foreign emerging markets entails greater risks than those normally associated with domestic markets, such as political, currency, economic and market risks.
Growth investing does not guarantee a profit or eliminate risk. The stocks of these companies can have relatively high valuations. Because of these high valuations, an investment in a growth stock
can be more risky than an investment in a company with more modest growth expectations.
Value investing does not guarantee a profit or eliminate risk. Not all companies whose stocks are considered to be value stocks are able to turn their business around or successfully employ
corrective strategies which would result in stock prices that do not rise as initially expected.
Certain securities referred to in this material may not have been registered under the U.S. Securities Act of 1933, as amended, and, if not, may not be offered or sold absent an exemption therefrom.
Recipients are required to comply with any legal or contractual restrictions on their purchase, holding, sale, exercise of rights or performance of obligations under any securities/instruments
transaction.
This material is disseminated in Australia to “retail clients” within the meaning of the Australian Corporations Act by Morgan Stanley Smith Barney Australia Pty Ltd (A.B.N. 19 009 145 555, holder of
Australian financial services license No. 240813).
Past performance is no guarantee of future results. This material is not a solicitation of any offer to buy or sell any security or other financial
instrument or to participate in any trading strategy.
Please refer to important information, disclosures and qualifications at the end of this material.
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Important Disclosures
Morgan Stanley Smith Barney is not incorporated under the People's Republic of China ("PRC") law and the research in relation to this report is conducted outside the PRC. This report will be
distributed only upon request of a specific recipient. This report does not constitute an offer to sell or the solicitation of an offer to buy any securities in the PRC. PRC investors must have the relevant
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Morgan Stanley Private Wealth Management Ltd, which is authorized and regulated by the Financial Services Authority, approves for the purpose of section 21 of the Financial Services and Markets
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© 2012 Morgan Stanley Smith Barney LLC. Member SIPC.
Past performance is no guarantee of future results. This material is not a solicitation of any offer to buy or sell any security or other financial
instrument or to participate in any trading strategy.
Please refer to important information, disclosures and qualifications at the end of this material.
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