Download There is no guarantee that forecasts discussed will be realized.

The Wall of Worry:
U.S. Economic and Market Outlook
February 5, 2008
Samuel A. Wardwell, CFA
Senior Vice President
Director of Investment Communications
Pioneer Investment Management, Inc.
The views expressed in this presentation are those of the investment
professional and are subject to change at any time. These views do
not necessarily reflect the views of Pioneer or others in the
Pioneer organization.
Not FDIC insured
May lose value
No bank guarantee
Today’s Wall of Worry (a partial list)
 Sub-prime mortgage defaults
 Credit crunch
 Rising energy prices
 Falling home prices
 Recession warnings
 Falling dollar
 Bear market
 Politics
There is no guarantee that forecasts discussed will be realized.
Past performance is no guarantee of future results.
19220-16-0208 | February 2008 | Page 2
Agenda
Global Context and Background
Main Street and Wall Street: House Prices and the Credit Crunch
Inflation, the Fed, and U.S. Fixed Income Markets
The U.S. Consumer
The Dollar, Profits, and U.S. Equity Markets
2008 Outlook
There is no guarantee that forecasts discussed will be realized.
Past performance is no guarantee of future results.
19220-16-0208 | February 2008 | Page 3
The US Economy in the Global Context
Share of 2006 Global GDP (Purchasing Power Parity Basis)
Other Developing
United States
Brazil
Russia
Euro area
India
Japan
China
United Kingdom
Other Advanced
Source: IMF World Economic Outlook, October, 2007
There is no guarantee that forecasts discussed will be realized.
Past performance is no guarantee of future results.
19220-16-0208 | February 2008 | Page 4
Global Real GDP Growth is Strong
Global Economic Growth
6
Actual
Projected
4
2
0
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
Source: IMF World Economic Outlook, October, 2007
There is no guarantee that forecasts discussed will be realized.
Past performance is no guarantee of future results.
19220-16-0208 | February 2008 | Page 5
High Commodity Prices Reflect Strong Demand, Supply Constraints,
Dollar Weakness, and Investor Psychology
Goldman Sachs Commodity Index - Price Level
700
600
500
400
300
200
100
0
12/31/1980
12/31/1985
12/31/1990
12/31/1995
12/31/2000
12/31/2005
Source: DataStream. Last data point: February 4, 2008
There is no guarantee that forecasts discussed will be realized.
Past performance is no guarantee of future results.
19220-16-0208 | February 2008 | Page 6
The U.S. Economy at mid-2007
Still in the “Goldilocks” Zone
 Consistent real GDP growth
 Low unemployment
 Low core inflation
 Moderate long-term interest rates
 Solid profit growth
There is no guarantee that forecasts discussed will be realized.
Past performance is no guarantee of future results.
19220-16-0208 | February 2008 | Page 7
U.S. Real GDP Growth Has Been Slowing…But By How Much?
Timing Issues are Distorting Quarterly Readings
Change in U.S. Real Gross Domestic Product
8
6
4
2
0
-2
Quarterly (annualized)
-4
Q4 1985
Q4 1990
Rolling 4 Quarter
Q4 1995
Q4 2000
Q4 2005
Source: DataStream. Last data point: 4th quarter 2007 (Advance)
There is no guarantee that forecasts discussed will be realized.
Past performance is no guarantee of future results.
19220-16-0208 | February 2008 | Page 8
Agenda
Global Context and Background
Main Street and Wall Street: House Prices and the Credit Crunch
Inflation, the Fed, and U.S. Fixed Income Markets
The U.S. Consumer
The Dollar, Profits, and U.S. Equity Markets
2008 Outlook
There is no guarantee that forecasts discussed will be realized.
Past performance is no guarantee of future results.
19220-16-0208 | February 2008 | Page 9
Homebuilding Continues to Contract
U.S. Housing Permits and Starts (000)
2500
Single-Family Permits
Total Permits
Starts
2000
1500
1000
500
0
Dec-60 Dec-65 Dec-70 Dec-75 Dec-80 Dec-85 Dec-90 Dec-95 Dec-00 Dec-05
Source: DataStream. Last data point: December, 2007
There is no guarantee that forecasts discussed will be realized.
Past performance is no guarantee of future results.
19220-16-0208 | February 2008 | Page 10
The U.S. Housing Market Remains Weak
$250
Median Existing Single Family Home
Selling Price ($000)
$200
Nominal
Constant (12/05) $
600
Existing Single-Family Home Monthly
Sales (000)
400
$150
$100
200
$50
$0
Dec-65
Dec-75
Dec-85
Dec-95
Dec-05
Rolling 12-Month Price Change
20%
15%
10%
4
Dec-75
Dec-85
Dec-95
Dec-05
Existing 1-Family Homes for Sale
(mm)
3
`
2
5%
0%
1
-5%
-10%
Dec-65
0
Dec-65
Dec-75
Dec-85
Dec-95
Dec-05
0
Dec-65
Dec-75
Dec-85
Dec-95
Dec-05
Source: DataStream. Last data point: December, 2007
There is no guarantee that forecasts discussed will be realized.
Past performance is no guarantee of future results.
19220-16-0208 | February 2008 | Page 11
Home Prices are Falling
$250
Median Existing Single Family Home Selling Price ($000)
Rolling 12-Month Average
$200
$150
$100
$50
$0
Dec-65
Dec-75
Dec-85
Dec-95
Dec-05
Source: DataStream. Last data point: December, 2007
There is no guarantee that forecasts discussed will be realized.
Past performance is no guarantee of future results.
19220-16-0208 | February 2008 | Page 12
Subprime Delinquencies Are Exceeding Expectations
Subprime Delinquencies (60+ days) by Vintage Year
30
25
20
% 15
10
2001
2002
2003
2005
2006
2007
2004
5
0
0
12
24
36
48
60
Months After Origination
Source: Credit Suisse. Last data point: December, 2007
There is no guarantee that forecasts discussed will be realized.
Past performance is no guarantee of future results.
19220-16-0208 | February 2008 | Page 13
Rating Agencies Have Aggressively Downgraded Subprime
Mortgage-Backed Paper
2006 Vintage Subprime CMBS
Current Rating
Original
Rating
AAA
AA
A
BBB
BB
AAA
CCC
and
Below
Average # of
Notches
Downgraded
AA
A
BBB
BB
B
56%
19%
24%
0%
1%
0%
5
9%
32%
33%
17%
6%
4%
6
11%
33%
32%
16%
8%
5
5%
22%
22%
51%
7
4%
19%
78%
6
Source: Lehman Brothers ABS Strategy, Moody’s, S&P, and Fitch. As of October 2, 2007
There is no guarantee that forecasts discussed will be realized.
Past performance is no guarantee of future results.
19220-16-0208 | February 2008 | Page 14
Elements of the Credit Market Crisis
 Securitization
 Relying on ratings
 Greed
 Hedge funds, Conduits, SIVs, SIV-lites
 Mark-to-market
 Leverage
 ABCP
 Fear
There is no guarantee that forecasts discussed will be realized.
Past performance is no guarantee of future results.
19220-16-0208 | February 2008 | Page 15
Fear and Illiquidity in Interbank Lending Markets
2.5
Spread Between LIBOR and Treasury Bill Yields
3 Month
Latest
2.0
1.5
1.0
0.5
0.0
12/31/02
12/31/03
12/31/04
12/31/05
12/31/06
12/31/07
Source: FactSet. Last data point: February 4, 2008
There is no guarantee that forecasts discussed will be realized.
Past performance is no guarantee of future results.
19220-16-0208 | February 2008 | Page 16
A Flight to Quality
Short-Term Interest Rates (%)
6
5
4
3
2
1
Fed Funds Target Rate
0
12/31/06
3/31/07
1-Month T-Bill Yield
6/30/07
3-Month T-Bill Yield
9/30/07
12/31/07
Source: DataStream. Last data point: February 4, 2008
There is no guarantee that forecasts discussed will be realized.
Past performance is no guarantee of future results.
19220-16-0208 | February 2008 | Page 17
Asset Backed Commercial Paper Market
Recent Signs of Stabilization
US$ Asset Backed Commercial Paper Outstanding ($ billion)
1400
1200
1000
800
600
400
200
0
12/31/06
3/31/07
6/30/07
9/30/07
12/31/07
Source: Bloomberg. Last data point: January 30, 2008
There is no guarantee that forecasts discussed will be realized.
Past performance is no guarantee of future results.
19220-16-0208 | February 2008 | Page 18
Agenda
Global Context and Background
Main Street and Wall Street: House Prices and the Credit Crunch
Inflation, the Fed, and U.S. Fixed Income Markets
The U.S. Consumer
The Dollar, Profits, and U.S. Equity Markets
2008 Outlook
There is no guarantee that forecasts discussed will be realized.
Past performance is no guarantee of future results.
19220-16-0208 | February 2008 | Page 19
Energy Prices Have Lifted Headline CPI relative to Core CPI
50%
40%
30%
20%
10%
0%
-10%
-20%
Dec-60
Rolling 12-Month Inflation
CPI
Core CPI
CPI-Energy
Dec-65
Dec-70
Dec-80
Dec-85
Dec-90
Dec-95
Dec-00
Dec-05
Rolling 12-Month Inflation
6%
5%
Dec-75
CPI
Core CPI
4%
3%
2%
1%
0%
Dec-03
Dec-04
Dec-05
Dec-06
Dec-07
Source: DataStream. Last data point: December, 2007
There is no guarantee that forecasts discussed will be realized.
Past performance is no guarantee of future results.
19220-16-0208 | February 2008 | Page 20
Core Inflation Remains Moderate
Core CPI (Consumer Price Index excluding Food and Energy)
4.0%
Rolling 3-month, annual rate
Rolling 12-month
3.5%
3.0%
2.5%
2.0%
1.5%
1.0%
0.5%
0.0%
Dec-95
Dec-97
Dec-99
Dec-01
Dec-03
Dec-05
Dec-07
Source: DataStream. Last data point: December, 2007
There is no guarantee that forecasts discussed will be realized.
Past performance is no guarantee of future results.
19220-16-0208 | February 2008 | Page 21
Monetary Policy Was Not Particularly Restrictive in 2007
Policy is Now Quite Accommodative
20%
Fed Funds Rate
15%
Rolling 12-month Core CPI
10%
5%
0%
10%
5%
0%
-5%
-10%
12/31/60
Real Fed Funds Rate
12/31/70
12/31/80
12/31/90
12/31/00
Source: DataStream. Last data point: February 4, 2008
There is no guarantee that forecasts discussed will be realized.
Past performance is no guarantee of future results.
19220-16-0208 | February 2008 | Page 22
The Evolving Federal Reserve Outlook
Excerpts from Recent Press Releases
 September 18 (-50 bps): “…intended to help forestall some of the
adverse effects on the broader economy that might otherwise arise
from the disruptions in financial markets…”
 October 31 (-25 bps): “…some inflation risks remain…”
 December 11 (-25 bps): “Recent developments, including the
deterioration in financial market conditions, have increased the
uncertainty surrounding the outlook for economic growth and
inflation.”
 January 21 (-75 bps): “…a weakening of the economic outlook
and increasing downside risks to growth… Appreciable downside
risks to growth remain. The Committee will continue to assess the
effects of financial and other developments on economic prospects
and will act in a timely manner as needed to address those risks. ”
 January 30 (-50 bps): “…downside risks to growth remain.”
There is no guarantee that forecasts discussed will be realized.
Past performance is no guarantee of future results.
19220-16-0208 | February 2008 | Page 23
Short-Term Treasury Yields Have Fallen Sharply
US Treasury Yield Curve
6
5
4
3
2
1
12/31/04
12/31/05
12/31/06
12/31/07
2/4/08
0
1m
3m
6m
1
2
3
5
7
10
20
30
Source: DataStream. Last data point: January 29, 2008
There is no guarantee that forecasts discussed will be realized.
Past performance is no guarantee of future results.
19220-16-0208 | February 2008 | Page 24
Review: 2007-8 US Bond Index Performance
Bond Index Cumulative Total Return
15%
10%
5%
0%
-5%
-10%
-15%
12/31/06
LB Aggregate
ML HY Master II
Relative (HY/AGG)
3/31/07
6/30/07
9/30/07
12/31/07
The ML High Yield Master II index is a commonly accepted measure of the performance of high yield securities. The Lehman
Brothers Aggregate Bond Index is a measure of the U.S. bond market. The historical performance shown is provided to illustrate
market trends and is not intended to represent the past or future performance of any Pioneer product. Indices are unmanaged
and their returns assume reinvestment of dividends and, unlike investment products returns, do not reflect any fees or
expenses. It is not possible to invest directly in an index.
Source: DataStream. Last data point: February 4, 2008
There is no guarantee that forecasts discussed will be realized.
Past performance is no guarantee of future results.
19220-16-0208 | February 2008 | Page 25
Sharp Widening in Credit Spreads
US Investment Grade
Mortgages
250
200
100
150
100
50
50
0
Dec-88
Dec-92
Dec-96
Dec-00
Dec-04
0
Dec-97
US High Yield
Dec-00
Dec-03
Dec-06
Global HY, ex-US
1200
900
900
600
600
300
300
0
Dec-89
Dec-93
Dec-97
Dec-01
Dec-05
0
Dec-99
Dec-02
Dec-05
Source: Bloomberg. Last data point: February 4, 2008
There is no guarantee that forecasts discussed will be realized.
Past performance is no guarantee of future results.
19220-16-0208 | February 2008 | Page 26
High Yield Bond Default Rates Remain Low
15
Trailing 12-Month U.S. High Yield Bond Issuer-Based Default Rate
10
5
0
Dec-75
Dec-80
Dec-85
Dec-90
Dec-95
Dec-00
Dec-05
Source: Moody’s Investor Service. Chart prepared by Pioneer. Last data point: December, 2007.
There is no guarantee that forecasts discussed will be realized.
Past performance is no guarantee of future results.
19220-16-0208 | February 2008 | Page 27
Corporate Bond Yields Have Not Risen Along with Spreads
US Bond Yields
7
6
5
4
3
Moody's BAA Corporate
2
Moody's AAA Corporate
1
0
Dec-04
10-yr Treasury
Dec-05
Dec-06
Dec-07
Source: Bloomberg. Last data point: February 1, 2008
There is no guarantee that forecasts discussed will be realized.
Past performance is no guarantee of future results.
19220-16-0208 | February 2008 | Page 28
Inflation-Adjusted Treasury Bond Yields Are Near 20-Year Lows
15%
10-Year Treasury Bond Yield
Rolling 12-month Core CPI
10%
5%
0%
10%
Real Treasury Bond Yield
5%
0%
-5%
12/31/65
12/31/75
12/31/85
12/31/95
12/31/05
Source: DataStream. Last data point: February 4, 2008
There is no guarantee that forecasts discussed will be realized.
Past performance is no guarantee of future results.
19220-16-0208 | February 2008 | Page 29
5y5y Forward TIPS Breakeven Rates Signal Rising Bond Market
Concern About Fed’s Commitment to Low Inflation
Breakeven Inflation on US TIPS
4.0
5yr spot
10yr spot
5y5y fwd
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
12/31/99
12/31/00
12/31/01
12/31/02
12/31/03
12/31/04
12/31/05
12/31/06
12/31/07
Source: Macroeconomic Advisers, LLC. Calculated from smoothed nominal and TIPS yield curves.
Last data point: January 29, 2008
There is no guarantee that forecasts discussed will be realized.
Past performance is no guarantee of future results.
19220-16-0208 | February 2008 | Page 30
Agenda
Global Context and Background
Main Street and Wall Street: House Prices and the Credit Crunch
Inflation, the Fed, and U.S. Fixed Income Markets
The U.S. Consumer
The Dollar, Profits, and U.S. Equity Markets
2008 Outlook
There is no guarantee that forecasts discussed will be realized.
Past performance is no guarantee of future results.
19220-16-0208 | February 2008 | Page 31
Why the Consumer Matters: A Top-Down View of the US Economy
Composition of 2006 U.S. Gross Domestic Product
Personal Consumption
Government
Private Investment
Change in Inventories
Net Exports
-10%
0%
10%
20%
30%
40%
50%
60%
70%
80%
Source: DataStream. Last data point: January 29, 2008
There is no guarantee that forecasts discussed will be realized.
Past performance is no guarantee of future results.
19220-16-0208 | February 2008 | Page 32
Incremental Contribution to Rolling 4-Quarter GDP Growth
Thus Far, the Consumer Has Held Up…
5%
Personal Consumption
0%
0%
-5%
-5%
5%
Net Exports
5%
Private Investment
5%
0%
0%
-5%
-5%
Government, Change in Inventories
Change in Inventories
Q4 1970
Q4 1980
Q4 1990
Q4 2000
Q4 1970
Q4 1980
Q4 1990
Government
Q4 2000
Source: DataStream. Last data point: 4th Quarter 2007
There is no guarantee that forecasts discussed will be realized.
Past performance is no guarantee of future results.
19220-16-0208 | February 2008 | Page 33
Energy Price Trends
Heating Oil and Gasoline Prices Are Squeezing the Consumer
120%
US Spot Energy Prices - Percent Change since June 30, 2005
Crude
100%
Gasoline
Natural Gas
80%
60%
40%
20%
0%
-20%
-40%
06/30/05
12/30/05
06/30/06
12/30/06
06/30/07
12/30/07
Source: DataStream. Last data point: February 4, 2008
There is no guarantee that forecasts discussed will be realized.
Past performance is no guarantee of future results.
19220-16-0208 | February 2008 | Page 34
The Unemployment Rate Has Risen From 4.4% to 4.9%
11
U.S. Unemployment Rate
10
9
8
7
6
5
4
3
2
1
0
Dec-60 Dec-65 Dec-70 Dec-75 Dec-80 Dec-85 Dec-90 Dec-95 Dec-00 Dec-05
Source: DataStream. Last data point: January, 2008
There is no guarantee that forecasts discussed will be realized.
Past performance is no guarantee of future results.
19220-16-0208 | February 2008 | Page 35
New Job Creation Continues to Weaken
700
Monthly Change in non-Farm Employment
500
300
100
-100
-300
-500
Dec-85
Monthly Change
Most Recent
Dec-90
Dec-95
Rolling 12-Month Average
Dec-00
Dec-05
Source: DataStream. Last data point: January, 2008
There is no guarantee that forecasts discussed will be realized.
Past performance is no guarantee of future results.
19220-16-0208 | February 2008 | Page 36
Initial Unemployment Claims Appear to be Trending Upward
U.S. Initial Unemployment Claims (000)
600
500
400
300
200
100
0
Dec-99
Dec-00
Dec-01
Dec-02
Dec-03
Dec-04
Dec-05
Dec-06
Dec-07
Source: DataStream. Last data point: January 29, 2008
There is no guarantee that forecasts discussed will be realized.
Past performance is no guarantee of future results.
19220-16-0208 | February 2008 | Page 37
Lower Interest Rates are Spurring Mortgage Refinancing Activity
U.S. Mortgage Bankers Refinancing Index
12000
10000
8000
6000
4000
2000
0
Dec-00
Dec-01
Dec-02
Dec-03
Dec-04
Dec-05
Dec-06
Dec-07
Source: DataStream. Last data point: January 29, 2008
There is no guarantee that forecasts discussed will be realized.
Past performance is no guarantee of future results.
19220-16-0208 | February 2008 | Page 38
Agenda
Global Context and Background
Main Street and Wall Street: House Prices and the Credit Crunch
Inflation, the Fed, and U.S. Fixed Income Markets
The U.S. Consumer
The Dollar, Profits, and U.S. Equity Markets
2008 Outlook
There is no guarantee that forecasts discussed will be realized.
Past performance is no guarantee of future results.
19220-16-0208 | February 2008 | Page 39
Review: 2007 Global Equity Market Performance
Cumulative Return (US$)
60%
50%
Emerging
Pacific ex-Japan
40%
Europe
30%
N. America
20%
Japan
10%
0%
-10%
-20%
-30%
12/31/06
3/31/07
6/30/07
9/30/07
12/31/07
The MSCI Europe, North America, Pacific ex-Japan, Japan, and Emerging Markets index measure the performance of
stocks in these respective markets. The historical performance shown is provided to illustrate market trends and is not
intended to represent the past or future performance of any Pioneer product. Indices are unmanaged and their returns
assume reinvestment of dividends and, unlike investment products returns, do not reflect any fees or expenses. It is not
possible to invest directly in an index.
Source: DataStream. Last data point: February 4, 2008
There is no guarantee that forecasts discussed will be realized.
Past performance is no guarantee of future results.
19220-16-0208 | February 2008 | Page 40
Implied Volatilities Highlight The Increased Level of Risk Aversion
50
CBOE S&P 500 Implied Volatility (VIX)
45
40
35
30
25
20
15
10
5
0
Dec-90
Dec-95
Dec-00
Dec-05
Source: DataStream. Last data point: February 4, 2008
There is no guarantee that forecasts discussed will be realized.
Past performance is no guarantee of future results.
19220-16-0208 | February 2008 | Page 41
The US Dollar in 2007-8
10%
U.S. Dollar Relative to the Euro and Yen (rebased to 12/31/2006)
stronger ->
Euro
Yen
5%
US$
0%
<- weaker
-5%
-10%
-15%
12/31/06
3/31/07
6/30/07
9/30/07
12/31/07
Source: DataStream. Last data point: February 4, 2008
There is no guarantee that forecasts discussed will be realized.
Past performance is no guarantee of future results.
19220-16-0208 | February 2008 | Page 42
US Trade Weighted Dollar Near 30-Year Lows
Trade-Weighted Value of the U.S. Dollar
150
140
130
120
110
100
90
80
70
12/31/75
12/31/80
12/31/85
12/31/90
12/31/95
12/31/00
12/31/05
Source: DataStream. Last data point: February 4, 2008
There is no guarantee that forecasts discussed will be realized.
Past performance is no guarantee of future results.
19220-16-0208 | February 2008 | Page 43
Stronger Export Growth is Beginning to Shrink the Trade Deficit
US Foreign Trade (% of GDP)
20%
Imports
Exports
Deficit
15%
10%
5%
0%
-5%
-10%
Q4 1955
Q4 1965
Q4 1975
Q4 1985
Q4 1995
Q4 2005
Source: DataStream. Last data point: 4th Quarter 2007 (Advance)
There is no guarantee that forecasts discussed will be realized.
Past performance is no guarantee of future results.
19220-16-0208 | February 2008 | Page 44
U.S. Capacity Utilization Remains at High Levels
U.S. Capacity Utilization
90
85
80
75
70
Dec-65
Dec-70
Dec-75
Dec-80
Dec-85
Dec-90
Dec-95
Dec-00
Dec-05
Source: DataStream. Last data point: December, 2007
There is no guarantee that forecasts discussed will be realized.
Past performance is no guarantee of future results.
19220-16-0208 | February 2008 | Page 45
Losses in the Financial Sector Have Stalled Profit Growth
Profit Growth Outside the Financial Sector Remains Solid
U.S. After-Tax Corporate Profits (log scale)
Q4 1950
Q4 1960
Q4 1970
Q4 1980
Q4 1990
Q4 2000
Source: DataStream. Last data point: 3rd Quarter 2007
There is no guarantee that forecasts discussed will be realized.
Past performance is no guarantee of future results.
19220-16-0208 | February 2008 | Page 46
U.S. Equity Valuations Remain Attractive Relative to Bond Yields
S&P 500 Earnings Yield and Bond Yields
9
S&P 500 E/P (T-12)
8
10-yr US Treasury Yield
BAA Bond Yield
7
6
5
4
3
Dec-00
Dec-01
Dec-02
Dec-03
Dec-04
Dec-05
Dec-06
Dec-07
The Standard & Poor's 500 Stock Index (the S&P 500) is a commonly used measure of the broad U.S. stock market. The
historical performance shown is provided to illustrate market trends and is not intended to represent the past or future
performance of any Pioneer product. Indices are unmanaged and their returns assume reinvestment of dividends and, unlike
investment products returns, do not reflect any fees or expenses. It is not possible to invest directly in an index.
Source: DataStream. Last data point: January 29, 2008
There is no guarantee that forecasts discussed will be realized.
Past performance is no guarantee of future results.
19220-16-0208 | February 2008 | Page 47
U.S. Equity Market Leadership: Style
140%
Cumulative Return Relative to the Russell 1000
Russell 1000 Growth
Russell 1000 Value
130%
120%
110%
100%
90%
80%
70%
60%
Dec-78
Dec-82
Dec-86
Dec-90
Dec-94
Dec-98
Dec-02
Dec-06
The Russell 1000 Growth Index measures the performance of large-cap U.S. growth stocks. The Russell 1000 Value Index
measures the performance of large-cap U.S. value stocks. The historical performance shown is provided to illustrate market
trends and is not intended to represent the past or future performance of any Pioneer product. Indices are unmanaged and their
returns assume reinvestment of dividends and, unlike investment products returns, do not reflect any fees or expenses. It is not
possible to invest directly in an index.
Source: DataStream. Last data point: January 31, 2008
There is no guarantee that forecasts discussed will be realized.
Past performance is no guarantee of future results.
19220-16-0208 | February 2008 | Page 48
U.S. Equity Market Leadership: Size
Cumulative Return Relative to the Russell 3000
180%
Russell Top 200
Russell Midcap
Russell 2000
160%
140%
120%
100%
80%
60%
Dec-78
Dec-82
Dec-86
Dec-90
Dec-94
Dec-98
Dec-02
Dec-06
The Russell Top 200, Midcap, and 2000 indexes Index measure the performance of large-cap mid-cap and small-cap
U.S. stocks, respectively. The historical performance shown is provided to illustrate market trends and is not intended to
represent the past or future performance of any Pioneer product. Indices are unmanaged and their returns assume
reinvestment of dividends and, unlike investment products returns, do not reflect any fees or expenses. It is not possible
to invest directly in an index. Small-cap and mid-cap companies often experience sharper price fluctuations than stocks
of large-cap companies.
Source: DataStream. Last data point: January 31, 2008
There is no guarantee that forecasts discussed will be realized.
Past performance is no guarantee of future results.
19220-16-0208 | February 2008 | Page 49
Agenda
Global Context and Background
Main Street and Wall Street: House Prices and the Credit Crunch
Inflation, the Fed, and U.S. Fixed Income Markets
The U.S. Consumer
The Dollar, Profits, and U.S. Equity Markets
2008 Outlook
There is no guarantee that forecasts discussed will be realized.
Past performance is no guarantee of future results.
19220-16-0208 | February 2008 | Page 50
Pioneer Global Asset Allocation Committee
2008 US Economic Forecast
 US economic growth: 2.2%
– No recession
– Weakness in 07q4 and 08q1, then improving
– Notable support from exports; investment spending bottoming
 Unemployment averages 5%
 Main downside risks: housing, credit crunch, oil prices
 US (Headline) CPI to rise by 2.5%
– Oil price expected to average $74
There is no guarantee that forecasts discussed will be realized.
Past performance is no guarantee of future results.
19220-16-0208 | February 2008 | Page 51
U.S. Real GDP Forecast: Recession Not Expected
8
Change in U.S. Real Gross Domestic Product
6
4
2
0
-2
-4
Q4 1987
Quarterly (annualized)
Rolling 4 Quarter
Q4 1992
Q4 1997
Projected
Projected
Q4 2002
Q4 2007
Historical Data Source: DataStream. Last data point: 4th January 29, 2008
Projections by Pioneer Investments Global Asset Allocation Committee
There is no guarantee that forecasts discussed will be realized.
Past performance is no guarantee of future results.
19220-16-0208 | February 2008 | Page 52
The US Economy: Drivers of Growth
US GDP CONTRIBUTIONS
6
5
4
3
2
1
0
-1
-2
1999
2000
2001
INVESTMENTS
INVENTORIES
2002
2003
2004
HOUSEHOLD CONS
NET TRADE
2005
2006
2007 E
2008 E
GOV EXPENDITURE
Source: Pioneer Investments Global Asset Allocation Committee
There is no guarantee that forecasts discussed will be realized.
Past performance is no guarantee of future results.
19220-16-0208 | February 2008 | Page 53
Glossary of Terms
The consumer price index (CPI) is a statistical time-series measure of a weighted average of prices of
a specified set of goods and services purchased by consumers. The CPI measure of core inflation
systematically excludes food and energy prices because they are highly volatile.
The federal funds rate is the interest rate at which depository institutions lend balances (federal funds)
at the Federal Reserve to other depository institutions overnight.
The Goldman Sachs Commodity Index is a composite index of commodity sector returns, representing
an unleveraged, long-only investment in commodity futures that is broadly diversified across the
spectrum of commodities. The returns are calculated on a fully-collateralized basis with full
reinvestment. The combination of these attributes provides investors with a representative and realistic
picture of realizable returns attainable in the commodities markets.
Government Bonds and Treasury Bills are guaranteed by the US government as to the timely payment
of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.
A Treasury Inflation-Protected Security (TIPS) is identical to a treasury bond except that principal and
coupon payments are adjusted to eliminate the effects of inflation.
The Standard & Poor's 500 Stock Index (the S&P 500) is a commonly used measure of the broad U.S.
stock market.
Indices are unmanaged and it is not possible to invest directly in an index.
There is no guarantee that forecasts discussed will be realized.
Past performance is no guarantee of future results.
19220-16-0208 | February 2008 | Page 54
Investment Suitability Is Important
There is no guarantee that forecasts discussed will be realized.
The views expressed in this presentation are those of the investment
professional and are subject to change at any time. These views do not
necessarily reflect the views of Pioneer or others in the Pioneer organization.
Pioneer Investment Management USA, Inc.
60 State Street
Boston, Massachusetts
www.pioneerinvestments.com
2008 Pioneer Investments
There is no guarantee that forecasts discussed will be realized.
Past performance is no guarantee of future results.
19220-16-0208 | February 2008 | Page 55