Monthly Perspectives - Strange Days - May 2016

Strange daysMay 2016Monthly Perspectives Portfolio Advice & Investment Research

This document is for distribution to Canadian clients only. Please refer to the last page of this report for important disclosure information.

Brad Simpson, Chief Wealth Strategist

In this issue

Strange days �� 1 - 2

Distortions can be dangerous �� 3 - 4

Finding growth in equities �� 5

Finding growth in preferred shares �� 6

Monthly market review �� 7

Important information �� 8

I’ve always been crazy; it helps me from going insane� This lyric from an old

country song may perfectly capture investor attitudes today� Consider the chart

on the following page (figure1), which provides the most recent results from the

AAII Investor Sentiment Survey� This survey measures the percentage of individual

investors who are bullish (optimistic), bearish (negative) and neutral (I don’t know

what to think) in their outlook on the direction of stock markets for the next six

months� Individual investors are polled from the ranks of the AAII membership

weekly� Just one vote per member is accepted in each weekly voting frame�

This is the sixth consecutive week that neutral sentiment is above 40%, the

longest streak since a 16 week stretch between April 9 and July 15, 2015�

This is also the 12th consecutive week and the 64th out of the past 68 weeks

with a neutral sentiment reading above its historical average of 31�0%�

(Continued on the next page)

2 Monthly Perspectives May 2016

Strange days (cont’d)Brad Simpson, Chief Wealth Strategist

What is most interesting is the fact that the neutral reading is nearing

historical highs� While this may be subjective, based on over 25

years of experience managing money and/or designing investment

strategy for individual investors, experience tells me that “neutral,”

in the minds of most folks, means they are uncertain and unable to

make a decision� Climbing the wall of worry is understandable in an

environment like this� The TD Wealth Asset Allocation Committee,

of which I am a participating member, meets monthly to review and

discuss key issues impacting markets and makes decisions based on

market risks and opportunities� The following is the list of broader

issues that the committee has currently highlighted as areas of

concern:

1. Persistent low growth

2. Periods of volatility across asset classes

3. Central banks with a dwindling supply of flotation devices

4. Decelerating earnings growth for companies

5. Credit market stress

6. Full valuations

7. Geopolitical and market risks

Bullish Bearish Neutral

20%

50%

45%

40%

35%

30%

25%

29-Jan-15 29-Mar-15 29-May-15 29-Jul-15 29-Sep-15 29-Nov-15 29-Jan-16 29-Mar-16

Source: Bloomberg Finance L.P. As at April 23, 2016.

Figure 1: AAII Investor Sentiment Survey

Strange days indeed� Inside this list are several symptoms that

exist as a result of the current environment� These symptoms

often lead to volatility risk, but they also create opportunities�

The following articles tackle three of the great challenges (and

opportunities) of investing today: negative interest rates, slow

earnings growth and the peculiar performance of preferred shares�

Our goal is that these thoughts will move our clients from feeling

neutral to having greater confidence and reasons to be optimistic�

Every environment has its challenges� Being prepared for the

bad and taking advantage of the good is critical for long-term

investment success� Make sure you are prepared� If any of these

articles hit home, contact your advisor and set a time to review your

total portfolio including hard assets like your real estate investments�

A critical component to investment success is the relentless pursuit

of being prepared for what comes next�

Every environment has its challenges� Being prepared

for the bad and taking advantage of the good is critical for long-term

investment success�


The biggest purchasers are central banks who are source of demand

of close to US$3 trillion a year (including negative yielding bonds)�

The U�S� Federal Reserve’s holdings of Treasury debt account for

close to 20% of U�S� government bonds outstanding� The Bank of

England currently holds 26% of U�K� government debt outstanding�

Holdings of German government debt by the European Central

Bank and the euro area’s national central banks recently accounted

for 10% of German sovereign debt outstanding� The Bank of

Japan currently owns more than a third of all outstanding Japanese

government bonds� Other non price-sensitive large entities investing

in negative yield bonds are pension funds, insurance companies and

banks due to imposed regulatory requirements� Index funds are

another non price-sensitive buyer of bonds, as are asset managers

who are required by their mandates to hold bonds in portfolios�

On a smaller scale are speculators and traders taking shorter-term

views on currency movements and even lower yields that would

result in capital appreciation�

The low (negative) interest rate strategy of central banks can distort financial markets

While this answers the question of who is investing in these negative

yield bonds, we still have to consider why this is happening� Central

banks manipulate the price of money with interest rates, and when

they change a policy rate, it is not the rate itself that affects the

economy, but rather the consequences it has on general financial

conditions� The intended consequences are to lower borrowing

costs for households and businesses to encourage more spending

that leads to stronger economic activity� As part of the process,

investors are discouraged from low/negative yielding investments

to buy higher yielding securities, such as stocks, commodities and

real estate to name a few, that have more risk�

Distortions can be dangerousSheldon Dong, CFA, Fixed Income Strategist

“The more guidance a central bank can provide the public about how policy is likely to evolve the greater the chance that market participants will make appropriate inferences�”

Ben Bernanke, former U�S� Federal Reserve Chairman

Approximately 25% of sovereign government bonds in the world

currently have negative yields� In other words, there are actually

investors today paying to have their money in an account that is

guaranteed by a government� If buying negative-yielding bonds, or

paying for the privilege of loaning money to governments, seems

unfathomable to you, you are not alone� It is counterintuitive�

However, once you analyze who the buyers are and the constraints

they are bound by, it starts to make a little more sense�

Sovereign Debt Yields

75% Positive25% Negative

Source: Portfolio Advice & Investment Research. As at April 15, 2016.

Figure 2: The Rise of Metropolitan Real Estate Prices

Source: Bloomberg Finance L.P. As at March 31, 2016.

0

200000

400000

600000

800000

1000000

1200000

Average Sale Price: Residential: Greater Vancouver (SA, C$)

Average Sale Price: Residential: Greater Toronto (SA, C$)


Distortions can be dangerous (cont’d)Sheldon Dong, CFA, Fixed Income Strategist

While all of this sounds good in theory, there are consequences�

The low/negative interest rate strategy of central banks can distort

financial markets� Consider the red hot real estate markets in

Vancouver and Toronto� In March 2016, the average price of a

single family home in Vancouver rose 27�4% year-over-year to

$1,342,000, while the average price of a detached home in Toronto

increased 12�4% from a year earlier to $1,174,000�

Faced with the choice of saving/investing money at an unappealing

rate of approximately 1�5% for a 5-year guaranteed investment

certificate (GIC), or taking out a 5-year mortgage at a near historical

low of 2�4% to invest in a real estate market delivering these type

of recent returns is incredibly tempting� This accounts for the

reason the most popular current question being posed around

tables at coffee shops in these two metro centers is “What’s your

spread?” Translated, this means: “what’s the difference between

your mortgage of a rental condo and your revenue being generated

from its rent?” This is where distortions can potentially occur�

Between September 2015 and January 2016, the average price

of a single-family detached home in the Greater Vancouver area

increased as much as it did from 1981 to 2005� Correspondingly,

we are also seeing new record highs for the ratio of household debt

to disposable income� As of the fourth quarter of last year, this

measure reached a new record high of 165�4% with much of that

new debt coming in the form of new mortgages� This means that

Canadian households on average held $1�65 in debt for every dollar

of disposable income�

We highlight this not as a dire warning about real estate,

TD Economics guidance calls for strong continued growth in both

these markets, but to provide a point of sober reflection� We have

record highs in two of Canada’s largest urban centers and record

highs in Canadian investors’ debt profile� We have an interest rate

environment that can cause price distortions in financial assets like

real estate� Because so many of us own homes we tend to look at

real estate differently� It is tangible; we can see it, so we conclude it

must be safe� However, if you are investing in real estate, not as your

primary residence, but as an investment it should be considered an

“equity-like” risk� Just like stock markets, real estate markets can

go down in value� For instance, Toronto experienced a similar bull

market in residential real estate in the mid-1980s� Between 1989

and 1996, the average price of a house in the Greater Toronto Area

(GTA) declined by 40% adjusted for inflation, while downtown

Toronto was hit the worst with over a 50% decline in home values�

Figure 3: The Rise of Debt to Disposable Income

Source: Bloomberg Finance L.P. As at , 2016.

80

100

120

140

160

180

3/1/1990 3/1/1996 3/1/2002 3/1/2008 3/1/2014

Canada National Balance Sheet Accounts Debt To Disposable Income

%

If you are considering real estate as an investment strategy, meet

with your advisor; consider the risks to ensure that your net worth

does not get caught in a potential monetary policy price distortion�

It is also important to note that the Bank of Canada is not oblivious to

the potential problems and these price distortions occurring, and has

enlisted the help of the federal government to help cool real estate

markets in Vancouver and Toronto through mortgage insurance rule

changes and other measures that will raise funding costs�

To bring this back to the beginning, we have to ask: What will be the

long-term impact of these negative interest rates? Negative yields

have never been used before in economies as large as the euro area

and Japan, so it is too early to tell what the long-term consequences

may be� However, they have become the newest tool of central

banks to influence behaviour� A negative consequence of the low

interest rate environment is that it encourages excessive risk taking�

Generally, investors like government bonds of strong developed

economies because they are safe investments, with the 90-day

term generally considered to be the “risk-free” rate (currently at

about 0�50% in Canada)� Investors should use government rates

as a starting point to help gauge the riskiness of higher yielding

investments, being reminded again that if it sounds too good to be

true, it usually is�

Real estate risk now resembles equity risk


Finding growth in equitiesCatherine Carlin, CFA, Senior Portfolio Manager North American Equities

Figure 4: Year/Year % Change in Quarterly S&P 500 Operating EPS

Source: S&P Global Market Intelligence. As at April 15, 2016.

For a long time, investors have been reading about slow economic growth, low interest rates, and more recently about an earnings recession� The persistent focus on “low” and “slow” leaves one wondering if there is any growth left anywhere for investors� In this article, we look at forecasts for the U�S� equity market, and breakdowns by sector with a view to finding growth�

Earnings recessionWe are familiar with the technical definition of an economic recession as two consecutive quarters of GDP contraction� More recently, we have begun to read the term “earnings recession,” which is similarly defined as two consecutive quarters of declines in corporate earnings� Figure 4 shows that the S&P 500 Index (S&P 500) is currently experiencing a technical earnings recession as companies work through this period of weak global growth, low oil prices, and a lofty U�S� dollar�

As at April 15, 2016, the data showed that Q1 2016 earnings are expected to be at least 8% lower than the previous year� Shockingly, at the beginning of the year, the expectations were for Q1 2016 earnings growth of 1�2%� While we don’t yet know if these dismal expectations will play out (the Q1 reporting season began on April 11 and will continue for some weeks), this would be the greatest pace of declines since 2009, and it would also mark the lowest earnings level since 2012�

The silver lining is that the earnings decreases are expected to trough in Q1 2016, with earnings growth resuming again in the second half of this year� Some analysts believe that as the recovery in earnings gains momentum, earnings expectations will be revised upwards, thus reinforcing a positive cycle�

A closer lookFigure 5 shows expected earnings growth rate by S&P 500 sector� There is a wide disparity, with the energy sector being the obvious laggard� However, even within the context of a very poor expected Q1 aggregate earnings report, there are three sectors where analysts are looking for growth: health care, telecommunications and consumer discretionary� These sectors have shown positive earnings growth for the past three quarters, and the consumer discretionary sector is expected to remain in the lead for the full year�

Figure 5: Sector EPS Growth

Sector Index Q1/15 Q1/16 FY/16

Consumer Discretionary 8�49% 11�20% 11�06%

Consumer Staples 4�26% -2�44% 2�85%

Energy -54�57% -107�09% -76�18%

Financials 18�33% -6�58% 2�27%

Healthcare 21�42% 3�00% 5�75%

Industrials 8�74% -7�37% 3�01%

Information Technology 9�07% -5�82% 2�26%

Materials -0�69% -17�75% 0�19%

Telecommunication Services 2�13% 5�87% 2�19%

Utilities 0�39% -1�63% 3�00%

S&P 500 3�22% -8�12% 0�35%

S&P 500 ex-energy 11�79% -3�43% 2�81%

Source: S&P Capital IQ. As at April 19, 2016.

An even closer lookThe consumer discretionary sector itself can be broken into sub-categories as shown in figure 6� Solid double-digit earnings growth is expected for all of the sub-groups in 2016� In 2017, the rate of growth is expected to moderate and is forecast to pick up again for most sectors in 2018�

Our search for growth has identified the top expected growth rates are in the retailing sector, including internet retailers Amazon�com Inc�, Expedia Inc�, Netflix Inc�, as well as discount chain Dollar Tree Inc� The consumer services group shows strong expected growth from leisure companies Carnival Corp�, Royal Caribbean Cruises Ltd� and Marriott International Inc� These results dovetail with the macroeconomic trends of a strong U�S� labour market, good housing trends, and favourable consumer confidence�

One can also see from figure 6 that high expected growth rates are generally reflected in the earnings multiples, so investors must ask themselves whether the expected growth rates are reasonable, and understand how much they are paying for the expected growth� For example, the growth expectations for the autos group beyond 2016 is clearly reflecting the well-publicized fear that we have reached “peak auto�” It is possible that the U�S�-centric analysts are being overly pessimistic, forgetting that the U�S� represents only a fraction of their global business� If this fear of slowing growth proves overdone, the group’s severely discounted valuation multiple and, meaningfully higher dividend yield could present an interesting, value-oriented, investment opportunity�

Figure 6: A Closer Look at Growth

Growth P/E Dividend

2016E 2017E 2018E 2016E Yield

Autos & Components 16�0% 2�1% -0�2% 7�5x 3�98%

Durables & Apparel 11�8% 7�9% 14�9% 18�4x 1�47%

Consumer Services 14�2% 11�2% 13�4% 22�5x 1�99%

Media 12�1% 6�7% 13�6% 16�3x 1�57%

Retailing 25�5% 14�4% 17�3% 23�4x 1�11%

Source: Bloomberg Finance L.P. As at April 22, 2016.

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%


Finding growth in preferred sharesScott Booth, CFA, Preferred Shares Strategist

Issuer Ticker Bid Price Current YieldYears Until

ResetReset Spread

(bps)

Running Yield on Reset with 5-year Gov’t Canada Yield of

0�00% 0�75% 1�50% 2�25%

Intact Financial Corp� IFC�pr�C $18�10 5�80% 0�4 266 3�67% 4�71% 5�75% 6�78%

Brookfield Asset Management Inc� BAM�pr�Z $18�94 6�34% 1�7 296 3�91% 4�90% 5�89% 6�88%

Enbridge Inc� ENB�pr�F $15�06 6�64% 2�1 251 4�17% 5�41% 6�66% 7�90%

Brookfield Renewable Power BRF�pr�A $14�15 5�93% 4�0 262 4�63% 5�95% 7�28% 8�60%

Emera Inc� EMA�pr�A $13�18 4�85% 4�3 184 3�49% 4�91% 6�34% 7�76%

Husky Energy Inc� HSE�pr�A $11�00 5�46% 4�9 173 3�93% 5�64% 7�34% 9�05%

Average 5.84% 3.97% 5.25% 6.54% 7.83%

Preferred shares have been in the penalty box for the better part of a year and a half� Pessimism has been pervasive and performance has been pitiful, as prices plunged, with indices hitting all-time lows and provoking palpable panic amongst investors with preferred shares in their portfolios�

In the past we have presented our view that most rate-reset preferred shares are not permanently impaired to the levels at which they trade� There is a real possibility of recovery in the majority of cases, with rising interest rates the most probable panacea to push prices in the direction of par value ($25�00)� Not all of them will get there, but we do see upside in most cases� Now is the time to turn the page and pose the question: is this the time and place for preferred shares in your portfolio?

A typical Canadian income generating portfolio would probably include some GICs, some corporate and government bonds, and a number of dividend paying stocks with a focus on dividend growth (or some combination thereof in a fund)� GICs always price at par, but the other investments are prone to interest rate sensitivity, likely benefiting as interest rates fall but perhaps coming under pressure in a rising rate environment�

Prudently constructed portfolios should be populated with assets that are likely to respond to important factors, such as the level of interest rates, in different ways� Rate-reset preferred shares of quality companies often offer relatively high yields and their prices should respond positively to rising interest rates, making them a good complement to the other assets in income portfolios� We see deeply discounted rate-reset preferred shares as a portfolio diversification tool, offering attractive cash flows, significant upside in terms of price and real protection against rising rates�

Protection against rising ratesOne of the criticisms of rate-reset preferred shares, particularly those priced near or above par, is that the embedded dividend-reset feature exposes investors to falling rates and widening credit spreads� They don’t really provide much protection against rising rates, because when the reset feature is of value to the investor, the issuing company is likely to exercise its option to call the security for redemption� The rate-reset structure has evolved to address this, with recently issued non-financial rate-resets now having a floor on the dividend�

We are periodically asked if a rate-reset preferred share will get redeemed, and often find the question is phrased in such a way as to indicate that redemption is a favourable outcome� It is not� Rate-resets generally get redeemed because the issuer can refinance more cheaply (lower dividend), which means the investor faces reinvestment risk, i�e�, the investor will likely reinvest at a lower rate� Deeply discounted rate-resets carry very little redemption risk� While the issuer’s option to redeem is always present, it many cases the redemption price ($25�00) is so far above the market price that probability of redemption is low� This gives these securities room for capital appreciation, unencumbered by their call prices�

Cash flow should be a preferred share investor’s focal point, both in terms of upside and understanding what is at risk if rates decline further� The table below examines a range of potential outcomes with Government of Canada (GoC) 5-year bond yields between zero and 2�25%, which investors can use to establish a range of cash flow expectations�

If rates don’t fall below zero, it seems reasonable that this sample portfolio could generate at least 4% dividend income for as long as it is outstanding� If rates go up, the portfolio’s yield has potential to increase� We suspect that this would be accompanied by an increase in market prices and believe this potential for price appreciation in a rising rate environment makes these very attractive assets to complement an income portfolio�

These are long-term investments� The last year has reminded us that market dislocations and challenging price environments can persist for fairly long periods of time and investors must have sufficient time horizons and risk tolerance to sit through cycles� We believe the sell-off is presenting some very good opportunities to lock up attractive, albeit variable, cash flows for the long term� We like that the potential upside really isn’t predicated on how the issuing companies perform (provided their credit worthiness is relatively stable)� Also, there is potential for capital gains, with rising rates the most significant driver� We continue to suggest investors focus on quality issuers� Diversifying exposure within an investor’s preferred share allocation is also prudent and we suggest including some new issues in portfolios as well, as their high spreads and floors (in the case of non-financials) should add an element of price stability while still providing attractive cash flow�

Figure 7: GoC’s 5-Year Bond Yields Impact Preferred Shares Yields

Basis points: bps. Source: Bloomberg Finance L.P. Portfolio Advice & Investment Research. As at April 22, 2016.


Monthly market review

(%) (%) (%) (%) (%) (%) (%) (%)

Canadian Indices ($CA) Return Index Level 1 Month 3 Months YTD 1 Year 3 Years 5 Years 10 Years 20 Years

S&P/TSX Composite (TR) 44,309 3�68 9�67 8�38 -5�43 7�05 3�05 4�33 7�56

S&P/TSX Composite (PR) 13,951 3�39 8�81 7�24 -8�36 3�85 0�01 1�35 5�11

S&P/TSX 60 (TR) 2,093 3�43 8�89 7�82 -5�07 7�92 3�51 4�61 8�13

S&P/TSX SmallCap (TR) 887 12�35 27�13 21�93 1�17 4�97 -2�62 0�98 -

U�S� Indices ($US) Return Index Level 1 Month 3 Months YTD 1 Year 3 Years 5 Years 10 Years 20 Years

S&P 500 (TR) 3,888 0�39 7�05 1�74 1�21 11�26 11�02 6�91 7�92

S&P 500 (PR) 2,065 0�27 6�45 1�05 -0�97 8�94 8�66 4�65 5�92

Dow Jones Industrial (PR) 17,774 0�50 7�94 2�00 -0�37 6�20 6�77 4�57 5�97

NASDAQ Composite (PR) 4,775 -1�94 3�50 -4�63 -3�36 12�78 10�69 7�47 7�19

Russell 2000 (TR) 5,433 1�57 9�67 0�03 -5�94 7�53 6�98 5�42 7�48

U�S� Indices ($CA) Return Index Level 1 Month 3 Months YTD 1 Year 3 Years 5 Years 10 Years 20 Years

S&P 500 (TR) 4,879 -2�88 -4�59 -7�76 4�80 19�72 17�41 8�13 7�48

S&P 500 (PR) 2,592 -2�99 -5�14 -8�39 2�55 17�22 14�91 5�85 5�48

Dow Jones Industrial (PR) 22,303 -2�77 -3�80 -7�52 3�16 14�27 12�91 5�76 5�54

NASDAQ Composite (PR) 5,992 -5�13 -7�76 -13�54 0�07 21�36 17�06 8�70 6�75

Russell 2000 (TR) 6,818 -1�73 -2�26 -9�31 -2�60 15�71 13�14 6�63 7�04

MSCI Indices ($US) Total Return Index Level 1 Month 3 Months YTD 1 Year 3 Years 5 Years 10 Years 20 Years

World 6,453 1�65 7�88 1�45 -3�61 6�86 6�57 4�71 6�25

EAFE (Europe, Australasia, Far East) 6,382 3�00 7�82 0�04 -8�89 1�92 2�16 2�09 4�53

EM (Emerging Markets) 1,744 0�56 13�72 6�35 -17�56 -4�23 -4�28 2�69 5�25

MSCI Indices ($CA) Total Return Index Level 1 Month 3 Months YTD 1 Year 3 Years 5 Years 10 Years 20 Years

World 8,097 -1�66 -3�86 -8�02 -0�18 14�99 12�70 5�90 5�81

EAFE (Europe, Australasia, Far East) 8,008 -0�34 -3�91 -9�30 -5�66 9�67 8�04 3�25 4�10

EM (Emerging Markets) 2,189 -2�70 1�35 -3�58 -14�63 3�06 1�23 3�86 4�82

Currency Level 1 Month 3 Months YTD 1 Year 3 Years 5 Years 10 Years 20 Years

Canadian Dollar ($US/$CA) 79�69 3�36 12�21 10�30 -3�43 -7�07 -5�44 -1�13 0�41

Regional Indices (Native Currency)

Price ReturnIndex Level 1 Month 3 Months YTD 1 Year 3 Years 5 Years 10 Years 20 Years

London FTSE 100 (UK) 6,242 1�09 2�60 -0�01 -10�33 -0�99 0�56 0�36 2�49

Hang Seng (Hong Kong) 21,067 1�40 7�03 -3�87 -25�12 -2�51 -2�34 2�37 3�32

Nikkei 225 (Japan) 16,666 -0�55 -4�86 -12�44 -14�62 6�34 11�09 -0�14 -1�39

Benchmark Bond Yields 3 Month 5 Year 10 Year 30 Year

Government of Canada Yields 0�55 0�88 1�51 2�08

U�S� Treasury Yields 0�23 1�30 1�83 2�68

Canadian Bond Indices ($CA) Total Return Index Level 1 Month 3 Months YTD 1 Year 3 Years 5 Years 10 Years

FTSE TMX Canada Universe Bond Index 1007�92 -0�08 0�92 1�31 2�09 3�45 4�96 5�31

FTSE TMX Canadian Short Term Bond Index (1-5 Years) 691�40 -0�13 0�06 0�28 1�43 2�14 2�70 3�85

FTSE TMX Canadian Mid Term Bond Index (5-10) 1103�35 -0�44 0�49 1�08 2�92 3�85 5�71 6�07

FTSE TMX Long Term Bond Index (10+ Years) 1598�55 0�26 2�43 2�90 2�37 4�91 7�99 7�19

Sources: TD Securities Inc., Bloomberg Finance L.P. TR: total return, PR: price return. As at April 30, 2016.


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Percentage of subject companies under each rating category—BUY (covering Action List BUY, BUY and Spec. BUY ratings), HOLD and REDUCE (covering TENDER and REDUCE ratings). As at May 2, 2016.

Distribution of Research Ratings

0%10%20%30%40%50%60%70%80%

BUY HOLD REDUCE

REDUCE5%

BUY57%

HOLD38%

63%

33%

4%


Distribution of Research Ratings^ Investment Banking Services Provided*

^ Percentage of subject companies under each rating category—BUY (covering Action List BUY, BUY and Spec. BUY ratings), HOLD and REDUCE (covering TENDER and REDUCE ratings).* Percentage of subject companies within each of the three categories (BUY, HOLD and REDUCE) for which TD Securities Inc. has provided investment banking services within the last 12 months.

Current as of April 4, 2016.

Percentage of subject companies within each of the three categories (BUY, HOLD and REDUCE) for which TD Securities Inc. has provided investment banking services within the last 12 months. As at May 2, 2016.

Investment Banking Services Provided

0%10%20%30%40%50%60%70%80%

BUY HOLD REDUCE

REDUCE5%

BUY57%

HOLD38%

63%

33%

4%


Distribution of Research Ratings^ Investment Banking Services Provided*

^ Percentage of subject companies under each rating category—BUY (covering Action List BUY, BUY and Spec. BUY ratings), HOLD and REDUCE (covering TENDER and REDUCE ratings).* Percentage of subject companies within each of the three categories (BUY, HOLD and REDUCE) for which TD Securities Inc. has provided investment banking services within the last 12 months.

Current as of April 4, 2016.

Economy & Finance

Monthly Perspectives - Strange Days - May 2016