MS smith barney -Global Investment Committee Outlook by riteshbhansali

VIEWS: 46 PAGES: 20

More Info
									Global Investment Committee Outlook




December 2012

                                           This presentation was created
                                    by the Global Investment Committee
                                        and is provided to you courtesy of




           Please refer to important information, disclosures and qualifications at the end of this material.
2012 - 2013 Outlook


 • European recession, but no global or US recession given ongoing central
   bank ease and US fiscal policy progress
 • Earnings expectations to stabilize
 • Slowing inflation in both developed and developing countries
 • Global policy: challenged in developed economies, robust options
   in developing ones
 • Modest US trade-weighted dollar strength; broad developed country
   currencies weak to developing country currencies, especially Asia




  Source: Morgan Stanley Smith Barney Global Investment Committee, Thomson Financial, DataStream. Data as of December 2012.



                               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.
                                                                                                                                                                                     2
                               Please refer to important information, disclosures and qualifications at the end of this material.
Global Investment Committee Tactical Weights
       Global Asset Class                                                                   Tactical Weight
         • Cash                                                                                       Underweight

         •
                 −   Short Duration                                                                   Underweight
                 −   Developed Sovereign                                                              Underweight
                 −   Investment Grade                                                                 Overweight
                 −   Inflation-linked Securities                                                      Underweight
                 −   High Yield                                                                       Underweight
                 −   Emerging Markets                                                                 Overweight

         •   Equities                                                                                 Overweight
                 −   US                                                                               Overweight
                 −   Europe                                                                           Market weight
                 −   Japan                                                                            Underweight
                 −   Emerging Markets                                                                 Overweight
         •   Alternative/Absolute Return                                                              Overweight
                 −   Commodities                                                                      Overweight
                 −   Global REITS                                                                     Underweight
                 −   Managed Futures                                                                  Overweight
                 −

                 −

                 −
                     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.
                                                                                                                                                                   3
             Please refer to important information, disclosures and qualifications at the end of this material.
Global GDP and CPI Forecasts


                         Morgan Stanley & Co.                              % Contribution to                      Citi Research                     % Contribution to
                      (Ye ar-over-Year % Change )                              Grow th                     (Year-over-Year % Change)                    Grow th

                               2012F          2013F            2014F                                  2012F            2013F           2014F
                                                                                  2013F                                                                   2013F
 Global GDP                     3.1             3.1              4.0                                    3.1             3.2              3.5
   Develope d Econom ie s       1.2             0.7              1.9               21                   1.2             0.9              1.5                22
     U.S.                       2.2             1.4              2.7               15                   2.1             1.8              3.0                15
     Euro Area                  -0.5            -0.5             0.9                -2                 -0.4             -0.7            -0.1                0
     U.K.                       -0.2            0.8              1.6                0                  -0.3             0.7              0.8                0
     Japan
   Developing                   1.7             0.4              0.8                3                   2.0             0.9              0.2                4
   Econom ies                   4.9             5.4              5.9               79                   4.7             5.3              5.3                78
     Brazil                     1.6             2.8              3.4                2                   1.4             3.9              4.0                2
     Russia                     3.6             3.1              3.7                4                   3.5             4.0              4.1                4
     India                      5.0             6.1              6.9               11                   5.4             6.2              6.9                12
     China                      7.7             8.2              8.0               39                   7.7             7.6              7.3                40
 Global Inflation               3.4             3.1              3.3                                    3.2             3.3              3.3
   Developed Economies          2.0             1.4              1.7                                    1.9             1.8              1.9
   Developing Economies         4.8             4.8              4.8                                    4.5             4.7              4.8
   U.S. Core                    2.3             2.2              2.2                                    1.8             1.6              1.6
   U.S. CPI                     2.1             1.3              1.6                                    1.8             1.9              1.9




 Source: Morgan Stanley & Co. Research, Citi Research, Morgan Stanley Smith Barney.
 Note: Regional and global forecast are GDP weighted averages, using Purchasing Power Parity estimates. That gives greater weights to developing economies.
 Data as of November 2012.



                                 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.
                                                                                                                                                                                       4
                                 Please refer to important information, disclosures and qualifications at the end of this material.
Dividend Yields By Region and Bond Yields
                 Region by Region, Dividends Trump 10-Year Government Bond Yields



   6%


   5%
          4.4%
                         4.2%
                                      4.0%
   4%

                                                                   3.1%           3.0%
                                                     2.9%
   3%                                                                                           2.6%
                                                                                                               2.4%

   2%                                                                                                                          1.6%
                                                                                                                                            1.3%

   1%


   0%
        Pacific ex   Europ e ex UK     UK         Emerging        Can ada        Global         Japan          US         10-Year US  10-Year
         Japan                                     Markets                                                                 Treasury German Bun d




                 Source: Citi Research, Worldscope, MSCI, FactSet as of December 2012.



                          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.
                                                                                                                                                                                5
                          Please refer to important information, disclosures and qualifications at the end of this material.
 Global Short Rates

                          Aggressive Easing Pushes Policy Interest Rates Toward Historic Lows


          Global Short Rates*

         18

         16

         14

         12

         10

          8

          6

          4

          2

          0
          1982     1984     1986       1988       1990       1992      1994       1996       1998      2000       2002       2004       2006      2008       2010       2012




*Weighted Index of policy Interest rates, 65% developed market and 35% emerging market
Sources: ISI Group as of November 2012.




                                   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.
                                                                                                                                                                                         6
                                   Please refer to important information, disclosures and qualifications at the end of this material.
Deficit Share of GDP and P/E Multiples

   US Federal Surplus/Deficit as a Percentage of GDP (% )                                              S&P 500 Forward Price/Earnings Ratio
     4                                                                                                                                                               35

     2                                                                                                                                                               30

     0
                                                                                                                                                                     25
                                                                                                                                                            Citi
    -2                                                                                                                                                    Forecast

                                                                                                                                                                     20
    -4
                                                                                                                                                                     15
    -6
                                                                                                                                                                     10
    -8

   -10                                                                                                                                                               5
                                                   S&P 500 Forward Price/Earnings Ratio 13.11
                                                   US Federal Surplus/Deficit as a Percentage of GDP -3.30
   -12                                                                                                                                                             0
      '60     '64      '68       '72         '76        '80         '84        '88         '92        '96         '00        '04         '08        '12         '16
    Source: Citi Research, Morgan Stanley Smith Barney. Data as of November 2012




                        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.
                                                                                                                                                                              7
                        Please refer to important information, disclosures and qualifications at the end of this material.
Emerging Market Equities Are Leading Global Equities
                        Emerging Market Equities Outperformed Most Developed Market Equities
                                          In the Decade Before March 2009 Trough and Since


  P e rc e nt (%)

  25
                            22

                                                                                                                                                       20
  20
                                                        17

                                                                                         15
  15


                                                                                                                                              9
  10



   5                                                                                                                          4

                                                                               0
   0

                                                                                                                -1
                -3                           -2
  -5
                     US A                 U nit e d K ing d o m             E uro p e e x U K                        J apan             E me rg ing M a rke t s



                                                                     3 /9 9 - 3 /0 9   3 /0 9 - C u r r e n t




           Source: Morgan Stanley & Co. Research, Citi Research, Morgan Stanley Smith Barney, Thomson Financial, Standard & Poor’s.
           Data as of December 2012.


                                 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.
                                                                                                                                                                                       8
                                 Please refer to important information, disclosures and qualifications at the end of this material.
Global Earnings Per Share



                    Morgan Stanley & Co.           Citi Research                                              Consensus
                                      S&P 500                                        S&P 500                 MSCI AC World                  MSCI EM

                 Operating        YOY         Operating       YOY            Operating       YOY     Operating           YOY     Operating          YOY
                  EPS ($)      Change (%)      EPS ($)      Change (%)        EPS ($)     Change (%)  EPS ($)         Change (%) EPS ($)         Change (%)


    2012E           100.00           2          103.00           5             102.28           6          24.97           4           88.28           4

    2013E            99.00          -1          108.00           5             111.76           9          27.80           11          99.49          13


    2014E           110.00          11          113.00           5             124.64          12          30.95           11         109.52          10

  52 Week Forward                                                              112.41                      27.79                       99.48




       *Morgan Stanley’s current and forecast policy rate for China uses the 1-year lending rate.
        **Citi’s current and forecast policy rate for China uses the 1-year deposit rate.

       Source: Morgan Stanley & Co. Research, Citi Research, Bloomberg, Morgan Stanley Smith Barney. Data as of December 2012.




                              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.
                                                                                                                                                                                    9
                              Please refer to important information, disclosures and qualifications at the end of this material.
Interest Rate Forecasts



    Morgan Stanley                                                              Citi Research
                             Current Rate             1Q13F        4Q13F                                   Current Rate         1Q13F        4Q13F
      Policy Rates (%)                                                            Policy Rates (%)
      US                       0.00 – 0.25            0.15         0.15           US                        0.00 - 0.25         0.25          0.25
      Eurozone                     0.75               0.50         0.50           Eurozone                     0.75             0.50          0.25
      Japan                        0.10               0.05         0.05           Japan                        0.10             0.10          0.10
      UK                           0.50               0.50         1.00           UK                           0.50             0.50          0.50
      China                        6.00*              6.25*        6.75*          China                        3.00**           3.00**        3.25**
      10-Year Government Bond Yields (%)                                          10-Year Government Bond Yields (%)
      US                            1.62              1.84         2.24           US                           1.62             1.75          2.55
      Eurozone                      1.30              1.42         1.68           Eurozone                     1.30             1.75          1.50
      Japan                         0.68              0.95         1.20           Japan                        0.68             1.10          1.30
      UK                            1.77              1.74         2.20           UK                           1.77             1.80          1.75




    *Morgan Stanley’s current and forecast policy rate for China uses the 1-year lending rate.
     **Citi’s current and forecast policy rate for China uses the 1-year deposit rate.

    Source: Morgan Stanley & Co. Research, Citi Research, Bloomberg, Morgan Stanley Smith Barney. Data as of December 2012.
     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.
                                                                                                                                                                                 10
                           Please refer to important information, disclosures and qualifications at the end of this material.
Stocks vs. Bonds and Cash Valuation



 Standard Deviations From Average
  4                                                                                                                                                                                     3
                                                                                                                                             Equities Relatively Expensive
          Cash Rate/Dividend Yield
  3       Bond Yield/Dividend Yield
                                                                                                                                                                                        2

  2
                                                                                                                                                                                        1

  1
                                                                                                                                                                                        0
  0

                                                                                                                                                                                        -1
 -1

                                          Equities Relatively Cheap                                                                                                                     -2
 -2


 -3                                                                                                                                                                                     -3
   '70   '72      '74     '76      '78     '80     '82     '84      '86     '88     '90     '92      '94     '96     '98     '00       '02     '04     '06     '08     '10    '12



               Note: Standard deviation is a statistical measurement that sheds light on historical volatility.

               Source: Citi Research, Morgan Stanley & Co. Research, Morgan Stanley Smith Barney, Thomson Financial. Data as of November 2012.



                                  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.
                                                                                                                                                                                             11
                                  Please refer to important information, disclosures and qualifications at the end of this material.
US Secular Stock Bear and Bull Markets
and Inflation Since 1946

     S &P 500 (log scale)                                                                                                                                                                                                                                      Core CPI (%)
    2 ,00 0                                                                                                                                                                                                                                                                              1 0%
                                          Bull 1 946 - 196 8
                                          Av erage Annual
                                                                                                                                                                                                                                                                                         9%
    1 ,00 0                                 Total Return
                                           Nominal = 1 3%                                                          Be ar 19 69 - 1982
      700                                   Re al = 10%                                                                                                                                                                                                                                  8%




                                                                                                                                                                                                                                                                  Cyclical Bull
      600                                                                                                          Av erage Annual
      500                                                                                                             Total Return
                                                                                                                    Nominal = 5 %                                                                                                                                                        7%




                                                                                                 Dec. 1968
      400
                                                                                                                      Re al = (2 )%                                                                                         Be ar 3/200 0 -3/2009
      3 00                                                                                                                                                                                                                    Av erage Annual
                                                                                                                                                                                                                                                                                         6%
                                                                                                                                                                                                                                Total Return
      2 00
                                                                                                                                                                                                                               Nominal = (5)%
                                                                                                                                                                                                                                 Re al = (7 )%                                           5%




                                                                                                                                                                                                                     Mar 2000
      1 00
                                                                                                                                                                                                                                                                                         4%




                                                                                                                                                                                                                                                           Mar. 2009
       70
       60




                                                                                                                                                      Aug.1982
       50                                                                                                                                                                                                                                                                                3%
       40                                                                                                                                                                     Bull 1 982 - 200 0
                                                                                                                                                                              Av erage Annual                                                                                            2%
       30                                                                                                                       Core CPI                                        Total Return
                                                                                                                                S&P 500 Price                                  Nominal = 18%
       20                                                                                                                                                                                                                                                                                1%
                                                                                                                                                                                Re al = 15%

                                                                                                                                                                                                                                                                                         0%
              '4 6   '4 8   '5 0   '5 2     '54   '5 6   '5 8   '60   '6 2   '64   '6 6   '6 8               '70   '72   '7 4   '7 6   '78   '8 0   '82          '84   '8 6   '88   '9 0   '92   '94   '96   '9 8   '0 0        '0 2   '0 4   '06   '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 present.

Source: Morgan Stanley Smith Barney, Bloomberg, Ibbotson Associates and FactSet. Data as of November 2012.
The following disclosure pertains to Ibbotson Associates’ data on slides 12 and 13:

(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.
                                                                                                                                                                                                                                                                                                12
                                                            Please refer to important information, disclosures and qualifications at the end of this material.
US Secular Bond Bear and Bull Markets
and Inflation Since 1946

 A Secular Bull Market in Bonds Is Coming to an End

  LT Bond Yield (%)
  Core CPI (%)

  16
                               Bear 1946 - 1981                                                                                                                 Bull 1981 - Pres ent
                               Averag e Annual                                                                                                                   Average Annual
  14
                                Total Return                                                                                                                      Total Return
                                Nominal = 2%                                                                                                                     Nominal = 11%
  12
                                 Real = (3)%                                       Long Bond Yield                                                                  Real = 9%
                                                                                   Core CPI
  10

   8

   6




                                                                                                                     Se pt 1 981
   4

   2

   0
       '46   '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    '98   '00    '02   '04   '06   '08   '1 0   '1 2
  S ource : Bloombe rg, Ibbots on and F ac ts e t.
  Note : C ore CP I 5 Y EA R m a; he adline C P I prior to 1963.



                         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 2012.


                                         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.
                                                                                                                                                                                                                             13
                                         Please refer to important information, disclosures and qualifications at the end of this material.
Global Investment Committee
Equity Strategy



• Equities expected to outperform

• Overweight Emerging Markets and U.S.

• Market weight Europe

• Underweight Japan

• 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.
                                                                                                                                                                             14
                       Please refer to important information, disclosures and qualifications at the end of this material.
Global Investment Committee
Fixed Income Strategy



• Bonds expected to underperform stocks

• Overweight Global IG Corporates (Munis for U.S. clients) and Emerging
  Market Debt

• Underweight Short Duration, Developed Country Sovereign Debt, High Yield
  and Inflation-Linked 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.
                                                                                                                                                                           15
                     Please refer to important information, disclosures and qualifications at the end of this material.
Global Investment Committee
Alternative/Absolute Return Strategy



• Overweight Managed Futures and Commodities
• Underweight global REITs




           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.
                                                                                                                                                                          16
                    Please refer to important information, disclosures and qualifications at the end of this material.
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.
                                                                                                                                                                                 17
                           Please refer to important information, disclosures and qualifications at the end of this material.
    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
basis for any investment decisions that you may make. Morgan Stanley Smith Barney is not acting as a fiduciary under either the Employee Retirement Income Security Act of 1974, as amended or
under section 4975 of the Internal Revenue Code of 1986 as amended in providing this material.

Morgan S tanley Smith Barney and its affiliates do not render advice on tax and tax accounting matters to clients.  T his material was not intended or written to be used, and it cannot be used or relied upon
                                                                                                                                                   E                               her
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.  ach client should consult his/ personal tax and/ legal or
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.
                                                                                                                                                                                                               18
                                             Please refer to important information, disclosures and qualifications at the end of this material.
    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.

Stocks of medium-sized companies entail special risks, such as limited product lines, markets, and financial resources, and greater market volatility than securities of larger, more-established
companies.

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.
                                                                                                                                                                                                             19
                                             Please refer to important information, disclosures and qualifications at the end of this material.
    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
qualifications to invest in such securities and must be responsible for obtaining all relevant approvals, licenses, verifications and or registrations from PRC's relevant governmental authorities.

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
Act 2000, content for distribution in the United Kingdom.

Morgan Stanley Smith Barney is not acting as a municipal advisor and the opinions or views contained herein are not intended to be, and do not constitute, advice within the meaning of Section 975
of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

This material is disseminated in the United States of America by Morgan Stanley Smith Barney LLC.

Third-party data providers make no warranties or representations of any kind relating to the accuracy, completeness, or timeliness of the data they provide and shall not have liability for any damages
of any kind relating to such data.

Morgan Stanley Smith Barney material, or any portion thereof, may not be reprinted, sold or redistributed without the written consent of Morgan Stanley Smith Barney.

© 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.
                                                                                                                                                                                                             20
                                             Please refer to important information, disclosures and qualifications at the end of this material.

								
To top