Capital Markets: Observations & Insights

VI

Smaller Capitalization Stocks Look Attractive Valuation

• Compelling valuation : Small cap P/E multiple premium is low relative to history

I

• Stronger fundamentals : Small caps are expected to grow much faster than large caps

• More levered to domestic economy : U.S. small caps have less exposure to international economies

II

Price-to-Earnings Russell 2000 / Russell 1000

Estimated Long-Term EPS Growth

60%

14%

III

50%

11%

40%

30%

IV

Median

20%

10%

0%

V

Russell 2000

Russell 1000

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

VI

Source: FactSet. EPS are consensus estimates and actual earnings per share might be materially different than shown.

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