Capital Markets: Observations & Insights

​ Performance

Prices and Fundamentals Converge

• Stock prices and fundamentals converged in 2017 after having previously diverged

• Growth stock fundamentals continue to imply outperformance

Growth Relative to Value

Stock Prices

Fundamentals

Convergence

110

105

Disconnect

100

95

90

Jul-16

Jul-17

Oct-16

Apr-17

Oct-17

Jun-16

Jan-17

Jun-17

Feb-17

Mar-17

Nov-16

Dec-16

Nov-17

Dec-17

Aug-16

Sep-16

Aug-17

Sep-17

May-17

Source: FactSet as of 12/31/2017. S&P 500 Growth and Value Indices used to represent Growth and Value stocks. Fundamentals are LTM EPS.

Page 9