Tom GalvinManaging Director, Senior Portfolio Manager | 2018

Developed Market Equity Positioning

We believe the higher level of growth and profitability increases the amount of resources available to invest in the future, thus enhancing the economic outlook.

PROFITABILITY

Our final P is the overall PROFITABILITY of companies in a country. We believe the higher level of growth and profitability increases the amount of resources available to invest in the future, thus enhancing the economic outlook.

We utilize the DuPont model, which evaluates the financial performance of companies on measures such as Asset Turnover, Pretax Margins, Debt Levels and, ultimately, Return on Equity. For ROE, we use recent returns as well as long-term averages. Asset Turnover is a ratio of a company’s sales to assets, and the U.S., using the S&P 500 benchmark as the proxy, is ahead of the MSCI Europe ex UK and Japan Indices. Pretax margins indicate how much money a company makes per dollar of sales, before taxes. U.S. companies are higher, at 12% recently, and 10% on average since 2001, than their counterparts in Germany and Japan (in the 7-8% range recently and 5-6% longer term). U.S. corporations have modestly higher debt levels than Japanese firms but rank lower than German companies. U.S. ROE, at 16% recently and 15.6% on a median basis, is meaningfully higher than 11% for Germany and 9% for Japan.

Our combined rankings once again place the U.S. as the clear leader.

See sources at the bottom of the webpage.

We believe the higher level of growth and profitability increases the amount of resources available to invest in the future, thus enhancing the economic outlook.

Sources and Disclosures

Sources for 4P Data

BCA Research

Bloomberg

Bureau of Labor and Statistics

CEIC Data

CIA World Factbook

Cornell University

FactSet

Global Innovation Index

Goldman Sachs

Heritage Foundation

Insead

International Monetary Fund

Ned Davis Research

OECD

SC Johnson College of Business

St. Louis Federal Reserve

tradingeconomics.com

WIPO

World Bank



Important Disclosures

City National Bank provides investment management services through its wholly owned subsidiary City National Rochdale, LLC, a registered investment advisor.

The information presented does not involve the rendering of personalized investment, financial, legal, or tax advice. This presentation is not an offer to buy or sell, or a solicitation of any offer to buy or sell, any of the securities mentioned herein.

Certain statements contained herein may constitute projections, forecasts, and other forward-looking statements, which do not reflect actual results and are based primarily upon a hypothetical set of assumptions applied to certain historical financial information. Certain information has been provided by third-party sources, and, although believed to be reliable, it has not been independently verified, and its accuracy or completeness cannot be guaranteed.

Any opinions, projections, forecasts, and forward-looking statements presented herein are valid as of the date of this document and are subject to change.

As with any investment strategy, there is no guarantee that investment objectives will be met, and investors may lose money. Returns include the reinvestment of interest and dividends. Investing involves risk, including the loss of principal. Diversification may not protect against market loss or risk.

Past performance is no guarantee of future performance.

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