1q16 market intelligence book - ria channel

Market IntelligenceTHE LATEST THINKING FROM OUR ASSET MANAGEMENT NETWORK

Q1 2017 OutlookAs of December 31, 2016

Now available on iPad!

John Hancock Investments | Market Intelligence

What you’ll find

1

About John Hancock Investments

A trusted brand

A better way to invest

Results for investors

Insight that leverages the best of our diverse asset management network

2

3

4

5

What we’re hearing from our network 6

U.S. equity: the Trump bump should continue

The U.S. expansion continues to mature

Lower taxes, deregulation, and rising rates could further fuel the earnings outlook

Some sectors are more expensive than others

Financials are driving the shift in sentiment from growth to value

Long term, expect mid-single-digit returns based on today’s valuations

7

8

9

10

11

12

International equity: mixed outlook

Upcoming elections in Europe threaten to upset the status quo

The European Central Bank should continue to provide support

After their longest period of underperformance, international equities offer relative value

Emerging-market fundamentals appear to have bottomed

13

14

15

16

17

Fixed income: select opportunities

The Fed will be better equipped to continue normalizing monetary policy in 2017

High-quality bond allocations are poised to earn meager returns

Credit sectors are better positioned to weather rising rates

Opportunities in corporate debt entail trade-offs

18

19

20

21

22

Compelling investment opportunities have become harder to find

23

High correlations across assets underscore the need for more effective diversification

24

Strategies for portfolio construction 25

Beyond consensus: a closer look at opposing views in our network

26

Family of funds 27

About John Hancock InvestmentsJohn Hancock Investments | Market Intelligence

A trusted brand

John Hancock Investments is a premier asset manager representing one of America’s most trusted brands, with a heritage of financial stewardship dating back to 1862. Helping our shareholders pursue their financial goals is at the core of everything we do. It’s why we support the role of professional financial advice and operate with the highest standards of conduct and integrity.

2

150 years of promises kept Diverse capabilities to help serve our clients

From our earliest days

as a four-person operation

on Boston’s State Street,

John Hancock has grown

to include a diversified

global investment firm.

The New York Times named

John Hancock one of the

most powerful brands

of the 20th century.1

More than $135 billion in assets under management across asset classes2

41% U.S. equity

25% Fixed income

18% International equity

11% Alternative and specialty

5% Other3

Data is as of 12/31/16.

1 The New York Times, 1999. 2 $86 billion in retail mutual fund assets and $50 billion in retirement assets, excluding non-John Hancock 529 plan assets and including seed capital. 3 Includes money markets, hybrid funds, and ETFs held by fund-of-fund portfolios that are overseen by John Hancock Investments. 4 Not all funds are available to all investors. Funds domiciled outside the United States are not available to U.S. persons.

Mutual funds

ETFs Closed-end funds

College savings

Managed accounts

Retirement portfolios

UCITS funds4

ESG funds

John Hancock Investments | Market Intelligence About John Hancock Investments

Introduced multimanager approach

Managed accounts

Target-date portfolios

ESG funds

1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 20161969

Closed-end funds

Target-risk portfolios

College savings Alternative Asset Allocation Fund

ETFs

UCITS funds

Epoch Investment Partners, Inc.

A better way to invest

We serve investors globally through a unique multimanager approach: We search the world to find proven portfolio teams with specialized expertise for every strategy we offer, then we apply robust investment oversight to ensure they continue to meet our uncompromising standards and serve the best interests of our shareholders.

Representative list of asset managers shows managers of stand-alone funds only. On 4/1/16, Mesirow Financial Investment Management acquired Fiduciary Management Associates, whose relationship with John Hancock Investments dates to 2009. All data is as of 12/31/16. All logos are the property of their respective owners.

3

74 proven portfolio teams 119 investment strategies28 elite asset managers

Our team of 175+ professionals who specialize in manager research and oversight vets more than 300 new strategies and holds over 100 in-person oversight meetings with managers annually.


Results for investors

4

Our unique approach to asset management enables us to provide a diverse set of investments backed by some of the world’s best managers, along with strong risk-adjusted returns across asset classes.

Our performance is the result of our multimanager approach and our focus on finding and overseeing the best portfolio teams.

1 As of 12/31/16. Includes mutual fund rankings/ratings only. Out of 77 funds rated by Morningstar, 16 funds received a 5-star overall rating and 29 funds receive a 4-star overall rating. Ratings are counted at the highest-rated share class. For each managed product, including mutual funds, variable annuity and variable life subaccounts, exchange-traded funds, closed-end funds, and separate accounts, with at least a 3-year history, Morningstar calculates a Morningstar rating based on a Morningstar Risk-Adjusted Return that accounts for variation in a fund’s monthly excess performance, placing more emphasis on downward variations and rewarding consistent performance. Exchange-traded funds and open-end mutual funds are considered a single population for comparative purposes. The top 10.0% of funds in each category, the next 22.5%, 35.0%, 22.5%, and bottom 10.0% receive 5, 4, 3, 2, or 1 star(s), respectively. The overall Morningstar rating for a managed product is derived from a weighted average of the performance figures associated with its 3-, 5-, and 10-year (if applicable) Morningstar rating metrics. The rating formula most heavily weights the 3-year rating, using the following calculation: 100% 3-year rating for 36 to 59 months of total returns, 60% 5-year rating/40% 3-year rating for 60 to 119 months of total returns, and 50% 10-year rating/30% 5-year rating/20% 3-year rating for 120 or more months of total returns. 2 Morningstar, as of 12/31/16. Investing involves risks, including the potential loss of principal. There is no guarantee that a fund’s investment strategies will be successful. Please see the funds’ prospectuses for additional risks. Past performance does not guarantee future results.

45 FUNDS 73%

OUTPERFORMED

45 funds rated 4 or 5 stars by Morningstar

at the highest-rated share class1

73% of funds outperformed their Morningstar

category averages over the past 10 years2


60+

75+

Insight that leverages the best of our diverse asset management network

Our multimanager approach to investing provides our dedicated in-house research team with a unique advantage: We leverage the very best market insight from our global network of specialized asset managers and investment partners.

5

More than 75 asset managers, independent research

firms, broker-dealers, and banks make up our network.

A dedicated 60+ person investment research team—

part of 175+ professionals specializing in manager research

and oversight—evaluates the views from our network.

Research is vetted and debated to develop our

12- to 18-month outlook on a range of asset classes.

The result is Market Intelligence, the latest thinking and

timely investment ideas from John Hancock Investments.

Aberdeen, Allianz, American Century, Ameriprise, Barclays, Barrow Hanley, BCA Research, BlackRock, BofA Merrill Lynch, Boston Common, Boston Partners, Brandywine Global, Breckinridge, Capital Economics, Capital Group, Citi, Credit Suisse, Davis, Deutsche Asset & Wealth Management, Dodge & Cox, DoubleLine, Eaton Vance, Edward Jones, Epoch, Evercore ISI, Federated, Fidelity, First Quadrant, Gavekal, Goldman Sachs, GW&K, Invesco, Ivy, Janney, Janus, Jennison, John Hancock Asset Management, J.P. Morgan, Lazard, Legg Mason, Leuthold, Loomis Sayles, Lord Abbett, LPL, Macquarie, Macro Research Board, Matthews Asia, Mercer, Mesirow, MFS, Morgan Stanley, MetWest, Ned Davis Research, NEPC, Neuberger Berman, Nuveen, Oppenheimer Funds, Parnassus, PIMCO, Pzena, Raymond James, Research Affiliates, Roubini Global Economics, Royce, Russell, Sustainable Growth Advisers, SSGA, Standard Life, Stone Harbor, T. Rowe Price, Templeton, Trillium, UBS, Vanguard, WAMCO, Wellington, Wells Capital, Wells Fargo

About John Hancock InvestmentsJohn Hancock Investments | Market Intelligence 6

What we’re hearing from our network

Elections: new regimes take center stage

Whereas central banks were the primary drivers of markets for much of the economic cycle, governments are likely to exert greater influence in the years ahead. The certainty of a pro-business agenda in the United States contrasts with uncertainty and “neverendum” in Europe.

See pages 8–9, 14–15, 25–26

Oil: stabilizing

Oil above $50 a barrel will provide support for corporate profits globally, but the commodity’s price is likely to stay rangebound, given the potential for ample supply to come back online.

See pages 9, 25–26

U.S. dollar: staying strong

Higher U.S. interest rates and expectations for a strengthening economy continue to act as tailwinds for the dollar with little cause for weakness in the year ahead.

See pages 8–9, 26

Key macro themes

U.S. equity: the Trump bump should continueInvestors anticipate fewer regulations, lower taxes, and new infrastructure spending in 2017.

John Hancock Investments | Market Intelligence 7U.S. equity: the Trump bump should continue

Key macro themes Range of views from our networkDarker shading indicates a greater concentration of views within our network.

BEARISH NEUTRAL BULLISH

U.S. equity

U.S. large cap

U.S. small cap

U.S. growth

U.S. value

Our 12–18 month view: SLIGHTLY POSITIVE

Our view is consistent with the consensus that U.S. equities will see further upside this year; however, we are slightly less enthusiastic on small caps, given their relatively higher valuations. Our neutral view on growth versus value reflects agreement with our managers that opportunities exist across both styles.


The policy agenda of the incoming administration is decidedly pro- business, with positive implications for a range of corporate sectors.

Oil: stabilizing

Having traded in a range for several months, oil now appears to be building a floor that should result in better energy sector earnings down the road.


While a strengthening U.S. dollar naturally favors domestically focused small caps, its negative effect on U.S. multinationals may be lessened by improving global growth.

What’s inside�� The U.S. expansion continues to mature

�� Lower taxes, deregulation, and rising rates could further fuel the earnings outlook

�� Some sectors are more expensive than others

�� Financials are driving the shift in sentiment from growth to value

�� Long term, expect mid-single-digit returns based on today’s valuations

The value of a company’s securities is subject to change with the company’s financial condition and overall market and economic conditions. See pages 8–12 for complete information. Past performance does not guarantee future results.

John Hancock Investments | Market Intelligence U.S. equity: the Trump bump should continue

YoY

chan

ge—

Com

posi

te In

dex

of L

eadi

ng In

dica

tors

Recessions

–22

–20

–18

–16

–14

–12

–10

–8

–6

–4

–2

0

2

4

6

8

10

12%

20162015201420132012201120102009200820072006200520042003200220012000

Composite Index of Leading Indicators (ranked by weighting in the index)

Weekly manufacturing hours worked

ISM Index of New Orders

Consumer expectations

Yield spread

New orders of consumer goods and materials

Leading Credit Index

New orders of nondefense capital goods

Stock prices

Weekly unemployment claims

Building permits

Darker shading indicates a greater concentration of views within our network.

Year-over-year (YoY) change in the Composite Index of Leading Indicators

“The underlying trends in the LEI suggest that the economy will continue expanding

into the first half of 2017, but it’s unlikely to considerably accelerate.”

The U.S. expansion continues to mature

Source: The Conference Board, as of 11/30/16. The Composite Index of Leading Indicators is an index published monthly by The Conference Board, used to predict the direction of the economy’s movements in the months to come. The index is made up of 10 economic components whose changes tend to precede changes in the overall economy. It is not possible to invest directly in an index. Past performance does not guarantee future results.

Optimism for economic growth postelection has pushed consumer expectations to 13-year highs.

8

U.S. equity

BEARISH NEUTRAL BULLISH= OUR 12–18 MONTH VIEW


1,000

1,200

1,400

1,600

1,800

2,000

2,200

2,400

100

105

110

115

120

125

130

$135

20162015201420132012

S&P 500 Index (left axis)

S&P 500 Index EPS forecast (right axis)

Factors that may affect earnings in 2017

Positive factors

Lower corporate taxes

Fewer regulations

Infrastructure spending

Higher oil prices

A steeper yield curve

Negative factors

A rising U.S. dollar

Potential increase in cost of capital


9

Lower taxes, deregulation, and rising rates could further fuel the earnings outlook

Earnings forecasts for S&P 500 Index companies have continued their upward trend postelection

Source: FactSet, as of 12/31/16. The S&P 500 Index tracks the performance of 500 of the largest publicly traded companies in the United States. It is not possible to invest directly in an index. Past performance does not guarantee future results.

“Long-term earnings expectations have broken out, suggesting that investors

have greatly improved confidence about the health and longevity of the business cycle.”

U.S. equity


The outlook for corporate earnings has steadily improved since bottoming in February, and stock prices have followed suit.


0

2

4

6

8

10

12

14

16

18%

12x 14x 16x 18x 20x

Forward P/E ratio

Long

-ter

m e

arni

ngs

grow

th fo

reca

st

Materials

1.80

Financials

Healthcare

Information technology

Utilities

Telecommunications

Industrials

Consumer discretionary

Consumer staples

1.09

1.32

1.661.37

2.32

3.29

1.91

Real estate2.261.80

S&P 500 Index

7.27


10

Source: FactSet, as of 12/31/16. Price/earnings-to-growth (PEG) ratio is a valuation metric for determining the relative trade-off between the price of a stock, the earnings generated per share, and the company’s expected growth. The forward price-to-earnings (P/E) ratio is a stock valuation measure comparing the current share price of a stock with the underlying company’s estimated earnings per share over the next 12 months. The long-term earnings growth forecast is an estimate of a company’s expected long-term growth in earnings, derived from all polled analysts’ estimates. The S&P 500 Index tracks the performance of 500 of the largest publicly traded companies in the United States. The energy PEG ratio (7.39) is not charted. It is not possible to invest directly in an index. Past performance does not guarantee future results.

Some sectors are more expensive than others

Our network favors sectors with a combination of compelling growth and reasonable valuations (lower PEG ratios)

PEG ratios of S&P 500 Index sectors (size of the bubbles represents PEG ratio values)

PEG = P/EG Overweight

Neutral/underweight

Network views

“We continue to find rich valuations in the dividend-oriented segments of the

market, especially given their lower growth potential.”

U.S. equity



Russell 1000 Value Index

Russell 1000 Growth Index

Russell 1000 Index

27%

15%

3%

10-year U.S. Treasury yield (left axis) Performance of Russell 1000 Value Index relative to that of Russell 1000 Growth Index (right axis)

0.9

1.0

1.1

1.2

1.3

1.4

1.5x

2016201520142013201220112010200920082007200620052004200320021.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5%

Russell 1000 Value Index

Russell 1000 Growth Index

Russell 1000 Index

27%

15%

3%

10-year U.S. Treasury yield (left axis) Performance of Russell 1000 Value Index relative to that of Russell 1000 Growth Index (right axis)

0.9

1.0

1.1

1.2

1.3

1.4

1.5x

2016201520142013201220112010200920082007200620052004200320021.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5%


11

Financials are driving the shift in sentiment from growth to value

Rising yields have historically been associated with outperformance of the financials-heavy Russell 1000 Value Index Financials sector weighting by index

Source: Bloomberg, FTSE/Russell, U.S. Department of the Treasury, as of 12/31/16. The Bank of America Merrill Lynch (BofA ML) 10-Year U.S. Treasury Index tracks the performance of U.S. Treasury securities having a maturity of 10 years. The Russell 1000 Value Index tracks the performance of publicly traded large-cap companies in the United States with lower price-to-book ratios and lower forecasted growth values. The Russell 1000 Growth Index tracks the performance of publicly traded large-cap companies in the United States with higher price-to-book ratios and higher forecasted growth values. The Russell 1000 Index tracks the performance of 1,000 publicly traded large-cap companies in the United States. It is not possible to invest directly in an index. Past performance does not guarantee future results.

U.S. value


“Our ‘rising rate beneficiaries’ theme decidedly favors financials, while potential economic and earnings

acceleration has caused us to shift our tactical recommendation to favoring value over growth.”

The recent bounce in yields bodes well for higher net interest margins among financials.


7x 8x 9x 10x 11x 12x 13x 14x 15x 16x 17x 18x 19x 20x 21x 22x 23x 24x 25x 26x 27x 28x 29x 30x–25

–20

–15

–10

–5

0

5

10

15

20

25

30

35

40%

Annu

aliz

ed p

rice

retu

rns

sinc

e 19

54

Starting trailing 12-month P/E ratio

S&P 500 Index rolling 1-year returnS&P 500 Index rolling 10-year return


While short-term results are driven by a variety of factors, long-term returns have clearly declined as valuations rise

12

U.S. equity


Long term, expect mid-single-digit returns based on today’s valuations

Source: Standard & Poor’s, Bloomberg, as of 12/31/16. The S&P 500 Index tracks the performance of 500 of the largest publicly traded companies in the United States. It is not possible to invest directly in an index. Trailing price-to-earnings (P/E) ratios measure a company’s current stock price as a multiple of its trailing 12-month earnings. Past performance does not guarantee future results.

Over the past 60 years, when valuations reached today’s levels, the median price return over the next decade was 5%. On a 1-year basis, the range of outcomes was significantly wider.

Current valuation range

100% of returns over 20% took place during the 1990s tech bubble

“Multiples could still expand from here based on low inflation and rates,

but at some level valuations will matter.”

International equity: mixed outlookWhile central banks should continue to provide support, a surging U.S. dollar and significant electoral uncertainty will create headwinds.

John Hancock Investments | Market Intelligence International equity: mixed outlook

Key macro themes

See pages 14–17 for complete information. Past performance does not guarantee future results.

Range of views from our networkDarker shading indicates a greater concentration of views within our network.


International equity

European equity

Japanese equity

Emerging-market equity

Our 12–18 month view: NEUTRAL

We agree with the consensus view that investors should maintain their current exposure to non-U.S. equities, both broadly and across major developed-market regions. While corporate fundamentals and valuations are increasingly potential tailwinds, populist politics in Europe and a stronger U.S. dollar will likely weigh on returns. As a result, we’ve maintained our neutral outlook.


Brexit may be just the tip of the iceberg as the European Union is tested by surging populism and a busy election calendar.

Oil: stabilizing

The rebound in oil off its 2016 lows has helped commodity- producing emerging markets and remains a net positive for import countries at current levels.


A stronger U.S. dollar will likely be a headwind for international allocations while benefiting foreign companies that export to the United States.

What’s inside�� Upcoming elections in Europe threaten to upset the status quo

�� The European Central Bank should continue to provide support

�� After their longest period of underperformance, international equities offer relative value

�� Emerging-market fundamentals appear to have bottomed

13


Germany Poland

Czech Republic

Slovakia

AustriaHungary

Romania

Bulgaria

Greece

Italy

SloveniaCroatia

Portugal

France

Spain

UnitedKingdom

Netherlands

Belgium

Luxembourg

Ireland

Malta

Denmark

Estonia

Latvia

Lithuania

Sweden

Finland

Cyprus

Country Political event Network view

United Kingdom

June 2016: Brexit vote

2017: Potentially triggering Article 50

Brexit-related instability will continue as trade details are negotiated in coming years

Italy December 2016: Constitutional referendum

2017: Potential government elections

Structural reforms are still needed, and major banks have insolvency risk

France April/May 2017: Presidential election

Far-right party has a chance of winning and advocates leaving the EU

Germany October 2017: Presidential election

Chancellor Merkel, running for a fourth term, will face competition from the anti-EU Alternative for Germany party


Four countries—under a cloud of political uncertainty and representing nearly 70% of Europe’s GDP—could decide the fate of the European Union (EU)

European equity


Upcoming elections in Europe threaten to upset the status quo

Source: World Bank, as of 12/31/16. Past performance does not guarantee future results.

“There could be a ‘neverendum’ in Europe, which is to say the political risks

surrounding the European Union will not go away anytime soon.”

14


ECB

bala

nce

shee

t (tr

illio

ns)

ECB response during Greek crisis

ECB response to deflationary pressures

and weak growth

1.8

2.0

2.2

2.4

2.6

2.8

3.0

3.2

3.4

3.6

€3.8

1.62016201520142013201220112010

Key monetary policy tools as of December 2016

Main refinancing operations rates

0.00%

Marginal lending facility rates

0.25%

Deposit facility rates –0.40%

Monthly QE purchases €80B (through 3/31/17)€60B (3/31/17–12/31/17)

Upcoming ECB meetings

2017 1/19/17 and 3/9/17


Source: Bloomberg, as of 12/31/16. Past performance does not guarantee future results.

15

The European Central Bank should continue to provide support

European Central Bank (ECB) assets will likely reach unprecedented levels in response to Brexit and other crises

The ECB is deploying its monetary policy arsenal in an environment of political and economic uncertainty.

European equity


“Monetary policy in the euro-zone is on track to remain exceptionally loose for a very long time to come.”


–240

–120

0

120

240

360%

2016201020052000199519901985198019751971

26 41 25 67 7549 58 18 87 111

MSC

I EAF

E In

dex

rela

tive

retu

rn

Length of cycle in months

Cumulative outperformance of international equities

Cumulative underperformance of international equities

Valuations and dividend yields are more attractive overseas

Top 5 countries in the MSCI EAFE Index by market capitalization

Forward P/E (x)

Dividend yield (%)

Japan 16.02 1.98

United Kingdom 17.07 4.01

France 15.83 3.31

Switzerland 17.87 3.39

Germany 14.62 2.61

United States 18.83 2.09


16

“U.S. outperformance is cyclical and the current cycle is already longer than the historical norm.”

Source: Bloomberg, FactSet, as of 12/31/16. International equities are represented by the MSCI Europe, Australasia, and Far East (EAFE) Index, which tracks the performance of publicly traded large- and mid-cap stocks of companies in those regions. Total returns are calculated gross of foreign withholding tax on dividends. U.S. equities are represented by the S&P 500 Index, which tracks the performance of 500 of the largest publicly traded companies in the United States. Japan, the United Kingdom, France, Switzerland, and Germany are represented by the MSCI Japan Index, the MSCI United Kingdom Index, the MSCI France Index, the MSCI Switzerland Index, and the MSCI Germany Index, respectively, which track the performance of publicly traded large- and mid-cap stocks of companies in those countries. It is not possible to invest directly in an index. Forward price-to-earnings (P/E) ratio is a stock valuation measure comparing the current share price of a stock with the underlying company’s estimated earnings per share over the next 12 months. Past performance does not guarantee future results.

Historically, periods of underperformance by international equities have been followed by periods of outperformance.

Cumulative relative performance of the MSCI EAFE Index against the S&P 500 Index

After their longest period of underperformance, international equities offer relative value

International equity



Emer

ging

Mar

kets

Man

ufac

turin

g PM

I

60

65

70

75

80

85

90

95

100

$105

MSCI EM

Index next 12-month earnings estim

ates

PMI (left axis) Earnings (right axis)

47

48

49

50

51

52

53

54

55

56

57

201620152014

Contracting Expanding

40 45 50 55 60

India

Brazil

Taiwan

SouthKorea

China48.0

51.9

46.6

49.4

49.4

56.2

44.5

45.2

51.1

49.6

February 2016December 2016

Emer

ging

Mar

kets

Man

ufac

turin

g PM

I

60

65

70

75

80

85

90

95

100

$105

MSCI EM

Index next 12-month earnings estim

ates

PMI (left axis) Earnings (right axis)

47

48

49

50

51

52

53

54

55

56

57

201620152014

Contracting Expanding

40 45 50 55 60

India

Brazil

Taiwan

SouthKorea

China48.0

51.9

46.6

49.4

49.4

56.2

44.5

45.2

51.1

49.6

February 2016December 2016


Forward earnings estimates and PMI readings have ticked up since early 2016

17

“Critically, EM fundamentals are beginning to shift in a more positive direction; EM growth

appears to be bottoming and inflation pressures are stabilizing.”

Emerging-market fundamentals appear to have bottomed

Emerging-market equity


PMI readings show several emerging economies moving to expansionary territory from February’s lows

Source: Bloomberg, FactSet, as of 12/31/16. Purchasing managers’ indexes (PMIs) are economic indicators derived from monthly surveys of private sector purchasing managers who are asked about changes in business conditions. An index above 50 indicates an increase in business activity while an index below 50 indicates a decrease in business activity. The MSCI Emerging Markets (EM) Index tracks the performance of publicly traded large- and mid-cap emerging-market stocks. It is not possible to invest directly in an index. Past performance does not guarantee future results.

PMIs of the five largest country weights in the MSCI EM Index

Fixed income: select opportunitiesA nimble approach may be warranted to pursue income opportunities outside of low-yielding government sectors.

John Hancock Investments | Market Intelligence Fixed income: select opportunities

Key macro themes

See pages 19–22 for complete information. Past performance does not guarantee future results.

Range of views from our networkDarker shading indicates a greater concentration of views within our network.


Fixed income

U.S. government

U.S. high yield

U.S. investment grade

Bank loans

Emerging-market debt (USD)

Our 12–18 month view: SLIGHTLY NEGATIVE

Our discussions with managers who are bearish on fixed income informed our slightly negative view, particularly as some have actively lowered their duration for high-quality bonds. Credit-sensitive sectors should benefit.


Expansionary fiscal policy could pressure the Fed to normalize rates more quickly.

Oil: stabilizing

Oil prices near $50 per barrel have moderated the macro risks to high-yield and emerging-market debt.


A strengthening dollar, combined with attractive relative yields, could draw more capital into U.S. fixed-income markets in 2017.

What’s inside�� The Fed will be better equipped to continue normalizing monetary policy in 2017

�� High-quality bond allocations are poised to earn meager returns

�� Credit sectors are better positioned to weather rising rates

�� Opportunities in corporate debt entail trade-offs

18


1.0

1.5

2.0

2.5

3.0

3.5%

Long term201920182017

1.1

1.4

1.9

2.1

2.6

2.9

2.9

3.0

2017 FOMC meeting schedule

Jan/Feb 31–1 July 25–26

Mar 14–15* Sept 19–20*

May 2–3 Oct/Nov 31–1

June 13–14* Dec 12–13*

* Meeting concludes with a press conference.

4.2 4.4 4.6 4.8 5.01.0

1.5

2.0

2.5

Unemployment rate

Core

infla

tion

Current


The Fed will be better equipped to continue normalizing monetary policy in 2017

“The increase in the median dots suggests greater con fidence by FOMC members

in the economic and inflation outlooks.”

19

The U.S. Federal Reserve is currently anticipating three rate hikes in 2017, a projection that looks increasingly plausible

Source: U.S. Federal Reserve (Fed), Chicago Fed, as of 12/31/16. Interest-rate projections are based on the median for the federal funds rate projections of the The Federal Open Market Committee (FOMC), the body responsible for setting the federal funds rate, which meets eight times a year. (One hundred basis points equals one percentage point.) FOMC members anonymously report interest-rate projections four times a year, in March, June, September, and December. Past performance does not guarantee future results.

Median level of target federal funds rate

Projection as of December 2016

Projection as of September 2016

The challenges the Fed faced in raising rates in 2016 are likely to dissipate as inflation expectations continue to rise.

Fixed income


Inflation and unemployment figures are getting closer to the Fed’s targets (%)


02 4 6 8 10 12 14 16 18

8

4

12

16

20

Subs

eque

nt fi

ve-y

ear r

etur

ns (%

)

Starting yield (%)

2000s2010s

1990s1980s1970s


20

High-quality bond allocations are poised to earn meager returns

Low yields and upward pressure on interest rates make duration-sensitive allocations a particularly risky proposition

Source: Bloomberg Barclays U.S. Aggregate Bond Index, as of 12/31/16. This index tracks the performance of U.S. investment-grade bonds in government, asset-backed, and corporate debt markets. Prior to 8/24/16, the index was named the Barclays U.S. Aggregate Bond Index. It is not possible to invest directly in an index. Past performance does not guarantee future results.

“In today’s fixed-income landscape, defined by extraordinarily low yields, conventional

high-quality bond strategies are no longer sufficient to meet investors’ return objectives.”

Relationship between starting bond yields and subsequent five-year returns for the Bloomberg Barclays U.S. Aggregate Bond Index

Fixed income


The notable exception to this relationship was when the aggressive rate increases of the Volcker era dampened the returns of earlier bond issues.

87% of a bond’s performance is attributable to its starting yield, and today, the Agg is yielding only 2.61%.



Source: FactSet, as of 12/31/16. The chart depicts daily closing prices for the 10-year U.S. Treasury yield from 1/1/09 to 12/31/16. The time periods identified in the chart reflect sudden and pronounced increases in the 10-year U.S. Treasury yield of at least 0.75% from trough to peak. High yield is represented by the Bloomberg Barclays U.S. Corporate High Yield Bond Index, which tracks the performance of the U.S. dollar-denominated high-yield, fixed-rate corporate bond market. Bank loans are represented by the S&P/LSTA U.S. Leveraged Loan 100 Total Return Index, which tracks the largest facilities in the leveraged loan market. U.S. aggregate is represented by the Bloomberg Barclays U.S. Aggregate Bond Index, which tracks the performance of U.S. investment-grade bonds in government, asset-backed, and corporate debt markets. U.S. Treasuries are represented by the Bloomberg Barclays U.S. Aggregate Government Index, which tracks the performance of U.S. dollar-denominated fixed-rate, nominal U.S. Treasuries and U.S. agency debentures. Bloomberg was added to the Barclays index names on 8/24/16. Diversification does not guarantee a profit or eliminate the risk of a loss. It is not possible to invest directly in an index. Past performance does not guarantee future results.

“Investing in areas beyond the Agg is not a recipe for taking on more risk; rather, we would argue it represents

a diversification of risks, and therefore offers the potential for reducing overall volatility.”The taper tantrum of 2012–2013 may offer clues to the trend that’s developing today

21

Bank loans


Credit sectors are better positioned to weather rising rates

– 6

–3

0

3

6

9

12

15

Cum

ulat

ive

retu

rn (%

)

Months from bottom in yields

1716151413121110987654321– 6

–3

0

3

6

9

12

15

Cum

ulat

ive

retu

rn (%

)

Months from bottom in yields

1716151413121110987654321

Period 10-year U.S. Treasury yield (%) Cumulative returns (%)

Start date End date Start yield End yield High yield Bank loans U.S. aggregate U.S. Treasuries

7/20/12 12/27/13 1.46 3.00 14.35 9.08 – 1.67 – 3.37

7/8/16 12/31/16 1.36 2.45 5.93 4.71 – 3.31 – 4.89


– 0.5 – 0.4 – 0.3 – 0.2 – 0.1 0.0 0.1 0.2 0.3 0.4 0.5 0.60

1

2

3

4

5

6

7

Yiel

d to

wor

st (%

)

Investment-grade corporates

U.S. aggregate Municipal

Mortgage-backed securities

U.S. Treasury

Emerging-market local

Bank loans

Emerging-market debt, USD

Global aggregate (ex-U.S.)

High yield

5-year quarterly correlation to S&P 500 Index (%)


“Bonds play a valuable role in overall portfolios by serving as a stabilizing force

when riskier assets, such as equities, are weak.”

22

Opportunities in corporate debt entail trade-offs U.S. investment grade


Source: Barclays Live, FactSet, Western Asset Management Company, as of 12/31/16. The S&P 500 Index tracks the performance of 500 of the largest publicly traded companies in the United States. It is not possible to invest directly in an index. Five-year quarterly return correlations are relative to the S&P 500 Index. Yield to worst is the lowest potential yield calculated by taking into account an issue’s optionality, such as prepayments or calls. Correlation is a statistical measure that describes how investments move in relation to each other, which ranges from –1.0 to 1.0. The closer the number is to 1.0 or –1.0, the more closely the two investments are related. Diversification does not guarantee a profit or eliminate the risk of a loss. Past performance does not guarantee future results.

Corporate bonds offer attractive yields with varying degrees of equity sensitivity

In the global landscape of fixed-income options, U.S. investment-grade corporates offer a compelling mix of yield and diversification potential.


10-yr medianLast quarterCurrent

10-yr min P/E

10-yr max P/E 10-year max reached 52.14x in December 2009

10-year max reached 21.83% in November 200810-yr median

Last quarterCurrent

10-yr min yield

10-yr max yield

0

5

10

15

20

25

30x

MSCI EMIndex

MSCI EAFEIndex

Russell 2000Index

Russell 1000Value Index

Russell 1000Growth Index

Russell 1000Index

0

3

6

9

12

15%

BloombergBarclays EMDIndex (USD)

BloombergBarclays Global

Agg Bond Index (ex-USD)

BloombergBarclays

U.S. High Yield Bond Index

BloombergBarclays

U.S. Corporate Bond Index

BloombergBarclays

U.S. Treasury Bond Index

BloombergBarclays

U.S. Aggregate Bond Index

10-yr medianLast quarterCurrent

10-yr min P/E

10-yr max P/E 10-year max reached 52.14x in December 2009

10-year max reached 21.83% in November 200810-yr median

Last quarterCurrent

10-yr min yield

10-yr max yield

0

5

10

15

20

25

30x

MSCI EMIndex

MSCI EAFEIndex

Russell 2000Index

Russell 1000Value Index

Russell 1000Growth Index

Russell 1000Index

0

3

6

9

12

15%

BloombergBarclays EMDIndex (USD)

BloombergBarclays Global

Agg Bond Index (ex-USD)

BloombergBarclays

U.S. High Yield Bond Index

BloombergBarclays

U.S. Corporate Bond Index

BloombergBarclays

U.S. Treasury Bond Index

BloombergBarclays

U.S. Aggregate Bond Index

“... across asset classes we are becoming wary of valuations at current levels,

which is a key issue as it relates to the amount of risk to take going forward.”1

23

Forward P/E ratios (12/31/06–12/31/16) 10-year yields (12/31/06–12/31/16)

Source: FactSet, Bloomberg, as of 12/31/16. 1 Andrew Milligan, head of global strategy, Standard Life Investments. The Russell 1000 Index tracks the performance of 1,000 publicly traded large-cap companies in the United States. The Russell 1000 Growth Index and Value Index track the performance of publicly traded large-cap companies in the United States with higher price-to-book ratios and higher forecasted growth values, and lower price-to-book ratios and lower forecasted growth values, respectively. The Russell 2000 Index tracks the performance of 2,000 publicly traded small-cap companies in the United States. The MSCI Europe, Australasia, and Far East (EAFE) Index tracks the performance of publicly traded large- and mid-cap stocks of companies in those regions. Total returns are calculated gross of foreign withholding tax on dividends. The MSCI Emerging Markets (EM) Index tracks the performance of publicly traded large- and mid-cap emerging-market stocks. The Bloomberg Barclays U.S. Aggregate Bond Index tracks the performance of U.S. investment-grade bonds in government, asset-backed, and corporate debt markets. The Bloomberg Barclays U.S. Treasury Bond Index, U.S. Corporate Bond Index, and U.S. High Yield Bond Index track the performance of U.S. bonds in those respective markets. The Bloomberg Barclays Global Aggregate (Agg) Bond Index (ex-USD) tracks the performance of global investment-grade bonds in government, corporate, and securitized debt markets. The Bloomberg Barclays Emerging Markets Debt (EMD) Index (USD) tracks hard currency emerging-market debt that includes fixed- and floating-rate U.S. dollar-denominated debt issued from sovereign, quasisovereign, and corporate emerging-market issuers. Bloomberg was added to the Barclays index names on 8/24/16. It is not possible to invest directly in an index. The forward price-to-earnings (P/E) ratio is a stock valuation measure comparing the current share price of a stock with the underlying company’s estimated earnings per share over the next 12 months. Past performance does not guarantee future results.

Compelling investment opportunities have become harder to find


Alternatives

Fixed income

Equities

Correlation to S&P 500 Index Correlation to Bloomberg Barclays U.S. Aggregate Bond Index

0.83

0.64

0.42

0.98

0.97

0.94

0.80

0.47

0.11

–0.310.410.65–0.16

0.08

0.35

0.69

0.160.74

0.75

0.87

0.54

0.03

0.16

0.63

–0.04

–0.20

–0.05

–0.21

0.07

0.92

0.96

0.590.210.91

0.69

0.19

–0.04

0.49–0.14

–0.21

–0.17

0.01

Even

tdr

iven

Equi

tyhe

dge

Hedgefund

Absolute

return

Hedg

e fun

dsof

fund

s

Macro

strategies

Relative

valueInt’l

equities Emerging-

market equities

U.S.REITS

Large-cap

growth stocks

Large-capvalue stocks

Mid

-cap

stoc

ks

Smal

l-cap

stock

s

High yi

eld

Investment

grade

International

bonds

Mortgage-

backed securities Bankloans Emerging-market debt

Treasury

Correlations

–0.8

–0.6

–0.4

–0.2

0.0

0.2

0.4

0.6

0.8

1.0

24

“Relying on duration as the primary means of pursuing downside-risk reduction may not work with rates

already at historically low levels or, even more perilously, if rising rates cause the market correction.”1

Three-year correlations to stocks and bonds

Source: Morningstar Direct, as of 11/30/16. 1 Kent Stahl, CFA, director of investment strategy and risk; Gregg Thomas, CFA, associate director of investment strategy and risk; Tom Simon, CFA, director of equity risk and investment strategy and risk; and Luke Stellini, director of strategic

solutions and investment strategy and risk, all of Wellington Management. Wellington Management is an SEC-registered investment advisor and an independent and unaffiliated subadvisor to John Hancock Investments. The S&P 500 Index tracks the performance of 500 of the largest publicly traded companies in the United States. The Bloomberg Barclays U.S. Aggregate Bond Index, which tracks the performance of U.S. investment-grade bonds in government, asset-backed, and corporate debt markets. Prior to 8/24/16, the index was named the Barclays U.S. Aggregate Bond Index. It is not possible to invest directly in an index. Past performance does not guarantee future results.

Absolute return strategies are unique in their modest correlation to both U.S. stocks and bonds.

In recent years, high-yield bonds, hedge funds of funds, and international equities have been highly correlated with U.S. equities, making diversification more challenging.

High correlations across assets underscore the need for more effective diversification

John Hancock Investments | Market Intelligence 25

Strategies for portfolio construction

Inflationary pressures are building The Core Consumer Price Index (CPI) in the United States has remained above 2% for the past 11 months; medical care and housing have seen the strongest inflationary increases.

Headline inflation is likely to accelerate in 2017 as higher oil prices translate into higher prices at the pump.

Inflation above 2% underscores the need to seek out assets that have the ability to earn positive real returns and maintain purchasing power.

Investors may wish to consider allocations to inflation-hedging asset classes such as Treasury Inflation-Protected Securities, infrastructure, and equities.

Investors should be mindful of risk Investor sentiment has become increasingly bullish on risk assets since the U.S. presidential election and volatility has remained muted. While risk assets should do well in the year ahead, there will likely be bumps along the way.

Conservative investors should not become overly complacent and may wish to consider strategies designed to help manage risk, such as high-quality corporate bonds and low beta alternatives.

Source: FactSet, as of 11/30/16 (top graph). Federal Reserve Economic Data (FRED), Federal Reserve Bank of St. Louis, as of 12/31/16 (bottom graph). The American Association of Individual Investors (AAII) Investor Sentiment Survey measures the percentage of individual investors who are bullish, bearish, and neutral on the stock market over the near term. The historical average for bullish sentiment among investors is 38.5%. The Chicago Board of Options Exchange (CBOE) Volatility Index (VIX) shows the market’s expectation of 30-day volatility and is constructed using the implied volatilities of a wide range of S&P 500 Index options. The Core Consumer Price Index (CPI) is a comprehensive measure used for estimation of price changes in a basket of goods and services representative of consumption expenditure in an economy. It is not possible to invest directly in an index. Past performance does not guarantee future results.

0.5

1.0

1.5

2.0

2.5%

2016201520142013201220112010

Core CPI YoY change

10

15

20

25

30

12/1611/1610/169/1620

30

40

50

60%AAII Investor Sentiment Survey—bullish (right axis)CBOE VIX (left axis)

John Hancock Investments | Market Intelligence 26

Consensus views Nonconsensus views


Mr. Trump’s corporate tax reform and fiscal spending proposals will be approved, providing support for U.S. equities and sending bond yields higher.

U.S. cyclical sectors will benefit on a relative basis from reflationary measures.

Market volatility will be elevated throughout 2017 as a result of elections in France and Germany and uncertainty in the wake of the U.K. and Italian referendums.

Mr. Trump’s agenda will face significant opposition during the congressional budget process resulting in some proposals being scaled back.

Expectations of economic growth based on a new political regime are overly optimistic and lower rates will persist, aiding U.S. Treasuries and defensive sectors such as utilities and REITs.

Geopolitical events in Europe will be largely discounted by the markets; positives such as aggressive central bank easing and weakening currencies will lift investor sentiment, pushing markets higher.

Oil: stabilizing Oil prices are likely to remain rangebound; while OPEC’s production cut agreement appears to have placed a floor on oil prices, U.S. swing producers will limit the upside by boosting output.

Oil above $50 a barrel represents a meaningful increase over early 2016 prices, which will provide a tailwind for corporate profits in key sectors.

The rebound in oil prices will send the rig count higher, creating excess supply and subsequently weighing on prices.

If recent dollar strength persists, the historically inverse relationship between oil and the dollar will return, weighing on prices.

Surprise geopolitical events are not being priced in today and could create a meaningful catalyst for higher oil prices.


Higher interest rates and capital flows into the United States will continue to push the dollar higher, although at a more moderate pace.

Technical indicators also point to further upside potential for the dollar entering 2017.

Additional gains in the dollar will dampen the profits of some U.S. multinational corporations.

Mr. Trump’s fiscal spending agenda will ultimately be financed by an increase in the budget deficit, weakening the dollar.

U.S. inflation will accelerate, leaving the Fed behind the curve and putting pressure on the dollar.

The Fed will again fall short of guidance, and the dollar’s ascent will reverse course as rates remain lower for longer.

Beyond consensus: a closer look at opposing views in our network

Incorporating contrarian views into the analysis of each asset class is an important part of our research process. This balance of insight can lead to more objective and fully formed conclusions by helping avoid confirmation bias and other behavioral pitfalls. Below are the most debated views during the previous quarter.


Managed by Morningstar category A C I R6

DO

MES

TIC

EQU

ITY

Balanced JHAM Allocation—50% to 70% equity SVBAX SVBCX SVBIX JBAWXBlue Chip Growth T. Rowe Price Large growth JBGAX JBGCXClassic Value Pzena Large value PZFVX JCVCX JCVIX JCVWXDisciplined Value Boston Partners Large value JVLAX JVLCX JVLIX JDVWXDisciplined Value Mid Cap1 Boston Partners Mid-cap blend JVMAX JVMCX JVMIX JVMRXEquity Income T. Rowe Price Large value JHEIX JHERXFundamental All Cap Core JHAM Large growth JFCAX JFCCX JFCIX JFAIXFundamental Large Cap Core2 JHAM Large blend TAGRX JHLVX JLVIX JLCWXFundamental Large Cap Value JHAM Large value JFVAX JFVCX JFVIX JFLVXNew Opportunities BW/DFA/GWK/INV Small blend JASOX JBSOX JHSOX JWSOXSmall Cap Value Wellington Small blend JSCAX JSCBX JSCCXSmall Company3 Mesirow Small blend JCSAX JCSIX JCSWXStrategic Growth JHAM Large growth JSGAX JSGCX JSGIX JSGTXU.S. Global Leaders Growth SGA Large growth USGLX USLCX USLIX UGLSXU.S. Growth4 Wellington Large blend JHUAX JHUCX JHUIX JUSEXValue Equity Barrow Hanley Large value JVEAX JVECX JVEIX JVERX

GLO

BAL/

INT’

L EQ

UIT

Y

Disciplined Value International Boston Partners Foreign large blend JDIBX JDICX JDVIX JDIUXEmerging Markets Dimensional Diversified emerging markets JEVAX JEVCX JEVIX JEVRXEmerging Markets Equity JHAM Diversified emerging markets JEMQX JEMZX JEMMX JEMGXGlobal Equity JHAM World stock JHGEX JGECX JGEFX JGEMXGlobal Shareholder Yield Epoch World stock JGYAX JGYCX JGYIX JGRSXGreater China Opportunities JHAM China region JCOAX JCOCX JCOIXInternational Growth Wellington Foreign large growth GOIGX GONCX GOGIX JIGTXInternational Small Company Dimensional Foreign small/mid blend JISAX JISDX JSCIXInternational Value Equity JHAM Foreign large value JIEAX JIEVX JIEEX JIVUX

INCO

ME

Bond JHAM Intermediate-term bond JHNBX JHCBX JHBIX JHBSXCalifornia Tax-Free Income JHAM Muni California long TACAX TCCAXEmerging Markets Debt JHAM Emerging markets bond JMKAX JMKCX JMKIX JEMIXFloating Rate Income WAMCO Bank loan JFIAX JFIGX JFIIX JFIRXGlobal Income Stone Harbor High yield bond JYGAX JYGIXGovernment Income JHAM Intermediate government JHGIX TCGIX JGIFXHigh Yield5 JHAM High yield bond JHHBX JHYCX JYHIX JFHYXHigh Yield Municipal Bond JHAM High yield muni JHTFX JCTFXIncome JHAM Multisector bond JHFIX JSTCX JSTIX JSNWXInvestment Grade Bond JHAM Intermediate-term bond TAUSX TCUSX TIUSX JIGEXMoney Market JHAM U.S. money market taxable JHMXX JMCXXShort Duration Credit Opportunities Stone Harbor Multisector bond JMBAX JMBCX JMBIX JSDEXSpectrum Income T. Rowe Price Multisector bond JHSIX JHSRXStrategic Income Opportunities JHAM Multisector bond JIPAX JIPCX JIPIX JIPRXTax-Free Bond JHAM Muni national long TAMBX TBMBX

Managed by Morningstar category A C I R6

ALT

ERN

ATIV

E A

ND

SPE

CIA

LTY

Absolute Return Currency First Quadrant Multicurrency JCUAX JCUCX JCUIX JCURXAlternative Asset Allocation JHAM Multialternative JAAAX JAACX JAAIX JAARXEnduring Assets Wellington World stock JEEBX JEEFX JEEIX JEEDXFinancial Industries JHAM Financial FIDAX FIDCX JFIFXGlobal Absolute Return Strategies Standard Life Multialternative JHAAX JHACX JHAIX JHASXGlobal Conservative Absolute Return Standard Life Nontraditional bond JHRAX JHRCX JHRIX JHRRXGlobal Focused Strategies Standard Life Multialternative JGFOX JGFEX JGFGX JGFDXGlobal Real Estate Standard Life Global real estate JHGRX JHGCX JHGSX JHGNXNatural Resources6 Jennison Natural resources JNRAX JNRIXRedwood Boston Partners Option writing JTRAX JTRCX JTRIX JTRRXRegional Bank JHAM Financial FRBAX FRBCX JRBFXSeaport Wellington Long/short equity JSFBX JSFTX JSFDX JSFRXTechnical Opportunities Wellington Large growth JTCAX JTCDX JTCIX

ASS

ET A

LLO

C. Income Allocation Fund JHAM Allocation—15% to 30% equity JIAFX JIAGX JIAIX JIASXLifestyle Portfolios7 JHAMRetirement Living Portfolios7 JHAMRetirement Living II Portfolios7 JHAMRetirement Choices Portfolios7 JHAM

ESG

ESG All Cap Core Trillium Large blend JHKAX JHKCX JHKIX JHKRXESG Core Bond Breckinridge Intermediate-term bond JBOAX JBOIX JBORXESG International Equity Boston Common Foreign large value JTQAX JTQIX JTQRXESG Large Cap Core Trillium Large blend JHJAX JHJCX JHJIX JHJRX

Index provider Morningstar category Ticker

ETF

John Hancock Multifactor Consumer Discretionary ETF Dimensional Consumer cyclical JHMCJohn Hancock Multifactor Consumer Staples ETF Dimensional Consumer defensive JHMSJohn Hancock Multifactor Developed International ETF Dimensional Foreign large blend JHMDJohn Hancock Multifactor Energy ETF Dimensional Equity energy JHMEJohn Hancock Multifactor Financials ETF Dimensional Financial JHMFJohn Hancock Multifactor Healthcare ETF Dimensional Health JHMHJohn Hancock Multifactor Industrials ETF Dimensional Industrials JHMIJohn Hancock Multifactor Large Cap ETF Dimensional Large blend JHMLJohn Hancock Multifactor Materials ETF Dimensional Natural resources JHMAJohn Hancock Multifactor Mid Cap ETF Dimensional Mid-cap blend JHMMJohn Hancock Multifactor Technology ETF Dimensional Technology JHMTJohn Hancock Multifactor Utilities ETF Dimensional Utilities JHMU

27

Family of funds As of December 31, 2016

1 As of 1/31/14, the fund is closed to new investors. 2 Prior to 3/1/16, the fund was named John Hancock Large Cap Equity Fund. 3 On 4/1/16, Mesirow Financial Investment Management acquired Fiduciary Management Associates. 4 Effective 9/28/16, Wellington Management Company LLP replaced GMO as the fund’s manager. Prior to that date, the fund was named John Hancock U.S. Equity Fund. 5 Prior to 10/28/16, the fund was named John Hancock Focused High Yield Fund. 6 As of 8/29/14, the fund is closed to new investments. 7 Effective 2/1/17, John Hancock Lifestyle Portfolios are renamed John Hancock Multimanager Lifestyle Portfolios, John Hancock Retirement Living Portfolios are renamed John Hancock Multimanager Lifetime Portfolios, John Hancock Retirement Living II Portfolios are renamed John Hancock Multi-Index Lifetime Portfolios, and John Hancock Retirement Choices Portfolios are renamed John Hancock Multi-Index Preservation Portfolios. Not all funds are available for sale at all firms. The funds listed above have associated risks. John Hancock Multifactor ETF shares are bought and sold at market price (not NAV), and are not individually redeemed from the fund. Brokerage commissions will reduce returns.

John Hancock ETFs are distributed by Foreside Fund Services, LLC, and are subadvised by Dimensional Fund Advisors LP. Foreside is not affiliated with John Hancock Funds, LLC or Dimensional Fund Advisors LP. Dimensional Fund Advisors LP receives compensation from John Hancock in connection with licensing rights to the John Hancock Dimensional indexes. Dimensional Fund Advisors LP does not sponsor, endorse, or sell, and makes no representation as to the advisability of investing in, John Hancock Multifactor ETFs.

Correlation is a statistical measure that describes how investments move in relation to each other, which ranges from –1.0 to 1.0. The closer the number is to 1.0 or –1.0, the more closely the two investments are related.

Diversification does not guarantee a profit or eliminate the risk of a loss. Macro strategies are represented by the HFRI Macro Index, which tracks the performance of hedge fund strategies making leveraged bets on anticipated price movements of stock markets, interest rates, foreign exchange, and physical commodities. Absolute return strategies are represented by the HFRX Absolute Return Index, which tracks the performance of the hedge funds that seek to obtain absolute returns rather than focus on beating a benchmark. Hedge funds are represented by the HFRU Hedge Fund Composite Index, which tracks the performance of the overall hedge fund universe. Relative value strategies are represented by the HFRI Relative Value Index, which tracks the performance of hedge funds that seek to exploit a valuation discrepancy in the relationship between multiple securities. Hedge fund-of-funds strategies are represented by the HFRI Fund of Funds Composite, which tracks the performance of hedge funds that invest with multiple managers through funds or managed accounts. Event driven is represented by the HFRI Event-Driven (Total) Index, which tracks companies currently or prospectively involved in corporate transactions of a wide variety, including, but not limited to, mergers, restructurings, financial distress, tender offers, shareholder buybacks, debt exchanges, security issuance, or other capital structure adjustments. Equity hedge strategies are represented by the HFRI Equity Hedge (Total) Index, which tracks the performance of hedge funds that maintain both long and short positions in equity and equity derivative securities. U.S. REITs are represented by the MSCI U.S. REIT Index, which seeks to track the performance of the most actively traded REITs in the United States. Large-cap growth stocks are represented by the Russell 1000 Growth Index, which tracks the performance of publicly traded large-cap companies in the United States with higher price-to-book ratios and higher forecasted growth values. Large-cap value stocks are represented by the Russell 1000 Value Index, which tracks the performance of publicly traded large-cap companies in the United States with lower price-to-book ratios and lower forecasted growth values. International equities are represented by the MSCI Europe, Australasia, and Far East (EAFE) Growth Index, which tracks the performance of publicly traded growth-oriented large- and mid-cap stocks of companies in those regions. Total returns are calculated gross of foreign withholding tax on dividends. Emerging-market equities are represented by the MSCI Emerging Markets (EM) Index, which tracks the performance of publicly traded large- and mid-cap emerging-market stocks. Small-cap stocks are represented by the Russell 2000 Index, which tracks the performance of 2,000 publicly traded small-cap companies in the United States. Mid-cap stocks are represented by the Russell Midcap Index, which tracks the performance of publicly traded mid-cap companies in the United States. The Bloomberg Barclays U.S. Aggregate Bond Index, which tracks the performance of U.S. investment-grade bonds in government, asset-backed, and corporate debt markets. Mortgage-backed securities are represented by the Bloomberg Barclays U.S. Mortgage-Backed Securities Index, an unmanaged index comprising 15- and 30-year fixed-rate securities backed by the mortgage pools of Ginnie Mae, Freddie Mac, and Fannie Mae. Bank loans are represented by the Bloomberg Barclays U.S. High Yield Loan Index, an unmanaged index that tracks broad total return metrics of the universe of U.S. dollar-denominated syndicated term loans. International bonds are represented by the Bloomberg Barclays Global Aggregate Bond Index (Agg), which tracks the performance of global investment-grade debt in fixed-rate treasury, government-related, corporate, and securitized bond markets. Investment grade is represented by the Bloomberg Barclays U.S. Corporate Index, which tracks the investment-grade, U.S. dollar-denominated, fixed-rate, taxable corporate bond market. Treasury is represented by the Bloomberg Barclays U.S. Treasury Index, which measures U.S. dollar-denominated, fixed-rate, nominal debt issued by the U.S. Treasury. Emerging-market debt is represented by the J.P. Morgan Emerging Markets Bond Global Index, a market-capitalization-weighted index that tracks the performance of U.S. dollar-denominated Brady bonds, Eurobonds, and traded loans issued by sovereign and quasisovereign entities. High-yield bonds are represented by the Bank of America Merrill Lynch (BofA ML) U.S. High Yield Master II Index, which tracks the performance of globally issued, U.S. dollar-denominated high-yield bonds. The S&P 500 Index tracks the performance of 500 of the largest publicly traded companies in the United States. It is not possible to invest directly in an index.

A fund’s investment objectives, risks, charges, and expenses should be considered carefully before investing. The prospectus contains this and other important information about the fund. To obtain a prospectus, contact your financial professional, call John Hancock Investments at 800-225-5291, or visit our website at jhinvestments.com. Please read the prospectus carefully before investing or sending money.

The opinions expressed are those of the contributors as of 12/31/16 and are subject to change. No forecasts are guaranteed. This commentary is provided for informational purposes only and is not an endorsement of any security, mutual fund, sector, or index. John Hancock Funds, LLC, John Hancock Advisers, LLC, and their affiliates, employees, and clients may hold or trade the securities mentioned in this commentary. Past performance does not guarantee future results.

Asset manager views are compiled throughout the preceding calendar quarter through in-person discussions, reviewed research, and on-site visits. These inputs are complemented by third-party research collected during the calendar quarter. Our views reflect John Hancock Investments’ proprietary weighting of these inputs.

A bearish reading indicates the potential for an asset to underperform its class or subclass on a risk-adjusted basis. A bullish reading indicates the potential for an asset to outperform its class or subclass on a risk-adjusted basis. A neutral reading indicates the potential for performance in line with the asset’s historical averages.

Stocks and bonds can decline due to adverse issuer, market, regulatory, or economic developments; foreign investing, especially in emerging markets, has additional risks, such as currency and market volatility and political and social instability; value stocks may decline in price; growth stocks may be more susceptible to earnings disappointments; the securities of small companies are subject to higher volatility than those of larger, more established companies; and high-yield bonds are subject to additional risks, such as increased risk of default. Fixed-income investments are subject to interest-rate and credit risk; their value will normally decline as interest rates rise or if an issuer is unable or unwilling to make principal or interest payments. Liquidity— the extent to which a security may be sold or a derivative position closed without negatively affecting its market value, if at all—may be impaired by reduced trading volume, heightened volatility, rising interest rates, and other market conditions. Hedging and other strategic transactions may increase volatility and result in losses if not successful. Currency transactions are affected by fluctuations in exchange rates. This material is not intended to be, nor shall it be interpreted or construed as, a recommendation or providing advice, impartial or otherwise. John Hancock Investments and its representatives and affiliates may receive compensation derived from the sale of and/or from any investment made in its products and services.

28John Hancock Investments | Market Intelligence

Connect with John Hancock Investments: @JH_Investments | jhinvestmentsblog.com

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NOT FDIC INSURED. MAY LOSE VALUE. NO BANK GUARANTEE. NOT INSURED BY ANY GOVERNMENT AGENCY.MF342887 JHAN-2016-04-04-0273 MIBOOK 1/17

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