2017 ECONOMIC AND INVESTMENT OUTLOOK

Leo Grohowski Chief Investment Officer

Hosted by:

December 14, 2016

6.7 6.5

-1.1

16.3

4.9

0.3

5.7

15.1

1.9

-3.3 -2.6

2.1

12.8

22.6

0.8

12.5

2.2 2.5

-5

0

5

10

15

20

25U.S. Large Cap U.S. Small Cap

DevelopedInternational

EmergingMarkets Fixed Income Hedge

PER

CEN

T

YTD Return through Election Day (11/8/2016) Return since Election Day (11/9/2016 to Present)

Total YTD Return

YTD Market Performance AS OF DECEMBER 12, 2016

As of 12/12/16 unless noted otherwise. Indices used: Large Cap: S&P 500 Total Return Index; Small Cap: Russell 2000; Developed International: MSCI EAFE (Net); Emerging Markets: MSCI EMF; Fixed Income: Barclays U.S. Aggregate Bond Index; Hedge: HFRX Global Hedge Index. Sources: Bloomberg L.P. and Morningstar. Past performance is not indicative of future performance. 2

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Our Key Investment Themes

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2016

3

Rising Rates

Modest Equity Gains

Divergent Monetary

Policy

Strong Dollar

Persistent Volatility

Stabilization of

Energy Prices

SUSTAINABLE ECONOMIC GROWTH

Our Key Investment Themes

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2017

4

Moderately Rising Rates

Modest Equity Gains

Shift to Fiscal

Reform

Strong Dollar

Bouts of Volatility

Disinflation to Reflation

SUSTAINABLE ECONOMIC GROWTH

Moderate U.S. Growth Expectations

1.8

-0.3

-2.8

2.5

1.9 2.3 2.2 2.4 2.4

1.5

2.2 2.7

-4

-2

0

2

4

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016E 2017E 2018E

PER

CEN

T BNY MELLON WEALTH MANAGEMENT GDP ESTIMATES

Sources: 2007-2015: Bureau of Economic Analysis; 2016E, 2017E and 2018E:BNY Mellon Wealth Management. 5

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Inflation Expectations Rising

0

20

40

60

80

100

120

1.0

1.2

1.4

1.6

1.8

2.0

2.2

2.4

2.6

2.8

2011 2012 2013 2014 2015 2016

PRIC

E ($

/BB)

PER

CEN

T

Yield on 10-Yr Treasury Note Less 10-Year TIPS Crude Oil ($/bbl)

ROLLING IMPLIED INFLATION ON 10-YEAR TREASURY

As of 12/12/2016. Source: Bloomberg 6

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Treasury Yields Decouple?

-0.5

0

0.5

1

1.5

2

2.5

2011 2012 2013 2014 2015 2016

PER

CEN

T DIFFERENCE BETWEEN 10-YEAR U.S. AND 10-YEAR GERMANY

As of 12/12/2016. Source: Bloomberg. 7

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Corporate Credit Spreads

0

100

200

300

400

500

600

700

800

900

1,000

2011 2012 2013 2014 2015 2016

OPT

ION

AD

JUST

ED S

PREA

D (B

PS)

U.S. Corporate High Yield - OAS U.S. Corporate Investment Grade - OAS

U.S. CORPORATE HIGH YIELD VS. U.S. CORPORATE INVESTMENT GRADE

As of 12/12/2016. Source: Barclays Live 8

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Muni Yields as a Percentage of Treasuries

80

100

120

140

2011 2012 2013 2014 2015 2016

PER

CEN

T AAA 10-YR MUNICIPAL BOND YIELDS AS PERCENTAGE OF 10-YR TREASURY YIELDS

As of 12/12/2016. Source: Bloomberg 9

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Historical Bull Markets S&P 500 1928 TO PRESENT

As of 11/30/2016. Source: StrategasRP 10

1932-37

1942-46

1949-56

1957-61

1962-66

1966-68

1970-73

19774-80

1982-87

1987-90

1990-00

2002-07

3-9-09 to Present 93 Months, 225%

Average 59 Months, 169%

0%

50%

100%

150%

200%

250%

300%

350%

400%

450%

0 20 40 60 80 100 120

BULL

MAR

KET

ADVA

NC

E (%

)

BULL MARKET DURATION (MONTHS)

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Equity Gains more Modest and U.S. Led

*As of 11/30/16. Source: Bloomberg and MSCI *U.S. Large Cap: S&P 500; U.S. Small Cap: S&P 600; Int’l Developed: MSCI EAFE; Emerging Markets: MSCI EM **Source: BNY Mellon Wealth Management 11

20.5x

26.7x

22.4x

15.5x

19.5x

22.9x

26.8x

14.9x

0

10

20

30

U.S.Large Cap

U.S.Small Cap

Int'lDeveloped

EmergingMarkets

P/E

RAT

IO

Current 1996-2015 Mean

Global Equities Remain Reasonably Valued*

$110 $115 $120 $125 $130 $135

15.0x 1,650 1,725 1,800 1,875 1,950 2,025

15.5x 1,705 1,783 1,860 1,938 2,015 2,093

16.0x 1,760 1,840 1,920 2,000 2,080 2,160

16.5x 1,815 1,898 1,980 2,063 2,145 2,228

17.0x 1,870 1,955 2,040 2,125 2,210 2,295

17.5x 1,925 2,013 2,100 2,188 2,275 2,363

18.0x 1,980 2,070 2,160 2,250 2,340 2,430

18.5x 2,035 2,128 2,220 2,313 2,405 2,498

19.0x 2,090 2,185 2,280 2,375 2,470 2,565

19.5x 2,145 2,243 2,340 2,438 2,535 2,633

20.0x 2,200 2,300 2,400 2,500 2,600 2,700

Expect Earnings to Increase**

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U.S. Dollar Expected to Strengthen TRADE-WEIGHTED DOLLAR

Data represents the Federal Reserve Broad Trade Weighted Dollar Index. As of 12/07/16. Source: Federal Reserve 12

Ave = 109

Ave = 104

Ave = 100

Ave = 106

Ave = 102

Ave = 97

Ave = 100

Ave = 101

Ave = 104

Ave = 117

Ave = 122

90

100

110

120

130

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

PRIC

E LE

VEL

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Worries About Inflation? CRB RAW INDUSTRIALS

As of 12/12/2016. Source: FactSet 13

Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16250

300

350

400

450

500

550

600

650

700

IND

EX

LEV

EL

(196

7=

100)

CRB Sub Index, Raw Industrials, 1967=100, Index - United States

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Geopolitical and Macro-Driven Volatility S&P 500

As of 11/30/2016. Source: Strategas RP

1,600

1,700

1,800

1,900

2,000

2,100

2,200

2,300

Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16

WB cuts its 2016 forecast

to 2.9%

Oil prices rose 12% based on production cut

rumors

Terrorist Attack in Brussels

Panama Papers

released

Oil prices hit +$50/bbl; WB cut its

2016 forecast to under 2.5%

Brexit

BoE lowered the counter cyclical buffer rate for U.K. banks to

bolster lending

BoE add'l stimulus & U.S. 255k

BoJ introduces "QQE with Yield Curve

Control"

U.S. PMIs bounce back in Sept; Italian 50 year bond sale

Trump wins U.S.

presidency

IND

EX L

EVEL

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President-Elect Trump’s Proposals TOP 10 TAX AND NON-TAX PRIORITIES

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Where do corporate, income and estate/gift tax reform fit in list of priorities?

1. Corporate tax reduction/reform 6. International tax reform: “repatriation”

2. Infrastructure Spending 7. Income tax reduction/reform

3. Obamacare repeal/replacement 8. Carried interest tax reform

4. Repeal of 3.8% surtax on net investment income

9. Estate/Gift tax repeal/reform

5. Immigration/border control 10. Trade deals and manufacturing

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Tax Reform Coming? TAX PROPOSAL COMPARISONS

1 Proposal does not state whether pass-through entities would be taxed at corporate rate, individual rates or a special pass-through rate. 2 Investment income will be taxed as ordinary income with families and individuals able to deduct 50% of their net capital gains, dividends, and interest income , leading to basic rates of 6%, 12.5%, and 16.5% on such investment income depending on the individual’s tax bracket. 3 Specific details of proposal unclear, such as amount of exemption, timing of tax and treatment of assets under exemption amount. 16

Tax Item Current Law Trump’s Proposal House Republican’s Proposal

Corporate Tax Rate Top rate of 35% Top rate of 15%1 Top rate of 20%

Ordinary Income Tax Rate 7 brackets: 10%-39.6% (+3.8% NIIT)

3 brackets: 12%/25%/33% (eliminate NIIT)

3 brackets: 12%/25%/33% (eliminate NIIT)

Taxable Interest Income Taxed as ordinary income Taxed as ordinary income Taxed as ordinary income with 50% deduction2

Long-Term Capital Gains & Qualified Dividends

3 brackets: 0%/15%/20% (+ 3.8% NIIT)

3 brackets: 0%/15%/20% (eliminate NIIT)

Taxed as ordinary income with 50% deduction2

Short-Term Capital Gains Taxed as ordinary income Taxed as ordinary income ?

Carried Interest Taxed at capital gains rates Taxed as ordinary income ?

AMT Remain Eliminated Eliminated

Standard Deduction Single: $6,350 (2017) Joint: $12,700 (2017)

Single: $15,000 Joint: $30,000

Single (no children): $12,000 Head of Household: $18,000

Joint: $24,000

Itemized Deductions Various Cap on total deductions

(Single: $100,000 Joint: $200,000)

Eliminate all except mortgage interest and

charitable contributions

Estate/Gift Tax Top rate: 40% Exemption: $5,490,000 (2017)

Eliminate “death” tax Tax on capital gains with

no basis step-up3

Eliminate Silent on basis step-up and a

replacement tax

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Estate Tax Repeal

From Donald Trump’s Plan: “The Trump Plan will repeal the death tax, but capital gains held until death and valued over $10

million will be subject to tax to exempt small businesses and family farms.”

What we know about the proposal: • Estate tax to be repealed • Replaced with capital gains tax on value over $10 million

What we don’t know about the proposal:

• $10 million exemption per individual or couple? • Capital gains taxed at death or when sold by inheritor? • Determination of tax basis on old assets? • Assets transferred to irrevocable trust excluded from tax? • Gift tax repealed? • GST tax repealed? • Fully repealed or with sunset provisions under budget reconciliation process? • Valuation discounts (proposed 2704 regulations)? • Date of enactment = effective date or retroactive? • States repeal estate taxes?

TAX PROPOSAL COMPARISONS

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Planning During Uncertain Times A PLAN FOR HIGH-NET WORTH INDIVIDUALS

18

Flexible Plans

Interest Rate Sensitive Planning

Non Tax-driven Planning

Income Tax Planning

Common Year-end Planning

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Asset Class Positioning

Underweight Small

Underweight Neutral Small

Overweight Overweight

EQUITY Large Cap Mid Cap Small Cap International Developed Large Cap International Developed Small Cap Emerging Markets Private Equity Private Equity-Real Estate

FIXED INCOME Treasuries Investment-grade Corporate Tax-exempt High Yield

DIVERSIFIERS Real Estate (REITs) Long/Short Hedge Absolute Return Hedge Managed Futures Commodities

As of 11/9/16 19

INVESTMENT STRATEGY COMMITTEE RECOMMENDATIONS

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Questions?

Thank You

December 14, 2016: 2017 Economic and Investment Outlook Your opinions and suggestions are extremely valuable to us. Please take a few minutes to respond to these questions so that we may improve future seminars. Thank you for your time and comments. 1. How useful was the seminar to you? Please circle one. not useful somewhat useful very useful 1 2 3 4 5 2. Was the objective of the seminar met? no not sure yes 3. The presentation and presentation materials were: too detailed not detailed enough appropriate 4. The presentation was: too long too short the right length 5. The presentation skills of the presenters were: Poor fair excellent 1 2 3 4 5 6. Would you recommend this seminar to an associate or friend? no not sure yes 7. The most convenient time for a seminar is: morning mid-day evening 8. The teleconference method of delivery was: Poor fair excellent 1 2 3 4 5 9. What other seminar topics are of interest to you? _____________________________________________________________________________ 10. Any additional comments? _____________________________________________________________________________ 11. I am interested in receiving more information about wealth management strategies. Name: _______________________________________________________Address: ____________________________________________________ 12. The following person might also be interested in receiving information about wealth management strategies. Name: _______________________________________________________ Address: ___________________________________________________ MANDATORY ATTENDANCE RECORD FOR CONTINUING EDUCATION CREDIT Please complete this section of the form if you are interested in obtaining CPE credit. Print Full Name Clearly_______________________________________________________________________ Firm Name with Complete Address___________________________________________________ __________________________________________________________________________________________ Email Address______________________________________________________________________________ CFPs MUST give the last 4 digits of Social Security # ______________________________________________ Please return this form via fax to 617-722-3522 . We hope that you enjoyed the seminar.

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Disclosure

The information provided is for illustrative/educational purposes only. All investment strategies referenced in this material come with investment risks, including loss of value and/or loss of anticipated income. Past performance does not guarantee future results. No investment strategy or risk management technique can guarantee returns in any market environment. This material is not intended to constitute legal, tax, investment or financial advice. Effort has been made to ensure that the material presented herein is accurate at the time of publication. However, this material is not intended to be a full and exhaustive explanation of the law in any area or of all of the tax, investment or financial options available. The information discussed herein may not be applicable to or appropriate for every investor and should be used only after consultation with professionals who have reviewed your specific situation. BNY Mellon Wealth Management may refer clients to certain of its affiliated offering expertise, products and services which may be of interest to the client. Use of an affiliate after such a referral remains the sole decision of the client. Strategic Architecture is a service mark owned by The Bank of New York Mellon Corporation BNY Mellon Wealth Management conducts business through various operating subsidiaries of The Bank of New York Mellon Corporation. ©2016 The Bank of New York Mellon Corporation. All rights reserved.

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