Climbing the Wall of Worry: U.S. Economic and Market Outlook. The views expressed in this presentation are those of the investment professional and are.

Climbing the Wall of Worry:U.S. Economic andMarket Outlook

.

The views expressed in this presentation are those of the investment professional and are subject to change at any time. These views do not necessarily reflect the views of Pioneer Investments or others in the Pioneer Investments organization.

January 20, 2013

19220-62-0113 January 2013 | Page 2

There is no guarantee that forecasts discussed will be realized.Past performance is no guarantee of future results.

Agenda

Overview: Sunny with a Chance of Tornados

U.S. GDP Outlook: Slow Growth Should Continue

Inflation: Limited Near-Term Risk

Asset Prices: Where is the Relative Value?

19220-62-0113 January 2013 | Page 3


Executive Summary

The U.S. economy does not appear to be heading into recession (although it may be pushed into one)

The global economic outlook is beginning to show signs of improvement

U.S. fiscal policy represents the greatest single source of economic and market risk

U.S. inflation appears likely to remain subdued in the near term

Valuations discount a very pessimistic macroeconomic outlook

– Investors appear to be placing a very high value on safety and liquidity

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The Global Economic Backdrop Appears to be Improving

1996 1998 2000 2002 2004 2006 2008 2010 2012-10

-5

0

5

10

15

©FactSet Research SystemsSource: FactSet. Last data point: Q3-12

Year/Year Real GDP Growth (%)ChinaUnited StatesEuropean UnionJapan

19220-62-0113 January 2013 | Page 5


U.S. Economic Outlook – Key PointsSlow growth should continue unless there is an external shock

The economy is not heading into a business cycle recession

– Rising employment and asset prices are tailwinds

– Private sector balance sheets and incomes are strong

– We don’t see the signs of excess which normally signal an impending recession

Washington represents the primary source of risk

– The “fiscal cliff” deal merely postponed difficult decisions

– The debt ceiling, spending sequesters, and lack of a budget represent significant first-quarter challenges

– Failure to curb the growth of entitlement spending is likely to lead to severe problems in the future and ratings downgrades in 2013

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The “Square Root” (Slow Growth) Recovery/Expansion ContinuesFourth quarter growth will be low—but it’s just volatility around the trend

1990 1995 2000 2005 2010-10

-8

-6

-4

-2

0

2

4

6

8

10

Ann

ual R

ate

(%)

©FactSet Research SystemsSource: FactSet. Last data point: Q3-12

Annualized Growth of U.S. Real Gross Domestic Product

Quarterly (annualized) Rolling 4 Quarter

19220-62-0113 January 2013 | Page 7


Quarterly Contribution to Annualized U.S. GDP Growth by SectorInventories, Trade, and Government will contribute less in Q4

+5%

-5%

+5%

-5%

+5%

-5%

Personal Consumption

Trade Deficit

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012©FactSet Research Sy stemsSource: FactSet. Last data point: Q3-12

Residential Investment

Nonresidential Investment

Inventories

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012©FactSet Research Sy stemsSource: FactSet. Last data point: Q3-12

Government

19220-62-0113 January 2013 | Page 8


Employment is Growing…Slowly, Perhaps, but Steadily

1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012

-800

-600

-400

-200

0

200

400

600

800

©FactSet Research SystemsSource: FactSet. Last data point: Dec-12

Monthly Change in non-Farm Employment (000)

Rolling 12-Month Average Monthly Change

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Home Prices Appear To be Rising in Most CitiesThis is important for consumer wealth and confidence

1996 1998 2000 2002 2004 2006 2008 2010 201250

75

100

125

150

175

200

225

250

©FactSet Research SystemsSource: FactSet. Last data point: Oct-12

Case-Shiller Home Price Index - Three Subsets(Indexed to 12/31/1999)

"Biggest Bubbles""Other 12"Detroit

19220-62-0113 January 2013 | Page 10


We Expect The Rebound in New Home Construction to ContinuePositive for both employment and GDP

1965 1970 1975 1980 1985 1990 1995 2000 2005 2010

500

1,000

1,500

2,000

2,500


U.S. Monthly Housing Permits and Starts (000)

Permits Starts

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We Expect Auto Sales to Remain Strong

1993 1995 1997 1999 2001 2003 2005 2007 2009 2011

5

10

15

20


U.S. New Light Vehicle Sales (Millions units/year)

Total Domestic Imported

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The ISM Indexes Are Signaling Economic AccelerationContinuing a cyclical pattern of seasonal “soft patches” and strengthening

2006 2007 2008 2009 2010 2011 201230

40

50

60

70

Ab

ove

50

= E

xpa

nsi

on

B

elo

w 5

0 =

Co

ntr

act

ion


ISM Indexes

ISM Non-Manufacturing IndexISM Non-Manufacturing New Orders IndexISM Manufacturing IndexISM Manufacturing New Orders Index

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The Index of Leading Economic Indicators Is (Still) RisingThe rate of increase is consistent with modest GDP growth

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010

30

40

50

60

70

80

90

100

110

Inde

x

©FactSet Research SystemsSource: FactSet. Last data point: Nov-12

U.S. Index of Leading Economic Indicators

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At Current Levels, Energy Price Pose Little Risk for the Economy

1970 1975 1980 1985 1990 1995 2000 2005 2010

0.5

1

1.5

2

2.5

3

©FactSet Research SystemsSource: FactSet. Last data point: 18-JAN-13

Oil (WTI) divided by Trailing 5-Year Average

U.S. Recessions

19220-62-0113 January 2013 | Page 15


US Monetary Policy Remains Very AccommodativeWe expect real interest rates to remain below zero for several more years

0%

5%

10%

15%

20%Rolling 12-month Core CPIFed Funds Rate

1965 1970 1975 1980 1985 1990 1995 2000 2005 2010-5%

0%

5%

10%


Real Fed Funds Rate

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Corporate Borrowing Costs Remain Very LowCompanies have been able to refinance debt, reduce interest expense

Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13

2

4

6

8

10

12

14

16

Per

cent


US Corporate Bond Yields

Barclays Capital US Aggregate Credit - Corporate - High Yield (CAA)Barclays Capital US Aggregate Credit - Corporate - High Yield (B)Barclays Capital US Aggregate Credit - Corporate - High Yield (BA)Barclays Capital US Aggregate Corporate (BAA)Barclays Capital US Aggregate Corporate (AAA)

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Business Profits are High2012 will almost certainly be the best year ever for S&P 500 earnings

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012$5

$10

$15

$20

$25


S&P 500 Trailing Quarterly Earnings

S&P 500 EPS US Recession

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Agenda





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Inflation is Not a Near-Term Concern…Nor is DeflationEnergy prices may continue to make headline inflation volatile

1970 1980 1990 2000 2010-2%

0%

2%

4%

6%

8%

10%

12%

14%

16%


Rolling 12-Month Inflation

CPICPI Core

19220-62-0113 January 2013 | Page 20


US Core Inflation is Restrained by Modest Unit Labor Cost Growth

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010-4%

0%

4%

8%

12%

16%


Unit Labor Costs and Inflation (Rolling 4 Quarter Change)

Unit Labor Costs Core CPI

19220-62-0113 January 2013 | Page 21


Agenda





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Fundamentals don’t support a broadly bullish outlook on CommoditiesMost commodities are priced well above the cost of production

1990 1995 2000 2005 20100

400

800

1,200

1,600

2,000

Gol

d, A

gric

ultu

re I

ndex

Pric

e

0

40

80

120

160

200

Oil P

rice


Gold, Oil, and Agricultural Commodities

Gold Oil (WTI) S&P GSCI Agricultural & Livestock

19220-62-0113 January 2013 | Page 23


Nominal Treasury Yields Remain Near All-Time Lows

2010 2011 20120

0.5

1

1.5

2

2.5

3

3.5

4

4.5


Fed Funds Rate and Treasury Bond Yields

US Fed Funds Target Rate US 2 Year TreasuryUS 5 Year Treasury US 10 Year Treasury

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U.S. TIPS Yields Are Near All-Time LowsNegative TIPS yields suggests investors are very risk averse

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012-2

-1

0

1

2

3

4


US TIPS Yields

20-Year10-Year7-Year5-Year

19220-62-0113 January 2013 | Page 25


Corporate Bond Credit Spreads Remain Above-AverageAnd well above the projected default rate

Jan-12

400600800

©FactSet

Research

Systems

Source:

FactSet.

Last

data

point:

18-JAN-13

ML US High Yield Master II -

Option Adjusted Spread

1/1/97 1/1/99 1/1/01 1/1/03 1/3/05 1/1/07 1/1/09 1/3/11 1/1/130

500

1,000

1,500

2,000


ML US High Yield Master II OAS

19220-62-0113 January 2013 | Page 26


S&P 500 Valuations Appear Relatively Inexpensive versus History

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

6

8

10

12

14

16

18

20


S&P 500 Valuation Metrics Price to Free Cash FlowPrice to EarningsEnterprise Value to EBITPrice to Cash Flow

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Equities Appear Very Inexpensive Relative to Bonds

1996 1998 2000 2002 2004 2006 2008 2010 20120%

3%

6%

9%

12%


U.S. Capital Market Valuations

S&P 500 Earnings/Price RatioMoody's BAA Corporate Bond YieldUS 10 Year Treasury YieldS&P 500 - Dividend Yield

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Valuations – Key PointsWe Believe:

Commodities

Generally expensive…

Fixed Income

Safety and liquidity (Treasuries) appear richly valued

– Little compensation for either current inflation or inflation risk

Corporate (and municipal) bonds are priced for higher default rates than we consider likely

Equities

Inexpensive relative to historic averages, very inexpensive relative to bonds

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Investment Suitability Is Important

There is no guarantee that forecasts discussed will be realized.

The views expressed in this presentation are those of the investment professional and are subject to change at any time. These views do not necessarily reflect the views of Pioneer Investments or others in the Pioneer Investments organization.

Neither Pioneer, nor its representatives are legal or tax advisors. In addition, Pioneer does not provide advice or recommendations. The investments you choose should correspond to your financial needs, goals, and risk tolerance. For assistance in determining your financial situation, please consult an investment professional.

There is no guarantee that a diversified portfolio will enhance overall return or outperform a non diversified portfolio. Diversification does not protect against market risk.

19220-62-0113 January 2013 | Page 30


Glossary of TermsThe consumer price index (CPI) is a statistical time-series measure of a weighted average of prices of a specified set of goods and services purchased by consumers. The CPI measure of core inflation systematically excludes food and energy prices because they are highly volatile.

The federal funds rate is the interest rate at which depository institutions lend balances (federal funds) at the Federal Reserve to other depository institutions overnight.

The Goldman Sachs Commodity Index is a composite index of commodity sector returns, representing an unleveraged, long-only investment in commodity futures that is broadly diversified across the spectrum of commodities. The returns are calculated on a fully-collateralized basis with full reinvestment. The combination of these attributes provides investors with a representative and realistic picture of realizable returns attainable in the commodities markets.

Government Bonds and Treasury Bills are guaranteed by the US government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.

The Leading Economic Indicators (LEI) index is a generally recognized index of several variables such as average workweek production and manufacturing, jobless claims and other statistics used to help identify turning points in US economic activity.

The Barclays Capital Baa Credit Index is an unmanaged index consisting of bonds in the Industrial, Utility, Finance and non-corporate sectors rated Baa by Moody's. It is equivalent to a BBB rating by Merrill Lynch.

The Barclays Capital Aa Credit Index is a sub-set of the Lehman US Credit Index. This AA investment-grade rating is composed of obligations judged to be of high quality and subject to very low credit risk. This is equivalent to a Merrill Lynch AA rating.

The Merrill Lynch BB US High Yield Index is a subset of The Merrill Lynch US High Yield Index including all securities rated BB1 through BB3, inclusive.

The Standard & Poor's 500 Stock Index (the S&P 500) is a commonly used measure of the broad U.S. stock market.

The S&P/Case-Shiller Home Price Index (S&P/CSI) is a market capitalization-weighted composite of 9 underlying Census Division indices, 20 individual metropolitan markets, and two market capitalization-weighted composite metro-area indices. The composite index weights reflect the aggregate value of single-family housing stock in each of the underlying regions or metropolitan areas.

A Treasury Inflation-Protected Security (TIPS) is identical to a treasury bond except that principal and coupon payments are adjusted to eliminate the effects of inflation.

Indices are unmanaged and it is not possible to invest directly in an index.

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Boston, Massachusetts 02109us.pioneerinvestments.com©2012 Pioneer Investments

Climbing the Wall of Worry: U.S. Economic and Market Outlook. The views expressed in this presentation are those of the investment professional and are.

Documents

guarantee of future

past performance

gdp slide

strong slide

confidence slide

trend slide

liquidity slide

modest gdp growth slide