Market Sector Update

• Across the globe, markets fell after peaking in January. A lack of volatility was enjoyed during the rather smooth market run in 2017, though increased during the first quarter of 2018 partially stemming from trade war concerns. Conviction of continued solid global gross domestic product (GDP) growth remains; however, inflation concerns and a higher-than-expected U.S. Federal budget have added to concerns of a potential overheating economy. We believe recent U.S. legislation passed by Congress, the large tax cuts and higher federal spending will increase capital expenditure and consumer spending, benefiting the economy as we move through 2018 and into 2019.
• The U.S. dollar continued to relinquish its past gains over the quarter, losing approximately 2% versus a basket of other currencies. The Japanese yen and British pound were standout performers. Also rising this quarter was the price for crude oil, which increased approximately 5%.
• During the quarter, the U.S. Federal Reserve (Fed) expectedly raised rates and indicated they plan on 2-3 additional rate increases in 2018. The Fed has stated they will continue on the path to unwind its multi-trillion-dollar balance sheet, which the market anticipates.
• The European Central Bank (ECB) does not plan to lower rates further, and has focused its attention on getting the banking system fit to handle any additional shocks. The ECB will begin to taper its bond purchases in early 2018, and its current focus is forcing more capital into weaker Italian, German, Spanish and Greek banks.
• Emerging-market growth has improved, which we believe will aid sales and earnings for multinational and emergingmarket companies. We believe this will continue to improve in 2018, and will be more inflationary for the overall global economy.

Portfolio Strategy

• The Fund outperformed its benchmark (before the effects of sales charges) for the quarter. Strong stock selection drove relative outperformance as the Fund was positioned for reflation and a cyclical recovery, which occurred. Strong stock selection in the industrials, consumer discretionary and energy sectors more than offset poor selection in financials. To a lesser degree, sector allocation also aided performance.
• Currency hedges stemming from the U.S. dollar weakening versus the euro slightly hurt performance. The Fund maintains hedges to a portion of the euro exposure.
• At the country level, stock selection was strong in France, Germany and the U.K. and more than offset poor selection in Italy. In addition, country allocation benefited performance, with the Fund’s allocation to France a top relative contributor. By and large, the Fund’s country allocations are driven by sector and company analysis, rather than macroeconomic viewpoints.
• As the quarter progressed, we maintained a growth and cyclical overweight allocation relative to the benchmark. We reduced exposure to utilities and financials, while adding to health care and consumer discretionary.
• The Fund’s largest sector overweights continue to include information technology, industrials and energy where we continue to find companies we believe provide good recovery potential or growth prospects. In our view, our underweight allocations to health care, consumer staples and financials tend to have poor relative fundamentals and valuation.

Outlook

• We think global economic growth will remain moderate to strong as we move through 2018. We expect the U.S., Europe, China and other parts of emerging markets to be the main engines of growth. We anticipate moderate earnings growth, relatively high valuations and a market environment with continued political and macroeconomic uncertainty in the U.S., Europe and Asia. We believe the largest market risks include a trade war between the U.S. and China as well as higher-than-expected inflation. Nevertheless, bonds are becoming less attractive relative to equities and we believe this trend will continue if global inflation reaccelerates. We expect the Fed to enact additional rate increases in 2018 and continue to shrink its balance sheet as planned. We believe the European Central Bank will begin to raise rates in 2019, while continuing to taper its purchase of bonds.
• In Europe, political uncertainty has been less of an ongoing issue, while investors have seen the benefits of higher GDP growth via stronger earnings-per-share growth. In France, pro-business reformer Emmanuel Macron pushed through labor reforms, and in Germany, Chancellor Merkel has formed a government with partners that will be more pro-European Union reform. We feel the U.K. faces additional long-term headwinds stemming from Brexit, as unknowns and the likely volatility will hurt its economy.
• We continue to target sectors, countries and stocks we believe best reflect our economic outlook and that have solid and growing free cash flow. We believe the odds of a recession are low as there has not been a boom in spending, excluding some property markets around the world, and the U.S. has a large tax cut that should encourage capital investment and consumer spending. In our view, the strongest long-term GDP growth should still occur in emerging markets and the U.S. due to better demographics. In an effort to capture this growth, we intend to continue investing in European multinationals with high revenue exposure to the U.S. and/or emerging markets.

The opinions expressed are those of the Fund’s manager and are not meant as investment advice or to predict or project the future performance of any investment product. The opinions are current through March 31, 2018, are subject to change at any time based on market and other current conditions, and no forecasts can be guaranteed. This commentary is being provided as a general source of information and is not intended as a recommendation to purchase, sell, or hold any specific security or to engage in any investment strategy. Investment decisions should always be made based on an investor’s specific objectives, financial needs, risk tolerance and time horizon. Past performance is not a guarantee of future results.

Risk factors: The value of the Fund's shares will change, and you could lose money on your investment. An investment in the Fund is not a bank deposit and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. International investing involves additional risks including currency fluctuations, political or economic conditions affecting the foreign country, and differences in accounting standards and foreign regulations. These risks are magnified in emerging markets. Because the Fund is generally invested in a small number of stocks, the performance of any one security held by the Fund will have a greater impact that if the Fund were invested in a larger number of securities. These and other risks are more fully described in the fund's prospectus. Not all funds or fund classes may be offered at all broker/dealers.