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. In U.S. dollar terms, Asia slightly outperformed the U.S. and Europe. 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 energy, consumer discretionary, materials and industrials sectors more than offset poor selection in health care. To a lesser degree, sector allocation also aided performance, with an overweight allocation to the strong-performing information technology sector a large relative contributor.
• The Fund’s overweight allocation to emerging markets benefitted performance, as did stock selection in the U.S. On the other hand, regional allocation, led by an overweight allocation to Europe relative to the U.S., detracted to performance. The merger of the Ivy Dividend Opportunities Fund into the Fund during the quarter caused a short-term distortion in allocation – a much smaller underweight, relative to last quarter, to U.S. stocks.
• We have maintained the Fund’s overweight allocation to Europe, as we believe European political fears will continue to subside over the next few years, which should bode well for the region and increase investor interest. In addition, we are finding attractive global names in Europe and Asia that we believe provide a better risk/return and dividend profile.
• The use of currency hedges to the U.S. dollar slightly detracted to performance, as the euro strengthened. The Fund maintains hedges to a portion of the euro exposure.
• As the quarter progressed, we increased exposure to industrials and materials, while lowering exposure to telecommunication services and consumer discretionary.
• The Fund’s largest sector overweights include financials, energy and materials where we continue to find companies we believe provide good dividend yield, recovery potential (higher rates) and/or growth prospects. In our view, our underweight allocations to consumer staples, consumer discretionary, telecommunications and utilities have poor fundamentals, growth prospects, relative valuations and/or dividend yields.

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.
• Currently, China is in a steady growth pattern with private sector spending offsetting some slowing of public spending. Besides GDP growth, the government is concerned about housing price rises (affordable housing) and controlling pollution. We believe any economic slowdown will be countered by additional fiscal or monetary easing. China is still in a multi-year rebalancing to a more consumer-based economy. In our view, these changes could have lasting impacts throughout the global marketplace in shaping GDP growth, commodity prices and multinational profits. The country has strong top-down leadership and its massive Silk Road Project (linking China via rail, road or ports to a multitude of trading partners in Asia and Africa) will help sustain growth in the region.
• 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. As always, we remain focused on companies with better business models that also have solid dividend yields.

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.

Effective February 26, 2018, Christopher Parker, CFA, was named a portfolio manager to the Ivy Global Equity Income Fund.

Risk factors: The value of the Fund’s shares will change, and you could lose money on your investment. 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. Fixed income securities are subject to interest rate risk and, as such, the net asset value of the Fund may fall as interest rates rise. Investing in high-income securities may carry a greater risk of nonpayment of interest or principal than higher-rated bonds. Dividend-paying investments may not experience the same price appreciation as non-dividend paying instruments. Dividend-paying companies may choose to not pay a dividend or the dividend may be less than expected.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.