Market Sector Update

• In contrast to the synchronized global growth markets enjoyed last year, 2018 has been more divergent. Once again, the U.S. has taken the lead on growth while other regions face headwinds from rising U.S. dollar cost as the U.S. Federal Reserve (Fed) hikes rates, higher oil prices and escalating trade tensions.
• Europe and Japan have experienced a soft patch, although recent data suggest a rebound, while China has witnessed a modest slowdown as credit conditions tighten.

Portfolio Strategy

• The Fund performed in-line with its benchmark for the quarter, reflecting the mix of returns and allocation weightings of the underlying funds. The Fund’s total contribution to return was most positively driven by the Ivy Global Growth Fund, Ivy Global Income Allocation Fund and Ivy European Opportunities Fund, respectively. U.S. assets, stocks with higher earnings quality and energy holdings outperformed in the quarter, which particularly benefitted these underlying funds.
• The Fund’s strategic allocation at quarter end was: 53% Ivy International Core Equity Fund, 17% Ivy Emerging Market Equity Fund and 10% each for Ivy European Opportunities Fund, Ivy Global Income Allocation Fund and Ivy Global Growth Fund.
• At quarter end, about 81% of the portfolio was invested in foreign equities and 10% was invested in domestic equities. The Fund held 5% in fixed income as well as 4% in cash and equivalents.

Outlook

• The U.S. economy continues to improve and gross domestic product estimates have been revised higher, driven by fiscal stimulus, strong job growth, growing labor force participation and low unemployment with positive, but moderate wage growth – all of which have kept consumer confidence near cycle highs and supported consumer spending growth. Globally, while concerns about trade tensions have risen and growth has somewhat slowed, activity appears to be rebounding in Europe and Japan, while generally robust corporate earnings and sales growth should provide strong support for asset prices.
• The Fed has tightened policy rates twice this year and now projects a total of four hikes in 2018. The Fed is not expected to accelerate their pace of hiking due to concerns about potential disruptions in global trade. The European Central Bank (ECB) has also indicated their intent to taper their quantitative easing program, although in a manner more dovish than previously expected. Bank lending and the cost of corporate credit remain generally benign and global policy rates are still rather accommodative of global growth.
• Potential risk factors to markets include inflation shocks, growth slowdown in China and escalating trade tensions. While inflation has continued to pick up in the U.S., labor supply and productivity are growing which will likely offset upward inflation pressure. Growth in China is slowing amidst deleveraging policy, tighter credit conditions and uncertainties around trade. The U.S. and China have announced corresponding tariffs, but the direct impact of the already announced numbers are relatively small and a NAFTA deal may soon be reached. There are ancillary risks, should the situation escalate, that companies could delay capital expenditure investment plans and dampen the economic outlook while corresponding margin pressures would negatively impact corporate earnings – both of which could negatively impact asset prices.
• While equity valuation expansion may be limited from here, positive returns are still likely to be driven by real growth from a positive macro environment, led by strong U.S. growth, contained inflationary pressures, accommodative – albeit it marginally tighter – monetary policy, broad access to cheap credit and strong corporate earnings.

The opinions expressed are those of the Fund’s managers for Class I shares and are not meant as investment advice or to predict or project the future performance of any investment product. The opinions are current through June 30, 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. Investing in a single region involves greater risk and potential reward than investing in a more diversified fund. Fixedincome securities are subject to interest rate risk and, as such, the net asset value of the Fund may fall as interest rates rise. Dividend-paying investments may not experience the same price appreciation as nondividend paying instruments. Dividend-paying companies may choose to not pay a dividend or the dividend may be less than expected. The performance of the Fund will depend on the success of the allocations among the chosen underlying funds. 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.