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BofAML GFSI™ X-Asset Risk Landscape GFSI below ‘normal’ for longest period since summer 2014 The GFSI continued its decline last week, falling to -0.21 as of 2-Jun from -0.17 a week prior. The indicator last spent a significant proportion of time below -0.2 back in summer 2014, when cross asset volatility recorded long term lows. + Equity risks led the broad based decline in stress across asset classes (Chart 2 and Chart 3), led by equity skew. ¢ While most stresses fell, crude oil volatility was among the top gainers (Chart 2) as oil continued its slide despite the May OPEC meeting seeing agreement for extending production cuts. « Also, Euro member bond spreads recorded a historically significant move higher (Chart 5) as the potential for early Italian elections causing political instability amidst ECB tapering revived concerns about European sovereign risk Chart 1: Latest* stress across GFSI sub-components 2.0 5 1.5 4 2 2 _Red shaded area highlights components in = ak Green shaded area highlights components in 2 10 4 _ = Blew. Bullish territory = 05 © 05 + -1.0 2éeé >eave aa erapras o> ce o x oc SBS erszsneunpSnBaS SEL OTR EEE RR ESHRESBSEHSE EER ESR ES ESS SESESESSSRERESES aAaMYrPatAHZ?-DPEYO mM et OTs K te SG4IDSGSFLDAYHZ eee bh Ue Ber ractt RLAgGZ>~eVOREeEEZ eVEel2S rr FeclusBeseBsgEFLEETSeESOESEES 2Ome ee eOog ss see a soOleaes SPOsesscRe2oeser~njuzseagsgeresasa See EDTA SPPTHODAZsSHRe ps se eet se ae EZtAPHRFOPRSFSEHBHE $8 2Ba Sx XD BrP >see OR SB eo BAH BELG R =~ 2©®LTtE&EReaPEX SE SSeE2EES ® @ tr oeecoco#E f®Fsaaf7ue £5 £Eet s 8 a “5 e535,5 2 Sr Ao B Ee ESPta AT Tee zao 7S SB°° EO B@ SseFztntre2e" 52 n 2¢ a £ £ oO oo amv eas =) - co Ww oO oO B 23 3 © = > so oz Og = « Wo g gw & @ pe os 8 am & =x > 6 z = = foe] Source: BofA Merrill Lynch Global Research. *Latest as of 2-Jun-17. Chart 2: Change** in stress across GFSI sub-components. W499 2 Lo ; a a — rr Gm Risk FS i i i S oo Skew un é 2 | = - 304 | o8 E Fg 08 | = “ are evds or zB > oe we aAaaAKks fan as Se pasa oo > Be See TS SSE SET ESSER BSSRPEGBSGESESSEESRSHRASSHESESES TUF aAMmMeteOzpeoaPr ates sGtrAFrrDIuMes FItOet et ese5 oe td5guunRg FG BE MPSOT FC END ES EEL ERS ApVPeSwenEDAgVEBZEMDEBENDSRENRDZEBRSGZS @2@esesgs Ss) >i = oO FEF, Q2RnE8 8F84 az,ma=o75 oes) oAaAF> B®@a5 LS AAFrESRPZERZ eeprHAseG BSR Z SG 2°88 SSE mr PSoRTS ti SstztoasnaokK =P xpeePSesrestsesret ess hvtEestepes s SSBFr>SSasksee& x FH=zGH [= a : [o} fast o = ca = so = 2eeeo PSC SS WGRBGSH PZeSV*BSZGZrATSATEWAGFS Lea" 2 202° Bs - Ya ez = 8 u 6s fy 8 a 3 = oO =~ BO is) 8 oO ow & 7) = ao = EQa a ra Source: BofA Merrill Lynch Global Research. **Latest as of 2-Jun-17. Change vs 1 week prior (26-May-17). The GFSI Risk Allocator (using Bull, Bear & Neutral weights of 2, 0, 1} suggested a 21.7% overweight position on 2-Jun (vs 13.0% OW as of 26-May). The percentages of Bullish, Bearish and Neutral GFSI components (as used in the Risk Allocator) as of 2-Jun were 30.4%, 8.7% and 60.9% respectively. 2 Global Equity Volatility Insights | 06 June 2017 oat Z HOUSE_OVERSIGHT_023576