Todd Owens' economice update slided from FCBR's January Membership Meeting.

1. Wells Fargo Wealth Management
ll lh
Economic and Market Strategy Update | January 2012
A Note about Disclosures
Please be sure to read the important
disclosures at the end of this presentation
Wells Fargo Private Bank provides financial services and
products through Wells Fargo Bank, N.A. and its various
affiliates and subsidiaries. Wells Fargo & Company and its
affiliates do not provide legal advice. Please consult your
legal advisors to determine how this information may apply
to your own situation. Whether any planned tax result is
realized by you depends on the specific facts of your
situation at the time your tax preparer submits your return.
1 200907125 TPB-IM21019 (08/09)

2. Top 15 Business Stories of 2011
MF Global
Arab Spring – Tunisia, Egypt, Libya, Syria
Japan Earthquake and Tsunami
U.S. Debt downgrade
Europe on the Brink
Commodity prices
Global market volatility
Obama versus Wall Street
Occupy Wall Street/Class Warfare
Seeking Wise Men
Municipalities on hard times
China
Unemployment
Housing market
Passing of Steve Jobs
Source CNBC
2

3. Today’s Agenda
Where are we in this economic cycle?
Where are we in this market cycle?
Investment strategies to consider in your portfolio
I i id i f li
3

4. U.S. GDP Outlook
U.S.
U S economic growth i
i h improved i the third quarter. We
d in h hi d W
are on track to reach our full-year 1.7 percent estimate.
U.S. GDP Growth Estimates
5
3.9 Actual
%)
3.8 3.8
ualized Grow Rate (%
4
Estimated
3 2.7
2.5
2.3
wth
2.0
2 1.7
1.3
1
0.4
0
Annu
-1 -0.7
2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11
Source: Wells Fargo Wealth Management, 12/1/11
4

5. U.S. Economic Outlook
The U S
Th U.S. economy may experience further improvement
i f h i
in the fourth quarter.
Leading Indicators Are Positive
1.40
1.2
1.20 Actual
%)
1.0
10
Inde Monthly Change (%
1.00 0.9
0.8
0.80 0.7 0.7 0.7
0.6
0.60
0.40 0.3 0.3
0.2 0.2 0.2 0.2
0.20 0.1
0.00
ex
-0.20
-0.40 -0.3
Source: FactSet, 11/30/11
5

6. Stimulus Winding Down
Eighty-seven percent of the U.S. stimulus has been
h f h l h b
distributed.
U.S. Stimulus Funding g
Total Paid Out $733 B
350 Total Funded $840 B
$300
300
250
$218 $215
illions
200
00
$ bi
150
100
50
0
Tax Benefits Contracts, Grants, Entitlements
Source: www.recovery.gov, 12/02/2011
Loans
6

7. Consumer Confidence Rises
Confidence rebounded in November, but remains weak.
Confidence Jumps 15 Points in November
120.00
onfidence Survey
100.00
100 00
80.00
November,
2011
Index = 56 0
56.0
Consumer Co
60.00
60 00
40.00
October,
2011
Index = 39.8
C
20.00
20 00 March ,
h
2009
Index = 26.9
0.00
Source: FactSet, 11/11
7

8. Consumers Still Buying
Retail sales continue to climb.
Retail Sales Growth is Positive
1.4 1.3
1.2 1.2
1.2
1.0 1.0
0
nge Mo/Mo
0.8
0.8 0.7
0.7 0.6
0.6 0.5
ercent Chan
0.4 0.3 0.3 0.3
0.2
0.2
0.0
Pe
-0.2
-0.2
-0.4
Source: FactSet, 12/11
8

9. Debt Service is Falling
The amount of disposable income required to service
h fd bl d
debt has dropped to 1994 levels.
Debt Payments as a % of Income
14.0
13.5
cent (%)
13.0
12.5
In Perc
12.0
11.5
11.0
11 0
10.5
10.0
Jun-94
Jun 94 Jun-96
Jun 96 Jun-98
Jun 98 Jun-00
Jun 00 Jun-02
Jun 02 Jun-04
Jun 04 Jun-06
Jun 06 Jun-08
Jun 08 Jun-10
Jun 10
Source: Wells Fargo Wealth Management, Federal Reserve Board, 11/1/11
9

10. Employers are Creating Some New Jobs
The unemployment rate fell to 8.6 percent in
November, the lowest rate since March 2009.
Unemployment R t Slowly Falling
U l t Rate Sl l F lli
11
Unemployme Rate (%)
10
9
ent
March,
2009, 8.6% November,
8
2011, 8.6%
7
6
Source: FactSet, 12/1/11
10

11. ISM Surveys Point to More Growth
Both the manufacturing and the service sectors are still
expanding, albeit at a slower rate than earlier this year.
Manufacturing and Service Sectors Slow
Institute of Supply Managemen Index
65 65
Exp
Manufacturing
nt
60 60
Index
Inde
panding
55 55
50 50
Service
45 Index 45
Contrac
40 40
cting
35 35
30 30
Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11
Source: FactSet, 12/5/11
11

12. Housing Struggles Continue
While affordability remains attractive, weak consumer
confidence is hurting home sales.
New Home Sales Near All-Time Low
1600.00 July, 2005
1,389,000
1400.00
1400 00
New Home Sales (000’s)
)
1200.00
1000.00
S
800.00
600.00
400.00
400 00
200.00 October, 2011
307,000
0.00
Jul-63
Jul 63 Jul-67
Jul 67 Jul-71
Jul 71 Jul-75
Jul 75 Jul-79
Jul 79 Jul-83
Jul 83 Jul-87
Jul 87 Jul-91
Jul 91 Jul-95
Jul 95 Jul-99
Jul 99 Jul-03
Jul 03 Jul-07
Jul 07 Jul-11
Jul 11
Source: FactSet, 12/1/11
12

13. Will Innovation Drive Growth Higher?
Thanks t A
Th k to America’s strong entrepreneurial spirit, we
i ’ t t i l i it
could be underestimating future U.S. growth rates.
U.S.
U S Patents Soared in 2010
300000
ted
250000
Numbe of US Patents Grant
200000
150000
100000
er
50000
0
Source: U.S. Patent and Trademark Office, 6/11
13

14. The World is Changing
By some measures, emerging economies are set to
surpass the developed economies in terms of total GDP.
Emerging Economies Overtaking Developed
70
cent Share of Global GDP (PPP)
65
60
55 Emerging Economies
2015 53% e
50
Developed Economies
D l dE i
f
45 2015 47% e
40
35
Perc
30
Date 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015
The Purchasing Power Parity (PPP) exchange rate is defined as the amount of currency that would be needed to purchase the same basket of
goods and services as one unit of th reference currency, usually th US d ll
d d i it f the f ll the dollar.
Source: IMF, 9/2011
14

15. Agricultural Commodities Prices Fall
The global slowdown has brought down many
commodities prices.
Price Changes in Select Commodities
30%
YTD %Chg 21%
20% 17%
12Mo %Chg 12%
hange
10% 4%
Percent Ch
0%
-1% -2%-1% 0%
-10% -7%
-10%
-12%
-20%
-20%
-22% -22%
22%
-24%
-30% -28%
-26% -27%
-30%
-31%
-32% -31%
-40%
Source: FactSet, 11/2011
15

16. Today’s Agenda
Where are we in this economic cycle?
Where are we in this market cycle?
Investment strategies to consider in your portfolio
I i id i f li
16

17. Equity Market Forecasts
Gains are expected in 2012, supported by solid
earnings growth and accommodative monetary policies.
Equity
Eq it Market Estimates
2010(a) 2011(a) 2012(e)
S&P 500 1258 1230 1350
Russell 2000 784 728 850
MSCI EAFE 1658 1428 1500
MSCI EM 1151 934 1100
Volatility (VIX Index) 18 24 27
Index price at December 31
Note: An index is not managed and unavailable for direct investment.
g
a: actual; e: estimate
Source: Bloomberg Finance, LLP, as of 12/12/11
17

18. Bull Markets Historical Perspective
We b l
believe the l
h latest b ll market is off to a good start.
bull k ff d
History shows we may only be in the early stages.
700% Average Bull Market: 68 Months, 178%
600% Current Bull Market: 31 Months, 67% '87-'00
urn
500%
Bull Market Retu
400%
'47-'57
300% '82-'87
Average
200% C t
Current
'02-'07
'62-'66
100% '66-'68 '74-'80
'70-'73 '57-'61
0%
0 20 40 60 80 100 120 140 160
A larger circle represents a higher return bull market Bull Market Length (Months)
Past performance is no guarantee of future results.
The S&P 500 is an unmanaged index and is unavailable for direct investment.
Source: Bloomberg Finance LLP, S&P 500 Index Price Return as of 11/30/11
18

19. U.S. Market Volatility is High
There has been a jump in the number of days the S&P
Th h b j i th b fd th
500 Index has moved up or down one percent or more.
Daily Volatility Has Been Very High
70.00%
61%
60.00%
52%
dex Daily Change (%)
50.00%
40.00% 36% 36%
33% 32%
30.00%
30 00% 24% 24%
20% 20% 20%
20.00%
12%
9%
10.00%
Ind
0.00%
Source: Bloomberg 11/11
19

20. Equities
Riskier assets h
k have been mixed in 2011. We expect
b d
returns in line with earnings growth in 2012.
Equity Returns b Market Segment
i by k
40.0 YTD 2011 2010
30.0 26.9 25.5
19.2 15.1
20.0 15.5 16.7
Change
10.0 8.2
1.1 30
3.0
%C
0.0
-1.6 -1.4
-10.0 -4.8
-10.9
-20.0
20 0 -17.2
-30.0
MSCI EM MSCI EAFE Russell R1000 Russell S&P 500 R1000
2000 Value Midcap Growth
Past Performance is no guarantee of future results.
Source: Bloomberg Finance, total return as of 11/30/11
20

21. Global Dividend Yields
Equity d d d yields are attractive relative to cash
dividend ld l h
and U.S. Treasurys.
Key Yields
6
5.0
5
3.8 3.9
4 3.7
3.3
2.9
3
Yield
2.1
21 22
2.2
2
1 0.53
0
Cash 10-yr TSY U.S. MSCI AC China Brazil U.K. Germany Australia
World
Past Performance is no guarantee of future results.
results
Source: Factset, MSCI All Country World Index, 11/30/11.
21

22. Lots of “Dry Powder” on the Sidelines
Ample liquidity remains available to support f
financial
market growth as risk appetites improve.
Liquidity
Li idit on the Sidelines
th Sid li
4500 4500
4000 4000
3500 3500
3000 3000
$ Billions
2500 2500
B
2000 2000
15-Year Average
1500 1500
1000 1000
500 500
0 0
1996 1999 2002 2005 2008 2011
Source: ICI, as of 10/31/11
Liquidity represented by money market mutual fund assets.
22

23. Key Points – Economy and Markets
IN OUR VIEW:
We expect the U.S. economy to grow between 1.5-2.0
percent in 2011.
The U.S. appears more strongly positioned than countries
more directly impacted by the Eurozone debt problems.
Stubbornly high unemployment and weak housing could
continue to constrain U.S. economic growth.
Commodity prices are easing, helping consumers and
supporting corporate profit margins.
The Federal Reserve’s stated intention is to keep short-
and long-term interest rates low.
Stocks in the U.S., Emerging markets and Europe are
trading at attractive valuations from a historic
perspective
23

24. Today’s Agenda
Where are we in this economic cycle?
Where are we in this market cycle?
Investment strategies to consider in your portfolio
I i id i f li
24

25. Asset Classes
Tactical adjustments:
Underweight Overweight
Treasury Bonds High Yield Bonds
Agency Bonds U.S. Large Cap
Duration Equity
Developed Market International
Bonds Emerging Markets
Equity
Conservative and
Diversified Hedge
Funds1
†Strategic or neutral recommendation is 0%. Asset class may not be underweighted because short
0%
positions in any asset class are prohibited.
1Some complementary strategies may be available to pre-qualified investors only.
Suggestions as of 11/30/11
25

26. Managing Through Uncertain Times
Market uncertainty is not new
Utilize a disciplined process to avoid the temptation
to panic
Increased volatility can present challenges and
opportunities
Strategies:
g
Hold enough (but not too much) liquidity
Match asset allocation to time horizon
M t h t ll ti t ti h i
Use the RiskOptics® approach to assess types of
risk
Invest in a globally diversified portfolio
26 26

27. Key Points – 2012 Strategy Highlights
OUR RECOMMENDATIONS:
Globalize all asset classes.
Seek growth in emerging/frontier markets.
g g g/
Consider investing in the consumer companies that are
benefiting from the wealthy in Asia and the more price-
conscious consumers in the EM.
Consider energy and technology companies.
Seek income in all four asset groups including fixed income,
equity, real assets and complementary strategies.
it l t d l t t t i
Focus on fundamental valuation measures, such as P/E
ratios.
Maintain liquidity to avoid having to sell on unfavorable
terms.
Apply RiskOptics® approach to ensure that the sources of
portfolio risk are truly diversified.
27 1. Some complementary strategies may be available to pre-qualified investors only.

28. Disclosures
Wells Fargo Private Bank provides products and services through Wells Fargo Bank, N.A. and its various affiliates and
subsidiaries.
The information and opinions in this report were prepared by the investment management division within Wells Fargo
Private Bank. Information and opinions have been obtained or derived from sources we consider reliable, but we cannot
guarantee their accuracy or completeness. Opinions represent Wells Fargo Private Bank’s opinion as of the date of this
report and are for general information purposes only. Wells Fargo Private Bank does not undertake to advise you of any
change in its opinions or the information contained in this report. Wells Fargo & Company affiliates may issue reports or
have opinions that are inconsistent with, and reach different conclusions from, this report.
This material is for general information only, is not suitable for all investors and is not soliciting any action from any
particular investor. Information and opinions presented have been obtained or derived from sources we believe reliable, but
we cannot guarantee their accuracy or completeness. Opinions represent WFB’s judgment as of the date of the report and
are subject to change without notice. WFC affiliates may issue reports or have opinions, which are inconsistent with, and
reach different conclusions from, this report.
This report is not an offer to buy or sell or a solicitation of an offer to buy or sell any securities mentioned. Wells Fargo &
Company and/or its affiliates may trade for their own accounts, be on the opposite side of customer orders, or have a long
or short position in the securities mentioned herein.
The investments discussed or recommended in this report are not insured by the Federal Deposit Insurance Corporation
(FDIC) and may be unsuitable for some investors depending on their specific investment objectives and financial position
position.
Past performance is not a guide to future performance. Income from investments may fluctuate. The price or value of the
investments also may fluctuate. There is always the potential for loss as well as gain.
Asset allocation and diversification do not assure or guarantee better performance and cannot eliminate the risk of
investment losses.
Investing in foreign securities presents certain risks that may not be present in domestic securities and may not be suitable
for all investors.
Real estate investment carries a certain degree of risk and may not be suitable for all investors.
28

29. Disclosures
Some real assets may be available to pre-qualified investors only.
Some alternative investments and complementary strategies may be available to prequalified investors only. Hedge
strategies and private investments may be speculative and involve a high degree of risk. Hedge strategies and private
investment performance can be volatile. An investor could lose all or a substantial amount of his or her investment. There is
no secondary market for the investor’s interest in a hedge fund or private equity investment and none is expected to
develop. There may be restrictions on transferring interests in a hedge fund or private equity investment.
Fixed income securities are subject to availability and market fluctuation. These securities may be worth less than the
original cost upon redemption. Certain high-yield/high-risk bonds carry particular market risks and may experience greater
volatility in market value than investment grade corporate bonds. Government bonds and Treasury bills are guaranteed by
the U.S. government and, if held to maturity, offer a fixed rate of return and fixed principal value. Interest from certain
municipal bonds may be subject to state and/or local taxes and in some instances, the alternative minimum tax.
Investing i f
I ti in foreign securities presents certain risks that may not be present in domestic securities and may not be suitable
i iti t t i i k th t tb ti d ti iti d tb it bl
for all investors.
Municipal bonds offer interest payments exempt from federal taxes, and potentially state and local income taxes. Unlike
U.S. Treasurys, municipal bonds are subject to credit risk and potentially the Alternative Minimum Tax (AMT). Quality
varies widely depending in the specific issuer.
Corporate bonds generally provide higher yields than U.S. Treasuries while incurring higher risk.
Yields are subject to change with economic conditions. Yield is only one factor that should be considered when making an
investment decision.
Wells Fargo & Company and its affiliates do not provide legal advice. Please consult your legal advisors to determine how
this information may apply to your own situation. Whether any planned tax result is realized by you depends on the specific
facts of your situation at the time your tax preparer submits your return .
You cannot invest directly in an index
index.
The Institute of Supply Management (ISM) Purchasing Manager’s Index gauges internal demand for raw materials/goods
that go into end-production. An index values over 50 indicate expansion; below 50 indicates contraction. The values for
the index can be between 0 and 100. You cannot invest directly in an index.
The S&P/Case-Shiller® U.S. National Home Price Index is a broad, market value-weighted composite of single-family home
price indices for the nine U.S. Census divisions and is calculated quarterly.
S&P 500 Index is a capitalization-weighted index calculated on a total-return basis with dividends reinvested. The index
includes 500 widely held U.S. market industrial, utility, transportation and financial companies.
29

30. Disclosures
S&P Midcap 400 Index is an unmanaged capitalization-weighted index of common stocks representing all major industries in
the mid-range of the U.S. stock market.
S&P Small Cap 600 Index is an unmanaged capitalization-weighted index of common stocks representing all major
industries in the small-cap (between $300mn and $2 billion) are of the market.
The Market Volatility Index (VIX) is an index designed to track market volatility as an independent entity. The index
calculated b
l l t d based on option activity and is used as an indicator of investor sentiment, with high values implying pessimism
d ti ti it di d i di t fi t ti t ith hi h l i l i i i
and low values implying optimism.
Wilshire 5000® Equity Index is an unmanaged index made up of all U.S. stocks regularly traded on the three major U.S.
exchanges, including the New York Stock Exchange, American Stock Exchange, and Nasdaq.
Russell 1000® Growth Index measures the performance of those Russell 1000 companies with higher price-to-book ratios
and higher forecasted growth values
values.
Russell 1000® Value Index measures the performance of those Russell 1000 companies with lower price-to-book ratios and
lower forecasted growth values.
Russell 2000® Index measures the performance of the 2,000 smallest companies in the Russell 3000® Index, which
represents approximately 8% of the total market capitalization of the Russell 3000®.
Russell Midcap Index measures the performance of the 800 smallest companies in the Russell 1000 Index, which represent
approximately 25% of the total market capitalization of the Russell 1000 Index.
MSCI EAFE Index (Europe, Australasia, Far East) is a free float-adjusted market capitalization index that is designed to
measure the equity market performance of developed markets, excluding the U.S. and Canada. As of June 2007 the MSCI
EAFE Index consisted of 21 developed-market country indices.
MSCI Europe, Australasia, Far East & Canada Gross Return Index is a free float-adjusted market capitalization index that is
designed to measure the equity market performance of developed markets excluding the U.S.
markets, US
Morgan Stanley Capital International (MSCI) Emerging Markets Global Index is a market capitalization-weighted benchmark
index made up of equities from 29 developing countries.
30

31. Disclosures
FTSE NAREIT Equity REIT Total Return Index is an unmanaged index reflecting performance of the U.S. real estate
investment trust market.
Equity Hedge: Equity Hedge strategies maintain positions both long and short in primarily equity and equity derivative
securities. A wide variety of investment processes can be employed to arrive at an investment decision, including both
quantitative and f d
i i d fundamental techniques.
l h i
Relative Value Arbitrage: Investment Managers who maintain positions in which the investment thesis is predicated on
realization of a valuation discrepancy in the relationship between multiple securities.
Short Term Asset Management (STAM) is designed for investors seeking professional assistance in managing short-term
fixed-income portfolios with an average maturity of generally less than one year.
Additional information is available upon request.
© 2011 Wells Fargo Bank, N.A., All rights reserved.
31