1. 2012 Market Update/Outlook
Robert F. Carey, CFA
Chief Investment Officer
This report was prepared by First Trust Advisors L. P., and reflects the current opinion of the authors. It is based upon sources and data believed to be accurate and reliable.
Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.

2. 2012 Themes and Trends
1. Modest P/E expansion, SPX earnings advance
~10%
2. Companies investing again (M&A, CapEx)
3. Credit spreads stable, treasury yields rise
4. Cyclical equity sectors outperform
5. Gridlock! No major change in Washington
policies
6. International Markets remain highly correlated to
US
7. Continued economic expansion

4. S&P 500 Block (millions USD)
1400
240000
200000
1300 160000
120000
1200 80000
40000
1100 0
-40000
1000 -80000
11/09 2/10 5/10 8/10 11/10 2/11 5/11 8/11 11/11 2/12
Source: Bloomberg

5. S&P 500 Non-Block (millions USD)
1400 8000
1300 4000
1200 0
1100 -4000
1000 -8000
900 -12000
800 -16000
700 -20000
11/09 2/10 5/10 8/10 11/10 2/11 5/11 8/11 11/11 2/12
Source: Bloomberg

6. S&P 500 Block (millions USD)
1400 50000
40000
1350
30000
1300
20000
1250
10000
1200
0
1150 -10000
12/11 1/12 2/12 3/12
Source: Bloomberg

7. S&P 500 Non-Block (millions USD)
1400
400
1350
200
1300
0
1250
-200
1200 -400
1150 -600
12/11 1/12 2/12 3/12
Source: Bloomberg

8. Asset Turns Margin
V
Credit
Spread TAXES

9. percent
25
10-Year Treasury
Corporate Junk Bond
20 BBB Bonds
Muni Bonds
15
10
5
0
1997 1999 2001 2003 2005 2007 2009 2011
Source: Citigroup Global Markets/Haver Analytics, Bloomberg, Merrill

10. basis points
1200
Hi Yield
Investment Grade
800
400
0
Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12
Source: CDS, Bloomberg

11. Monthly Index Closes S&P 500 Index

12. Source: Bloomberg, Standard & Poor’s

13. correlation
1.0
MSCI EAFE Index
MSCI Emerging Markets Index
NIKKEI 225 Index
0.8
0.6
0.4
0.2
0.0
1990 1995 2000 2005 2010
Source: Bloomberg

15. Consumer Dis.
Consumer Staples
Energy
Financials
Health Care
Industrials
Information Tech
Materials
Telecomm Services
Utilities
0% 5% 10% 15% 20% 25% 30%