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INVESTMENT INSIGHTS  |  July 2016

Are the American Funds Exposed to Brexit?

International Funds Have the Highest Concentration of Investments in European Companies.

The U.K.’s June 23 vote to leave the European Union surprised many investors, triggering one of the steepest two-day selloffs for global equities in history. While markets have since recovered much of those losses, volatility will likely persist as the short- and long-term impact of Brexit on the U.K. and the rest of Europe remains unclear. The uncertainty has driven government bond yields to record lows and the U.S. dollar to a three-decade high against the British pound.

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INVESTMENT INSIGHTS  | 
July 2016
 |  FEATURING Matt Miller , Mark A. Brett & Jens Søndergaard

Brexit’s Fallout: Could a Shock to the System Be a Good Thing?

Capital Group portfolio manager Mark Brett and economist Jens Søndergaard, both based in London, discuss possible implications of the Brexit vote for the U.K., the European Union and investors.

Watch Video (4:57)

No doubt, the world’s markets spent the first half of 2016 on rocky ground. Investors have been confronted with the British vote to leave the European Union (“Brexit”), a “growth scare” in the U.S., the economic deceleration in China, and the introduction of negative interest rates in some markets. Nevertheless, the global economy is expected to remain on a path to growth — albeit very slow growth.

Looking ahead to the second half of 2016, market volatility is likely to remain elevated. What are the longer term implications of the Brexit vote? Can the resilient U.S. economy continue on its growth path? Will Chinese consumption remain healthy as the world’s second-largest economy continues to slow? Potential opportunity will likely arise for disciplined, active investors who can look past the near-term macroeconomic clouds toward individual companies with bright prospects.

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INVESTMENT INSIGHTS  |  July 2016

Three Reasons Why the U.K. Should Be O.K.

It’s not worth dwelling too much on the reasons why British voters opted to leave the European Union. That question will be analyzed by political pundits and the media for years to come. For investors, a key question today is, will the U.K. be OK going forward?

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But Process Will Be Lengthy and Outcome Likely Not as Bad as Markets Fear

  • Stock markets slide in response to Brexit vote in an orderly decline
  • British pound suffers big loss, euro also slides against dollar
  • Market volatility to remain elevated as Britain and Europe reach new agreements
  • A long-term investment horizon remains key to successful investing

British voters surprised the world on Thursday by approving a proposal to abandon the European Union, with 51.9% of the vote in favor of leaving and 48.1% in favor of remaining. Global markets and currencies reacted negatively to the news, evidenced by a spike in volatility and declines across all major equity markets. Stocks gave up ground after rallying the prior week in the run-up to the vote.

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INVESTMENT INSIGHTS  |  June 2016

Brexit: How Did We Get Here?

Great Britain joined the European Union’s predecessor, the European Economic Community, in 1973 and it has always been a somewhat reluctant member. The EU now includes 28 nations, 19 of which are part of the single-currency monetary union known as the euro zone.

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INVESTMENT INSIGHTS  |  June 2016

European Union Faces Crucial Test in Brexit Referendum

U.K. voters will go to the polls on Thursday, June 23 to decide whether they should stay in the European Union or abandon the 28-nation bloc. The so-called Brexit vote is a significant challenge to the EU’s authority and threatens to further destabilize Europe at a time when weak economic growth and high debt levels are already straining intergovernmental relations.

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INVESTMENT INSIGHTS  |  Thu Jun 02 03:15:01 PDT 2016  |  FEATURING Fergus N. MacDonald & David A. Hoag

Sub-Zero World: Not Much Positive About Negative Rates

  • Central banks are experimenting with negative interest rates in an attempt to jumpstart weak economies. 
  • Negative-yielding debt in Europe and Japan makes U.S. bonds attractive on a relative basis. 
  • Portfolio managers David Hoag and Fergus MacDonald warn that negative rates may be causing distortions in asset prices and the economy.
  • Quantitative easing and negative rates are bound to spark inflationary pressures over time. 
  • The U.S. Federal Reserve is unlikely to introduce negative rates.

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INVESTMENT INSIGHTS  |  March 2016  |  FEATURING Georgios Damtsas & Jody Jonsson

The New Breed of Global Companies Is Creative, Nimble and Networked

  • There’s been a shift in the makeup of global companies over the past decade to idea-driven companies
  • Speed of product adoption is much faster, but competition is greater
  • Marketing muscle and global distribution networks are crucial

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INVESTMENT INSIGHTS  | 
February 2016
 |  FEATURING Jody Jonsson

Insights From a Morningstar® Award-Winning Manager

American Funds portfolio manager Jody Jonsson discusses the objectives of New Perspective Fund®, whose portfolio management team was recently named Morningstar’s International Stock Fund Manager of the Year. She also shares keys to the fund’s recent and long-term success.

Watch Video (3:43)

  • Volatility likely to persist amid global slowdown and uncertainty about central bank policies
  • Risk of a recession in the U.S. has increased due to a tightening of financial conditions
  • Fed likely to eschew any further rate increases in 2016
  • Negative interest rates and deflation pose a real threat in Japan and Europe
  • 2008 repeat still an unlikely scenario
  • Holding a broadly diversified portfolio with exposure to multiple asset classes is still likely the best approach

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INVESTMENT INSIGHTS  | 
January 2016
 |  FEATURING Kevin G. Clifford & Robert W. Lovelace

Capital Group Hiring Where the World Is Going

American Funds portfolio manager Rob Lovelace discusses the investment group’s approach to hiring new research associates.

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INVESTMENT INSIGHTS  | 
January 2016
 |  FEATURING Jody Jonsson

China, Volatility and Why This Is Not 2008

Portfolio manager Jody Jonsson discusses the role of China’s decelerating GDP and overvalued currency in the latest market volatility.

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Stock and Oil Prices Decline Price Returns Since 12/22

Source: RIMES
Equity markets were led lower by the route in China’s stock market, which declined steadily from its recent peak on Dec. 22, 2015. Crude oil has also fallen on fears of oversupply and slackening demand.

  • High levels of volatility expected to continue as markets adjust to slowing growth in China, lower oil prices and weak industrial activity.
  • While stock prices could fluctuate further, chances of a global recession or a financial crisis are low.
  • Modest expansion in developed economies will partly offset deceleration in China.
  • Equity valuations in Europe are attractive and leave room for potential gains.
  • M&A activity is supportive and there remain many areas of opportunity in financial markets.

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INVESTMENT INSIGHTS  |  December 2015

Identify Investment Opportunities in a Slow-Growth World

Global Stocks Paused for Breath in 2015

Source: RIMES. As of October 30, 2015.

2016 Market Outlook, Article 1 of 6

One in a series of articles in which Capital Group portfolio managers offer their views on the current investing environment.

With China’s economic growth slowing and the Federal Reserve contemplating higher interest rates, it’s been a tough year in the financial markets. The MSCI World Index is essentially flat on a year-to-date basis amid rising volatility and widespread uncertainty over the outlook for 2016. A strong bull run over the prior seven years has also raised questions about valuations. Against this backdrop, several Capital Group portfolio managers offer their views on the current investing environment:

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MARKET COMMENTARY  |  December 2015

World Markets Review for November 2015

Global stocks produced mixed returns amid investor worries about sluggish economic growth and expectations for higher U.S. interest rates. European equities advanced on the promise of new monetary stimulus measures, however, U.S. stocks were flat and emerging markets retreated. Bonds also declined as Federal Reserve leaders indicated that a rate hike is likely in December. The dollar rose sharply against the euro and the yen.

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INVESTMENT INSIGHTS  | 
November 2015
 |  FEATURING Wesley K.-S. Phoa

What a Rate Hike Can Mean for Long-Term Yields

A portfolio manager discusses why interest rates have remained low in the U.S. and what to expect from yields when rates do rise.

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MARKET COMMENTARY  |  November 2015

World Markets Review for October 2015

Global stocks rallied as central bank stimulus and rising M&A activity helped offset ongoing concerns about a slowing world economy. Energy and materials stocks led markets higher amid signs of stabilization in commodity markets. Information technology stocks also advanced on better-than-expected earnings from some bellwether companies. Bonds were generally flat, and the U.S. dollar rose against the euro and the yen.

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INVESTMENT INSIGHTS  |  October 2015  |  FEATURING Brad Barrett

Changing Channels: Media’s New Direction

The landscape of media is undergoing a tectonic shift as the way people consume information, entertainment and even communicate with each other has been transformed by innovation and technology.

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INVESTMENT INSIGHTS  |  October 2015  |  FEATURING Timothy D. Armour

Digital Dollars: Ad Money Didn’t Waste Any Time Moving Online

Advertisers have flocked to the Internet and mobile as consumers change behavior

The face of the world’s media market is changing. Advertising dollars are increasingly flowing from traditional ads to digital. Increased spending on mobile, social media and digital video propelled U.S. digital advertising revenue to $49.5 billion for the full year of 2014, a 16% increase over 2013.

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INVESTMENT INSIGHTS  |  October 2015  |  FEATURING Brad Barrett

Going Mobile: The Serious Business of Playing Games

With sales about to exceed $100 billion a year, video games are hardly kid stuff

In 2013, Grand Theft Auto V became the fastest-selling entertainment product of all time, with sales of $1 billion in just three days. That probably disabused most people of the notion that video games were kid stuff.

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INVESTMENT INSIGHTS  |  October 2015  |  FEATURING Andrei Muresianu

Has Streaming Turned Cable TV Into a House of Cards?

Netflix and others have redefined TV, but consumers are reluctant to cut the cord

Netflix can seem like a juggernaut. The company recently reported that it had 65.6 million subscribers at the end of the second quarter of 2015. Of those, 42 million are in the U.S. and another 23 million are international.

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INVESTMENT INSIGHTS  |  October 2015  |  FEATURING Jim S. Kang

Inflection Points Abound as Consumers Embrace New Technology

Streamers, gamers and cord-cutters are part of the landscape, but not point-and-shoot cameras

One need not look too far these days to find an example of how innovation can transform an industry. The charts above show a remarkable array of change, some of which are still evolving. Many gamers now play on mobile devices, not consoles. Most pictures are taken on phones, and most point-and-shoot cameras have been put on the shelf.

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Online and social media rival television as the main source of news in the U.S.

How people consume news has undergone a sea change. More people now get their news from digital sources than they do from either print newspapers or the radio, and digital is starting to make a move on TV as the dominant place people go for news.

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MARKET COMMENTARY  |  October 2015

World Markets Review for Third Quarter 2015

Global stocks tumbled amid increasingly alarming signs of an economic slowdown in China and uncertainty over U.S. monetary policy. Energy and materials stocks plummeted on worries about declining global demand for commodities. Defensive sectors, including consumer staples and utilities, generally held up better than cyclical stocks. Government bonds rallied and the U.S. dollar slipped against the euro and the yen. 

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Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.

Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the fund prospectuses and summary prospectuses, which can be obtained from a financial professional and should be read carefully before investing. 

The return of principal for bond funds and for funds with significant underlying bond holdings is not guaranteed. Fund shares are subject to the same interest rate, inflation and credit risks associated with the underlying bond holdings. Lower rated bonds are subject to greater fluctuations in value and risk of loss of income and principal than higher rated bonds. 

Investing outside the United States involves risks, such as currency fluctuations, periods of illiquidity and price volatility, as more fully described in the prospectus. These risks may be heightened in connection with investments in developing countries. 

The Capital Group companies manage equity assets through three investment groups. These groups make investment and proxy voting decisions independently. Fixed income investment professionals provide fixed income research and investment management across the Capital organization; however, for securities with equity characteristics, they act solely on behalf of one of the three equity investment groups.

Statements attributed to an individual represent the opinions of that individual as of the date published and do not necessarily reflect the opinions of Capital Group or its affiliates. This information is intended to highlight issues and not to be comprehensive or to provide advice.