2012 Market Outlook

Jon Erickson, CFASenior Vice President, ResearchFirst Trust Advisors LP

U.S. Sector Returns – 2011

Returns represent the S&P 500 GICS Sectors for the period 12/31/10 through 12/31/11. Returns are for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index. Past performance is no guarantee of future results.

-20.00%

-15.00%

-10.00%

-5.00%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

U.S. Sector Returns – YTD 2012

Returns represent the S&P 500 GICS Sectors for the period 12/31/11 through 5/10/12. Returns are for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index. Past performance is no guarantee of future results.

U.S. Style Returns – 2011

Returns for the period 12/31/10 through 12/31/11. Returns are for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index. Past performance is no guarantee of future results.

-3.00%

-2.00%

-1.00%

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

S&P 500Value

S&P 500 S&P 500Growth

S&P 400Value

S&P 400 S&P 400Growth

S&P 600Value

S&P 600 S&P 600Growth

U.S. Style Returns – YTD 2012

Returns for the period 12/31/11 through 5/10/12. Returns are for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index. Past performance is no guarantee of future results.

Country Returns – 2011

Returns are represented by MSCI Country Indexes for the period 12/31/10 through 12/31/11. Returns are for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index. Past performance is no guarantee of future results.

-40.00%

-35.00%

-30.00%

-25.00%

-20.00%

-15.00%

-10.00%

-5.00%

0.00%

5.00%

Country Returns – YTD 2012

Returns are represented by MSCI Country Indexes for the period 12/31/11 through 5/10/12. Returns are for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index. Past performance is no guarantee of future results.

Germany $184BBritain $188BFrance $60B

$16B

$22B

$18B

Ireland$867B

$0.8BGreece$236B

German

y $23

8B $28B

$31B$30B

Spain $1.1 Trillion $86B

Germany $190B

France $511B

Britain $77B

Amount owed between countries as of December 31, 2010 in billions of dollars

Italy $1.5 Trillion

Portugal $286B

$0.7B

$8.5B $6.9B

$6.7B$9.7B

$0.1B

$5.2B

$5.4B

$46B

$47B

France $45BGermany $47B

Britain $24B

$0.8

B$1

.3B

Fran

ce

$75B

Ger

man

y $

45B

Brit

ain

$15

B

Britain

$114

B

Fran

ce $2

20B

Europe’s Web of Debt

Source: New York Times

Debt vs. GDP

Source: IMF

As of 12/31/2010

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

$16,000

Japan Greece Italy UnitedStates

France Canada Germany UnitedKingdom

India Brazil Spain Australia China Russia

Japan Greece Italy United States France Canada Germany United

Kingdom India Brazil Spain Australia China Russia

GDP 5458.872 305.415 2055.114 14657.8 2582.527 1574.051 3315.643 2247.455 1537.966 2090.314 1409.946 1235.539 5878.257 1465.079DEBT 12024.93 433.7614 2445.766 13419.47 2175.667 1322.928 2652.329 1735.984 1109.973 1380.974 847.5763 275.5935 1041.112 144.6146

%Debt/GDP 220.28% 142.02% 119.01% 91.55% 84.25% 84.05% 79.99% 77.24% 72.17% 66.07% 60.11% 22.31% 17.71% 9.87%

Federal Receipts vs. Outlays 12-Month Moving Total

1.6

1.8

2.0

2.2

2.4

2.6

2.8

3.0

3.2

3.4

3.6

3.8

2000 2002 2004 2006 2008 2010 2012

Federal OutlaysFederal Receipts

trillions

Source: Treasury Department. Data from January 2000 through November 2011.

16

18

20

22

24

26

1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015

Government Spending as a % of GDPDow Jones Industrial Average (Log Scale)

percent index

1,250

7,500

5,000

2,500

10,000

12,50015,000

500

Government Spending as a % of GDP vs. Dow

?

Source: OMB, WSJ. Data from January 1965 through February 2012. Returns are for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index. Past performance is no guarantee of future results.

Housing Starts (Thousands, Annual Rate)

400

800

1200

1600

2000

2400

04 05 06 07 08 09 10 11

Normal = 1.6 Million

Home Building Must “Boom” to Normalize

Source: Census Bureau. Data from January 2004 through November 2011.

Household Financial Obligations RatioRecurring Monthly Payments as a Percent of After-Tax Income

14

15

16

17

18

19

20

80 85 90 95 00 05 10

Consumer Obligations Low Versus Income

Source: Federal Reserve Board. Data from First Quarter 1980 through Third Quarter 2011.

S&P 500 Index

1527.46

3/24/2000

815.28

9/30/2002

676.53

3/9/2009

1552.50

7/13/2007

1357.99

5/10/2012

Returns are for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index. Past performance is no guarantee of future results.

Returns are for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index. Past performance is no guarantee of future results.

S&P 500 Index

Theoretical 8% compounded growth

S&P 500 10 Year Rolling Return

Returns are for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index. Past performance is no guarantee of future results.

10 Year US Treasury vs. Earnings Yield

Returns are for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index. Past performance is no guarantee of future results.

Valuation Comparison of S&P 500 Current Compared to 20 Year Average

Price/ SalesPrice/ Cash FlowPrice/ Book

Cur

rent

20 Y

ears

Cur

rent

20 Y

ears

20 Y

ears

Cur

rent

Data obtained from the Compustat database. Data as of 2-28-2012. Comparisons are for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index. Past performance is no guarantee of future results.

Bond and Stock Inflows

Source: ICI, FT Advisors

-300

-200

-100

0

100

200

300

400

500

1996 1998 2000 2002 2004 2006 2008 2010 2012

Net Equity Fund Flows Rolling 12 MonthNet Bond Fund Flows Rolling 12 Month

billions, USD

These slides were prepared by First Trust Advisors L.P. (FTA) and reflect the current opinion of FTA. It is based on sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. The information does not constitute a solicitation or an offer to buy or sell any security.Investing involves risks, including the risk of loss.An investment in common stocks involves risks such as an economic recession and the possible deterioration of either the financial condition of the issuers of equity securities or the general condition of the stock market. An investment in small-cap companies or mid-cap companies is subject to additional risks as the share prices of small-cap and mid-cap companies are often more volatile than those of larger companies due to various factors, including limited trading volumes, products, financial resources, management inexperience, and less publicly available information. An investment concentrated in common stocks of issuers from a specific industry sector is more risky than a broadly diversified portfolio.An investment in foreign securities is subject to additional risks, such as currency fluctuations, political risk, the lack of adequate financial information, withholding taxes, and exchange control restrictions impacting foreign issuers. Risks associated with investing in foreign securities may be more pronounced in emerging markets, where the securities markets are substantially smaller, less developed, less liquid, less regulated, and more volatile than the U.S. and developed foreign markets. An investment in U.S. Treasury securities involves certain risks including changes in interest rates, economic recession, deterioration of the U.S. Treasury market or investor’s perception thereof, and possible downgrades by credit rating agencies.

Certain Considerations

• Questions & Answers

• Thank you!

Q & A