International equity markets face headwinds that ultimately keep us less Favored asset classes favorable compared with U.S. equities through 2023. In aggregate, international earnings growth prospects lag those for the U.S., while sentiment, geopolitical • U.S. Large Cap Equities tensions, and only a partial dollar depreciation reinforce our preference for U.S. • U.S. Mid Cap Equities over international markets. We see no catalyst for sustained international equity market outperformance in 2023. The dollar may surrender some of its 2022 appreciation but should Favored equity sectors stay strong enough to maintain a headwind for international returns. • Energy Meanwhile, elevated commodity prices will likely help commodity exporters but undercut earnings among commodity importers. And a difficult European • Health Care recession should weigh on developed market returns. • Information Technology Stay balanced and focus on quality sectors We continue to prefer balance, patience, and a tilt toward quality, both across equity sectors and at the sub-industry level. Our favored sectors remain Information Technology (IT), Health Care, and Energy, while we remain unfavorable on the highly cyclical Consumer Discretionary sector and the interest-rate-sensitive Real Estate sector.* IT has high-quality attributes, and we remain attracted to the numerous secular growth drivers that underpin the sector. IT’s largest constituents sport particularly strong financial health, while more broadly, many companies within the sector have high margins, low balance-sheet leverage, and solid long-term growth prospects. Within the IT sector, we favor the IT Services, Networking Equipment, Payment Processors, Semiconductor Equipment, and Software sub- industries because we expect relatively resilient corporate tech spending even in an uncertain macroeconomic backdrop and supply chain reshoring. We remain neutral on Semiconductors and PC Hardware due to concerns on the economic cycle but would note that valuations for these sub-industries and IT more generally have become more reasonable in recent quarters. Our preference for the Health Care sector comes from its mix of defensive and quality characteristics. For instance, we expect the Managed Care sub-industry to maintain strong earnings stability while also continuing to benefit from the effects of an aging population. We also favor the Life Sciences and Medical Devices sub-industries, as we expect these areas to continue exhibiting strong and consistent organic growth due to increasing adoption of advanced medical technologies that include biologics, diagnostics, and robotic surgery. We are neutral on large-cap Pharmaceuticals, as we view the fundamentals as balanced — generally strong earnings stability, offset by varying exposure at the company level to pandemic-related product lines (such as vaccines) and a wide spread of pipeline quality. Meanwhile, we remain unfavorable on Generic Pharmaceutical companies, where we continue to believe that fundamentals remain questionable. *Sub-industry analysis prepared by Wells Fargo Advisors Global Securities Research (GSR). For more detailed information at the sub-industry level, please see “2023 Equity Sector Outlook: Balanced and ready”, December 2022. 10 | 2023 Outlook Please see pages 25–27 for important definitions and risk considerations.