Many yields have soared to pre-financial crisis levels 12 10 8 6 4 Yield to worst (%) 2 0 DM ex-U.S. 10-year 10-year Cash Investment- High-yield EM High yield fixed income municipal Treasury grade municipal fixed income corporate Yield as of 12/31/2006 Yield as of 11/15/2021 Yield as of 11/15/2022 Sources: Bloomberg and Wells Fargo Investment Institute, as of November 15, 2022. DM = developed market. EM = emerging market. For illustrative purposes only. Emerging Market: J.P. Morgan EMBI Global Index, High yield: Bloomberg U.S. Corporate High Yield Bond Index, High yield municipal: Bloomberg U.S. Municipal High Yield Index, Investment-grade corporate: Bloomberg U.S. Corporate Bond Index, Developed Market ex-U.S.: J.P. Morgan GBI Global Ex U.S. Index, and Cash: Bloomberg U.S. Treasury Bills (1–3M) Index. An index is unmanaged and not available for direct investment. Yields represent past performance and fluctuate with market conditions. Current yields may be higher or lower than those quoted. Past performance is no guarantee of future results. See index definitions at end of report. Resist the urge to time the markets 4 Market timing involves moving all or a significant portion of a portfolio into or out of asset classes based on near-term market expectations. Unfortunately, such a strategy is nearly impossible to accomplish successfully. Our research has found that the stock market’s best and worst days often follow each other closely and occur during periods of high volatility — often during a bear market — making it all the more difficult to time.* Instead of timing the markets with large allocation changes, we prefer more modest tactical adjustments for short-term investors. Our guidance combines a quality approach in equities, a barbell between short- and long-term fixed-income assets, low-correlated alternative strategies, and commodities — for the longer supply-demand rebalancing in those markets. Once we anticipate recovery and lower interest rates, we expect to shift gears to more cyclical opportunities. For their part, investors with a long time horizon may want to consider following our guidance in a disciplined, patient, and incremental way. The fixed-income barbell and our preference for commodities and higher-quality U.S. equity sectors should offer some attractive long-term entry points while markets remain volatile in the coming months. The same patient and disciplined approach should apply later in the year, but over the potentially broader opportunity set that typically accompanies an economic recovery. *Wells Fargo Investment Institute, The perils of trying to time volatile markets, September 14, 2022. 22 | 2023 Outlook Please see pages 25–27 for important definitions and risk considerations.