March - Putnam Investments

Much has been said about the harsh winterweather’s effect on U.S. economic growth.Do you believe it had a meaningful impact?I am not one who generally reacts stronglyto weather and its impact on the economyand markets. I believe that it can be a littleoverhyped, but, clearly, the weather had achilling effect on economic activity duringthe early months of 2014. Weather hurteverything from auto sales to home sales toconstruction. Anecdotally, the situation hasimproved as the weather warms up — withthe good news moving from south to northin the United States. The second quarter willlikely deliver better results in these areas. Inmy opinion, it will not be until summer thatimproved data will be fully evident.What is your outlook for the remainderof 2014?Looking at the economic data, we believe weare in a low-growth environment. GDP hastrended higher, but it’s a slow process. TheU.S. economy has been stuck in the muck, andwe believe we are in the early stages of pullingourselves out.That said, we are in a different market environmenttoday than in 2013, when stocksexperienced extraordinary growth. Webelieve it would be a mistake to expecta repeat performance this year and, sofar in 2014, this view has been confirmed.Nonetheless, we continue to believe thatthe U.S. economy’s fundamentals are solidenough to support further growth in equitymarkets for the rest of the year.We are also relatively optimistic about theeconomic recovery in the eurozone. However,the situation in Ukraine and the slowingpace of emerging-market economies areworrisome issues, to be sure, and will demandour ongoing attention. The developing risksin global markets may change the generalattractiveness of asset classes. However, webelieve that the broadly diversified structurePortfolio composition comparisonU.S. large-capgrowth stocksU.S. large-capvalue stocksInternational stocksU.S. high-yield bondsU.S. smallandmid-capgrowth stocksas of 9/30/13as of 3/31/1422.9%24.0%22.9%23.9%13.7%13.9%11.7%11.6%8.3%8.7%This chart shows how the fund’s top weightings have changed over the past six months. Allocationsare shown as a percentage of the fund’s net assets. Short-term investments and net other assets,if any, represent the market value weights of cash, derivatives, short-term securities, and otherunclassified assets in the portfolio. Current period summary information may differ from the portfolioschedule included in the financial statements due to the inclusion of derivative securities, any interestaccruals, the exclusion of as-of trades, if any, and the use of different classifications of securities forpresentation purposes. Holdings and allocations may vary over time.8 Dynamic Asset Allocation Growth Fund