CIBC WOOD GUNDY

2020 Q3 U.S. MARKET REVIEWSUSYN WAGNER, CIM®, FCSI, CFP

INVESTMENT ADVISOR, SENIOR PORTFOLIO MANAGER

403 508-3252 susyn.wagner@cibc.ca, www.susynwagner.ca

S&P 500 Performance 2020 Q3 (Price Return)

3700

3500

3300

3100

2900

2700

2500

2300

2100July August September

After five consecutive positive months, the index declined inSeptember.

+ 5.5% + 7.0% -3.9%

8.5%

U.S. Market Performance (Total Return)

July August September Q3

S&P500 5.6% 7.2% -3.8% 8.9%

S&P400 4.6% 3.5% -3.2% 4.8%

Russell2000 2.8% 5.6% -3.3% 4.9%

DJIA 2.5% 7.9% -2.2% 8.2%

NASDAQ 6.9% 9.7% -5.1% 11.2%

14%

12%

10%

8%

6%

4%

2%

0%

-2%

-4%

-6%

Afterfivemonthsofmarketrebound,allfiveindicesfell intoredterritory inSeptember.

The S&P 500 and particularly the NASDAQ exhibited the best returns for the quarter.

July August September Q3

S&P500 73% 73% 32% 71%

S&P400 63% 72% 25% 57%

S&P600 55% 66% 24% 47%

80%

60%

40%

20%

0%

Market Breadth (% of stocks with a positive totalreturn)

The S&P 500 fell -3.9% in September.

32% of its constituents had a positive return.

Quarterly Market Breadth (% of S&P 500 stocks with a positive total return)

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

Market breadth for Q3 fell to 71% from 92% in the previous quarter.

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

GICS Sectors: 2020 Q3 Total Returns

-20.00% -15.00% -10.00% -5.00% 0.00% 5.00% 10.00% 15.00%

25 Consumer Discretionary

15 Materials

20 Industrials

45 Information Technology

30 Consumer Staples

50 Communication Services

55 Utilities

35 Health Care

40 Financials

60 Real Estate

10 Energy

S&P 500 Sector Results

25%

20%

15%

10%

5%

0%

-5%

-10%

-15%

-20%

-25%

71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15 17 19

%To

tal R

etur

nHistoric Performance –Q4

S&P 500 Total Return –4th Quarter Performance: 1971 to 2019

88

Q4

# positive quarters 39

# negative quarters 10

% positive 80%

Q1 Q2 Q3 Q4

Average 3.3% 2.8% 0.8% 4.16%

Median 2.5% 2.5% 2.6% 5.57%

Std Dev 8.0% 7.2% 8.9% 8.5%

Q4 Historic Performance

GICS Sector Q4 Performance Since 1989

Return(%)Energy Materials Industrials

Consumer

Disc.

Consumer

Staples

Health

Care Financials I.T. Telecom UtilitiesReal

Estate

Median 1.8% 7.4% 6.8% 7.4% 6.1% 6.2% 7.5% 8.7% 7.4% 4.0% 4.8%

Std Dev 9.9% 11.1% 9.2% 10.8% 7.1% 7.3% 11.9% 16.7% 11.4% 6.4% 13.7%

% Positive 65% 77% 84% 81% 87% 87% 77% 77% 65% 81% 72%

Historically, IT is the best performer in Q4, while Energy is the worst.

The chart below illustrates the historic median return, standard deviation and

probabilityofaprofitablequarter foreach sector intheUS:

Earnings: Year-over-year earnings growth of the S&P 500

86%

14%

CommunicationServices

78%

22%

ConsumerDiscretionary

91%

ConsumerStaples

9%

73%

27%

Energy

78%

Financials

2%20%

89%

HealthCare

11%

93%

Industrials

1%

6%

75%

11%

14%

Utilities

93%

Materials

7%

48%52%

RealEstate

84%

15%1%

S&P 500 EarningsResults

BEAT MISS MET

95%

Information

Technology1%

4%

GICS Sectors: 2020 Q3Overview

Earningsestimates werecuttoomuchbytheanalysts inQ2,explainingthepositiveEstimateRevisions

inQ3. Nonetheless, fortheyeartoSeptember30,EstimateRevisions aredramaticallynegative.

SectorCurrent

P/B

Expected

ROE

Expected EPS

GrowthEarnings Surprise Estimate Revisions

10 Energy 0.7x 2.80% -62.50% 7.80% 12.90%

15 Materials 2.0x 12.30% -21.40% 7.40% 9.20%

20 Industrials 2.4x 13.50% -22.00% 9.40% 5.30%

25 Consumer Discretionary 2.4x 15.00% -15.10% 14.70% 9.50%

30 Consumer Staples 2.7x 14.90% -1.30% 6.30% 3.60%

35 Health Care 4.1x 15.40% -10.60% 10.20% 1.60%

40 Financials 0.9x 9.10% -21.00% 5.70% 1.90%

45 Information Technology 3.3x 15.40% -6.90% 10.60% 4.80%

50 Communication Services 1.9x 8.20% -10.80% 10.30% 0.80%

55 Utilities 1.7x 11.50% 0.00% 0.80% -0.70%

60 Real Estate 1.5x 3.40% -17.20% 0.40% -4.40%

The Asset Mix Decision

Dividend yield on the S&P 500 is still greater than the 10-year bond yield and

the gap has slightly decreased since last quarter.

EconomicSnapshot

Unemployment, Capacity Utilization and inflation rates all rebounded in Q3

from their Q2 extremes.

Summary

FUNDAMENTALSVALUATIONS:

The median P/B in the CPMS universe has recovered to about the mid-point of its range of the past seven years.

PROFITABILITY:CPMS median reported ROE (net of T-bills) has declined 180 basis points since March. It is projected to rise again significantly in 2021.

EARNINGS

GROWTH:Reported earnings continued to decline in Q3 but bounced from Q2 lows.

ASSET MIX DECISION

Dividend yield on the S&P 500 is still greater than the 10-year bond yield and the gap has slightly decreased since last quarter.

ECONOMICSANALYSIS

Unemployment, Capacity Utilization and inflation rates all rebounded inQ3 from their Q2extremes.

CIBC WOOD GUNDY

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403 508-3252 susyn.wagner@cibc.ca, www.susynwagner.ca

Susyn Wagner is an Investment Advisor with CIBC Wood Gundy in Calgary, Alberta, Canada.

The views of Susyn Wagner do not necessarily reflect those of CIBC World Markets Inc.

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