And After All That, What’s an Advisor to Do Now?

TODAY’S MODERATOR

Gerald Gugger, CFA

Investment Communications

Strategist

TODAY’S SPEAKER

Chris Petrosino, CFA

Managing Director of Quantitative

Strategies

Agenda

1. Diverging Paths

2. There is No Alternative

3. Taking Action

Q&A

4

Diverging Paths1

5

The equity market versus the economy

1

6

Where the

Economy

Was

Late in the economic

cycle, but in a good place

-

200,000

400,000

600,000

800,000

Weekly data.

Source: Federal Reserve (01/06/1968 – 03/07/2020).

INITIAL JOBLESS CLAIMS (PRE-COVID)

NORMAL

LATE

CYCLE

1

7

Where the

Economy

Is Now

Past peak carnage, but

still historically bad

Weekly data.

Source: Federal Reserve (01/06/1968 – 06/27/2020).

-

2,000,000

4,000,000

6,000,000

8,000,000

INITIAL JOBLESS CLAIMS (POST-COVID)

1

8

Trade

Collapses

Slow growth, weak

trade, and supply chain

disruptions take a toll !-20%

-10%

0%

10%

20%

200

1

200

2

200

3

200

4

200

5

200

6

200

7

200

8

200

9

201

0

201

1

201

2

201

3

201

4

201

5

201

6

201

7

201

8

201

9

202

0

Vo

lum

e G

row

th

WORLD TRADE MONITOR: VOLUMES

Year-over-year.

Source: CPB World Trade Monitor (01/2001 – 04/2020).

1

9

Remarkable

in its Speed

Compared to past bear

markets, the current

selloff has been fast

Pe

rcen

t fr

om

Pe

ak

Days from Peak

Grey represents middle 50% range.

Analysis is of the S&P 500 over 21 bear markets since 1928.

Source: FactSet (01/03/1928 – 03/31/2020). See last slide for disclosures.

-40%

-30%

-20%

-10%

0%

Today Median

TODAY’S BEAR MARKET VS

THE PAST 90 YEARS OF BEAR MARKETS

1

10

Remarkable

in its Speed

Compared to past bear

markets, the current

rally has also been fast

Days from Peak

Grey represents middle 50% range.

Analysis is of the S&P 500 over 21 bear markets since 1928.

Source: FactSet (01/03/1928 – 06/30/2020). See last slide for disclosures.

TODAY’S BEAR MARKET VS

THE PAST 90 YEARS OF BEAR MARKETS

Pe

rcen

t fr

om

Pe

ak

-40%

-30%

-20%

-10%

0%

Today Median

1

11

Differing

Opinions

It’s not uncommon for

markets to lead

fundamentals, but…

?

Data is seasonally-adjusted. See last slide for disclosures.

Source: Bloomberg (01/2008 – 05/2020).

S&P 500 INDEX

VS CONSUMER CONFIDENCE

20

80

140

600

1200

1800

2400

3000

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

S&P 500 Index Conference Board Consumer Confidence

1

12

A Closer

Look

The market says

everything is fine, but

the data say otherwise

80

100

120

140

160

2016 2017 2018 2019 2020

Ind

exe

d to

10

0

S&P 500 Consumer Confidence Index

!

!!

Index date is 01/2016. Data are seasonally adjusted.

Source: Bloomberg. See last slide for disclosures.

S&P 500 INDEX VS

CONSUMER CONFIDENCE AND CEO BUSINESS SURVEY DATA

40

80

120

160

2016 2017 2018 2019 2020

Ind

exe

d to

10

0

S&P 500 US Business Roundtable CEO Survey Index

1

13

POLL:When do you think the market expects S&P 500 earnings will reach 2019 levels?

There is No Alternative (to Equities)2

14

Ultra-low rates have wide reverberations

2

15

A One Year Blip

The market is not on clearance, and it’s not even on sale

Source: FactSet (12/2006 – 12/2022 Estimate)

Source: US Treasury (01/31/1996 – 05/29/2020).

10

15

20

25

S&P 500: Forward Price-to-Earnings Ratio Period Average

$-

$50

$100

$150

$200

S&P 500: Price-to-Earnings Ratio on 2021 Estimates

S&P 500 EPS AND FORWARD P/E RATIO

Earn

ings P

er

Share

Price

-to-E

arn

ings R

atio

* estimates

2

16

You Only

Live Once

Retailer investors are

pouring money into the

market, chasing returns

9,000

18,000

27,000

36,000

2200

2600

3000

3400

To

tal R

ob

inh

oo

d A

cco

un

ts

S&

P 5

00

S&P 500 Index Robinhood Accounts

See last slide for disclosures.

Source: Bloomberg, Robinhood (05/02018 – 06/24/2020).

S&P 500 VS ROBINHOOD ACCOUNTS

2

17

Greenshoots

Optimism that COVID-19 is

easing and the economy is

rapidly reopening

-20%

-10%

0%

10%

RETAIL SALES GROWTH(excluding food services)

Year-over-year, seasonally-adjusted.

Source: Federal Reserve, Bloomberg (01/01/2008 – 05/01/2020).

2

18

Bond Market

Shows It Too

Repricing of risk not limited

to equities

Source: Bloomberg (01/02/2002 – 06/30/2020)

0

600

1200

1800

2400

High Yield

US FIXED INCOME: OPTION-ADJUSTED SPREADS

0

150

300

450

600

Investment GradeB

asis

poin

tsB

asis

poin

ts

2

19

Monetary Support

Fed takes worst case liquidity scenarios off the table

$-

$2,000,000

$4,000,000

$6,000,000

$8,000,000

$10,000,000

200

3

200

4

200

5

200

6

200

7

200

8

200

9

201

0

201

1

201

2

201

3

201

4

201

5

201

6

201

7

201

8

201

9

202

0

Dollars in millions. See last slide for disclosures.

Source: Federal Reserve (01/01/2003 – 06/17/2020).

FEDERAL RESERVE BALANCE SHEET: TOTAL ASSETS

2

20

Fiscal Support

Federal government provides a backstop to the real economy

US FEDERAL GOVERNMENT DEFICIT AS % OF GDP

-30%

-20%

-10%

0%

1930 1940 1950 1960 1970 1980 1990 2000 2010 2020

CURRENT 2020

PROJECTIONS

See last slide for disclosures.

Source: Federal Reserve (1930 – 2020).

2

21

Lower for Longer

Interest rates are set to be remarkably low for a long time

Source: US Treasury (01/02/2020 – 06/30/2020).

US TREASURY YIELD CURVE

1M1Y 3Y5Y

10Y

20Y

30Y

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

Yie

ld t

o M

atu

rity

Maturity

1/2/2020 6/30/2020

2

22

TINA

With low yield in fixed income, some investors are fleeing to stocks

EQUITY DIVIDEND YIELDS VS BOND YIELDS

S&P 500 dividend yield and US 10-Year Treasury Yield.

Source: Shiller/Yale University (01/1871-06/2020).

0%

4%

8%

12%

16%

187

11

87

51

88

01

88

41

88

81

89

31

89

71

90

11

90

61

91

01

91

41

91

91

92

31

92

71

93

21

93

61

94

01

94

51

94

91

95

31

95

81

96

21

96

61

97

11

97

51

97

91

98

41

98

81

99

21

99

72

00

12

00

52

01

02

01

42

01

8

S&P Div Yield 10-Year Treasury

2

Yields using US 10-Year Treasury Note.

Source: Bloomberg (01/31/1962 – 05/31/2020).

TINA in the US

Lower yields don’t always drive higher multiples

0

5

10

15

20

<3% 3% to 5% 5% to 7% 7% to 9% 9% to 11% >11%

S&

P 5

00

Me

dia

n P

/E10-Year US Treasury Yield Range

MEDIAN S&P 500 P/E

BY TREASURY YIELD RANGE

-1.0%

0.0%

1.0%

2.0%

3.0%

0

4

8

12

16

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

MSCI Eurozone NTM P/E German Long Bond Yield

2

TINA Abroad

No sign of TINA internationally either

FORWARD P/E RATIOS

VS GOVERNMENT BOND YIELDS

Long bond yields are representative of the

respective local 10-year government bond yield.

Source: Bloomberg (05/31/2010 – 05/31/2020).

-0.5%

0.0%

0.5%

1.0%

1.5%

0

4

8

12

16

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Japan NTM P/E Japanese Long Bond Yield

2

25

POLL:

What is your biggest concern from now through the rest of the year?

Taking Action3

26

What we are doing today

3

27

LOWER EQUITY MARKET RETURNS

FIXED INCOME REMAINS CHALLENGED

RISKS TILTED TO THE DOWNSIDE

Our 2020 Outlook Going into the Year

3

28

LOWER EQUITY MARKET RETURNS

FIXED INCOME REMAINS CHALLENGED

RISKS TILTED TO THE DOWNSIDE

Our Outlook Today

3

29

Be Different Opportunistic by theme

Utilizing security selection

Dynamic asset allocation

3

30

Goal:

Adjust your positioning as market conditions evolve

Dynamic Asset Allocation

FOR EXAMPLEConsider an allocation to a multi-asset class ‘swing’ manager to help client portfolios actively adjust throughout market cycles

3

31

Opportunistic By Theme

Goal:

Tilt portfolios by shifting beyond core exposures

FOR EXAMPLEMake your beta smarter by redeploying small pieces of core holdings to unique strategies and asset classes

3

32

Utilizing Security Selection

Goal:

Look for managers who think outside of the box

FOR EXAMPLEFind an active manager with a unique process. Alpha only exists for those who dare to be different

3

33

We think that in a low rate, low return world, active investment tools and strategies will be needed to

meet long-term return objectives

Question& Answers

THANK YOU

Sources & Disclosures

Unless otherwise noted,, analysis provided by Manning & Napier. Past performance does not guarantee future results. Current performance may be higher or lower than that quoted; investors can obtain the

most recent quarter-end performance at www.manning-napier.com.

©2020 Morningstar, Inc. All rights reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied, adapted or distributed; and (3) is not warranted to be accurate,

complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information, except where such damages or losses cannot be limited or excluded by law in your

jurisdiction. Past financial performance is no guarantee of future results.

The S&P 500 Price Return Index is an unmanaged, capitalization-weighted measure comprised of 500 leading U.S. companies to gauge U.S. large cap equities. The Index returns do not reflect any fees, expenses, or adjust for cash

dividends. The S&P 500 Total Return Index is an unmanaged, capitalization-weighted measure comprised of 500 leading U.S. companies to gauge U.S. large cap equities. The Index returns do not reflect any fees or expenses. The

index accounts for the reinvestment of regular cash dividends, but not for the withholding of taxes. Index returns provided by Bloomberg. S&P Dow Jones Indices LLC, a division of S&P Global Inc., is the publisher of various index

based data products and services, certain of which have been licensed for use to Manning & Napier. All such content Copyright © 2020 by S&P Dow Jones Indices LLC and/or its affiliates. All rights reserved. Data provided is not a

representation or warranty, express or implied, as to the ability of any index to accurately represent the asset class or market sector that it purports to represent and none of these parties shall have any liability for any errors,

omissions, or interruptions of any index or the data included therein.

Investment-Grade is representative of the Intercontinental Exchange (ICE) Bank of America (BofA) U.S. Corporate Index which is an index that tracks the performance of investment-grade corporate debt publicly issued in the U.S.

domestic market. The securities must have at least one year remaining term to final maturity as of the rebalancing date, at least 18 months to final maturity at the time of issuance, a fixed coupon schedule, and a minimum amount

outstanding of $250 million. The Index returns do not reflect any fees or expenses.

High Yield is representative of the Intercontinental Exchange (ICE) Bank of America (BofA) U.S. Cash Pay High Yield Index which tracks the performance of U.S. dollar denominated below investment grade corporate debt, currently

in a coupon paying period, issued in the U.S. domestic market. Qualifying securities must have at least one year remaining term to final maturity as of the rebalancing date, at least 18 months to final maturity at the time of issuance, a

fixed coupon schedule, and a minimum amount outstanding of $250 million. The Index returns do not reflect any fees or expenses.

SMA-SEM170 (07/20) 35