Before the Bell · 2020. 9. 14. · 33X earnings, Apple at 34X, Alphabet at 35X, Netflix 72X , and Amazon at 120X. Of course, these companies represent the growth opportunities in

FOR IMPORTANT DISCLOSURES PLEASE SEE THE DISCLOSURE PAGES AT THE END OF THIS DOCUMENT Notations:

• For further information on any of the topics mentioned, please contact your Financial Advisor. • Unless specifically stated otherwise, comments contained in this document should not be construed as an investment opinion or

recommendation of any securities mentioned. Charts depicted are from FactSet unless otherwise noted. ____________________________________________________________________________________________________________________________ © 2020 Ameriprise Financial, Inc. All rights reserved. Page 1 of 12

Before the Bell Morning Market Brief

September 14, 2020

MONDAY MORNING MARKET STRATEGY: David M. Joy, Chief Market Strategist Stocks endured another week of choppy trading last week, full of down days followed by up days. In total, the S&P 500 was down 2.5 percent. This followed its 2.3 percent decline of the previous week. From its peak on September 2nd the index is now lower by 6.7 percent. It is no secret that the tech sector has suffered the worst of the declines, falling 11.1 percent since the index’s peak. Communications services and energy have been battered as well, tumbling 8.2 and 7.4 percent respectively. As has been noted before, cyclical groups have fared relatively better, but no group is positive. Materials are down only 1.8 percent and industrials are down just 2.9. Utilities and financials have also held up relatively well. The Nasdaq composite has fared even worse than the S&P 500. It fell 4.1 percent last week, after falling 3.3 percent the week prior. From its peak September 2nd peak the index is lower by 10 percent, and the Nasdaq 100 is down 10.7 percent.

It is difficult to say whether the correction in technology and its kindred spirits in the momentum trade has further to run. The Nasdaq has enjoyed just one day of higher prices since its peak, while suffering five down days. And it ended last week on a decidedly weaker note, falling on both Thursday and Friday. The economic data has been somewhat soft of late, providing a convenient excuse to take profits. And while the declines so far have certainly erased some of the excess in valuations, the poster children of the momentum trade are by no means cheap. Facebook is trading at 33X earnings, Apple at 34X, Alphabet at 35X, Netflix 72X, and Amazon at 120X. Of course, these companies represent the growth opportunities in this economy and should command a higher multiple. The question is how much higher.

Last week’s jobless claims report was the latest example of the economy’s third quarter economic recovery flattening to some extent. The Atlanta Fed’s GDPNow model is forecasting robust annualized growth of 30.8 percent in the quarter, just shy of its peak forecast for the quarter of 31 percent just one week ago, so there as been only slight deterioration in the outlook, at least according to this model. In fact, the model has shown steady improvement over the past month from its 20.5 percent forecast on August 12th. But there has been a slowdown in the rate of improvement among the more high frequency data points, including weekly jobless claims, continuing claims, Apple mobility trends, OpenTable diners, and TSA travelers.

Since the start of summer, the major holidays have represented temporary peaks in social mobility, followed by spikes in infection rates. Memorial Day and the Fourth of July exhibited this pattern. Labor Day seems to be exhibiting a similar result as the number of infections nationally has climbed sharply in the last few days, after having fallen to a three-month low on September 8th. And according to the CDC, cases of the seasonal flu start to rise in October, and peak between December and February. So we are not far from the time when a so-called second wave of covid 19 could coincide with the normal flu season, causing further disruption.

The week ahead is quite full on the economic calendar. Reports on industrial production, retail sales, housing starts and permits, homebuilders’ confidence, jobless claims, leading indicators, and consumer sentiment are all scheduled.

Before The Bell September 14, 2020 ____________________________________________________________________________________________________________________________

____________________________________________________________________________________________________________________________ © 2020 Ameriprise Financial, Inc. All rights reserved. Page 2 of 12

The Federal Reserve meets this week as well and will publish its latest estimates of future economic activity and the path of fed funds. It may also choose to amplify its outlook for the path of policy and how it intends to achieve its new average inflation framework, although that could come at a later meeting, likely December.

Earlier today, Monday, the Eurozone reported its industrial production data for July which fell fractionally shy of expectations, but the previous month was revised higher. And later in the week China will report its August data for industrial production, retail sales, and fixed investment.

MORNING MARKET COMMENTARY: Anthony M. Saglimbene, Global Market Strategist

• Quick Take: U.S. futures are pointing to a higher open; European markets are trading mostly higher; Asia ended mostly higher overnight; West Texas Intermediate (WTI) oil trading at $37.10; 10-year U.S. Treasury yield at 0.67%.

• Market Snapshot — The Week Ahead: Last week, the S&P 500 Index declined 2.5% and posted its first back-to-back weekly decline since late April/early May. The NASDAQ Composite, where selling pressure has been concentrated on Technology and high-momentum stocks, posted its worst week since March — falling 4.1%. The NASDAQ finished the week 10% below its September 2nd all-time high, marking a swift technical correction for the Composite, as the FactSet chart below helps highlight.

9:30am 9:30am 5:19pm 9:30am 9:30am 5:19pm 9:30am 9:30am 5:19pm 9:30am 9:30am 5:19pm 9:30am8/31 9/1 9/2 9/3 9/4 9/8 9/9 9/10 9/11

10,600

10,800

11,000

11,200

11,400

11,600

11,800

12,000

12,200

12056.44

-1205.52-10.00%

10850.92

The NASDAQ stes into a correction 10-Day

NASDAQ Composite - Price

• Catalysts for last week’s weakness were generally unchanged from the prior week. Overbought technical conditions, headwinds for a vaccine, growing skepticism over the next coronavirus relief bill, and rising U.S./China tensions drove the narrative last week. And developments on each could continue to drive stock momentum this week, in our view.

• However, coming into the week, Tech positioning within the options market is still generally bullish. Net long exposure for the 50 most popular stocks, which includes a healthy dose of Tech names, is near a 10-year high, per FactSet. Even with a 10% correction, the NASDAQ starts the week only a whisper below its 50-day moving average, while the S&P 500 remains above this critical near-term trend line. With that said, other overbought technical pressures have eased modestly across stocks, including relative strength indicators and the number of stocks trading above their 50-day moving average.



• As we highlighted last week in our Before the Bell headline comments, selling pressure has been more concentrated on areas where excesses had built. Thus far, the modest correction across stock prices has been orderly, and in our view, necessary to return some rationalization to trader’s behavior.

• Coming into this week, we would note the following: Technical conditions across small-cap stocks, as well as Technology, are still fragile. Particularly

for Tech, which has experienced a parabolic rise in price since March, weakening momentum is a near-term concern for the overall market. For small-caps, performance trends were already flatlining before the sell-off and based on a slowing economic recovery. We believe each stock area offers a window into investor’s confidence in overall market levels and the ongoing economic recovery. Given the massive spike in asset prices from the March bottom, traders will closely watch how stocks react to 50-day and possibly 100-day moving average levels for confirmation equities can hold these critical thresholds.

The Fed is on deck. The market is anticipating the Federal Reserve will provide more guidance on its flexible average inflation targeting at this week’s FOMC meeting (Tuesday/Wednesday). However, a third of respondents in a recent Bloomberg economic survey don’t believe the Fed will provide more specific guidance around its new inflation-targeting mandate until 2021. No change in interest rate policy or asset purchase levels is expected following Wednesday’s statement. The Fed is also expected to release an update to its Summary of Economic Projections. Overall, the world’s leading central bank is expected to revise its outlook for the U.S. economy higher.

Consumer Update: August retail sales (Wednesday), housing starts (Thursday), initial jobless claims (Thursday), and a preliminary look at September U of M sentiment on Friday should provide an updated look into the health of the consumer. Above all the market technicals and near-term trading conditions that lined our discussion above, the consumer is the most critical driver to the path for stock prices longer-term. Their health, job prospects, sentiment, and financial conditions are essential ingredients when evaluating economic/market conditions. This week’s data should supply a further window into how consumers are responding to the economic recovery and an overall decline in new U.S. virus cases.

• Asia-Pacific: Asian equities finished mostly higher on Monday. Oracle and ByteDance are expected to partner to save TikTok’s U.S. operations and avoid President Trump’s ban in the U.S. due to security concerns, according to The Wall Street Journal. Oracle beat out Microsoft’s bid and comes after the Chinese government threw a curveball at negotiations when it issued new export restrictions on artificial intelligence technology last month. Other reports highlight if President Trump rejected the deal, TikTok’s app could go dark for U.S. users on Tuesday — which is the deadline for a sale. Importantly, ByteDance will not sell its U.S. operations or transfer its source code for its algorithms to Oracle under the partnership.

• Europe: Markets across the region are trading mostly higher at midday. Eurozone industrial output rose as expected in July, with upward revisions for June. The rise in July was driven by stronger output of capital and durable consumer goods.

• Following last week’s European Central Bank (ECB) meeting, ECB President Christine Lagarde said over the weekend, a stronger euro has partly offset the positive impact from the central bank’s stimulus efforts. According to Bloomberg, her comments highlight the predicament the ECB faces today. The euro sits at its strongest level versus the U.S. dollar in more than two years. At the same time, the European economy is struggling to restart its engines in the middle of a pandemic.

• U.S.: Equity futures are pointing to a stronger open. Here is a quick news rundown to start your morning: Is growth slowing? The Wall Street Journal discussed slowing growth trends across the U.K., Japan, India,

Spain, and Italy, arguing the coronavirus is likely to weigh on spending absent a vaccine. In the U.S., the Citi Economic Surprise Index is showing signs of peaking, while last week’s initial jobless claims and continuing claims unexpectedly rose. Further job gains are critical to a recovery, and while August employment reports were solid, concerns are growing that some job losses could be permanent.

No movement on stimulus relief. Democrats and Republicans remain at odds on the fifth round of coronavirus relief, which now looks less likely before the November 3rd election. While each party has attempted to rally their caucus, highlighting that the other side needs a deal before the election, official negotiations have not restarted. As The Hill noted, with each side so far apart on a deal, it is difficult to see how Congress can bridge the gap this close to an election.

AstraZeneca resumes its coronavirus vaccine trials in the U.K. Per FactSet, U.K. regulators concluded it is safe for the company to continue its vaccine trials after a study participant became ill and the trial was



put on hold. However, the trial remains on pause in the U.S. as well as other countries until regulators determine it is safe to proceed.

WORLD CAPITAL MARKETS 9/14/2020 As of: 8:30 AM ET

Americas % chg. % YTD Value Europe (Intra-day) % chg. %YTD Value Asia/Pacific (Last Night) % chg. %YTD ValueS&P 500 0.05% 4.83% 3,341.0 DJSTOXX 50 (Europe) 0.05% -9.27% 3,317.5 Nikkei 225 (Japan) 0.65% 0.77% 23,559.3 Dow Jones 0.48% -1.32% 27,665.6 FTSE 100 (U.K.) 0.01% -17.86% 6,033.0 Hang Seng (Hong Kong) 0.56% -9.99% 24,640.3 NASDAQ Composite -0.60% 21.85% 10,853.5 DAX Index (Germany) -0.11% -0.46% 13,188.6 Korea Kospi 100 1.30% 10.98% 2,427.9 Russell 2000 -0.70% -9.40% 1,497.3 CAC 40 (France) 0.27% -13.85% 5,047.9 Singapore STI -0.30% -20.14% 2,482.6 Brazil Bovespa -0.48% -14.94% 98,363 FTSE MIB (Italy) 0.03% -15.66% 19,826.3 Shanghai Comp. (China) 0.57% 7.50% 3,278.8 S&P/TSX Comp. (Canada) 0.23% -2.68% 16,222.5 IBEX 35 (Spain) 0.40% -25.25% 6,971.3 Bombay Sensex (India) -0.25% -5.11% 38,756.6 Mexico IPC 0.43% -15.60% 36,334.9 MOEX Index (Russia) 0.42% -0.20% 2,922.6 S&P/ASX 200 (Australia) 0.68% -8.88% 5,899.5

Global % chg. % YTD Value Developed International % chg. %YTD Value Emerging International % chg. %YTD ValueMSCI All-Country World Idx 0.09% 1.82% 566.0 MSCI EAFE -0.01% -4.79% 1,897.0 MSCI Emerging Mkts 0.60% -0.17% 1,091.8 Note: International market returns shown on a local currency basis. The equity index data shown above is on a total return basis, inclusive of dividends.

S&P 500 Sectors % chg. % YTD Value Commodities Communication Services -0.29% 9.85% 197.8 Equity Income Indices % chg. % YTD Value Futures & Spot (Intra-day) % chg. % YTD ValueConsumer Discretionary -0.32% 22.26% 1,196.9 JPM Alerian MLP Index -0.70% -47.01% 115.6 CRB Raw Industrials 0.31% 1.44% 458.28 Consumer Staples 0.61% 4.29% 662.1 FTSE NAREIT Comp. TR -0.50% -11.63% 18,868.4 NYMEX WTI Crude (p/bbl.) -0.86% -39.39% 37.01 Energy 0.26% -44.43% 243.6 DJ US Select Dividend 0.97% -18.55% 1,865.4 ICE Brent Crude (p/bbl.) -0.68% -40.06% 39.56 Financials 0.76% -18.52% 409.3 DJ Global Select Dividend 0.58% -19.40% 183.3 NYMEX Nat Gas (mmBtu) 5.07% 8.91% 2.38 Health Care 0.39% 3.63% 1,216.1 S&P Div. Aristocrats 0.74% -2.08% 3,003.8 Spot Gold (troy oz.) 0.44% 28.46% 1,949.15 Industrials 1.39% -3.56% 653.9 Spot Silver (troy oz.) 0.75% 50.86% 26.93 Materials 1.31% 7.49% 408.2 LME Copper (per ton) 1.20% 10.10% 6,770.25 Real Estate -0.28% -6.61% 220.4 Bond Indices % chg. % YTD Value LME Aluminum (per ton) -0.86% -2.49% 1,736.95 Technology -0.75% 24.24% 1,984.0 Barclays US Agg. Bond 0.09% 7.03% 2,381.4 CBOT Corn (cents p/bushel) 0.47% -8.01% 370.25 Utilities 0.34% -7.21% 297.4 Barclays HY Bond -0.07% 1.34% 2,212.0 CBOT Wheat (cents p/bushel) 0.05% -6.14% 542.25

Foreign Exchange (Intra-day) % chg. % YTD Value % chg. % YTD Value % chg. % YTD ValueEuro (€/$) 0.23% 5.89% 1.19 Japanese Yen ($/¥) 0.21% 2.52% 105.94 Canadian Dollar ($/C$) 0.05% -1.38% 1.32British Pound (£/$) 0.52% -2.97% 1.29 Australian Dollar (A$/$) -0.16% 3.58% 0.73 Swiss Franc ($/CHF) 0.24% 6.61% 0.91Data/Price Source: Bloomberg. Equity Index data is total return, inclusive of dividends, where applicable.

Ameriprise Global Asset Allocation Committee U.S. Equity Sector - Tactical View

S&P 500 GAAC GAAC S&P 500 GAAC GAACIndex GAAC Tactical Recommended Index GAAC Tactical Recommended

Sector Weight Tactical View Overlay Weight Sector Weight Tactical View Overlay Weight

1) Communication Services 10.9% Underweight - 2.0% 8.9% 6) Health Care 14.6% Overweight +2.0% 16.6%

2) Consumer Discretionary 10.8% Overweight +2.0% 12.8% 7) Industrials 8.0% Overweight +2.0% 10.0%

3) Consumer Staples 7.0% Underweight - 2.0% 5.0% 8) Information Technology 27.1% Overweight +2.0% 29.1%

4) Energy 2.9% Equalweight - 2.9% 9) Materials 2.5% Equalweight - 2.5%

5) Financials 10.3% Underweight - 2.0% 8.3% 10) Real Estate 2.8% Equalweight - 2.8%

11) Utilities 3.1% Underweight - 2.0% 1.1%As of: July 1 , 2020

Ameriprise Global Asset Allocation Committee Global Equity Region - Tactical View

MSCI All-Country GAAC GAAC MSCI All-Country GAAC GAACWorld Index GAAC Tactical Recommended World Index GAAC Tactical Recommended

Region Weight Tactical View Overlay Weight Region Weight Tactical View Overlay Weight

1) United States 56.0% Overweight +5.1% 61.1% 5) Latin America 1.0% Equalweight - 1.0%

2) Canada 2.7% Equalweight - 2.7% 6) Asia-Pacific ex Japan 14.7% Overweight +2.0% 16.7%

3) United Kingdom 3.9% Underweight - 2.0% 1.9% 7) Japan 7.0% Underweight - 2.0% 5.0%

4) Europe ex U.K. 13.6% Underweight - 2.0% 11.6% 8) Middle East / Africa 1.1% Underweight - 1.1% -

As of July 1, 2020



THE WEEK AHEAD: Russell T. Price, CFA, Chief Economist • This week, Industrial Production, the Fed, Housing Starts and Retail Sales are all in-focus for markets. • On Tuesday, investors will be looking for another solid gain in manufacturing output via the Fed’s Industrial

Production report for the month of August. Forecaster’s as surveyed by Bloomberg expect ta 1.0% month-over-month gain in the Index, with a modestly better 1.3% gain in its manufacturing component. Manufacturing accounts for approximately 75% of the Index, but Mining and Utility Output are both expected to be down in the month. Mining activity (which includes oil and natural gas extraction), should be down modestly in reflection of lower commodity prices and thus reduced drilling activity of late. Utility output is also expected to be down due to more temperate weather conditions across the country versus exceptionally hot conditions in June and July.

• Investors will focus their attention on the manufacturing component of the Index in looking for indication of the strength or weakness of the manufacturing recovery. In July, capacity utilization in the U.S. manufacturing sector was at 69.2%, according to the report; solidly above the 60% low recached in April but still well below February’s 75.2%.

• On Wednesday, the Commerce Department’s Retail Sales report for August will be a critical reflection of consumer financial health and sentiment. The federal government’s $600 /week enhanced unemployment benefit expired at the end of July, but it may be too early for this change to have a material impact on consumer activity. Auto makers and dealers previously reported further recovery in sales. Overall sales, however, are still well below prior levels due to the jump in unemployment and poor availability of many popular new car models. Used cars have also been in short supply thus offering some upside to used car prices as seen in Friday’s Consumer Price Index (CPI) report. Overall, retail sales for August are expected to show a 1.0% month-over-month gain, via the Bloomberg Consensus. We believe this consensus may be overly optimistic and we are forecasting a 0.5% gain. If achieved, a 1.0% increase for the month would leave total retail sales about 3.2% above year-ago levels.

• The Federal Reserve’s monetary policy setting group, the Federal Open Market Committee, will also conclude its two day meeting on Wednesday afternoon. No changes in rates or actions are expected but markets will look for further details on the Fed’s new strategy of “average inflation targeting.”

• On Thursday, investors will be looking for a resumption of the downward trend in new and continuing unemployment claims. Claims stalled in the previous week, as the data was likely influenced by the Labor Day holiday. It can take a week or two for the claims data to get back on-track after a major holiday, but forecasters will be looking for some improvement, nonetheless.

• Also on Thursday, forecasters are looking for New Housing Starts to moderate after a blistering acceleration over the last few months. Most of the deceleration should also come from the multi-family sector where the start of a few large apartment complexes can cause the numbers considerable volatility from one month to the next. Overall, the Bloomberg consensus looks for total new starts of 1.48 million (an annualized pace), or down 1.1% from July’s 1.496 million. July’s pace, however, represented a 23% month-over-month increase, while June’s pace itself was 17.5% better than the rate for May, which was 11% better than April. Total starts were, in fact, an exceptional 23% above year-ago levels in July, a pace that we see as unsustainable over the near-term given recent employment trends in the sector and relatively tight labor availability.

September 14 15 16 17 18Industrial Production - China Empire Mfg. Index Retail Sales Initial Jobless Claims Leading Economic IndexRetail Sales - China Import Prices NAHB Housing Index Philly Fed Mfg. Index U of M Consumer Sentiment Fixed Investment - China Industrial Production Business Inventories Housing Starts Retail Sales - U.K.

Industrial Production - Eurozone Capacity Utilization FOMC Rate Decision Building Permits Retail Sales - Canada

Retail Sales - Japan Unemployment - U.K. Trade - Eurozone Inflation - Eurozone

Inflation - India Trade - Japan Inflation - U.K. Monetary Policy - Japan

Trade - India Manufacturing Activity - Canada Inflation - Canada Employment - Canada



Where Market Fundamentals Stand Heading into The Week:

S&P 500 Trailing and Forward P/E valuations: Source: FactSet Please note: Although we try to maintain consistency as much as possible, Price to Earnings (P/E) ratios may differ modestly from once source to another. Most notably, P/E numbers can often show their most notable differences during an earnings release season as some sources may still use the last full ‘actual’ earnings number (for instance, currently Q4 trailing 12-month earnings per share) while others use earnings per share that are updated for Q1 using a combination of actual and estimated earnings per share. The calculation of earnings (operating earnings versus ‘as reported’ or GAAP) also often differs modestly from one data source to another due to the proprietary use of calculation methodologies. The “average” shown in the charts below represent averages for the period shown.

Consensus Earnings Estimates: Source: FactSet

Please note: The consensus earnings estimates shown below should not be fully relied upon. In this very dynamic and rapidly changing environment, forecasts have more uncertainty than usual.

S&P 500 Earnings Estimates 2015 2016 2017 20219/14/2020 Actual Actual Actual Actual Actual Actual Actual Actual Actual Actual Actual Actual Actual Est. Est. Est.

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

Quarterly $$ amount $38.72 $41.13 $42.88 $41.32 $38.80 $41.59 $42.21 $41.78 $33.32 $28.22 $32.74 $36.16 change over last week $0.03 $0.01 yr/yr 25.4% 25.4% 27.8% 13.7% 0.2% 1.1% -1.6% 1.1% -14.1% -32.1% -22.4% -13.5% qtr/qtr -1% 6% 4% -4% -6% 7% 1% -1% -20% -15% 16% 10%

Trailing 4 quarters $$ $118.67 $119.64 $133.50 $141.41 $149.74 $159.07 $164.05 $164.13 $164.59 $163.92 $164.38 $158.90 $145.53 $136.06 $130.44 $166.52 yr/yr -0.3% 0.8% 11.6% 22.9% 0.2% -20.6% 27.7%Implied P/E based on a S&P 500 level of: 3341 20.3 21.0 23.0 24.6 25.6 20.1

2019 20202018



BY THE NUMBERS: ECONOMIC ACTUALS AND FORECAST:

ECONOMIC NEWS OUT TODAY: Economic Releases for Monday, September 14, 2020. All times Eastern. Consensus estimates via Bloomberg. None scheduled FIXED INCOME NEWS & VIEWS: Brian M. Erickson, CFA, Fixed Income Research & Strategy Federal Reserve Meeting On Tap This Week • The Federal Reserve is scheduled to hold its six rate policy meeting of 2020 beginning on Tuesday and wrapping up

with a policy statement, updated projections, and a Chairman Powell press conference Wednesday afternoon. We anticipate the Fed holds steady with the current rate and bond purchase stimulus. Rate policy remains fully accommodative, and the Fed’s credit purchase programs retain the majority of their capacity. We expect markets focus settles on the Fed’s projections and how optimistic prospects for inflation are in the eyes of policymakers. Too much optimism and markets may begin to question the Fed’s willingness to sustain stimulus. Conversely, too much pessimism and the market doubt if the Fed can achieve above-target inflation. Most likely, the Fed will look to strike a balance between the two, with a mix of low-for-long policy posture and forecasts that inflation does eventually move higher.

• In line with Fed member statements over the past two months, we anticipate a call for fiscal action to stimulate the economy in ways Fed policy cannot by targeting groups most impacted by Covid-driven job losses and income disruption. We noted the inter-reliance between Fed and fiscal policy in addressing the impacts and potential damage as consumers and businesses to endure the shifts in demand and wrinkles in supply chains within the economy. We believe monetary policy on its own likely falls short in bridging the economy to better times. While both levels worked in tandem in the first half of the year, Fed policy emerged as a more durable response. We believe both components are critical for optimal recovery.

• The Fed acted in concert with other developed market central banks by shifting policy rates to fully accommodative (see chart below left) in response to the pandemic induced global economic shutdown in the first half. They also committed to keeping policy rates accommodative until their respective economies recover. Further, all G7 central banks maintain on-going government bond programs that support fiscal stimulus and aim to support lower funding costs beyond just the near-term.

• Implications for bond markets: Low borrowing rates for short-term funding join reduced long-term borrowing rates from central bank asset purchase programs. All told, compressed bond yields around the globe face fixed income investors with modest income prospects and little coupon return to offset rising yields. Low yields impede investors seeking income from investment portfolios and leave total return investors more reliant on price moves for returns. We believe uncertainties around the next round of fiscal support, the return of flu season, and geopolitical risks warrant a bias toward core fixed income, including Treasuries at present. We continue to believe Treasuries provide integral ballast in diversified portfolios. Finally, we believe collective global central bank support drives the tidal flow of global liquidity lifting bond prices and providing a floor under adverse events that pose a temporary set-back.

Current Projections:Actual Actual Actual Actual Est. Est. Actual Actual Actual Est. Est.2016 2017 2018 2019 2020 2021 Q4-2019 Q1-2020 Q2-2020 Q3-2020 Q4-2020

Real GDP (YOY) 1.7% 2.3% 3.0% 2.2% -4.1% 3.8% 2.1% -5.0% -31.7% 26.5% 4.5%Unemployment Rate 4.7% 4.1% 3.9% 3.5% 8.0% 6.0% 3.5% 4.4% 11.1% 9.0% 8.0%CPI (YoY) 1.3% 2.1% 2.4% 1.8% 1.0% 2.1% 2.0% 2.1% 0.4% 1.2% 1.0%Core PCE (YoY) 1.6% 1.6% 2.0% 1.6% 1.1% 1.5% 1.6% 1.7% 0.9% 1.1% 1.1%

Sources: Historical data via FactSet. Estimates (Est.) via American Enterprise Investment Services, Inc.

YoY = Year-over-year, Unemployment numbers are period ending. GDP: Gross Domestic Product; CPI: Consumer Price Index

PCE: Personal Consumption Expenditures Price Index. Core excludes food and energy.

Please note: Due to the very dynamic nature of current economic conditions, economic forecasts may change measurably and quickly.

Last Updated:

Full Year Quarterly

September 4, 2020



However, the lack of fiscal support may open the door to potential losses for consumer credit, dim consumption, and spur a social divide around who government support actually serves.

• Treasury markets question the ability of the Fed to spur inflation. Over the past four months, DXY, the U.S. dollar relative to a basket of securities, settled lower, prompting Treasury inflation break-evens to rise (see chart below right). The recent dollar stability coming after members of the ECB talked back the value of the euro relative to the dollar pulled 5-year breakevens off of a high of 1.70%. Overall, two-year breakevens remain the most sensitive as one would expect to changes in inflation (see chart below left). While early in the policy response to the 2008 financial crisis, monetary responses were sterilized to limit the expansion of the money supply, the U.S. expansion of M2 this year shows the money supply may play a more central role over the next few years.

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Lyle B. Schonberger - Vice President Business Unit Compliance Liaison (BUCL) Jeff Carlson, CLU, ChFC – Sr. Manager Investment Research Coordinator Kimberly K. Shores Sr. Administrative Assistant Jillian Willis STRATEGISTS Chief Market Strategist David M. Joy – Vice President Global Market Strategist Anthony M. Saglimbene – Vice President

Thomas Crandall, CFA, CMT, CAIA – Sr. Director, Asset Allocation Cedric Buermann Jr., CFA – Analyst – Quantitative, Asset Allocation

Gaurav Sawhney – Research Analyst

Amit Tiwari – Sr. Research Associate Chief Economist Russell T. Price, CFA – Vice President Retirement Research Jay C. Untiedt, CFA, CAIA, RICP – Vice President EQUITY RESEARCH Equity Research Director Justin H. Burgin – Vice President

Consumer Goods and Services Patrick S. Diedrickson, CFA – Director

Energy/Utilities William Foley, ASIP – Director

Financial Services/REITs Lori Wilking-Przekop – Sr Director

Health Care Daniel Garofalo – Director

Industrials/Materials Frederick M. Schultz – Director

Technology/Telecommunication Open

MANAGER RESEARCH

Michael V. Jastrow, CFA – Vice President

Mark Phelps, CFA – Director – Multi-Asset Solutions ETFs, CEFs, UITs Jeffrey R. Lindell, CFA – Director

James P. Johnson, CFA, CFP® – Sr Analyst Alternatives Justin E. Bell, CFA – Vice President – Head of Quantitative Research and Alternatives

Kay S. Nachampassak – Director - Alternatives Quantitative Research Kurt J. Merkle, CFA, CFP®, CAIA – Sr Director

Peter W. LaFontaine – Sr Analyst

David Hauge, CFA – Analyst

Blake Hockert – Sr Associate

Bishnu Dhar – Sr Research Analyst

Parveen Vedi – Sr Research Associate

Darakshan Ali – Research Process Trainee Equities Christine A. Pederson, CAIA, CIMA – Sr Director – Growth Equity, Infrastructure & REIT

Benjamin L. Becker, CFA – Director – International/Global Equity

Cynthia Tupy, CFA – Director – Value and Equity Income Equity

Alex Zachman, CFA – Analyst – Core Equity Fixed Income Steven T. Pope, CFA, CFP® – Sr Director – Non-Core Fixed Income

Douglas D. Noah, CFA – Sr Analyst – Core Taxable & Tax-Exempt Fixed Income

FIXED INCOME RESEARCH & STRATEGY

Fixed Income Research Brian M. Erickson, CFA – Vice President High Yield and Investment Grade Credit Jon Kyle Cartwright – Sr. Director

Stephen Tufo – Director

RETIREMENT RESEARCH

Jay C. Untiedt, CFA, CAIA, RICP – Vice President

Nidhi Khandelwal – Director

Matt Morgan – Sr. Manager



The content in this report is authored by American Enterprise Investment Services Inc. (“AEIS”) and distributed by Ameriprise Financial Services, LLC (“AFS”) to financial advisors and clients of AFS. AEIS and AFS are affiliates and subsidiaries of Ameriprise Financial, Inc. Both AEIS and AFS are member firms registered with FINRA and are subject to the objectivity safeguards and disclosure requirements relating to research analysts and the publication and distribution of research reports. The “Important Disclosures” below relate to the AEIS research analyst(s) that prepared this publication. The “Disclosures of Possible Conflicts of Interest” section, where applicable, relates to the conflicts of interest of each of AEIS and AFS, their affiliates and their research analysts, as applicable, with respect to the subject companies mentioned in the report. Each of AEIS and AFS have implemented policies and procedures reasonably designed to ensure that its employees involved in the preparation, content and distribution of research reports, including dually registered employees, do not influence the objectivity or timing of the publication of research report content. All research policies, coverage decisions, compensation, hiring and other personnel decisions with respect to research analysts are made by AEIS, which is operationally independent of AFS. IMPORTANT DISCLOSURES As of June 30, 2020 The views expressed regarding the company(ies) and sector(s) featured in this publication reflect the personal views of the research analyst(s) authoring the publication. Further, no part of research analyst compensation is directly or indirectly related to the specific recommendations or views contained in this publication. A part of a research analyst’s compensation may be based upon overall firm revenue and profitability, of which investment banking, sales and trading, and principal trading are components. No part of a research analyst’s compensation is based on a specific investment banking transaction, nor is it based on sales, trading, or principal trading. A research analyst may have visited the material operations of one or more of the subject companies mentioned in this research report. No payment was received for the related travel costs. Additional information and current research disclosures on individual companies mentioned in this research report are available on our website at ameriprise.com/legal/disclosures in the Additional Ameriprise research disclosures section, or through your Ameriprise financial advisor. You may also submit a written request to Ameriprise Financial, Inc., 1441 West Long Lake Road, Troy MI, 48098. Independent third-party research on individual companies is available to clients at ameriprise.com/research-market-insights. SEC filings may be viewed at sec.gov. Tactical asset class recommendations mentioned in this report reflect The Ameriprise Global Asset Allocation Committee’s general view of the financial markets, as of the date of the report, based on then current conditions. Our tactical recommendations may differ materially from what is presented in a customized long-term financial plan or portfolio strategy. You should view our recommendations in conjunction with a broader long-term portfolio strategy. Not all products, services, or asset classes mentioned in this report may be available for sale at Ameriprise Financial Services, Inc. Please consult with your financial advisor. Diversification and Asset Allocation do not assure a profit or protect against loss. RISK FACTORS Dividend and interest payments are not guaranteed. The amount of dividend payment, if any, can vary over time and issuers may reduce or eliminate dividends paid on securities in the event of a recession or adverse event affecting a specific industry or issuer. Should a company be unable to pay interest

on a timely basis a default may occur and interruption or reduction of interest and principal occur. Investments in a narrowly focused sector may exhibit higher volatility than investments with broader objectives and is subject to market risk and economic risk. Income Risk: We note that dividends are declared solely at the discretion of the companies’ boards of directors. Dividend cuts or eliminations will likely negatively impact underlying company valuations. Published dividend yields are calculated before fees and taxes. Dividends paid by foreign companies to ADR holders may be subject to a withholding tax which could adversely affect the realized dividend yield. In certain circumstances, investors in ADR shares have the option to receive dividends in the form of cash payments, rights shares or ADR shares. Each form of dividend payment will have different tax consequences and therefore generate a different yield. In some instances, ADR holders are eligible to reclaim a portion of the withholding tax. International investing involves increased risk and volatility due to political and economic instability, currency fluctuations, and differences in financial reporting and accounting standards and oversight. Risks are particularly significant in emerging markets. Market Risk: Equity markets in general could sustain significant volatility due to several factors. As we have seen recently, both economic and geopolitical issues could have a material impact on this model portfolio and the equity market as a whole. Quantitative Strategy Risk: Stock selection and portfolio maintenance strategies based on quantitative analytics carry a unique set of risks. Quantitative strategies rely on comprehensive, accurate and thorough historical data. The Ameriprise Investment Research Group utilizes current and historical data provided by third-party data vendors. Material errors in database construction and maintenance could have an adverse effect on quantitative research and the resulting stock selection strategies. PRODUCT RISK DISCLOSURES Exchange Traded Funds (ETF) trade like stocks, are subject to investment risk and will fluctuate in market value. For additional information on individual ETFs, see available third-party research which provides additional investment highlights. SEC filings may be viewed at sec.gov

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All fixed income securities are subject to a series of risks which may include, but are not limited to: interest rate risk, call risk, refunding risk, default risk, inflations risk, liquidity risk and event risk. Please review these risks with your financial advisor to better understand how these risks may affect your investment choices. In general, bond prices rise when interest rates fall and vice versa. This effect is usually more pronounced for longer-term securities. This means you may lose money if you sell a bond prior to maturity as a result of interest rate or other market movement. Any information relating to the income or capital gains tax treatment of financial instruments or strategies discussed herein is not intended to provide specific tax advice or to be used by anyone to provide tax advice. Investors are urged to seek tax advice based on their particular circumstances from an independent tax professional. A real estate investment trust or REIT is a company that owns and operates income-producing real estate. In addition, some REITs participate in the financing of real estate. To qualify as a REIT, a company must: I) invest at least 75% of its total assets in real estate assets, II) generate at least 75% of its gross income from real property or interest, and III) pay at least 90% of its taxable income to shareholders in the form of distributions. A company that qualifies as a REIT is permitted to deduct the distributions paid to shareholders from its corporate taxes. Consequently, many REITs target to payout at least 100% of taxable income, resulting in virtually no corporate taxes. An investment in a REIT is subject to many of the same risks as a direct investment in real estate including, but not limited to: Illiquidity and valuation complexities, redemption restrictions, distribution and diversification limits, tax consequences, fees, defaults by borrowers or tenants, market saturation, balloon payments, refinancing, bankruptcy, decreases in market rates for rents and other economic, political, or regulatory occurrences affecting the real estate industry. Ratings are provided by Moody’s Investors Services and Standard & Poor’s. Non-Investment grade securities, commonly known as "high-yield" or "junk" bonds, are historically subject to greater risk of default, including the loss of principal and interest, than higher-rated bonds, which may result in greater price volatility than experienced with a higher-rated issue. Securities offered through AFSI may not be suitable for all investors. Consult with your financial advisor for more information regarding the suitability of a particular investment. For further information on fixed income securities please refer to FINRA’s Smart Bond Investing at FINRA.org, MSRB’s Electronic Municipal Market Access at emma.msrb.org, or Investing in Bonds at investinginbonds.com. Alternative investments cover a broad range of strategies and structures designed to be low or non-correlated to traditional equity and fixed-income markets with a long-term expectation of illiquidity. Alternative investments involve substantial risks

and are more volatile than traditional investments, making them more suitable for investors with an above-average tolerance for risk. Growth securities, at times, may not perform as well as value securities or the stock market in general and may be out of favor with investors. Value securities may be unprofitable if the market fails to recognize their intrinsic worth or the portfolio manager misgauged that worth. DEFINITIONS OF TERMS Agency – Agency bonds are issued by Government Sponsored Enterprises (GSE), but are NOT direct obligations of the U.S. government. Common GSE’s are the Federal Home Loan Mortgage Corp. (Freddie Mac) Federal National Mortgage Association (Fannie Mae) and Federal Home Loan Bank (FHLB). Beta: A measure of the risk arising from exposure to general market movements as opposed to company-specific factors. Betas in this report, unless otherwise noted, use the S&P 500 as the market benchmark and result from calculations over historic periods. A beta below 1.0, for example, can suggest the equity has tended to move with lower volatility than the broader market or, due to company-specific factors, has had higher volatility but generally low correlations with the overall market. Corporate Bonds – Are debt instruments issued by a private corporation. Non-Investment grade securities, commonly known as “high-yield” or “junk” bonds, are historically subject to greater risk of default, including the loss of principal and interest, than higher-rated bonds, which may result in greater price volatility than experienced with a higher-rated issue. Mortgage Backed Securities – Bonds are subject to prepayment risk. Yield and average lives shown consider prepayment assumptions that may not be met. Changes in payments may significantly affect yield and average life. Please contact your financial advisor for information on CMOs and how they react to different market conditions. Municipal Bonds – Interest income may be subject to state and/or local income taxes and/or the alternative minimum tax (AMT). Municipal securities subject to AMT assume a “nontaxable” status for yield calculations. Certain municipal bond income may be subject to federal income tax and are identified as “taxable”. Gains on sales/redemptions of municipal bonds may be taxed as capital gains. If the bonds are insured, the insurance pertains to the timely payment of principal (at maturity) and interest by the insurer of the underlying securities and not to the price of the bond, which will fluctuate prior to maturity. The guarantees are backed by the claims-paying ability of the listed insurance company. Treasury Securities – There is no guarantee as to the market value of these securities if they are sold prior to maturity or redemption. Price/Book: A financial ratio used to compare a company’s market share price, as of a certain date, to its book value per



share. Book value relates to the accounting value of assets and liabilities in a company’s balance sheet. It is generally not a direct reflection of future earnings prospects or hard to value intangibles, such as brand, that could help generate those earnings. Price/Earnings: An equity valuation multiple calculated by dividing the market share price, as of a certain date, by earnings per share. Trailing P/E uses the share price divided by the past four-quarters’ earnings per share. Forward P/E uses the share price as of a certain date divided by the consensus estimate of the future four-quarters’ EPS. Price/Sales: An equity valuation multiple calculated by dividing the market share price, as of a certain date, by the company’s sales per share over the most recent year. INDEX DEFINITIONS An index is a statistical composite that is not managed. It is not possible to invest directly in an index. Definitions of individual indices mentioned in this report are available on our website at ameriprise.com/legal/disclosures in the Additional Ameriprise research disclosures section, or through your Ameriprise financial advisor. DISCLAIMER SECTION Except for the historical information contained herein, certain matters in this report are forward-looking statements or projections that are dependent upon certain risks and uncertainties, including but not limited to, such factors and considerations as general market volatility, global economic and geopolitical impacts, fiscal and monetary policy, liquidity, the level of interest rates, historical sector performance relationships as they relate to the business and economic cycle, consumer preferences, foreign currency exchange rates, litigation risk, competitive positioning, the ability to successfully integrate acquisitions, the ability to develop and commercialize new products and services, legislative risks, the pricing environment for products and services, and compliance with various local, state, and federal health care laws. See latest third-party research reports and updates for risks pertaining to a particular security. This summary is based upon financial information and statistical data obtained from sources deemed reliable, but in no way is warranted by Ameriprise Financial, Inc. as to accuracy or completeness. This is not a solicitation by Ameriprise Financial Services, LLC of any order to buy or sell securities. This summary is based exclusively on an analysis of general current market conditions, rather than the appropriateness of a specific proposed securities transaction. We will not advise you as to any change in figures or our views. Past performance is not a guarantee of future results. Investment products are not federally or FDIC-insured, are not deposits or obligations of, or guaranteed by any financial institution, and involve investment risks including possible loss of principal and fluctuation in value.

Ameriprise Financial Services, LLC and its affiliates do not offer tax or legal advice. Consumers should consult with their tax advisor or attorney regarding their specific situation. Ameriprise Financial Services, LLC. Member FINRA and SIPC.

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