Before the Bell...2020/04/30 · Morning Market Brief April 30, 2020 FOR IMPORTANT DISCLOSURES, PLEASE SEE THE DISCLOSURE PAGES AT THE END OF THIS DOCUMENT THURSDAY MORNING MARKET

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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

April 30, 2020

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

THURSDAY MORNING MARKET UPDATE: David M. Joy, Chief Market Strategist First quarter GDP fell by an estimated annualized rate of 4.8 percent. That was higher than the 4.0 percent consensus forecast, as personal consumption fell more than expected. Notable declines came in healthcare services, as consumers stayed away from facilities dealing with the virus outbreak. Not surprisingly, food and recreation service consumption declined sharply. Among goods consumption, motor vehicle sales were notably weak, but offset by a rise in grocery and household goods purchases. It was the weakest quarterly result since the fourth quarter of 2008 when activity fell 8.4 percent. With only a couple of weeks of virus mitigation impact during the quarter, the implications for the second quarter are ominous.

After a modest 1.2 percent decline last week, stocks are higher by 3.6 percent through the first three days this week. Investors understand that the economic data is going to be weak and are so far looking through it. And despite the seemingly universal reticence of the healthcare community, tentative steps to reopen the economy in a handful of states is being viewed optimistically. And the best performing sectors this week are the cyclical laggards. Energy is higher by 12.2 percent, financials by 7.5, and materials by 7.2 percent. Adding to the rising optimism yesterday was a report of positive results from a trial of Gilead’s Remdesivir drug in covid-19 patients. The S&P 500 reached its highest level since March 6th. yesterday, leaving it lower on the year by 9.0 percent. It is still 13 percent below its February 19th. peak, but from the low on March 23rd. it has rallied by 31.4 percent. At the same time, the VIX index of implied volatility continues to fall. It closed on Wednesday of this week at 31, its lowest level since late February.

In further evidence of rising optimism, high yield credit spreads have narrowed modestly this week, down 16 basis points to 787, using the ICE B of A High Yield index. That still leaves the spread considerably wider than the 357 basis points level at the February peak in equities. But the spread is also now appreciably narrower than the 1087 at the March 23rd. low in stocks. Most of the narrowing has occurred as a result of a decline in high yield rates, as the treasury market has barely moved. The yield to maturity on the high yield index has fallen almost 300 basis points from 11.41 percent on March 23rd to 8.46 at yesterday’s close. The yield on the ten-year treasury note has declined from 0.79 percent on March 23rd to just 0.63 percent at yesterday’s close, and has hardly budged in the past two weeks.

The fatigue of those practicing social distancing is apparently growing. The Social Distancing Index maintained by the University of Maryland, based on cellphone tracking of the movement of millions of Americans, shows more people are on the move. Based on a scale of 0-100, with the higher number representing complete compliance with social distancing practices despite differences at the state level, the index has declined in each of the two weeks ended April 24th. The index had seen a steady rise between March 13th as the virus began to intensify, and April 14th., from 14 to 51 percent compliance. But it has since declined to 44, as some states have loosened restrictions, warmer weather is arriving, people wanting to get back to work, and some others are no doubt simply tired of being restricted to home.

Before The Bell April 30, 2020 ____________________________________________________________________________________________________________________________

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

The states with the biggest declines over the past two weeks include Louisiana -15 to 35, Ohio -13 to 37, and Indiana -12 to 32. At the opposite end of the spectrum are Wyoming + 3 to 23, and no change in Rhode Island at 54, and Massachusetts at 60, the latter two of which continue to be seriously impacted by the virus. The degree of compliance ranges from a high of 69 in Washington D.C. and 65 in New York and New Jersey, to a low of 23 in far less densely populated Wyoming, and 24 in Montana. Healthcare professionals continue to advise that social distancing practices be maintained at the risk of a resurgence in infections. How that evolves in states that are now in the process of easing restrictions will be watched carefully.

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

Quick Take: U.S. futures are pointing to a lower open; European markets are trading mostly in the red; Asia ended mostly higher overnight; West Texas Intermediate (WTI) oil trading up to $17.47; 10-year U.S. Treasury yield at 0.61%.

Taking A Closer Look At Small-Caps: Yesterday, stocks accelerated higher after an NIAID study found Gilead’s Remdesivir improved COVID-19 patients' recovery time. As a result, the Russell 2000 Index soared +4.8% on Wednesday. The Index has gained more than +1.0% for six straight trading days — the longest such streak in its history, according to Bespoke Investment Group. Although the small-cap, domestically-focused index is down roughly 18% year-to-date, and lagging other major broad-based U.S. indexes in 2020, it has surged higher by +41% from its March 23rd low, as the FactSet chart below highlights.

Since the March lows, the Russell 2000 Index has led markets higher and meaningfully outpaced the S&P 500. In April, the small-cap stock barometer is even outperforming the tech-heavy NASDAQ Composite, which is another higher-beta index of stocks that can be subject to the whims of investor sentiment. Note: market optimism has brightened over recent weeks, and as more U.S. states start to engage and implement their “restart initiatives.” A U.S. economy beginning to open for business is undoubtedly a more conducive environment for small-cap companies dependent on domestic demand. Hence, small-cap stocks, in general, have outperformed over recent days and weeks in anticipation of better days ahead.



Below are a few quick points worth noting on the Russell 2000: Roughly 24% of the Index is devoted to Financials, with Regional Banks (7.6%) and Real Estate Investment

Trusts (7.2%) holding a substantial weighting in that mix. Health Care (roughly 17%) and Technology (approximately 8%) comprise other material sector exposures

within the small-cap barometer. Nearly 80% of the companies in the Russell 2000 Index generate their revenue here at home. While most

small-cap companies are insulated from China in terms of revenue exposure, many industrial and technology companies rely on global supply chains that include operations across Asia.

On a forward earnings basis, the Russell 2000 Index is very expensive relative to its five-year history. On a trailing earnings basis, however, the Russell 2000 is trading materially below its five-year average. We point to this divergence in valuation to reflect the overall guesswork happening on the earnings front today and given COVID-19 impacts on company guidance and analyst forecasts.

Form an earnings perspective, company visibility is just as murky in the small-cap space as it is with S&P 500 companies today. Given the majority of companies big and small are pulling forward profit guidance, analysts will have a tougher time anticipating the outlook for businesses over the coming quarters.

As the FactSet table below shows, earnings per share (EPS) growth has declined precipitously across Russell 2000 companies during the first quarter, with current second quarter EPS estimates even more abysmal. At present, we anticipate S&P 500 EPS could decline by roughly 20% in 2020. As the table below shows, analysts are currently baking in twice that decline for smaller sized companies.

Considering Financials, Industrials, Materials, and Energy drive roughly 44% of the revenue exposure in the Russell 2000, as the FactSet table below shows, we would advise investors to be cautious about the earnings growth power across small-caps this year. With that said, we believe Health Care, Technology, and consumer/business-related sectors could see better earnings trends as the year progresses and more of the economy reopens for business.



We currently hold a tactical weight in small-caps that match our strategic targets. In the rapid bear market decline from the February highs, traders/investors were quick to shed small-cap stocks in favor of larger, more stable companies. As equities have surged higher from the lows, traders have reversed some of that preference, helping small-cap stocks to bounce quicker and with more force during the current rally. In prior periods where the Russell 2000 Index was outperforming the S&P 500, and where small-caps were posting such consistently strong daily gains, the domestic barometer was generally higher three months, six months, and twelve months out, per Bespoke.

Further, the Russell 2000 modestly outperformed the S&P 500 over the next six and twelve months, also according to Bespoke data. In our view, a gradual reopening of the U.S. economy could help U.S. companies of all shapes and sizes. It’s also essential to recognize Russell 2000 companies “are not” mom-and-pop restaurants, and retailers, which may continue to struggle once the economy reopens. Russell 2000 companies are publically traded, have access to liquidity through public and private markets, and in many instances, are quite sizable corporate entities. We would expect small-caps to continue to trade on the strength of an economic recovery and subject to how well the U.S. is returning toward normal.

Asia-Pacific: Asian equities finished mostly higher on Thursday. Official manufacturing PMI in China dipped to 50.8 in April from 52.0 in March. For smaller and more localized companies in China, the Caixin manufacturing PMI fell back into contraction, coming in at 49.4 in April — down from 50.1 in the prior month. In the official reading, manufacturing activity moderated from March, with overall orders stalling. Export activity deteriorated and given the global economic shutdown that ensued following the spread of the coronavirus. However, April nonmanufacturing PMI in China ticked higher to 53.2 from 53.0 in March, driven by an acceleration in construction.

Europe: Markets across the region are trading in the red at mid-day. Eurozone Q1 GDP fell 3.8% q/q following a +0.1% gain in the final quarter of 2019. According to FactSet, the decline in Eurozone growth was the worst on record (series began in 1995), as the 5.8% contraction in French Q1 GDP was the worst since 1949. As most investors fully understand, the data is likely to be far worse in Q2, as most lockdowns across Europe and the rest of the world did not go into effect until after early March. Across Europe, business activity is likely to be slow to restart, and social distancing policies are expected to remain in place after economies reopen.

The European Central Bank (ECB) left interest rate policy and asset purchases unchanged today. In March, the ECB said it would buy an additional €120 of assets under its asset purchase program by year-end, and on top of the €20 billion a month it already buys. The ECB also previously announced a €750 billion pandemic emergency purchase program to be completed by the end of the year.

U.S.: Equity futures are pointing to a lower open. Here's a quick news rundown to start your morning: U.S. weekly jobless claims rose 3.84 million in the week ending April 25th. Coming into today's report,

initial jobless claims were expected to increase by 3.25 million. Continuing claims, which offer a better window into the unemployment rate, rose to nearly 18.0 million. Thus far, jobless claims have topped 30 million over the last six weeks.

Big tech holding under stress. Cloud computing helped to support Microsoft’s Q1 earnings as more employees work remotely, while eBay said it saw better-than-expected sales in the prior quarter. Facebook

Russell 2000 Revenue Exposure by Sector/Industry

% Exposure

Finance 25.06

Healthcare 18.89

Technology 11.88

Industrials 11.37

Non-Energy Materials 5.82

Consumer Non-Cyclicals 4.99

Consumer Cyclicals 4.52

Business Services 4.40

Utilities 4.05

Consumer Services 3.29

Energy 1.71

Telecommunications 1.18

Other -0.01



beat on revenue expectations, and Qualcomm said revenue was up in the chip business. While company outlooks are cautious and guidance is weak, underlying conditions across big tech generally appear stable and given the difficult circumstances. Information Technology is up over +14% in April, and flat on the year (which is quite an accomplishment given where other sectors sit in 2020).

A Manhattan-style project to fight COVID-19? According to Bloomberg, the Trump administration is organizing a program to combine the pharmaceutical industry, government, and military to reduce the development time to create a COVID-19 vaccine. An optimistic view could see production time reduced by eight months under such coordinated efforts. The goal of the project would be to produce roughly 300 million doses, with the government shouldering most of the financial risk associated with developing a vaccine.

As expected, the Fed held policy steady on Wednesday and said it could do more if necessary. Yesterday’s Federal Reserve policy announcement held little surprises, as the FOMC held rates near zero and said the health crisis poses considerable risks to the economic outlook. The central bank also committed to leaving rates low until the economy is on track for full employment, and it sees price stability. Importantly, Fed Chair Jerome Powell said he expects the central bank will need to do more to support the economy over time but also highlighted more fiscal support would help. Mr. Powell also said this is not the time to let government deficits get in the way of winning the battle over the coronavirus.

Earnings Update: With approximately 43% of S&P 500 Q1’20 profit reports complete, the blended earnings per share (EPS) growth rate has declined 15.8% y/y on sales growth of just +0.3%.

WORLD CAPITAL MARKETS 4/30/2020 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 2.66% -8.45% 2,939.5 DJSTOXX 50 (Europe) -0.92% -20.13% 2,968.7 Nikkei 225 (Japan) 2.14% -13.81% 20,193.7 Dow Jones 2.21% -13.05% 24,633.9 FTSE 100 (U.K.) -1.55% -19.18% 6,020.7 Hang Seng (Hong Kong) 0.28% -12.40% 24,643.6 NASDAQ Composite 3.57% -0.29% 8,914.7 DAX Index (Germany) -1.08% -17.06% 10,988.3 Korea Kospi 100 0.70% -11.18% 1,947.6 Russell 2000 4.83% -18.08% 1,360.8 CAC 40 (France) -0.70% -22.03% 4,638.3 Singapore STI 1.92% -18.09% 2,624.2 Brazil Bovespa 2.29% -28.08% 83,171 FTSE MIB (Italy) -1.05% -23.95% 17,877.0 Shanghai Comp. (China) 1.33% -6.23% 2,860.1 S&P/TSX Comp. (Canada) 2.90% -9.71% 15,228.1 IBEX 35 (Spain) -0.76% -26.00% 7,002.2 Bombay Sensex (India) 3.05% -18.02% 33,717.6 Mexico IPC 2.90% -15.01% 36,870.1 MOEX Index (Russia) -0.51% -12.71% 2,649.5 S&P/ASX 200 (Australia) 2.39% -16.01% 5,522.4 Note: International market returns shown on a local currency basis. Equity index data is total return, inclusive of dividends.

Global % chg. % YTD Value Developed International % chg. %YTD Value Emerging International % chg. %YTD ValueMSCI All-Country World Idx 2.29% -12.17% 492.6 MSCI EAFE 1.46% -17.29% 1,664.9 MSCI Emerging Mkts 1.88% -17.03% 919.7

S&P 500 Sectors % chg. % YTD Value Commodities Communication Services 5.05% -5.49% 170.6 Equity Income Indices % chg. % YTD Value Futures & Spot (Intra-day) % chg. % YTD ValueConsumer Discretionary 2.31% -3.09% 952.1 JPM Alerian MLP Index 8.42% -36.42% 138.8 CRB Raw Industrials 0.20% -8.68% 412.6 Consumer Staples -0.41% -5.70% 604.4 FTSE NAREIT Comp. TR 1.40% -15.74% 17,992.2 NYMEX WTI Crude (p/bbl.) 15.21% -71.59% 17.4 Energy 7.35% -34.23% 296.3 DJ US Select Dividend 2.11% -20.33% 1,824.8 ICE Brent Crude (p/bbl.) 12.60% -61.55% 25.4 Financials 3.01% -23.38% 388.8 DJ Global Select Dividend 0.10% -27.88% 167.9 NYMEX Nat Gas (mmBtu) 0.54% -14.16% 1.9 Health Care 0.74% -1.19% 1,167.2 S&P Div. Aristocrats 1.43% -13.25% 2,661.2 Spot Gold (troy oz.) -0.07% 12.85% 1,712.2 Industrials 1.94% -19.03% 553.7 Spot Silver (troy oz.) -0.29% -14.57% 15.3

Materials 2.57% -12.23% 336.5 LME Copper (per ton) 0.73% -14.90% 5,233.0 Real Estate 0.35% -10.98% 212.0 Bond Indices % chg. % YTD Value LME Aluminum (per ton) 0.07% -17.68% 1,466.3 Technology 4.22% 0.68% 1,616.0 Barclays US Agg. Bond 0.02% 4.96% 2,335.4 CBOT Corn (cents p/bushel) 0.08% -21.51% 314.8 Utilities -0.92% -8.56% 297.8 Barclays HY Bond 0.38% -9.11% 1,984.0 CBOT Wheat (cents p/bushel) -1.06% -9.32% 511.0

Foreign Exchange (Intra-day) % chg. % YTD Value % chg. % YTD Value % chg. % YTD ValueEuro (€/$) -0.05% -3.08% 1.09 Japanese Yen ($/¥) 0.08% 1.89% 106.60 Canadian Dollar ($/C$) 0.02% -6.40% 1.39British Pound (£/$) 0.32% -5.64% 1.25 Australian Dollar (A$/$) -0.21% -6.81% 0.65 Swiss Franc ($/CHF) 0.21% -0.52% 0.97Data/Price Source: Bloomberg. Equity Index data is total return, inclusive of dividends, where applicable.



BY THE NUMBERS: ECONOMIC ACTUALS AND FORECAST:

ECONOMIC NEWS OUT TODAY: Economic Releases for Thursday, April 30, 2020. All times Eastern. Consensus estimates via Bloomberg. Time Period Release Consensus Est. Actual Prior Revised to 8:30 AM Apr. 25 Initial Jobless Claims 3500k 3839k 4427k 4442k 8:30 AM Apr. 18 Continuing Claims 19500k 17992k 15976k 15818k 8:30 AM MAR Personal Income -1.7% -2.0% +0.6% 8:30 AM MAR Personal Spending -5.1% -7.5% +0.2% 8:30 AM MAR PCE Deflator (MoM) -0.3% -0.3% +0.1% 8:30 AM MAR PCE Core Deflator (MoM) -0.3% -0.1% +0.2% 8:30 AM MAR PCE Core Deflator (YoY) +1.7% +1.7% +1.8% 10:00 AM APR Chicago Purch. Mgrs. Index 37.7 47.8

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

S&P 500 GAAC GAAC S&P 500 GAAC GAAC

Index GAAC Tactical Recommended Index GAAC Tactical RecommendedSector Weight Tactical View Overlay Weight Sector Weight Tactical View Overlay Weight

1) Communication Services 10.7% Underweight - 2.0% 8.7% 6) Health Care 14.9% Overweight +3.0% 17.9%

2) Consumer Discretionary 9.9% Overweight +2.0% 11.9% 7) Industrials 8.4% Equalweight - 8.4%

3) Consumer Staples 7.6% Equalweight - 7.6% 8) Information Technology 25.7% Equalweight - 25.7%

4) Energy 2.7% Equalweight - 2.7% 9) Materials 2.4% Equalweight - 2.4%

5) Financials 11.2% Underweight - 3.0% 8.2% 10) Real Estate 3.0% Overweight +1.0% 4.0%

11) Utilities 3.5% Underweight - 1.0% 2.5%

As of: March 31, 2020

Ameriprise Global Asset Allocation Committee Global Equity Region - Tactical View

MSCI All-Country GAAC GAAC MSCI All-Country GAAC GAAC

World Index GAAC Tactical Recommended World Index GAAC Tactical RecommendedRegion Weight Tactical View Overlay Weight Region Weight Tactical View Overlay Weight

1) United States 55.7% Overweight +7.1% 62.8% 5) Latin America 1.0% Equalweight - 1.0%

2) Canada 2.7% Equalweight - 2.7% 6) Asia-Pacific ex Japan 14.4% Equalweight - 14.4%

3) United Kingdom 4.2% Underweight - 2.0% 2.2% 7) Japan 7.2% Underweight - 2.0% 5.2%

4) Europe ex U.K. 13.7% Underweight - 2.0% 11.7% 8) Middle East / Africa 1.1% Underweight - 1.1% -

As of: March 31, 2020

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

Real GDP (YOY) 1.6% 2.4% 2.9% 2.3% -5.5% 3.8% 2.1% 2.1% -4.8% -40.0% 30.0%Unemployment Rate 4.7% 4.1% 3.9% 3.5% 9.5% 5.0% 3.5% 3.5% 4.4% 11.0% 11.0%CPI (YoY) 1.3% 2.1% 2.4% 1.8% 0.9% 2.2% 1.8% 2.0% 1.5% 0.2% 0.3%Core PCE (YoY) 1.7% 1.6% 1.9% 1.6% 1.4% 1.6% 1.7% 1.6% 1.8% 1.3% 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 Last Updated

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

Quarterly

April 29, 2020



Economic Perspective: Russell T. Price, CFA – Chief Economist With today’s release, the six-week total for new unemployment claims now stands at 30.3 million (note: today’s

report reflects new claims through last Saturday, April 25th). The number represents an amazing 19.2% of total U.S. employment based on February employment of approximately 158 million, as reported by the Labor Department.

As seen in the table at right (data depicted in the table is sourced from the Labor Department), new claims have been decelerating over recent weeks and should see further, considerable deceleration in the weeks ahead.

State unemployment systems appear to be processing new filings more efficiently and the bulk of immediate layoffs that followed mandated shutdowns has likely entered the system at this stage. Indeed, several states have been noting lower volumes.

The federal support legislation passed at the end of March (the CARES Act) provided for significant added unemployment resources providing strong support to those effected over this period. The terms of unemployment insurance programs are determined at the state level with state pay-out rates ranging from about $275 per week to just over $500. The CARES Act provided an additional $600 per week for unemployment recipients until July 31st. Combined, near-term unemployment benefits rise to a level that exceeds median weekly earnings in 41 states, based on data from the Labor Department.

FIXED INCOME NEWS & VIEWS: Brian M. Erickson, CFA, Fixed Income Research & Strategy

Treasury Yields Settle into Narrow Ranges Treasury yields settled into new trading ranges in April after a tumultuous March. We largely attribute the Fed’s step

into Quantitative Easing Unlimited and its purchase of $1.5 trillion of U.S. Treasuries between the end of February and April 22. Fed Treasury purchases not only absorbed net new Treasury issuance to fund CARES Act fiscal stimulus it also enabled bond markets to find a new temporary equilibrium. Five-year Treasuries yield 0.34%, 10-years yield 0.61% and long-bonds yield 1.24%. The chart below right depicts how the old 10-year Treasury settled into a narrow range on a price basis between $108 and $109.

The Fed sought to enable markets to function through efforts announced in March according to Fed Chairman Powell’s comments at his press conference Wednesday (see our recap below). We see Treasury markets as an example of where that impact can already be seen.

Fed Stands Behind Rapid, Bold Response; Prepared to Act The Fed stood upon the massive policy response unleashed in March at its latest policy meeting. The Fed issued a

fully reformatted policy statement that we believe paralleled the new financial challenges due to the global pandemic, the evolving economic disruption, and the inherent uncertainty of the Fed’s preemptive actions taken before economic data becomes available to support a defined course of action. Fed Chairman Powell exuded confidence



that the Fed’s actions were bold while acknowledging that the Fed was ready to take further action in response to new complications that arise.

To set the context, Fed Chairmen Powell put a human face on the toll this contraction already caused and will exert going forward. “This is an extraordinary shock – unlike anything that has happened in my lifetime.” – J. Powell

The Fed’s primary goal: Principally, the Fed sought to enable markets to function as a price discovery mechanism. On that front, we believe the Fed achieved success. The Fed aims not to replace the market’s role or to fully put all the assembled resources to work. Rather, the Fed and Treasury seek to use the potential capacity as a support mechanism so markets can operate. Certainly, purchases will be made to establish how the support mechanics function and to show a willingness to be involved, but unlike the programs where implementation targets expanding lending by a set amount, we do not see the new purchase facilities as obligated purchases; rather purchases as necessary.

We draw the example of if markets see wide bid/ask spreads on Treasuries how that requires wider markets on investment grade bonds, even wider markets on high yield and so on across fixed income. Enabling market functioning for the most liquid assets alleviates the need to incorporate price in an expanding liquidity premium, which grounds investor sentiment around what assets are worth. The financial crisis centered on how markets treated even houses as liquid assets leading up to 2008, and how that reverted to not knowing what the full spectrum of assets were worth; even high-quality assets.

The importance of Congressional action: Called on Congress to use spending and policy making authorities that the fall beyond the Fed’s charter to function in parallel with Fed action to meet the coronavirus induced contraction. Powell identified that it was imperative that we as a country take all actions possible to get the economy back to full capacity as soon as possible to avert permanent impairment of our nation’s economic capacity. In particular, Powell zeroed in on how Congress could help viable businesses remain solvent.

Where we go from here: Fed Chair Powell highlighted that unemployment would continue to rise before improving, and that a key unknown remains how the coronavirus impacts evolve and how long they endure. Though he clearly identified that sizable unknown, there are concrete actions that the Fed has taken and could take going forward. Bottom line: The Fed is ready and responding where it can make an impact.

Our view: The Fed looks to support markets in functioning, not to skew how markets price risk. Toward that end, we suggest the narrowing of Treasury trading ranges as a sign of the Fed’s effectiveness. While the Fed sought to help markets clear and function, we do not believe they intended to prop up markets or to distort the market’s critical function of determining reward vs. risk. Aligned with our up-in-quality and follow-the-Fed themes, we question if the market is truly pricing reward vs. risk in lower quality markets, or if expectations anchor to a full Fed put even on risk assets. We believe investors playing in the lowest quality margins may be in for a rude awakening to the realities of a profound economic contraction. Now is not the time to reach for yield or return, because frankly, we don’t believe you will find it and risk losing your investment in the process. Now is the time to skew toward the high-quality markets the Fed supports in our view.

This space intentionally left blank.



Ameriprise Investment Research Group Ameriprise Financial 1441 West Long Lake Road, Suite 250, Troy, MI 48098 [email protected] For additional information or to locate your nearest branch office, visit ameriprise.com RESEARCH & DUE DILIGENCE LEADER

Lyle B. Schonberger - Vice President Business Unit Compliance Liaison (BUCL)

Jeff Carlson, CLU, ChFC – Manager

Investment Research Coordinator Kimberly K. Shores Sr Administrative Assistant Jillian Willis 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 – Director

Quantitative Strategies/International Andrew R. Heaney, CFA – Director

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, Asset Allocation Gaurav Sawhney – Research Analyst

Amit Tiwari, CFA – Sr Research Associate CHIEF ECONOMIST Russell T. Price, CFA – Vice President MANAGER RESEARCH

Michael V. Jastrow, CFA – Vice President

Jeffrey R. Lindell, CFA – Director – ETFs & CEFs

Mark Phelps, CFA – Director – Multi-Asset Solutions Equities Christine A. Pederson, CAIA, CIMA – Sr Director – Growth Equity, Infrastructure & REIT

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

Alex Zachman, CFA – Analyst – Core Equity

Cynthia Tupy, CFA – Director – Value and Equity Income Equity Fixed Income & Alternatives Jay C. Untiedt, CFA, CAIA – Sr Director – Alternatives

Steven T. Pope, CFA, CFP® – Director – Non-Core Fixed Income

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

Blake Hockert – Associate – Reporting & Analytics

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 INVESTMENT DUE DILIGENCE

Justin E. Bell, CFA – Vice President

Kurt J. Merkle, CFA, CFP®, CAIA – Sr. Director

Kay S. Nachampassak – Director

Peter W. LaFontaine – Sr. Analyst

James P. Johnson, CFA, CFP® – Sr. Analyst

David Hauge, CFA – Analyst

Bishnu Dhar – Sr. Research Analyst

Parveen Vedi – Sr. Research Associate

Darakshan Ali – Research Process Trainee

INNOVATION AND DEVELOPMENT

Allen Rodrigues – Vice President

Nidhi Khandelwal – Director

Dan Burns – Sr. Manager

Matt Morgan – Sr. Manager

Natasha Wayland – Sr. Manager



The content in this report is authored by American Enterprise Investment Services Inc. (“AEIS”) and distributed by Ameriprise Financial Services, Inc. (“AFSI”) to financial advisors and clients of AFSI. AEIS and AFSI are affiliates and subsidiaries of Ameriprise Financial, Inc. Both AEIS and AFSI 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 AFSI, their affiliates and their research analysts, as applicable, with respect to the subject companies mentioned in the report. Each of AEIS and AFSI 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 AFSI. IMPORTANT DISCLOSURES As of March 31, 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 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.

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, Inc. of any order to buy or sell securities. This summary is based exclusively on an analysis of general current market conditions, rather than the suitability 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. AFSI 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, Inc. Member FINRA and SIPC.

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Before the Bell...2020/04/30 · Morning Market Brief April 30, 2020 FOR IMPORTANT DISCLOSURES, PLEASE SEE THE DISCLOSURE PAGES AT THE END OF THIS DOCUMENT THURSDAY MORNING MARKET