Before the Bell · 9/23/2019 · across the Eurozone, it has started to slip, missing consensus estimates for September. • U.S.: Equity futures are pointing to a flat-to-weaker

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. ____________________________________________________________________________________________________________________________ © 2019 Ameriprise Financial, Inc. All rights reserved. Page 1 of 13

Before the Bell Morning Market Brief

September 23, 2019

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

MONDAY MORNING MARKET STRATEGY: David M. Joy, Chief Market Strategist The Federal Reserve lowered the overnight interest rate once again last week. It was the second quarter-point reduction in this easing cycle, following the first in late July. Highlighting the divergence of opinion regarding the outlook for the economy, there were three dissenting votes. One was cast by a participant who preferred a half-point rate cut, and two who preferred no cut at all. In its post-meeting statement, the FOMC pointed to strong domestic labor markets, and strong household spending. Conversely, it also pointed to weak business investment and export activity, and muted inflationary pressures. And although it did not specifically call out the higher level of U.S. trade policy uncertainty, the statement did make reference to “the implications of global developments for the economic outlook” in deciding to once again lower the overnight rate. However, in his opening remarks at the post-meeting press conference, Chairman Powell made specific mention of the trade war as a major source of the weakness in business investment and export activity cited in the meeting statement, saying in part “…business investment and exports have weakened amid falling manufacturing output. The main reasons appear to be slower growth abroad and trade policy developments-two sources of uncertainty that we have been monitoring all year.” In his remarks at the Jackson Hole Federal Reserve conference one month ago, Powell expressed the challenge faced by central banks in responding to trade headwinds, saying “We have much experience addressing typical macroeconomic developments…But fitting trade policy uncertainty into this framework is a new challenge…There are…no recent precedents to guide any policy response to the current situation.” The staff in the Division of International Finance at the Fed has this month published a research paper entitled “The Economic Effects of Trade Policy Uncertainty” *. In it, the authors construct a series of models to quantify the economic impact of an increase in trade policy uncertainty of the magnitude experienced in the U.S. in 2018. It begins with the construction of several measures of trade policy uncertainty, based on newspaper mentions, corporate earnings call transcripts, and U.S. historical experience of changes in trade policy. In the first part of the paper, the authors attempt to quantify the firm and industry level impact on capital investment, by observing changes in balance sheet values of capital assets, concluding that investment declined by roughly 1 percent in 2018, or the equivalent of roughly $25B. Of course, the impact varies depending upon the degree of exposure to export activity. The second part of the paper examines the channels through which rising uncertainty impacts both capital investment and overall economic activity. The authors conclude that “A rise in trade tensions leads to a sizeable decline in consumption, investment, GDP, and consumer price inflation.” It finds that both the news and uncertainty of future higher tariffs reduces investment and output, but that the news about future higher tariffs accounts for approximately two-thirds of the effect, “…as it directly entails expectations for higher costs of imports and lower demand for exports. Higher uncertainty about tariffs also dampens investment and GDP by reducing firm entry into the export market and by triggering upward pricing bias for firms subject to pricing rigidity, which increases markups and reduces hours

Before The Bell September 23, 2019 ____________________________________________________________________________________________________________________________

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worked and output.” Under this methodology, the impact on capital investment is even higher, at roughly 1.5 percent. The initial annual impact on overall GDP is estimated to be roughly 0.75 percent. Fed funds futures now anticipate a third quarter-point rate cut in December with a roughly 70 percent probability. Trade policy uncertainty will play a significant role in determining how the Fed responds. Recent talks between the U.S. and China have been characterized by both sides as productive, and further talks are expected to take place in early October. There are other outstanding trade issues as well, including talks this week with Japan which are expected to yield an agreement. But issues also remain with the EU, and the new USMCA with Canada and Mexico has yet to be ratified. Given the economic importance of clarity on trade policy as estimated by the Fed’s economic staff in its recent paper, it is no surprise that capital markets remain sensitive to any developments on the trade front. And no surprise that the Fed remains sensitive as well. *Caldera, Dario, Matteo Iacoviello, Patrick Molligo, Andrea Prestipino, and Andrea Raffo (2019). The Economic Effects of Trade Policy Uncertainty. International Finance Discussion Papers 1256. MORNING MARKET COMMENTARY: Anthony M. Saglimbene, Global Market Strategist

• Quick Take: U.S. futures are pointing to a flattish-to-lower open; European markets are trading down; Asia ended mostly mixed overnight; West Texas Intermediate (WTI) oil trading at $57.82; 10-year U.S. Treasury yield at 1.69%.

• Bearish Sentiment Plummets, As Stocks Near All-time Highs: As the first FactSet chart below shows, and one would assume given the rally in stock prices this month, bearish sentiment fell aggressively last week among retail investors. Market volatility currently sits in the middle of its recent range, trade tensions have temporarily been put on hiatus, and an easier Federal Reserve has more mom-and-pop investors currently optimistic about the stock market. Or said another way, investors are less bearish today than they were in August.

• Bearish sentiment declined 14.4% last week – the largest such percentage decline since January 10th. Investors no longer appear predominantly negative on forward stock returns based on the American Association of Individual Investors (AAII) Sentiment Survey. Funny how several weeks of gains in the S&P 500, lower interest rates, and some better-than-expected economic data can quickly change one’s point of view. Importantly, bearish sentiment is back below its historical average for the first time since August 1st.



• As the next FactSet chart below shows, bullish sentiment across retail investors has steadily risen over recent weeks. In the latest AAII sentiment survey, investors reporting they are bullish on stock prices over the next six months rose to 35.3 from 33.1 in the prior survey. Although bullish sentiment has improved, it remains below its historical average of 38.1, according to Bespoke Investment Group. Bullish sentiment has remained below its historical average for 18 of the last 19 weeks. Interestingly, more investors sit in the neutral camp today. In our view, more retail investors may need to move into the bullish camp from the neutral position if stocks are going to make a meaningful run at new all-time highs.

• Although the sentiment data is certainly not going to predict future stock prices, recent shifts in retail investor sentiment do highlight how attitudes on the market can quickly shift. As we highlighted a few weeks ago, from a contrarian perspective, when a large number of investors are so negative about the future, it can be instructive to think about the possibility of what could go right. In this most recent case, a cooling in recession and trade fears, combined with easier central bank policy proved constructive for turning stock prices higher in September. Consequently, investor sentiment has now turned higher over recent weeks. Moving forward, we believe it is important to stay balanced and be prepared for both bullish and bearish outcomes that could influence where asset prices head next.

• Asia-Pacific: Asian equities finished mixed on Monday. Last Friday, the S&P 500 Index was attempting to close out the week on a high note, looking to post its fourth straight week of gains. However, the Index fell short after news broke on Friday that China had canceled its planned visits to farms in Montana and Nebraska. Markets immediately feared the worse. Surmising the canceled farm trip, following lower-level trade discussions in Washington last week, was a sign that discussions had taken a turn south. However, multiple reports over the weekend suggested the canceled farm trip by the Chinese trade delegation was not an indication that talks had deteriorated. Both U.S. and China trade officials highlighted that last week’s meetings were productive, and the two sides agreed to maintain communication. Although neither side provided much detail, higher-level talks are still expected to take place in China, scheduled for October 10th and 11th.

• With that said, trade headlines remain cautious, particularly after President Trump told the press he doesn’t believe he needs to strike a trade deal with China before the 2020 presidential election. The president also said he is looking for a ‘complete deal’ and not a partial deal with Beijing. Last week, markets reacted somewhat favorably to reports that an interim deal could be struck between both sides and early as next month. Bottom line: The trade situation between the U.S. and China remains as uncertain as ever.



• Europe: Markets across the region are trading lower at mid-day. Eurozone Flash Composite PMI for September moved to a 75-month low, barely hanging onto expansion territory. Flash Eurozone, German, and French manufacturing PMIs all missed consensus estimates for September, with French manufacturing activity the only industrial measure barely hovering in expansion. This month, German manufacturing activity has fallen at its fastest rate since 2009. The large takeaway from this morning’s PMI data is that the deepening contraction in manufacturing activity is starting to show up in the services side of the economy. Although services PMI remains firmly in expansion territory across the Eurozone, it has started to slip, missing consensus estimates for September.

• U.S.: Equity futures are pointing to a flat-to-weaker open this morning. Later this morning, investors will get their first look at manufacturing and services PMI data for September. As we highlighted above, the data was weaker than expected in Europe. Thus far, the U.S. has remained more insulated from global trade and slowing growth issues. For investors to keep buying into that macro, the data will have to continue to show U.S. manufacturing and services activity is holding up to the building global pressures around it.

• As we have stated previously, confidence/sentiment data is becoming an increasingly important gauge in monitoring market momentum. Our headline comments above show retail investors are becoming less bearish on the market after successive weeks of stock gains. This week, investors will get the chance to square that data with how the consumer feels.

• On Tuesday, September consumer confidence is expected to dip to 133.0 from 135.1 in August. This would remain below the 8-month high of 135.8 in July, but still well above the 16-month low of 121.7 in January. On Friday, September U of M Consumer Sentiment is expected to hold steady after the preliminary reading of 92, which is higher than the 89.8 reading in August, but lower than July’s 98.4 level.

WORLD CAPITAL MARKETS (all data as of approximately 8:00 AM ET)

Americas % chg. % YTD Value Europe (Intra-day) % chg. %YTD Value Asia/Pacific (Last Night) % chg. %YTD Value

S&P 500 -0.49% 21.13% 2,992.1 DJSTOXX 50 (Europe) -0.96% 21.75% 3,537.2 Nikkei 225 (Japan) 0.16% 11.70% 22,079.1 Dow Jones -0.59% 17.58% 26,935.1 FTSE 100 (U.K.) -0.19% 12.95% 7,331.1 HK Hang Seng ( H. Kong) -0.81% 4.81% 26,222.4 NASDAQ -0.80% 23.34% 8,117.7 DAX Index (Germany) -1.06% 16.83% 12,335.6 Korea Kospi 100 0.01% 2.94% 2,091.7 Russell 2000 -0.11% 16.79% 1,559.8 CAC 40 (France) -1.01% 22.56% 5,633.2 Singapore STI -0.52% 6.08% 3,143.2 Brazil Bovespa 0.46% 19.26% 104,817.4 FTSE MIB (Italy) -1.07% 19.45% 21,887.6 Shanghai Comp. (China) -0.98% 22.21% 2,977.1 S&P/TSX Comp. (Canada) 0.25% 20.57% 16,899.7 IBEX 35 (Spain) -1.00% 9.50% 9,086.9 Bombay Sensex (India) 2.83% 9.47% 39,090.0 Mexico IPC 1.26% 6.89% 43,559.5 Russia TI -0.79% 20.40% 4,784.2 S&P/ASX 200 (Australia) 0.28% 25.01% 6,749.7

Global % chg. % YTD Value Developed International % chg. %YTD Value Emerging International % chg. %YTD Value

MSCI All-Country World Idx -0.23% 17.70% 525.6 MSCI EAFE -0.05% 14.53% 1,912.7 MSCI Emerging Mkts 0.46% 8.24% 1,021.3 Note: International market returns shown on a local currency basis. Equity index data is total return, inclusive of dividends.

S&P 500 Sectors % chg. % YTD Value Equity Income Indices % chg. % YTD Value Commodities Consumer Discretionary -1.17% 22.57% 948.2 JPM Alerian MLP Index -0.01% 7.96% 24.0 Futures & Spot (Intra-day) % chg. % YTD ValueConsumer Staples -0.22% 21.08% 618.9 FTSE NAREIT Comp. -0.06% 27.61% 21,178.5 CRB Raw Industrials 0.17% -8.13% 441.4 Energy 0.08% 9.66% 452.3 DJ US Select Dividend -0.26% 16.65% 2,170.1 NYMEX WTI Crude (p/bbl.) -0.10% 27.79% 58.0 Financials -0.64% 19.93% 467.0 DJ Global Select Dividend -0.56% 5.03% 217.2 ICE Brent Crude (p/bbl.) -0.17% 19.28% 64.2 Real Estate -0.33% 29.01% 242.8 S&P Div. Aristocrats -0.35% 19.58% 2,866.4 NYMEX Nat Gas (mmBtu) -0.79% -14.49% 2.5 Health Care 0.60% 7.91% 1,066.2 Spot Gold (troy oz.) 0.29% 18.62% 1,521.3 Industrials -0.66% 22.83% 656.4 Spot Silver (troy oz.) 2.80% 19.37% 18.5 Materials -0.16% 17.51% 366.1 Bond Indices % chg. % YTD Value LME Copper (per ton) 0.15% -3.01% 5,770.0 Technology -1.12% 31.08% 1,410.3 Barclays US Agg. Bond 0.12% 8.07% 2,211.7 LME Aluminum (per ton) -0.14% -4.75% 1,774.3 Communication Services -0.46% 24.21% 170.7 Barclays HY Bond 0.01% 11.77% 2,134.1 CBOT Corn (cents p/bushel) 0.74% -6.04% 373.5 Utilities 0.37% 23.68% 324.1 CBOT Wheat (cents p/bushel) 0.57% -10.23% 487.0

Foreign Exchange (Intra-day) % chg. % YTD Value % chg. % YTD Value % chg. % YTD ValueEuro (€/$) -0.2% -4.2% 1.10 Japanese Yen ($/¥) 0.05% 2.03% 107.51 Canadian Dollar ($/C$) 0.0% 2.8% 1.33 British Pound (£/$) -0.5% -2.6% 1.24 Australian Dollar (A$/$) 0.10% -3.92% 0.68 Swiss Franc ($/CHF) 0.0% -0.9% 0.99 Data/Price Source: Bloomberg; Equity Index data is total return, inclusive of dividends where applicable.



THE WEEK AHEAD: Russell T. Price, CFA, Chief Economist • An early read on the pending earnings release season suggests more of the same: flat earnings, below average

sales growth. It’s hard to believe that the third quarter earnings release season is less than 2 weeks away. Currently, consensus estimates foresee S&P 500 earnings to be about -4% below year ago levels on sales growth of about +3%. We note that the current estimate for EPS performance is generally in-line with where estimates stood just ahead of the Q1 and Q2 reporting seasons, quarters that ended-up with earnings being generally flat with their year-ago comparisons.

• However, sales expectations, which are usually closer to the ultimate “mark,” would represent the slowest pace of sales growth for the S&P 500 since Q3-2016 when sharply lower energy and commodity prices were acting as heavy pressures on overall S&P 500 financial results.

• As indicated in the table below, lower commodity prices are again a factor in sales expectations for the current quarter. Lower sales in the Energy and Materials sectors are expected to shave just over one percentage point from overall sales per share for companies of the Index.

• Economic releases this week: Given the elevated importance of consumer activity in the current environment the week’s various reports on consumer attitudes and income will be particularly important. We start the week on Tuesday with the Conference Board’s measure of Consumer Confidence for September. Forecasters as surveyed by Bloomberg expect the Index to show a modest decline from August levels but remain at strong levels overall.

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 10.2% Underweight - 2.0% 8.2% 6) Health Care 14.3% Overweight +2.0% 16.3%

2) Consumer Discretionary 10.2% Equalweight - 10.2% 7) Industrials 9.3% Equalweight - 9.3%

3) Consumer Staples 7.3% Equalweight - 7.3% 8) Information Technology 21.6% Overweight +2.0% 23.6%

4) Energy 5.0% Equalweight - 5.0% 9) Materials 2.7% Equalweight - 2.7%

5) Financials 12.9% Underweight - 2.0% 10.9% 10) Real Estate 3.1% Overweight +1.0% 4.1%

11) Utilities 3.4% Underweight - 1.0% 2.4%

Index weighting represents relative weightings based on the regional market capitalization balance of the MSCI All-Country World Index; may not add due to rounding. The GAAC Tactical Overlay, as well as Recommended Tactical Weights, is derived from the Ameriprise Global Asset Allocation Committee (GAAC).Views are expressed relative to the Index and are provided to represent investment conviction in each region. Tactical Allocations are designed to augment Index returns over a 6-12 month time horizon. Index weights as of 6/21/19. Numbers may not add due to rounding.

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 55.5% Overweight +4.3% 59.8% 5) Latin America 1.5% Equalweight - 1.5%

2) Canada 3.0% Equalweight - 3.0% 6) Asia-Pacific ex Japan 12.2% Equalweight - 12.2%

3) United Kingdom 5.0% Underweight - 1.0% 4.0% 7) Japan 7.0% Underweight - 1.0% 6.0%

4) Europe ex U.K. 14.5% Underweight - 1.0% 13.5% 8) Middle East / Africa 1.3% Underweight - 1.3% -

Index weighting represents relative weightings based on the regional market capitalization balance of the MSCI All-Country World Index; may not add due to rounding. The GAAC Tactical Overlay, as well as Recommended Tactical Weights, is derived from the Ameriprise Global Asset Allocation Committee (GAAC).Views are expressed relative to the Index and are provided to represent investment conviction in each region. Tactical Allocations are designed to augment Index returns over a 6-12 month time horizon. Index weights as of 6/21/19. Numbers may not add due to rounding.



The Index is forecast to register a reading of 134.0 versus the 135.1 reported in August. We note that the six-month average for the series is 130.0.

• Separately, the University of Michigan’s measure of Consumer Sentiment, out on Friday, is expected to be about flat with its mid-month estimate of 92.0, which would leave it slight above its August-ending level of 89.8.

• On Friday, Personal Income and Spending for the month of August is reported. Income is expected to show a healthy bounce-back after what was a fairly common “breather” in the series in July. Total personal income grew by just 0.1% in July but this was after five straight months in which monthly income growth averaged over +0.4%. Income growth has also been averaging a healthy year-over-year pace in a range of about +5%. Slower job growth could ease this pace, but just as likely rising wages could offset moderating employment gains. Meanwhile, Personal Spending for the month is expected to see a healthy gain of about 0.3% to 0.4% after surging 0.6% in July. Retail sales held up well in August after a very strong July thus suggesting good consumer financial sentiment.

• There is also still a significant dose of housing data for investors to digest this week. On Wednesday, New Home Sales for the month of August are expected to come-in very close to their 6-month average pace of about 660,000 (on an annualized basis). The New Home Sales data, however, has been exceptionally volatile over recent months. On a month-over-month basis, the Census Department said sales dropped a whopping 12.8% in July (although were 4.8% above year-ago levels), but this was after a substantial gain of 20.8% in June. Revisions should smooth the series somewhat, but we should also be prepared for some continuing volatility in the series.

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September 23 24 25 26 27Markit Prelim. PMI S&P/CaseShiller Home $$$ New Home Sales Initial Jobless Claims Personal Inc. & Spending

Retail Sales - Mexico Consumer Confidence Employment - Mexico Q2 GDP - 3rd estimate Durable Goods Orders

Richmond Fed Mfg. Index Jobseekers - France Advance Trade - Goods U. of M. Cons. Sentiment

Consumer Sentiment - S. Korea Kansas City Fed. Mfg. Economic Sentiment - Euro Zone

Pending Home Sales Employment - Brazil

Employment - Canada Trade - Mexico



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

S&P 500 Earnings Estimates 2014 2015 2016 20209/23/2019 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 $30.87 $32.80 $33.54 $36.29 $38.71 $41.13 $42.87 $41.32 $38.80 $41.47 $41.49 $42.93 change over last week $0.02 -$0.06 -$0.08 yr/yr 13.9% 10.7% 6.7% 15.9% 25.4% 25.4% 27.8% 13.9% 0.2% 0.8% -3.2% 3.9% qtr/qtr -1% 6% 2% 8% 7% 6% 4% -4% -6% 7% 0% 3%

Trailing 4 quarters $$ $119.02 $118.67 $119.64 $123.25 $126.42 $128.53 $133.50 $141.34 $149.67 $159.00 $164.03 $164.12 $164.46 $163.08 $164.69 $181.83 yr/yr 6.8% -0.3% 0.8% 11.6% 22.9% 0.4% 10.4%Implied P/E based on a S&P 500 level of: 2992 18.2 18.2 18.3 18.2 16.5

2018 20192017



BY THE NUMBERS: ECONOMIC ACTUALS AND FORECAST:

ECONOMIC NEWS OUT TODAY: Economic Releases for Monday, September 23, 2019. All times Eastern. Consensus estimates via Bloomberg. None Scheduled

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

Fed Commits to Repo Support Over Quarter-end; We Believe Bank Reserve Increase Necessary • The Fed stepped in to add $75 billion of repo funding in each day from Tuesday through the end of the week. Friday,

the Fed announced daily overnight repo actions though October 10 along with 14-day funding as well to bridge market liquidity over the end of the third quarter. In essence, the repo actions take Treasury securities back onto the Fed’s balance sheet, injecting cash and liquidity into funding markets.

• At issue is that the level of excess bank reserves, while more than $1 trillion, are not sufficient to provide for all the funding necessary to keep short-term borrowing conditions fluid and normal. Between September 2018 and August 2019, the Fed reduced the size of its balance sheet by $600 billion, leaving more than $1 trillion of excess bank reserves to shape the 25 basis point target range to the fed funds rate. The mechanics around the fed funds target range are new; a post-financial crisis framework that is truly a work in progress. Before the financial crisis the Fed used open-market operations, similar to Fed actions in the repo market last week but in directly on either side of the federal funds market, to ensure Fed policies were achieved and maintained.

• JPMorgan CEO Jamie Dimon framed up market liquidity last week, “banks have a tremendous amount of liquidity, but also a tremendous amount of restraints on how they use that liquidity” reinforcing that neither banking system leverage nor solvency were in questions. Rather than looking to banks, we turn to elevated Treasury issuance that absorbs liquidity as investors by T-bills and Treasury notes rather than hold cash or money market investments. The chart below depicts the nearly $4 trillion increase in Treasuries since the end of 2015 and the $600 billion jump in Treasuries since August as the U.S. Treasury rebuilt liquidity following the re-set of the nation’s debt ceiling. While the Fed estimated that roughly $1 trillion of excess bank reserves would be sufficient to maintain fluid functioning of short-term funding markets, the Fed balance sheet reduction of $600 over the past year combined with the swift growth of Treasuries to fund deficit spending converged to create the latest funding pinch in our view. We believe this along with the ebb and flow of tax payments and bond settlements drove the funding pinch

Current Projections:Actual Actual Actual Actual Actual Est. Est. Actual Actual Est. Est.2014 2015 2016 2017 2018 2019 2020 Q1-2019 Q2-2019 Q3-2019 Q4-2019

Real GDP (YOY) 2.5% 2.9% 1.6% 2.4% 2.9% 2.2% 2.1% 3.1% 2.0% 1.9% 2.2%Unemployment Rate 5.6% 5.0% 4.7% 4.1% 3.9% 3.6% 3.5% 3.8% 3.7% 3.6% 3.6%CPI (YoY) 1.6% 0.1% 1.3% 2.1% 2.4% 1.8% 2.1% 1.6% 1.8% 1.9% 2.0%Core PCE (YoY) 1.6% 1.3% 1.7% 1.6% 1.9% 1.8% 1.9% 1.6% 1.5% 1.7% 1.8%

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:

Quarterly

September 6, 2019



Treasuries Held By the Public $ in trillions

Source: Bloomberg L.P.

• We believe the Fed has the tools to change and shape short-term liquidity conditions. After the latest round of repo

intervention ends on October 10, we anticipate the Fed looks to “organically grow” its balance sheet as Fed Chair Jerome Powell put it. We point out that expanding the Fed balance sheet with the supply of money or adjusting bank reserve levels higher would not be considered Quantitative Easing (QE) for markets. The Fed would likely expand holding of T-bills to ensure ample cash was in the system, rather than getting locked up in Treasuries. The goal of QE is quite different; it targets intermediate and long-term Treasury purchases to lower funding costs beyond the short-term for consumers and corporations.

• Impact for bond investors: Recent funding stress in the repo market is not symptomatic of a bigger problem. If anything, this is simply a reminder that things can occasionally go wrong in the markets and that investing comes along with a measure of risk. Investors, consumers, and corporations that approach finances prudently, and with an eye toward diversifying risks can better navigate period where liquidity is temporarily challenged. Overnight Repurchase Rate (Repo) and Fed Funds Target Range

Source: Bloomberg L.P.

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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 Curtis R. Trimble – 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, CAIA – Sr Director, Asset Allocation

Gaurav Sawhney – Research Analyst

Amit Tiwari – 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 – Analyst – Core Equity

Cynthia Tupy, CFA – Analyst – 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 – 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 Bums – Sr. Manager

Matt Morgan – Sr. Manager

Natasha Wayland – Sr. Manager

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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.

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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.

Documents

Before the Bell · 9/23/2019 · across the Eurozone, it has started to slip, missing consensus estimates for September. • U.S.: Equity futures are pointing to a flat-to-weaker