Before the Bell · In some respects, we would agree with that statement and its why we remain comfortable leaving our 2950 year -end S& P 500 target level unchanged for the time being

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

July 1, 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 long-awaited meeting between presidents Trump and Xi has concluded with the two sides agreeing to resume trade negotiations. The U.S. indefinitely suspended the imposition of new tariffs but left in place those already in effect. The U.S. also agreed to allow resumption of certain technology sales to Huawei, a precondition upon which the Chinese insisted. And the Chinese agreed to buy more U.S. agricultural products. The meeting did not result in any major breakthrough that might form the basis for a definitive agreement, but none was expected. The fact that the two countries are once again talking is a positive development and will likely be viewed as such by investors, but only up to a point. And, as expected, global stock markets are rallying on the news in early Monday trading. But whether the trade war ultimately proves to have been worth the disruption and cost will depend on where these negotiations lead, and for how long they extend. In the meantime, inasmuch as the tariffs and tensions that have slowed the global economy remain in place, this meeting will not result in any immediate burst of optimism among corporate decision makers. And it likely gives the Federal Reserve more reason to consider lowering interest rates when it meets at the end of the month. Stocks drifted last week ahead of the U.S.-China meeting, but overall the month of June was the strongest in years. The S&P 500 slipped 0.3 percent for the week, but added 6.9 percent for the month, bringing its year-to-date gain to 17.3 percent. The June rally was triggered by Fed chairman Powell’s dovish comments to a Chicago symposium early in the month and represents a complete reversal of the 6.6 percent decline in May that was triggered by the escalation of trade tensions. Bonds continued to reflect a world of moderating growth with little inflation. The yield on the ten-year note fell four basis points to 2.01 percent last week, after beginning the month at a yield of 2.13 percent. The two-year note slid two basis points to end the week at 1.76 percent. It began the month at 1.95 percent. They began the year at 2.68 and 2.50 percent respectively. Last week the core PCE reading for May showed prices rising at a modest 1.6 percent year-over-year, while the headline rate was also unchanged at 1.5 percent, still below the Fed’s target. High yield spreads widened slightly last week, from 395 to 407 basis points, but for the month overall narrowed by 52 basis points. Spreads began the year at 533 basis points. The challenge for the Fed is how to balance the strong consumer sector of the economy with the weakening manufacturing sector. The definitive readings for both are on this week’s calendar. On Monday, the ISM report on manufacturing activity is scheduled, and on Friday we will get the June jobs report. The ISM index is expected to slow further from last month’s 52.1 reading. Anything below 50 indicates that the sector is contracting. But, since manufacturing represents approximately just 11 percent of U.S. GDP, it would take a reading below 43 to indicate a recessionary type contraction. The most recent contractionary reading was in August 2016. However, the index has been declining since its subsequent peak of 60.8 in August 2018. As for the jobs report, the Bloomberg consensus

Before The Bell July 1, 2019 ____________________________________________________________________________________________________________________________

____________________________________________________________________________________________________________________________ © 2019 Ameriprise Financial, Inc. All rights reserved. Page 2 of 13

anticipates non-farm jobs growth of 160,000 and an unchanged unemployment rate of 3.6 percent. Year-over-year growth in average hourly earnings is expected to edge higher to 3.2 percent. Lastly, second quarter earnings season will get underway shortly, and another decline is expected following the modest decline of the first quarter. According to FactSet, an earnings decline of 2.6 percent is expected. Third quarter expectations have also turned fractionally negative. With the modestly positive agreement to restart trade negotiations between the U.S. and China, the bullish narrative now pivots to the Fed meeting at the end of July, when it is overwhelmingly expected to lower the overnight rate by a quarter point. Another such cut is expected in September. However, even assuming the Fed cuts as expected, actual progress on trade must be achieved for the global economy to stabilize, and for equity prices to move sustainably higher.

MORNING MARKET COMMENTARY: Anthony M. Saglimbene, Global Market Strategist • Quick Take: U.S. futures are pointing to a materially higher open; European markets are trading in the green;

Asia ended higher overnight; West Texas Intermediate (WTI) oil trading at $60.12; 10-year U.S. Treasury yield at 2.02%.

• The Bull & Bear Case For Stocks: The second half of 2019 kicks off today and U.S. stock prices sit in the driver's seat, as strong first half performance sets up a solid seasonality pattern through the rest of the year. Over the last ten years, the month of July has been very strong, with the S&P 500 Index positive 80% of the time, while the NASDAQ 100 has risen 100% of the time, according to Bespoke Investment Group. Further, when the S&P 500 is higher by +10.0% or more during the first half of the year (up over +17.0% in the first six months of 2019), the Index gains an average +1.8% over the third quarter. Lastly, on the subject of performance, the broad-based U.S. stock barometer historically gaines +5.0% on average during the second half when it is positive in the first half. If it isn’t yet obvious, what we’re trying to convey is that seasonality factors for stock prices set up well for the next six months. While those trends suggest an easy second half for investors, we doubt it will play out that easy due to slowing growth trends and a still uncertain path for trade.

• Over the weekend, President Trump and China President Xi Jinping agreed to restart trade discussions and avoid increasing tariffs on the other’s imports. However, the level of uncertainty regarding trade policy and the potential for further tariffs has hardly been put to rest. As the second half gets underway, businesses of all shapes and sizes could remain worried when/if the next shoe will drop in trade, and how to mitigate any potential damage from the fallout.

• Below is a table we run from time-to-time that sums up the high-level points to be made for higher and lower stock prices. Although the Federal Reserve and expectations for lower interest rates may play the most dominant and immediate role in shaping stock direction over the near-term, subdued investor confidence and softer global growth may temper any large shift in either direction.

The Bull Case for U.S. Stocks The Bear Case for U.S. Stocks

Intraday trading patterns are positive Expectations for Fed rate cuts this year may be

too aggressive

Stocks recently made new all-time highs Yield curve inverted and re-steepening

Market breadth is defensive, yet solid Global growth is soft

Investor sentiment is subdued Global manufacturing activity is either moderating

or in contraction

Seasonal tailwinds (i.e., strong first half bodes well for a strong second half)

U.S. labor market is slowing



Interest rates are low and could go lower Earnings growth is slowing

Lower mortgage rates could add fuel to the housing market

Profit warnings are on the rise

Financial conditions are easy Leading economic indicators looking like they have peaked

U.S. dollar strength moderating Trade uncertainty remains a key headwind

Credit markets are on solid footing IPO volume strong, possibly indicating a rush by private investors to cash out

Small businesses are confident Political gridlock—not necessarily bullish for

stocks

Economic data sentiment is weak, potentially setting up for upside surprises

2020 election is right around the corner and may increase Washington uncertainty

Valuations are fair Defensive stocks continue to demonstrate leadership

An escalation in U.S./China trade tensions on hold for now

High debt levels

Sources: American Enterprise Investment Services Inc. & Bespoke Investment Group

• Last week, the Global Asset Allocation Committee released its tactical guidance for the third quarter and modestly shifted to a defensive, yet balanced position. The table above leaves the impression that risks and opportunities are fairly balanced today. In some respects, we would agree with that statement and its why we remain comfortable leaving our 2950 year-end S&P 500 target level unchanged for the time being. However, we believe much has to go right for markets to keep pressing higher in the second half, and we question the magnitude of potential gains given the softening macro trends. Conversely, we believe stock prices have a lot of downside risk if the already investor scripted trends reverse (i.e., the Fed does not cut rates more than once, growth doesn’t pick up, and the U.S. and China do not strike a trade deal). For now, investors should play the start of the third quarter close to the vest, and wait for some of the more bearish cases on stock prices to clear or improve. Please see the latest Tactical Asset Allocation Update report for more information on the Committee’s recommendations for broad asset class, sector, and region positioning. Note: The TAAU report replaces the previously named Asset Allocation Tables report.

• Asia-Pacific: Asian equities finished higher on Monday. Following the G20 summit in Osaka, Japan over the weekend and President Trump’s visit to North and South Korea, this is what you need to know:

The U.S. and China agreed to a trade ceasefire and will resume trade talks, which collapsed in May. Both sides said they would avoid pressing further tariffs as long as talks were progressing as expected. President Trump said the U.S. would relax restrictions on Huawei and allow some American companies to

sell products to the China telecom giant. In exchange, Beijing agreed to buy a large number of farm products from U.S. companies, though specifics

are lacking, and Chinese officials did not confirm the agreement. President Trump became the first sitting U.S. president to set foot inside of North Korea over the weekend.

Trump joined North Korean leader Kim Jong Un at the demilitarized zone before each discussed getting denuclearization talks back on track.



• In our view, the meeting between President Trump and China President Xi Jinping went as the market expected. Though a small expectation for a breakthrough deal was likely hanging in the market, trading action overnight in Asia and pre-market activity here in the U.S. suggest investors are relieved the meeting did not go south and escalate tensions. Nevertheless, the hard work of hammering out a trade deal will again resume, and as investors have seen so far, that has been a difficult hurdle for both sides to overcome.

• China official manufacturing PMI remained in contraction last month, sitting at 49.4 and unchanged from May levels. However, non-manufacturing PMI activity remains in expansion territory, with the June reading coming in at 54.2, a tick lower than May’s 54.3 level. Caixin manufacturing PMI activity (a measure of smaller and more localized Chinese manufacturers) also fell into contraction during June. The bottom line: growth in China remains soft. June manufacturing PMI in Japan contracted to a three-month low in the final reading.

• Europe: Markets across the region are trading in the green at mid-day. Eurozone manufacturing PMI slipped to 47.6 in the final June reading and currently sits well below the expansion marker of 50. Importantly, large economies such as Germany, Italy, and Spain all have manufacturing activity that sits in contraction – lending support that global growth continues to show signs of softening. UK manufacturing PMI activity also sank to a six-year low.

• U.S.: Equity futures are pointing to a materially positive open this morning. Pre-market activity this morning suggests stocks are set to rally at the start of the second half on hopes of an eventual U.S./China trade deal and an economic backdrop that will prompt central bankers to ease monetary policy. In this Goldilocks scenario, we would expect risk assets to do well as long as that narrative remains intact. But as we said last week, investors are still pricing in too much accommodation and pinning a lot of hope on a Federal Reserve that will ease interest rates aggressively against a stable economic backdrop.

• Importantly, there are no guarantees investors will not wake one morning to the news that trade talks have collapsed again, and the U.S. is imposing tariffs on the remaining $300 + billion in Chinese imports. Thankfully, existing tariffs have not had a large impact on consumer behavior. Although this could change fast if tariffs are placed on a host of consumer products that comprise a large portion of the $300 + billion left in outstanding Chinese goods, which thus far, have escaped a tariff impact.

• For now, investors appear comfortable looking past slowing profit and economic growth, trade frictions that remain unresolved, and a Federal Reserve that is unlikely to ease to the magnitude futures are pricing in absent a recession. In our view, investors should position portfolios with a slightly defensive bias, lean on quality investments with more visible/predictable outlooks, and recognize markets may continue to climb a wall of worry as long as a large disruption to growth expectations are avoided.

• According to multiple reports, Russia and Saudi Arabia agreed to extend oil production cuts over the weekend, and before this week’s OPEC + producers gathering in Vienna. Both agreed to curb crude output by 1.2 million barrels per day for six to nine months. While this week’s OPEC meeting may prove to be a formality, U.S. sanctions against Iran and Tehran’s place in setting production quotas among OPEC nations may be some of the thornier issues discussed. West Texas crude breached $60 a barrel this morning for the first time since May.

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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 0.58% 18.54% 2,941.8 DJSTOXX 50 (Europe) 0.95% 20.35% 3,506.8 Nikkei 225 (Japan) 2.13% 9.82% 21,730.0 Dow Jones 0.28% 15.40% 26,600.0 FTSE 100 (U.K.) 1.34% 14.61% 7,525.0 HK Hang Seng ( H. Kong) -0.28% 12.75% 28,542.6 NASDAQ 0.48% 21.34% 8,006.2 DAX Index (Germany) 1.25% 18.90% 12,554.2 Korea Kospi 100 -0.04% 4.55% 2,129.7 Russell 2000 1.29% 16.97% 1,566.6 CAC 40 (France) 0.83% 21.41% 5,584.8 Singapore STI 1.52% 12.20% 3,372.3 Brazil Bovespa 0.24% 14.88% 100,967.2 FTSE MIB (Italy) 0.52% 16.48% 21,344.5 Shanghai Comp. (China) 2.22% 23.64% 3,044.9 S&P/TSX Comp. (Canada) 0.46% 16.19% 16,382.2 IBEX 35 (Spain) 0.71% 11.13% 9,263.9 Bombay Sensex (India) 0.74% 10.68% 39,686.5 Mexico IPC -0.36% 5.62% 43,161.2 Russia TI 1.62% 18.99% 4,840.8 S&P/ASX 200 (Australia) 0.44% 21.06% 6,648.1

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

MSCI All-Country World Idx 0.48% 16.60% 523.4 MSCI EAFE 0.44% 14.53% 1,922.3 MSCI Emerging Mkts 0.00% 10.71% 1,054.9 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 0.25% 21.84% 945.6 JPM Alerian MLP Index 1.20% 12.48% 25.0 Futures & Spot (Intra-day) % chg. % YTD ValueConsumer Staples 0.07% 16.18% 597.3 FTSE NAREIT Comp. 0.50% 19.27% 19,793.9 CRB Raw Industrials 0.12% -5.25% 455.2 Energy 1.19% 13.13% 471.3 DJ US Select Dividend 0.88% 13.64% 2,114.1 NYMEX WTI Crude (p/bbl.) 2.98% 32.59% 60.2 Financials 1.40% 17.24% 458.9 DJ Global Select Dividend 0.46% 5.49% 218.1 ICE Brent Crude (p/bbl.) 2.83% 23.74% 66.6 Real Estate 0.30% 20.42% 227.9 S&P Div. Aristocrats 0.78% 15.94% 2,779.1 NYMEX Nat Gas (mmBtu) -1.60% -22.76% 2.3 Health Care 0.37% 8.07% 1,072.5 Spot Gold (troy oz.) -1.21% 8.58% 1,392.5 Industrials 0.97% 21.38% 651.7 Spot Silver (troy oz.) -0.23% -1.39% 15.3 Materials 0.86% 17.26% 367.1 Bond Indices % chg. % YTD Value LME Copper (per ton) 0.09% 0.55% 5,982.0 Technology 0.14% 27.13% 1,372.6 Barclays US Agg. Bond 0.05% 6.11% 2,171.7 LME Aluminum (per ton) 0.52% -4.46% 1,779.8 Communication Services 0.78% 19.09% 164.2 Barclays HY Bond 0.12% 9.94% 2,099.1 CBOT Corn (cents p/bushel) -0.52% 7.99% 429.3 Utilities 0.52% 14.70% 303.0 CBOT Wheat (cents p/bushel) -0.95% -1.23% 521.8

Foreign Exchange (Intra-day) % chg. % YTD Value % chg. % YTD Value % chg. % YTD ValueEuro (€/$) -0.2% -1.0% 1.14 Japanese Yen ($/¥) -0.42% 1.28% 108.30 Canadian Dollar ($/C$) 0.0% 4.1% 1.31 British Pound (£/$) -0.2% -0.7% 1.27 Australian Dollar (A$/$) -0.36% -0.77% 0.70 Swiss Franc ($/CHF) -0.6% 0.0% 0.98 Data/Price Source: Bloomberg; Equity Index data is total return, inclusive of dividends where applicable.

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.

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.



THE WEEK AHEAD: Russell T. Price, CFA, Chief Economist • It looks to be a busy holiday-shortened week. While many traders may be looking to take a break this week given

Thursday’s holiday, the economic calendar remains busy, and thus offers some potential for market moving information. Friday’s Employment Report for June will certainly be closely watched given May’s weak performance and the resulting expectations for a near-term Federal Reserve rate hike. The “truce” in the ongoing trade dispute between the U.S. and China achieved over the weekend, however, may also dampen expectations for significant Fed action, although we still believe there to be room for the Fed to cut by 25 basis points at its late July meeting. Although we believe recession odds remain low (though certainly higher than where they were), inflation has remained weak, leaving plenty of room for policymakers to re-align the official policy rate with market rates which are currently much lower.

• The economic calendar begins this week with the Institute of Supply Management’s (ISM) Manufacturing Index for the month of June on Monday. U.S. manufacturing activity has softened over the last several months for a variety of reasons and the ISM measure is getting closer to the 50 mark which is meant to delineate between month-over-month expansion and contraction in the sector. Aside from the slower pace resulting from trade frictions, manufacturing demand is also seeing some near-term weakness from a bulge in business inventory levels, a relatively strong dollar which is placing added pressure on the demand for U.S. made goods internationally, and cautious domestic business investment as well. Lower energy prices are also weighing on equipment demand in the energy sector which has come to represent a larger percentage of the U.S. economy. The chart at right is sourced from FactSet.

• On Wednesday, markets will get their first look at June employment growth on a national scale via the ADP Employment Estimate. The ADP measure does not always correlate very well with the Labor Department’s report released a few days later, but it turned out to be quite prophetic last month as both measures dropped in to the double-digits, +27k for ADP and +75k for the Labor Department. Both reports are expected to see a bounce-back for June but still exhibit a deceleration trend as the number of people on the sidelines available to be hired into the job market continues to dwindle.

• The ISM’s Non-Manufacturing (Services) Index is also released on Wednesday. Activity on the services side of the economy has also slowed somewhat over the last several months but it is still expanding at healthy rates overall. It may be important in terms of investor psychology for this report to show a continued solid pace given the weakness seen on the manufacturing side of the economy. Forecasters as surveyed by Bloomberg expect the measure to show a reading of 56.5 versus the 56.9 reported in May and the report’s 6-month average of 57.2.

• Finally, on Friday the Labor Department’s Employment Report is expected to show total job growth for the month of June of +170,000. This would put the report back-on trend with its six-month average of +175,000, but still well-above the monthly pace of U.S. labor force expansion of about 90,000. In other words, monthly job growth above 90,000 is still trimming the number of workers on the sidelines. And although we believe there to be some added room to further lift the labor force participation rate, the current unemployment rate of just 3.6% suggests that we are running low on available workers.

July 1 2 3 4 5ISM Manufacturing Index U.S. Auto Sales Initial Jobless Claims Independence Day. Employment Report

Construction Spending Retail Sales - Germany Challenger Layoff Notices U.S. Markets Closed Industrial Production - Spain

Markit Final PMI Industrial Production - Brazil Trade Balance Manufacturing Activity - Canada

Machinery Orders - Japan ADP Employment Estimate

Unemployment - Euro Zone ISM Services Index

Consumer Confidence - Japan Factory Orders

Trade - Canada Retail Sales - Euro Zone



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 20207/1/2019 Actual Actual Actual Actual Actual Actual Actual Actual Actual Actual Actual Actual Est. 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 $40.42 $42.92 $44.24 change over last week $0.00 -$0.02 -$0.16 -$0.17 yr/yr 13.9% 10.7% 6.7% 15.9% 25.4% 25.4% 27.8% 13.9% 0.2% -1.7% 0.1% 7.1% qtr/qtr -1% 6% 2% 8% 7% 6% 4% -4% -6% 4% 6% 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 $163.41 $163.46 $166.38 $184.78 yr/yr 6.8% -0.3% 0.8% 11.6% 22.9% 1.4% 11.1%Implied P/E based on a S&P 500 level o 2942 17.9 17.9 18.0 18.0 17.7 15.9

2018 20192017



BY THE NUMBERS: ECONOMIC ACTUALS AND FORECAST:

ECONOMIC NEWS OUT TODAY: Economic Releases for Monday, July 1, 2019. All times Eastern. Consensus estimates via Bloomberg. Time Period Release Consensus Est. Actual Prior Revised to 10:00 AM JUN ISM Manufacturing Index 51.3 52.1 10:00 AM JUN ISM Prices Paid 53.0 53.2 10:00 AM JUN ISM New Orders 53.0 52.7 10:00 AM MAY Construction Spending +0.2% +0.0% FIXED INCOME NEWS & VIEWS: Brian M. Erickson, CFA, Fixed Income Research & Strategy

• Update on Treasury yields: While U.S. equity markets appear poised to move higher this morning after an apparent resumption of trade discussions with China, U.S. Treasury and German Bund markets are little changed ahead of the open to U.S. Equity trading.

• June Jobs report wraps up holiday shortened trading week. Bond markets will close early on Wednesday at 2:00 PM ET and will be closed all day Thursday in celebration of U.S. Independence Day. Payroll data ahead of the market open Friday will precede a full trading session for the final day of the week, and drive expectations around how the Fed approaches policy at the end of the month.

Level Setting For Fixed Income Yields and Returns • We began 2019 touting that yield had returned to fixed income. Six months into the year, moderate yields evaporated.

We believe return potential and income from fixed income has declined. The longer a bond is held the more the initial yield to worst drives the likely return.

• Year to Date total returns: Bloomberg Barclays US Aggregate Index 6.1%, Bloomberg Barclays U.S. Investment Grade Corporates 9.8%, Bloomberg Barclays Municipal Index 5.0%, Bloomberg Barclays U.S. High Yield Index 9.4%, and the JPMorgan Emerging Market Bond Index 10.6%. Our bias away from government exposure toward credit exposure performed well year to date. Much of the easy returns have been captured as markets squeezed our excess potential following the year-end bond market dislocation. For the second half, we see fixed income return potential as lower compared to the first half.

• Core Fixed Income: The Bloomberg Barclays U.S. Aggregate Index yielded 2.84% at the end of June, down 44 basis points (bps) from 3.28% at the end of 2018. The Aggregate represents our core fixed income allocation, including Treasuries, mortgage backed securities, and investment grade corporate bonds. The yield of 3.28% still tops Consumer Price Index inflation of 1.8% resulting in a healthy 1 percentage point of yield over inflation; a unique outlier in today’s depressed yield environment around the globe. Given slowing growth in the Eurozone, U.S. and China, we believe yields are likely to remain depressed by low inflation and potential monetary policy actions over the next 6 to 12 months.

• High Yield Corporates: The Bloomberg Barclays U.S. Corporate High Yield Index offered a 5.87% yield to worst at the end of Q2, down from 7.95% at the end of 2018. By rating segment Ba-rated yields end Q2 at 4.36%, B-rated at

Current Projections:Actual Actual Actual Actual Actual Est. Est. Actual Est. 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% 2.2% 2.9% 2.2% 1.6% 3.1% 1.9% 2.3% 2.4%Unemployment Rate 5.6% 5.0% 4.7% 4.1% 3.9% 3.5% 3.5% 3.8% 3.7% 3.6% 3.5%CPI (YoY) 1.6% 0.1% 1.3% 2.1% 2.4% 1.9% 2.1% 1.6% 1.7% 2.1% 2.2%Core PCE (YoY) 1.6% 1.3% 1.7% 1.6% 1.9% 1.7% 1.9% 1.5% 1.6% 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

July 1 , 2019



5.99%, and Caa-rated at 10.14%. We anticipate credit investors likely retain a selective approach toward new issues and anticipate that a rising tide does not equally lift lower rated issuers and uncertainty clouds cash flow forecasts.

• Municipals: The yield to worst for the Bloomberg Barclays U.S. Municipal Index ended Q2 at 2.02% down from 2.69% at the end of last year. While tax exempt municipals have been well bid, shedding 67 bps this year compared to 44 bps for the U.S. Aggregate, we believe the lack of supply, and continued talk of potentially higher taxes into the 2020 Presidential election could compel further investment.

• In sum, though the yield environment is lower than seen at the start of 2019, yields levels remain attractive on a global basis and are likely to remain low for the balance of the year. We recommend investors invest in fixed income markets and avoid attempting to wait for a higher yields environment to return.

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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)

Open – Sr Manager

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

Daniel Balter, CFA – Analyst – Quantitative, 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, 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, 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



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 June 30, 2019 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. 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 · In some respects, we would agree with that statement and its why we remain comfortable leaving our 2950 year -end S& P 500 target level unchanged for the time being