BTIG Equity & Derivatives Strategy · 10/1/2019 · BTIG Equity & Derivatives Strategy. The Year of Living Dangerously. October 2019. Please Read: Important disclosures and analysts’

P A G E 1

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BTIG Equity & Derivatives StrategyThe Year of Living DangerouslyOctober 2019

Please Read: Important disclosures and analysts’ certifications appear in the appendix

Julian Emanuel(212) [email protected]

Michael Chu, CFA, CMT(212) [email protected]

P A G E 2

BTIG Equity & Derivatives Strategy: Key Points

S&P 500 Estimates• 2019 Year-end Price Target: 3,000• 2019 EPS Estimate: $168• 2020 EPS Estimate: $179

Broader, Deeper, More Volatile – Cyclical Bear, Secular Bull• (Almost) One Year Later:Yes, Virginia, that was a (Non-Recessionary) Bear Market• Peak Everything vs. Still (?) Strong: Further upside is a state of mind, stabilizing data, and political will• Minding the Megaphone: The message of higher highs + lower lows = Something’s Gotta Give?

RISK and REWARD in The Year of Living Dangerously• Options Market Memos: VIX Floor, S&P 500 Ceiling; Fear of the Future, Europe Sleepwalking?• Bricks in the “Wall of Worry”: Inflation, Rates/Fed/Yield Curve, Growth Here and Abroad• Fed Wars: How much can be done? MMT?• Politics: Gridlock (and Impeachment proceedings) widens the range of outcomes• Trade Wars: If it ain’t broke, hopefully it gets fixed anyway• In Search of Alpha: Leadership tends to narrow in late cycle• Growth & Value: Can a shift “accommodate” the Bull?• Bonds – The Biggest Bubble Ever?: Keynes vs. Stein• Other Markets/Assets/”Wars”: Will RoW play catchup?; on USD, Gold and Bitcoin

BTIG Sector Recommendations – Focus on Value and Valuation• Overweight: Energy, Financials, Health Care• Underweight: Consumer Discretionary, Consumer Staples, Utilities• Neutral: Communication Services, Industrials, Materials, Real Estate, Technology

P A G E 3

S&P 500 Estimates

P A G E 4

S&P 500 Year-End Estimates

Source: Factset, BTIG

2016 2017 2018 2019e 2020e

Price Level ($) 2,238.83 2,673.61 2,506.85 3,000.00 --

% Growth 9.54% 19.42% -6.24% 19.67% --

EPS ($) 119.32 133.61 161.57 168.00 179.00

% Growth 0.47% 11.98% 20.93% 3.98% 6.55%

Forward P/E (BTIGe) 17.1x 16.8x 16.5x 14.9x --

Trailing P/E 18.8x 20.0x 15.5x -- --

P A G E 5

Broader, Deeper, More Volatile – Cyclical Bear, Secular Bull

P A G E 6

Yes, Virginia, That Was a Bear Market

• The S&P 500 fell into a “technical bear market”, down 20.2% from the 9/21/18 peak to the 12/26/18 trough. Thedecline fell just short of that mark on a close-to-close basis, and went unreported by the financial media – similar tothe 2011 “Debt Default Bear” and 1998’s “LTCM Bear”.

• “Fall’s Fall” gave way to a seasonal surprise, uncharacteristic weakness in December. Tax loss selling, Passive selling,Hedge Fund liquidation, a government shutdown, a “tone deaf” Fed.

• While 4Q2018 VIX fell short of its February 2018 “Volmageddon” highs near 50, less-liquid Small Caps reflected ahigher level of fear as Russell 2000 volatility hit a 4 year high. Small Caps continue to be a conspicuousunderperformer in 2019YTD, perhaps fearful of the slow growth message of plunging long-term interest rates.

“Fall’s Fall” to Seasonal Surprise – S&P 500 “Technical Bear”

Source: Bloomberg, BTIG

Small Is Less Beautiful in 2019


2,300

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2,800

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3,000

Jul '18 Oct '18 Jan '19

S&P 500

1.4%

1.6%

1.8%

2.0%

2.2%

2.4%

2.6%

2.8%

0.50

0.51

0.52

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0.57

Jan '19 Mar '19 May '19 Jul '19 Sep '19

Russell 2000/S&P 500 US 10Yr Yld

P A G E 7

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Oct '17 Jan '18 Apr '18 Jul '18 Oct '18 Jan '19 Apr '19 Jul '19

Citi Econ. Surprise - US

Surprising Strength to U.S. Econ – Or Calm Before the Storm?


Peak Everything vs. Still (?) Strong (Part 1: GDP)

• The 4Q2018 Bear Market was rooted in fears of peak profits, peak margins, peak earnings, peak growth, peakemployment, peak confidence, peak China ... “Peak Everything”.

• Expectations are reset, shifting the perspective to “Still (?) Strong”.

• U.S. GDP is expected to grow at 2.3% (BTIGe 2.2%) in 2019, 1.7% (BTIGe 1.9%) in 2020, supported by rates historicallylow in the grander scheme, an accommodative Fed, and a strong labor market. While the Trade War issues weighs ongrowth, is there a pre-Election 2020 Deal in sight? Perhaps only politicians know for sure.

U.S. Interest Rates, in the Grander Scheme


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US 10Yr Yield

P A G E 8

Peak Everything vs. Still (?) Strong (Part 2: Earnings)

• With the Trade Wars 18 months old, earnings estimates continue to drift lower, from $178.30 in August 2018 to$164.47 currently; BTIGe $168. YoY growth remains positive. 2020 consensus $181.58, looks too high (BTIGe $179) but2020 is not a concern until closer to year end in this Trade War year, 2019.

• Question remains: where is the risk to 2019 consensus? Upside pending trade deal(s) or further downside with anunresolved China situation?

• Perhaps only politicians know for sure.

Record EPS – Growth, Still


Earnings – Where to Now?


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2011 2012 2013 2014 2015 2016 2017 2018 2019

YoY % (rhs) S&P 500 EPS (lhs)

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Jul '18 Oct '18 Jan '19 Apr '19 Jul '19

S&P 500 2019 EPS Est. S&P 500 2020 EPS Est.

P A G E 9

Recession Red Flag, or Red Herring?

• Risk of recession remains elevated as trade tensions and anemic growth abroad dominate.

• While consumer confidence remains high in the present, the view of the future is historically downbeat, as was thecase in 1998.

• Questions remain: How accommodative is the Fed? Can Trade War damage be repaired near term, or not until 2020 orbeyond? And how does Presidential Impeachment proceedings affect the calculus?

• Perhaps only politicians know for sure.

Recession Prob. Above 20% – Red Flag or Red Herring?


Goodbye Yellow Brick Road?


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1960 1970 1980 1990 2000 2010 2020

Prob of Recession in 12 Mo

-150

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1970 1975 1980 1985 1990 1995 2000 2005 2010 2015

Conf. Board Expectations - Present Situation

P A G E 1 0

Trade War-Weary, Economic Canaries Still Sing – For Now

• Jobless Claims remain near generational lows.

• C&I Lending moderating but not materially. Credit markets still near tights with record September issuance.

• ISM bent but not broken – particularly Services, 85% of the U.S. Economy.

• Is the Services/Manufacturing divergence setting up to resemble 2016’s “Recession That Wasn’t”?

Initial Jobless Claims


C&I Lending


ISM Manufacturing & Services


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2013 2014 2015 2016 2017 2018 2019

Initial Jobless Claims

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2013 2014 2015 2016 2017 2018 2019

C&I Lending

464850525456586062

2013 2014 2015 2016 2017 2018 2019

ISM Manuf ISM Non-Manuf

P A G E 1 1

New “Canaries” Worth Watching?

• The IPO market has begun to underperform, replete with mispriced and scuttled deals.

• History (4Q2018, 1Q2016) says this does not necessarily need to be a concern, but memories of 2000 are renewed.

• On an even deeper level, memories of the 1980’s and 1990’s are resurfacing with the Fed’s Repo market/liquiditychallenges.

IPOs Not “Working” as of Late


Repo – Frequent Spikes, Esp. at the Turn


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Jan '19 Apr '19 Jul '19 Oct '19

FTSE Ren US IPO (lhs) S&P 500 (rhs)

1.6%

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2.2%

2.4%

2.6%

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3.2%

Oct '18 Jan '19 Apr '19 Jul '19 Oct '19

USD GC Overnight Repo Rate

P A G E 1 2

Ursa Majors and Ursa Minors

Ursa Majors and Ursa Minors


Start End Bear Market High to Low New High Mo to Recession/Date Date Length (Mo) Perf. Date New High Non-Recession9/16/1929 11/13/1929 1.9 -44.6% 9/22/1954 300.2 Recession4/10/1930 6/1/1932 25.7 -83.0% 12/9/1952 272.0 Recession9/7/1932 2/27/1933 5.7 -40.6% 5/26/1933 8.6 Recession7/18/1933 10/19/1933 3.0 -29.4% 10/22/1935 27.1 Non-Recession2/6/1934 3/14/1935 13.3 -31.8% 9/10/1935 19.1 Non-Recession3/10/1937 3/31/1938 12.7 -54.5% 2/5/1946 106.8 Recession10/25/1939 6/10/1940 7.5 -31.9% 7/10/1944 56.5 Non-Recession11/12/1940 4/28/1942 17.5 -34.2% 3/29/1943 28.6 Non-Recession5/29/1946 10/9/1946 4.3 -26.6% 6/9/1950 48.3 Non-Recession6/15/1948 6/13/1949 11.9 -20.6% 1/9/1950 18.8 Recession7/15/1957 10/22/1957 3.2 -20.7% 9/16/1958 14.0 Recession12/12/1961 6/26/1962 6.5 -28.0% 9/3/1963 20.7 Non-Recession2/9/1966 10/7/1966 7.9 -22.2% 5/4/1967 14.8 Non-Recession11/29/1968 5/26/1970 17.9 -36.1% 3/6/1972 39.2 Recession1/11/1973 10/3/1974 20.7 -48.2% 7/17/1980 90.2 Recession11/28/1980 8/9/1982 20.4 -27.3% 11/3/1982 23.2 Recession8/25/1987 10/20/1987 1.8 -35.9% 7/26/1989 23.0 Non-Recession7/16/1990 10/11/1990 2.8 -20.4% 2/12/1991 6.9 Recession7/20/1998 10/8/1998 2.6 -22.4% 11/24/1998 4.1 Non-Recession3/24/2000 10/10/2002 30.5 -50.5% 7/13/2007 87.6 Recession10/11/2007 3/6/2009 16.8 -57.7% 4/10/2013 66.0 Recession5/2/2011 10/4/2011 5.1 -21.6% 2/27/2012 9.8 Non-Recession9/21/2018 12/26/2018 3.2 -20.2% 4/29/2019 7.3 Non-RecessionAverage 10.6 -35.1% 56.2Recession 14.2 -42.0% 86.1Non-Recession 7.2 -29.2% 26.9

• The economic “Canaries” sing, “No Recession”. Not yet. BTIG does not forecast a recession prior to Election 2020.

• Non-Recessionary Bear markets over the past century have lasted 7 months and averaged -29% downside.

• 4Q2018’s “technical bear” hit the lower end of past Ursa Minors’ duration and drawdown range. Do new highs meanthe worst is behind us? Perhaps only politicians know for sure with the 2020 Election in sight.

P A G E 1 3

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2017 2018 2019

S&P 500

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1990 1995 2000 2005 2010 2015

S&P 500 200WMA

Will the Thin Blue Line Hold in 2020?


The Market’s Megaphone


Minding the Megaphone

• The S&P 500 “V” rebounded from its Bull market support line from the 2009 lows, also along the psychologicallyimportant 200-Week Moving Average.

• Can the rally that began on Boxing Day 2018 extend into 4Q019 (with memories of last year’s Fall Fall still fresh) andinto 2020, a Presidential Election year?

• More volatility, both upside and downside, has resulted in a “broadening pattern” or “Megaphone”. While this canmark the end of a major trend, higher lows could keep the old Bull young.

P A G E 1 4

Inflation, Fed, Bonds – Something’s Gotta Give

Led Weight (Irrational?) Zeppelin


Does the Bull Die Without Reflation?


• The Fed, fixed on its 2% inflation target, lifted stocks and expectations together in 1H2019. The Trade War has dousedthese expectations – a threat to the equity rally.

• The Fed cut on 7/31 and again on 9/18 to little effect. Is it all about the Trade War?

• And the 10-Year Yield, suppressed by global growth fears and European rate weakness , is a battleground for whethergrowth will continue and Fed policy will be effective.

• Can Central Banks reflate? Are ultralow bond yields “The Biggest Bubble Ever”? Something’s Gotta Give.

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Jan '18 Apr '18 Jul '18 Oct '18 Jan '19 Apr '19 Jul '19 Oct '19

US 5 Yr Breakeven (lhs) S&P 500 (rhs)

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US 10 Yr Yield (lhs) Germany 10 Yr Yield (rhs)

P A G E 1 5

S&P 500 Valuation, From Wall to Wall


VIX and the Six (Year Cycle)


High Stakes in The Year of Living Dangerously

• While markets have seen upside in 2019 with expectations reset and the Fed supportive, baggage carried from 2018 –Trade War, U.S. political tension, Brexit uncertainty, to name a few – will continue to pose risks.

• The Trade War is the most worrisome. Should the situation further deteriorate into an “Economic Cold War” multiplesmay revisit their lower levels seen prior to 1990, during the Cold War. Fix China, and Europe still needs solving.

• Talk of 70% top tax rates, anti-business sentiment rising, “Socialism” and Impeachment in 2019’s lexicon, multiplecompression threatens from within the U.S. And Modern Monetary Theory (MMT)? A recipe for a weaker U.S. Dollar,Higher Interest Rates and lower valuations. It is Never “Different This Time”.

• These risks should continue to underpin volatility, which ebbs and flows but shifted cyclically higher in February 2018.

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S&P 500 Trailing 12M P/E Period Average

P A G E 1 6

RISK and REWARD in The Year of Living Dangerously

P A G E 1 7

Another “Year of Living Dangerously”


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S&P 500 from 6/1/1990 S&P 500 from 6/1/1998S&P 500 from 8/1/2018

Options Market Memos (Part 1)

S&P 500 Average 1-Year Volatility


• The Fed stopped (hiking), abruptly pivoted, then reversed (to easing) on 7/31 and again on 9/18, as politicalindependence is questioned.

• Growth has been slowing (especially in China and Europe), political risks are rising. A perfect recipe for highervolatility.

• Maybe we shouldn’t be surprised by 2018-19’s new high/Bear Market/new high in the span of one year (ok, 7 months!)– it happened in 1998 and in 1990-91 as well.

• Higher volatility is a frequent occurrence in the latter stages of Bull markets.

Avg 1yr Volatility

StartEnd/Current

1yr Prior toMarket Top

2yrs Prior to

Market Top6/1/1932 3/10/1937 17.5 18.23/31/1938 11/9/1938 35.3 22.44/11/1939 10/25/1939 26.7 36.24/28/1942 5/29/1946 14.8 10.46/13/1949 8/2/1956 13.2 11.610/22/1957 12/12/1961 8.1 9.86/26/1962 2/9/1966 6.3 5.210/7/1966 11/29/1968 9.8 8.45/26/1970 1/11/1973 8.0 9.610/3/1974 9/21/1976 12.2 19.53/6/1978 1/6/1981 16.1 11.18/12/1982 8/25/1987 15.2 12.812/4/1987 7/16/1990 13.6 12.310/11/1990 3/24/2000 18.9 20.010/9/2002 10/9/2007 12.1 10.73/9/2009Avg. (ex current): 15.2 14.5

P A G E 1 8

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S&P 500 (lhs) VIX (rhs)


Sizing Up Past Summer Slides


VIX Floor, S&P 500 Ceiling – Still a Very Fine House


• Those who cannot remember the past are condemned to repeat it – George Santayana

• Since volatility pivoted higher at the end of 2017, the VIX has consistently held its floor while the S&P 500 cannot breakthrough the ceiling.

• Complacency (VIX sub 14) has had a price – flat to down near-term returns. The current “Seasonal Slide” is nodifferent.

• Will the “Summer Slide” which began at the 7/26 high continue to range trade, or are new lows in store? Washingtonand Beijing hold the keys. The rest of the world watches, nervously.

Jan-Aug Max Date

Jan-AugMax

FollowingMin Date

Mo. toMin

FollowingMin

% Chgto Min

New HighDate

Mo. toNew Highfrom Prev.

7/17/1985 196.07 9/26/1985 2.3 179.45 -8.5% 11/11/1985 3.88/27/1986 254.24 9/29/1986 1.1 228.08 -10.3% 12/3/1986 3.28/25/1987 337.89 10/20/1987 1.8 216.46 -35.9% 7/26/1989 23.08/27/1989 352.73 1/30/1990 5.1 319.83 -9.3% 5/14/1990 8.6

7/16/1990 369.78 10/11/1990 2.8 294.51 -20.4% 2/12/1991 6.98/29/1991 396.82 12/2/1991 3.1 371.36 -6.4% 12/23/1991 3.8

8/4/1992 425.14 10/5/1992 2.0 396.8 -6.7% 11/20/1992 3.58/7/1997 964.17 10/28/1997 2.7 855.27 -11.3% 11/21/1997 3.5

7/20/1998 1,190.58 10/8/1998 2.6 923.32 -22.4% 11/24/1998 4.17/19/1999 1,420.14 10/18/1999 3.0 1233.66 -13.1% 11/16/1999 3.97/14/2003 1,015.41 8/6/2003 0.7 960.84 -5.4% 9/2/2003 1.6

8/3/2005 1,245.86 10/13/2005 2.3 1168.2 -6.2% 11/18/2005 3.57/16/2007 1,555.90 8/16/2007 1.0 1370.6 -11.9% 10/5/2007 2.68/21/2012 1,426.68 11/18/2012 2.9 1343.35 -5.8% 12/11/2012 3.78/26/2014 2,005.04 10/15/2014 1.6 1820.66 -9.2% 10/31/2014 2.28/15/2016 2,193.81 11/6/2016 2.7 2083.79 -5.0% 11/21/2016 3.28/29/2018 2,916.50 12/26/2018 3.9 2346.58 -19.5% 4/17/2019 7.6

All Avg. 2.5 -12.2% 5.2Same Yr New High Avg. 2.3 -10.1% 3.6

P A G E 1 9


• Volatility itself remains volatile in both Equities and Fixed Income. Where are the opportunities?

• While U.S. equities remain rangebound, S&P 500 Skew 18 months out continued to steepen (expensive downside putsrelative to upside calls) as investor caution into and through Election 2020 is elevated. Can this degree of caution -skew often being a contrary indicator at extremes – help drive market upside if outcomes on a variety of geopoliticalissues between now and then prove more favorable than expected?

• The Euro has been remarkably calm this year, but the upcoming 10/31 Brexit deadline could reawaken volatility fromhistoric lows. Other catalysts include a growing embrace of stimulus. The ECB announced it will resume QE, and willGermany follow the Netherlands’ lead for more aggressive fiscal stimulus in addition to its budget-neutral climateinitiative?

SPX 18-Month 90-110% Skew, % Vol


EURUSD 1M ATM Implied Vol


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SPX 18M 90%-110% Impl. Vol. Skew

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P A G E 2 0

What Keeps Us Up at Night

Consumer Confidence with 12 & 36 Mo. Moving Averages


10/2 Yield Curve – The Chilling Effect of “Absolute Zero”

Recessions ShadedSource: Bloomberg, BTIG

• With growth heading lower in the U.S. and elsewhere, and the 10/2 Yield Curve presciently predicting past recessions,the Fed is listening – and cutting – very carefully.

• With 10/2 at “Absolute Zero”, will the curve steepen, can recession be averted and are ultralow bond yields here tostay?

• Is the White House now as sensitive about the 10/2 Yield Curve as it is about the level of the Dow Jones IndustrialAverage with the 2020 Election looming?

• Near-record Consumer Confidence has begun to plateau, fatigued by reversal-prone trade rhetoric. Brokenconfidence has accompanied every recession since 1970, and the importance of reaching a trade deal cannot beunderstated.

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US 10-2Yr Yield Curve

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Conf. Board Cons. Confidence 12MMA 36MMA

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S&P 500 Bbg Story Keyword Search: Trade War

Trade Tension Flares Fan Market Flames


Words Matter – More & More

Political Risk Rising with Impeachment?


• When the Trade War is making headlines, stocks decline.

• Will the “Seasonal Slide” bottom over a “Trade Truce” or do politicians continue to push toward 1987 style policy andasset market brinkmanship?

• The U.S. economic data remains reasonably strong; the consumer and his/her confidence is paramount.

• Impeachment proceedings against President Trump add a new facet to already contentious U.S. politics. Do they riskweighing on consumer and investor sentiment?

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Bbg Story Keyword Seard: Impeachment

P A G E 2 2

The Fed: Wishes, Wars & Politics

MMT – Been There, Done That


Above 2%? Panacea or Pandora’s Box?


• The Fed wants to manage risk, desires inflation, needs political independence.

• Two cuts with little effect as Repo woes and Manufacturing woes take center stage.

• Is there more beyond repo “liquidity management”? Will that be viewed as QE? Is 2% inflation something really to bedesired? What can the Fed do to counteract Trade Wars?

• MMT is likely good for Germany, but ... MMT “light” has existed since Reagan. Institutionalization of MMT beckonsthe 1970s.

• Economic Nationalism, “Green New Deal”, all have the potential for stoking inflation.

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US Debt Outstanding (lhs) US Dollar Index (rhs)

P A G E 2 3

Debunking the Myth that Gridlock Is Good for Stocks

Midterm Results Under Unified Government


• In the Rearview: The longest government shutdown ever, Mueller, Budget and the Debt Ceiling no longer an issue.Yet acrimony remains high as the flames of Impeachment are fanned – 2019’s rally is in spite of, not because ofgovernment. The statistics bear it out.

• Gridlock in general underperforms Unified government (5.6% vs. 9.0% annual return, 1928-2017), but the range ofoutcomes is wide, particularly when Unified becomes Divided government, as is now the case into the next Election.

• Trade Wars, investigations and intensifying social class frictions promise to keep politics a central issue for stocks atleast until November 2020.

Midterm Control Control Next Yr.Date Pre-Midterm Post-Midterm Return 11/4/1930 Republicans Divided -47.1%11/6/1934 Democrats Democrats 41.4%11/8/1938 Democrats Democrats -5.2%11/3/1942 Democrats Democrats 19.4%11/5/1946 Democrats Divided 0.0%11/7/1950 Democrats Democrats 16.3%11/2/1954 Republicans Divided 26.4%11/6/1962 Democrats Democrats 18.9%11/8/1966 Democrats Democrats 20.1%11/7/1978 Democrats Democrats 12.3%11/8/1994 Democrats Divided 34.1%11/7/2006 Republicans Divided 3.5%11/2/2010 Democrats Divided 0.0%

P A G E 2 4

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China Holdings of US Treasuries

China Holdings of U.S. Treasuries


Trade WarsUpending the World Order Is Messy Business

It’s a Wonderful Life


• Global trade, the greatest engine of prosperity in human history as the last 40 years have shown, is being redrawn.

• Part of 4Q2018’s U.S. market selloff and 2019’s May, August and October volatility spikes is China’s weaknessinevitably washing ashore. The world can ill afford a “hard landing” in China. Especially if it means China selling U.S.Treasuries to “cushion the downside”.

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P A G E 2 5

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USD/CNY

British Pound – Plaza Accord Low in Sight


FX – The New Geopolitical Battleground

Chinese Yuan – 8?


• After months in hibernation, FX returns to center stage. China is a “currency manipulator” – Currency War on! TheU.S. Dollar moves toward multi-year highs.

• And Boris Johnson in the PM post in the UK – Outcomes less clear than ever.

• Could GBP/USD, EUR/USD and EUR/GBP all go to 1.00? Not if Washington can help it – at all.

• Does Treasury Secretary Mnuchin have his finger on the “Sell Dollars” Intervention Button?

1.00

1.20

1.40

1.60

1.80

2.00

2.20

2.40

2.60

1975 1980 1985 1990 1995 2000 2005 2010 2015

GBP/USD

P A G E 2 6

Tech Bubble Narrowing Leadership


Bull Market Over for Some Stocks?


• Percentage of stocks above their 200DMA’s, a market breadth indicator, fell sharply during 2018’s February-Marchselloff, plunged in 4Q2018 and remains weak in 2019 despite the S&P 500 new highs. Leadership tends to narrowin late stage Bull markets – as seen leading up to the 2000 Tech Bubble and 2007 GFC tops. Many stocks havealready made multi-year tops.

• Sector and stock selection become increasingly important – Alpha over Beta. Active over Passive? Buy Low, SellHigh?

• Are Bond Proxies (Utilities, Staples, Software) “Onward Ever Upward”? Will Value ever cease being a “trap”?

Not All Boats to Be Lifted?

20

25

30

35

40

45

50

55

60

65

Jan '99 Apr '99 Jul '99 Oct '99 Jan '00

% NYSE Stocks Above 200DMA

Pre-GFC Narrowing Leadership


20

30

40

50

60

70

80

90

Oct '06 Jan '07 Apr '07 Jul '07 Oct '07


0

10

20

30

40

50

60

70

80

2016 2017 2018 2019


P A G E 2 7

Growth vs. Value – Growth Spurt


Value and Growth, Correlation and Causation?• In 20 years, there have been two major trend changes between Value and Growth, March 2000 and May 2007.

• Multi-year Bear Markets commenced almost immediately (2000 – Tech Bubble Burst; 2007 – Financial CrisisBegins).

• “Mini turns” such as 3/2001, 10/2002, 3/2009, 9/2011 attributable to FX inflections and stock market bottoms.

• 2007 notable because of the “Quant Fund Quake”. In 2019-20,could a Trade War and an Election cycle tilt in favorof Value over Growth as FAANG comes under scrutiny? Could Passive become too Aggressive?

• Will a turn in the correlation between stocks and bonds (think pre-1998 as well as February 2018) cause a “FactorFlameout”?

• Does a reversal in ultralow long-dated global government bond yields, “The Biggest Bubble Ever”, cause Growthto underperform? Was September a “dress rehearsal” for further Value/Growth reversion?

0.6

0.8

1.0

1.2

1.4

1.6

1.8

1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019

Russell 1000 Growth/Value Ratio

P A G E 2 8

The Biggest Bubble Ever?


Greed First, Fear Later


Global Government Bonds: The Biggest Bubble Ever? (Part 1)

• Markets can stay irrational for longer than you can remain solvent – John Maynard Keynes

• Without “anchored expectations” of disinflation/deflation or outright societal chaos, how can the idea of a lenderpaying money to lend to a borrower make rational economic sense?

• Perhaps only the Index benchmarked funds or the passive algorithms know the answer?

• After a 30+ Year global bond bull market, are the buyers of German 10-Year Yields at -0.55%, Italy 10-Year at 0.90%,Austria 100-Year sub 1% or the U.S. 10-Year ($22T Debt, Election 2020 ahead) at 1.6% the same people who boughtDutch Tulips in 1637, Japanese stocks in 1989, or Dot.Com stocks in 2000?

10K

15K

20K

25K

30K

35K

40K

1986 1987 1988 1989 1990 1991 1992 1993

Nikkei 225

5T

7T

9T

11T

13T

15T

17T

19T

2017 2018 2019

Bbg Global Agg. Neg. Yielding Debt (MV)

P A G E 2 9

German 10-Year Yields vs. Breakevens – Extreme Divergence


Japanese 10-Year Yield



• That which cannot go on forever, won’t – Herbert Stein

• Eventually bubbles pop; Homebuilder stocks topped in 2005, House Prices in 2006, the Financial Crisis Stock top was10/2007.

• A catalyst is needed. On the positive side: Successful Central Bank reflation, an end to the Trade Wars, a smoothBrexit, or “The Golden Ticket” – German fiscal stimulus.

• Negative catalysts include further sales of U.S. Treasuries by China and the recognition of systemic sovereign risks(No deal Brexit?), particularly in Europe.

• Did August’s parabolic yield plunge and September’s sharp reversal pop the Bubble?

0.6%

0.7%

0.8%

0.9%

1.0%

1.1%

1.2%

1.3%

1.4%

1.5%

-0.8%

-0.6%

-0.4%

-0.2%

0.0%

0.2%

0.4%

0.6%

0.8%

Feb '18 May '18 Aug '18 Nov '18 Feb '19 May '19 Aug '19

Germany 10Yr Yield (lhs) Germany 10Yr Breakeven (rhs)

-0.35%

-0.30%

-0.25%

-0.20%

-0.15%

-0.10%

-0.05%

0.00%

0.05%

2019

Japan 10Yr Yld

P A G E 3 0

Treasury Yield Non-Confirmation

Normalized to 7/8/2016, U.S. 10-Year Yield all-time closing lowSource: Bloomberg, BTIG

Nasdaq Divergence Foreshadowed GFC Low

Normalized to 11/20/2008, Nasdaq GFC closing lowSource: Bloomberg, BTIG


• Technical analysis helps to put parameters around the irrational and the unsustainable.

• Extreme moves often end in notable divergences.

• Could the U.S. 10-Year Yield not trading below its 2016 low despite new 30-Year Yield lows in 2019 signal a changecoming?

• Nasdaq’s refusal to make a new low in March 2009 despite further S&P 500 weakness was a sign of reversal – the endof the GFC Bear Market.

-20%

0%

20%

40%

60%

80%

100%

Jul '08 Oct '08 Jan '09 Apr '09

Nasdaq 100 S&P 500

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

2014 2015 2016 2017 2018 2019

US 30Yr Yld US 10Yr Yld

P A G E 3 1

Other Markets – Buy Low, Sell High?

International Markets & S&P 500 Valuation Heat Maps

Data as of 10/1/2019Note: Annual numbers are the average month-end NTM P/E estimates for the corresponding year.1MSCI EAFE proxied with EFA. 2MSCI EM proxied with EEM.Source: Factset, BTIG

• Investors have soured on Europe, Japan, China and EM broadly.

• Could even the slightest daylight between Trump and Xi catalyze international equities?

• Could a “clean Brexit” and pumping ECB ignite the “biggest losers” – European Banks?

• Or is the chaos of a “no-deal Brexit” the entry for European equities investors have been waiting for?

• Japan, long sensitive to recovering U.S. growth, higher yields, and weaker FX looks attractive as the ultimate“cyclical” market.

S&P 500MSCI

EAFE 1STOXXEurope Nikkei

MSCIEM 2 S&P 500

MSCIEAFE 1

STOXXEurope Nikkei

MSCIEM 2

2000 22.3 -- 23.4 -- -- 2000 -- -- 1.1 -- --2001 20.2 -- 18.4 28.1 -- 2001 -- -- -1.9 7.9 --2002 17.5 13.9 15.6 30.3 -- 2002 -- -3.7 -2.0 12.8 --2003 16.3 11.9 12.9 21.2 11.6 2003 -- -4.4 -3.4 4.9 -4.72004 16.1 13.7 12.6 19.2 11.0 2004 -- -2.4 -3.5 3.1 -5.12005 14.8 13.3 12.5 18.7 10.6 2005 -- -1.5 -2.2 3.9 -4.12006 14.0 13.5 12.8 20.3 11.5 2006 -- -0.5 -1.2 6.3 -2.62007 14.4 13.2 13.1 18.4 13.2 2007 -- -1.3 -1.3 4.0 -1.22008 12.3 10.1 9.7 14.4 10.6 2008 -- -2.2 -2.6 2.1 -1.62009 13.5 13.2 11.6 31.0 13.0 2009 -- -0.2 -1.9 17.6 -0.52010 12.7 12.1 11.3 17.6 11.8 2010 -- -0.6 -1.4 5.0 -0.92011 12.0 10.7 10.0 13.7 10.3 2011 -- -1.3 -2.0 1.8 -1.62012 12.3 11.1 10.5 13.4 10.1 2012 -- -1.2 -1.8 1.1 -2.22013 13.8 13.1 12.7 17.3 10.4 2013 -- -0.8 -1.1 3.5 -3.42014 15.2 13.9 14.3 16.9 10.7 2014 -- -1.3 -0.9 1.7 -4.52015 16.2 15.2 15.4 17.9 11.5 2015 -- -1.1 -0.8 1.7 -4.72016 16.4 14.3 14.2 15.9 11.8 2016 -- -2.1 -2.2 -0.4 -4.62017 17.6 14.8 15.1 16.8 12.4 2017 -- -2.8 -2.5 -0.8 -5.22018 16.4 13.6 14.1 15.4 11.5 2018 -- -2.8 -2.4 -1.0 -4.9

Current 16.6 13.7 14.2 15.9 12.0 Current -- -2.9 -2.5 -0.7 -4.6Average 15.5 13.0 13.7 19.3 11.4 Average -- -1.8 -1.8 4.2 -3.2

P A G E 3 2

1,000

1,100

1,200

1,300

1,400

1,500

1,600

1,700

1,800

1,900

2,000

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Gold

Gold – Attractive Hedge in an Uncertain World?


60

70

80

90

100

110

120

130

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

US Dollar Index

U.S. Dollar – Something’s Gotta Give


Dollar Decision Due, $2,000/oz. Gold in 2020?

• Everyone wants a weak currency. Does President Trump tweet the loudest? Does the Fed have the mostammunition to ease?

• Gold, the barbarous relic, where speculators became net short in 2018 for the first time in a generation, couldeventually reclaim the all-time highs. After a great run in 1H2019, a bit of “digestion”, as the Bond Bubble “pops”,is in order. Yet in a world of geopolitical uncertainty, Trade, Currency and Fed Wars, the seeds of inflation beingplanted, and as an alternative for rational investors unwilling to pay borrowers for the right to lend, $2,000/oz. in2020 or post the U.S. Election, in 2021, is in sight.

• All That Glitters is not just stocks and bonds.

P A G E 3 3

0K

2K

4K

6K

8K

10K

12K

14K

16K

18K

20K

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Bitcoin

Bitcoin – Boom Bust, Boom Bust, Boom?


Nasdaq Volatility in the Reboot Era


Bitcoin – Yes, Bitcoin. Is this NASDAQ 2002?• Boom Bust, Boom Bust, Boom? – Bitcoin has crashed numerous times past. It is now largely ignored and volatility

has collapsed, similar to tech stocks in the early – mid 2000s.

• If Block Chain is indeed technologically important, could cryptocurrency in general and Bitcoin in particular, riseonce more? History seldom repeats but often rhymes.

• Bitcoin’s rise YTD has exceeded our expectations, but bodes well for the future. Similar to Gold, after a great runin 1H2019, a bit of “digestion”, as the Bond Bubble “pops”, is in order.

10%

20%

30%

40%

50%

60%

70%

2001 2002 2003 2004 2005 2006

Nasdaq 100 200D Realized Vol.

P A G E 3 4

BTIG Sector Recommendations – Focus on Value and Valuation

P A G E 3 5

Sector Recommendations Overview

• Preferences driven by sector specific as well as broader macro dynamics – selectivity is crucial.

Overweight Neutral Underweight

Energy Comm. Services Materials Consumer Discretionary

Financials Industrials Real Estate Consumer Staples

Health Care Info Tech Utilities

P A G E 3 6

Financials Prefer Curve Steepening


Overweight

Energy, Financials, & Health Care

Energy• Sector at historical low S&P 500 weighting• Oil Futures curve in backwardation• Accommodative Fed anchors inflation expectations• Producers’ commitment to cuts to assure markets

(despite U.S. pressure)?

Financials• “Biggest Bubble Ever” popped, historically low

(negative) yields headed higher?• Accommodative Fed encourages yield curve

steepening• Price-to-Book valuation inexpensive relative to

historical average

Health Care• Favorable demographic trends• Attractive absolute, relative valuations• Monitoring U.S. Health Care debate

WTI Crude vs. U.S Crude Oil Inventory


Health Care – Affordable?


300K

400K

500K20

70

120

2014 2015 2016 2017 2018 2019

WTI Crude Oil (lhs) US Crude Oil Inventory (rhs, inv.)

-200

20406080

0.148 0.153 0.158 0.163 0.168 0.173 0.178US

10-2

Yr Y

ield

Cur

ve

S&P 500 Financials/S&P 500

-5

0

5

10

15

1995 2000 2005 2010 2015

Health Care - S&P 500 NTM P/E Spread

P A G E 3 7

Consumer Confidence on the Cusp?


Underweight

Consumer Discretionary, Consumer Staples, & Utilities

Utilities• Absolute, relative valuations at historical highs• “Biggest Bubble Ever” popped, historically low

(negative) yields headed higher?• Regulatory headwinds from environmental and

pricing concerns?

Consumer Discretionary• Absolute, relative valuations elevated, both highest

among sectors• Multiples at risk if volatility returns, as seen in Q4

2018? Trade War casualty?• Retail Sales remain slower as consumer sentiment

has plateaued

Consumer Staples• Absolute, relative valuations elevated• “Biggest Bubble Ever” popped, historically low

(negative) yields headed higher?• Input costs pressures, result of Trade War

Utilities & 10-Year Yields


Consumer Staples & 10-Year Yields


1%2%2%3%3%4%

0.18 0.20 0.22 0.24 0.26 0.28U

S 10

Yr Y

ield

S&P 500 Cons. Stap./S&P 500

1%2%2%3%3%4%

0.085 0.095 0.105 0.115 0.125

US

10 Y

r Yie

ld

S&P 500 Utilities/S&P 500

80

90

100

110

120

130

140

2015 2016 2017 2018 2019

Conf. Board Cons. Confidence

P A G E 3 8

Neutral

Communication Services, Industrials, Materials, Real Estate, & Technology

Industrials• Absolute, relative valuations below historical

averages• On the Trade War front line• Dollar headwind to abate with accommodative

Fed?• Manufacturing slowdown – inventory-stocking

pause or something more?

Manufacturing Gears Slipping


Communication Services Valuations Below Peaks

Avg. month-end NTM P/ESource: Factset, BTIG

Communication Services• Valuation, while rising, below dot-com levels of

former Tech, CD, and Telecom sectors• Long-term Growth vs. Value trend intact despite

recent pressure• Could increased regulatory scrutiny dampen

investor sentiment?

Information Technology• Valuations, while rising, still below Dot.Com and

pre-GFC levels• Software relatively expensive within Tech• Long-term Growth vs. Value trend intact despite

recent pressure• Could growing regulatory scrutiny dampen investor

sentiment?

Technology Is the Bull Market


0x

10x

20x

30x

40x

50x

Comm. Svcs.Current

Cons. Disc.High (1999)

Info. TechHigh (2000)

Telecom High(1999)

-5.0%

0.0%

5.0%

10.0%

45

50

55

60

65

2015 2016 2017 2018 2019

ISM Manuf (lhs) Indu Prod YoY (rhs)

0%

500%

1000%

1500%

2000%

1990 1995 2000 2005 2010 2015

S&P 500 Info TechS&P 500

P A G E 3 9

Neutral (Cont’d)

Communication Services, Industrials, Materials, Real Estate, & Technology

Real Estate• Absolute valuation at historical high, relative

valuation elevated• Continued home and land price improvement• “Biggest Bubble Ever” popped, historically low

(negative) yields headed higher?

Real Estate & 10 Year Yields


Commodities & Materials – Shell Shocked


Materials• Absolute, relative valuations elevated• On the Trade War front line• Accommodative Fed anchors inflation expectations• Dollar headwind to abate with accommodative

Fed? 75

80

85

90

95

100

0.115

0.125

0.135

0.145

0.155

0.165

2015 2016 2017 2018 2019

Materials/S&P 500 (lhs)Bloomberg Commodities ex-Energy (rhs)

1%2%2%3%3%4%

0.065 0.070 0.075 0.080 0.085 0.090 0.095 0.100

US

10 Y

r Yie

ld

S&P 500 Real Estate/S&P 500

P A G E 4 0

S&P 500 and Sector, S&P 600 Valuation Heat Map

Data as of 10/1/2019

Note: Annual numbers are the average month-end NTM P/E estimates for the corresponding year. 1Financials numbers are Price/Book, historical numbers include Real Estate. 2Real Estate numbers are Price/Funds From OperationsSource: Factset, BTIG

S&P 500ConsDisc

ConsStap Energy

HealthCare Industrials Materials Tech

Comm.Services Utilities Financials 1

Real Estate 2

S&P 600Small Cap

1996 14.3 14.2 16.9 15.5 18.8 15.0 12.2 14.6 14.4 12.1 1.6 -- --1997 16.8 15.5 20.1 17.6 22.3 16.9 14.4 17.7 16.5 12.4 2.2 -- 14.31998 20.0 20.3 22.2 20.3 28.3 17.8 14.7 25.0 21.5 15.0 2.7 -- 16.91999 23.0 23.8 20.9 25.3 27.6 20.3 16.2 36.3 27.1 14.5 2.8 -- 15.92000 22.1 20.7 17.1 18.3 26.8 20.6 9.5 40.6 23.3 15.1 2.7 -- 15.82001 20.2 23.5 18.0 15.2 25.2 20.0 13.7 34.7 23.6 13.3 2.5 -- 15.92002 17.4 20.1 16.5 18.1 20.1 17.6 15.0 30.4 16.1 10.1 2.1 10.7 16.72003 16.3 18.1 15.9 14.7 17.8 17.5 15.4 26.8 14.9 11.7 1.9 11.0 16.02004 16.0 17.0 17.1 14.2 17.5 18.2 12.7 22.5 17.9 13.5 1.9 13.2 16.82005 14.7 16.4 16.6 11.6 17.2 16.3 11.3 19.2 14.7 14.9 1.7 15.1 16.02006 14.1 16.0 16.7 9.8 16.6 15.4 10.5 18.4 14.1 14.1 1.8 17.6 15.82007 14.4 16.9 17.0 11.3 15.8 15.5 11.5 19.3 15.1 15.7 1.7 17.6 16.42008 12.4 15.3 14.8 9.5 12.4 12.4 10.8 14.6 11.9 13.5 1.1 12.7 14.32009 13.5 19.6 12.7 13.5 10.7 13.4 23.4 15.0 13.0 11.1 0.9 11.3 15.82010 12.5 14.0 13.4 11.2 10.8 14.5 12.7 12.8 14.3 11.8 1.0 16.6 15.82011 12.0 13.9 14.0 10.9 11.2 13.2 10.8 11.9 16.2 13.2 0.9 17.5 15.32012 12.3 14.6 15.2 10.7 12.1 12.5 11.8 11.8 17.8 14.3 0.9 18.1 15.02013 13.9 16.7 16.5 12.2 14.8 14.5 13.9 12.8 15.8 14.9 1.1 18.0 17.12014 15.2 17.6 17.7 14.0 16.5 15.8 15.5 14.9 13.5 15.7 1.3 18.0 17.92015 16.2 18.4 19.3 26.4 16.7 15.4 14.5 15.5 12.9 15.7 1.3 18.7 18.22016 16.5 17.4 20.1 56.5 14.9 16.1 15.9 16.2 13.6 17.3 1.2 18.6 18.02017 17.7 19.6 19.9 28.0 16.2 18.1 18.1 18.4 13.1 17.9 1.3 18.2 19.62018 16.3 20.3 17.6 17.6 15.7 16.2 15.5 17.8 12.7 16.4 1.4 17.5 17.1

Current 16.6 21.0 19.8 15.7 14.5 15.6 17.0 19.3 17.3 20.1 1.3 20.0 16.7Average 16.0 17.8 17.2 17.5 17.7 16.2 13.9 20.3 16.3 14.1 1.7 15.9 16.4

P A G E 4 1

Summary

3,000 year-end 2019 price target

Overweight: Energy, Financials, Health Care

Underweight: Consumer Discretionary, Consumer Staples, Utilities

Late stage cyclicality: Steeper yield curve, higher stocks and volatility

P A G E 4 2

APPENDIX A: Investment Risk

The past does not determine the future, though it’s certainly an influencing factor. While investment cycles do reoccur, sodoes fundamental change.

The primary risk we identify of the strategies discussed in this analysis is mean reversion, of both volatility and leaders versuslaggards.

Exogenous factors capable of disrupting our analysis can always intervene. Extreme events such as war, natural disasters andcataclysmic accidents, as well as far less dramatic but still unanticipated events are always capable of invalidating, or at leastsubstantially distorting the time framework of any investment strategy based on mean reversion. As these risks, which mayoccur alone or in combination, cannot by definition ever be properly accounted for in our view, we highlight them here.

In the case of volatility-reliant strategies, the risk is actually the lack of any material change, a no surprises, steady-state‘more of the same’ kind of financial environment, in which the market shrugs off potentially destabilizing risks andopportunities, seemingly no matter how large they may grow on the horizon.

In the case of low volatility-reliant strategies, the risk is that volatility is higher than anticipated in either direction, resultingin either an actual loss or diminished profit vs. a ‘do nothing’ approach.

10/14/2019

P A G E 4 3

APPENDIX B: Analyst Certification and Other Important Disclosures

Analyst CertificationI, Julian Emanuel, hereby certify that the views about the companies and securities discussed in this report are accurately expressed and that I have not received and will not receive direct or indirect compensation in exchange for expressing specific recommendations or views in this report.I, Michael Chu, hereby certify that the views about the companies and securities discussed in this report are accurately expressed and that I have not received and will not receive direct or indirect compensation in exchange for expressing specific recommendations or views in this report.

Regulatory DisclosuresRatings DefinitionsBTIG LLC’s (“BTIG”) ratings, effective June 12, 2017, are defined as follows: BTIG LLC’s (“BTIG”) ratings, effective June 12, 2017, are defined as follows: BUY – A security which is expected to produce a positive total return of 15% or greater over the 12 months following the

recommendation. The BUY rating may be maintained as long as it is deemed appropriate, notwithstanding price fluctuations that would cause the target to fall outside of the 15% return.

SELL – A security which is expected to produce a negative total return of 15% or greater over the next 12 months following the recommendation. The SELL rating may be maintained as long as it is deemed appropriate, notwithstanding price fluctuations that would cause the target to fall outside of the 15% return.

NEUTRAL – A security which is not expected to appreciate or depreciate meaningfully over the next 12 months. NOT RATED – A security which is not rated or covered by BTIG. UNDER REVIEW – Effective immediately, coverage of the following securities is Under Review. Ratings, price targets,

disclosures, and estimates for the companies listed below are suspended and should no longer be relied upon.

10/14/2019

P A G E 4 4

Distribution of Ratings and Investment Banking Clients BTIG must disclose in each research report the percentage of all securities rated by the member to which the member would assign a “buy”, “neutral” or “sell” rating. The said ratings are updated on a quarterly basis. BTIG must also disclose the percentage of subject companies within each of these three categories for whom the member has provided investment banking services within the previous twelve months. Stocks under coverage as of the end of the most recent calendar quarter (September 30, 2019): 299

Distribution of BTIG’s Research Recommendations (as of September 30, 2019): BUY: 65.6%; NEUTRAL: 33.1%; SELL: 1.3%

Distribution of BTIG’s Investment Banking Services (as of September 30, 2019): BUY: 28.6%; NEUTRAL: 12.1%; SELL: 0.0%

For purposes of FINRA ratings distribution rules, BTIG’s stock ratings of Buy, Neutral and Sell fall into Buy, Hold and Sell categories, respectively.

Equity and Derivatives Strategy DisclosureThis report is a product of the BTIG Research Department's Equity and Derivatives Strategy team. Views expressed may differ from the views of the BTIG research analysts covering the stocks and/or sectors mentioned in this report. Such analysis and/or strategies may be directionally counter to another BTIG LLC analysts’ published rating/price target for the stock. Anysuch, this analysis is distinct from and does not affect the BTIG LLC analyst’s fundamental equity rating for such stocks, whichreflects a stock’s expected return as discussed in BTIG LLC’s “Analyst Stock Ratings” disclosures. This report may discuss companies not currently covered by BTIG LLC.

P A G E 4 5

Equity and Derivatives Strategy Disclosure (continued)Structured securities, options and other complex instruments discussed in this report may involve a high degree of risk and thus may be appropriate investments only for sophisticated investors who are capable of understanding and assuming the risks involved. Because of the high degree of emphasis on tax considerations to many option transactions, the investor considering options should consult with his/her tax advisor as to how taxes affect the outcome of contemplated option transactions. Please refer to the additional information in the “Options Statement and Risk Disclosure” section located immediately below.

Options Statement and Risk DisclosureOptions involve risk and are not suitable for all investors. There is no guarantee that the strategies promoted will accomplish the stated objectives. Options trading is considered speculative and it is possible to lose a portion of, all of your initialinvestment, or funds in excess of the principal invested. Prior to buying or selling an option, clients must read a copy of Characteristics and Risks of Standardized Options (ODD) http://www.theocc.com/about/publications/character-risks.jsp. Copies of the ODD are also available from BTIG, LLC, available at [email protected]. Because of the importance of tax considerations to all options transactions, investors considering options should consult with a tax advisor as to how taxes affect the outcome of contemplated options transactions. Transaction costs may be significant in option strategies that call for multiple purchase and sales of options such as spreads. Supporting documentation will be supplied upon request; please contact your BTIG Salesperson for further information.

Disclosures in Research Reports Covering Six or More CompaniesAll current required disclosures can be obtained by contacting BTIG at 825 Third Avenue, 6th Floor, New York, NY 10022 or on our website at http://www.btigresearch.com

Other DisclosuresAdditional Information Available Upon Request

Prices of the most recent market close unless otherwise specified.

10/14/2019

http://www.theocc.com/about/publications/character-risks.jsp

mailto:[email protected]

http://www.btigresearch.com/

P A G E 4 6

General DisclosuresResearch reports produced by BTIG LLC (“BTIG”) are published for and intended to be distributed solely to BTIG institutional and corporate clients. Recipients of BTIG reports will not be considered clients of BTIG solely because they may have received such BTIG report.

To the extent recipient accesses BTIG research, whether on a BTIG research website or through a third-party platform, BTIG is able to search, filter, download and review information on the readership of BTIG’s research, including the specific researchconsumed and the name, company name, email address and, in certain circumstances, the location of the individual who accessed the research (the “Readership Information”). Recipient consents to BTIG’s receipt of the Readership Information, including receipt of that information from a third party.The research analyst(s) responsible for the preparation of this report receives compensation based upon a variety of factors,including the quality and accuracy of research, internal/client feedback, and overall Firm revenues.

BTIG reports are based on public information and BTIG considers the same to be reliable, comprehensive information, but makes no representation or warranty that the reports are accurate or complete. BTIG opinions and information provided in this report are as of the date of the report and may change without notice. An issuer may be classified as “Under Review” or “Research Restricted”. In these cases, investors should consider any previous investment recommendation and/or rating to a subject company/issuer to no longer be current and should not be relied upon nor considered a solicitation.

This research report is not an offer to buy or sell or solicitation of an offer to buy or sell any security in any jurisdiction where such an offer or solicitation would be illegal. This research report was not drafted specifically for any particular individual or entity and is not a personal recommendation to participate in any particular trading strategy or transaction. Any recipient of this research report should obtain independent advice specific to their personal circumstances before undertaking any investment activity and must make their own independent evaluation of any securities or financial instruments.

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BTIG Equity & Derivatives Strategy · 10/1/2019 · BTIG Equity & Derivatives Strategy. The Year of Living Dangerously. October 2019. Please Read: Important disclosures and analysts’