l re ery 1 - doubleline.com · to cut interest rates more than once this year, notwithstanding their oft-stated expectation that policy rates will remain steady. 5-30 year yields

Monthly Market CommentaryJanuary 2020

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OverviewThe month of January was a tale of two halves as risk assets generally maintained their positive momentum from 2019 into the start of the year, shaking off geopolitical issues between the U.S. and Iran. Risk assets were aided by the signing of the phase one trade deal on January 15 but the optimism faded as uncertainty stemming from the Chinese coronavirus outbreak worried market participants. By the end of January, the virus had claimed 259 lives and the number of confirmed cases worldwide had grown exponentially to approximately 10,000. The initial death toll pales in comparison to the severe acute respiratory syndrome (SARS) virus that killed more than 770 people worldwide in 2002 and 2003; however, memories of that outbreak gave investors pause as January came to a close. Commodities bore the brunt of the sell-off as millions of people in China have been banned from conducting nonessential travel. Both West Texas Intermediate (WTI) Crude oil and Copper experienced significant price depreciation declining in an unprecedented 13 straight trading sessions into month-end. As a result, copper’s falling price shifted the copper-gold ratio. This ratio is watched closely by DoubleLine as an indication of the direction of the 10-year U.S. Treasury (UST) yield. This ratio declined with Copper prices falling and Gold prices rising, signaling a lower yield on the 10-year UST note. (Figure 1)

Yields rallied across most tenors of the UST curve with the 10-year note yield falling more than 40 basis points (bps) during the month. Longer-dated USTs fell more sharply than shorter dated USTs, flattening the curve as the spread between the yield of the 10-year note dipped below the interest rate on the 3-month Treasury bill. This inversion occurred two days after Federal Reserve (Fed) Chairman Jerome Powell held his press conference on January 29. Chairman Powell announced the Fed Funds Rate would remain unchanged at 1.50% - 1.75%. Market participants largely anticipated the decision from the Federal Open Market Committee (FOMC) to keep the target range unchanged but expectations for future rate cuts increased as measured by Bloomberg’s World Interest Rate Probability function. At the start of the new decade, market participants expected less than one rate cut for the entirety of 2020; by month-end, market participants expected two 25 bps cuts in the Fed Funds Rate for 2020, signaling that monetary conditions are too tight. The FOMC’s focus remains on inflation that sits below their “two percent symmetric objective”1 as measured by the Core Personal Consumption Expenditure at 1.6%, as of January 31.

Figure 1. Source: Bloomberg, DoubleLine

1 Jerome Powell’s Press Conference, January 29, 2020

Copper/Gold Ratio versus UST 10-year Yield | August 31, 2015 - February 10, 2020

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Overview (cont’d)

U.S. gross domestic product (GDP) grew 2.3% for the 2019 calendar year, after rising at a seasonally and inflation-adjusted annual rate of 2.1% in the fourth quarter. The 2.3% year-over-year (YoY) advance marked the slowest pace of annual growth since 2016, albeit in-line with the 10-year average pace of 2.2%. (Figure 2) The U.S. unemployment rate remained at a multi-decade low of 3.5% in December, while nonfarm payroll employment added 145,000 jobs in December, bringing the 2019 total to 2.3 million jobs added. Wage growth continued at a steady rate of 3.7% YoY. The U.S. housing market continued to benefit from falling interest rates, as existing home sales were up 10.8% YoY, recovering from a 10.23% decline in 2018, while new home sales were up 10.4% YoY, up from 0.7% in 2018. Headwinds to the U.S. economy remain within the manufacturing sector, as trade disputes between the U.S. and China, and Boeing production issues, continue to constrain the U.S. Institute for Supply Management Purchasing Managers Index (PMI). The U.S. PMI remained under 50 for the fifth consecutive month in December, falling -0.4% month-over-month (MoM), and ending 2019 at 47.2. The Conference Board’s Leading Economic Indicators (LEI) continued its downtrend falling to 0.1% YoY in December, marking its lowest reading in the last 10 years.

U.S. Government Securities• The Bloomberg Barclays U.S. Treasury Index gained +2.44% in

January, its biggest monthly advance since last August.

• After economic sentiment improved in December, downside concerns returned in January and were exacerbated by the coronavirus outbreak in China. The world’s second largest

economy is expected to slow materially in the first quarter. It is unclear the extent to which China’s slowdown will impact the U.S. and the broader global economy. The 10-year Treasury yield fell over 40 bps during the period as investors scrambled for safety.

• Short-term yields out to 6-month continued to hold steady; longer tenors saw bigger adjustments. 1-3 year yields were repriced lower as market participants started to think a slower economy and continued subdued inflation may force the Fed to cut interest rates more than once this year, notwithstanding their oft-stated expectation that policy rates will remain steady. 5-30 year yields moved largely in parallel, down 38-41 bps. The widely watched yield spread between 3-month and 10-year treasuries fell over 40 bps during the month and went briefly negative on January 31.

• The Fed’s large scale T-bill purchases and temporary repo operations successfully calmed short term funding markets. Repo rates were calm over year-end amid ample liquidity.

• The Treasury department announced it will add a 20-year bond to its issuance calendar after a 34 year hiatus. Market observers see some likelihood Treasury may also add a 1-year SOFR linked floater late this year.

• Treasury Inflation-Protected Securities (TIPS) breakeven rates declined after December CPI printed lower than expected. Crude oil prices fell about 15% in January, contributing to lower inflation expectations. The 2-year breakeven inflation rate dropped 12 bps to 1.35% and the 10-year breakeven dropped 15 bps to 1.64%.

Agency Mortgage-Backed Securities

• The overall prepayments of conventional UMBS decreased in January to 14.5 CPR. Refinance activity picked up to its highest level in over five years; however this activity is expected to be reflected in February and March speeds.

• In January, gross issuance of Agency MBS increased by $1 billion to $167 billion and net issuance increased from $33 billion to $46 billion.

U.S. Treasury Yield Curve 12/31/2019 1/31/2020 Change3 month 1.54 1.54 0.006 month 1.58 1.52 -0.061 year 1.57 1.42 -0.152 year 1.57 1.31 -0.263 year 1.61 1.29 -0.325 year 1.69 1.31 -0.3810 year 1.92 1.51 -0.4130 year 2.39 2.00 -0.39Source: Bloomberg

U.S. GDP Year-Over-Year | December 31, 2009 - December 31, 2019

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Figure 2. Source: Bloomberg, DoubleLine


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Mortgage Bankers Association Purchase Index

Source: eMBS, Barclays Capital. FHLMC Commitment Rate Source: Bloomberg

Agency Mortgage-Backed Securities (cont’d)

• Over the month, the yield curve flattened with longer rates rallying more than shorter rates. The 2-year U.S. Treasury rate decreased 26 bps while the 10-year U.S. Treasury rate decreased 41 bps. Volatility also increased, largely over news of the coronavirus outbreak and fear of the virus spreading.

• The MBA U.S. Refinancing Index Seasonally-Adjusted more than doubled over the month, largely attributed to the period beginning lower due to the holidays and activity continuously increasing as mortgage rates decreased.

• In January, the Bloomberg Barclays U.S. MBS Index total return was 0.70% while the excess return, measured relative to maturity-matched Treasuries, was -0.53%.

• The duration of the Bloomberg Barclays U.S. MBS Index contracted from 3.21 to 2.62 over the month.

Duration of Barclays U.S. MBS Bond Index | As of January 31, 2020

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MBA Refinance Index | As of January 31, 2020

Source: Bloomberg. Base = 100 on 3/16/1990. Non-Seasonally Adjusted

1/31/20 2,976

MBA Purchase Index | As of January 31, 2020

1/31/20 283.8

Source: Bloomberg. Base = 100 on 1/14/2011. Seasonally Adjusted

Source: Bloomberg. Base = 100 on 1/14/2011. Seasonally Adjusted

1/31/20 2.62

Conditional Prepayment Rates (CPR)2019-2020 February March April May June July August September October November December January

Fannie Mae (FNMA) 7.4 9.2 11.2 13.0 12.6 15.9 16.8 18.4 20.2 16.5 16.5 14.5Ginnie Mae (GNMA) 9.8 11.7 14.3 16.9 17.1 20.9 22.3 22.8 24.4 22 22.9 21.3Freddie Mac (FHLMC) 7.3 8.9 11.3 13.4 12.6 16.2 17.2 19.1 20.6 16.7 16.6 14.6

Bloomberg Barclays U.S. MBS Index 11/29/2019 12/31/2019 1/31/2020 ChangeAverage Dollar Price 104.17 104.19 104.67 0.48Duration 3.05 3.21 2.62 -0.59

Bloomberg Barclays U.S. Index Returns 11/29/2019 12/31/2019 1/31/2020Aggregate -0.05% -0.07% 1.92%MBS 0.08% 0.28% 0.70%Corporate 0.25% 0.32% 2.34%Treasury -0.30% -0.56% 2.44%

Conditional Prepayment Rates (CPR)2019-2020 February March April May June July August September October November December January

Fannie Mae (FNMA) 7.4 9.2 11.2 13.0 12.6 15.9 16.8 18.4 20.2 16.5 16.5 14.5Ginnie Mae (GNMA) 9.8 11.7 14.3 16.9 17.1 20.9 22.3 22.8 24.4 22 22.9 21.3Freddie Mac (FHLMC) 7.3 8.9 11.3 13.4 12.6 16.2 17.2 19.1 20.6 16.7 16.6 14.6

Bloomberg Barclays U.S. MBS Index 11/29/2019 12/31/2019 1/31/2020 ChangeAverage Dollar Price 104.17 104.19 104.67 0.48Duration 3.05 3.21 2.62 -0.59

Bloomberg Barclays U.S. Index Returns 11/29/2019 12/31/2019 1/31/2020Aggregate -0.05% -0.07% 1.92%MBS 0.08% 0.28% 0.70%Corporate 0.25% 0.32% 2.34%Treasury -0.30% -0.56% 2.44%

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Freddie Mac Commitment Rate - 30 Year | January 30, 2020

1/30/20 3.51

Source: Bloomberg, DoubleLine

% Years


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Non-Agency Mortgage-Backed Securities• Non-Agency RMBS delivered positive returns during the

month with a backdrop of strong housing data, despite broader market concerns. Non-Agency RMBS spreads were notably tighter, even though issuance was strong, as risk sensitive sectors experienced the most spread tightening. Voluntary prepayments (and expectations) have leveled off but concerns may reemerge as mortgage rates continue to fall.

• There was approximately $10.9 billion in new issuance priced2, a notably strong month. The sectors that experienced strong issuance were Credit Risk Transfers, Non-Performing loans and Non-QM.

• Home prices increased +2.5% YoY3, increasing 33 bps from the prior month and appear to have troughed from the lows experienced in July. Existing home sales4 increased +3.6% from the prior month. Notably, sales are up +10.8% from a year ago as lower mortgage rates continue to be supportive of home prices and housing supply continues to tighten on the margin.

• The 30-year mortgage rate5 finished the month at 3.51%, down 23 basis points from the prior month. Mortgage rates are currently at the lowest level since the fourth quarter of 2016, surpassing the low set in the summer of 2019.

Commercial Mortgage-Backed Securities• Private-label CMBS issuance totaled $11.9 billion in

January, more than three times the $3.2 billion that priced in January 2019. This month’s issuance was aided by a $3.4 billion floating-rate SASB to finance Blackstone’s $5.7 billion acquisition of an industrial portfolio. Despite a record year for gross issuance, the net outstanding universe shrank by 51 bps in January to $568.8 billion. Nevertheless, with the exception of December 2019, which was aided by record setting issuance in November 2019, the net outstanding universe remains larger today than any time since 2015. With more than $2 trillion in CRE mortgage debt maturing in the next five years (the highest five-year total to date), many market participants are expecting elevated gross issuance.

• The U.S. All-Property CPPI ended up at 7.8% in 2019, as compared to 6.6% over the same period in 2018. Non-major markets increased by +8.3%, outperforming major markets by 244 bps. Price growth at the national level recorded 68 bps in December, in line with the month prior, marking the sixth month of consecutive gains. The industrial sector closed out the year with the most substantial gain of +12.1% YoY, trailed closely by the apartment sector, registering a gain of +9.1% YoY. However, the apartment sector closed out the decade with the most substantial gains, increasing a total of 163%. Retail price growth accelerated into year-end, posting a gain of +3.8% YoY. While this was well below other property types, it was stronger than the sub-2% growth seen two years earlier. Transaction volume was down just 2% from 2018, held back by a lack of entity-level deals seen in 2018, such as Brookfield’s acquisition of GGP.

• CMBS secondary market cash spreads moved tighter in January with AAA LCFs tightening by 1 bps to swaps +79 bps and BBBs by 30 bps to swaps +275 bps. Aided by fresh inflows at the beginning of the year, investors were active in the secondary market in January, grinding spreads tighter alongside new issue. Dealers were also active throughout the month, purchasing large blocks for their own balance sheets, a sign of broader market sentiment. Conversely, CMBX spreads moved wider in January, largely a result of macro weakness towards month-end, with AAA 2012-2016 reference indices widening by an average of 4bps and BBBs by an average of 22 bps.

Asset-Backed Securities• ABS kicked off the year on solid footing as geopolitical

tensions between the U.S. and Iran as well as economic growth concerns related to the coronavirus caused strong fixed income performance. The Bloomberg Barclays ABS Index, which tracks mostly auto and credit card securitizations, returned 0.99%. As for esoteric ABS sectors, the ICE Bank of America U.S. Fixed Rate ABS Securities Index returned 1.35% over the month. These returns are in-line with or better than comparable periods of strong rate rallies such as May 2019 and August 2019.

2 Bloomberg 3 S&P Corelogic Case-Shiller 20-City Home Price Composite4 National Association of Realtors Existing Home Sale Index 5 Freddie Mac Primary Mortgage Market Survey


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Asset-Backed Securities (cont’d)

• ABS spreads tightened across nearly every sector during January, with on-the-run assets such as subprime auto tightening by 7 to 15 bps and lesser-known sectors such as senior aircraft, franchise, and consumer ABS tightening by 7 to 12 bps. Risk off flows driven by equity market volatility in the middle of month caused investors to chase ABS spreads tighter.

• Primary market activity for ABS was healthy throughout January. Roughly $20 billion in new issuance across 27 different deals priced during the month. As is usually the case, auto and credit card ABS made up the bulk of the issuance ($13.6 billion) but the remainder featured transactions backed by consumer loans, student loans, and small business loans. Investor appetite was strong as even lower-rated debt tranches were highly subscribed.

• Economic data releases and consumer delinquency reports from January continue to show that the U.S. consumer is in good condition. Average Hourly Earnings growth as reported by the Bureau of Labor Statistics is at 3.1% on a YoY basis and annualized net loss rates for consumer and student loan ABS remain within original expectations.

Investment Grade Credit• Investment Grade credit started January on a strong

footing; however, the rally we saw at the beginning of the month quickly gave way to spreading coronavirus fears and a risk off sentiment. Investment Grade credit spreads as measured by the Bloomberg Barclays U.S. Credit Index initially narrowed to multi-year tights of 89 bps only to widen out to 98 bps by the end of the month, underperforming duration-match Treasuries by 70 bps. The total return for the month was 2.34%, while the flight to U.S. Treasuries pushed Investment Grade yields to a record low of 2.53%.

• The best-performing sectors for the month on a total return basis were industrial (other), foreign local governments, natural gas, utility (other), and electrics. The worst performing sectors on a total return basis were independent energy, supranationals, home construction, leisure, and lodging.

• At the ratings level, higher-rated segments outperformed. Double-As posted a total return of 2.55% versus 2.43% for single-As, and a total return of 2.33% for BBBs.

• Additionally, across the curve, long duration credit outperformed with a total return of 4.06% versus 2.38% for intermediate duration and 0.56% for short duration credits.

• USD Investment Grade new issuance in January was $172 billion gross and $80.1 billion net. Financials led the way with $59.6 billion in gross issuance and $31.6 billion in net issuance.

• Investment Grade fund flows continued to be strong in January, as Investment Grade took in $27.4 billion to start off the year.

Performance of Select Barclays indices Last 12 Months

Total Fixed-Rate Investment Grade Supply As of January 31, 2020

Source: Barclays Live

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Collateralized Loan Obligations• The U.S. CLO new issue market saw nine deals price in January,

totaling $4.1 billion. Refi/reset activity was also strong during the month, with seven refi and two reset transactions pricing, totaling $3.1 billion and $1.0 billion, respectively.

• While loan default rates ticked higher by 44 bps to +1.83% MoM, the percentage of U.S. CLO collateral trading below 90 decreased by -1.8% as the S&P LSTA LL Price Index ended the month slightly ahead of where it began, gaining $0.23 to 96.95. This led to some improvement in CLO market value-based metrics, with the median NAV for U.S. BSL CLOs increasing by +2.5% MoM to 53.7%.

• Spreads tightened across the stack, fueling an average total return of 0.85% for January per JP Morgan’s post-crisis CLO TR Level Index. The BB- and B-rated segments contributed the highest returns.

• On January 30, 2020, the Fed published a re-proposal of Section 13 of the Bank Holding Company Act, also known as the Volcker Rule. The proposed changes would allow the reintroduction of non-loan assets into CLO portfolios, with a five percent cap. Most CLO managers feel this additional avenue to source collateral, as well as a new way to participate in distressed/bankruptcy dealings, will result in greater flexibility. The re-proposal is subject to a 60-day comment period.

Bank Loans• The bank loan market was up +0.56% in January, reflecting

0.09% of price appreciation and 0.47% of interest income. After a sharp rally to start the year, prices softened mid-month as equity markets sold off on coronavirus fears. Nevertheless, the market remained relatively fully valued and over 48% of bank loans were bid above par at month-end.

• The “risk-on” tone was evident in the strong return of CCC-rated loans, which rose +1.29% and materially outperformed both single-B loans (+0.66%) and BB loans (+0.30%). BB-rated loans had strong performance in 2019 and entered 2020 relatively fully valued.

• The default rate remained stable at low levels, ending the month at just 1.83% on an issuer basis over the last 12 months. Corporate earnings growth has slowed, heightening the risk of defaults, but the market expects earnings to rebound somewhat in 2020.

• The primary market was very active in January as issuers took advantage of strong market conditions to aggressively reprice outstanding debt to lower spread levels. In total, there was $97.4 billion of repricing activity, nearing the monthly record of $101 billion set in January 2017. Outside of repricings, there was $60 billion of new issue volume in January, but half of this came from refinancing transactions.

• On the demand side, there was $4.1 billion of new CLO issuance in the month, the lowest reading since January 2017. Retail flows finally turned positive for the first time in 16 months, with an estimated $149 million of inflows. However, the market increasingly expects further interest rate cuts, a viewpoint that will present a challenge for loan flows.

• The market rally in December and January brought the loan market back to a relatively fully valued position. However, with steady economic growth and the potential for earnings to rebound in 2020, the loan market currently offers reasonable risk/return.

CLO New Issuance | September 2012 to January 2020

Last 12 Months Issuance | February 2019 to January 2020

Source: Bloomberg, DoubleLine

05101520253035

$0$2$4$6$8

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High Yield• High yield began the year with significant strength that gave

way to weakness in the second half of January, with the Bloomberg Barclays U.S. High Yield Corporate Index ending the month up 3 bps. Index yield rose 33 bps to 5.52% while spread widened 54 bps to 390 bps.

• By rating, BBs resumed their leadership in January, returning 37 bps, while other ratings categories lagged (Bs lost 28 bps and CCCs lost 32 bps). By sector, the three best performers in January were Banking (+2.45%), Automotive (+1.70%), and Home Construction (+1.31%). The worst sectors were Independent (-3.49%), Oil Field Services (-1.79%), and Wireless (-1.18%).

• The par-weighted 12-month default rate increased slightly to 2.65% in January, according to JP Morgan. For reference, current default rate levels compare to 2.63% at the end of 2019 and 1.83% at the end of 2018. The long-term average back to 1980 is 3.43%.

• Gross issuance was $38.5 billion in January, according to JP Morgan, which was the second heaviest January in history. Recall that in 2019, primary activity increased 52% gross and 28% net of refinancings to $287 billion, though against a 2018 whose full-year activity was the lightest since 2009 (2018 volume of $187 billion was a 43% decline compared to 2017).

• Inflows continued in January, as high yield took in $700 million. For 2019, inflows totaled $18.7 billion, according to Lipper, compared to outflows of $46.9 billion in 2018 and outflows of $20.3 billion in 2017. Last year represented just the second year of inflows since 2012 (the other being 2016).

Commodities• In January, coronavirus fears catalyzed a broad commodity

market sell off of 10.94% and 7.48% as measured by the S&P GSCI and BCOM, respectively. The best performing sector was Precious Metals (+3.52%). As the flight to perceived safety ensued, Gold increased +3.83%.

• Energy declined 15.06% as the anticipated negative shock to demand punished crude with WTI down -15.48% and Brent falling -13.25%.

• Industrial Metals declined -7.22% with the global economic bellwether Copper dropping -9.97% on fears of weak China demand.

• The agriculture sector edged down -2.78% with Soybeans down -8.69%, while Sugar (+8.87%) and Cocoa (+9.33%) rallied strongly.

Emerging Markets Fixed Income• EM sovereign and corporate external bonds both posted

positive performance for January. The positive performance of external EM debt was driven by lower UST yields and accrued interest, which offset higher credit spreads for the period.

• The JP Morgan EMBI Global Diversified Index credit spread widened by 24 bps over the month, while the UST yield curve flattened with 2-year UST yields lower by 26 bps and 10 year UST yields lower by 41 bps.

• Performance across all regions was positive in both the sovereign index and corporate index for January, as measured by the JP Morgan EMBI Global Diversified and JP Morgan CEMBI Broad Diversified, respectfully. Europe was the best performing region in both the sovereign and corporate index, while the Middle East was the worst performing region for the sovereign index, and Africa was the worst performing region in the corporate index.

• The sovereign and corporate indices experienced similar returns over the period, with the investment grade sub-index outperforming the high yield grade sub-index in both the sovereign and corporate indices over the period.

• Factors that may affect risk appetite for 2020 include a potential slowdown in Chinese and global growth, possibly driven by the uncertainty surrounding the impact of the coronavirus outbreak, less accommodative developed market central banks, the U.S. Presidential election, rising developed market yields, an escalation in trade tensions, as well as policy risks due to an increase in populism.

JP Morgan Emerging Markets Bond Index Performance February 28, 2019 to January 31, 2020

Source: JP Morgan

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JPM Emerging Markets Bond Global Diversified Index (EMBI)

JPM Corporate Emerging Markets Bond Broad Diversified Index (CEMBI)

JPM Government Bond Emerging Markets Broad Diversified Index (GBI-EM)


8

International Sovereign• Global government bonds, as measured by the FTSE

WGBI Index, posted positive returns for January. Positive performance was driven by falling global bond yields which offset foreign currency losses against the U.S. Dollar (USD).

• The USD, as measured by the U.S. Dollar Index (DXY), rose during the month amid rising concerns about the economic impact of the coronavirus outbreak. The FOMC kept the Fed Funds Rate unchanged at its January 29 meeting and affirmed their commitment to its 2% inflation target. Also, 10-year UST yields moved sharply lower over the month given global economic growth concerns.

• The Euro fell against the USD over the month. The European Central Bank (ECB) left its monetary policy unchanged, while ECB President Christine Lagarde reiterated her call for more fiscal support for the economy.

• The Japanese Yen rose against the USD this month, benefitting from its safe-haven status against a pickup in market volatility. The Bank of Japan (BoJ) kept its accommodative monetary policy unchanged. BoJ Governor Kuroda indicated that the central bank would consider easing rates further to support the economy, which some market participants viewed as a signal of continued support of extremely accommodative monetary policy.

Infrastructure• Infrastructure assets performed well during January as

equity indices declined and UST rates rallied across the curve. This type of environment caused a spike in investor demand for infrastructure-related securities due to their intermediate durations and investment-grade credit ratings. The Bloomberg Barclays U.S. Aggregate Bond Index returned 1.92% during January and the Bloomberg Barclays U.S. Corporate Bond Index returned 2.34%.

• One of the top performing infrastructure segments in January was securitizations backed by residential renewable energy systems. These securities, which tend to carry longer durations and finance clean energy upgrades to single-family homes, experienced both spread tightening and duration-related price increases over the month. Unsecured corporate bonds issued by power and utility companies also performed well in January due to their longer durations and perceived safety as countercyclical investments.

• Shipping container ABS, which experienced spread widening for most of 2019 due to the U.S.-China trade conflict, finally saw spreads tighten by about 10 basis points in January as the U.S. and China signed the long-awaited Phase One trade deal in Washington on January 15.

• Issuance projections for “Green Bonds” – bonds that are specifically used to finance environmental projects – is expected to be between $300 and $400 billion in 2020 alone. This would mark a roughly 37% increase over the 2019 issuance total as investor focus on this sector continues to grow.


9

U.S. Equities • The S&P 500 Index ended January in much the same place as

it began the year, with a total return for the month of -0.04%. Beneath this flat return was a tale of two markets. For the first three weeks of the month, the S&P 500 continued the late-2018 rally, closing at a number of new all-time highs. However, with the coronavirus virtually freezing travel to Asia and Fed balance sheet growth leveling off, the U.S. equity markets traded down sharply into month-end. Implied volatility, as measured by the VIX Index, spiked from calm levels below 12 to almost 20.

• There were several notable divergences in the equity markets in the month. First, market returns narrowed, with the largest capitalization constituents of the S&P 500 outperforming their smaller peers. In January, the S&P500 outperformed the Equal-Weight S&P 500 Index (which does not capitalization weight its constituents) and the Russell 2000 (representing small capitalization equities) by 1.78% and 3.17%, respectively. Similarly, growth equities continued their notable outperformance compared to value stocks. For the month, the Russell 1000 Value Index actually fell by 2.16%, while the Russell 1000 Growth Index returned a positive 2.23%

• Consensus estimates continue to predict a sharp rebound in earnings growth in 2020, with companies of the S&P 500 expected to post 2020 earnings 9.1% higher than 2019. Revenues are expected (by consensus) to grow 5.2% YoY. These strong growth rates stand in stark contrast to 2019, when earnings saw virtually no growth over 2018 levels. As January drew to a close - and with close to half the companies of the S&P 500 having reported fourth quarter earnings – consensus estimates saw fourth quarter earnings falling 0.3% below the fourth quarter of 2018 on revenue growth of 3.1%. We believe the durability of the recent equity market rally depends heavily on the ability of corporate America to deliver on the earnings rebound currently projected by Wall Street analysts.

Global Equities• Global equities had a strong start in January but posted

negative returns into the end of January as the China coronavirus outbreak spooked the risk-on sentiment, with the Morgan Stanley Capital International All-Country World Index (MSCI ACWI) down 1.08% during the month. U.S. equities had mixed performance with the S&P 500 down 0.04% and NASDAQ Composite up 2.03% during the month, respectively. The NASDAQ Composite enjoyed strong earnings from some technology firms. The Russell 2000 and the Dow Jones Averages declined -3.21% and -0.89%, respectively during the month.

• In Europe, equities underperformed the broader market with the Eurostoxx 50 down 2.71% in January. Core European equities had in-line performance with the DAX returning -2.02% and CAC returning -2.78% in January. In the periphery, equities performed slightly better with the FTSEMIB down -0.76% and IBEX declining -2.25% in January. UK equities underperformed the rest of European markets with the FTSE 100 down -3.92%.

• Asian equities underperformed in January due to the close ties to China. Japanese equities, as measured by the Nikkei, were down 1.90% in January. Chinese equities and Hong Kong equities accounted for the most of the underperformance with the Harvest CSI 300 China A-Shares ETF and Hang Seng Index, down -9.58%% and -7.09%, respectively. Korean and Taiwan equities, as measured by KOSPI and TAIEX index, were down -3.58 and -4.63%, respectively in January.

• EM equities underperformed the broader market significantly, with MSCI EM Index returning -5.79% in January. Brazil’s Ibovespa was down -4.06% in January. Russian equities, as measured by MSCI Russia Index, declined -3.74% in January. Indian equities, as measured by MSCI India, were down -1.72% for the month.

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Definitions/Explanations

AUD - Australian Dollar

ADP Research Institute – ADP generates data-driven discoveries about the world of work and derives economic indicators from these discoveries. Its two primary areas of focus are Labor Market trends, and issues related to People + Performance at work.

Bloomberg Agriculture Subindex - Formerly known as Dow Jones-UBS Agriculture Subin-dex (DJUBSAG), the index is a commodity group subindex of the Bloomberg CI. It is com-posed of futures contracts on coffee, corn, cotton, soybeans, soybean oil, soybean meal, sugar and wheat. It reflects the return of underlying commodity futures price movements only and is quoted in USD.

Basis Point - A basis point (bps) equals 0.01%.

Bloomberg Barclays U.S. Aggregate Bond Index - An index that represents securities that are SEC-registered, taxable, and dollar denominated. The index covers the U.S. investment grade fixed rate bond market, with index components for government and corporate secu-rities, mortgage pass-through securities, and asset-backed securities. These major sectors are subdivided into more specific indices that are calculated and reported on a regular basis.

Bloomberg Barclays U.S. Aggregate Credit Average OAS Index - The Option-Adjusted Spread calculated on the Bloomberg Barclays U.S. Aggregate Bond Index.

Bloomberg Barclays Asset-Backed Securities (ABS) Index - The ABS component of the U.S. Aggregate Index. It includes securities whose value and income payments are derived from and collateralized (‘or backed”) by a specified pool of underlying assets including credit cards, auto loans, etc.

Bloomberg Barclays U.S. Corporate Bond Index - An index that represents the total return measure of the corporates portion of the Barclays U.S. Aggregate Index.

Bloomberg Barclays U.S. Credit Index – The U.S. Credit component of the U.S. Govern-ment/Credit Index. This index consists of publically-issued U.S. corporate and specified for-eign debentures and secured notes that meet the specified maturity, liquidity, and quality requirements. To qualify, bonds must be SEC-registered. The U.S. Credit Index is the same as the former U.S. Corporate Investment Grade Index.

Bloomberg Barclays U.S. MBS Index - An index that measures the performance of invest-ment grade fixed-rate mortgage-backed pass-through securities of the Government-Spon-sored Enterprises (GSEs): Ginnie Mae (GNMA), Fannie Mae (FNMA), and Freddie Mac (FHLMC).

Bloomberg Barclays U.S. High Yield Corporate Index - An index that covers the universe of fixed rate, non-investment grade debt. Eurobonds and debt issuer from countries des-ignated as emerging markets (e.g. Argentina, Brazil, Venezuela, etc.) are excluded, but Ca-nadian and global bonds (SEC registered) of issuers in non-EMG countries are included. Original issue zeros, step-up coupon structures, 144-As and pay-in-kind (PIK, as of October 1, 2009) are also included.

Bloomberg Barclays U.S. Treasury Total Return Unhedged USD Index - Measures U.S. dollar-denominated, fixed-rate, nominal debt issued by the U.S. Treasury. Treasury bills are excluded by the maturity constraint, but are part of a separate Short Treasury Index.

Bloomberg Barclays U.S. Treasury Index - The Index is the U.S. Treasury component of the U.S. Government Index. Public obligations of the U.S. Treasury with a remaining maturity of one year or more.

Bloomberg Commodity Index (BCOM) - An index calculated on an excess return basis that reflects commodity futures price movements. The index rebalances annually weighted 2/3 by trading volume and 1/3 by world production and weight-caps are applied at the commodity, sector and group level for diversification. Roll period typically occurs from 6th-10th business day based on the roll schedule.

Bid Wanted In Competition (BWIC) - A situation where an institutional investorsubmits its bond bid list to various securities dealers. Dealers are then allowed to make bids on the listed securities. The dealers with the highest bids are subsequently contacted.

Broadly Syndicated Loans (BSL) - Any Loan to an Obligor issued as part of a loan facility with an original loan size (including any first and second lien loans included in the facility) greater than $250,000,000.

CBOE Volatility Index (VIX) - A popular measure of the stock market’s expectation of vol-atility implied by S&P 500 Index options, calculated and published by the Chicago Board Options Exchange (CBOE).

Collateralized Loan Obligation (CLO) - A single security backed by a pool of debt.

CMBX Index - The CMBX is an index, or more accurately a series of indices, designed to reflect the creditworthiness of commercial mortgage-backed securities (CMBS).

Conference Board Leading Economic Index (LEI) - Phenomena, such as the unemploy-ment and new construction rates, used by The Conference Board to predict the financial condition of a particular industry or the economy in general.

Conference Board Consumer Confidence Index (CCI) - Measures how optimistic or pessi-mistic consumers are with respect to the economy in the near future. The Index is based on the concept that if consumers are optimistic, they tend to purchase more goods and services. This increase in spending inevitably stimulates the whole economy.

Conference Board Measure of CEO Confidence - A survey of approximately 100 CEOs in a wide variety of industries that details Chief Executive’s attitudes and expectations regard-ing the overall state of the economy as well as their own industry.

Consumer Price Index (CPI) - A measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food and medical care. It is calculated by taking price changes for each item in the predetermined basket of goods and averaging them. Changes in the CPI are used to assess price changes associated with the cost of living; the CPI is one of the most frequently used statistics for identifying periods of inflation or deflation.

Cotation Assistee en Continu (CAC) - A French stock market index that tracks the 40 larg-est French stocks based on the Euronext Paris market capitalization.

Credit Default Swap Index (CDX) - Formerly the Dow Jones CDX, this is a financial instru-ment made up of credit securities that have been issued by North American or emerging markets companies. The CDX is itself a tradable security – a credit market derivative.

Deutscher Aktien Index (DAX) - A blue chip stock market index consisting of the 30 major German companies trading on the Frankfurt Stock Exchange.

Dot Plot - A simple statistical chart that consists of data points plotted as dots on a graph with x- and y-axes. Dot plots are well known as the method that the U.S. Federal Reserve (Fed) uses to convey its benchmark Federal Funds interest rate outlook at certain Federal Open Market Committee (FOMC) meetings.

Dow Jones Industrial Average (DJIA) - An index that tracks 30 large, publicly-owned com-panies trading on the New York Stock Exchange (NYSE) and the NASDAQ.

EUR - Euro

EUR/USD - The Currency Pair EUR/USD is the shortened term for the euro and U.S. dollar pair or cross for the currencies of the European Union (EU) and the United States (USD). The currency pair indicates how many U.S. dollars (the quote currency) are needed to purchase one euro (the base currency).

Eurostoxx 50 Index - A stock index of Eurozone stocks designed by STOXX, an index provid-er owned by Deutsche Borse Group and SIX group, with the goal of providing a blue-chip representation of Supersector leaders in the Eurozone.

FactSet - Provides computer-based financial data and analysis for financial professionals, including investment managers, hedge funds and investment bankers. It consolidates data on global markets, public and private companies, and equity and fixed-income portfolios.

Federal Family Education Loan Program (FFELP) - A system of private student loans which were subsidized and guaranteed by the United States federal government.

Financial Times Stock Exchange Milano Italia Borsa (FTSE MIB) - The benchmark stock market index for the Borsa Italiana, the Italian national stock exchange, which superseded the MIB-30 in September 2004. The index consists of the 40 most-traded stock classes on the exchange.

Financial Times Stock Exchange 100 (FTSE 100) - A capitalization-weighted index of the 100 most highly capitalized companies traded on the London Stock Exchange.

The Financial Times Stock Exchange World Government Bond Index (FTSE WGBI- Mea-sures the performance of fixed-rate, local currency, investment-grade sovereign bonds. The WGBI is a widely used benchmark that currently includes sovereign debt from over 20 countries, denominated in a variety of currencies, and has more than 30 years of history available. The WGBI provides a broad benchmark for the global sovereign fixed income market. Sub-indexes are available in any combination of currency, maturity, or rating.

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G-10 (Group of 10) - The G10 consists of eleven industrialized nations that meet on an an-nual basis or more frequently, as necessary, to consult each other, debate and cooperate on international financial matters. The member countries are: Belgium, Canada, France, Germany, Italy, Japan, the Netherlands, Sweden, Switzerland, the United Kingdom and the United States.

FTSEMIB - The benchmark stock market index for the Borsa Italiana, the Italian national stock exchange, which superseded the MIB-30 in September 2004. The index consists of the 40 most-traded stock classes on the exchange.

GBP - British Pound

Gilt - Bonds issued by the U.K., India, and other Commonwealth countries.

Hang Seng Index - A free-float capitalization-weighted index of a selection of companies from the Stock Exchange of Hong Kong. The components of the index are divided into four subindices: Commerce and Industry, Finance, Utilities, and Properties.

Ibovespa Index - A gross return index weighted by traded volume and comprised of the most liquid stocks traded on the Sao Paulo Stock Exchange. The Ibovespa Index has been divided 10 times by a factor of 10 since January 1, 1985.

ICE BofA U.S. Fixed Rate Miscellaneous Asset Backed Securities Index - A subset of ICE BofA U.S. Fixed Rate Asset Backed Securities Index including all asset backed securities col-lateralized by anything other than auto loans, home equity loans, manufactured housing, credit card receivables and utility assets.

IHS Markit Eurozone Manufacturing Purchasing Managers’ Index - A measure of the per-formance of the manufacturing sector derived from a survey of 3,000 manufacturing firms and including national data for Germany, France, Italy, Spain, the Netherlands, Austria, the Republic of Ireland, and Greece. The index is based on five individual indexes: New Orders (30%), Output (25%), Employment (20%), Suppliers’ Delivery Times (15%), and Stock of Items Purchased (10%), with the Delivery Times index inverted to move in a comparable direction. A reading of above 50 indicates an expansion of the sector, while a reading be-low 50 represents a contraction and 50 indicates no change.

The IHS Markit/CIPS UK Manufacturing PMI® - Based on data compiled from monthly replies to questionnaires sent to purchasing executives in over 600 industrial companies. It is a composite index based on five of the individual indexes with the following weights: New Orders - 0.3, Output - 0.25, Employment - 0.2, Suppliers’ Delivery Times - 0.15, Stock of Items Purchased - 0.1, with the Delivery Times Index inverted so that it moves in a comparable direction.

Indice Bursatil Espanol (IBEX) - The official index of the Spanish Continuous Market. The index is comprised of the 35 most liquid stocks traded on the Continuous market. It is calculated, supervised and published by the Sociedad de Bolsas.

Institute for Supply Management (ISM) Purchasing Managers Index (PMI) - An indicator of the economic health of the manufacturing sector. The PMI is based on five major indi-cators: new orders, inventory levels, production, supplier deliveries and the employment environment.

ISM Non-Manufacturing Index (ISM NMI) - An index made up of data from 400 non-man-ufacturing firms collected by the Institute of Supply Management (ISM).

ISM New Orders Index - The Manufacturing ISM Report On Business is based on data com-piled from monthly replies to questions asked of purchasing and supply executives in over 400 industrial companies. For each of the indicators measured (New Orders, Backlog of Orders, New Export Orders, Imports, Production, Supplier Deliveries, Inventories, Custom-ers Inventories, Employment, and Prices), this report shows the percentage reporting each response, the net difference between the number of responses in the positive economic direction and the negative economic direction and the diffusion index. Responses are raw data and are never changed. The diffusion index includes the percent of positive respons-es plus one-half of those responding the same (considered positive). The resulting single index number is then seasonally adjusted to allow for the effects of repetitive intra-year variations resulting primarily from normal differences in weather conditions, various insti-tutional arrangements, and differences attributable to non-moveable holidays. All season-al adjustment factors are supplied by the U.S. Department of Commerce and are subject annually to relatively minor changes when conditions warrant them.

JP Morgan CLO TR Level Index - Holistically captures the USD-denominated CLO market, representing over 3000 instruments at a total par value of US $236.1 billion. It allows mar-ket participants to track securitized loan market valuations.

JP Morgan Corporate Emerging Markets Bond Broad Diversified Index (CEMBI) -This in-dex is a market capitalization weighted index consisting of U.S.-denominated Emerging Market corporate bonds. It is a liquid global corporate benchmark representing Asia, Latin America, Europe and the Middle East/Africa.

JP Morgan Government Bond Emerging Markets Broad Diversified Index (GBI EM) - This index is the first comprehensive, global local Emerging Markets index, and consists of regu-larly traded, liquid fixed-rate, domestic currency government bonds to which international investors can gain exposure.

JP Morgan Emerging Markets Bond Global Diversified Index (EMBI) - This index is unique-ly-weighted version of the EMBI Global. It limits the weights of those index countries with larger debt stocks by only including specified portions of these countries’ eligible current face amounts of debt outstanding. The countries covered in the EMBI Global Diversified are identical to those covered by EMBI Global.

JPY - Japanese Yen

Korea Composite Stock Price Index (KOSPI) - The index of all common stocks traded on the Stock Market Division of the Korea Exchange. It is the representative stock market index of South Korea, like the S&P 500 in the United States.

Last Cash Flow (LCF) - The last revenue stream paid to a bond over a given period.

Leveraged Commentary & Data (LCD) - A unit of S&P Global Market Intelligence, LCD pro-vides in-depth coverage of the leveraged loan market through real-time news, analysis, commentary, and proprietary loan data.

LTM - Last Twelve Months

Major Markets - Major markets are defined by Real Capital Analytics as Boston, Chicago, Washington, D.C., Los Angeles, New York City and San Francisco. All markets outside of the Major Markets are Non-Major Markets.

Markit CMBX Index - A synthetic tradable index referencing a basket of 25 commercial mortgage-backed securities.

Morgan Stanley Capital International All Country World Index (MSCI ACWI) - A market-capitalization-weighted index designed to provide a broad mea-sure of stock performance throughout the world, including both developed and emerging markets.

Mortgage Bankers Association (MBA) Purchase Index - An index that includes all mort-gage applications for purchases of single-family homes. It covers the entire market, both conventional and government loans and all products.

Mortgage Bankers Association (MBA) Refinance Index - An index that covers all mortgage applications to refinance an existing mortgage. It includes conventional and government refinances. SA indicates seasonally adjusted and NSA indicates non-seasonally adjusted.

MSCI Emerging Markets (MSCI EM) - An index that covers 24 Emerging Market countries and is designed to capture the large and mid-cap representation across those countries.

MSCI Russia Index - A free-float capitalization-weighted index used to track the equity market performance of Russian securities on the MICEX Stock Exchange.

NASDAQ Composite - A stock market index of the common stocks and similar securities (e.g. ADRs, tracking stocks, limited partnership interests) listed on the NASDAQ stock mar-ket with over 3,000 components. This index is highly followed in the U.S. as an indicator of the performance of stocks of technology companies and growth companies. Since both U.S. and non-U.S. companies are listed on the NASDAQ stock market, the index is not exclusively a U.S. index.

NASDAQ 100 Index - A basket of the 100 largest, most actively traded U.S companies listed on the NASDAQ stock exchange.

NFIB Small Business Optimism Index - The small business optimism index is compiled from a survey that is conducted each month by the National Federation of Independent Business (NFIB) of its members. The index is a composite of 10 seasonally adjusted compo-nents based on the following questions: plans to increase employment, plans to make cap-ital outlays, plans to increase inventories, expect economy to improve, expect real sales higher, current inventory, current job openings, expected credit conditions, now a good time to expand, and earnings trend.

Nikkei 225 Index - A price-weighted index comprised of Japan’s top 225 blue-chip com-panies on the Tokyo Stock Exchange. The Nikkei is equivalent to the Dow Jones Industrial Average Index in the U.S.

Personal Consumption Expenditures (PCE) Core Price Index - Measures price changes in consumer goods and services. Expenditures included in the index are actual U.S. house-hold expenditures. Data that pertains to services, durablesand non-durables are measured by the index.

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Qualified Mortgage (QM) - A qualified mortgage is a mortgage that meets certain require-ments for lender protection and secondary market trading under the Dodd-Frank Wall Street Reform and Consumer Protection Act.

RCA Commercial Property Price Index - The Moody’s/RCA Commercial Property Price In-dex (CPPI) describes various non-residential property types for the U.S. (10 monthly series from 2000). The Moody’s/RCA Commercial Property Price Index is a periodic same-property round-trip investment price change index of the U.S. commercial investment property mar-ket. The dataset contains 20 monthly indicators.

Russell 1000 Growth Index - An index that measures the performance of the large-cap growth segment of the U.S. equity universe. It includes those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values.

Russell 1000 Value Index - An index that measures the performance of the large-cap value segment of the U.S. equity universe. It includes those Russell 1000 companies with lower price-to-book ratios and lower expected growth values.

Russell 2000 Index - A subset of the Russell 3000 Index representing approximately 10% of the total market capitalization and measuring the performance of the small-cap segment of the U.S. equity universe.

S&P CoreLogic Case-Shiller National Home Price Index - An index that tracks the value of single-family housing within the United States. The index is a composite of single-family home price indices for the nine U.S. Census divisions.

S&P CoreLogic Case-Shiller 20-City Composite Home Price NSA Index - Seeks to measures the value of residential real estate in 20 major U.S. metropolitan areas: Atlanta, Boston, Charlotte, Chicago, Cleveland, Dallas, Denver, Detroit, Las Vegas, Los Angeles, Miami, Min-neapolis, New York, Phoenix, Portland, San Diego, San Francisco, Seattle, Tampa and Wash-ington, D.C.

S&P/LSTA Leveraged Loan Index - An index designed to track the market-weighted perfor-mance of the largest institutional leveraged loans based on the market weightings, spreads and interest payments.

S&P Goldman Sachs Commodity Index (GSCI) - Standard & Poor’s Goldman Sachs Com-modity Index, or GSCI, is a composite index of commodity sector returns which represents a broadly diversified, unleveraged, long-only position in commodity futures.

S&P 500 Index - Standard & Poor’s U.S. 500 Index, a capitalized-weighted index of 500 stocks.

S&P Global Market Intelligence - A provider of multi-asset class and real-time data, re-search, news and analytics to institutional investors, investment and commercial banks, in-vestment advisors and wealth managers, corporations, and universities.

Secured Overnight Financing Rate (SOFR) - An influential interest rate that banks use to price U.S. dollar-denominated derivatives and loans. The daily SOFR is based on transactions in the Treasury repurchase market, where investors offer banks overnight loans backed by their bond assets.

Shanghai Composite Index - A capitalization-weighted index that tracks the daily perfor-mance of all A-shares and B-shares listed on the Shanghai Stock Exchange. The index was developed on December 19, 1990 with a base value of 100.

Spread - The difference between yields on differing debt instruments, calculated by deduct-ing the yield of one instrument from another. The higher the yield spread, the greater the difference between the yields offered by each instrument. The spread can be measured be-tween debt instruments of differing maturities, credit ratings and risk.

TAIEX Index - A stock market index for the companies traded on the Taiwan Stock Exchange.

TAIEX covers all of the listed stocks excluding preferred stocks, full-delivery stocks and newly listed stocks, which are listed for less than one calendar month.

Trade Reporting and Compliance Engine (TRACE) - The Trade Reporting and Compliance Engine is the FINRA-developed vehicle that facilitates the mandatory reporting of over-the-counter secondary market transactions in eligible fixed income securities.

U-3 Unemployment Rate - The U.S. Bureau of Labor Statistics U-3 unemployment rate is the officially recognized rate of unemployment, measuring the number of unemployed people as a percentage of the labor force.

U.S. Dollar Index (DXY) - A weighted geometric mean of the United States dollar’s value relative to a basket of 6 major foreign currencies, including the Euro, Japanese yen, Pound sterling, Canadian dollar, Swedish krona and Swiss franc.

U.S. Treasuries (UST) - Commonly used for references to the Treasury debt that the U.S. issues.

Uniform Mortgage-Backed Securities (UMBS) - Single-class securities backed by mortgage loans purchased by either Freddie Mac or Fannie Mae.

University of Michigan Consumer Sentiment Index - The Surveys of Consumers is a rotating panel survey based on a nationally representative sample that gives each household in the coterminous U.S. an equal probability of being selected. Interviews are conducted through-out the month by telephone. The minimum monthly change required for significance at the 95-percent level in the Sentiment Index is 4.8 points; for Current and Expectations Index the minimum is 6 points.

USD/JPY - The Currency Pair USD/JPY is the shortened term for the yen and U.S. dollar pair or cross for the currencies of Japan (JPY) and the United States (USD). The currency pair indicates how many Japanese yen (the quote currency) are needed to purchase one U.S. dollar (the base currency).

Weighted Average Cost of Capital (WACC) - The weighted average cost of capital (WACC) is a calculation of a firm’s cost of capital in which each category of capital is proportionate-ly weighted. All sources of capital, including common stock, preferred stock, bonds, and any other long-term debt, are included in a WACC calculation.

WAL (Weighted Average Life) - The average number of years for which each dollar of unpaid principal on a loan or mortgage remains outstanding.

World Interest Rate Probabilities WIRP (WIRP) - Allows you to analyze the probabilities of various interest rate level outcomes as implied by the futures, options, and OIS markets, so you can quantify to what extent the markets are “pricing in” future central bank interest rate changes.

WTI - West Text Intermediate Crude Oil Front Month Futures Contract

Z-Score - A numerical measurement used in statistics of a value’s relationship to the mean (average) of a group of values, measured in terms of standard deviations from the mean. If a Z-score is 0, it indicates that the data point’s score is identical to the mean score. A Z-score of 1.0 would indicate a value that is one standard deviation from the mean. Z-scores may be positive or negative, with a positive value indicating the score is above the mean and a negative score indicating it is below the mean.

An investment cannot be made directly in an index.

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Important Information Regarding This MaterialIssue selection processes and tools illustrated throughout this presentation are samples and may be modified periodically. These are not the only tools used by the investment teams, are extremely sophisticated, may not always produce the intended results and are not intended for use by non-professionals.

DoubleLine has no obligation to provide revised assessments in the event of changed circumstances. While we have gathered this information from sources believed to be reliable, DoubleLine cannot guarantee the accuracy of the infor-mation provided. Securities discussed are not recommendations and are present-ed as examples of issue selection or portfolio management processes. They have been picked for comparison or illustration purposes only. No security presented within is either offered for sale or purchase. DoubleLine reserves the right to change its investment perspective and outlook without notice as market condi-tions dictate or as additional information becomes available. This material may include statements that constitute “forward-looking statements” under the U.S. securities laws. Forward-looking statements include, among other things, projec-tions, estimates, and information about possible or future results related to a cli-ent’s account, or market or regulatory developments.

Important Information Regarding Risk FactorsInvestment strategies may not achieve the desired results due to implementa-tion lag, other timing factors, portfolio management decision-making, economic or market conditions or other unanticipated factors. The views and forecasts ex-pressed in this material are as of the date indicated, are subject to change without notice, may not come to pass and do not represent a recommendation or offer of any particular security, strategy, or investment. All investments involve risks. Please request a copy of DoubleLine’s Form ADV Part 2A to review the material risks involved in DoubleLine’s strategies. Past performance is no guarantee of fu-ture results.

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DoubleLine is an active manager and will adjust the composition of clients’ portfo-lios consistent with our investment team’s judgment concerning market conditions and any particular sector or security. The construction of DoubleLine portfolios may differ substantially from the construction of any of a variety of market indices. As such, a DoubleLine portfolio has the potential to underperform or outperform a bond market index. Since markets can remain inefficiently priced for long periods, DoubleLine’s performance is properly assessed over a full multi-year market cycle.

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For Investors in ChileIf any products are offered within Chile, they will be offered and sold only pur-suant to General Rule 336 of the SVS, an exemption to the registration require-ments, or in circumstances which do not constitute a public offer of securities in Chile within the meaning of Article 4 of the Chilean Law No. 18,045 on Securities Market.

This communication is addressed only to “Qualified Investors” (as defined in SVS General Rule No. 216).

Si algunos valores son ofrecidos dentro de Chile, serán ofrecidos y colocados sólo de acuerdo a la Norma de Carácter General 336 de la SVS, una excepción a la obligación de registro, o en circunstancias que no constituyan una oferta pública de valores en Chile según lo definido por el Artículo 4 de la Ley 18.045 de Mercado de Valores de Chile.

Esta comunicación está dirigida a “Inversionistas Calificados” (según se define en la Norma de Carácter General N° 216 de la SVS).

For Investors in PeruAll content in this document is for information or general use only. The informa-tion contained in this document is referential and may not be construed as an offer, invitation or recommendation, nor should be taken as a basis to take (or stop taking) any decision.

This neither is an offer or an invitation to offer nor authorizes such sales or invita-tions in places where such offers or invitations are contrary to the corresponding applicable.

This communication is not intended for any person who is not qualified as an institutional investor, in accordance with provisions set forth in SMV Resolution Nº 021-2013-SMV-01, and as subsequently amended. No legal, financial, tax or any other kind of advice is hereby being provided.

Todo lo contenido en este documento es sólo para fines informativos o de uso general. La información contenida en este documento es referencial y no puede interpretarse como una oferta, invitación o recomendación, ni debe consider-arse como fundamento para tomar (o dejar de tomar) alguna decisión.

La presente no constituye una oferta ni una invitación a ofertar ni autoriza tales ventas o invitaciones en los lugares donde tales ofertas o invitaciones sean con-trarias a las respectivas leyes aplicables.

Esta comunicación no está dirigida a ninguna persona que no califique como un inversionista institucional, de conformidad con lo dispuesto en la Resolución SMV Nº 021-2013-SMV-01, así como pueda ser modificada en el futuro. Por medio de la presente comunicación no se le está proveyendo de consejo legal, financiero, tributario o de cualquier otro tipo.

For Investors in Latin America and the Middle EastThis material has not been registered with, or approved or passed on in any way, by any regulatory body or authority in any jurisdiction. This material is for the information of prospective investors only and nothing in this material is intended to endorse or recommend a particular course of action. By receiving this materi-al, the person or entity to whom it has been issued understands, acknowledges and agrees that neither this material nor the contents therein shall be deemed as an offer to sell or a solicitation of an offer to buy, or a recommendation of any security or any other product, strategy or service by DoubleLine or any other third party.

For Investors in Japan (Discretionary Investment Manager (DIM) & Non- Dis-cretionary Investment Manager (Non-DIM)DoubleLine Investment Management Asia Ltd. (“DoubleLine Asia”) is registered with the Kanto Local Finance Bureau as an Investment Advisory and Agency (“IAA”) operator in Japan (Registration No. 2986). However, DoubleLine Asia only conducts the agency business under its IAA registration. Under its agen-cy business, DoubleLine Asia is authorized to intermediate in the execution of investment advisory and investment management contracts between its affili-ates which are registered investment managers outside of Japan (“Foreign In-vestment Managers”) and discretionary investment managers and trust banks conducting the investment management business (together the “Japan DIMs”) registered in Japan.

DoubleLine Asia is not permitted to market or solicit any securities or other in-vestment products, nor is it able to provide any direct investment advisory or investment management services in Japan or elsewhere.

While discussions with Japan DIMs may involve its agency business of interme-diating investment advisory and investment management arrangements, all dis-cussions with persons other than Japan DIMs are necessarily limited to general information about DoubleLine Asia and its affiliates and nothing herein should be read to suggest a solicitation of products or services inconsistent with such regulatory status.

Documents

l re ery 1 - doubleline.com · to cut interest rates more than once this year, notwithstanding their oft-stated expectation that policy rates will remain steady. 5-30 year yields