before the bell · 2020-03-16 · before the bell march 16, ... should i delay retirement?...

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For further information on any of the topics mentioned, please contact your Financial Advisor. Unless specifically stated otherwise, comments contained in this document should not be construed as an investment opinion or

recommendation of any securities mentioned. Charts depicted are from FactSet unless otherwise noted. ____________________________________________________________________________________________________________________________ © 2020 Ameriprise Financial, Inc. All rights reserved. of 14

Before the Bell Morning Market Brief

March 16, 2020

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

MONDAY MORNING MARKET STRATEGY: David M. Joy, Chief Market Strategist Stocks tumbled into a bear market last week for the first time in eleven years, after a disappointing coronavirus address to the country by the president. But the almost 10 percent decline in the S&P 500 on Thursday was quickly followed by a better than 9 percent gain after the president declared a national emergency on Friday. As the week came to a close, the index was 19.9 percent below its February peak, but the technical definition of a bear market had been met. According to Ned Davis Research, the mean decline among bear markets without recessions over the past 100 years is -25 percent and takes 40 weeks to recover. If accompanied by a recession, the median decline is 35 percent and takes 74 weeks to recover. The week’s volatility was extreme, as the VIX index averaged 55, including a brief move above 75, compared to its ten-year weekly average of 17. The daily price change of the index last week included moves of 8, 5, 5, 10, and 9 percent.

High yield credit spreads widened sharply on the week, rising 167 basis points to the highest in four years. Treasury bond yields rose as liquidity concerns overwhelmed worries about the economy. The yield on the ten-year climbed 20 basis points to 0.96 percent, while the thirty-year rose from 1.29 to 1.54 percent. In an effort to alleviate the pressure in the treasury market, and provide support overall to the economy, on Sunday the Federal Reserve lowered the fed funds rate to zero, just two weeks after cutting the same rate by one-half percent. At the same time, it announced an increase in its bond buying activity in both the treasury and mortgage-backed securities and made it less onerous for banks to borrow from the discount window.

The seriousness of the coronavirus outbreak has finally hit the U.S. Suspensions of NBA, NHL, and MLB seasons, March Madness, the closing of schools, the shutting of restaurants and bars, and restrictions on travel are reinforcing the message that social distancing is a critical weapon in the battle to slow the spread of the virus. But it only works if people take it seriously, unlike the situation in China where the government can more or less make it happen. The cycle of the virus in the U.S. is likely to accelerate and peak over the next two months, or so. The news on the number of new infections and deaths is likely to rise significantly, especially as the frequency of testing increases. And ultimately the resulting slowdown will begin to show up in economic data. It wasn’t until roughly mid-February that the virus hit our domestic radar screen as a potential threat. Prior to that it was primarily a China problem. And the reality of the domestic impact has really only hit home recently. So the data will not truly reflect the domestic economic impact until we see some March and April data. This week we will get February reports on retail sales and industrial production, as well as several reports from the housing sector.

Before The Bell March 16, 2020 ____________________________________________________________________________________________________________________________

____________________________________________________________________________________________________________________________ © 2020 Ameriprise Financial, Inc. All rights reserved. of 14

On Monday, China reported some of its February economic results which were far weaker than expected. Rather than falling by the consensus 4 percent, retail sales fell 20.5 percent. Industrial production was expected to drop by 3 percent, but instead fell by 13.5 percent. And fixed investment fell 24.5 percent, rather than the expected 2 percent.

Despite the Fed’s Sunday rate cut, and despite Friday’s powerful rally, U.S. futures are pointing to a sharply lower open. European stocks are sharply lower as well. The ten-year note yield is back down to 0.76, giving back all of its increase from last week. Domestic crude oil has fallen below $30 a barrel for the first time in four years.

Investors realize that monetary policy can only help so much in this situation, and that the fiscal response needs to be considerably larger than what we have seen so far. Whether politicians in Washington and elsewhere understand that remains to be seen. Sizeable fiscal packages have been announced in some countries, including South Korea, and the UK. Germany has said it will provide whatever is needed. But clearly, more will be needed if markets are going to stabilize, especially while the number of infections continues to rise and lives are disrupted by social distancing.

MORNING MARKET COMMENTARY: Anthony M. Saglimbene, Global market Strategist Quick Take: U.S. futures are pointing to another limit down morning, where stocks are likely to be halted at the

open; European markets are trading down by 7.0% to 10.0%; Asia ended significantly lower overnight; West Texas Intermediate (WTI) oil trading at $29.58; 10-year U.S. Treasury yield slumping to 0.78%.

COVID-19 Q&A: We understand investor anxiety is high at the moment, due to recent market volatility related to COVID-19 (coronavirus). To help address investors' most pressing concerns, below is a series of questions and answers to help frame the impact of the viral outbreak on your portfolio. Please see our Committee Perspectives: COVID19 Q&A for this content included in a standalone report as well as other market and economic related questions regarding the viral outbreak.

Given the market volatility, should I rethink my diversification and risk tolerance strategy to help me withstand market volatility? Only if your current risk tolerance and existing portfolio are not appropriate. Your financial advisor has tools to help assist with understanding your tolerance for loss and how to set the right expectations for your portfolio. If you are feeling unsettled by recent market events, please reach out to your advisor. He or she can carefully review your goals/strategy to help keep you on track during this volatile period

My 401(k) account balance has dropped. How can I stay on track with my financial goals? If your portfolio consists of a mix of stocks, bonds, alternatives, and cash, your 401(k) is likely weathering the market declines better than a standard all-stock benchmark, such as the S&P 500. It's crucial to keep recent stock declines in perspective and incorporate a diversified investment approach. Markets historically move through periods of dislocation, but generally, asset prices rise over the long-term. If you have an employer-sponsored retirement account, like a 401(k), and would like assistance with how to position your unique investment selections, your financial advisor can assist.

I'm already in retirement and don't have as much time for the market to recover. Should I rethink my financial plan? It's important to discuss your circumstances with a financial advisor. He or she is equipped to help you monitor your investments, recommend specific strategies designed for retirees, and help you evaluate your spending needs. Incorporating flexible withdrawal strategies as well as developing a careful approach to 'where' you pull money from could help you keep your retirement goals on track. Importantly, even in retirement, your investment strategy should incorporate a longer-term focus.

I've been planning to retire later this year. Should I delay retirement? Everyone's situation is unique. Please connect with your advisor to review and re-project your personalized financial plan to take an objective look at your situation in light of the current environment.

Now that U.S. stocks have fallen into a bear market (down 20% or more from their market peaks), does it make sense to buy investments whose share prices may rise during the next market rebound? It's important to emphasize the concept of "time in the market beats market timing." We don't know when the selling pressure will abate, and we could see stock prices fall further from here. But if you have a long enough time horizon, when the bottom in selling pressure eventually emerges, stocks have a strong track record of bouncing back over time. Longer-term investors should keep this point at the forefront of their minds, especially during the difficult days and months ahead. For those with the stomach to look past this event-driven crisis, utilizing a dollar-cost averaging strategy could help you dip your toes back into being a buyer — and taking advantage of potential



buying opportunities. We believe investors should focus on high-quality stock and bond investments and ensure their portfolio is filled with holdings they are comfortable owning in both up and down markets.

The market environment is challenging; should I consider making more significant changes to my portfolio? It is critical not to panic and deviate from your well-constructed investment approach. We know these last few weeks are unsettling. At the moment, there is a lot of uncertainty running through markets. Simply put: This is a poor time to make significant adjustments to your portfolio, particularly if the choice is to reduce equity exposure materially. While each investor's circumstance is unique, if you and your advisor constructed the appropriate mix of assets, risk, and time horizon into your portfolio, you will weather this storm. Importantly, we still believe the impact of the virus will be temporary, and eventually, markets and the economy will carry on. We are monitoring market, economic, and virus developments closely. Our Global Asset Allocation Committee is regularly meeting to discuss the changing environment. If a change in course is warranted, we will adjust our tactical asset allocation advice and communicate appropriately. Investors often make their worst decisions when they are most scared about the future and during times of market stress. Over time, investment opportunities will emerge, and investors will have a chance to make more thoughtful adjustments.

Should I consider bonds for protection or yield in this current environment? High-quality bond investments are earning their keep in a portfolio today. For U.S. government and investment-grade fixed income, bond prices have risen in value as yields have fallen. Over recent weeks, investors have sought "safety" in U.S. government and investment-grade bonds due to their ability to help weather stock market volatility. For well-diversified portfolios, healthy allocations to high-quality fixed income investments have reduced risk and shielded some of the pain across the stock market. We believe investors should continue to maintain a preference for higher-quality fixed income investments and suggest speaking with a financial advisor about ways to access these types of investments.

In these conditions, what can I do to gain more stability in my portfolio? As we alluded to in our previous responses, we believe investors should focus on higher-quality investments as a means to increase stability in a portfolio. This includes allocating to investments that focus on companies with more predictable profit streams, stable business prospects, and strong balance sheets. For stocks, a steady dividend could also add a degree of stability to a portfolio. Importantly, incorporating a well-diversified approach, that balances stocks, bonds, alternatives, and cash across a portfolio, is an essential ingredient in helping construct an all-weather strategy.

Should I move out of equities and into cash? While each circumstance is unique, it is seldom in an investor's best interest to sell during times of extreme market stress. As many investors learned in 2000 and 2008, attempting to time the market's ups and downs proved very challenging. For those that were shaken out of the stock market in late 2008/early 2009, selling stocks at the bottom when panic selling was most severe, reentering the market ultimately proved just as challenging. Investors are best served by waiting for the dust to settle and then evaluating if an adjustment in your allocation is appropriate

I need to sell some of my investments to pay for an upcoming expense (e.g., college tuition, medical treatment). How can I make the best of the situation, given the market volatility? Some costs are unavoidable. Therefore, it's crucial to have a well-designed strategy that helps match the current market situation with your unique financial circumstances. A financial advisor can help you plan for upcoming expenses, manage cash flows, and help you decide the appropriate accounts to draw from.

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Asia-Pacific: Asian equities finished materially lower on Monday. In a coordinated effort by central banks to help maintain ample liquidity across global markets, the Bank of Japan (BOJ) held an emergency meeting overnight. As expected, the BOJ announced it would increase asset purchases, including additional purchases of corporate bonds and ETFs.

The Bank of Korea (BOK) cut its repo rate 50 basis points to a record low and following its emergency meeting on Monday. Like other central banks, Monday's meeting was the first emergency meeting by the BOK since the financial crisis. Lower rates apply to loan facilities for smaller companies, and the BOK added bank bonds to open market operations to enhance liquidity.

The Reserve Bank of New Zealand slashed its official cash rate to 0. 25% from 1.0%. The rate will remain at this level for at least the next 12 months. Separately, the Reserve Bank of Australia said it stands ready to purchase government bonds in the secondary market to support markets and maintain liquidity.

In the January/February period, industrial production in China shrank 13.5% y/y, fixed asset investment plummeted 24.5%, and retail sales contracted 20.5%. The degree of weakness across activity in China suggests the country could be facing its first GDP contraction on record, according to FactSet.

Europe: Markets across the region are trading down significantly at mid-day. On Sunday, Italy reported its largest daily increase of COVID-19 cases, with 3,500 new infections. Italy has nearly 25,000 reported cases and only trails China in terms of volume. With Europe rapidly approaching a new epicenter for the outbreak, the continent is starting to enter a lockdown. Per FactSet, Germany tightened border controls over the weekend, Spain imposed a nationwide lockdown, and France closed all shops, bars, and restaurants.

U.S.: Equity futures are pointing to a very difficult day. When pre-market activity opened up last night, futures were halted, creating another limit-down situation and triggering circuit breakers on the CME. In five of the last six sessions, contracts on the S&P 500 have triggered the circuit breakers and halted pre-market activity to the downside. The circuit breakers during pre-market, like during normal trading, are designed to limit extreme selling pressure.

However, this halted trading activity in the pre-market leaves investors somewhat in the dark until the SPDR S&P 500 Trust (SPY) starts trading in the early morning. This morning, SPY is pointing to a 10% lower open, suggesting U.S. markets will trigger circuit breakers and halt trading for 15 minutes.

U.S. stocks are coming off back-to-back 9% plus swings on Thursday and Friday, the first such occurrence since the Great Depression. Last week, the S&P 500 averaged a move of 7.2%, the most volatile five trading days since the financial crisis in 2008.

Investors are now struggling to make sense of a rapidly changing economic scenario, as companies around the U.S. shutter businesses, countries shut borders, and activity grinds to a halt. On Sunday, the Federal Reserve made the extraordinary move to slash interest rates to zero in an attempt to shield the blow from what is very likely to be a recessionary environment in the U.S. On top of its move to provide liquidity to the repo market last week, the Fed promised to boost its bond holdings by at least $700 billion yesterday.

Markets are falling this morning, not because it doesn't believe the Fed is doing all it can — they are. Stocks keep falling because the Fed has quickly exhausted its traditional ammo, its moves are not equipped to address the viral outbreak, and the fiscal/government response has been underwhelming. Over time, we do believe the Fed's recent moves will help keep liquidity sound, cushion the economic stress, and provide easier conditions for businesses when some normalcy returns.

Bottom line: Until investors can get a grasp on the magnitude of the health crisis in the U.S., as well as COVID-19's spread, the market and economy are very likely to remain in extreme flux.

In other related items you need to know: There are nearly 170,000 reported cases of COVID-19 worldwide. Cases in the U.S. currently stand at more than 3,700. The CDC urged that all mass gatherings of 50 or more people be suspended for eight weeks. The White House extended its travel ban on Europe to include the U.K. and Ireland. While some states have already closed restaurants and bars, the White House is considering such a

move nationally, per The New York Times. According to Bloomberg, the eight largest banks are suspending their share buybacks through the

second quarter. The additional capital will be used to support a collective objective of providing help to individuals and small businesses affected by the viral outbreak. When conditions warrant, each bank has the ability on its own to reinstate its share buyback program.



WORLD CAPITAL MARKETS 3/16/2020 As of: 8:30 AM ET

Americas % chg. % YTD Value Europe (Intra-day) % chg. %YTD Value Asia/Pacific (Last Night) % chg. %YTD ValueS&P 500 9.29% -15.73% 2,711.0 DJSTOXX 50 (Europe) -8.73% -36.76% 2,360.3 Nikkei 225 (Japan) -2.46% -28.07% 17,002.0 Dow Jones 9.36% -18.28% 23,185.6 FTSE 100 (U.K.) -7.27% -33.26% 4,976.1 Hang Seng (Hong Kong) -4.03% -17.83% 23,063.6 NASDAQ Composite 9.35% -11.99% 7,874.9 DAX Index (Germany) -8.71% -36.39% 8,428.3 Korea Kospi 100 -3.19% -21.97% 1,714.9 Russell 2000 7.77% -27.27% 1,210.1 CAC 40 (France) -9.61% -37.63% 3,722.4 Singapore STI -5.25% -22.41% 2,495.8 Brazil Bovespa 13.91% -28.51% 82,678 FTSE MIB (Italy) -9.11% -38.31% 14,500.5 Shanghai Comp. (China) -3.40% -8.55% 2,789.3 S&P/TSX Comp. (Canada) 9.66% -19.09% 13,716.3 IBEX 35 (Spain) -10.01% -37.32% 5,966.0 Bombay Sensex (India) -7.96% -23.79% 31,390.1 Mexico IPC 3.95% -12.45% 38,085.1 MOEX Index (Russia) -4.61% -27.24% 2,209.5 S&P/ASX 200 (Australia) -9.70% -23.97% 5,002.0

Global % chg. % YTD Value Developed International % chg. %YTD Value Emerging International % chg. %YTD ValueMSCI All-Country World Idx 5.27% -19.86% 451.1 MSCI EAFE -0.77% -26.98% 1,480.3 MSCI Emerging Mkts 0.91% -19.88% 891.2 Note: International market returns shown on a local currency basis. Equity index data is total return, inclusive of dividends.

S&P 500 Sectors % chg. % YTD Value Commodities Communication Services 9.20% -12.98% 157.6 Equity Income Indices % chg. % YTD Value Futures & Spot (Intra-day) % chg. % YTD ValueConsumer Discretionary 6.08% -17.28% 813.2 JPM Alerian MLP Index 8.25% -50.91% 107.1 CRB Raw Industrials -1.98% -2.47% 440.6 Consumer Staples 8.41% -9.61% 582.2 FTSE NAREIT Comp. TR 8.90% -13.02% 18,571.5 NYMEX WTI Crude (p/bbl.) -7.44% -51.90% 29.4 Energy 8.84% -46.50% 241.3 DJ US Select Dividend 8.24% -24.08% 1,738.7 ICE Brent Crude (p/bbl.) -9.93% -53.80% 30.5 Financials 13.23% -25.09% 381.2 DJ Global Select Dividend -6.59% -36.70% 148.9 NYMEX Nat Gas (mmBtu) -4.17% -18.18% 1.8 Health Care 6.95% -10.93% 1,053.9 S&P Div. Aristocrats 7.53% -17.99% 2,515.7 Spot Gold (troy oz.) -3.44% -2.64% 1,477.3 Industrials 7.83% -22.77% 528.6 Spot Silver (troy oz.) -13.18% -28.41% 12.8

Materials 6.92% -24.26% 290.8 LME Copper (per ton) 0.42% -11.40% 5,447.8 Real Estate 8.63% -8.78% 218.1 Bond Indices % chg. % YTD Value LME Aluminum (per ton) 1.41% -6.68% 1,662.4 Technology 11.96% -8.07% 1,476.9 Barclays US Agg. Bond -0.62% 2.36% 2,277.5 CBOT Corn (cents p/bushel) -1.30% -8.55% 361.0 Utilities 5.55% -10.89% 290.5 Barclays HY Bond -0.08% -8.84% 1,989.8 CBOT Wheat (cents p/bushe -1.68% -11.44% 497.5

Foreign Exchange (Intra-day % chg. % YTD Value % chg. % YTD Value % chg. % YTD ValueEuro (€/$) 0.77% -0.18% 1.12 Japanese Yen ($/¥) 1.71% 2.65% 105.81 Canadian Dollar ($/C$) -0.68% -6.55% 1.39British Pound (£/$) 0.24% -7.16% 1.23 Australian Dollar (A$/$) -0.52% -12.11% 0.62 Swiss Franc ($/CHF) 1.00% 2.58% 0.94Data/Price Source: Bloomberg. Equity Index data is total return, inclusive of dividends, where applicable.

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

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

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

1) Communication Services 10.5% Underweight - 2.0% 8.5% 6) Health Care 13.9% Equalweight - 13.9%

2) Consumer Discretionary 10.0% Overweight +2.0% 12.0% 7) Industrials 9.3% Equalweight - 9.3%

3) Consumer Staples 7.4% Equalweight - 7.4% 8) Information Technology 21.8% Overweight +2.0% 23.8%

4) Energy 4.6% Equalweight - 4.6% 9) Materials 2.7% Equalweight - 2.7%

5) Financials 13.1% Underweight - 2.0% 11.1% 10) Real Estate 3.2% Overweight +1.0% 4.2%

11) Utilities 3.5% Underweight - 1.0% 2.5%

Index weighting represents relative weightings based on the regional market capitalization balance of the MSCI All-Country World Index; may not add due to rounding. The GAAC Tactical Overlay, as well

as Recommended Tactical Weights, is derived from the Ameriprise Global Asset Allocation Committee (GAAC).Views are expressed relative to the Index and are provided to represent investment

conviction in each region. Tactical Allocations are designed to augment Index returns over a 6-12 month time horizon. Index weights as of 9/20/19. Numbers may not add due to rounding.

Ameriprise Global Asset Allocation Committee Global Equity Region - Tactical View

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

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

1) United States 55.6% Overweight +7.3% 62.9% 5) Latin America 1.4% Equalweight - 1.4%

2) Canada 3.1% Equalweight - 3.1% 6) Asia-Pacific ex Japan 12.0% Equalweight - 12.0%

3) United Kingdom 4.8% Underweight - 2.0% 2.8% 7) Japan 7.3% Underweight - 2.0% 5.3%

4) Europe ex U.K. 14.5% Underweight - 2.0% 12.5% 8) Middle East / Africa 1.3% Underweight - 1.3% -

Index weighting represents relative weightings based on the regional market capitalization balance of the MSCI All-Country World Index; may not add due to rounding. The GAAC Tactical Overlay, as well as

Recommended Tactical Weights, is derived from the Ameriprise Global Asset Allocation Committee (GAAC).Views are expressed relative to the Index and are provided to represent investment conviction in

each region. Tactical Allocations are designed to augment Index returns over a 6-12 month time horizon. Index weights as of 9/20/19. Numbers may not add due to rounding.



THE WEEK AHEAD: Russell T. Price, CFA, Chief Economist The Federal Reserve’s second surprise cut in less than two weeks’ time may be somewhat alarming, but it shows

officials are very much engaged in the current situation and willing to do whatever it takes to support the economy and the financial system through this period. Sunday’s announcement doesn’t make this week’s FOMC meeting any less important. Markets will still be very keen to hear the perspective of Fed officials in this very unusual situation. Please see other sections of this report for more on this move.

We believe it is very important to note our view that we do NOT see the current downturn as comparable to the 2008/ ’09 experience. Economic activity over the near-term will be down sharply out of health necessity, NOT due to a financial crisis. Financial crisis induced downturns, similar to that seen in 2008 /’09 are the most dangerous since they can wipe-out the entire financial well-being of many, many people. As seen during the Great Depression, such downturns can take many years to recover. Today, aside from the recent downturn in stock prices reflective of the temporary alleviation of economic activity, U.S. consumers in aggregate are in strong condition. The financial system also entered this period is strong condition and is seeing very strong and rapid support from the Federal Reserve and its printing press.

This week’s key economic releases are mostly still reflective of conditions as they were prior to the domestic coronavirus outbreak. The two regional manufacturing reports from the New York and Philadelphia Federal Reserve Banks, however, are more timely, and are thus likely to reflect some influence from the current situation. Forecasters expect the reports to remain slightly positive for now, but that will certainly change in April.

Tuesday’s report on February Retail Sales, meanwhile, is expected to show a modest month-over-month increase. Lower gasoline prices, should be a notable negative contributor to the overall measure. Auto sales were also basically flat in the month at 16.8 million on an annualized basis. Some retailers, such as grocery stores and home supply retailers, are also likely to show solid gains due to the surge of provision stocking that has taken place in recent weeks.

Tuesday’s report on Industrial Production for the month of February is also expected to post a modest gain. Prior to the coronavirus outbreak, most manufacturing measures seemed to be regaining momentum. Modestly stronger manufacturing activity, will have to fight declines in utility output (due to generally mild winter temperatures) and lower mining activity to keep the overall index in positive territory.

On Wednesday, the February report on New Housing Starts is expected to show a moderate pullback after two exceptionally strong months. New starts in December and January represented the strongest pace of new starts since before the financial crisis as a return to exceptionally low interest rates, strong buyer demand and favorable weather conditions for building activity, all aided the measure. New starts over the period, however, also far exceeded the number of building permits filed. As such, the prior pace is likely to prove unsustainable over the near-term at least.

On Friday, Existing Home Sales for the month of February will be released. Sales are measured at the time of closing which typically comes a month or two after a purchase contract has been signed. As such, the report should see little impact from recent concerns related to the coronavirus and its potential impact on economic activity. Overall, forecasters as surveyed by Bloomberg expect sales to show a modest gain of about 1.5% over january levels. Here too, mild winter weather during the period is likely to offer the sales rate for the month a boost.



Where Market Fundamentals Stand Heading into The Week:

S&P 500 Trailing and Forward P/E valuations: Source: FactSet Please note: Although we try to maintain consistency as much as possible, Price to Earnings (P/E) ratios may differ modestly from once source to another. Most notably, P/E numbers can often show their most notable differences during an earnings release season as some sources may still use the last full ‘actual’ earnings number (for instance, currently Q2 trailing 12-month earnings per share) while others use earnings per share that are updated for Q3 using a combination of actual and estimated earnings per share. The calculation of earnings (operating earnings versus ‘as reported’ or GAAP) also often differs modestly from one data source to another due to the proprietary use of calculation methodologies. The “average” shown in the charts below represent averages for the period shown.

Consensus Earnings Estimates: Source: FactSet

S&P 500 Earnings Estimates 2015 2016 2017 20213/15/2020 Actual Actual Actual Actual Actual Actual Actual Actual Actual Actual Actual Est. Est. Est. Est. Est.

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

Quarterly $$ amount $38.78 $41.12 $42.88 $41.27 $38.85 $41.47 $42.18 $41.77 $38.61 $42.28 $45.22 $46.14

change over last week -$0.26 -$0.58 -$0.54 -$0.37

yr/yr 25.4% 25.4% 27.8% 13.8% 0.2% 0.9% -1.6% 1.2% -0.6% 2.0% 7.2% 10.5%

qtr/qtr -1% 6% 4% -4% -6% 7% 2% -1% -8% 10% 7% 2%

Trailing 4 quarters $$ $118.67 $119.64 $133.50 $141.40 $149.72 $159.05 $164.05 $164.12 $164.47 $163.77 $164.27 $164.03 $164.84 $167.88 $172.25 $193.66

yr/yr -0.3% 0.8% 11.6% 22.9% 0.1% 4.9% 12.4%

Implied P/E based on a S&P 500 level of: 2711 16.5 16.5 16.4 16.1 15.7 14.0

2019 20202018



BY THE NUMBERS: ECONOMIC ACTUALS AND FORECAST:

ECONOMIC NEWS OUT TODAY: Economic Releases for Monday, March 16, 2020. All times Eastern. Consensus estimates via Bloomberg. Time Period Release Consensus Est. Actual Prior Revised to 8:30 AM MAR Empire Manufacturing Index +2.0 -21.5 12.9 Economic Perspective: Russell T. Price, CFA – Chief Economist The U.S. economy is likely to see a material decline in economic activity in Q2, but this is NOT 2008 /2009 in

our view. It’s clear to all that this is a very unusual time. Proper actions to stem further spread of the coronavirus will no doubt

have a dramatic negative impact on economic activity over the intermediate term. However, we believe the most likely path is still one in which the contraction in activity is relatively short-lived. Additionally, the dynamics of this downturn are dramatically different that those that led to the Great Recession. This is a downturn of necessity, not one driven by a financial crisis or excessive debt burdens.

Financial crisis induced downturns, similar to that seen in 2008 /’09 are the most dangerous since they can wipe-out the entire financial well-being of many, many people. As seen during the Great Depression, such downturns can take many years to recover. Today, aside from the recent downturn in stock prices reflective of the temporary alleviation of economic activity, U.S. consumers in aggregate are in strong condition. The financial system also entered this period is strong condition and is seeing very strong and rapid support from the Federal Reserve and its printing press.

Timing is the key. One of the greatest uncertainties of this situation, as it pertains to economic activity and thus financial markets, is how long this situation will last. We continue to believe the most likely scenario is one in which the greatest negative impact lasts a few weeks to a few months. We note that this matches the general guidance for closures, cancelations and delays, as developed with collaboration with many health officials. According to Epidemiology experts there are four options as to timing.

1. Warmer, more humid weather could very well slow the virus’s ability to spread, as is often seen with

coronaviruses (this is by no means a certainty). This avenue, in combination with the social distancing efforts already being employed, should lead to a slowdown in new cases, alleviating public panic and allowing activity to slowly return.

2. Better treatments and therapies are developed over the near-term that lower infection rates and improves outcomes for those that contract the virus. This is clearly an area with a tremendous amount of work being done with various positive reports and reasons to be somewhat optimistic, in our view.

3. The virus continues until most people have been exposed. Health officials tell us that under this possibility the virus simply runs out of people to infect. This, of course, would be the worst-case scenario.

4. A vaccine. A vaccine will eventually be developed, but this option is not the best solution to the current situation as vaccine development takes time. Health officials generally believe that it could be a year to two before one is commercially available. The Director of China’s Science and Technology Development Center at its National Health Commission, however, said over the weekend that China expects to have a vaccine ready for emergency use in April.

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

Real GDP (YOY) 1.6% 2.4% 2.9% 2.3% 1.5% 2.1% 2.0% 2.1% 2.1% 1.6% -2.0%

Unemployment Rate 4.7% 4.1% 3.9% 3.5% 3.6% 3.5% 3.7% 3.5% 3.5% 3.7% 3.7%

CPI (YoY) 1.3% 2.1% 2.4% 1.8% 1.8% 2.2% 1.8% 1.8% 2.0% 2.1% 1.6%

Core PCE (YoY) 1.7% 1.6% 1.9% 1.6% 1.6% 1.9% 1.6% 1.7% 1.6% 1.5% 1.7%

Sources: Historical data via FactSet. Estimates (Est.) via American Enterprise Investment Services, Inc.

YoY = Year-over-year, Unemployment numbers are period ending. GDP: Gross Domestic Product; CPI: Consumer Price Index

PCE: Personal Consumption Expenditures Price Index. Core excludes food and energy Last Updated:

Quarterly

March 6, 2020



We do not hold ourselves out as health officials of any sort, however, we believe a close examination of the commentary provided by health experts suggests that a combination of options 1 and 2 appears to be the most likely path.

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

Fed Cuts Rates to Zero; Treasury Yields Fall on the Short end The Treasury curve fell on the front-end following the Fed’s bold action Sunday (see our comments below for more).

Yields on the long end drifted higher as bond markets retain the sell what you can sell orientation focused on Treasury markets.

This morning, shortly before the open to U.S. equity trading, the International Monetary Fund announced a commitment of $1 trillion of loan capacity to help countries address the corona virus. Based on monetary policy, budding fiscal policy, and the access to borrowing countries can bolster efforts to moderate coronavirus spread and build the framework for the economic recovery in our view.

Treasury Yield Curve Comparison

Source: Bloomberg L.P.

Fed Takes Bold Steps – Treasury Yields Fall on the Short End The Federal reserve stepped in again over the weekend adding further stimulus to quell disruptions in the plumbing

of fixed income markets. The Fed pulled out a bazooka package of policy efforts to support market functioning this morning as investors contemplate the how the policies aided at slowing the spread of the corona virus may impact economic activity and behaviors.

Cut rates to 0%: In addition to the 0.50% rate cut on March 3, the Fed cut its fed funds target rate by a full percentage point to 0.00%-0.25% on Sunday. The collective 1.50% rate cut is the fastest Fed response in history. Knowing the activity shock we face emanates from sudden shocks in the economy for an unknown period could. Though the Fed’s next policy meeting was scheduled for March 17-18, it has been cancelled given the Fed’s announcement and Fed Chairman Powell press conference on Sunday. Chair Powell in response to a question around prospects for the Fed to cut rates below zero, and he responded that that was not likely given the presence of our money markets and the operational difficulty pricing on a negative rate basis. Europe’s banking driven lending markets made negative rates a possibility for spurring bank lending a mechanic that does not translates through U.S. capital market driven funding markets.

Profound repo market support: The Fed exerted bold support for core funding markets through an additional $1.5 trillion of term repo operations to ensure banks can swap Treasuries for cash. Banks tapped a limited $86 billion of the incremental auctions. We believe the Fed’s stand alone bolstered the market confidence that the Fed would be present and responsive to liquidity pinches that arise. The Fed had been focused on stepping back from the repo market as T-bill purchases sent excess bank reserve levels higher; a retreat that quickly evolved into a decisive push back into the market. Similar to the repo market intervention, the Fed established currency swaps with key foreign central banks to ensure currency exchange friction remains off the table as a challenge to global financial plumbing.

All ahead full on QE (bond buying): The Fed stepped up Quantitative Easing (QE) Friday shifting capacity for $60 billion of T-bill purchases each month to Treasuries across the curve. On Sunday the Fed added $500 billion of additional Treasury capacity to be available as needed. Rather than set to regular recurring purchases, the Fed aims to be the



counterparty for large position selling that could quickly dent market liquidity and pricing. The crude oil war between Saudi Arabia and Russia may prompt selling of global sovereign debt as sovereign wealth assets are exchanged for cash to fund expenditures. China’s fiscal spending program and currency support initiatives requiring funding as well. We believe the Fed’s $500 billion commitment serves to assure sellers that a Fed bid is available and aimed to support Treasury market functioning. The charts below highlight the re-expansion of the Fed’s balance sheet (below right), and the expansion of excess bank reserves since late last year (below left).

The Fed also committed to $200 billion of asset purchase support for agency mortgages and to shift reinvestment of mortgage principal back into mortgage backed securities. While 10-year Treasury yields declined sharply over the past four weeks, 15 and 30-year mortgage rates for consumers failed to reflect the full decline. The Fed wanted to remove liquidity from the reasons for the divergence. We see it critical for consumers to have access to refinancing or new purchase loans to sustain activity within the economy.

Fed’s bottom line: Monetary policy falls short of addressing the near-term economic impacts from the virus, but by acting, the Fed removed a potentially restrictive policy posture from hampering liquidity or ultimately leading to support for an economic recovery. The Fed is committed to take any necessary action to ensure liquidity and core market functioning, as well as looking ahead to its key role in leading the economic recovery.

Implications for fixed income investors: The Fed brought sent its key rate to near zero sending short investment rates back to levels last seen in 2015. The recent selling of Treasuries and high-quality assets may continue, but gain support from the new context created by the Fed. In the near-term, Treasury yields are likely to remain low for longer. The Fed’s action supported a 2.3% total return year to date on the Bloomberg Barclays U.S. Aggregate Index, and 6.0% on the Bloomberg Barclays U.S. Treasury Index. We continue to see high quality fixed income segments as a key anchor in a diversified portfolio.

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

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

Jeff Carlson, CLU, ChFC – Manager

Investment Research Coordinator Kimberly K. Shores Sr Administrative Assistant Jillian Willis EQUITY RESEARCH Equity Research Director Justin H. Burgin – Vice President

Consumer Goods and Services Patrick S. Diedrickson, CFA – Director

Energy/Utilities William Foley, ASIP – Director

Financial Services/REITs Lori Wilking-Przekop – Sr Director

Health Care Daniel Garofalo – Director

Industrials/Materials Frederick M. Schultz – Director

Technology/Telecommunication Open – Director

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

STRATEGISTS CHIEF MARKET STRATEGIST David M. Joy – Vice President GLOBAL MARKET STRATEGIST Anthony M. Saglimbene – Vice President

Thomas Crandall, CFA, CMT, CAIA – Sr Director, Asset Allocation

Cedric Buermann Jr., CFA – Analyst, Asset Allocation Gaurav Sawhney – Research Analyst

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

Michael V. Jastrow, CFA – Vice President

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

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

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

Alex Zachman, CFA – Analyst – Core Equity

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

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

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

Blake Hockert – Associate – Reporting & Analytics

FIXED INCOME RESEARCH & STRATEGY

Fixed Income Research Brian M. Erickson, CFA – Vice President High Yield and Investment Grade Credit Jon Kyle Cartwright – Sr Director

Stephen Tufo – Director INVESTMENT DUE DILIGENCE

Justin E. Bell, CFA – Vice President

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

Kay S. Nachampassak – Director

Peter W. LaFontaine – Sr. Analyst

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

David Hauge, CFA – Analyst

Bishnu Dhar – Sr. Research Analyst

Parveen Vedi – Sr. Research Associate

Darakshan Ali – Research Process Trainee

INNOVATION AND DEVELOPMENT

Allen Rodrigues – Vice President

Nidhi Khandelwal – Director

Dan Burns – Sr. Manager

Matt Morgan – Sr. Manager

Natasha Wayland – Sr. Manager



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