Weekly COVID-19 Market Webinar

April 6, 2020

2

-22.6

-34.8-36.7

-26.4-25.1

3.4

9.0

-15.2

-1.8

-7.1

-34.4

-0.7

-24.2

-40

-35

-30

-25

-20

-15

-10

-5

0

5

10

Perc

ent

Large Cap

U.S. Equities InternationalEquities

Fixed Income Diversifiers

Market Performance Year to Date

Returns as of 4/3/20 unless otherwise noted *Returns as of 04/2/20.Indices used: Large Cap: S&P 500; Mid Cap: S&P 400; Small Cap: Russell 2000; Developed International: MSCI EAFE (Net); Emerging Markets: MSCI EMF; Taxable Fixed Income: Barclays U.S. Aggregate; High Yield Fixed Income: BofA US HY TR; Treasuries: U.S. Treasury Index; Muni: S&P Intermediate High Quality; Hedge: HFRX Equity Hedge Index; Global Real Estate: FTSE EPRA/NAREIT; Commodities: Bloomberg Commodity. TR USD.Sources: Bloomberg L.P. and Morningstar. Past performance is not indicative of future performance.

Mid Cap Small Cap Dev. Emerg. Taxable Treas. High

Yield Munis Hedge* Global REITs

Managed Futures* Commodities

3 Source: Covidtracking.com. As of 4/5/20.

United States COVID-19 Cases: Mid-April Peak Likely

0

50000

100000

150000

200000

250000

300000

350000C

umul

ativ

e C

ases

U.S. Cumulative Cases

- 5,000

10,000 15,000 20,000 25,000 30,000 35,000 40,000

New

Cas

es

U.S. Daily New Cases

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4

New Cases in Italy and New York Beginning to Slow

Source: Worldometer.com. As of 4/5/20.

0

1000

2000

3000

4000

5000

6000

7000N

ew C

ases

Italy Daily New Cases

0

2000

4000

6000

8000

10000

12000

New

Cas

es

New York Daily New Cases

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COVID-19’s Impact on the Job Market

Source: Strategas. As of 4/3/20.

-15%-10%-5%0%5%10%15%20%25%-10%

-8%-6%-4%-2%0%2%4%6%8%

'01 '06 '11 '16

Initial Unemployment Claims & GDP

Y/Y Pct Change In Real GDP Quarterly Claims

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China Bounces Back

Source: Strategas. As of 3/31/20.

35

40

45

50

55

60

65

'05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20

China: ISM Manufacturing PMI(SA, 50+ = Increasing)

7

U.S. Fiscal Policy Response

$2 Trillion Stimulus Package. The package includes:

•Individuals: $250B in payments to individuals ($1200 per adult for incomes up to $75,000, $500 per child). ~$250B broader unemployment insurance to replace workers’ lost wages, on average.

•Small Businesses:$377B small business program that will provide affected businesses with loans that they will not need to repay if the proceeds are used to pay wages or other necessities.

•Distressed Sectors: $50B secured lending facility to U.S. passenger and cargo air carriers, and "national security" sectors.

•State Aid: $150B in state aid, to partly offset the effects of COVID-19 on state/local budgets.

•Other spending: $340B, including $130B in funding for hospitals/other health activities, $200B for other federal programs.

•Loans and Loan Guarantees: $500B in capital for loans and loan guarantees, including $454B that the Treasury may use to backstop Fed facilities to provide business credit.

8

Federal Reserve’s Initiatives to Help Fixed Income Markets

Source: Strategas. As of 4/6/20.

0

1

2

3

4

5

6

'08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21

U.S.: Assets on Federal Reserve Balance

Treasuries

MBS

Other

Dec '08: QE1 Starts

Mar '10: QE1 Ends

Nov '10: QE2 Starts

Sept '11: Op Twist Starts

Jun '12: QE2 Ends

Sept '12:QE3 Starts

Dec '12:Op Twist Ends

Dec '13:Tapering Starts

Oct '14:QE3 Ends Oct '17:

Runoff Starts

Jul '19:Runoff Ends

Oct '19:Purchases

Restart

Mar '20:COVID-19 Stimulus

9

What the Bond Market is Signaling?

Source: Lipper. As of 4/1/2020.

-45

-40

-35

-30

-25

-20

-15

-10

-5

0

5

10

2/26/20 3/4/20 3/11/20 3/18/20 3/25/20 4/1/20

Fixed Income Flows

U.S. Municipal U.S. Corporate Investment Grade U.S. Corporate High Yield

10

Municipal Bond Market Volatility Creating Opportunities

Source: AAA MMD. As of 4/6/2020.

10 Year & 30 Year AAA Municipal Yield Curves

1.63

2.44

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

3/1/2020 3/6/2020 3/11/2020 3/16/2020 3/21/2020 3/26/2020 3/31/2020 4/5/2020

Yiel

d

10-Year AAA Municipal 30-Year AAA Municipal

11

Performance Following S&P 500 Worst Quarters

Source: Strategas.

Date Performance +1 Quarter +2 Quarters

3Q 1974 -26.1% 7.9% 31.2%

4Q 1987 -23.2% 4.8% 10.7%

4Q2008 -22.6% -11.7% 1.8%

2Q 1962 -21.3% 2.8% 15.3%

1Q 2020 -20.0% ? ?

2Q 1970 -18.9% 15.8% 26.7%

Q3 2002 -17.6% 7.9% 4.0%

Q3 2001 -15.0% 10.3% 10.2%

Q3 1990 -14.5% 7.9% 22.6%

Q3 2011 -14.3% 11.2% 24.5%

12

Interaction Between The Economy And Stock Market

Low unemployment

Falling commodity prices

Inventories high

Profits decreasing

Falling inflation

Capital expenditures decreasing

Falling interest rates (loose $)

High unemployment

Rising commodity prices

Declining inventories

Profits accelerating

Capital expenditures

increasing

Rising inflation

Rising interest rates (tight $)

SELL PROTECT

CHEAPER CAPITAL: BORROW TO BUY OR BUILD M153087

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Asset Class Positioning: Investment Strategy Committee Recommendations

As of 4/1/20.

Underweight Small Underweight Neutral Small

Overweight Overweight

Equity Large Cap Mid Cap Small Cap International Developed Large Cap International Developed Small Cap Emerging Markets Private Equity Private Equity-Real Estate

Fixed Income Treasuries Investment-grade Corporate Tax-exempt High Yield

Diversifiers Real Estate (REITs) Long/Short Hedge Absolute Return Hedge Managed Futures Commodities

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Gradual Recovery to Pre-Crisis Levels

Flattening the COVID-19 Curve Remains Key

Fiscal and Monetary Measures Starting to Heal the Markets

Fixed Income Markets Begin to Stabilize, Opportunities Being Created

Bottoming Process Underway with Volatility to Persist

Active Wealth Critical in a Volatile, More Challenging Return Environment

Key Takeaways

Q&A

Thank You

17

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