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Before the Bell Morning Market Brief

May 4, 2020

MONDAY MORNING MARKET STRATEGY: David M. Joy, Chief Market Strategist Until now we have had to make do with a somewhat limited view of the economic impact of the coronavirus. First quarter GDP was bad enough at -4.8 percent, but the economy was really only shut down for a couple of weeks in the first quarter. Consumer spending slowed sharply as might be expected with over 90 percent of the population subject to varying degrees of stay-at-home orders. The new weekly jobless claims reports have provided a close to real time tally of the devastation in the labor market, but there have been few opportunities to get a full, economy-wide reading of the overall impact. Last Friday, the ISM manufacturing report for April was, not surprisingly, considerably weaker than March, especially the new orders category, and consumer confidence plunged, but responses to both of those surveys are typically collected in the middle of the month. We also learned that vehicle sales fell sharply, although not as much as expected. That partial view is about to change this week and next, as monthly economic data begins to reflect the full impact of the virus.

Beginning with this Friday’s April employment report, we will begin to get a true, month-long picture of just how economically debilitating the shutdown has been. The unemployment rate is expected to rise to 16 percent, from 4.4 percent in March, and it could turn out to be higher depending on the labor force participation rate. During the following week, we will learn the latest producer and consumer price indices for April, retail sales, and industrial production. All are expected to show significant, perhaps disquieting, declines. The next two weeks will also tell us more about the experience of those communities slowly reopening their economies. Questions as to how quickly consumers will reengage socially, and whether a new frugality will emerge will begin to come into focus, as will the associated risk of an acceleration of infections as social distancing discipline eases.

U.S. equities fell for the second straight week, but the slide was a modest 0.2 percent. And for the third straight week, stocks traveled in a fairly narrow range, although volatility remains elevated after rising for the first time in five weeks. The S&P 500 rose almost 13 percent in April, its best monthly gain in over 30 years. But on Friday, as the new month began, a degree of caution returned after one of the year’s better performers, Amazon (+24 percent ytd) warned of second quarter headwinds and fell 8 percent, and Apple pulled its forward guidance. A reported 160 companies in the S&P 500 have now pulled their guidance. With earnings season now more than half complete, first quarter results are expected to show a year-over-year decline of roughly 14 percent, according to FactSet. Second quarter results are expected to be down 37 percent, and the full year is expected to be down 18 percent. The latter two estimates obviously entail significant amounts of guesswork.

Whereas equity volatility remains elevated, the same is not true for treasury bonds, perhaps not surprisingly as the desire for safety remains high. The MOVE index of implied one-month treasury option volatility has fallen to its lowest level of the past year. During the twelve months through the middle of this past February, the MOVE index averaged a reading of 64. But as the markets started to become unnerved halfway through the month, the index began to surge,

Before The Bell May 4, 2020 ____________________________________________________________________________________________________________________________

____________________________________________________________________________________________________________________________ © 2020 Ameriprise Financial, Inc. All rights reserved. of 13

peaking at 164 on March 9th. Since then, however, the index has receded all the way down to 48, a level last seen in May, 2019. On May 6th of last year, the ten-year treasury note yield stood at 2.47 percent. It closed this past Friday at 0.61 percent. However, since the start of April, the yield has moved little, between a low of 0.57 and a high of 0.77 percent. The two-year note has fluctuated between 0.19 and 0.29 percent, and the thirty-year bond has traveled between a low of 1.16 percent and a high of 1.41.

MORNING MARKET COMMENTARY: Anthony M. Saglimbene, Global market Strategist Quick Take: U.S. futures are pointing to a lower open; European markets are trading in the red; Asia ended lower

overnight; West Texas Intermediate (WTI) oil trading up to $19.33; 10-year U.S. Treasury yield at 0.63%.

Record Cuts To Q2 S&P 500 Earnings: Through Friday, 55% of S&P 500 companies had reported their Q1 earnings results. Blended Q1 earnings per share (EPS) is currently down 13.7% y/y on sales growth of +0.7%. However, that figure showed a modest improvement by the end of last week as positive earnings surprises out of the Energy, Technology, and Health Care sectors helped ease some of the downward profit pressure on the S&P 500. Nearly 150 S&P 500 companies will report their first quarter results over the next five days, making for another busy week on the corporate front.

While the corporate updates from the previous quarter are essential, as investors can further analyze the details of initial impacts from COVID-19 shutdowns, the market is already looking ahead to Q2 and beyond. As the FactSet chart below highlights, Q2'20 bottom-up S&P 500 earnings per share (EPS) estimates collapsed 28.4% during April. Over the last five years, the average decline in bottom-up EPS estimates during the first month of the current quarter is just 1.4%. Last month's record decline in profit expectations for the current quarter was the worst at least since FactSet started recording the data in Q1 2002. The previous largest monthly decline in current-quarter EPS estimates was in Q1 2009, where estimates plummeted 20.6%.

Bottom line: Q2 earnings estimates in April fell aggressively as Q1 profits have come in very weak, and most companies have decided to forgo providing forward guidance. As a result, analysts have slashed their expectations for the current quarter considering much of the global economy was locked down in April and unable to source, manufacture, ship, and consume as it usually would. We expect Q2 profit estimates to move around quite a bit in May and June, as more details/evidence emerge on how the world reopens for business.



The FactSet table below provides more Q2 earnings expectations detail for each S&P 500 sector as well as its average profit revision for the first month of the quarter. The first standout point to us is that most cyclical sectors are expected to see very significant profit declines in Q2, led by Energy and Consumer Discretionary. Secondly, and simply on a relative basis, analysts expect Q2 earnings to holdup better across the Technology and Health Care sectors. Combined, these two sectors account for 41% of the S&P 500's market capitalization. In our view, both industries have longer-term secular trends that could help them weather the near-term uncertainty in profit outlooks. It is likely one reason both sectors are down only modestly in 2020, and the number one and two performing sectors this year, respectively.

As we have communicated for several weeks in these pages, reinforced in the recently updated Quarterly Capital Market Digest (QCMD) report, and highlighted through our new S&P 500 year-end target forecasts, investors should keep their return expectations modest for now.

In our view, the market needs some real improvement on the economic and corporate front before it could march materially higher from here. Over the near-term, it is unlikely any of the economic or corporate data will instill much confidence. However, as more of the country reopens, we monitor the effects of social distancing on consumption, and news of coronavirus vaccines develop, the situation could change. For now, markets look content with trading in a rangebound pattern, and as long as our health crisis doesn't darken over the coming weeks.

Asia-Pacific: Asian equities finished lower on Monday. According to Reuters, Japan Prime Minister Shinzo Abe said he would extend his country's national state emergency until May 31st. Mr. Abe said he could lift the order sooner, but he would lean on health experts to decide. However, the government is considering allowing parks, museums, libraries, and other public facilities to reopen.

Photos of North Korean leader Kim Jong Un surfaced over the weekend, helping authenticate the dictator's whereabouts. In a related note, North and South Korea exchanged gunfire at the Demilitarized Zone on Sunday, though U.S. Secretary of State said the shots were likely accidental, per Reuters.

Europe: Most markets across the region are trading in the red at midday. In a quarterly survey of UK CFOs, Deloitte found Britain's largest firms expect the coronavirus to reduce revenue by 22% in 2020. Overall risk appetite among U.K. financial officers is similar to the 2008/2009 financial crisis, with most expecting business conditions to improve to pre-pandemic levels in Q2'21. Today, CFOs are focused on cost control, preserving cash, selling assets, and reducing debt/leverage.

U.S.: Equity futures are pointing to a lower open. Here's a quick news rundown to start your morning: U.S./China trade tensions keeping market sentiment cautious at the start of the week. Stocks

were pressured on Friday after President Trump accused China of concealing the coronavirus outbreak and where it originated. On Sunday, the president told Fox News, "we have a very complicated game going on" with China. Secretary of State Mike Pompeo was more direct, telling ABC News yesterday there was a significant amount of evidence the coronavirus originated in a virus lab in Wuhan and Beijing concealed its origin. Other reports over the weekend suggest Beijing also limited exports of medical supplies to other countries and downplayed the severity of the disease. The backlash on how China handled the outbreak has quickly grown into global criticism/pressure of how the country dealt with the crisis during its initial days.



The fast track development of coronavirus vaccines has been reduced to 14. Senior White House officials told NBC News the number of potential coronavirus vaccine candidates under development that remains viable has come down from 93 to 14. Officials said the 14 vaccines would undergo additional testing over the next two weeks, with 6-8 expected to make the next round of clinical trials, per FactSet. The goal could see three or four move to final testing and potentially be cleared for use early next year. As Bloomberg noted last week, "Operation Warp Speed" aims to combine pharmaceutical companies, government, and military knowledge/operations in helping speed the development of a vaccine. Under the government program, taxpayers would shoulder the bulk of the cost for development.

Along with a barrage of earnings reports this week, April economic data will be closely watched. On Tuesday, ISM nonmanufacturing data is likely to show the services sector plunged in April, putting the index into a contraction for the first time since December 2009. Factory orders (today), the trade deficit (Tuesday), and Q1 productivity (Thursday) are other economic measures that are likely to show a challenging environment. But it's the April nonfarm payrolls report on Friday that will grab the headlines. FactSet estimates call for 22 million job losses in April after 701K jobs were lost in March. Economists expect the unemployment rate climbed to 16.1% last month from 4.4% in March. As we have commented on for several weeks, the April data will be historically terrible, but to some degree, the markets have braced for it already. Although markets could tremble some as the economic data continues to pour in, government and monetary stimulus have helped backstop some of the worst-case outcomes. The real question for the market now is how quickly the economy reopens and whether May kicks off an economic restart or looks more like April did.

WORLD CAPITAL MARKETS 5/4/2020 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 -2.81% -11.83% 2,830.7 DJSTOXX 50 (Europe) -3.18% -23.59% 2,834.8 Nikkei 225 (Japan) Closed -16.26% 19,619.4 Dow Jones -2.55% -16.26% 23,723.7 FTSE 100 (U.K.) 0.15% -22.53% 5,771.8 Hang Seng (Hong Kong) -4.18% -16.06% 23,613.8 NASDAQ Composite -3.20% -3.75% 8,604.9 DAX Index (Germany) -3.14% -20.59% 10,520.7 Korea Kospi 100 -2.68% -13.56% 1,895.4 Russell 2000 -3.83% -24.11% 1,260.5 CAC 40 (France) -3.43% -25.51% 4,415.5 Singapore STI -2.31% -19.93% 2,563.7 Brazil Bovespa -3.20% -30.39% 80,506 FTSE MIB (Italy) -2.72% -26.79% 17,209.0 Shanghai Comp. (China) Closed -6.23% 2,860.1 S&P/TSX Comp. (Canada) -1.09% -13.31% 14,620.3 IBEX 35 (Spain) -2.32% -28.54% 6,761.4 Bombay Sensex (India) -5.94% -22.89% 31,715.4 Mexico IPC -1.08% -15.93% 36,470.1 MOEX Index (Russia) -0.93% -13.52% 2,625.9 S&P/ASX 200 (Australia) 1.41% -19.02% 5,319.8 Note: International market returns shown on a local currency basis. Equity index data is total return, inclusive of dividends.

Global % chg. % YTD Value Developed International % chg. %YTD Value Emerging International % chg. %YTD ValueMSCI All-Country World Idx -2.17% -14.65% 478.6 MSCI EAFE -1.32% -18.71% 1,635.8 MSCI Emerging Mkts -0.88% -17.29% 916.8

S&P 500 Sectors % chg. % YTD Value Commodities Communication Services -1.56% -6.95% 168.0 Equity Income Indices % chg. % YTD Value Futures & Spot (Intra-day) % chg. % YTD ValueConsumer Discretionary -4.61% -7.20% 911.7 JPM Alerian MLP Index -4.81% -41.06% 128.6 CRB Raw Industrials 0.00% -8.75% 412.2 Consumer Staples -1.18% -7.86% 590.5 FTSE NAREIT Comp. TR -3.46% -19.56% 17,175.0 NYMEX WTI Crude (p/bbl.) -0.56% -67.79% 19.7 Energy -6.00% -39.51% 272.3 DJ US Select Dividend -3.48% -25.28% 1,711.4 ICE Brent Crude (p/bbl.) 0.04% -59.92% 26.5 Financials -3.32% -27.87% 365.8 DJ Global Select Dividend -2.04% -31.68% 159.0 NYMEX Nat Gas (mmBtu) 4.60% -9.68% 2.0 Health Care -2.08% -3.67% 1,137.9 S&P Div. Aristocrats -2.88% -17.61% 2,527.3 Spot Gold (troy oz.) -0.06% 12.00% 1,699.4 Industrials -2.98% -23.04% 526.2 Spot Silver (troy oz.) -1.01% -16.96% 14.8

Materials -2.17% -16.67% 319.5 LME Copper (per ton) -1.54% -17.37% 5,081.0 Real Estate -3.24% -14.42% 203.8 Bond Indices % chg. % YTD Value LME Aluminum (per ton) -0.68% -18.65% 1,449.1 Technology -2.92% -2.69% 1,561.7 Barclays US Agg. Bond -0.12% 4.86% 2,333.1 CBOT Corn (cents p/bushel) -1.33% -21.63% 314.3 Utilities -2.44% -12.89% 283.6 Barclays HY Bond -0.18% -8.92% 1,988.1 CBOT Wheat (cents p/bushe -1.16% -9.41% 510.5

Foreign Exchange (Intra-day % chg. % YTD Value % chg. % YTD Value % chg. % YTD ValueEuro (€/$) -0.44% -2.50% 1.09 Japanese Yen ($/¥) 0.01% 1.60% 106.90 Canadian Dollar ($/C$) 0.14% -7.67% 1.41British Pound (£/$) -0.65% -6.28% 1.24 Australian Dollar (A$/$) -0.06% -8.65% 0.64 Swiss Franc ($/CHF) -0.38% 0.16% 0.97Data/Price Source: Bloomberg. Equity Index data is total return, inclusive of dividends, where applicable.



BY THE NUMBERS: ECONOMIC ACTUALS AND FORECAST:

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 10.7% Underweight - 2.0% 8.7% 6) Health Care 14.9% Overweight +3.0% 17.9%

2) Consumer Discretionary 9.9% Overweight +2.0% 11.9% 7) Industrials 8.4% Equalweight - 8.4%

3) Consumer Staples 7.6% Equalweight - 7.6% 8) Information Technology 25.7% Equalweight - 25.7%

4) Energy 2.7% Equalweight - 2.7% 9) Materials 2.4% Equalweight - 2.4%

5) Financials 11.2% Underweight - 3.0% 8.2% 10) Real Estate 3.0% Overweight +1.0% 4.0%

11) Utilities 3.5% Underweight - 1.0% 2.5%

As of: March 31, 2020

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 55.7% Overweight +7.1% 62.8% 5) Latin America 1.0% Equalweight - 1.0%

2) Canada 2.7% Equalweight - 2.7% 6) Asia-Pacific ex Japan 14.4% Equalweight - 14.4%

3) United Kingdom 4.2% Underweight - 2.0% 2.2% 7) Japan 7.2% Underweight - 2.0% 5.2%

4) Europe ex U.K. 13.7% Underweight - 2.0% 11.7% 8) Middle East / Africa 1.1% Underweight - 1.1% -

As of: March 31, 2020

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

Real GDP (YOY) 1.6% 2.4% 2.9% 2.3% -5.5% 3.8% 2.1% 2.1% -4.8% -40.0% 30.0%Unemployment Rate 4.7% 4.1% 3.9% 3.5% 9.5% 5.0% 3.5% 3.5% 4.4% 11.0% 11.0%CPI (YoY) 1.3% 2.1% 2.4% 1.8% 0.9% 2.2% 1.8% 2.0% 1.5% 0.2% 0.3%Core PCE (YoY) 1.7% 1.6% 1.9% 1.6% 1.4% 1.6% 1.7% 1.6% 1.8% 1.3% 1.1%

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

Please note: Due to the very dynamic nature of current economic conditions economic forecasts may change measurably and quickly.

Quarterly

April 29, 2020



THE WEEK AHEAD: Russell T. Price, CFA, Chief Economist Through last Friday, 283 or 56% of S&P 500 companies, had reported their results for the first quarter. Earnings

growth for the period, which started the year forecast to rise by 4.8% over year-ago levels, is now on trend to see a decline of 14.6%, according to FactSet. This week, another 148 S&P 500 constituents (including 2 Dow Jones Industrials Average members) are on the docket. All numbers mentioned in this commentary, as well as those depicted in the chart at right, are sourced from FactSet.

Earnings estimates beyond Q1 are also still falling fast, even though many companies are suspending their guidance given the uncertainty of the virus and the challenges of restarting economic activity. Since the year began, 2020 S&P 500 EPS estimates are now down $46, to $131.30. Consensus estimates for 2021 are also down $28.30 since January 6th, to a current $168.46. Full-year EPS for 2019, by contrast were $164.38.

Five sectors account for all of the downside pressure on Q1 results at this time. As can be seen in the chart at left, the Consumer Discretionary, Financials, Energy, Industrials and Materials, are each seeing very negative yr/yr comparisons, while the Communication Services, Health Care, Technology, Real Estate, Consumer Staples, and Utilities sectors currently offer positive blended growth rates for Q1. Please see page 7 of this report for added detail on earnings estimates.

The Economic Calendar: The economic calendar is dominated by the employment picture this week. The Labor Department’s monthly Employment Report for April will be released on Friday, and the ADP report on Wednesday will offer a preview of such. Both reports will be historically bad with nonfarm payrolls predicted to drop by over 21 million and the unemployment rate forecast to easily exceed its worst level ever. The Labor Department has produced an “Unemployment Rate” since 1948 with a current record high of 10.8%, as measured in the fourth quarter of 1982. According to Bloomberg, forecasters currently predict an unemployment rate for April of 16%. As we’ve noted on a number of occasions previously, the number could be notably lower given the manner in which unemployment is measured, i.e., people must be activity looking for work to be considered unemployed.

We know from new unemployment claims that about 30 million Americans have lost their job over the last six weeks. Since data for the report is obtained during the week that contains the 12th of each month, Friday’s report will not fully reflect the total number of jobs lost.

On Tuesday, the ISM’s Non-manufacturing Index for April is due out. As was the case with the ISM Manufacturing Index released last Friday, and both measures in March, the report’s headline Index is likely to overstate actual conditions due to supplier delivery delays. In last Friday’s ISM manufacturing report, new orders (with a reading of 27.1) and production volumes (27.5) both fell to record levels but the headline business activity Index declined to just 41.5 due to a sharp increase in the supplier deliveries component (with a reading of 72).

May 4 5 6 7 8Factory Orders ISM Non-Manufacturing Index ADP Employment Estimate Initial Jobless Claims Employment Report

Auto Sales - Canada Trade Balance Retail Sales - Eurozone Nonfarm Productivity Wholesale Inventories

Industrial Production - Brazil Monetary Policy - Brazil Unit labor Costs Home Building - Canada

Challenger Layoff Notices Employment - Canada

Consumer Credit

Trade - China

Industrial Production - Germany

Retail Sales - Italy



Where Market Fundamentals Stand Heading into The Week:

S&P 500 Trailing and Forward P/E valuations: Source: FactSet Please note: Although we try to maintain consistency as much as possible, Price to Earnings (P/E) ratios may differ modestly from once source to another. Most notably, P/E numbers can often show their most notable differences during an earnings release season as some sources may still use the last full ‘actual’ earnings number (for instance, currently Q4 trailing 12-month earnings per share) while others use earnings per share that are updated for Q1 using a combination of actual and estimated earnings per share. The calculation of earnings (operating earnings versus ‘as reported’ or GAAP) also often differs modestly from one data source to another due to the proprietary use of calculation methodologies. The “average” shown in the charts below represent averages for the period shown.

Please note: The consensus earnings estimates shown below should NOT be relied upon. In this VERY dynamic and rapidly changing environment, analysts have very likely not had time to fully adjust their forecasts for the reality of the situation, and they may not for some time. Ultimately, we believe Q1 aggregate earnings for S&P 500 companies are still likely to be lower than that shown below and significantly lower in Q2. By comparison, S&P 500 earnings per share were negative in just one quarter during the Great Recession, posting an EPS loss of $2.42 in Q4-2008.

Consensus Earnings Estimates: Source: FactSet

S&P 500 Earnings Estimates 2015 2016 2017 2021

5/4/2020 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 $38.72 $41.13 $42.88 $41.32 $38.80 $41.59 $42.21 $41.78 $33.55 $25.77 $33.83 $38.15

change over last week $0.80 -$2.13 -$1.42 -$0.75

yr/yr 25.4% 25.4% 27.8% 13.7% 0.2% 1.1% -1.6% 1.1% -13.5% -38.0% -19.9% -8.7%

qtr/qtr -1% 6% 4% -4% -6% 7% 1% -1% -20% -23% 31% 13%

Trailing 4 quarters $$ $118.67 $119.64 $133.50 $141.41 $149.74 $159.07 $164.05 $164.13 $164.59 $163.92 $164.38 $159.13 $143.31 $134.93 $131.30 $168.46

yr/yr -0.3% 0.8% 11.6% 22.9% 0.2% -20.1% 28.3%

Implied P/E based on a S&P 500 level of: 2831 17.2 17.8 19.8 21.0 21.6 16.8

2019 20202018



ECONOMIC NEWS OUT TODAY: Economic Releases for Monday, May 4, 2020. All times Eastern. Consensus estimates via Bloomberg. Time Period Release Consensus Est. Actual Prior Revised to 10:00 AM MAR Factory Orders (MoM) -9.2% 0.0%

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

Treasury Yields Stable on Fed Treasury Purchases Treasury yields start the week mixed with yields in the belly moving lower and yields on both the short and long-end

of the curve moving higher ahead of a week offering heavy cash management bill supply as well as 3-year, 10-year and 30-year auctions. The Fed’s holdings of Treasuries rose from $2.4 trillion at the end of February to $3.9 trillion on April 29. Fed bond buying largely offset new Treasury supply, yet markets define the clearing level when absorbing U.S. Treasury issuance at auction.

Credit Takes Two Paths After the Fed announced support for credit markets, bond investors stepped in to provide support for corporate

borrowers. Investment grade issuance is up more than 80% after new supply surpassed $767 billion year to date through April, compared to just $414 billion year to date in 2019. In high yields new issuance failed to reach $5 billion in March and rebounded to $37 billion in April.

We see the divide between Bloomberg Barclays U.S. Investment Grade Corporate Index spreads and Bloomberg Barclays BB-rated Corporate spreads reflects a growing divide between lower leveraged, more resilient companies and those at even the highest quality bucket of high yield (see chart below left). After a bold response to support announced by the Fed, markets are refocusing on the realities faced by activity that is likely reflected in the Bureau of Labor Services April Payroll report scheduled for Friday expected to reach mid-teen levels. Fed purchases have yet begun to occur, and the scope of support remains uncertain, after bond markets quickly priced in robust Fed engagement in our view. With unemployment support offsetting some of the consumer impact in the near-term, uncertainty remains both around how consumer consumption may rebound and the chill it creates for businesses planning as well. Toward that end, we believe companies with greater liquidity and lower leverage levels are better positioned to successfully weather headwinds that have yet to peak. We look for high yield spreads to widen further relative to investment grade and for even lower rated credit to leak wider as the depth of the slowdown is defined though the second quarter.

Today, the we recommend investors move up in quality given the narrowing give-up for trading into higher quality positions. In the months ahead we anticipate a better buying opportunity likely arises as the length of a recovery becomes clear, challenging the ability for speculative companies to remain solvent and endure.



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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



The content in this report is authored by American Enterprise Investment Services Inc. (“AEIS”) and distributed by Ameriprise Financial Services, Inc. (“AFSI”) to financial advisors and clients of AFSI. AEIS and AFSI are affiliates and subsidiaries of Ameriprise Financial, Inc. Both AEIS and AFSI are member firms registered with FINRA and are subject to the objectivity safeguards and disclosure requirements relating to research analysts and the publication and distribution of research reports. The “Important Disclosures” below relate to the AEIS research analyst(s) that prepared this publication. The “Disclosures of Possible Conflicts of Interest” section, where applicable, relates to the conflicts of interest of each of AEIS and AFSI, their affiliates and their research analysts, as applicable, with respect to the subject companies mentioned in the report. Each of AEIS and AFSI have implemented policies and procedures reasonably designed to ensure that its employees involved in the preparation, content and distribution of research reports, including dually registered employees, do not influence the objectivity or timing of the publication of research report content. All research policies, coverage decisions, compensation, hiring and other personnel decisions with respect to research analysts are made by AEIS, which is operationally independent of AFSI. IMPORTANT DISCLOSURES As of March 31, 2020 The views expressed regarding the company(ies) and sector(s) featured in this publication reflect the personal views of the research analyst(s) authoring the publication. Further, no part of research analyst compensation is directly or indirectly related to the specific recommendations or views contained in this publication. A part of a research analyst’s compensation may be based upon overall firm revenue and profitability, of which investment banking, sales and trading, and principal trading are components. No part of a research analyst’s compensation is based on a specific investment banking transaction, nor is it based on sales, trading, or principal trading. A research analyst may have visited the material operations of one or more of the subject companies mentioned in this research report. No payment was received for the related travel costs. Additional information and current research disclosures on individual companies mentioned in this research report are available on our website at ameriprise.com/legal/disclosures in the Additional Ameriprise research disclosures section, or through your Ameriprise financial advisor. You may also submit a written request to Ameriprise Financial, Inc., 1441 West Long Lake Road, Troy MI, 48098. Independent third-party research on individual companies is available to clients at ameriprise.com/research-market-insights. SEC filings may be viewed at sec.gov. Tactical asset class recommendations mentioned in this report reflect The Ameriprise Global Asset Allocation Committee’s general view of the financial markets, as of the date of the report, based on then current conditions. Our tactical recommendations may differ materially from what is presented in a customized long-term financial plan or portfolio strategy. You should view our recommendations in conjunction with a broader long-term portfolio strategy. Not all products, services, or asset classes mentioned in this report may be available for sale at Ameriprise Financial Services, Inc. Please consult with your financial advisor. Diversification and Asset Allocation do not assure a profit or protect against loss. RISK FACTORS Dividend and interest payments are not guaranteed. The amount of dividend payment, if any, can vary over time and issuers may reduce or eliminate dividends paid on securities in the event of a recession or adverse event affecting a specific industry or issuer. Should a company be unable to pay interest

on a timely basis a default may occur and interruption or reduction of interest and principal occur. Investments in a narrowly focused sector may exhibit higher volatility than investments with broader objectives and is subject to market risk and economic risk. Income Risk: We note that dividends are declared solely at the discretion of the companies’ boards of directors. Dividend cuts or eliminations will likely negatively impact underlying company valuations. Published dividend yields are calculated before fees and taxes. Dividends paid by foreign companies to ADR holders may be subject to a withholding tax which could adversely affect the realized dividend yield. In certain circumstances, investors in ADR shares have the option to receive dividends in the form of cash payments, rights shares or ADR shares. Each form of dividend payment will have different tax consequences and therefore generate a different yield. In some instances, ADR holders are eligible to reclaim a portion of the withholding tax. International investing involves increased risk and volatility due to political and economic instability, currency fluctuations, and differences in financial reporting and accounting standards and oversight. Risks are particularly significant in emerging markets. Market Risk: Equity markets in general could sustain significant volatility due to several factors. As we have seen recently, both economic and geopolitical issues could have a material impact on this model portfolio and the equity market as a whole. Quantitative Strategy Risk: Stock selection and portfolio maintenance strategies based on quantitative analytics carry a unique set of risks. Quantitative strategies rely on comprehensive, accurate and thorough historical data. The Ameriprise Investment Research Group utilizes current and historical data provided by third-party data vendors. Material errors in database construction and maintenance could have an adverse effect on quantitative research and the resulting stock selection strategies. PRODUCT RISK DISCLOSURES Exchange Traded Funds (ETF) trade like stocks, are subject to investment risk and will fluctuate in market value. For additional information on individual ETFs, see available third-party research which provides additional investment highlights. SEC filings may be viewed at sec.gov All fixed income securities are subject to a series of risks which may include, but are not limited to: interest rate risk, call risk,



refunding risk, default risk, inflations risk, liquidity risk and event risk. Please review these risks with your financial advisor to better understand how these risks may affect your investment choices. In general, bond prices rise when interest rates fall and vice versa. This effect is usually more pronounced for longer-term securities. This means you may lose money if you sell a bond prior to maturity as a result of interest rate or other market movement. Any information relating to the income or capital gains tax treatment of financial instruments or strategies discussed herein is not intended to provide specific tax advice or to be used by anyone to provide tax advice. Investors are urged to seek tax advice based on their particular circumstances from an independent tax professional. A real estate investment trust or REIT is a company that owns and operates income-producing real estate. In addition, some REITs participate in the financing of real estate. To qualify as a REIT, a company must: I) invest at least 75% of its total assets in real estate assets, II) generate at least 75% of its gross income from real property or interest, and III) pay at least 90% of its taxable income to shareholders in the form of distributions. A company that qualifies as a REIT is permitted to deduct the distributions paid to shareholders from its corporate taxes. Consequently, many REITs target to payout at least 100% of taxable income, resulting in virtually no corporate taxes. An investment in a REIT is subject to many of the same risks as a direct investment in real estate including, but not limited to: Illiquidity and valuation complexities, redemption restrictions, distribution and diversification limits, tax consequences, fees, defaults by borrowers or tenants, market saturation, balloon payments, refinancing, bankruptcy, decreases in market rates for rents and other economic, political, or regulatory occurrences affecting the real estate industry. Ratings are provided by Moody’s Investors Services and Standard & Poor’s. Non-Investment grade securities, commonly known as "high-yield" or "junk" bonds, are historically subject to greater risk of default, including the loss of principal and interest, than higher-rated bonds, which may result in greater price volatility than experienced with a higher-rated issue. Securities offered through AFSI may not be suitable for all investors. Consult with your financial advisor for more information regarding the suitability of a particular investment. For further information on fixed income securities please refer to FINRA’s Smart Bond Investing at FINRA.org, MSRB’s Electronic Municipal Market Access at emma.msrb.org, or Investing in Bonds at investinginbonds.com. DEFINITIONS OF TERMS Agency – Agency bonds are issued by Government Sponsored Enterprises (GSE), but are NOT direct obligations of the U.S. government. Common GSE’s are the Federal Home Loan Mortgage Corp. (Freddie Mac) Federal National Mortgage Association (Fannie Mae) and Federal Home Loan Bank

(FHLB). Beta: A measure of the risk arising from exposure to general market movements as opposed to company-specific factors. Betas in this report, unless otherwise noted, use the S&P 500 as the market benchmark and result from calculations over historic periods. A beta below 1.0, for example, can suggest the equity has tended to move with lower volatility than the broader market or, due to company-specific factors, has had higher volatility but generally low correlations with the overall market. Corporate Bonds – Are debt instruments issued by a private corporation. Non-Investment grade securities, commonly known as “high-yield” or “junk” bonds, are historically subject to greater risk of default, including the loss of principal and interest, than higher-rated bonds, which may result in greater price volatility than experienced with a higher-rated issue. Mortgage Backed Securities – Bonds are subject to prepayment risk. Yield and average lives shown consider prepayment assumptions that may not be met. Changes in payments may significantly affect yield and average life. Please contact your financial advisor for information on CMOs and how they react to different market conditions. Municipal Bonds – Interest income may be subject to state and/or local income taxes and/or the alternative minimum tax (AMT). Municipal securities subject to AMT assume a “nontaxable” status for yield calculations. Certain municipal bond income may be subject to federal income tax and are identified as “taxable”. Gains on sales/redemptions of municipal bonds may be taxed as capital gains. If the bonds are insured, the insurance pertains to the timely payment of principal (at maturity) and interest by the insurer of the underlying securities and not to the price of the bond, which will fluctuate prior to maturity. The guarantees are backed by the claims-paying ability of the listed insurance company. Treasury Securities – There is no guarantee as to the market value of these securities if they are sold prior to maturity or redemption. Price/Book: A financial ratio used to compare a company’s market share price, as of a certain date, to its book value per share. Book value relates to the accounting value of assets and liabilities in a company’s balance sheet. It is generally not a direct reflection of future earnings prospects or hard to value intangibles, such as brand, that could help generate those earnings. Price/Earnings: An equity valuation multiple calculated by dividing the market share price, as of a certain date, by earnings per share. Trailing P/E uses the share price divided by the past four-quarters’ earnings per share. Forward P/E uses the share price as of a certain date divided by the consensus estimate of the future four-quarters’ EPS. Price/Sales: An equity valuation multiple calculated by dividing the market share price, as of a certain date, by the company’s sales per share over the most recent year. INDEX DEFINITIONS



An index is a statistical composite that is not managed. It is not possible to invest directly in an index. Definitions of individual indices mentioned in this report are available on our website at ameriprise.com/legal/disclosures in the Additional Ameriprise research disclosures section, or through your Ameriprise financial advisor. DISCLAIMER SECTION Except for the historical information contained herein, certain matters in this report are forward-looking statements or projections that are dependent upon certain risks and uncertainties, including but not limited to, such factors and considerations as general market volatility, global economic and geopolitical impacts, fiscal and monetary policy, liquidity, the level of interest rates, historical sector performance relationships as they relate to the business and economic cycle, consumer preferences, foreign currency exchange rates, litigation risk, competitive positioning, the ability to successfully integrate acquisitions, the ability to develop and commercialize new products and services, legislative risks, the pricing environment for products and services, and compliance with various local, state, and federal health care laws. See latest third-party research reports and updates for risks pertaining to a particular security. This summary is based upon financial information and statistical data obtained from sources deemed reliable, but in no way is warranted by Ameriprise Financial, Inc. as to accuracy or completeness. This is not a solicitation by Ameriprise Financial Services, Inc. of any order to buy or sell securities. This summary is based exclusively on an analysis of general current market conditions, rather than the suitability of a specific proposed securities transaction. We will not advise you as to any change in figures or our views. Past performance is not a guarantee of future results. Investment products are not federally or FDIC-insured, are not deposits or obligations of, or guaranteed by any financial institution, and involve investment risks including possible loss of principal and fluctuation in value. AFSI and its affiliates do not offer tax or legal advice. Consumers should consult with their tax advisor or attorney regarding their specific situation. Ameriprise Financial Services, Inc. Member FINRA and SIPC.

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Transcript of Before the Bell - cdn.ameriprisecontent.com€¦ · 4/5/2020 · U.S. equities fell for the second...