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S&P 500 Pure Valueprice 50-day moving average

Data Source: Truist IAG, FactSet. Past performance does not guarantee future results.

The foundation for outperformance for value and cyclicals over a 12-month window remains in place Catch up potential after an extended period of underperformance

- Growth outperformance appears to have peaked last fall after a 14-year outperformance cycle

Above-trend economic growth that provides greater upside to earnings of cyclically-exposed companies

We favor the pure value style, which has a greater weighting to financials and energy- Lagging the S&P 500 by more than 30% over the past three years- Only 3% above its 2018 highs- Relative valuations remain attractive- Earnings trends improving relative to the broader market

Financials: leveraged to economic improvement; the sector only just recently broke above its 2007 high and has trailed the broader market by 25% over the past three years, while relative valuations remain attractive.

Energy: under-loved sector that has underperformed the broader market by 67% over the past three years, while valuations remain attractive, and earnings estimates are rising.

Small caps (as represented by the S&P 600): became very extended on a short-term basis, but still trailing the S&P 500 by 10% over the past three years. Earnings have been the primary driver of returns over the past six months and small caps still trade at a discount relative to the S&P 500.

Please see following pages for charts and support

Market Perspective: Pullback in value and cyclicals presents an opportunity Keith Lerner, CFA, CMTChief Market Strategist Managing Director, Portfolio & Market Strategy

What happened?After tremendous outperformance over the past six months, economically-sensitive areas of the market, such as the value style, financials, energy, and small caps are down anywhere from 4% to 10% from recent highs.

Our take—opportunity to addOn March 15, we laid out the weight of the evidence in our work which indicated that the value style still had upside potential over the next 12 months. We noted then that value was overheated on a short-term basis, but that we would use any short-term setbacks to add to the position, with a bias for the pure value style.

Given the aforementioned pullback, we recommend investors that are underweight cyclical segments of the market, such as pure value, to use this opportunity to add to positions.

March 25, 2021

Investment and Insurance Products: • Are not FDIC or any other Government Agency Insured • Are not Bank Guaranteed • May Lose Value

We view the recent pullback as an opportunity to add to value, cyclicals and small caps as primary trends still appear higher

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S&P 500 Pure Valueprice 50-day moving average

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S&P Financialsprice 50-day moving average

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S&P Energy

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S&P Small Cap

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Data Source: Truist IAG, FactSet

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Large cap growth price relative to large cap value

~14-year growth outperformancecycle begins

After a roughly 14-year outperformance cycle, growth’s dominance relative to value peaked in the fall of 2020 We still see more upside in value relative to growth over the next 12 months given value’s dramatic longer-term underperformance as well as the U.S. economy being on the cusp of the best growth in more than 35 years.

Data Source: Truist IAG, FactSet. Past performance does not guarantee future results.

Large cap growth = Russell 1000 Growth; Large cap value = Russell 1000 Value

Data Source: Truist IAG, FactSet. Past performance does not guarantee future results.

Pure Value is represented by the Invesco S&P 500 Pure Value ETF

Pure value style: We still see upside over next 12 months

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Invesco S&P 500 Pure Value price

Pure value is only 3% above 2018 levels

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Invesco S&P 500 Pure Value rolling 3-year performance relative to the S&P 500

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Pure Value's forward relative P/E is still at the lower end of its trading range

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Pure Value's recent outperformance supported by earnings

Pure Value price relative to S&P 500 (l-axis)Pure Value forward earnings relative to S&P 500 (r-axis)

Financials & energy: Catch up potential remains after severe underperformance over the past three years

Data Source: Truist IAG, FactSet. Past performance does not guarantee future results

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S&P small cap rolling 3-month performance relative to the S&P 500

Small caps extended to upside relative to large caps

Small caps extended to downside relative to large caps

Small caps pulling back after becoming extended short-term; but still trailing large caps by 10% over past three years.

Data Source: Truist IAG, FactSet. Past performance does not guarantee future results

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S&P small cap rolling 3-year performance relative to the S&P 500

Small caps extended to upside relative to large caps

Small caps extended to downside relative to large caps

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S&P small caps’ price-to-earnings ratio relative to large caps lowest since 2001

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Small caps cheap relative to large caps

Despite strong returns over the past six months, relative valuations for small caps remain attractive, aided by positive earnings trends.

Data Source: Truist IAG, FactSet. Small Caps = S&P 600, Large Caps = S&P 500. Investments in small-sized companies may involve greater risks than in those of larger, better known companies. Returns on investments in stocks of small companies could trail the returns on investments in stocks of larger companies. Past performance does not guarantee future results.

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Small caps' forward earnings trends relative to large caps have rebounded sharply

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Asset classes are represented by the following indexes. An investment cannot be made directly into an index.

S&P 500 Index is comprised of 500 widely-held securities considered to be representative of the stock market in general.

S&P 500 Pure Value Index measures the performance of securities that exhibit strong value characteristics in the S&P 500 Index.

S&P 600 Index measures the performance of the small-cap segment of the U.S. equity market. It is composed of small-cap companies that meet certain investability and financial viability criteria.

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