before the bell · 30/03/2020 · after the close, steep rebounds in stock prices are common...

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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 30, 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 staged a powerful rally last week on hopes that the government’s response to the coronavirus will be enough to keep the economy afloat. The S&P 500 surged higher by 10.3 percent, including a 3.4 percent decline on Friday, after Washington’s $2T stimulus package, the equivalent of almost 10 percent of 2019 U.S. GDP, came into focus. Coupled with the earlier initiatives of the Federal Reserve to unlock funding markets, investors turned more optimistic that the worst-case scenarios for the economy could be averted. It was just the second positive week for stocks in the past six. The S&P 500 is now 25 percent below its February 19th peak, compared to its nadir of -34 percent at the close last Monday.

As welcome as the higher prices are, there remains a level of uncertainty as to whether or not we have seen the bottom of this bear market. Expected volatility remains extremely high. History tells us that we often see rallies in bear markets that ultimately give way to a retest of the previous low. Whether that will occur in this instance, no one can say. The news in the days and weeks ahead will certainly get worse, as the number of infections continues to rise and the data reflects the economic impact. We saw evidence of the later with last week’s flash PMI reports and weekly jobless claims. And we do not know what the full extent of the economic impact of the virus will be. The second quarter, which begins on Wednesday, is lining up to be the weakest of this downturn.

But the fiscal and monetary response has been massive, with the expectation of more to come if necessary. The response overseas in many cases has also been sizeable. By some estimates, a total of $5T in stimulus has been pledged by the G20 countries, or approximately 6 percent of 2019 global GDP. What we can say, and perhaps more importantly for investors, is that stocks are far more attractively priced now than they were before the selloff. Long-term investors should stay invested and focused on their long-term goals. And for those so inclined, the pullback has created an opportunity to rebalance portfolios that now may be underweighted in stocks. History also tells us that markets need time to fully recover from bear markets, in some cases more than a year to get back all that they lost. But ultimately, they do recover as the economy comes back to life. And those who took advantage of the lower prices when confidence may have been is short supply are typically well rewarded.

It likely offers little consolation to know that few equity markets around the globe have been spared in the current selloff, although some Asian markets have fared relatively better. In the aggregate, the rest of the world’s markets, as measured by the MSCI All-Country World Ex-U.S. index, peaked on January 17th. From that date forward, it is lower by 27 percent in dollar terms. At the regional level, the European index is down 26 percent from its U.S. coincident peak of February 19th. At the country level, the German DAX index is down 28 percent. The Japanese Nikkei index had been lower by a similar 31 percent through March 19th., but a 20 percent rally last week has improved its relative standing.

Before The Bell March 30, 2020 ____________________________________________________________________________________________________________________________

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

The MSCI Emerging Markets index is down 27 percent in dollar terms from its January 17th. peak. But the worst of the EM selloff has been felt in Latin America, where the regional index is down 47 percent from its January 2nd. peak, notwithstanding a modest 5 percent rally last week. The Brazilian Bovespa index is down 51 percent in dollar terms from its January 2nd peak, compared to just 38 percent in local currency terms, as the real has depreciated sharply versus the dollar. The MSCI Asia Ex-Japan index is lower by 22 percent from its January peak. The Chinese CSI 300 index is lower by a comparatively modest 14 percent from its comparatively recent March 5th. peak. The South Korean Kospi index, in contrast, is lower by 28 percent, and Taiwan is down 22 percent. The Bloomberg Dollar Spot index is higher on the year by almost 5 percent, even after a 4 percent decline last week, acting as a headwind for unhedged dollar-based investors in foreign markets.

Bond markets continued to unfreeze last week, encouraged by the Fed’s various initiatives. Credit spreads narrowed, the ten-year treasury yield fell from 0.85 to 0.68 percent, and agency mortgage-backed bond yields fell sharply. The yield on ten-year AAA municipal bonds fell by half, from 2.86 to 1.39 percent. Short-term muni yields fell even further. The yield on 30-day commercial paper fell from 1.78 to 1.26 percent. And expected volatility in the treasury market also moved sharply lower. However, high yield primary markets remained inactive last week.

The economic calendar in the week ahead is full, headlined by Friday’s March employment report. The Bloomberg consensus estimates a loss of 100,000 non-farm jobs and a rise in the unemployment rate to 3.8 percent. But keep in mind, this is payroll data as of mid-March. The full impact of the slowdown will not be seen until the April, or even May jobs report. Perhaps more telling will be Thursday’s weekly jobless claims number, estimated once again to total more than 3 million. Also telling will the Conference Board’s consumer confidence index on Tuesday, which is expected to show a sharp decline to levels not seen since 2016. And the March ISM manufacturing report on Wednesday is expected to once again slip into contraction, with particular weakness in new orders.

MORNING MARKET COMMENTARY: Anthony M. Saglimbene, Global market Strategist Quick Take: U.S. futures are pointing to a mixed to slightly higher open; European markets are trading mostly in

the red; Asia ended mixed overnight; West Texas Intermediate (WTI) oil trading at $20.22; 10-year U.S. Treasury yield slumping to 0.65%.

Can The Market Start Building Support From Here? Last week, U.S. stocks posted their best week since the financial crisis in 2008 and experienced a reprieve from the more extreme downside selling pressures. The S&P 500 Index gained over +10.0% last week, as Congress passed a massive stimulus bill, the Fed kept liquidity flowing, and investors attempted to look ahead toward a day where America would return to regular activity.

However, the index closed the week on a sour note and finished Friday lower by roughly 3.5%. The S&P 500 has finished lower in eight of the last nine Fridays, indicating traders are more comfortable lightening their stock positions heading into a weekend of unknown variables related to the coronavirus.

For the Dow Jones Industrials Average, the 20% gain the 30-stock index experienced from its bottom in just three days last week was the fastest price surge since October 1931. However, and as we indicated in last Friday’s After the Close, steep rebounds in stock prices are common during bear markets. As long as trading remains volatile and the macro/fundamental environment is highly uncertain, we believe reading too much into a few days of trading is simply not in your best interest. As the market attempts to find some support, and the end of quarter rebalancing benefits begin to fade, below are a few top-of-mind items to start your week.

As long as the U.S. remains in a health crisis, the market is unlikely to calm down. COVID-19 cases are growing, and at an uneven pace across the country. Social distancing policies, in some regards, are not being taken as seriously as they should, which is also contributing to the viral spread across the country. New York, New Jersey, Connecticut, and Michigan are new “hot spots” for the virus, and these states are likely to face longer than previously stated shelter in place or stay at home orders. It is also improbable America “as a whole” will return to regular activity over the next two to three weeks. This point alone increases the risk that economic and market activity will be volatile, uneven, and unpredictable. The market will look ahead at some point to a place where America is back up and running, but the “when” is still a huge question mark.



Given the significant unknowns at the moment, we suspect traders and programmed trading strategies could keep markets volatile over the near-term. Although market volatility has ebbed lower over the last week or so, back-and-forth trading remains at historically high levels. Until there is greater supporting evidence that the country is stemming the spread of the virus, this is a traders’ market, in our view. Don’t get whip-sawed by the daily moves. Investors should seek to weather the storm by focusing on proper allocation strategies, keeping overall portfolio changes small and looking to high-quality investments that are situated to come out of this crisis in a position of strength. If anything, one should be increasing the quality of their investments in this market.

Nothing about this crisis says it will end quickly. We believe investors should prepare for a gradual recovery and one that produces winners and losers across the market. Earnings estimates have fallen precipitously for the first half of the year. S&P 500 Q1’20 earnings per share (EPS) are expected to decline by 3.5% y/y — down from the +3.3% growth expected at the end of January. Further, Q2’20 S&P 500 EPS analyst estimates have plummeted to a decline of 7.8% y/y, from +4.7% expected growth at the end of January. Bottom line: The market now expects almost no profit growth in 2020, and we believe that expectations may prove too optimistic based on how long parts of America are likely to remain in an economic stop.

As the embedded FactSet chart below highlights, initial jobless claims surged higher last week at an unprecedented rate. While we’ll spare you all the details of the report, the chart below also shows the relationship jobless claims has with the S&P 500 over time. Given how sudden and extreme the job losses were last week as well as our expectations that over time we could see a substantial rebound in claims, the direction of stock prices could remain fluid. This Friday’s March nonfarm payrolls report could hold some sway on directing stock traffic later in the week.

The S&P 500’s December 2018 lows have been tested, and thus far, have held, as highlighted in the FactSet chart below. Also, based on the S&P 500’s 14-day relative strength index, stocks have started to trade in a more normal range. With that said, and based on our comments above, we wouldn’t place too much emphasis on these points, as traders may look to retest the December 2018 lows again. End of quarter portfolio rebalancing has likely put a temporary bid under stocks at the moment. However, it’s a small positive to keep an eye on, especially if time goes by, and the Index doesn’t approach those weaker bounds over the intermediate-term.



Lastly, companies with more aggressive share buyback plans have underperformed over the last few months, as the Ameriprise chart below demonstrates. Over recent weeks, many S&P 500 companies have suspended their share buyback plans. At the same time, investors are growing concerned restrictions contained in the U.S. government's aid package could eventually hinder future corporate buyback strategies for some companies. Corporations have been the largest purchasers of stocks in recent quarters, but this does not necessarily say the companies shares outstanding have declined by a similar amount. Companies that repurchase the largest number of shares often issue the largest number of shares to employees. However, any material/lasting drawdown in share repurchases could be a concern, in our view, espcially if it is not met with a similar contrction in employee share issuance.

On a positive note, however, many S&P 500 companies entered this downturn in a strong financial position. While share buybacks may have helped increase EPS growth, and the reduction of this lever could be negative for investors, corporate America is in the process of again reevaluating their business structure — mostly because they have to.

As companies are forced to review Capex plans, operating efficiency strategies, debt utilization, and labor costs, strong S&P 500 companies could emerge from this crisis in a better fundamental position. Yes, it’s still early to give these considerations more meaningful consideration given the circumstances on the ground today. But this point could become an essential ingredient in helping the market eventually find its support.

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Dec-19 Jan-20 Jan-20 Feb-20 Feb-20 Mar-20

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S&P 500 Buyback Index vs. S&P 500 Index(last 3 months)



Asia-Pacific: Asian equities finished mixed on Monday. Overnight, the People’s Bank of China (PBoC) lowered its seven-day reverse repo rate and injected more liquidity into its markets. The RRR cut was the first since February and the largest since 2015. The PBoC also committed to helping limit the economic pain from COVID-19, and that it would pursue “more moderate flexibility” when it comes to monetary policy.

Beijing also announced fiscal measures to help moderate the damage to its economy from the coronavirus. According to FactSet, China’s government announced it would raise its fiscal deficit ratio, issue special government bonds, increase the scale of special bonds for local governments, and guide lending rates lower. The government also urged for efforts to expand household spending.

Europe: Markets across the region are trading mostly in the red at mid-day. While the coronavirus has been particularly harsh on Italy and Spain, new fatalities slowed for the fourth straight day in Spain and the second consecutive day in Italy. The pace of new infections is also starting to slow in each country. Both countries have enacted very strict lockdowns, which has prompted other European countries to adopt similar strategies to help slow the infection rate and bend their health curves.

U.S.: Equity futures are pointing to a mixed to slightly higher open. Over recent days, markets have benefited from end of quarter rebalancing strategies and following the fastest drawdown in stock prices ever. However, investors should prepare for more volatility once we move through this short-term market dynamic. Here’s a quick news rundown to start your morning:

Stocks are on pace for their worst monthly performance since the financial crisis. For March, Energy is lower by 36.5% on a total return basis, with Financials and Industrials each lower by 20.5%, and 19.4%, respectively. The S&P 500 Index is down 13.8%, while the MSCI World ex USA Index has shed 15.2% this month. But it’s not all bad news for investors. The Barclays Bloomberg U.S. Government Index is higher by +2.8% this month, and areas across Alternatives have seen slightly negative results. Both asset categories have helped blunt the declines in equities this month.

President Trump extended social distancing guidelines until April 30th. On Sunday, the president said his administration would continue with its policies to help slow the spread of the coronavirus and following new projections that millions of Americans could contract the disease. White House social distancing guidelines were previously expected to expire tomorrow. National Institute of Allergy and Infectious Diseases Director Anthony Fauci said yesterday the COVID-19 death toll could approach 100-200K and if America adheres to social distancing policies.

While the ink isn’t even dry on the $2 trillion aid package signed into law last Friday, Congress is already considering another round of stimulus. According to The Hill, Democrats and Republicans are looking at separate proposals for a Phase 4 package that may depend on how long the outbreak lasts and the extent of economic damage. U.S. Treasury Secretary Steven Mnuchin told CBS’s Face the Nation the White House would go back to Congress for additional support if needed.

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WORLD CAPITAL MARKETS 3/30/2020 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 -3.37% -20.95% 2,541.5 DJSTOXX 50 (Europe) -0.55% -27.23% 2,713.6 Nikkei 225 (Japan) -1.57% -18.52% 19,085.0 Dow Jones -4.06% -23.72% 21,636.8 FTSE 100 (U.K.) -0.62% -26.44% 5,476.0 Hang Seng (Hong Kong) -1.32% -17.41% 23,175.1 NASDAQ Composite -3.79% -16.13% 7,502.4 DAX Index (Germany) -0.03% -27.32% 9,629.3 Korea Kospi 100 -0.04% -21.70% 1,717.1 Russell 2000 -4.09% -31.90% 1,132.0 CAC 40 (France) -1.04% -27.66% 4,306.3 Singapore STI -4.45% -24.61% 2,416.2 Brazil Bovespa -5.51% -36.51% 73,429 FTSE MIB (Italy) -1.17% -29.27% 16,625.0 Shanghai Comp. (China) -0.90% -9.93% 2,747.2 S&P/TSX Comp. (Canada) -5.11% -24.98% 12,687.7 IBEX 35 (Spain) -1.91% -30.09% 6,648.4 Bombay Sensex (India) -4.61% -30.85% 28,440.3 Mexico IPC -5.34% -22.21% 33,799.5 MOEX Index (Russia) 0.27% -20.71% 2,407.5 S&P/ASX 200 (Australia) 7.00% -21.20% 5,181.4

Global % chg. % YTD Value Developed International % chg. %YTD Value Emerging International % chg. %YTD ValueMSCI All-Country World Idx -2.40% -22.29% 436.6 MSCI EAFE -0.78% -23.22% 1,549.5 MSCI Emerging Mkts -1.03% -24.14% 842.5 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 -4.09% -19.44% 145.9 Equity Income Indices % chg. % YTD Value Futures & Spot (Intra-day) % chg. % YTD ValueConsumer Discretionary -3.37% -19.59% 790.2 JPM Alerian MLP Index -5.64% -60.37% 86.5 CRB Raw Industrials 0.05% -7.01% 420.1 Consumer Staples -0.72% -14.37% 550.1 FTSE NAREIT Comp. TR 0.01% -23.35% 16,367.7 NYMEX WTI Crude (p/bbl.) -6.18% -66.95% 20.2 Energy -6.93% -51.75% 217.6 DJ US Select Dividend -2.27% -29.47% 1,615.4 ICE Brent Crude (p/bbl.) -8.78% -65.55% 22.7 Financials -3.31% -31.27% 349.7 DJ Global Select Dividend -0.43% -35.23% 151.9 NYMEX Nat Gas (mmBtu) -2.39% -25.49% 1.6 Health Care -2.41% -16.25% 990.7 S&P Div. Aristocrats -2.49% -24.39% 2,319.5 Spot Gold (troy oz.) -0.57% 6.70% 1,619.0 Industrials -4.33% -27.23% 498.0 Spot Silver (troy oz.) -3.34% -21.67% 14.0 Materials -3.81% -27.49% 278.3 LME Copper (per ton) -0.13% -22.22% 4,782.5 Real Estate -0.07% -18.86% 193.8 Bond Indices % chg. % YTD Value LME Aluminum (per ton) 0.76% -14.89% 1,516.0 Technology -4.61% -13.88% 1,383.0 Barclays US Agg. Bond 0.43% 2.67% 2,284.4 CBOT Corn (cents p/bushel) -0.22% -12.54% 345.3 Utilities 0.52% -13.12% 283.1 Barclays HY Bond 1.60% -13.97% 1,877.9 CBOT Wheat (cents p/bushel) 0.70% 2.40% 575.3

Foreign Exchange (Intra-day) % chg. % YTD Value % chg. % YTD Value % chg. % YTD ValueEuro (€/$) -0.98% -1.61% 1.10 Japanese Yen ($/¥) -0.18% 0.43% 108.14 Canadian Dollar ($/C$) -1.18% -8.21% 1.42British Pound (£/$) -0.34% -6.33% 1.24 Australian Dollar (A$/$) -0.70% -12.76% 0.61 Swiss Franc ($/CHF) -0.64% 0.92% 0.96Data/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 economic calendar is very busy this week and we start to see data for periods covering coronavirus-related

shutdowns. Financial markets will of course be keen to monitor employment conditions in this environment. Although the Labor Department’s Employment Report will be released on Friday, it will still be new unemployment claims that offers the best view of evolving job market conditions, in our opinion. The Jobs Report is typically one of the most influential economic reports published each month. This week, however, investors will likely be just as focused, possibly more, on the Labor Department’s jobless claims report due out on Tuesday. The claims report is much timelier and does not rely on sampling. This week, we believe the number of new claims could even modestly surpass the nearly 3.3 million new claims reported via last week’s report.

The Jobs Report, meanwhile, offers much more detail, but it also faces some potential challenges in a situation like this. For instance, the nonfarm payroll number is based on a survey of approximately 145,000 businesses and government agencies at 697,000 worksites. What if these worksites are closed due to the virus? The unemployment rate also faces a fundamental challenge. The rate is derived from a survey of households. However, in order to be considered unemployed you have to be part of the labor force – i.e., either working or looking for work. In the current circumstances, relatively few people are likely looking for work since so many businesses are closed.

Also, Friday’s Jobs Report for March will not show the full impact of the current situation due to timing. Data for the Report is compiled in the week that contains the 12th of the month – a week this past month that showed a sizable increase in new claims (from 211k to 282k), but an increase that was inconsequential relative to what was to come. As such, we believe the unemployment rate is likely to rise modestly, to about 3.7%. For the month of April, however, we anticipate the unemployment rate as likely to rise to a level of approximately 10%. We further anticipate the rate is likely to see a near-term peak of approximately 13% to 14% in May, before starting to decline, thereafter.

Elsewhere, the ISM reports on Manufacturing and Services (Nonmanufacturing) could see record low levels. Manufacturing activity in particular has been disrupted nearly across the country. The only factor that may offer some support for the numbers would be the timing of responses as those offered early in the month would clearly be better than those received later. As of Friday, the Bloomberg consensus estimate for Wednesday’s ISM Manufacturing Index is 45.0 versus February’s 50.1. We believe the actual number is more likely to be below 40.

Tuesday’s report on Consumer Confidence will also be closely watched for what is likely to be a record decline. Forecaster’s as surveyed by Bloomberg expect the report to see a drop to 110 from February’s 130.7. Here too we believe the decline could be more significant and we estimate a reading of 98.


March 30 31 April 1 2 3Dallas Fed Mfg. Index S&P / Case-Shiller Index ADP Employment Estimate Challenger Layoff Notices Employment Report

Pending Home Sales Consumer Confidence Construction Spending Trade Balance ISM Non-Manufacturing Index

Manufacturing PMI - China Chicago Purch. Mgr. Index ISM Manufacturing Index Initial Jobless Claims Retail Sales - Eurozone

Economic Sentiment - Eurozone Manufacturing Activity - Canada U.S. Auto Sales Factory Orders Industrial Production - Spain

Industrial Production - Japan Machinery Orders - Japan Unemployment - Eurozone Durable Goods Orders

Retail Sales - Japan GDP - U.K. Retail Sales - Germany Retail Sales - Australia

Retail Sales - S. Korea Inflation - Eurozone Industrial Production - Brazil Trade - Canada

Manufacturing PMI - China Unemployment - Italy Trade - Brazil

Unemployment - Germany



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.

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 catch-up to the reality of the situation and they may not for some time. Ultimately, we believe Q1 aggregate earnings for S&P 500 companies are likely to be significantly lower than that shown below, and likely negative 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 20213/30/2020 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 $37.41 $38.31 $42.52 $44.26

change over last week -$0.61 -$2.36 -$1.29 -$0.84

yr/yr 25.4% 25.4% 27.8% 13.7% 0.2% 1.1% -1.6% 1.1% -3.6% -7.9% 0.7% 5.9%

qtr/qtr -1% 6% 4% -4% -6% 7% 1% -1% -10% 2% 11% 4%

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 $162.99 $159.71 $160.02 $162.50 $186.76

yr/yr -0.3% 0.8% 11.6% 22.9% 0.2% -1.1% 14.9%

Implied P/E based on a S&P 500 level of: 2541 15.5 15.6 15.9 15.9 15.6 13.6

2019 20202018



ECONOMIC NEWS OUT TODAY: Economic Releases for Monday, March 30, 2020. All times Eastern. Consensus estimates via Bloomberg. Time Period Release Consensus Est. Actual Prior Revised to 10:00 AM FEB Pending Home Sales (MoM) -2.3% +5.2% 10:00 AM FEB Continuing Claims +3.5% +6.7%

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

Treasuries Remain Well Bid; Credit Supported By $2 Trillion in Stimulus Treasury prices remain well bid this morning after ending Friday at the lowest level seen since the one-day moonshot

in Treasury prices on March 9. Ten-year Treasury yields closed Friday at 0.67% and slid another three basis points lower this morning to 0.64% ahead of the open to U.S. equity markets.

Credit spreads improved through last week on expectations that the stimulus package may bring relief to corporate

markets. The chart below reflects the measured tightening that occurred as the legislation came together. We note that while markets saw all risk levels recede, the package funds the Fed’s high-quality ring-fenced approach that we believe creates a divide rather than provides unison. Fallen Angels, corporate bonds that fall from investment grade to high yield fall from the Fed’s grace. And the entire high yield space lies beyond the fence as well, suggesting new issue markets may be slow to return leading to high yield corporate defaults in the near-term.

Treasury Yield Curve Comparison

Source: Bloomberg L.P.



$2 trillion Stimulus - Implications to Fixed Income Markets The bill signed by President Trump Friday reflects new fiscal spending of approximately 10% of GDP. In no uncertain

terms, that’s massive. To offset the extraordinary drop in economic activity, reflects an extraordinary boost in activity. The timing also matter on how quickly the programs like the Small Business Administration’s (SBA) support for small business and the Fed scales up support for market liquidity. We believe the Fed has already stepped in putting its footprint in the market. The SBA’s lending programs may take a bit more time.

Corporate bonds: We mentioned last Wednesday in our Before the Bell commentary how the Fed’s efforts inserted a ring-fence around the upper investment grade corporates. Fiscal support creates a different cordon spanning select industries including airlines and defense contractors to an extent. This morning we published a Special Issue – Corporate Bonds report on corporate bond markets highlight what high quality companies and sectors look like, and where future opportunities may arise as the recovery comes into focus.

Consumer credit bonds: Certainly, the consumer stands on much better footing than leading into the 2008 financial crisis. However, the drop in activity and employment can quickly hit people living paycheck to paycheck. The bill focuses on income support; a one-time payment and the expansion of unemployment benefits. Consumers will benefit if the payments come in a few weeks rather than a couple months. This timing likely determines the impact on consumer asset backed securities (ABS) such as mortgage backed securities, credit card ABS, and auto loan ABS. What the bill did not do was create jobs that would draw-down what could be a sharp rise in unemployment. A rise in delinquencies likely equates to wider spread premiums on ABS, which could prove problematic if delinquencies are sustained or evolve into defaults. We believe there may be a need for another round of fiscal support in the second quarter once gaps in stimulus support become visible and if the shelter in place orders need to be sustained beyond April.

We recommend following the Fed when selecting fixed income investments, focusing on market segments supported by Fed liquidity. Further uncertainty lies ahead centered on how the outbreak in the U.S. may plateau, how shelter in place restrictions may lifted on a region by region basis, how high unemployment may rise, and how liquidity beyond the Fed’s ringfence may strain markets. We believe investors should wait before jumping into high yield until we have greater clarity on when shelter in place orders may be lifted and how the economy may be evolving.




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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before the bell · 30/03/2020 · after the close, steep rebounds in stock prices are common...

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