US ECONOMY

CONSUMER HEALTH

NEGATIVE

The consumer has been the bedrock of the US economy through much of the current expansion, and remains in a strong position. However, we have further reduced our grade to NEGATIVE as a result of the unprecedented social distancing and quarantining efforts currently being employed to fight the spread of COVID-19.

CORPORATE EARNINGS

NEGATIVE

Coming into the year, analysts were expecting mid to single digit earnings growth, but the spread of COVID-19 is likely to have a substantial impact on near-term earnings forecasts. However, earnings could bounce back quickly once the pandemic has run its course.

EMPLOYMENT

NEGATIVE

We have downgraded our employment grade another level as we expect the next few weeks will reveal significant job losses due to the suspension of economic activity in the services industry to combat the spread of COVID-19.

INFLATION

POSITIVE

Inflation is often a sign of “tightening” in the economy and can be a signal that growth is peaking. The deflationary environment created by COVID-19 should provide additional room for robust stimulus from both fiscal and monetary policy initiatives.

FISCAL POLICY

VERY POSITIVE

The CARES Act provides approximately $2.2 trillion of support for businesses and families that are impacted by the economic fallout of the COVID-19 pandemic. This is by far the largest fiscal stimulus package ever passed, and we anticipate the possibility of additional support once we emerge on the other side of the “curve”.

MONETARY POLICY

VERY POSITIVE

In response to the threat of COVID-19, the Federal Reserve has implemented two emergency rate cuts and has moved its target interest rate back to zero. Additionally, it has announced its intention to conduct further asset purchases to support markets. We believe that the Fed is doing all it can to support the economy and markets.

GLOBAL CONSIDERATIONS

GEOPOLITICAL RISKS

VERY NEGATIVE

With COVID-19 being declared a global pandemic, our geopolitical risks rating is VERY NEGATIVE. However, we think it is important for investors to disentangle the public health concerns over the near-term from the expectations for markets over the long-term. The pandemic remains a near-term issue at this time.

ECONOMIC RISKS

VERY NEGATIVE

As discussed in our commentary, COVID-19 represents a real threat to economic activity globally. However, we do expect that the eventual economic recovery will occur more swiftly than from previous economic shocks.

US ECONOMY

CONSUMER HEALTH

NEUTRAL

The consumer has been the bedrock of the US economy through much of the current expansion and remains in a strong position. However, we have further reduced our grade to NEUTRAL as a result of the unprecedented social distancing and quarantining efforts currently being employed to fight the spread of COVID-19.

CORPORATE EARNINGS

NEUTRAL

Coming into the year, analysts were expecting mid to single digit earnings growth, but the spread of COVID-19 is likely to have a substantial impact on near-term earnings forecasts. However, earnings could bounce back quickly once the pandemic has run its course.

EMPLOYMENT

NEUTRAL

We have downgraded our employment grade another level as we expect the next few weeks will reveal significant job losses due to the suspension of economic activity in the services industry to combat the spread of COVID-19. However, we still view the potential for permanent job losses as a result of the pandemic as very low.

INFLATION

POSITIVE

Inflation is often a sign of “tightening” in the economy and can be a signal that growth is peaking. The deflationary environment created by COVID-19 should provide additional room for robust stimulus from both fiscal and monetary policy initiatives.

FISCAL POLICY

POSITIVE

We anticipate a significant fiscal response to the COVID-19 outbreak and expect that the government will make a concerted effort to provide economic relief to industries and families who are most impacted by the economic fallout of the pandemic.

MONETARY POLICY

VERY POSITIVE

In response to the threat of COVID-19, the Federal Reserve has implemented two emergency rate cuts and has moved its target interest rate back to zero. Additionally, it has announced its intention to conduct further asset purchases to support markets. We believe that the Fed is doing all it can to support the economy and markets.

GLOBAL CONSIDERATIONS

GEOPOLITICAL RISKS

VERY NEGATIVE

With COVID-19 being declared a global pandemic, our geopolitical risks rating is VERY NEGATIVE. However, we think it is important for investors to disentangle the public health concerns over the near-term from the expectations for markets over the long-term. The pandemic remains a near-term issue at this time.

ECONOMIC RISKS

VERY NEGATIVE

As discussed in our commentary, COVID-19 represents a real threat to economic activity globally. However, we do expect that the eventual economic recovery will occur more swiftly than from previous economic shocks.

US ECONOMY

CONSUMER HEALTH

NEUTRAL

The consumer has been the bedrock of the US economy through much of the current expansion, and remains in a strong position. However, we have further reduced our grade to NEUTRAL as a result of the unprecedented social distancing and quarantining efforts currently being employed to fight the spread of COVID-19.

CORPORATE EARNINGS

NEUTRAL

Coming into the year, analysts were expecting mid to single digit earnings growth, but the spread of COVID-19 is likely to have a substantial impact on near-term earnings forecasts. However, earnings could bounce back quickly once the pandemic has run its course.

EMPLOYMENT

POSITIVE

The February jobs report once again exceeded consensus expectations. The spread of COVID-19 will likely stunt job growth in the near-term, but we still view the potential for permanent job losses as a result of the pandemic as very low.

INFLATION

POSITIVE

Inflation is often a sign of “tightening” in the economy, and can be a signal that growth is peaking. The deflationary environment created by COVID-19 should provide additional room for robust stimulus from both fiscal and monetary policy initiatives.

FISCAL POLICY

POSITIVE

We anticipate a significant fiscal response to the COVID-19 outbreak, and expect that the government will make a concerted effort to provide economic relief to industries and families who are most impacted by the economic fallout of the pandemic.

MONETARY POLICY

VERY POSITIVE

In response to the threat of COVID-19, the Federal Reserve has implemented two emergency rate cuts and has moved its target interest rate back to zero. Additionally, it has announced its intention to conduct further asset purchases to support markets. We believe that the Fed is doing all it can to support the economy and markets.

GLOBAL CONSIDERATIONS

GEOPOLITICAL RISKS

VERY NEGATIVE

With COVID-19 being declared a global pandemic, our geopolitical risks rating is VERY NEGATIVE. However, we think it is important for investors to disentangle the public health concerns over the near-term from the expectations for markets over the long-term. The pandemic remains a near-term issue at this time.

ECONOMIC RISKS

VERY NEGATIVE

As discussed in our commentary, COVID-19 represents a real threat to economic activity globally. However, we do expect that the eventual economic recovery will occur more swiftly than from previous economic shocks.

US ECONOMY

CONSUMER HEALTH

POSITIVE

The consumer has been the bedrock of the US economy through much of the current expansion but is likely to be challenged by the rising fear associated with COVID-19. We are reducing our grade from VERY POSITIVE to POSITIVE and will be watching consumer spending data closely in

the coming weeks.

CORPORATE EARNINGS

NEUTRAL

Corporate earnings growth was weak throughout 2019 as a result of slowing in the global economy and trade policy uncertainty. However, analysts are expecting mid to high single digit earnings growth in 2020, which will be important to sustaining recent levels of equity returns.

EMPLOYMENT

VERY POSITIVE

Hidden amid all of the volatility last week was the February jobs report, which once again exceeded consensus expectations. At this point in time, we still view the potential for permanent job losses as a result of COVID-19 as very low.

INFLATION

POSITIVE

Inflation is often a sign of “tightening” in the economy, and can be a signal that growth is peaking. Recent inflationary data has increased slightly, but inflation remains benign at this time, which bodes well for the extension of the economic cycle.

FISCAL POLICY

POSITIVE

The Tax Cuts and Jobs Act of 2017 lowered the effective tax rates for many individuals and corporations. We view the cuts as a tailwind for economic activity over the next several years.

MONETARY POLICY

POSITIVE

With the potential threat that COVID-19 poses to the economy, attention is now turning to whether the Federal Reserve will take action following its March policy meeting. Markets are beginning to anticipate a rate cut from the Fed, which would provide support for market in the

near-term.

GLOBAL CONSIDERATIONS

GEOPOLITICAL RISKS

VERY NEGATIVE

Our geopolitical risks rating is now VERY NEGATIVE as there is more evidence of the coronavirus spreading outside China. However, we think it is important for investors to disentangle the public health concerns over the near-term from the expectations for markets over the long-term. The

outbreak remains a near-term issue at this time.

ECONOMIC RISKS

NEGATIVE

As discussed in our weekly commentary, COVID-19 represents a real threat to economic activity globally. However, we simply do not yet have the data to support a full analysis of the economic impacts of the disease and quarantine efforts. We plan to continue keeping tabs on a variety of

leading indicators and will update our outlook accordingly.

US ECONOMY

CONSUMER HEALTH

VERY POSITIVE

The consumer has been the bedrock of the US economy through much of the current expansion and we have seen little to suggest that this cannot continue.

CORPORATE EARNINGS

NEUTRAL

Corporate earnings growth was weak throughout 2019 as a result of slowing in the global economy and trade policy uncertainty. However, analysts are expecting mid to high single digit earnings growth in 2020, which will be important to sustaining recent levels of equity returns.

EMPLOYMENT

VERY POSITIVE

The economy added 225,000 new jobs in January, exceeding consensus expectations. The report also indicated that the unemployment rate ticked up to 3.6% as a result of more people looking for jobs. The expansion of the labor force should be taken as an additional sign of the confidence Americans have in the health of the labor market.

INFLATION

POSITIVE

Inflation is often a sign of “tightening” in the economy and can be a signal that growth is peaking. Recent inflationary data has increased slightly, but inflation remains benign at this time, which bodes well for the extension of the economic cycle.

FISCAL POLICY

POSITIVE

The Tax Cuts and Jobs Act of 2017 lowered the effective tax rates for many individuals and corporations. We view the cuts as a tailwind for economic activity over the next several years.

MONETARY POLICY

POSITIVE

With the Federal Reserve expected to refrain from any further adjustments to interest rates without a material change in the economic outlook, it is unlikely that changes in Fed Policy will disrupt the economic cycle in the near future. Furthermore, the low absolute level of interest rates remains a positive for markets.

GLOBAL CONSIDERATIONS

GEOPOLITICAL RISKS

VERY NEGATIVE

Our geopolitical risks rating is now VERY NEGATIVE as there is more evidence of the coronavirus spreading outside China. However, we think it is important for investors to disentangle the public health concerns over the near-term from the expectations for markets over the long-term. The outbreak remains a near-term issue at this time.

ECONOMIC RISKS

NEUTRAL

Due to low inflation and lukewarm economic activity, central banks around the world remain in a very accommodative stance. We have seen some recent evidence of modest recovery in places like Germany, but overall, we expect global economic growth to remain modest.

US ECONOMY

CONSUMER HEALTH

VERY POSITIVE

The consumer has been the bedrock of the US economy through much of the current expansion and we have seen little to suggest that this cannot continue.

CORPORATE EARNINGS

NEUTRAL

Corporate earnings growth was weak throughout 2019 as a result of slowing in the global economy and trade policy uncertainty. However, analysts are expecting mid to high single digit earnings growth in 2020, which will be important to sustaining recent levels of equity returns.

EMPLOYMENT

VERY POSITIVE

The economy added 225,000 new jobs in January, exceeding consensus expectations. The report also indicated that the unemployment rate ticked up to 3.6% as a result of more people looking for jobs. The expansion of the labor force should be taken as an additional sign of the confidence

Americans have in the health of the labor market.

INFLATION

POSITIVE

Inflation is often a sign of “tightening” in the economy and can be a signal that growth is peaking. Recent inflationary data has increased slightly, but inflation remains benign at this time, which bodes well for the extension of the economic cycle.

FISCAL POLICY

POSITIVE

The Tax Cuts and Jobs Act of 2017 lowered the effective tax rates for many individuals and corporations. We view the cuts as a tailwind for economic activity over the next several years.

MONETARY POLICY

POSITIVE

With the Federal Reserve expected to refrain from any further adjustments to interest rates without a material change in the economic outlook, it is unlikely that changes in Fed Policy will disrupt the economic cycle in the near future. Furthermore, the low absolute level of interest

rates remain a positive for markets.

GLOBAL CONSIDERATIONS

GEOPOLITICAL RISKS

NEGATIVE

Our assessment of Geopolitical Risks is NEGATIVE at this time as a result of the continued spread of the coronavirus. Encouragingly, the disease remains largely confined to mainland China, but the situation is fluid. The virus poses a threat to economic growth, manufacturing activity, and

consumer spending in affected regions.

ECONOMIC RISKS

NEUTRAL

Due to low inflation and weak economic activity, central banks around the world remain in a very accommodative stance. We have seen some recent evidence of modest recovery in places like Germany, but overall, we expect global economic growth to remain modest.

US ECONOMY

CONSUMER HEALTH

VERY POSITIVE

The consumer has been the bedrock of the US economy through much of the current expansion and we have seen little to suggest that this cannot continue.

CORPORATE EARNINGS

NEUTRAL

Corporate earnings growth was weak throughout 2019 as a result of slowing in the global economy and trade policy uncertainty. However, analysts are expecting mid to high single digit earnings growth in 2020, which will be important to sustaining recent levels of equity returns.

EMPLOYMENT

VERY POSITIVE

The economy added 225,000 new jobs in January, exceeding consensus expectations. The report also indicated that the unemployment rate ticked up to 3.6% as a result of more people looking for jobs. The expansion of the labor force should be taken as an additional sign of the confidence

Americans have in the health of the labor market.

INFLATION

POSITIVE

Inflation is often a sign of “tightening” in the economy and can be a signal that growth is peaking. Recent inflationary data has increased slightly, but inflation remains benign at this time, which bodes well for the extension of the economic cycle.

FISCAL POLICY

POSITIVE

The Tax Cuts and Jobs Act of 2017 lowered the effective tax rates for many individuals and corporations. We view the cuts as a tailwind for economic activity over the next several years.

MONETARY POLICY

POSITIVE

With the Federal Reserve expected to refrain from any further adjustments to interest rates without a material change in the economic outlook, it is unlikely that changes in Fed Policy will disrupt the economic cycle in the near future. Furthermore, the low absolute level of interest rates remain a positive for markets.

GLOBAL CONSIDERATIONS

GEOPOLITICAL RISKS

NEGATIVE

Our assessment of Geopolitical Risks is NEGATIVE at this time as a result of the continued spread of the coronavirus outside of mainland China. The virus poses a threat to economic growth and consumer spending in affected regions as a result of the “fear factor” it induces.

ECONOMIC RISKS

NEUTRAL

Due to low inflation and weak economic activity, central banks around the world remain in a very accommodative stance. We have seen some recent evidence of modest recovery in places like Germany, but overall, we expect global economic growth to remain modest.

US ECONOMY

CONSUMER HEALTH

VERY POSITIVE

The consumer has been the bedrock of the US economy through much of the current expansion and we have seen little to suggest that this cannot continue.

CORPORATE EARNINGS

NEUTRAL

Corporate earnings growth was weak throughout 2019 as a result of slowing in the global economy and trade policy uncertainty. However, analysts are expecting mid to high single digit earnings growth in 2020, which will be important to sustaining recent levels of equity returns.

EMPLOYMENT

VERY POSITIVE

December’s headline jobs growth number of 145,000 missed consensus expectations, though the unemployment rate remained stable at 3.5%; a 50-year low. Despite the softer than anticipated results in December 2019 was an incredibly strong year for the labor market, and it remains the healthiest area of the economy.

INFLATION

POSITIVE

Inflation is often a sign of “tightening” in the economy and can be a signal that growth is peaking. Recent inflationary data has increased slightly, but inflation remains benign at this time, which bodes well for the extension of the economic cycle.

FISCAL POLICY

POSITIVE

The Tax Cuts and Jobs Act of 2017 lowered the effective tax rates for many individuals and corporations. We view the cuts as a tailwind for economic activity over the next several years.

MONETARY POLICY

POSITIVE

With the Federal Reserve expected to refrain from any further adjustments to interest rates without a material change in the economic outlook, it is unlikely that changes in Fed Policy will disrupt the economic cycle in the near future. Furthermore, the low absolute level of interest rates remains a positive for markets.

GLOBAL CONSIDERATIONS

GEOPOLITICAL RISKS

NEGATIVE

Our assessment of Geopolitical Risks is NEGATIVE at this time as a result of the continued spread of the coronavirus outside of mainland China. The virus poses a threat to economic growth and consumer spending in affected regions as a result of the “fear factor” it induces.

ECONOMIC RISKS

NEUTRAL

Due to low inflation and weak economic activity, central banks around the world remain in a very accommodative stance. We have seen some recent evidence of modest recovery in places like Germany, but overall, we expect global economic growth to remain modest.

US ECONOMY

CONSUMER HEALTH

VERY POSITIVE

The consumer has been the bedrock of the US economy through much of the current expansion and we have seen little to suggest that this cannot continue.

CORPORATE EARNINGS

NEUTRAL

Corporate earnings growth was weak throughout 2019 as a result of slowing in the global economy and trade policy uncertainty. However, analysts are expecting mid to high single digit earnings growth in 2020, which will be important to sustaining recent levels of equity returns.

EMPLOYMENT

VERY POSITIVE

December’s headline jobs growth number of 145,000 missed consensus expectations, though the unemployment rate remained stable at 3.5%; a 50-year low. Despite the softer than anticipated results in December 2019 was an incredibly strong year for the labor market, and it remains the healthiest area of the economy.

INFLATION

POSITIVE

Inflation is often a sign of “tightening” in the economy and can be a signal that growth is peaking. Recent inflationary data has increased slightly, but inflation remains benign at this time, which bodes well for the extension of the economic cycle.

FISCAL POLICY

POSITIVE

The Tax Cuts and Jobs Act of 2017 lowered the effective tax rates for many individuals and corporations. We view the cuts as a tailwind for economic activity over the next several years.

MONETARY POLICY

POSITIVE

With the Federal Reserve expected to refrain from any further adjustments to interest rates without a material change in the economic outlook, it is unlikely that changes in Fed Policy will disrupt the economic cycle in the near future. Furthermore, the low absolute level of interest rates remains a positive for markets.

GLOBAL CONSIDERATIONS

GEOPOLITICAL RISKS

NEGATIVE

We have adjusted our assessment of Geopolitical Risks to NEGATIVE as a result of the continued spread of the coronavirus outside of mainland China. The virus poses a threat to economic growth consumer spending in affected regions as a result of the “fear factor” it induces.

ECONOMIC RISKS

NEUTRAL

Due to low inflation and weak economic activity, central banks around the world remain in a very accommodative stance. We have seen some recent evidence of modest recovery in places like Germany, but we expect global economic growth to remain modest overall.