Anatomy of a Recession Presentation

The Anatomy of a Recession: What to Look for and Where We're Headed

First Quarter 2021

Past performance is no guarantee of future

results. Financial term and index definitions are available in the appendix.

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Probabilities vs. Possibilities

The Wall of Worry

Equity Valuations

Fed Policy Error

Civil Unrest

Trade Wars

North Korea Escalation

Inflation

COVID-19

Sovereign Debt Crisis

Depression

Dollar Strengthens

Corporate Leverage

China Over-Tightening

Populism

EM Problems Intensify

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Panic Attacks

800

MSCI ACWI

700

600 500

Endgame Panic

Brent Bottoms at $27.88

Japan Goes NIRP

Trump Impeachment

Scare

Brexit

400 2016

WTI Bottoms

Rate Hike Scare

2017

Trade War Escalation

Short Volatility Unwind

N. Korea Crisis

Quitaly Fears

Tariffs Scheduled

for Last $300B of

Fed

Imports

Communication

Error

Trade War

Accelerates

U.S. Gov't Shutdown

2/10 Yield Curve Inversion

Trade War Escalates

China COVID-19 Shutdown

Potential Second Wave

Fiscal Cliff

Fears

Pandemic Goes Global

US Election Concerns

2018

2019

2020

"The definition of insanity is doing the same thing over and over again and expecting a different result." - Attributed to Albert Einstein

Data as of Dec. 31, 2020. Source: MSCI. Past performance is not a guarantee of future results. Investors cannot invest direct ly in an index, and unmanaged index returns do not reflect any fees, expenses or sales charges.

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Effects of Panic Attacks on Average Investors

20 Years Annualized Returns (1999-2019)

12

10

9.9%

8

6

4

2

0 REITs

7.7%

5.6%

4.5%

4.0%

3.4%

2.9%

2.2%

Gold

U.S. Stock

Government Related Bonds

Investment Returns

International Equities

Homes

Average Investor

Source: Bloomberg, June 30, 2019. Average asset allocation investor return is based on an analysis by DALBAR, Inc., which utilizes the net of aggregate mutual fund sales, redemptions and exchanges each month as a measure of investor behavior. Indices shown are as follows: REITs are represented by the NAREIT Equity REIT Index, U.S. Stocks are represented by the S&P 500 Index, International Equities are represented by the MSCI EAFE Index, Government-Related Bonds are represented by the Bloomberg Barclays U.S. Aggregate Bond Index, Homes are represented by U.S. existing home sales median price, Gold is represented by the U.S. dollar spot price of one troy ounce, Inflation is represented by the Consumer Price Index. Indices are unmanaged and cannot be purchased directly by investors. Index performance is shown for illustrative purposes only and does not predict or depict the performance of any investment. Past performance is no guarantee of future results.

Inflation

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U.S. Recession Recovery Dashboard

? 9 variables have historically foreshadowed a durable recovery ? The overall signal suggests the economy has started a new economic expansion

Data as of Dec. 31, 2020. Source: FactSet, Bloomberg, Conference Board, Census Bureau, Federal Reserve, FRBPA, Chicago Fed, ISM, Dept. of Labor, Bloomberg/Barclays, AAII, Investors Intelligence, and Moody's.

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S&P EPS Surprise Relative to Expectations (%) 2Q09 4Q09 2Q10 4Q10 2Q11 4Q11 2Q12 4Q12 2Q13 4Q13 2Q14 4Q14 2Q15 4Q15 2Q16 4Q16 2Q17 4Q17 2Q18 4Q18 2Q19 4Q19 2Q20

Historic Earnings Surprise

Earnings Beats in 2Q20 & 3Q20 Were Much Stronger than the Last Recovery

25% 20% 15% 10%

5% 0% -5%

Earnings have handily beat expectations and helped power the market's rally.

Data as of Sept. 30, 2020, latest available as of Dec. 31, 2020. Source: FactSet. Past performance is not a guarantee of future

results. Investors cannot invest directly in an index, and unmanaged index returns do not reflect any fees, expenses or sales charges.

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Retail Sales Suggest V-Shaped Recovery

U.S. Headline Retail Sales (Peak Month = 100)

110

COVID-19 Crisis

105

6 Months

Dot-Com Bubble 16 Months

Global Financial Crisis 34 Months

100

95

90

85

80

75 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 Number of Months from Peak

2001

2008

2020

Strong stimulus measures have supported a robust recovery in consumer spending.

Data as of Nov. 30, 2020, latest available as of Dec. 31, 2020. Source: U.S. Census Bureau, FactSet. Past performance is not a guarantee of future results. Investors cannot invest directly in an index, and unmanaged index returns do not reflect any fees, expenses o r sales charges.

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Winter is Coming

U.S. COVID-19 Cases and Deaths

250,000

15,000

200,000

12,000

U.S. New Cases

U.S. Daily Deaths

150,000

9,000

100,000

6,000

50,000

3,000

0

0

Mar. Mar. Mar. Apr. Apr. May May June June July July Aug. Aug. Sept. Sept. Oct. Oct. Nov. Nov. Dec. Dec. 1 16 31 14 30 15 30 14 29 14 29 13 28 12 27 12 27 11 26 11 26

U.S. New Cases - 7-Day Moving Average (LHS)

U.S. Daily Deaths - 7-Day Moving Average (RHS)

The virus remains a key concern for investors, particularly as the Northern Hemisphere enters colder months.

Better awareness and protocols have significantly reduced mortality rates, making full lockdowns less likely.

Data as of March 1 ? Dec. 31, 2020. Source: Our World in Data, European Centre for Disease Control (ECDC), Covid Tracking

Project. Past performance is not a guarantee of future results. Investors cannot invest directly in an index, and unmanaged index returns do not reflect any fees, expenses or sales charges.

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