Perspec'veonMarketVola'lityJuly14,2020

PerspectiveontheCoronavirus

Source:StrategasResearch

Althoughthereareshorttermnega'vereac'onstoepidemics,ul'mately,thehealthoftheglobaleconomyandmagnitudeofmonetary&fiscals'mulusdictatethedirec'onofriskmarkets.BothSARSandSwineflucoincidedwithglobals'mulusmeasurestocombatrecessions.Asaresult,marketsralliedaKerini'alvola'lity.

Globalgovernmentmeasurestoshutdowneconomiesandquaran'nehealthyci'zenswasunique.

2

MarketReac'on

Source:BofA,Strategas,NedDavis

MarketReaction

Ini'almarketreac'onsimilarto9/11&Hitler’sinvasionofFrance.

4

Source:NedDavis

MarketReaction

Ini'almarketreac'onsimilarto9/11&Hitler’sinvasionofFrance.

5

Source:ASRResearch,Strategas,MRBPartners

MonetaryPolicyResponse–CentralBankResponse

6

Source:BiancoResearch

MonetaryResponse–FedIsNotOutofArrows

7

Source:Strategas,BCA

FiscalResponse

Arguablylateanddelayedbypoli'cs,butofsignificantmagnitude.

8

Source:BCA,Strategas,Bridgewater

ThisIsNot2008

Despitebankstockpricecollapse,therearenoimminentcreditconcernswiththeUSbankingsystem.Bankscon'nuetolendthroughthecrisis.

9

MarketReaction

RallyofftheLows–OneoftheGreatestinMarketHistory(ButVeryNarrow)

Source:BespokeInvestmentGroup,Strategas,BlackRock 10

MarketReaction

RallyofftheLows–GreatestinMarketHistory(ButVeryNarrow)

Source:NedDavis 11

Source:BespokeResearch

MarketReaction

RallyofftheLows–GreatestinMarketHistoryMissedbyRetailInvestors

12

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WhatDeterminestheShapeofRecovery?Employment,theConsumer,andthePathoftheVirus

EconomicImpact

PerspecDveontheCoronavirus

DoestheshapeorleDermaDer?

Source:NedDavisResearch 14

ImpactoftheCoronavirus–USLaborMarket&ConsumerSpendingShock

Source:BCA 15

LookingForward–WilltheWellRunDry?

Source:Blackrock 16

Source:Allianz,Strategas

LookingForward

17

Source:Allianz

PerspectiveontheCoronavirus

Thepathoutofeconomicshutdown–Vshapelooksunlikelygivenconsumerpacerns(>2/3ofoureconomy!).

18

Source:Bianco,Allianz

PerspectiveontheCoronavirus

Thepathoutofeconomicshutdown–Vshapelooksunlikelygivenconsumerpacerns(>2/3ofoureconomy!).

VirusspreadingintheSunbeltshowshowfragiletherecoveryis.

19

LookingForward

Source:Bespoke

MarketReaction

HistoryDoesRhyme…ExpectVolaKlity

21

Source:ASRLtd

MarketReaction

HistoryDoesRhyme…ExpectVolaKlity

22

Source:MRB,Strategas

SupplementalChartsofInterest–Elections/Politics

23

Source:Bianco,Strategas,BCA

SupplementalChartsofInterest–Elections/Politics:OntheOtherHand…

Marketsdonopriceinriskun'lOctober.Pollingdatahasnotbeenaccurate.

24

Source:NedDavis,FinancialTimes,BCA

WhatCouldGoWrong?

GlobalDebtExplosionamplifiedbytheCovidCrisis

25

LookingForward

ChartstoWatch

Short-TermTechnicals

POSITIVE

+50%FibonacciRetracementlevelforS&P500(2947=61.8%)clearedalongwith200daymovingaverage(3000)inJune

+Creditspreadstightening,copperpricesarerallyingoffthebottomandsemiconductorpricesareoutperformingtheS&P500

-Two-yearTreasuryYields:Flailing2yearpricesdemonstratelackofconfidenceingrowth

-Ultrashorttechnicalareoverbought.Put/Callratiosshownofearinequities.

+EquityMutualFundFlowsfinallyturnedpositive.SentimentSurveysarestillbearish.

+S&Pfuturespositioningisnetshort(2016levelsdespitetheS&Pmove.

+PolicyUncertaintyIndexremainselevated*Creditspreadsarecriticaltorecovery*Watchingsmallcap,REITs,banks,&transportstoconfirmtheturn

RegulatoryInsights

MIXED

+/-ReopeningofAmericaiscriticalforsustainedequitymoves

-Thelongerstatesremainclosedthehigherrisksforpermanentunemployment,bankruptcies,anddefaults.Theresultisadampenedrecovery

+Additionalstimulusintheworks(individualsandstate/localgovernment).Potentialfor“on-shoring”taxincentives

+Totalmonetary/fiscalresponseintheUSis$10trillion(6monthsofGDP)

+Fedpurchasesofcorps,munis,andETFsminimizesliquidityrisk

-Electionyearrhetoricwillheatup-TradeWarPartII?-GovernmentCoviddecisionscreateuncertainty

-Pathoftheviruspostre-openornextfluseason

*WatchOxfordCovidGovernmentResponseTrackerData–remainsstringentdespitere-openings

EconomicDevelopments

NEGATIVE

-Alleconomicdataareafunctionofwhenshut-inorderslift -Thisposesascientificandpoliticaldilemma

-EarningsandGDPwillbehorrific–howwillmarketsreact?

-MarketreactionsdependonCoVidnewsoftheday

+EcondataeasilysurpassingpessimisticexpectationsinMayandJune

*WatchingNYFed’sWeeklyEconIndexforaturnandotherhighfrequencydata: -Weeklyjoblessclaims-Weeklyretailsales-Railcardata-Bankruptcyfilings

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MarketReaction

HistoryDoesRhyme…

S&P S&PPrice Return Price Return

Assumed From FromS&P EPS Market EPS Bear-Market Bottom Bear-Market Bottom

Market Bottom Bottom Turn Around through Recession throughBottom Quarter * Lead-Time * Date Turn Around Date End Recession End Month

10/22/1957 3Q 1958 3Q Before 1/31/1959 42.3% Apr-58 11.4%6/26/196210/7/1966 3Q 1967 3Q Before 1/31/1968 26.0%5/26/1970 4Q 1970 2Q Before 4/30/1971 50.0% Nov-70 25.8%10/3/1974 3Q 1975 3Q Before 1/31/1976 61.9% Mar-75 33.8%8/12/1982 1Q 1983 2Q Before 7/31/1983 58.7% Nov-82 35.3%12/4/1987

10/11/1990 4Q 1991 4Q Before 4/30/1992 40.4% Mar-91 27.0%10/9/2002 4Q 2001 4Q After 4/30/2002 N/A Nov-01 N/A3/9/2009 3Q 2009 2Q Before 1/31/2010 58.7% Jun-09 35.9%

* Source: Strategas

THE OPPORTUNITY COST OF WAITING FOR THE BELL TO RING

No earnings declines exhibited during this bear market.

No earnings declines exhibited during this bear market.

Bear market without accompanying recession.Bear market without accompanying recession.

Bear market without accompanying recession.

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Source:CapitalEconomics

PerspectiveontheCoronavirus

SignsofFlaDeningConfirmedCases

28

Source:CapitalEconomics,ASRLtd.,Strategas

PerspectiveontheCoronavirus

Thepathoutofeconomicshutdown–robustbusinessac'vitybutsubduedconsumerspending.

29

Source:Statista,Bespoke

ImpactoftheCoronavirus

EmploymentandGDPContribuKonbyIndustry–SmallBusinessStruggles

30

InvestmentThemes

OpalAssetAllocationDashboard

Equity U.S. Macro Conditions

Developed International Macro Conditions

Fixed IncomeEmerging International Macro Conditions

Currencies Real Assets

1 Recommendations are intended to reflect a 12-24 month forecast.The presence of an arrow indicates a recent change (right arrow = upgraded; left arrow = downgraded).

Asset Allocation Dashboard – July 7, 2020

Taiber Kosmala & Associates Asset Allocation Recommendations1

─ 2 ─ 1 0 + 1 + 2Beta

+ 1 + 2

ValueGrowthLarge-CapSmall-CapU.S.Developed International

→Technicals (200 Day Moving Average) →

DurationInvestment GradeHigh YieldLoansNon-U.S.

U.S. Dollar $Euro €

Emerging International

←→

Japanese Yen ¥British Sterling £

─ 2 ─ 1 0MonetaryFiscalEconomicValuation

MonetaryFiscalEconomicValuation

→

MonetaryFiscalEconomicValuation

Oil ←Precious MetalsIndustrial Metals →Timber

Public REITs

AgriculturePrivate Real Estate

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OpalWealthAdvisorsAssetAlloca'onRecommenda'ons1

Source:BCA,Strategas,Murenbeeld

SupplementalChartsofInterest

Gold&Energy

33

Source:Leuthold,Strategas

SupplementalChartsofInterest

F.A.Q.SmallCaps

34

Source:MRB,BankofAmerica

SupplementalChartsofInterest

F.A.Q.InternaKonal

35

Source:BankofAmerica,Strategas,MRB

SupplementalChartsofInterest–Valuevs.Growth

4factorsaidgrowth:1)weakaggregateearnings2)lowrates 3)technologicalshiKs4)qualitytrade.

36

Source:RiverNorthCapitalManagement

SupplementalChartsofInterest–CEFs

37

Source:ZelmanAssociates

TheBullishThesisforHomebuilders

Recordlowinventories,recordlowrates,increasedaffordabilityandyoungerdemographicshiKprovidehealthybackdrop.

38

Source:ZelmanAssociates

SupplementalHomebuildersCharts

UrbantosuburbanshiK,higherfamilyforma'on,resilientsales,andhigherposi'veequityforhomeowners.

39

Source:EatonVance,Strategas

SupplementalChartsofInterest

HistoricalContextofFixedIncomeValuaKons

40

Source:BCA,Bianco,Strategas

SupplementalChartsofInterest

HistoricalContextofEquityValuaKons

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