Economic and Market Webcast:

Investment Analysis and Strategy

September 14, 2020

2 Source: FactSet. As of 9/14/20

Market Performance

0

20

40

60

80

100

120

140

160

S&P Nasdaq Russell 2000 MSCI EAFE MSCI EM

Index YTD % Change

S&P 500 5.1%

Nasdaq 23.7%

Russell 2000 -8.8%

MSCI EAFE -5.2%

MSCI EM -0.2%

3

30

40

50

60

70

80

90

09 10 11 12 13 14 15 16 17 18 19 20

Cro

wd S

entim

ent

Indic

ato

r

Year

NDR Crowd Sentiment Poll

Optimism

64.9

Investor Sentiment

As of 9/8/20. Source: Ned Davis Research.

*12/1/95 – 9/8/20.

11.1

22.3

-0.1

-3.3-5

0

5

10

15

20

25

Below 57.0 57.0-66.0 FromBelow

57.0-66.0 FromAbove

Above 66.0

Perc

ent

Crowd Sentiment Indicator

S&P 500 % Gain per Annum*

Pessimism

4

Cash on the Sidelines Still Elevated

Source: Federal Reserve Board. As of 9/10/20.

M153407

* Includes Retail and Institutional Money Funds

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Liquid Assets*

5

Preparing for Increased Volatility Ahead of Election

As of 9/14/2020. Source: FactSet.

Year

# of +/- 1%

Market

Moves

% of

trading

days

2020 83 47%

2019 38 15%

2018 64 25%

2017 8 4%

6

Source; Dr. Fauci presentation to Harvard Medical School- Grand Rounds 9/10/20. https://masscpr.hms.harvard.edu/event/harvard-medical-school-grand-rounds-featuring-dr-

anthony-s-fauci

Daily Case Trends in U.S. and Europe

7 Source: Covidtracking.com. As of 9/12/20.

U.S. Looking Better On All Measures

0

10000

20000

30000

40000

50000

60000

70000

80000

90000

3/16 3/30 4/13 4/27 5/11 5/25 6/8 6/22 7/6 7/20 8/3 8/17 8/31

U.S. Daily New Cases

0

500

1000

1500

2000

2500

3000

3/1 3/15 3/29 4/12 4/26 5/10 5/24 6/7 6/21 7/5 7/19 8/2 8/16 8/30

U.S. Daily COVID Deaths

0

10000

20000

30000

40000

50000

60000

70000

3/17 3/31 4/14 4/28 5/12 5/26 6/9 6/23 7/7 7/21 8/4 8/18 9/1

U.S. Current Hospitalizations

0%

5%

10%

15%

20%

25%

30%

4/1 4/15 4/29 5/13 5/27 6/10 6/24 7/8 7/22 8/5 8/19 9/2

U.S. Test Positivity Rate

8

Southern States Decline- Texas, Florida

Covidtracking.com as of 9/12/20.

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

3/5 3/19 4/2 4/16 4/30 5/14 5/28 6/11 6/25 7/9 7/23 8/6 8/20 9/3

Florida Daily New Cases

0

50

100

150

200

250

300

3/18 4/1 4/15 4/29 5/13 5/27 6/10 6/24 7/8 7/22 8/5 8/19 9/2

Florida Daily Deaths

0

2000

4000

6000

8000

10000

12000

14000

16000

3/6 3/20 4/3 4/17 5/1 5/15 5/29 6/12 6/26 7/10 7/24 8/7 8/21 9/4

Texas Daily New Cases

0

100

200

300

400

500

600

700

800

3/18 4/1 4/15 4/29 5/13 5/27 6/10 6/24 7/8 7/22 8/5 8/19 9/2

Texas Daily Deaths

9 Source: Covidtracking.com. As of 9/12/20.

Coastal States Decline

0

500

1000

1500

2000

2500

3000

3500

4000

4500

3/5 3/19 4/2 4/16 4/30 5/14 5/28 6/11 6/25 7/9 7/23 8/6 8/20 9/3

MA Daily New Cases

0

50

100

150

200

250

300

3/23 4/6 4/20 5/4 5/18 6/1 6/15 6/29 7/13 7/27 8/10 8/24 9/7

Massachusetts Daily Deaths

0

50

100

150

200

250

3/14 3/28 4/11 4/25 5/9 5/23 6/6 6/20 7/4 7/18 8/1 8/15 8/29 9/12

CA Daily Deaths

0

2000

4000

6000

8000

10000

12000

14000

3/6 3/20 4/3 4/17 5/1 5/15 5/29 6/12 6/26 7/10 7/24 8/7 8/21 9/4

CA Daily New Cases

10 Dr. Fauci, Harvard Medical School Grand Rounds Presentation: https://masscpr.hms.harvard.edu/event/harvard-medical-school-grand-rounds-featuring-dr-anthony-s-fauci

Vaccine Update

Moderna

BioNTech

AstraZeneca

Janssen

Merck

Novavax

Sanofi

11 Source

Vaccine Rollout

Phase 1 Phase 2 Phase 3 Phase 4

1a: Jumpstart Phase

• High-risk workers in health

care facilities

• First responders

1b:

• People of all ages with

comorbid and underlying

conditions that put them at

significantly higher risk

• Older adults living in

congregate or overcrowded

settings

• Critical risk workers-who are

both in industries essential to

the functioning of society and

at substantially high risk of

exposure

• Teachers and school staff

• People of all ages with

comorbid and underlying

conditions that put them at

moderately higher risk

• All older adults not included in

Phase 1

• People in homeless shelters

or group homes for

individuals with physical or

mental disabilities or in

recovery

• People in prisons, jails,

detention centers and similar

faculties and staff with work in

such settings

• Young adults

• Children

• Workers in industries

essential to the functioning

of society and at increased

risk of exposure not

included in Phase 1 or 2

• Everyone residing in the

United States who did not

receive the vaccine in

previous phases

Equity is a crosscutting

consideration

• In each population group, vaccine access should be prioritized for geographic areas identified

through CDCs Social Vulnerability Index.

https://www.nap.edu/read/25914/chapter/4#56

12 Source: Strategas. As of 9/14/20

Global Leading Economic Indicators Rebounding

93

94

95

96

97

98

99

100

101

102

103

'96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20

U.S. LEI

85

90

95

100

105

110

'97 '99 '01 '03 '05 '07 '09 '11 '13 '15 '17 '19 '21

China LEI

90

92

94

96

98

100

102

104

'96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20

U.K. LEI

90

92

94

96

98

100

102

104

'96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20

Germany LEI

13 Source: Federal Reserve Bank of St. Louis. As of 9/5/20

Improving Employment Data

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

8,000,000

Weekly Initial Claims

125,000

130,000

135,000

140,000

145,000

150,000

155,000

Total Nonfarm Payrolls

14 Source: FactSet, Bloomberg. As of 9/11/20

Monitoring Inflation

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

6.0

Consumer Price Index

0

10

20

30

40

50

60

70

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.0

10-Year TIPS Oil ($)

Oil P

rice

Pe

rce

nt Oil vs. 10-Year TIPS Breakeven

15

Treasury Yields at Historic Lows

As of 9/11/2020. Source: Bloomberg

0.13

0.67

1.42

0.0

0.5

1.0

1.5

2.0

2.5

Yie

ld

2-Year Treasury 10-Year Treasury 30-Year Treasury

16 As of 9/11/2020. Source: Bloomberg/Barclays Live

Credit Spreads Stabilize

493

131

0

200

400

600

800

1,000

1,200

01/01/2020 02/01/2020 03/01/2020 04/01/2020 05/01/2020 06/01/2020 07/01/2020 08/01/2020 09/01/2020

Op

tio

n A

dju

ste

d S

pre

ad

(B

PS

)

U.S. Corporate High Yield U.S. Corporate Investment Grade

17

0

200

400

600

800

1000

1200

1400

1600

1800

2015 2016 2017 2018 2019 2020 YTD

U.S. Municipal U.S. Investment Grade Corporate U.S. High Yield Corporate

As of 9/11/2020. Source: Bloomberg League Tables, Merrill Lynch Tax-Exempt: Refinitiv; BofA Global Research as of 9/9/20.

Fixed Income Supply

18

U.S. Corporate Investment Grade Duration

As of 9/11/2020. Source: Bloomberg/Barclays Live

6.2

6.4

6.6

6.8

7

7.2

7.4

7.6

7.8

8

8.2

8.4

8.6

8.8

9

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Dura

tion

19

Corporations Leveraging Up

As of 9/11/2020. Source: Bloomberg/Barclays Live

0

10

20

30

40

50

60

BBB A AA

Perc

ent

Ratings

2010 2020

0

500

1000

1500

2000

2500

3000

3500

Baa Corporate A Corporate Aa Corporate

Mill

ions

Amount Outstanding

2010 2020

20

Municipal SupplyTax-Exempt and Taxable Supply

As of 9/9/2020. Source: The Bond Buyer and Merrill Lynch: Refinitiv; BofA Global Research

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

500,000

2016 2017 2018 2019 2020

Tax-Exempt Taxable

$ B

illio

ns

21

Municipal Weekly Inflows, $B

As of 9/9/2020. Source: Refinitiv, JP Morgan Note: YTD cumulative fund flows show 2009, 2019, and 2020

22 Source: 2020 The PEW Charitable Trusts: Fiscal 50: State Trends and Analysis

Fund Balance as Percentage of Expenses

-10.0%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%A

laba

ma

Ala

ska

Ari

zon

a

Ark

an

sa

s

Ca

lifo

rnia

Co

lora

do

Co

nne

cticu

t

De

law

are

Flo

rid

a

Ge

org

ia

Ha

wa

ii

Ida

ho

Illin

ois

Ind

iana

Iow

a

Ka

nsa

s

Ke

ntu

cky

Lou

isia

na

Ma

ine

Ma

ryla

nd

Ma

ssa

ch

usett

s

Mic

hig

an

Min

neso

ta

Mis

sis

sip

pi

Mis

so

uri

Mo

nta

na

Nebra

ska

Ne

vad

a

Ne

w H

am

pshir

e

Ne

w J

ers

ey

Ne

w M

exic

o

New

York

No

rth

Ca

rolin

a

No

rth

Da

ko

ta

Oh

io

Okla

hom

a

Ore

gon

Pe

nnsylv

ania

Rh

ode

Isla

nd

So

uth

Ca

rolin

a

So

uth

Da

kota

Te

nne

ssee

Te

xa

s

Uta

h

Ve

rmo

nt

Vir

gin

ia

Wash

ingto

n

West

Vir

gin

ia

Wis

con

sin

Wyo

min

g

50-s

tate

me

dia

n

FY 2009 FY 2019

23 Source: Moodys Investor Service

Moodys Update: Special Tax Debt Payments

Selected Issuer Pledge Revenues

Bond

Ratings

Scheduled

P&I

(in $000)

P&I

Payment

Date

Special

Liquidity

Utilized?

MADS

Coverage

Bexar County, TXHotel Taxes & Rental

Car FeesA2 $14,915 08/15 No 1.4x

Arlington, TX

Sales Taxes, Hotel

Taxes & Rental Car

Fees

A1 sr/

A3 sub$13,676 08/15 No

1.3x sr/

0.9x sub

Mansfield Economic Dev Corp, TX Sales Taxes Aa3 $2,017 08/01 No 2.0x

Elmore County Board of Education, AL Sales Taxes Aa3 $2,534 08/01 No 1.6x

Benton, ARHotel Taxes, Food &

Beverage TaxesA2 $610 08/01 No 1.8x

Houston, TXHotel Taxes & Parking

FeesA2 $43,670 09/01 No 1.3x

Lexington-Fayette Urban County

Government, KYHotel Taxes

A2 sr/

A3 sub$1,430 09/01 No*

1.3x sr/

1.1x sub

Issuers with elevated payment risk made scheduled debt service payments

*Lexington-Fayette Urban County Government utilized a refunding to extend near-term debt service payment obligations

24

Running Ahead of 2009 Rally

Source: Strategas. As of 9/2/20

100

110

120

130

140

150

160

170

0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100 105 110 115 120

# of Trading Days Off Low

S&P 500 Performance Off March 2009 Low vs. March 2020 Low

Mar-09 Mar-20

25

Market Leaders

Source: FactSet. As of 9/11/20

80

100

120

140

160

180

200

03/20 04/20 05/20 06/20 07/20 08/20

Growth vs. Value

Russell 1000 Growth Russell 1000 Value

80

100

120

140

160

180

03/20 04/20 05/20 06/20 07/20 08/20

Large Cap vs. Small Cap

Russell 1000 Russell 2000

26 Source: Strategas. As of 9/2/20

Correlation Between Trump Odds and New COVID Cases

37

39

41

43

45

47

49

51

5310000

20000

30000

40000

50000

60000

70000

16-Apr 2-May 18-May 3-Jun 19-Jun 5-Jul 21-Jul 6-Aug 22-Aug

Average New Daily COVID Cases vs. Betting Odds of GOP White House

Odds of GOP winning the presidency

(Right, inverted)

New daily COVID cases (Left, 7-day avg.)

27 Source: Strategas. As of 9/2/20

Swing State Races Beginning to Tighten

-4

-2

0

2

4

6

8

10

12

AZ FL GA MI NC PA TX WI

Biden General Election Polling Lead in Trump 2016 Swing States

1-Jul 27-Aug

28

Asset Class Positioning:

Investment Strategy Committee Recommendations

As of 9/2/20

Underweight Small Underweight Neutral Small Overweight Overweight

Equity u

Large Cap u

Mid Cap u

Small Cap u

International Developed Large Cap u

International Developed Small Cap u

Emerging Markets u

Private Equity u

Private Equity-Real Estate u

Real Estate (REITs) u

Fixed Income u

Treasuries u

Investment-grade Corporate u

Tax-exempt u

High Yield u

Emerging Market Debt u

Diversifiers u

Long/Short Hedge u

Absolute Return Hedge u

Commodities u

Questions

To submit a question click the “Ask a Question” tab

Thank You

31

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the tax, investment or financial options available. We recommend all individuals consult with their lawyer or tax professional, or their investment or financial advisor for professional assurance

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