Anatomy of a Recession Presentation - Legg Mason...China COVID-19 Shutdown Pandemic Goes Global 4 Effects of Panic Attacks on Average Investors 20 Years Annualized Returns (1999-2018)

1

Past performance is no guarantee of future

results. Financial term and index definitions

are available in the appendix.

The Anatomy of a Recession:

What to Look for and Where

We’re Headed

Third Quarter 2020

2

Unprecedented Use of the Word “Unprecedented”

Interest in search term over time: numbers represent search interest relative to the highest point on the chart for the given region and time. A value of

100 is the peak popularity for the term. Data as of June 30, 2020. Source: Google Trends. 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.

0

20

40

60

80

100

Jan. 2004 Jul. 2006 Jan. 2009 Jul. 2011 Jan. 2014 Jul. 2016 Jan. 2019

Inte

rest

in

Searc

h T

erm

Over

Tim

e

Popularity of "Unprecedented" in Google Searches

3

Panic Attacks

Data as of June 30, 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.

400

500

600

700

2015 2016 2017 2018 2019 2020

MSCI ACWI

Trade

War

Accelerates

Tariffs Scheduled

for Last $300B of

Imports

Renewed

Grexit

Scare

Oil Falls,

Dollar

Rises

Greece Sets

7/5 Vote

Yuan Devalued &

ETF Flash Crash

Third Ave

Blows Up

Endgame

Panic

Brent

Bottoms at

$27.88

Japan

Goes

NIRP

WTI

Bottoms

Brexit

Rate

Hike

Scare

Trump

Impeachment

Scare

N. Korea

Crisis

Short

Volatility

Unwind

Trade War

Escalation

Quitaly

Fears Fed

Communication

Error

U.S. Gov’t

Shutdown

2/10 Yield

Curve

Inversion

“The definition of insanity is doing the same thing over and over again and expecting a different result.”

- Attributed to Albert Einstein

Trade War

Escalates

China

COVID-19

Shutdown

Pandemic

Goes

Global

Potential

Second

Wave

4

Effects of Panic Attacks on Average Investors20 Years Annualized Returns (1999-2018)

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.

9.9%

7.7%

5.6%

4.5%

4.0%

3.4%

2.2%1.9%

0

2

4

6

8

10

12

REITs Gold U.S. Stock Government

Related Bonds

International

Equities

Homes Inflation Average Investor

Investment Returns

5

Selloffs Occur Much Quicker than the Ascension to the Prior Peak

Stairs Up, Elevator Down

Note: For this slide, we are looking at selloffs of 15% or higher.

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.

S&P 500 Drawdowns

Peak Trough % ChangeMonths to

Climb to Peak

Months Peak to

Trough

Months Back to

Previous High

Jul-57 Oct-57 -20.7% 5 3 8

Nov-61 Jun-62 -27.9% 36 6 10

Feb-66 Oct-66 -22.2% 27 7 5

Nov-68 May-70 -36.1% 64 17 15

Jan-73 Oct-74 -48.3% 121 20 49

Sep-76 Mar-78 -19.4% 10 17 13

Feb-80 Mar-80 -17.1% 11 1 3

Dec-80 Aug-82 -27.1% 9 20 2

Aug-87 Dec-87 -33.5% 18 3 15

Jul-90 Oct-90 -19.9% 16 3 3

Jul-98 Aug-98 -19.3% 6 1 2

Mar-00 Oct-02 -49.1% 35 29 39

Oct-07 Mar-09 -56.8% 132 16 34

Apr-10 Jul-10 -16.0% 7 2 3

May-11 Oct-11 -19.4% 8 5 3

Sep-18 Dec-18 -19.8% 16 3 3

Median 16 6 7

After a major selloff, it typically takes seven months to regain the former highs.

6

Fastest Bear Market From Peak in U.S. History

As of March 31, 2020, latest available as of June 30, 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.

451

445

426

353

320

274

201

167

87

55

42

22

0 100 200 300 400 500

Nov. 1980

Aug. 1956

Nov. 1968

Mar. 2000

Jan. 1973

Oct. 2007

Feb. 1966

Dec. 1961

Jul. 1990

Aug. 1987

Sep. 1929

Mar. 2020

Number of Days

Days from Market Peak to Bear Market (-20%)

The speed of the recent market decline is unprecedented,

surpassing even the selloff heading into the Great Depression.

7

The COVID-19 Selloff vs. History

Data as of June 30, 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.

0%

10%

20%

30%

40%

50%

60%

70%-9

mo

-6m

o

-3m

o

+3m

o

+6m

o

+9m

o

Cu

mu

lati

ve R

etu

rns

fro

m M

ark

et

Bo

tto

ms

S&P 500 Performance Around Bear Markets Since 1928

80th - 20th Percentile Range Current Average

The speed of the market's response to coronavirus, on both the way down and up, have

been outliers relative to history.

8

How Long Does the Typical Recession Last?On Average, Recessions Have Lasted 13 Months

As of March 31, 2020. Source: National Bureau of Economic Research, Wikipedia and Deutsche Bank Global Research. 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.

7

18

14 13

43

13

8

11 108

10 11

16

6

16

8 8

18

13

0

5

10

15

20

25

30

35

40

45

50

1918

1920

1923

1926

1929

1937

1945

1948

1953

1957

1960

1969

1973

1980

1981

1990

2001

2007

Avera

ge

Mo

nth

s

Number of Months U.S. Economy in Recession

The 1918 recession, which occurred amidst the Spanish Flu, lasted about half

as long as a typical recession.

Average

Length

of a

Recession

9

Fed Tsunami

(E) represents Estimated Fed QE Purchases. Data as of June 30, 2020. Source: The Federal Reserve Bank of New York. 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.

0

200

400

600

800

1,000

1,200

Jan. Feb. Mar. Apr. May Jun. Jul. (E) Aug. (E) Sept. (E) Oct. (E) Nov. (E) Dec. (E)

$ B

illi

on

s

Fed QE Purchases

The Fed's balance sheet has increased by ~$3T since the coronavirus crisis became apparent.

Some of this increased liquidity will be offset by Treasury issuance, which is expected to run

~$225B per month vs. $120B in expected monthly QE.

10

Fiscal Stimulus: GFC vs. COVID-19Governments Have Stepped Up Their Support During the Recent Crisis

Stimulus as a % of GDP. Source: IMF. 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.

United States

India

Canada

Japan

Germany

France

United Kingdom

South Africa

Brazil

2008 Current (June 30, 2020)

2.9%8.6%

0.5%

10.0%

2.2%

21.0%

1.4%

14.6%

3.5%

33.0%

1.5%

14.5%

2.8%

11.8%

4.9%12.1%

0.6%5.5%

11

Stocks Anticipate Economic Recoveries

Data as of March 2020.

Source: National Bureau of Economic Research, 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.

Economic Recessions vs. Market Lows

Recession

Start

Recession

End

Length of

Recession

(Months)

Market

Low

Market Low to

End of Recession

S&P 500

Peak to Trough

Nov-48 Oct-49 11 Jun-49 4 Months Prior -30%

Jul-53 May-54 10 Sep-53 8 Months Prior -15%

Aug-57 Apr-58 7 Oct-57 6 Months Prior -22%

Apr-60 Feb-61 9 Oct-60 4 Months Prior -14%

Dec-69 Nov-70 10 May-70 6 Months Prior -36%

Nov-73 Mar-75 16 Oct-74 5 Months Prior -48%

Jan-80 Jul-80 6 Mar-80 4 Months Prior -17%

Jul-81 Nov-82 15 Aug-82 3 Months Prior -27%

Jul-90 Mar-91 8 Oct-90 5 Months Prior -20%

Mar-01 Nov-01 7 Oct-02 11 Months After -49%

Dec-07 Jun-09 17 Mar-09 3 Months Prior -57%

Average 3 Months Prior -30%

12

Counter Trend Rallies Are CommonplaceRecessionary Bear Markets Often See Pockets of Strength

Source: National Bureau of Economic Research, 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.

Largest Historical Recessionary Counter Trend Rallies

Recession Begin Recession EndLargest Counter

Trend Rally

Dec. 1969 Nov. 1970 6%

Nov. 1973 Mar. 1975 10%

Jan. 1980 July 1980 4%

Jul. 1981 Nov. 1982 12%

Jul. 1990 Mar. 1991 6%

Mar. 2001 Nov. 2001 19%

Dec. 2007 Jun. 2009 24% 600

800

1,000

1,200

1,400

1,600

1,800

Oct. 2007 Feb. 2008 Jun. 2008 Oct. 2008 Feb. 2009

S&P 500 Counter Trend Rallies: 2007-2009

11 Days

8%9 Days

7%

51 Days

12%

31 Days

24%

7 Days

19%

2 Days

12%

3 Days

9%

20 Days

7%

13

U.S. Recession Recovery Dashboard

Data as of June 30, 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.

• 9 variables have historically foreshadowed a durable recovery

• The overall signal suggests the economy has started a new economic expansion

June 30, 2020 May 31, 2020 April 30, 2020

Co

nfi

den

ce Consumer Confidence

Business Confidence (ISM)

Investor Sentiment

Eco

no

mic

Housing Starts

Initial Jobless Claims

Philly Fed

Fin

an

cia

l Credit Spreads

Fed Policy

Financial Conditions

Overall Signal

Expansion Improvement Recession

14

U.S. Recession Recovery Dashboard

Data as of June 30, 2020. Source: Source: FactSet, Bloomberg, Conference Board, Census Bureau, Federal Reserve, FRBPA, Chicago Fed, ISM, Dept. of Labor,

Bloomberg/Barclays, AAII, Investors Intelligence, and Moody’s. The ClearBridge U.S. Recession Recovery Dashboard was created in March 2020. References to

the signals it would have sent in the years prior to March 2020 are based on how the underlying data was reflected in the com ponent indicators at the time.

• 9 variables have historically foreshadowed a durable recovery

• The overall signal suggests the economy has started a new economic expansion

Current 2007-2009 2001 1990-1991 1981-1982 1980 1973-1975 1969-1970

Co

nfi

den

ce Consumer Confidence

Business Confidence (ISM)

Investor Sentiment

Eco

no

mic

Housing Starts

Initial Jobless Claims

Philly Fed

Fin

an

cia

l Credit Spreads

Fed Policy

Financial Conditions n/a

Overall

Months From Green to End of

Recession? +5 -1 0 -2 +1 -1 +6

Expansion Improvement Recession

15

Following the End of Recessions, Equities Typically Do Quite Well

Market Returns During Economic Expansions

Source: FactSet, NBER. 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.

S&P 500 Returns During Economic Expansions

Trough Month S&P 500 Level Peak Month S&P 500 Level Duration (Months) Change Secular Trend

Nov. 30, 1970 87.2 Nov. 30, 1973 95.9 36 10.0% Secular Bear

Mar. 31, 1975 83.4 Jan. 31, 1980 115.1 58 38.1% Secular Bear

July 31, 1980 121.7 Jul. 31, 1981 130.9 12 7.6% Secular Bull

Nov. 30, 1982 138.5 Jul. 31, 1990 356.2 92 157.1% Secular Bull

Mar. 28, 1991 375.2 Mar. 30, 2001 1160.3 120 209.2% Secular Bull

Nov. 30, 2001 1139.5 Dec. 31, 2007 1468.4 73 28.9% Secular Bear

Jun. 30, 2009 919.3 Feb. 28, 2020 2954.2 128 221.3% Secular Bull

Average: 74 96.0%

Secular Bull Average: 88 148.8%

Secular Bear Average: 56 25.7%

There is a strong likelihood the economy has entered the next expansion.

We continue to believe stocks are in the midst of a secular bull market. If correct, this would

bode well for equity investors in the coming years.

16

What Shape Recovery?The Shape of the Economic Recovery Will Likely Influence the Market’s Path Forward

Note: recoveries are using sample data. Source: Brookings Institution, The Wall Street Journal. 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.

W-Shaped

V-Shaped

L-Shaped

Swoosh-Shaped

Z-Shaped

U-Shaped

GD

P

Time

GD

P

Time

GD

P

Time

GD

P

Time

GD

P

Time

GD

P

Time

Economy recovers but

activity permanently lost

GDP recovers, but slower

than V-shape

Recovery is longer than

V-shape, faster than U-shape

Spending surge fuels GDP

above pre-crisis levels

Restrictions lifted too soon,

more cases paralyze economyEconomy never fully recovers

17

Services Epicenter of Downturn Services Have Been a Large Negative Contributor to GDP, in Contrast to History

As of March 31, 2020, most recent as of June 30, 2020. Source: BEA. 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.

-4.8

-1.1

1.1

-1.0

-1.8

-6%

-5%

-4%

-3%

-2%

-1%

0%

1%

2%

Services Exports Non-Durables Durables Investments

Co

ntr

ibu

tio

n t

o G

DP

Q1 2020

0.60.1

-0.1-0.4

-2.1

-6%

-5%

-4%

-3%

-2%

-1%

0%

1%

2%

Services Exports Non-Durables Durables Investments

Co

ntr

ibu

tio

n t

o G

DP

Average Contribution During Recessions Since 1960

Historically, services have been a source of stability during recessions.

In the current downturn, services have been disproportionately affected largely due to

social-distancing guidelines.

18

Flattening The Curve?

Data as of March 1 - June 30, 2020. Source: Our World in Data, European Centre for Disease Control (ECDC). 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.

0

5

10

15

20

25

30

35

40

45

March 1 March 31 April 30 May 30 June 29

New

Case

s 7

Day M

ovin

g A

vera

ge (

Th

ou

san

ds)

European Union United States

The U.S.'s piecemeal approach has been less successful in flattening the

curve compared to Europe.

The U.S. appears to be seeing a re-emergence of the virus which could

dampen the economic recovery.

19

Older Consumers May Remain on Sidelines

Data as of Dec. 31, 2018, most recent available as of June 30, 2020. Source: Bureau of Labor Statistics. 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.

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017

Percentage of Total Spending by Age Cohort

65 Years and Above 55 Years and Above

Those most at risk to coronavirus (55+) account for over 40% of spending in

the U.S. Absent a medical breakthrough, spending from this cohort may

remain tepid.

20

Liquidity Addressed, Solvency Risk Remains

Data as of June 30, 2020. Source: FactSet, U.S. Courts, DOL. Past performance is not a guarantee of future results. Investors cannot invest directly in an


0

100

200

300

400

500

600

700

800

900

1,000

3%

6%

9%

12%

15%

18%

1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019

U.S

. Nu

mb

er o

f Filin

gs

U.S

. U

nem

plo

ym

en

t R

ate

Recession U.S. Unemployment Rate (LHS) U.S. Chapter 11 Bankruptcy Filings (RHS)

Policymakers have addressed near-term liquidity concerns. However, longer-

term bankruptcy risks remain possible due to shifts in consumer behavior.

21

Profit Margins Under Pressure

BEA = Bureau of Economic Analysis. Workforce data as of Dec. 31, 2019; corporate profits data as of Jan. 1, 2020, both most recent as of June 30, 2020.

Source: U.S. Bureau of Labor Statistics, BEA, NBER. Past performance is not a guarantee of future results. Investors cannot invest directly in an index, and


1-19

20-49

50-499

500

-999

41%

1000+

Employees

% of Workforce by Employer Size

Companies with fewer than 1000 workers employ 59% of the U.S. labor force. The average

company in the Russell 2000 employs 3,679 workers.

Before the recent drop, corporate profits had have been flat for over five years with many

small businesses facing pressure to combat higher compensation costs.

59%

<1000 Employees500

750

1,000

1,250

1,500

1,750

2,000

2,250

1995 1998 2001 2004 2007 2010 2013 2016 2019$

(B

illi

on

s)

U.S. Corporate Profits

Recession

Corp. Profits (Prior to Jul. 2019 Revision)

Corp. Profits (Post Revision)

22

First Pullback After a Major Low

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.

S&P 500 First Drawdown Following Initial Rally Off Major Low

Market Low Initial Rally # of Days 1st Drawdown # of Days

Oct. 1957 7.0% 26 -5.6% 13

Jun. 1962 14.3% 40 -10.5% 43

May 1970 13.3% 6 -9.3% 23

Oct. 1974 20.8% 25 -13.6% 20

Aug. 1982 21.9% 27 -3.6% 7

Oct. 1987 14.9% 2 -13.3% 31

Oct. 1990 12.3% 50 -6.1% 11

Oct. 2002 20.9% 35 -14.7% 69

Mar. 2009 39.9% 67 -7.1% 19

Average -9.3% 26

23

Strongest 50-Day Rallies in History

Dates refer to the end of each 50-day rally. Source: LPL Research, 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.

Largest 50-Day Gains Ever (Greater than 20%)

50-Day

% Change

S&P 500 Index Return

Date 3 Months 6 Months 12 Months

March 6, 1975 26.9% 10.5% 2.3% 18.4%

Oct. 22, 1982 35.6% 3.6% 15.6% 19.5%

March 26, 1991 20.4% -1.3% 2.7% 8.4%

June 24, 1997 20.5% 5.4% 4.1% 26.4%

Dec. 18, 1998 23.8% 10.8% 13.0% 19.6%

May 19, 2009 34.2% 9.7% 20.6% 22.8%

Sept. 16, 2009 21.3% 3.8% 8.5% 5.2%

June 3, 2020 39.6% ? ? ?

Average 6.1% 9.5% 17.2%

% Positive 85.7% 100.0% 100.0%

Equities have historically continued to do well following the strongest market runs.

24

Will Labor Market Weakness Persist?

Data as of June 30, 2020. Source: BLS. Past performance is not a guarantee of future results. Investors cannot invest directly in an index, and


60%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

1967 1971 1975 1979 1983 1987 1991 1995 1999 2003 2007 2011 2015 2019

Percentage of Layoffs Classified as Temporary

Recession Temporary Layoffs

An unprecedented number of job losses have been classified as temporary (furloughs).

If these layoffs are in fact "temporary," the economy could bounce back much faster

than anticipated.

25

Ready. Aim. Fire?

PPP Liquidity refers to the Paycheck Protection Program. As of June 30, 2020. Source: Federal Reserve. Past performance is not a guarantee of


$4B $7B

$33B

$0 $1B

$53B

$00

100

200

300

400

500

600

700

800

900

1,000

1,100

1,200

Commercial Paper

Funding

Corporate Credit

Facility

Money Market

Fund Liquidity

Main Street

Lending Program

Municipal

Liquidity

PPP

Liquidity

Term Asset-Backed

$, B

illi

on

s

Fed's Emergency Lending Facilities

Fed Program Limit Actual Allocated Thus Far (June 30, 2020)

Only $98.5 billion of the total $4.1 trillion in potential Fed support is currently being utilized.

$1,100B

$750B$700B

$600B

$500B

$350B

$100B

26

U.S. Has More Room for QE

Data as of June 30, 2020. Source: FactSet. Past performance is not a guarantee of future results. Investors cannot invest directly in an


0%

20%

40%

60%

80%

100%

120%

140%

2003 2006 2010 2014 2017

Siz

e o

f C

en

tral

Ban

k B

ala

nce S

heet

as

a %

of

GD

P

United States

37.3%

Eurozone

59.9%

Japan

123.35%

The Fed’s smaller balance sheet as a % of GDP affords policymakers greater

flexibility if the economy rolls over.

27

Dry Powder Abundant

* Institutional & Retail Money Funds – ICI.

** MSCI U.S. IMI Index.

Data as of July 3, 2020. Source: FactSet. Past performance is not a guarantee of future results. Investors cannot invest directly in an index, and


9%

11%

13%

15%

17%

19%

21%

2015 2016 2017 2018 2019 2020

Cash as % of Equity Market Cap

U.S. Cash* as % of Equity Market Capitalization**

Investors cash holdings are at 18% of total equity market cap, the highest

level since 2012.

28

New Secular Bull Market?

Secular bear market average drawdown includes selloff beginning September 1929. Data as of June 30, 2020. Source: Bloomberg,

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.

1

5

25

125

625

3125

1930 1940 1950 1960 1970 1980 1990 2000 2010 2020

S&

P 5

00

In

dex

(Lo

g-S

cale

)

S&P 500

1930-1950

All-Time Highs: 0

Cumulative Return: -22.2%

1950-1970

All-Time Highs: 365

Cumulative Return: 451.9%

1970-1980

All-Time Highs:

35

Cumulative

Return: 17.2%

1980-2000

All-Time Highs: 500

Cumulative Return:

1,261.2%

2000-2010

All-Time

Highs: 13

Cumulative

Return:

-24.1%

2010-Present

All-Time Highs:

255

Cumulative

Return: 178%

Secular Bear: Average Drawdown -46.1%

Secular Bull: Average Drawdown -25.3%

29

One Year OutlookThemes That Will Drive the Market Over the Next 12 Months

CurrencyInternationalU.S. Presidential

AgendaRecovery Risks

Volatility ValuationsDebt

30

Recovery Risks

31

Not All Markets Pricing In A Recovery

Data as of June 30, 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.

0.4%

0.6%

0.8%

1.0%

1.2%

1.4%

1.6%

1.8%

2.0%

2,200

2,400

2,600

2,800

3,000

3,200

3,400

Jan. Feb. Mar. Apr. May. Jun.

10

Year U

.S. T

reasu

ry Y

ield

S&

P 5

00

S&P 500 (LHS) 10 Year U.S. Treasury Yield (RHS)

Treasuries started selling off in response to COVID-19 fears well before equities,

and remain near trough levels even as equities have rallied.

32

Less Travel, Slower Growth

As of Dec. 31, 2018, most recent available as of June 30, 2020. Source: OECD. 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.

12.5%

11.8%

8.6%

7.4%7.0%

6.5%

4.1% 3.9%

3.1%2.8% 2.8%

2.1% 2.0% 2.0%

0%

2%

4%

6%

8%

10%

12%

14%

Portugal Spain Mexico France Sweden Austria Indonesia Germany Australia South

Africa

United

States

Canada Denmark Japan

% G

DP

Tourism as % of GDP

Global tourism contributed $8.8 trillion to the global economy and supported 10% of

all jobs on the planet in 2018.

The pandemic has put more than 100 million jobs and $2.7 trillion in GDP at risk,

according to the World Travel & Tourism Council.

33

Earnings Not Expected to Rebound Quickly

As of June 30, 2020. Source: S&P, Credit Suisse. 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.

0

2

4

6

8

10

12

14

16

18

'37 - '38 '45 '48 - '49 '53 - '54 '57 - '58 '60 - '61 '69 - '70 '73 - '75 '80 '81 - '82 '90 - '91 '01 '07 - '09 2020E

Nu

mb

er

of

Qu

art

ers

Number of Quarters for Trailing (LTM) EPS to Return to Prior Highs

Earnings typically take 2.5 years to recover to pre-recessionary levels. Consensus

expectations are for an even slower bounce-back today.

Average: 10 Quarters

34

Vaccine Development Not a Slam Dunk

1 2016 vaccine RTS.S undergoing pilot trials in select countries after being approved by European regulators in 2015. 2 The only approved vaccine is Bacillus Calmette-Guerin (BCG),

developed in 1921 but its efficacy in adults is variable. Other TB vaccines are currently in development. 32016 partially effective vaccine CYD-TDV, sold under the brand name Dengvaxia.4 Successful first human clinical trials of a vaccine against the virus in 2016. 5 A number of vaccine candidates are currently under investigation. 6 2016 VSV-EBOV vaccine in human

clinical trials and allowed for use in emergency through the WHO “Emergency Use Assessment and Listing”. 7 Not all cervical cancers are caused by the HPV virus and the HPV vaccine

can protect against other cancers caused by the HPV virus. 8 2009 efficacy findings for vaccine RV 144 has shown some promise. In stage III human trials. Source: Our World in Data.

1870 1880 1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 2020

AIDS

Cervical Cancer

Ebola

Diarrheal Disease

Hepatitis

Birth Defects, Mononucleosis

Measles

Chickenpox

Zika Fever

Polio

Dengue Fever

Whooping Cough

Meningitis

Typhoid Fever

Tuberculosis

Malaria

Historically, vaccine development is measured in decades, not years.

The global focus and resources devoted to finding a vaccine for COVID-19 could

dramatically shorten the process.

1880

1882

1884 1989

1889 1981

1906 1946

1907

1908 1955

1947

1953 1995

1953 1963

1960

1965 1981

1973 2006

1976

1981 2006

19838

7

6

5

4

3

2

1

35

U.S. Presidential Agenda

36

Presidential Cycle: The Economy

Source: Strategas Research Partners. Past performance is not a guarantee of future results. Investors cannot invest directly in


6

1

0

5

0

1

2

3

4

5

6

7

Year 1 Year 2 Year 3 Year 4

Number of Recessions Starting Per Year of the Presidential Cycle

1948 – 2016

37

When It Comes to Re-election, It's All About the Economy

Source: National Bureau of Economic Research, Bureau of Labor Statistics and Wikipedia. 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.

No Recession in 2 Years Before Election

Year PresidentChange in Election Year

Unemployment RateRecession? Re-election? Margin of Victory (Popular Vote)

2012 Obama -1.6% No Yes 3.9%

2004 Bush 43 -0.2% No Yes 2.5%

1996 Clinton -0.6% No Yes 8.5%

1984 Reagan -3.0% No Yes 18.2%

1972 Nixon 0.1% No Yes 23.2%

1964 Johnson -0.3% No Yes 22.6%

1956 Eisenhower -1.8% No Yes 15.4%

Recession in 2 Years Before Election

Year PresidentChange in Election Year

Unemployment RateRecession? Re-election? Margin of Victory (Popular Vote)

1992 Bush 41 1.4% Yes No -5.6%

1980 Carter 1.7% Yes No -9.7%

1976 Ford 1.7% Yes No -2.1%

Presidents facing re-election tend to win when the economy is strong, and not

when conditions worsen ahead of voting day.

38

Corrections During Presidential Election Years

As of March 2020., most recent as of June 30, 2020. Source: FactSet. Past performance is not a guarantee of future results. Investors cannot


-13

-4

-9-5

-8

-17-13

-8 -6 -8

-17

-8

-48

-10 -11

-34

31

1114

3

-4

37

3027

12

50

-10

16

45

28 27

-60%

-40%

-20%

0%

20%

40%

60%

1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004 2008 2012 2016 2020

S&

P 5

00

Market Corrections During Years of Presidential Elections

Market Corrections During Years of Presidential Elections Market Performance 1-Year after Correction

This is the second largest equity market decline during a presidential election year since 1960.

The opposition took the White House in the 4 largest drawdowns (2008, 2000, 1980, and 1960).

?

39

Stocks Anticipate Election Outcome

Data as of June 30, 2020. Source: FactSet. Past performance is not a guarantee of future results. Investors cannot invest directly in an index, and


-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec.

S&P 500 Average Performance During Election Years 1936 – 2016

Incumbent Party Won Incumbent Party Lost

In the three months before the election, stocks have historically fallen ahead of a

change in party, and rallied when the incumbent retained the White House.

The market has correctly "predicted" every election since 1984 and 86% of the time

since 1936.

Election Day

40

International

International investments are subject to special risks, including

currency fluctuations and social, economic and political

uncertainties, which could increase volatility. These risks are

magnified in emerging markets.

41

Home Country Bias

Morningstar Category Assets as of May 31, 2020. GDP as of Dec. 31, 2019. MSCI World Index as of June 30, 2020. Source: Morningstar,

IMF, FactSet. Data most recent available as of June 30, 2020. Past performance is not a guarantee of future results. Investors cannot


U.S.

International

% Assets

The U.S. represents 69% of

U.S. investor portfolios

U.S.

International

% GDP

The U.S. represents only 33%

of Global GDP

Investors tend to over-allocate to their home country.

U.S.

International

% Market Cap

The U.S. represents 64% of

Global Market Cap

42

U.S. vs. International Equity Performance

S&P 500 vs. MSCI EAFE. Data as of June 30, 2020. Source: FactSet. Past performance is not a guarantee of future results. Investors cannot invest directly in an index,


0.0

0.5

1.0

1.5

2.0

2.5

3.0

1978 1983 1988 1993 1998 2003 2008 2013 2018

Dif

fere

nces

Betw

een

In

dexes

77.9%

U.S.

Outperformed

174.9%

390.5%

International

Outperformed

U.S

.

Ou

tperf

orm

ed

U.S.

Outperformed

163.0%

95.8%

International

Outperformed

Geographic leadership tends to persist for multiple years.

43

Dollar Regimes Coincide With Global Equity Leadership

Data as of June 30, 2020. MSCI U.S. Index vs. MSCI All Country World ex.-U.S. Index in U.S. dollar terms. One year rolling periods. 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.

-40

-30

-20

-10

0

10

20

30

40

1993 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

U.S

. vs.

Rest

of

Wo

rld

On

e-Y

ear

Rela

tive P

erf

orm

an

ce (

%)

Relative Stock Price: U.S. vs. Rest of World

(Rolling 1-Year Periods)

Dollar Bull Dollar Bear Dollar Bull

Periods of sustained dollar strength have aligned with U.S. equity outperformance.

Dollar weakness could lead to a shift in global equity market leadership.

44

Global Fiscal Impulse

Countries are listed in order from highest to lowest 2019 GDP. Source: Brugel. Past performance is not a guarantee of future results. Investors cannot


0% 10% 20% 30% 40% 50% 60%

Portugal

Belgium

Netherlands

Spain

Italy

France

UK

Germany

United States

Government Coronavirus Response as % of 2019 GDP

Immediate Fiscal Impulse Deferral Other Liquidity/Guarantee QE as % of GDP

Governments around the world have adopted strong measures to combat the

drag from shutdowns.

45

Corporations Have Been the Largest Buyers of Equities

Data as of June 30, 2020. Source: Federal Reserve Bank, Deutsche Bank. Past performance is not a guarantee of future results. Investors cannot invest directly in an index,


-3 -2 -1 0 1 2 3 4 5

Households

Pensions

Other Domestic Buyers

Mutual Funds

Foreign Sectors

ETFs

Non-Financial Corporations

Trillions ($)

Cumulative Equity Flows Since 2Q 2009

One of the key drivers over the last cycle was corporate buybacks.

Buybacks are likely to slow due to negative earnings growth and restrictions associated

with government stimulus funds.

46

Currency

47

U.S. Dollar Cycle

As of June 30, 2020. Source: Federal Reserve Bank of St. Louis, Federal Reserve and FactSet. Major Currencies, Index Mar 1973=100, Monthly, Not Seasonally

Adjusted. 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.

60

80

100

120

140

160

180

1973 1978 1983 1988 1993 1998 2003 2008 2013 2018

Ind

ex

Mar

19

73

=1

00

Trade-Weighted U.S. Dollar

17 years 18 years14 years

U.S. dollar cycles typically last approximately 16 years.

History suggests that the dollar may be approaching an inflection point.

?

48

Twin Deficits: Budget and Trade

Data as of Dec. 31, 2019, most recent available as of March 31, 2020. Source: BEA, Federal Reserve, FactSet. Past performance is not a guarantee of


-10

-8

-6

-4

-2

0

2

4

6

8

10

-30%

-20%

-10%

0%

10%

20%

30%

40%

1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019

Tw

in D

efic

its -5

Year C

han

ge

Real

Tra

de W

eig

hte

d D

oll

ar

-5

Year

Ch

an

ge

Real Trade Weighted Dollar (Lagged 2 Years, LHS) Twin Deficits as a % of GDP (RHS)

Twin deficits show the dollar should modestly weaken over the next several years.

49

The U.S. Dollar Dominates the International Monetary System

Data as of June 2018.

Source: European Central Bank, BofA Merrill Lynch Global Research.

62.2

56.3

39.9

62.7

23.4 23.2

35.7

20.1

2.4 3.2 3.04.9

0.0 0.01.6 1.2

0%

10%

20%

30%

40%

50%

60%

70%

International Debt International Loans Global Payment Currency Foreign Exchange Reserves

Sh

are

of

the I

nte

rnati

on

al

Syst

em

USD EUR JPY Renminbi

The greenback is firmly entrenched as the world's reserve currency.

50

Debt

51

Quality Reigns SupremeEquity Investors Have Differentiated Between High & Low Rated Companies

Data as of June 30, 2020. Source: FactSet. Past performance is not a guarantee of future results. Investors cannot invest


A

AA

AAA

BBB

BBB

-60%

-50%

-40%

-30%

-20%

-10%

0%

10%

Feb. 20, 2020 Mar. 22, 2020 Apr. 22, 2020 May. 23, 2020 Jun. 23, 2020

Russell 3000 Returns by Credit Rating

Businesses with stronger balance sheets have held up better through the recent

downturn and bounce-back.

52

U.S. Credit Quality Deterioration

As of June 30, 2020. Source: Bloomberg/Barclays. Past performance is not a guarantee of future results. Investors cannot invest directly


Baa

43.8%

A

38.3%

Aa

10.4%

Aaa

7.4%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 2015 2018

In 1973, only 9% of credits were rated Baa versus 44% today.

The risk from fallen angels has been dampened considerably due to the

Fed’s backstop.

53

Will Corporations Follow The Debt Playbook?

Data as of Dec. 31, 2018. Source: IMF. Past performance is not a guarantee of future results. Investors cannot invest directly in an index, and unmanaged


65

70

75

80

85

90

95

100

64

66

68

70

72

74

76

78

-32 -28 -24 -20 -16 -12 -8 -4 Crisis 4 8 12 16 20 24 28 32 36 40

Ho

use

ho

ld D

eb

t as a

% o

f GD

P

Co

rpo

rate

Deb

t as

a %

of

GD

P

Quarters Before/After Crisis

Corporate Debt (2010 to 2018) Household Debt (2000 to 2018)

Over the past 20 years, households built up and then paid down a substantial amount of debt.

More recently, corporate debt balances have grown. Time will tell if the current crisis forces a

shift in corporate behavior.

Household debt

deleveraging

2009 - 2018

Household debt

buildup

2000 - 2008

Corporate debt

buildup

2010 - 2018

Corporate debt

deleveraging???

54

U.S. Debt Levels Set to Rise Higher

Budget as % of GDP data as of June 30, 2020. Source: Bloomberg, CBO, Deutsche Bank, FRED. Future debt levels are based on a Congressional

Budget Office forecast. 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.

Barring a change in spending, U.S. debt levels will grow substantially in the coming decades.

0

20

40

60

80

100

120

140

160

1790 1815 1840 1865 1890 1915 1940 1965 1990 2015 2040

U.S

. D

eb

t as

% o

f G

DP

Federal Debt Held by the Public Since 1790

-30%

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

1929 1939 1949 1959 1969 1979 1989 1999 2009 2019Fed

era

l S

urp

lus

or

Defi

cit

as

% o

f G

DP

(A

nn

ual)

U.S. Budget as a % of GDP Since 1929

WW II

2009 GFC

COVID-19

55

Volatility

56

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019

S&P 500 Calendar Year Total Return S&P 500 Largest Intra-Year Price Decline (%)

Median

Intra-Year

Price Decline

-9.9%

Median

Annualized

Total Return

+15.1%

Volatility Does Not Equal a Financial Loss Unless You Sell

As of Dec. 31, 2019. Source: FactSet. Past performance is not a guarantee of future results. Investors cannot invest directly in


57

Missing the Best Days Can Drastically Reduce Returns

Data as of March 31, 2020. Source: FactSet. Past performance is not a guarantee of future results. Investors cannot invest directly in an index, and


Cumulative Annualized

Decade Price ReturnExcluding 10 Best Days

Per DecadePrice Return

Excluding 10 Best Days

Per Decade

1930 -42% -79% -5% -15%

1940 35% -14% 3% -2%

1950 257% 167% 14% 11%

1960 54% 14% 4% 1%

1970 17% -20% 2% -2%

1980 227% 108% 13% 8%

1990 316% 186% 15% 12%

2000 -24% -62% -3% -10%

2010 190% 95% 11% 7%

Average Since 1930 114% 44% 6% 1%

Investors that missed the 10 best days in a given decade would have seen 70%

lower returns over the course of that decade on average.

28% of the best days (5% or more) took place in the first two months of a

bull market.

58

Can You Time the Market?

Data as of April 30, 2019, 10 months before current prior market peak. Source: Yardeni Research. 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.

10

100

1,000

10,000

100,000

1936 1946 1956 1966 1976 1986 1996 2006 2016

Cu

mu

lati

ve R

etu

rns

(Lo

g S

cale

) ($

)

Buy & Hold vs. Market-Timing Since 1936 (Growth of $100)

Cumulative Return: Buy & Hold Cumulative Return: Sell 10 Months Before Peak, Buy 10 Months After Trough

Since 1936, an investor that consistently sold 10 months prior to a market peak and bought

back 10 months after the trough was worse overall than a buy and hold investor.

Cumulative

Return:

$21,934

Cumulative

Return:

$8,848

59

Which Equities Do Well During Periods of Market Volatility?During the Last Eight Major Market Drawdowns, Some Sectors Held Up Better than Others

Source: FactSet. Note: Market Drawdowns defined as declines of 15% or greater in S&P 500 since 1987. Hit rate defined as % of severe declines with

relative outperformance vs. S&P 500. Past performance is not a guarantee of future results. Investors cannot invest directly in an index, and unmanaged


100%

88%

100%

88%

50%

25%

38%

13%

38%

13%

0% 20% 40% 60% 80% 100%

Consumer Staples

Utilities

Health Care

Comm. Services

Energy

Materials

Cons. Discretionary

Industrials

IT

Financials

Hit Rate

19%

12%

11%

5%

3%

0%

-2%

-4%

-5%

-7%

-10% -5% 0% 5% 10% 15% 20%

Consumer Staples

Utilities

Health Care

Comm. Services

Energy

Materials

Cons. Discretionary

Industrials

IT

Financials

Relative Performance

During periods of market turmoil, defensive sectors such as Staples, Utilities, and

Health Care have historically tended to deliver better relative performance.

60

Typical Market Leadership in a Downturn

Note: Average performance: average performance during selloffs of 5% or more, Hit Rate: Hit rate of outperformance during 5%+ selloffs, 2005 – present.

Benchmarks used: Large Value: S&P 500 Value, Large Blend: S&P 500, Large Growth: S&P 500 Growth; Mid Value: S&P 400 Value, Mid Blend: S&P 400, Mid

Growth: S&P 400 Growth; Small Value: S&P 600 Value, Small Blend: S&P 600, Small Growth: S&P 600 Growth. Outperformance frequency calculated relative to

S&P 1500 index. Source: S&P, Bloomberg. Past performance is not a guarantee of future results. Investors cannot invest direct ly in an index, and unmanaged


Mark

et

Cap

Sm

all

Mid

Larg

e

Value Blend Growth

Investment Style

Large Cap Value

-13.8%Avg. Perf.

35% Hit Rate

Mid Cap Value

-15.1%Avg. Perf.

19% Hit Rate

Small Cap Value

-15.7%Avg. Perf.

15% Hit Rate

Large Cap

-12.9%Avg. Perf.

85% Hit Rate

Mid Cap

-14.6%Avg. Perf.

23% Hit Rate

Small Cap

-15.1%Avg. Perf.

19% Hit Rate

Large Cap Growth

-12.1%Avg. Perf.

77% Hit Rate

Mid Cap Growth

-14.0%Avg. Perf.

31% Hit Rate

Small Cap Growth

-14.5%Avg. Perf.

39% Hit Rate

Most

Defensive

Least

Defensive

Less

Defe

nsi

ve

Less Defensive

61

Which Equities Do Well Following Selloffs? Following the Last Seven Major Market Drawdowns, Some Sectors Have Rebounded More Strongly

Source: FactSet. Note: Market Drawdowns defined as pullbacks of 15% or greater in S&P 500 since 1987. Hit rate defined as % of severe declines with

relative outperformance vs. S&P 500 12 months after each decline. Past performance is not a guarantee of future results. Investors cannot invest directly


86%

71%

71%

71%

57%

29%

57%

14%

14%

14%

0% 20% 40% 60% 80% 100%

IT

Financials

Industrials

Cons. Discretionary

Materials

Health Care

Comm. Services

Energy

Consumer Staples

Utilities

Hit Rate

23%

15%

6%

6%

0%

-9%

-11%

-15%

-15%

-18%

-30% -20% -10% 0% 10% 20% 30%

IT

Financials

Industrials

Cons. Discretionary

Materials

Health Care

Comm. Services

Energy

Consumer Staples

Utilities

Relative Performance

Following periods of market turmoil, more cyclical sectors such as IT, Financials,

Industrials, and Consumer Discretionary have historically tended to deliver

better relative performance.

62

Valuations

63

65

14 14

20

35

0

5

10

15

20

25

30

35

<-20% -20% - 10% -10% - 0% 0% - 10% 10% - 20% >20%

Years

S&P 500 Annual Total Return Ranges

1927

1928

1933

1935

1936

1938

1942

1943

1945

1950

1951

1954

1955

1958

1961

1963

1967

1975

1976

1980

1982

1983

1985

1989

1991

1995

1996

1997

1998

1999

2003

2009

2013

2017

2019

1930

1931

1937

1974

2002

2008

1941

1957

1966

1973

2001

1929

1932

1934

1939

1940

1946

1953

1962

1969

1977

1981

1990

2000

2018

1947

1948

1956

1960

1970

1978

1984

1987

1992

1994

2005

2007

2011

2015

1926

1944

1949

1952

1959

1964

1965

1968

1971

1972

1979

1986

1988

1993

2004

2006

2010

2012

2014

2016

Market Annual Returns Distribution of S&P 500 Total Returns Since 1926

As of Dec. 31, 2019.

Source: Strategas Research Partners.

64

Price/Earnings Is Not The Only Indicator To Watch

Data as of June 30, 2020. Source: Bloomberg. Past performance is not a guarantee of future results. Investors cannot invest


Dec. 2007

17.5

Sept. 2009

23.2

10

15

20

25

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Recession S&P 500 Price/Earnings Ratio

65

Index Composition Supports Higher P/Es Cyclical Sector Representation is at 100-Year Low

As of June 30, 2020. Source: Cornerstone Macro. Past performance is not a guarantee of future results. Investors cannot invest


20%

30%

40%

50%

60%

70%

80%

1926 1936 1946 1956 1966 1976 1986 1996 2006 2016

% o

f S

&P

50

0

Cyclicals (Financials, Industrials, Materials, Energy)

Growth, Stability and Defense (Tech, Comm., Health Care, Staples, Discretionary, Utilities, REITs)

Less-volatile sectors are typically rewarded with higher multiples. These groups make

up a record-high share of the S&P 500 today.

66

Dividend-Paying Equities Attractive

As of June 30, 2020. Source: FactSet. Past performance is not a guarantee of future results. Investors cannot invest directly in


0%

10%

20%

30%

40%

50%

60%

70%

80%

1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019

% o

f S

&P

50

0 S

tock

s w

/ D

ivid

en

d Y

ield

> 3

0 Y

ear

Tre

asu

ry Y

ield

63% of S&P stocks now have a dividend yield greater than the 30-year Treasury.

67

Glossary of Terms

BEA: Bureau of Economic Analysis

GDP: Gross Domestic Product

DAX: Blue chip stock market index consisting of the 30 major German companies trading on the Frankfurt Stock Exchange.

IFO: The Ifo Institute for Economic Research is a Munich-based research institution.

P/E Ratio: Price/Earnings ratio

PMI: Purchasing Manager’s Index

Quantitative easing (QE): Monetary policy implemented by a central bank in which it increases the excess reserves of the banking system through the

direct purchase of debt securities.

Shibor: Shanghai Interbank Offered Rate

S&P 500 Index: Unmanaged index of 500 stocks that is generally representative of the performance of larger companies in the U.S.

VIX: VIX is the ticker symbol and the popular name for the Chicago Board Options Exchange's CBOE Volatility Index, a popular measure of the stock

market's expectation of volatility based on S&P 500 index options.

Yield Curve: Comparison of interest rates at a point in time of bonds with equal credit quality but different maturity dates.

YoY: Year Over Year

U.S. Treasurys: Direct debt obligations issued and backed by the "full faith and credit" of the U.S. government. The U.S. government guarantees the

principal and interest payments on U.S. Treasuries when the securities are held to maturity. Unlike U.S. Treasury securities, debt securities issued by the

federal agencies and instrumentalities and related investments may or may not be backed by the full faith and credit of the U.S. government. Even when

the U.S. government guarantees principal and interest payments on securities, this guarantee does not apply to losses resulting from declines in the

market value of these securities.

68

Name and PositionIndustry

Experience

ClearBridge

TenureEducation, Experience and Professional Designations

Jeffrey Schulze CFA

Director, Investment

Strategist

15 years • Joined ClearBridge in

2014

• Member of the CFA Institute

• Lord Abbett & Co., LLC – Portfolio Specialist

• BS in Finance from Rutgers University

Josh Jamner CFA

Vice President,

Investment Strategy

Analyst

11 years • Joined ClearBridge in

2017

• Member of the CFA Institute

• RBC Capital Markets - Assistant Vice President, Associate Strategist - U.S. Equity

• Bessemer Trust - Assistant Vice President, Client Portfolio Analyst

• BA in Government from Colby College

Biographies

69

Additional Important InformationPast performance is no guarantee of future results.

©2020 Legg Mason Investor Services, LLC, member FINRA, SIPC. “Anatomy of a Recession” is a

trademark of ClearBridge Investments, LLC. Legg Mason Investor Services, LLC and ClearBridge

Investments, LLC are subsidiaries of Legg Mason, Inc.

All opinions and data included in this presentation are as of July 2020 unless noted otherwise

and are subject to change. The opinions and views expressed herein are of the presenter and

may differ from other managers, or the firm as a whole, and are not intended to be a forecast of

future events, a guarantee of future results or investment advice. This information should not be

used as the sole basis to make any investment decision. The statistics have been obtained from

sources believed to be reliable, but the accuracy and completeness of this information cannot

be guaranteed. Neither ClearBridge Investments nor its information providers are responsible for

any damages or losses arising from any use of this information.

All investments involve risk, including loss of principal. Equity securities are subject to price

fluctuation and possible loss of principal. Fixed-income securities involve interest rate, credit,

inflation, and reinvestment risks; and possible loss of principal. As interest rates rise, the value of

fixed-income securities falls. An investor cannot invest directly in an index. Unmanaged index

returns do not reflect any fees, expenses or sales charges.

Any information, statement or opinion set forth herein is general in nature, is not directed to or

based on the financial situation or needs of any particular investor, and does not constitute, and

should not be construed as, investment advice, forecast of future events, a guarantee of future

results, or a recommendation with respect to any particular security or investment strategy or

type of retirement account. Investors seeking financial advice regarding the appropriateness of

investing in any securities or investment strategies should consult their financial professional.

This material is approved for distribution in those countries and to those recipients listed

below. Note: this material may not be available in all regions listed.

All investors and eligible counterparties in Europe, the UK, Switzerland:

In Europe (excluding UK and Switzerland), this financial promotion is issued by Legg Mason

Investments (Ireland) Limited, registered office 6th Floor, Building Three, Number One

Ballsbridge, 126 Pembroke Road, Ballsbridge, Dublin 4, D04 EP27. Registered in Ireland,

Company No. 271887. Authorised and regulated by the Central Bank of Ireland.

All Qualified Investors in Switzerland:

In Switzerland, this financial promotion is issued by Legg Mason Investments (Switzerland)

GmbH, authorised by the Swiss Financial Market Supervisory Authority FINMA. Investors in

Switzerland: The representative in Switzerland is FIRST INDEPENDENT FUND SERVICES LTD.,

Klausstrasse 33, 8008 Zurich, Switzerland and the paying agent in Switzerland is NPB Neue Privat

Bank AG, Limmatquai 1, 8024 Zurich, Switzerland. Copies of the Articles of Association, the

Prospectus, the Key Investor Information documents and the annual and semi-annual reports of

the Company may be obtained free of charge from the representative in Switzerland.

All investors in the UK:

In the UK this financial promotion is issued by Legg Mason Investments (Europe) Limited,

registered office 201 Bishopsgate, London EC2M 3AB.

Registered in England and Wales, Company No. 1732037. Authorized and regulated by the

Financial Conduct Authority. Client Services +44 (0)207 070 7444

All Investors in Hong Kong and Singapore:

This material is provided by Legg Mason Asset Management Hong Kong Limited in Hong Kong

and Legg Mason Asset Management Singapore Pte. Limited (Registration Number (UEN):

200007942R) in Singapore.

This material has not been reviewed by any regulatory authority in Hong Kong or

Singapore.

All Investors in the People's Republic of China ("PRC"):

This material is provided by Legg Mason Asset Management Hong Kong Limited to

intended recipients in the PRC. The content of this document is only for Press or the PRC

investors investing in the QDII Product offered by PRC's commercial bank in accordance

with the regulation of China Banking Regulatory Commission. Investors should read the

offering document prior to any subscription. Please seek advice from PRC's commercial

banks and/or other professional advisors, if necessary. Please note that Legg Mason and

its affiliates are the Managers of the offshore funds invested by QDII Products only. Legg

Mason and its affiliates are not authorized by any regulatory authority to conduct

business or investment activities in China.

This material has not been reviewed by any regulatory authority in the PRC.

Distributors and existing investors in Korea and Distributors in Taiwan:

This material is provided by Legg Mason Asset Management Hong Kong Limited to eligible

recipients in Korea and by Legg Mason Investments (Taiwan) Limited (Registration Number:

(98) Jin Guan Tou Gu Xin Zi Di 001; Address: Suite E, 55F, Taipei 101 Tower, 7, Xin Yi Road,

Section 5, Taipei 110, Taiwan, R.O.C.; Tel: (886) 2-8722 1666) in Taiwan. Legg Mason

Investments (Taiwan) Limited operates and manages its business independently.

This material has not been reviewed by any regulatory authority in Korea or Taiwan.

If the Press would like to re-edit the press release from their own point of view, it should

base on the public information provided by the Legg Mason Investments (Taiwan) and the

information contained in such press releases shall be not over-promising or exaggerating.

All Investors in the Americas:

This material is provided by Legg Mason Investor Services LLC, a U.S. registered Broker-Dealer,

which includes Legg Mason Americas International. Legg Mason Investor Services, LLC, Member

FINRA/SIPC, and all entities mentioned are subsidiaries of Legg Mason, Inc.

All Investors in Australia and New Zealand:

This document is issued by Legg Mason Asset Management Australia Limited (ABN 76 004 835

839, AFSL 204827). The information in this document is of a general nature only and is not

intended to be, and is not, a complete or definitive statement of matters described in it. It has

not been prepared to take into account the investment objectives, financial objectives or

particular needs of any particular person.

954899-CBAX539422

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