Before the Bell...2020/10/12 · For further information on any of the topics mentioned, please contact your Financial Advisor. Unless specifically stated otherwise, comments contained

FOR IMPORTANT DISCLOSURES PLEASE SEE THE DISCLOSURE PAGES AT THE END OF THIS DOCUMENT Notations:

For further information on any of the topics mentioned, please contact your Financial Advisor. Unless specifically stated otherwise, comments contained in this document should not be construed as an investment opinion or

recommendation of any securities mentioned. Charts depicted are from FactSet unless otherwise noted. ____________________________________________________________________________________________________________________________ © 2020 Ameriprise Financial, Inc. All rights reserved. Page 1 of 12

Before the Bell Morning Market Brief

October 12, 2020

MONDAY MORNING MARKET STRATEGY: David M. Joy, Chief Market Strategist U.S. stocks enjoyed their best week in several months, as the S&P 500 gained 3.8 percent. Variously ascribed to the on again off again stimulus talks in Washington and the potentially salutary effects of possible blue wave election, stocks edged within less than one percent of their early September high. The index has now gained 7.4 percent since its recent September 23rd. low. And while every sector in the index gained on the week, the leadership showed a clear cyclical bias. Materials led the way with a gain of 5.1 percent, followed closely by energy and technology. The VIX index fell to a level of 25 for the first time since late August.

As robust as the move was, small stocks were even stronger. The Russell 2000 climbed 6.4 percent, bringing its surge off its September 23rd low to 12.8 percent, but leaving it still 1.9 percent shy of turning positive on the year.

Eurozone equities rose 3.5 percent in dollar terms, as measured by the EuroStoxx 50 index, reflecting the dollar’s weakness versus the euro. The Nikkei climbed 2.2 percent in dollar terms, and China’s CSI 300 index rose 3.5 percent, as the currency firmed.

Bond yields also rose. The ten-year treasury note added seven basis points to 0.77 percent, its highest weekly close since early June. High yield credit spreads tightened for the second straight week.

There wasn’t much economic news last week to account for the strength in equities and the rise in yields. In the U.S., the ISM service sector report was strong, but jobless claims showed further evidence of leveling off. And the minutes from the Fed’s September meeting contained little surprise. But this week may be a different story. In addition to both producer and consumer prices for September, retail sales and industrial production are on the calendar, as is preliminary consumer sentiment for October. All are expected to show some strengthening from the prior month. The bond market is closed on Monday.

Corporate earnings season begins this week. Since the start of the third quarter expectations have steadily improved, although they will certainly fall well below last year’s level. According to FactSet, aggregate earnings are set to decline by 20.5 percent compared to last year, and they could be better than that. The Atlanta GDPNow model forecasts third quarter growth will top 35 percent. How meaningful a better-than-expected quarter for earnings will be remains to be seen, however. How confident company managements feel about the months ahead will likely be far more influential. According to the Business Roundtable, CEO confidence improved markedly in the third quarter, but remains below its level at the start of the year. The OECD Business Confidence Index for the U.S. is more optimistic, however, showing a rebound to levels that prevailed in 2018. The big banks kick things off this week and have something to prove. The KBW bank index is lower on the year by 30 percent. But even the banks have rallied in the past couple of weeks, climbing 6.4 percent last week and 5.1 percent the prior week, no doubt encouraged by the rise in bond yields.

Before The Bell October 12, 2020 ____________________________________________________________________________________________________________________________

____________________________________________________________________________________________________________________________ © 2020 Ameriprise Financial, Inc. All rights reserved. Page 2 of 12

Neither politics nor the coronavirus will be far from the headlines this week. Supreme Court nomination hearings will compete with election campaigning for the daily headlines, with now just three weeks to go before the election. But so will the virus, as Europe deals with a second wave, and daily infections in the U.S. have risen above 45,000.

MORNING MARKET COMMENTARY: Anthony M. Saglimbene, Global Market Strategist Quick Take: U.S. futures are pointing to a higher open; European markets are trading in the green; Asia ended

higher overnight; West Texas Intermediate (WTI) oil trading at $40.11; 10-year U.S. Treasury yield at 0.78%.

Checking In On Investor Sentiment: At the beginning of last week, we pointed out that the S&P 500 Index was struggling to move materially above its 50-day moving average and its old February high. By the end of the week, the broad-based stock benchmark had raced through both levels, finishing higher by +3.8% over the five trading days. Notably, the S&P 500 posted its best weekly performance in more than three months and is roughly just 3% shy of its September all-time high.

The NASDAQ Composite was up +4.6% last week, while the Russell 2000 Index popped +6.4%. Over the previous three months, the Russell 2000 has risen over +15.0% and is now less than 5% away from its January 17th all-time high. Despite the uncertain political, economic, and virus backdrop at the moment, investors are taking a "glass-half-full" approach — pushing stock prices higher.

Although Washington dysfunction took center stage last week, the hope of an eventual stimulus package lifted optimism. Also, positive news on COVID-19 vaccines and treatments, as well as some positive preannouncements before earnings season this week, helped lift stock prices.

According to last Thursday's weekly American Association of Individual Investors Survey, bullish sentiment rose 8.5 percentage points. The current level of 34.7% is the highest reading for the bulls since the sentiment level initially rallied off the bear market lows in mid-April. The 8.5 percentage point gain last week is also the largest one week rise in bullish sentiment since January. A record run for stock prices from the March bottom, as well as their recent resiliency in the face of rising macro pressures, could finally be helping to bring more investors into the fold of the bulls. In our view, it will be interesting to see if this trend can hold over the coming weeks, and as the November 3rd election draws closer.

As the next two FactSet charts below highlight, bullish sentiment has traced subdued levels since falling in March, but last week, finally surpassed its five-year average. In contrast, bearish sentiment continues to remain well above its five-year average but has continued to trend lower over recent weeks.



Bespoke Investment Group noted that bearish sentiment dipped below 40% last week for only the second time since mid-June and is at its lowest level since June 11th. In addition, the bull/bear spread in the AAII's weekly survey of retail investors dipped to its lowest level since June 11th. However, the overall negative tilt in sentiment stands at 33 straight weeks. While this sentiment survey tends to lean bearish historically, 33 weeks is a long time for retail investors to consistently remain so negative on stocks. Considering the market move from the March bottom, we believe the AAII data has acted more as a contrarian signal for other investor types (e.g., professional money managers) than a gauge to anticipate stock direction.

While a majority of retail investors still cast a skeptical eye toward stocks today, their negative bias may be starting to thaw. Interestingly, their "less bearish" view on forward returns comes when other professional money managers are looking to hedge volatility and mitigate risk. While the near-term could remain clouded by the election and coronavirus trends, our view is that economic activity and corporate profits could continue to trend in a positive direction through next year. That's one reason to remain cautiously optimistic about stock prices heading into year-end, even despite the growing anxiety in other macro conditions.

Asia-Pacific: Asian equities finished higher on Monday. Stocks in China climbed higher overnight on optimism China President Xi Jinping's address in Shenzhen this week could mark some positive changes. Per FactSet, Xi is expected to discuss reforms for Shenzhen that could provide greater autonomy for the city and plans to turn southern China into a global technology hub. Creating a special economic zone could relax restrictions on energy, telecommunications, public service, transportation, and education. Also, loosening limits on foreign investment in cutting-edge technologies and improving fair competition are other areas some expect Xi's address to outline.

Europe: Markets across the region are trading higher at midday. At the end of the week, the October 15th Brexit summit will offer the UK and European Union a chance to assess the state of negotiations. While there is expected to be some posturing and mini-dramas both before and after the summit, most expect that both sides will inch closer to a final agreement. However, that agreement may be narrow in scope and continue to pose challenges for each economy moving forward

U.S.: Equity futures are pointing to a positive open. Here is a quick news rundown to start your morning: Q3 Earnings Season kicks off tomorrow. Johnson & Johnson, Delta Airlines, JPMorgan Chase, Citigroup,

and BlackRock report their profit reports for the third quarter tomorrow. Analysts expect Q3'20 S&P 500 earnings per share (EPS) to decline by 20.5% y/y, which would mark the second largest y/y decline since Q2'09 (-26.9%). Analysts expect sales to decline by 3.5% y/y. However, EPS estimates rose through the third quarter, and companies typically beat profit estimates by healthy margins during the reporting season. Look for our Q3 earnings preview in tomorrow's Before the Bell.



This week's inflation reports should show a tame backdrop. The September consumer price inflation (CPI) report on Tuesday is expected to show a +0.2% m/m rise, which is slower than the +0.4% pace in August. September producer price inflation (PPI) (Wednesday) is also expected to moderate to +0.2% from +0.3% in August.

The other notable economic reports that line the week. Thursday's initial jobless claims, as well as September retail sales and U of M consumer sentiment (both on Friday), are expected to show continued strength across the consumer. The retail sales report will provide our first glimpse into a full month of data without the added unemployment benefits. Did sales trends hold without the extra $600 a week in unemployment benefits? Economists expect September retail sales jumped +0.8% m/m versus the +0.6% pace in August.

Democrats and Republicans cannot agree on a stimulus bill. CNBC reported over the weekend House Democrats rejected Republican's revised coronavirus stimulus offer of $1.8 trillion. The sticking point? The Republican proposal does not include a strategic plan to counter COVID-19 and provides inadequate funding for state and local governments based on Democrats' assessment. In our view, it is becoming more apparent a stimulus bill may have to wait until after the election.

Is the market growing less concerned about the potential for a Democratic sweep in November? Several press reports over the weekend highlighted a Democratic sweep could increase the prospects for another massive stimulus injection that could boost economic growth next year. As we’ve noted many times the last several weeks, JPMorgan is in the news this morning after noting that while Democrats could raise the capital gains tax if they take control in Washington, the change likely wouldn't go into effect in January 2022. Notably, while that could weigh on stocks in Q4'21, the low yield/high equity risk premium environment would likely see markets resume an upward trajectory after the temporary selling pressure. In our view, we could see some of that selling pressure after the election in anticipation of the change. Please refer to our recently published Election Insights: An Investor's Roadmap to the 2020 Election for more detail on a range of potential election outcomes in November.

WORLD CAPITAL MARKETS 10/12/2020 As of: 8:30 AM ET

Americas % chg. % YTD Value Europe (Intra-day) % chg. %YTD Value Asia/Pacific (Last Night) % chg. %YTD ValueS&P 500 0.88% 9.22% 3,477.1 DJSTOXX 50 (Europe) 0.83% -9.63% 3,300.4 Nikkei 225 (Japan) -0.26% 1.25% 23,558.7 Dow Jones 0.57% 2.02% 28,586.9 FTSE 100 (U.K.) 0.16% -17.86% 6,026.3 Hang Seng (Hong Kong) 2.20% -9.82% 24,649.7 NASDAQ Composite 1.39% 30.06% 11,579.9 DAX Index (Germany) 0.58% -0.92% 13,127.1 Korea Kospi 100 0.49% 9.85% 2,403.7 Russell 2000 0.55% -0.81% 1,637.5 CAC 40 (France) 0.90% -14.69% 4,991.3 Singapore STI 0.77% -17.87% 2,552.4 Brazil Bovespa -0.45% -15.70% 97,483 FTSE MIB (Italy) 0.73% -16.03% 19,739.2 Shanghai Comp. (China) 2.64% 10.11% 3,358.5 S&P/TSX Comp. (Canada) 0.17% -0.33% 16,562.8 IBEX 35 (Spain) 0.33% -25.22% 6,973.6 Bombay Sensex (India) 0.21% -0.61% 40,593.8 Mexico IPC 0.24% -10.49% 38,494.4 MOEX Index (Russia) 0.73% -0.94% 2,854.9 S&P/ASX 200 (Australia) 0.49% -5.24% 6,132.0

Global % chg. % YTD Value Developed International % chg. %YTD Value Emerging International % chg. %YTD ValueMSCI All-Country World Idx 0.79% 5.34% 584.6 MSCI EAFE 0.72% -3.89% 1,910.2 MSCI Emerging Mkts 0.45% 2.81% 1,122.5

Note: International market returns shown on a local currency basis. The equity index data shown above is on a total return basis, inclusive of dividends.

S&P 500 Sectors % chg. % YTD Value Commodities Communication Services 0.77% 10.58% 198.6 Equity Income Indices % chg. % YTD Value Futures & Spot (Intra-day) % chg. % YTD ValueConsumer Discretionary 1.50% 28.73% 1,260.1 JPM Alerian MLP Index -0.09% -46.03% 117.8 CRB Raw Industrials 1.18% 3.15% 466.01 Consumer Staples 0.77% 6.84% 676.1 FTSE NAREIT Comp. TR -0.43% -7.94% 19,656.9 NYMEX WTI Crude (p/bbl.) -1.53% -34.52% 39.98 Energy -1.59% -46.68% 233.7 DJ US Select Dividend -0.46% -14.92% 1,948.7 ICE Brent Crude (p/bbl.) -1.38% -35.97% 42.26 Financials 0.07% -16.39% 419.1 DJ Global Select Dividend 0.34% -18.46% 184.8 NYMEX Nat Gas (mmBtu) 5.03% 31.52% 2.88 Health Care 0.88% 7.80% 1,263.3 S&P Div. Aristocrats 0.35% 1.78% 3,122.0 Spot Gold (troy oz.) -0.19% 26.98% 1,926.65 Industrials 0.40% 0.66% 682.1 Spot Silver (troy oz.) 0.31% 41.33% 25.23 Materials 0.73% 10.21% 418.0 LME Copper (per ton) 1.34% 10.06% 6,767.50 Real Estate -0.30% -2.45% 229.0 Bond Indices % chg. % YTD Value LME Aluminum (per ton) 2.15% 2.61% 1,827.75 Technology 1.54% 32.47% 2,114.1 Barclays US Agg. Bond -0.02% 6.55% 2,370.8 CBOT Corn (cents p/bushel) 0.63% -1.24% 397.50 Utilities -0.04% 0.78% 322.6 Barclays HY Bond 0.15% 1.99% 2,226.1 CBOT Wheat (cents p/bushel) 0.17% 2.94% 594.75

Foreign Exchange (Intra-day) % chg. % YTD Value % chg. % YTD Value % chg. % YTD ValueEuro (€/$) -0.19% 5.26% 1.18 Japanese Yen ($/¥) 0.18% 3.02% 105.43 Canadian Dollar ($/C$) -0.02% -1.01% 1.31British Pound (£/$) -0.05% -1.71% 1.30 Australian Dollar (A$/$) -0.35% 2.76% 0.72 Swiss Franc ($/CHF) 0.04% 6.18% 0.91Data/Price Source: Bloomberg. Equity Index data is total return, inclusive of dividends, where applicable.



THE WEEK AHEAD: Russell T. Price, CFA, Chief Economist Inflation and Retail Sales highlight the economic release calendar this week. Inflation should decelerate to a

more normalized pace, while retail sales will be scrutinized for further evidence weakening consumer finances. Seasonal factors, however, are expected to have benefited retail sales in September, however. (All forecast estimates and data are sourced from Bloomberg unless otherwise noted.)

Tuesday’s Consumer Price Index report for September is expected to show a 0.2% month-over-month gain at both the headline and core levels. If achieved, it would be the slowest monthly increase in consumer prices since May. Over the prior three months, some goods experienced strong price increases due to select product shortages and a quick rebound in consumer demand. Items such as appliances and other household goods, as well as used autos and exercise equipment, experienced strong price gains through August. Recent reports, however, suggest that the pace of price expansion for many of these goods may have eased in September. Meanwhile, Homeowners’ Equivalent Rent is likely to take-on a greater role in putting downward pressure on the Index. The component has been slowly easing in recent months and is likely to have weakened further in September as falling rental rates in many of the country’s largest cities have been declining for the first time in years. Given the very large weighting of housing costs in the Index, we believe this component is likely to place greater downward pressure on the index going forward.

Initial jobless claims are expected to remain fairly high in this week’s report with the consensus currently looking for new claims of 820k versus last week’s reported 840k. The expiration of payroll protections in the air transportation industry, along with a few other high-profile announced job cuts, is expected to offset much of the ongoing progress in other areas. Notably, recent virus trends have not been encouraging as to the resumption of job call-backs in the leisure and hospitality sector. People in this segment that work at bars and restaurants, will face a rising challenge simply due to weather. Many such businesses had adjusted to indoor seating constraints by expanding outdoors. This will become more difficult in attracting customers as the weather turns.

Meanwhile, Friday’s report on Retail Sales is expected to show another strong monthly gain of about 0.8% - which, if achieved, would represent a year-over-year gain of about 3.2%. The timing of back-to-school purchases this year is expected to play a role in offering some potential upside to the measure. In “normal” years, back-to-school shopping typically has the greatest impact on August retail results. But given this year’s uncertainty relative to the

S&P 500 GAAC GAAC S&P 500 GAAC GAAC

Index GAAC Tactical Recommended Index GAAC Tactical Recommended

Weight Tactical View Overlay Weight Weight Tactical View Overlay Weight

Consumer Discretionary 11.6% Overweight 2.0% 13.6% Real Estate 2.6% Equalweight - 2.6%

Industrials 8.4% Overweight 2.0% 10.4% Energy 2.2% Equalweight - 2.2%

Materials 2.6% Overweight 2.0% 4.6% Financials 9.7% Equalweight - 9.7%

Information Technology 27.7% Equalweight - 27.7% Communication Services 10.8% Underweight -2.0% 8.8%

Health Care 14.3% Equalweight - 14.3% Consumer Staples 7.1% Underweight -2.0% 5.1%

Utilities 3.0% Underweight -2.0% 1.0%

Index weightings represent the respective market capitalization of each sector in the S&P 500 as of 9/22/2020. The numbers may not add due to rounding. The GAAC Tactical Overlay, as well as Recommended Tactical

Weights, is derived from the Ameriprise Global Asset Allocation Committee (GAAC).Views are expressed relative to the Index and are provided to represent investment conviction in each region. Tactical Allocations are

designed to augment Index returns over a 6-12 month time horizon. Numbers may not add due to rounding.

Ameriprise Global Asset Allocation Committee (GAAC)

U.S. Equity Sector - Tactical Views

As of: October 1, 2020

MSCI All-Country GAAC GAAC MSCI All-Country GAAC GAAC

World Index GAAC Tactical Recommended World Index GAAC Tactical Recommended

Weight Tactical View Overlay Weight Weight Tactical View Overlay Weight

United States 56.5% Overweight 3.1% 59.6% Europe ex U.K. 13.3% Underweight -1.0% 12.3%

Asia-Pacific ex Japan 15.2% Overweight 2.0% 17.2% United Kingdom 3.4% Underweight -2.0% 1.4%

Canada 2.7% Equalweight - 2.7% Japan 6.9% Underweight -1.0% 5.9%

Latin America 0.9% Equalweight - 0.9% Middle East / Africa 1.1% Underweight -1.1% -

as of: October 1, 2020

Global Equity Regions - Tactical Views

Index weightings are based on the regional market capitalizations of the MSCI All-Country World Index as of 9/22/2020. The numbers may not add due to rounding. The GAAC Tactical Overlay, as well as the

Recommended Tactical Weights, are derived from the Ameriprise Global Asset Allocation Committee (GAAC). Views are expressed relative to the Index and are provided to represent investment conviction in each

region. Tactical Allocations are designed to augment Index returns over a 6-12 month time horizon.



school schedule and how learning would be conducted, it appears that a significant portion of those sales may have been drawn into September. After January, September of typically the weakest month of the year for retail activity. This seasonal influence thus could make the flux in school spending more noticeable.

Where Market Fundamentals Stand Heading into The Week:

S&P 500 Trailing and Forward P/E valuations: Source: FactSet Please note: Although we try to maintain consistency as much as possible, Price to Earnings (P/E) ratios may differ modestly from once source to another. Most notably, P/E numbers can often show their most notable differences during an earnings release season as some sources may still use the last full ‘actual’ earnings number (for instance, currently Q4 trailing 12-month earnings per share) while others use earnings per share that are updated for Q1 using a combination of actual and estimated earnings per share. The calculation of earnings (operating earnings versus ‘as reported’ or GAAP) also often differs modestly from one data source to another due to the proprietary use of calculation methodologies. The “average” shown in the charts below represent averages for the period shown.

October 12 13 14 15 16Machinery Orders - Japan Consumer Price Index Producer Price Index Initial Jobless Claims Retail Sales Trade - China NFIB Small Bus. Optimism Inflation - China Empire Mfg. Index Industrial Production Industrial Production - India Industrial Production - China Industrial Production - Eurozone Import Prices Capacity Utilization Industrial Production - Mexico Unemployment - U.K. Inflation - India Philly Fed. Mfg. Index U of M Consumer Sentiment

Inflation - Germany Trade - India GDP - China Business Inventories Employment - S. Korea Employment - Canada Inflation - Eurozone

Trade - Eurozone

Manufacturing Activity - Canada



Consensus Earnings Estimates: Source: FactSet

Please note: The consensus earnings estimates shown below should not be fully relied upon. In this very dynamic and rapidly changing environment, forecasts have more uncertainty than usual.

BY THE NUMBERS: ECONOMIC ACTUALS AND FORECAST:

ECONOMIC NEWS OUT TODAY: Economic Releases for Monday, October 12, 2020. All times Eastern. Consensus estimates via Bloomberg. None Scheduled FIXED INCOME NEWS & VIEWS: Brian M. Erickson, CFA, Fixed Income Research & Strategy U.S. bond markets are closed today for the Columbus Day holiday. Fed Policy Meeting Minutes Focus Years into the Future Minutes of the Fed’s September 15-16 policy meeting released this week show the committee principally focused

on how the Fed might respond differently once the economy recovers. One reason the Fed has the opportunity to focus three years ahead when the U.S. economic rebound remains in its infancy centers on the size and scale of its second-quarter response. The Fed can withdraw from short-term liquidity support and retain vastly unused lending programs for credit markets. As a result, the Fed sought to reinforce that the economy will recover. The traditional cycle underlies even an environment where we end up living with Covid-19 on a long-term basis.

New inflation target. A vital facet of the latest Fed inflation mandate starts with a full employment target and continues rate accommodation until inflation flares. This approach Minutes of the last Fed policy meeting noted, "it would likely be appropriate to maintain the current target range until labor market conditions were judged to be

S&P 500 Earnings Estimates 2016 2017 2018 202210/12/2020 Actual Actual Actual Actual Actual Actual Actual Actual Actual Est. Est. Est. Est. Est. Est. Est.

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

Quarterly $$ amount $38.80 $41.59 $42.21 $41.78 $33.32 $28.22 $33.31 $36.16 $37.35 $40.55 $43.06 $45.05 change over last week $0.26 $0.08 $0.08 $0.10 $0.02 -$0.09 yr/yr 0.2% 1.1% -1.6% 1.1% -14.1% -32.1% -21.1% -13.5% 12.1% 43.7% 29.3% 24.6% qtr/qtr -6% 7% 1% -1% -20% -15% 18% 9% 3% 9% 6% 5%

Trailing 4 quarters $$ $119.64 $133.50 $164.05 $164.13 $164.59 $163.92 $164.38 $158.90 $145.53 $136.63 $131.01 $135.04 $147.37 $157.12 $166.01 $192.43 yr/yr 0.8% 11.6% 22.9% 0.2% -20.3% 26.7% 15.9%Implied P/E based on a S&P 500 level of: 3477 23.9 25.4 26.5 25.7 23.6 22.1 20.9 18.1

2020 20212019

Current Projections:Actual Actual Actual Actual Est. Est. Actual Actual Actual Est. Est.2016 2017 2018 2019 2020 2021 Q4-2019 Q1-2020 Q2-2020 Q3-2020 Q4-2020

Real GDP (YOY) 1.7% 2.3% 3.0% 2.2% -3.8% 3.8% 2.1% -5.0% -31.4% 29.5% 4.0%Unemployment Rate 4.7% 4.1% 3.9% 3.5% 7.4% 5.8% 3.5% 4.4% 11.1% 7.9% 7.4%CPI (YoY) 1.3% 2.1% 2.4% 1.8% 1.2% 2.1% 2.0% 2.1% 0.4% 1.4% 1.2%Core PCE (YoY) 1.6% 1.6% 2.0% 1.6% 1.5% 1.8% 1.6% 1.7% 0.9% 1.6% 1.7%

Sources: Historical data via FactSet. Estimates (Est.) via American Enterprise Investment Services, Inc.

YoY = Year-over-year, Unemployment numbers are period ending. GDP: Gross Domestic Product; CPI: Consumer Price Index

PCE: Personal Consumption Expenditures Price Index. Core excludes food and energy.

Please note: Due to the very dynamic nature of current economic conditions, economic forecasts may change measurably and quickly.

Last Updated:

Full Year Quarterly

October 5, 2020



consistent with the Committee's assessments of maximum employment and inflation had risen to 2% and was on track to moderately exceed 2% for some time." The expectation that full employment will be reached before inflation stirs. The minutes showed a range of perspectives on how strong or loose guidance around average inflation should be, suggesting that there are hawks not wanting to be boxed in at all, and doves willing to go further in committing to accommodation for a while after inflation surpasses the Fed’s 2% target.

Ramifications for bond investors: First off, we see the spread of views among members of the Federal Open Market Committee on defining a 2% average inflation level as a strong positive for Fed policy effectiveness and credibility. The range of dovish to hawkish views connects with the spectrum of market views. If one end of the spectrum was not represented on the committee, bond markets would climb a wall of worry that the Fed may not fully grasp or appreciate the full array of risks. Second, we find a focus on inflation in 2020 as a bit misplaced given the degree of slack in the economy and the urgency for recovery over what to do once employment returns to low levels and price pressures emerge. In the end, we view the Fed’s focus on prompting fiscal support in the short-term and how the Fed might shape the recovery long-term as appropriate today. That view likely shapes bond market expectations as the recovery evolves and the Covid-19 pandemic plays out.

While Bond Markets Contemplate 2021, The Fed Looks Beyond 2023

Source: Bloomberg L.P. and Federal Reserve

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Ameriprise Investment Research Group Ameriprise Financial 1441 West Long Lake Road, Suite 250, Troy, MI 48098 [email protected] For additional information or to locate your nearest branch office, visit ameriprise.com RESEARCH & DUE DILIGENCE LEADER

Lyle B. Schonberger - Vice President Business Unit Compliance Liaison (BUCL) Jeff Carlson, CLU, ChFC – Sr. Manager Investment Research Coordinator Kimberly K. Shores Sr. Administrative Assistant Jillian Willis STRATEGISTS Chief Market Strategist David M. Joy – Vice President Global Market Strategist Anthony M. Saglimbene – Vice President

Thomas Crandall, CFA, CMT, CAIA – Sr. Director, Asset Allocation Cedric Buermann Jr., CFA – Analyst – Quantitative, Asset Allocation

Gaurav Sawhney – Research Analyst

Amit Tiwari – Sr. Research Associate Chief Economist Russell T. Price, CFA – Vice President Retirement Research Jay C. Untiedt, CFA, CAIA, RICP – Vice President EQUITY RESEARCH Equity Research Director Justin H. Burgin – Vice President

Consumer Goods and Services Patrick S. Diedrickson, CFA – Director

Energy/Utilities William Foley, ASIP – Director

Financial Services/REITs Lori Wilking-Przekop – Sr Director

Health Care Daniel Garofalo – Director

Industrials/Materials Frederick M. Schultz – Director

Technology/Telecommunication Open

MANAGER RESEARCH

Michael V. Jastrow, CFA – Vice President

Mark Phelps, CFA – Director – Multi-Asset Solutions ETFs, CEFs, UITs Jeffrey R. Lindell, CFA – Director

James P. Johnson, CFA, CFP® – Sr Analyst Alternatives Justin E. Bell, CFA – Vice President – Head of Quantitative Research and Alternatives

Kay S. Nachampassak – Director - Alternatives Quantitative Research Kurt J. Merkle, CFA, CFP®, CAIA – Sr Director

Peter W. LaFontaine – Sr Analyst

David Hauge, CFA – Analyst

Blake Hockert – Sr Associate

Bishnu Dhar – Sr Research Analyst

Parveen Vedi – Sr Research Associate

Darakshan Ali – Research Process Trainee Equities Christine A. Pederson, CAIA, CIMA – Sr Director – Growth Equity, Infrastructure & REIT

Benjamin L. Becker, CFA – Director – International/Global Equity

Cynthia Tupy, CFA – Director – Value and Equity Income Equity

Alex Zachman, CFA – Analyst – Core Equity Fixed Income Steven T. Pope, CFA, CFP® – Sr Director – Non-Core Fixed Income

Douglas D. Noah, CFA – Sr Analyst – Core Taxable & Tax-Exempt Fixed Income

FIXED INCOME RESEARCH & STRATEGY

Fixed Income Research Brian M. Erickson, CFA – Vice President High Yield and Investment Grade Credit Jon Kyle Cartwright – Sr. Director

Stephen Tufo – Director

RETIREMENT RESEARCH

Jay C. Untiedt, CFA, CAIA, RICP – Vice President

Nidhi Khandelwal – Director

Matt Morgan – Sr. Manager



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on a timely basis a default may occur and interruption or reduction of interest and principal occur. Investments in a narrowly focused sector may exhibit higher volatility than investments with broader objectives and is subject to market risk and economic risk. Income Risk: We note that dividends are declared solely at the discretion of the companies’ boards of directors. Dividend cuts or eliminations will likely negatively impact underlying company valuations. Published dividend yields are calculated before fees and taxes. Dividends paid by foreign companies to ADR holders may be subject to a withholding tax which could adversely affect the realized dividend yield. In certain circumstances, investors in ADR shares have the option to receive dividends in the form of cash payments, rights shares or ADR shares. Each form of dividend payment will have different tax consequences and therefore generate a different yield. In some instances, ADR holders are eligible to reclaim a portion of the withholding tax. International investing involves increased risk and volatility due to political and economic instability, currency fluctuations, and differences in financial reporting and accounting standards and oversight. Risks are particularly significant in emerging markets. Market Risk: Equity markets in general could sustain significant volatility due to several factors. As we have seen recently, both economic and geopolitical issues could have a material impact on this model portfolio and the equity market as a whole. Quantitative Strategy Risk: Stock selection and portfolio maintenance strategies based on quantitative analytics carry a unique set of risks. Quantitative strategies rely on comprehensive, accurate and thorough historical data. The Ameriprise Investment Research Group utilizes current and historical data provided by third-party data vendors. Material errors in database construction and maintenance could have an adverse effect on quantitative research and the resulting stock selection strategies. PRODUCT RISK DISCLOSURES Exchange Traded Funds (ETF) trade like stocks, are subject to investment risk and will fluctuate in market value. For additional information on individual ETFs, see available third-party research which provides additional investment highlights. SEC filings may be viewed at sec.gov



All fixed income securities are subject to a series of risks which may include, but are not limited to: interest rate risk, call risk, refunding risk, default risk, inflations risk, liquidity risk and event risk. Please review these risks with your financial advisor to better understand how these risks may affect your investment choices. In general, bond prices rise when interest rates fall and vice versa. This effect is usually more pronounced for longer-term securities. This means you may lose money if you sell a bond prior to maturity as a result of interest rate or other market movement. Any information relating to the income or capital gains tax treatment of financial instruments or strategies discussed herein is not intended to provide specific tax advice or to be used by anyone to provide tax advice. Investors are urged to seek tax advice based on their particular circumstances from an independent tax professional. A real estate investment trust or REIT is a company that owns and operates income-producing real estate. In addition, some REITs participate in the financing of real estate. To qualify as a REIT, a company must: I) invest at least 75% of its total assets in real estate assets, II) generate at least 75% of its gross income from real property or interest, and III) pay at least 90% of its taxable income to shareholders in the form of distributions. A company that qualifies as a REIT is permitted to deduct the distributions paid to shareholders from its corporate taxes. Consequently, many REITs target to payout at least 100% of taxable income, resulting in virtually no corporate taxes. An investment in a REIT is subject to many of the same risks as a direct investment in real estate including, but not limited to: Illiquidity and valuation complexities, redemption restrictions, distribution and diversification limits, tax consequences, fees, defaults by borrowers or tenants, market saturation, balloon payments, refinancing, bankruptcy, decreases in market rates for rents and other economic, political, or regulatory occurrences affecting the real estate industry. Ratings are provided by Moody’s Investors Services and Standard & Poor’s. Non-Investment grade securities, commonly known as "high-yield" or "junk" bonds, are historically subject to greater risk of default, including the loss of principal and interest, than higher-rated bonds, which may result in greater price volatility than experienced with a higher-rated issue. Securities offered through AFSI may not be suitable for all investors. Consult with your financial advisor for more information regarding the suitability of a particular investment. For further information on fixed income securities please refer to FINRA’s Smart Bond Investing at FINRA.org, MSRB’s Electronic Municipal Market Access at emma.msrb.org, or Investing in Bonds at investinginbonds.com. Alternative investments cover a broad range of strategies and structures designed to be low or non-correlated to traditional equity and fixed-income markets with a long-term expectation of illiquidity. Alternative investments involve substantial risks

and are more volatile than traditional investments, making them more suitable for investors with an above-average tolerance for risk. Growth securities, at times, may not perform as well as value securities or the stock market in general and may be out of favor with investors. Value securities may be unprofitable if the market fails to recognize their intrinsic worth or the portfolio manager misgauged that worth. DEFINITIONS OF TERMS Agency – Agency bonds are issued by Government Sponsored Enterprises (GSE), but are NOT direct obligations of the U.S. government. Common GSE’s are the Federal Home Loan Mortgage Corp. (Freddie Mac) Federal National Mortgage Association (Fannie Mae) and Federal Home Loan Bank (FHLB). Beta: A measure of the risk arising from exposure to general market movements as opposed to company-specific factors. Betas in this report, unless otherwise noted, use the S&P 500 as the market benchmark and result from calculations over historic periods. A beta below 1.0, for example, can suggest the equity has tended to move with lower volatility than the broader market or, due to company-specific factors, has had higher volatility but generally low correlations with the overall market. Corporate Bonds – Are debt instruments issued by a private corporation. Non-Investment grade securities, commonly known as “high-yield” or “junk” bonds, are historically subject to greater risk of default, including the loss of principal and interest, than higher-rated bonds, which may result in greater price volatility than experienced with a higher-rated issue. Mortgage Backed Securities – Bonds are subject to prepayment risk. Yield and average lives shown consider prepayment assumptions that may not be met. Changes in payments may significantly affect yield and average life. Please contact your financial advisor for information on CMOs and how they react to different market conditions. Municipal Bonds – Interest income may be subject to state and/or local income taxes and/or the alternative minimum tax (AMT). Municipal securities subject to AMT assume a “nontaxable” status for yield calculations. Certain municipal bond income may be subject to federal income tax and are identified as “taxable”. Gains on sales/redemptions of municipal bonds may be taxed as capital gains. If the bonds are insured, the insurance pertains to the timely payment of principal (at maturity) and interest by the insurer of the underlying securities and not to the price of the bond, which will fluctuate prior to maturity. The guarantees are backed by the claims-paying ability of the listed insurance company. Treasury Securities – There is no guarantee as to the market value of these securities if they are sold prior to maturity or redemption. Price/Book: A financial ratio used to compare a company’s market share price, as of a certain date, to its book value per



share. Book value relates to the accounting value of assets and liabilities in a company’s balance sheet. It is generally not a direct reflection of future earnings prospects or hard to value intangibles, such as brand, that could help generate those earnings. Price/Earnings: An equity valuation multiple calculated by dividing the market share price, as of a certain date, by earnings per share. Trailing P/E uses the share price divided by the past four-quarters’ earnings per share. Forward P/E uses the share price as of a certain date divided by the consensus estimate of the future four-quarters’ EPS. Price/Sales: An equity valuation multiple calculated by dividing the market share price, as of a certain date, by the company’s sales per share over the most recent year. INDEX DEFINITIONS An index is a statistical composite that is not managed. It is not possible to invest directly in an index. Definitions of individual indices mentioned in this report are available on our website at ameriprise.com/legal/disclosures in the Additional Ameriprise research disclosures section, or through your Ameriprise financial advisor. DISCLAIMER SECTION Except for the historical information contained herein, certain matters in this report are forward-looking statements or projections that are dependent upon certain risks and uncertainties, including but not limited to, such factors and considerations as general market volatility, global economic and geopolitical impacts, fiscal and monetary policy, liquidity, the level of interest rates, historical sector performance relationships as they relate to the business and economic cycle, consumer preferences, foreign currency exchange rates, litigation risk, competitive positioning, the ability to successfully integrate acquisitions, the ability to develop and commercialize new products and services, legislative risks, the pricing environment for products and services, and compliance with various local, state, and federal health care laws. See latest third-party research reports and updates for risks pertaining to a particular security. This summary is based upon financial information and statistical data obtained from sources deemed reliable, but in no way is warranted by Ameriprise Financial, Inc. as to accuracy or completeness. This is not a solicitation by Ameriprise Financial Services, LLC of any order to buy or sell securities. This summary is based exclusively on an analysis of general current market conditions, rather than the appropriateness of a specific proposed securities transaction. We will not advise you as to any change in figures or our views. Past performance is not a guarantee of future results. Investment products are not federally or FDIC-insured, are not deposits or obligations of, or guaranteed by any financial institution, and involve investment risks including possible loss of principal and fluctuation in value.

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Before the Bell...2020/10/12 · For further information on any of the topics mentioned, please contact your Financial Advisor. Unless specifically stated otherwise, comments contained