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Recap: Before recent market volatility surged, the U.S. economy had been on a solid footing. A buoyant job market had fueled rising household income and strong consumer spending; that spending cushioned the economy through choppy waters created by the trade war with China, a manufacturing sector contraction and weakening momentum abroad.

Then came the coronavirus! 

A public health emergency transformed into an economic emergency. 

At that point, both the magnitude and duration of the economic effects of the virus became highly uncertain. And, its future impact will depend on how the disease progresses, the efficacy of the action countries takes, public health officials’ contingency plans and implementations, and policymakers’ actions to mitigate the effects on sentiment and economic activity.
 
However, preliminary data has suggested that the U.S. economy is already shrinking, as businesses close and unemployment soars.
 
The strong labor market that kept the U.S. economy humming for a decade has ground to a halt as a result of the coronavirus pandemic. A record 3.28 million workers applied for unemployment benefits in the last week in March, a fifteen-fold increase from the previous week.
 
Add to that the composite purchasing managers index (PMI) for the U.S. released in late March. It dropped to a seasonally adjusted 40.5 in March from 49.6 in February. The decline was the steepest recorded since 2009. The services sector was particularly hard-hit, with  services  PMI contracting at the fastest rate in the last decade as restaurants, bars and hotels have all bore the brunt of social-distancing measures. 



All these would suggest that the U.S. economy has fallen into a recession in the first quarter of 2020. At this point, GDP growth in Q1 is expected to exceed -2% but will nosedive in Q2-2020. Q3 GDP is also likely to contract.The extent of the coming downturn has remained unclear, given uncertainties stemming from an unknown trajectory of the pandemic, extreme volatility in the
financial markets, restrictions on daily economic activity of unknown duration and government responses adjusting daily with a likelihood to continue changing in the weeks and months ahead.
 

Why is the Contraction So Severe?

There are three channels through which U.S. real GDP growth should downshift, at least in the next few months. First, slower growth in countries that have been affected by the outbreak will exert headwinds on U.S. export growth. Second, the U.S. supply chain could be adversely affected by output stoppages in other countries. Third, financial conditions have tightened significantly as the stock market has swooned and the corporate bond spreads have widened significantly as a
result of concerns over credit integrity. If the selloff in capital markets is sustained, banks could eventually tighten lending standards for businesses and households.
 
The severity of the expected contraction for overall GDP in the first half of 2020 will reflect the drop in personal consumption expenditures, which accounted for roughly two-thirds of total spending in the economy. There are some categories of consumer spending, such as air travel, restaurants, hotels, etc., that have, experienced “sudden stops.” Not only will sharp declines in spending in these categories directly depress personal consumption expenditures, but there will be indirect negative effects on other categories of spending as newly unemployed workers curtail discretionary consumption.
 
On the other hand, some categories (e.g., spending on groceries and health care products) will be boosted. Overall, however, personal consumption expenditures will likely drop significantly.
 

Coronavirus’s Sector Impact


Employment:  So  far  business  leaders have largely avoided laying off masses of American workers. But the pressure on companies to squeeze costs is building as consumers, governments and others pull back on activity. Laying off workers could become unavoidable in some industries such as shipping, air travel, retailing and hotels, as demand slows.  There is, of course, the potential for temporary furloughing of employees, rather than dismissing them permanently. That would help maintain employee morale and ensure companies have a pool of experienced workers when demand accelerates.
 
Consumer and Business: U.S. consumer spending was strong before the virus surfaced, and not all business activity had stalled. Just as households have stocked up on supplies and prepared for an uncertain future, companies have made similar moves by making sure they have credit lined up and cash in hand.

Energy: The oil and gas industry are now facing twin shocks: a demand drop caused by the pandemic, and a supply glut caused by overproduction. A spat between OPEC and   Russia   overproduction   worsened the situation in mid-March, sending U.S. benchmark prices crashing to $30 a barrel. The result has been that companies, especially many American shale drillers, have begun belt-tightening, with many slashing spending, and reducing drilling rigs. The idling of rigs  should  eventually  lead  to reductions in employment and overall production of oil in the U.S.


 
Airlines: Airlines are preparing for the prospect that they could face depressed demand for months. Carriers have slashed scheduled flights, froze hiring, and offered employees unpaid time off to conserve cash and prevent layoffs.
 
Hotels: Conference cancellations and a pullback in business travel are dragging down revenue in the hotel industry. There is the possibility that some businesses may never come back if fears about future virus outbreaks, along with emerging environmental concerns about air travel, prompt them to rely increasingly on digital teleconferencing.
 
Pharmaceuticals: The biggest impact on the pharmaceutical industry has been on its supply chain, partly because of how much medicines rely on raw materials from outside the U.S. The epidemic could affect supplies for certain drugs or sales, depending on how long the pandemic lasts. But the pandemic could also be an opportunity for many companies that are racing to develop drugs and vaccines.
 
Grocers: Supermarkets face opportunity and peril as more people stock up on supplies and hunker down at home. Many stores have rushed to meet the rising demand for sanitizers, household goods, and shelf-stable foods while also rationing how much customers can buy. Many grocers have also expanded delivery and pick-up options as consumers avoid stores altogether.
 
Retailers: The retailers that are likely to fare better as Americans adjust to the current outbreak are those that invested in online logistics or can serve shoppers safely. The disruption is likely to lead to some product shortages later in 2020.
 
Education: Most colleges and universities have switched their classes online. Local restaurants and shops that have relied on students for business will feel an immediate hit. Longer-term effects are not entirely known yet. Schools with limited liquidity, i.e. those reliant on tuition revenue or endowment draws to fund operations, are at particular risk amid the potentially prolonged financial uncertainty. Next academic year’s enrollment is also a question mark after schools have halted international recruiting and on-campus admissions events.
 
Manufacturing: U.S. manufacturers are facing a bleak 2020. Most already had lower demand from key customers, including from autos and the energy industry. That weakness has now gained momentum from the new coronavirus’ disruptive effects on global travel, commodity consumption, consumer spending, and factory supply chains. U.S. industrial output will turn negative this year for the first time since 2016.
 

Government Policy Measures

Both the Federal Reserve and the Congress have taken unprecedented actions to help ensure economic activity can resume as soon as the coronavirus pandemic is under control.
 


Monetary Policy: The Federal Reserve has lowered the interest rate to almost zero  and will likely keep its target range for the fed funds rate between 0.00% and 0.25% indefinitely. It has also taken steps to keep credit flowing to businesses and households. Specifically, the Fed has provided much- needed liquidity to markets in corporate bonds and asset-backed securities and just announced details about a facility that is designed to support lending to small and medium-sized businesses. 

The action taken by the Federal Reserve should help support confidence and ease financial conditions of indebted households and firms, thereby helping to mitigate potential demand-side impacts of the virus.
 
However, the virus’s near-term effects on the supply side of the economy are not things that can be affected by lowering interest rates. A stronger fiscal-policy response would be the obvious alternative to constrained monetary policy in the current low-rate environment.
 
Fiscal Policy: The Congress responded by approving the largest relief package in U.S. history that will extend aid to many struggling Americans through, among other things, increased funding for unemployment insurance and tax rebates to individuals and families. Also, the legislation will provide generous loans and grants to businesses so that the hit to economy-wide spending does not force them into bankruptcy, thereby exacerbating the downturn. It will also augment drained state coffers and send additional resources to sapped health-care providers.
 

Global Economic Outlook

The global economy is headed into uncharted territory now. Previous slowdowns were due to sharp falls in demand, exacerbated by poor consumer and investor confidence. But this time, economic activity has also been directly disrupted by strict measures imposed to curb the spread of the coronavirus.
 
Many countries in the euro area have been essentially locked down, so parts of those economies have come to an abrupt halt. But under the assumption that the social distancing measures have succeeded in bringing the outbreak in Europe  to an end, economic activity in the Eurozone should begin to stabilize later this year. Real GDP in the Eurozone will likely slump at an annualized rate of roughly -15% in the second quarter. Real GDP in the euro area should fall at least 4% this year.
 
In the last four decades, China has not experienced a year in which real GDP has contracted. That string should come to an end in 2020. Chinese GDP will likely fall by about 1% this year. Much of this contraction reflected the nosedive that the economy experienced earlier this year when some of the most economically important regions of the country were under complete lockdown.
 
Now that life has begun to return to normal in China, their economy should bounce back. The factories have gradually restarted production and stores have opened, but demand has crashed as buyers world-wide have taken a pause, waiting for the pandemic to end. It will take a few quarters to dig out of the deep hole the economy fell into during Q1. Moreover, deep recessions in most other major economies will exert some headwinds on Chinese GDP growth this year via weaker export growth to those regions.
 
A wide range of problems could be building up in emerging markets - the spread of the virus, the shut-down of economies, the capital outflows of those markets and the price shock for commodity exporters. Many of these emerging markets will experience a contraction as necessary containment measures take their toll and are shocked by reduced global demand for their exports - tourism, commodities, and manufactured goods – that provide critical streams of foreign exchange.
 
Recovery is projected for 2021. That rebound may be sizeable, but only if countries have succeeded in containing the virus everywhere and preventing liquidity problems from becoming a solvency issue. A key concern about a long-lasting impact of the sudden stop of the world economy has been the risk of a wave of bankruptcies and layoffs that could undermine the recovery. To prevent this from happening, many countries have taken far-reaching measures to address the health crisis and to cushion its impact on the economy, both on the monetary and on the fiscal side.
 
Outlook: The events of the past few weeks have been unprecedented, and there is no useful roadmap to follow for giving clear insights into how the economy may evolve in the coming quarters. In general, however, the fallout from the coronavirus outbreak will have a significant and negative impact on U.S. economic prospects. A recession is now all but certain and will in some ways rival—and possibly even surpass—the severity of the 2007-09 slump.
 
A record-setting rate of economic contraction in the second quarter is essentially a foregone conclusion, and growth- depressing after-effects of the shock are expected to linger through the third quarter. The ranks of the unemployed likely will swell dramatically in the coming months.
 
Nonfarm payrolls may decline by roughly eight million jobs (or more) over the next two quarters and the unemployment rate will shoot up from its current 50-year low of 3.5% to double digits 9% by the third quarter of this year. The slump in economic activity and the sharp rise in the unemployment rate should push consumer price inflation down to less than 1% by this summer.
 
 
But the U.S. economy may start bouncing back later this year. The economy built up few major imbalances during the recently ended 11-year long expansion, so it should return to a positive trajectory once the coronavirus pandemic is brought under control and further outbreaks do not reappear.
 

Market Commentary

Recap: The first quarter of 2020 was a difficult one for investors.  As the year began, the consensus opinion was that   the U.S. and much of the world were in the later stages of the current economic cycle. Nobody foresaw, however, that economic activity would largely grind to a halt as a result of the coronavirus pandemic. Largely forgotten in the ensuing volatility, U.S. equity markets recorded all-time highs as recently as February 19th. While conversations early in the year were centered on whether there would be a recession in 2020, the debate shifted to how deep and long the recession will be. Until there is clarity regarding the virus’s rate of spread, location of spread, and time until containment, market volatility and uncertainty will be the new normal. Given this environment, markets have fallen sharply since the start of the year. The U.S. benchmark S&P 500 fell 19.6% during the quarter. Overseas, the MSCI EAFE index slid 22.8%, and the MSCI Emerging Markets index dropped 23.6%. Fixed income markets produced mixed results. The Barclays U.S. Aggregate Bond Index rose 3.2%, while the Barclays Global Aggregate ex. USD Bond index was down 2.7%.
 
Domestic Equities: The quarter began on a positive note as investor sentiment was buoyed by a seemingly improving global economy and healthier trade relations. Subsequently, however, U.S. equity markets were driven sharply downward by developments surrounding the coronavirus pandemic. Against the backdrop of an escalating health crisis, the nearly eleven-year bull market came to a sudden halt, falling from its all-time high into bear market territory in just twenty-six days. To shield the economy from the virus’s impact, the Federal Reserve cut interest rates twice in March and pledged hundreds of billions of dollars in asset purchases. The federal government’s response to the health crisis was not limited to monetary measures. Late in the quarter, President Trump signed a $2.3 trillion coronavirus relief bill that includes one-time payments to individuals, strengthened unemployment insurance, additional health care funding, and business loans and grants to deter layoffs. Senate Democratic Leader Chuck Schumer called the fiscal measure, “the largest rescue package in American history.”
 
International Equities: Developed international equity returns for the quarter were sharply negative and trailed those generated in the U.S. European equities, as measured by the MSCI Europe index, fell more than 24% during the period due to the spread of the coronavirus. Italy and Spain were amongst the world’s most severely affected countries. Nations across Europe took steps to restrict the movement of people and shut down portions of the economy. The European Central Bank announced the Pandemic Emergency Purchase Programme, a €750 billion package, and governments across the region announced a variety of fiscal relief efforts. The MSCI UK index dropped nearly 29% during the quarter as the sterling hit multi-decade lows versus the U.S. dollar. Early in the year, headlines in the UK were dominated by domestic politics and Brexit while the newsfeed later in the quarter focused on concerns about the coronavirus and its health and economic impacts. In Japan, stocks outperformed broader international indexes, generating a quarterly loss of about 17%. As of quarter end, Japan had experienced a slower spread of the coronavirus and a lower mortality rate. As a result, Japanese government officials have been less aggressive in curtailing economic activity. This may change soon. The MSCI Emerging Markets Index declined more than 23% during the quarter. Amongst the BRICs, China was the clear winner, falling about 10% as the number of new COVID-19 cases declined and economic activity began to resume. Brazil was the weakest member of the index, falling more than 50% during the first three months of the year.
 
Fixed Income: Government bond yields declined during the quarter as investors sought safety amid rising fears driven by the coronavirus pandemic. The move downward in yields and heightened volatility largely occurred in late February and March as much of the world locked down in response to the pandemic. The U.S. 10-year Treasury yield dropped 129 bps during the quarter and established new all-time lows. Overseas, the 10-year German bund fell 30 bps, and the UK gilt yield declined 50 bps. Government bonds outperformed corporate issues, and high yield credit suffered, given the risk-averse environment. Emerging market bonds generated significant losses as the value of local currencies fell, relative to the dollar. The J.P. Morgan Emerging Market Bond Index-Global Diversified fell more than 13% during the quarter.
 
Outlook: While the coronavirus pandemic will probably weigh on the world’s economy beyond 2020, a recovery of equity indexes during the second half of the year is a possibility. Historically, the stock market typically troughs before the recession is over. The recent low in the S&P 500 was nearly 35% less than its peak on February 19th. To put this in perspective, the peak-to-trough decline was larger than this during the Great Depression, after the dot-com bubble burst, and during the Global Financial Crisis. Although markets have recovered a bit the past couple of weeks, there is no guarantee that they have troughed. A retest of the March 23rd low is certainly possible. Any optimism must be tempered by the unknowns surrounding the current health crisis. Nonetheless, assuming the virus is contained soon, a short recession is possible as is a recovery of risk assets in the second half of the year.
 
In the U.S., the first quarter saw the nearly eleven-year bull market come to an end as the S&P 500 fell nearly 35% in less than the five weeks between February 19th and March 23rd. Despite an upward move of more than 15% during the quarter’s final days, the index remains decidedly negative for the year. On a positive note, long term investors may enjoy tailwinds in the form of aggressive monetary and fiscal policies that may eventually promote stronger economic conditions when the virus disruption has cleared. Additionally, the recent fall in both short and long term interest rates strengthens the case for U.S. equities, for both current income and future capital gains. The U.S. remains a high-quality equity market supported by ample liquidity.
 
Internationally, the current health crisis has harmed the entire globe and has touched each of the world’s economies. China was the first country to enter the crisis, and also the first to see a downward trend in the number of new cases. Significant monetary and fiscal stimulus should position China for a strong rebound when the threat of the virus begins to subside. Outside of China, Europe has been the worst affected region as it has high exposure to global trade, the ECB has little monetary policy firepower, and the rules around fiscal policy in the Eurozone make stimulus measures difficult to implement. The Eurozone is likely to experience a deeper recession than the U.S., but may also experience a bigger economic bounce when the coronavirus subsides as it will benefit from a rebound in global trade. Generally speaking, many of the valuation disparities that existed in markets before the crisis endure today. While international stocks traditionally have had lower price-to-earnings ratios than their U.S. counterparts, the deviation is especially extreme today. For long term investors, the arguments in favor of international stocks haven’t changed since the start of the year, including the potential of a weaker dollar. The inclusion of an allocation to foreign stocks in a diversified portfolio remains appropriate.
 
As the year began, expectations surrounding emerging markets assumed improving trade relations and economic growth, supported by the lagged impact of global monetary policy easing and the partial de-escalation of the U.S.-China trade dispute. The coronavirus pandemic changes this thesis. Global growth will be delayed, and near term Chinese economic growth will be materially impacted. The extent to which the crisis sustains remains unclear, but successful containment would support a meaningful rebound in economic activity. A significant stimulus by the Chinese government offers a tailwind. Currency trends also play a role as a further impact of the virus has been a strengthening U.S. dollar. A modest depreciation in the value of the dollar wouldn’t be surprising and would likely benefit emerging market economies and markets. In short, a benchmark weight exposure to emerging markets may be appropriate, but coronavirus related risks certainly suggest that caution is prudent. Valuations are attractive.
 
For fixed-income investors, the environment remains challenging with yields on 10-year Treasuries ending the quarter at 0.70%. Assuming the economy gets past the coronavirus driven recession and begins to expand again, yields are unattractive. Developed market government bonds continue to serve a useful role as ballast against risk-off episodes. Credit markets face downside risks and increased uncertainty given the current economic outlook and reduced appetite for risk assets. Temporary liquidity crunches are possible. While there may be select opportunities within the high yield asset class, and issues are attractively priced, caution is appropriate as increased defaults are likely in the months ahead. High quality fixed income should continue to play a key role in managing portfolio risk. However, the prospect of an economic recovery, especially if accompanied by high government debt loads, tempers overall enthusiasm for fixed-income investments.
 
 
Sources: Department of Commerce, Bloomberg, Morningstar, Department of Labor, Federal Reserve of Chicago
 

Quarterly Update and Commentary, Q1 2020

Index Performance as of: 3/31/2020
   
1 Week
 
1 Month
 
QTD
 
3 Month
 
YTD
 
1 Year
 
3 Year
 
5 Year
 
3000 Value
6.45 -17.58 -27.32 -27.32 -27.32 -17.99 -2.67 1.61
3000 5.70 -13.75 -20.90 -20.90 -20.90 -9.11 4.00 5.77
3000 Growth 5.10 -10.41 -14.85 -14.85 -14.85 -0.44 10.53 9.73
1000 Value 6.48 -17.09 -26.73 -26.73 -26.73 -17.14 -2.18 1.90
1000 5.73 -13.21 -20.22 -20.22 -20.22 -8.01 4.64 6.22
1000 Growth 5.13 -9.84 -14.10 -14.10 -14.10 0.91 11.32 10.36
Mid Cap Value 6.81 -22.70 -31.71 -31.71 -31.71 -24.09 -5.97 -0.76
Mid Cap 6.12 -19.49 -27.07 -27.07 -27.07 -18.27 -0.81 1.85
Mid Cap Growth 5.24 -14.91 -20.04 -20.04 -20.04 -9.43 6.53 5.61
2000 Value 5.94 -24.67 -35.66 -35.66 -35.66 -29.59 -9.51 -2.42
2000 5.24 -21.73 -30.61 -30.61 -30.61 -23.95 -4.64 -0.25
2000 Growth 4.67 -19.10 -25.76 -25.76 -25.76 -18.55 0.10 1.70
 
S&P 500
5.64 -12.35 -19.60 -19.60 -19.60 -6.96 5.10 6.72
Consumer Disc 2.27 -13.24 -19.29 -19.29 -19.29 -10.75 5.69 7.36
Consumer Staples 6.72 -5.39 -12.74 -12.74 -12.74 -0.59 2.87 5.19
Energy 6.11 -34.80 -50.45 -50.45 -50.45 -52.34 -21.63 -14.21
Financials 4.60 -21.31 -31.92 -31.92 -31.92 -17.11 -2.31 3.36
Health Care 10.27 -3.82 -12.67 -12.67 -12.67 -1.01 8.16 6.01
Industrials 7.47 -19.18 -27.05 -27.05 -27.05 -19.44 -1.79 2.97
Information Technology 3.46 -8.64 -11.93 -11.93 -11.93 10.40 17.63 17.04
Materials 5.10 -14.06 -26.14 -26.14 -26.14 -16.54 -2.80 0.57
Real Estate 12.08 -14.95 -19.21 -19.21 -19.21 -11.30 2.95 3.38
Communication Services 3.19 -12.14 -16.95 -16.95 -16.95 -3.31 -0.30 3.66
Utilities 11.55 -10.01 -13.50 -13.50 -13.50 -1.40 6.23 8.28
 
Dow Jones Industrial Avg.
5.85 -13.62 -22.73 -22.73 -22.73 -13.36 4.42 6.86
Wilshire 5000 (Full Cap) 5.57 -13.87 -20.84 -20.84 -20.84 -9.72 3.77 5.53
 
MSCI EAFE
7.83 -13.35 -22.83 -22.83 -22.83 -14.35 -1.82 -0.62
MSCI EM 5.94 -15.40 -23.60 -23.60 -23.60 -17.65 -1.62 -0.37
MSCI Frontier Markets 0.86 -21.96 -26.59 -26.59 -26.59 -18.92 -4.29 -2.85
MSCI ACWI 6.39 -13.50 -21.37 -21.37 -21.37 -11.23 1.50 2.85
MSCI ACWI Ex USA 7.33 -14.48 -23.36 -23.36 -23.36 -15.54 -1.96 -0.64
MSCI AC Asia Ex Japan 6.24 -12.05 -18.38 -18.38 -18.38 -13.42 1.06 1.34

Quarterly Update and Commentary, Q1 2020
 
Index Performance as of: 3/31/2020
   
1 Week
 
1 Month
 
QTD
 
3 Month
 
YTD
 
1 Year
 
3 Year
 
5 Year
 
MSCI Brazil
2.09 -38.17 -50.23 -50.23 -50.23 -41.81 -11.06 -2.38
MSCI BRIC 4.87 -14.37 -20.93 -20.93 -20.93 -14.78 2.22 2.23
MSCI China 4.24 -6.59 -10.22 -10.22 -10.22 -5.81 7.05 3.57
MSCI Europe 6.98 -14.44 -24.33 -24.33 -24.33 -15.47 -2.34 -1.31
MSCI India 10.69 -25.13 -31.13 -31.13 -31.13 -30.81 -6.64 -3.50
MSCI Japan 9.62 -7.15 -16.79 -16.79 -16.79 -6.67 0.95 1.82
MSCI EM Latin America 5.36 -34.48 -45.62 -45.62 -45.62 -40.71 -12.97 -5.90
MSCI Russia 4.02 -23.31 -36.36 -36.36 -36.36 -14.36 1.80 6.48
 
Barclays U.S. Aggregate
1.76 -0.59 3.15 3.15 3.15 8.91 4.82 3.36
ICE BofAML US 3M Trsy Bill -0.01 0.29 0.57 0.57 0.57 2.25 1.83 1.19
Barclays U.S. Gov’t 0.57 2.84 8.08 8.08 8.08 13.05 5.78 3.63
Barclays U.S. Credit 5.24 -6.63 -3.14 -3.14 -3.14 5.09 4.19 3.28
Barclays High Yield Corp. 8.20 -11.46 -12.68 -12.68 -12.68 -6.92 0.76 2.78
Barclays Municipal 6.46 -3.63 -0.63 -0.63 -0.63 3.84 3.96 3.19
Barclays TIPS -0.51 -1.76 1.69 1.69 1.69 6.84 3.46 2.67
Barclays Gbl Agg Ex USD 2.87 -3.22 -2.68 -2.68 -2.68 0.74 2.57 2.04
Barclays Global Aggregate 2.37 -2.24 -0.33 -0.33 -0.33 4.19 3.55 2.64
JPM EMBI Global Div 5.09 -13.85 -13.38 -13.38 -13.38 -6.82 0.42 2.82
 
Alerian MLP
8.57 -47.23 -57.19 -57.19 -57.19 -60.87 -28.90 -20.66
Bloomberg Commodity -2.99 -12.81 -23.29 -23.29 -23.29 -22.27 -8.60 -7.76
FTSE NAREIT Equity REIT 12.23 -21.92 -27.30 -27.30 -27.30 -21.23 -3.14 -0.35
S&P Global Natural Res. 7.71 -18.12 -32.88 -32.88 -32.88 -29.95 -6.41 -2.73
S&P N. Amer Natural Res. 5.53 -30.33 -43.90 -43.90 -43.90 -43.15 -18.03 -11.90

 
This Newsletter was produced for Middleburg Financial by Capital Market Consultants, Inc.


Disclosures:
Past performance quoted is past performance and is not a guarantee of future results. Portfolio diversification does not guarantee investment returns and does not eliminate the risk of loss. The opinions and estimates put forth constitute our judgment and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions. We believe the information provided here is reliable, but do not warrant its accuracy or completeness. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The views and strategies described may not be suitable for all investors. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, accounting, legal or tax advice. References to future returns are not promises or even estimates of actual returns a client portfolio may achieve. Any forecasts contained herein are for illustrative purposes only and are not to be relied upon as advice or interpreted as a recommendation.

Securities are not insured by FDIC or any other government agency, are not bank guaranteed, are not deposits or a condition to any banking service or activity, are subject to risk and may lose value, including the possible loss of principal.

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