ARGUS MARKET OUTLOOKFOR THE SECOND HALF

Wednesday, July 1, 202011:00 a.m. ET

61 Broadway • NYC, N.Y. 10006Telephone: (212) 425-7500

MODERATOR:

Jim Kelleher, CFADirector of Research

THE MONTHLY RESEARCH CONFERENCE CALL

- 2 -

WHAT’S NEW AT ARGUS?

� Argus Market Outlook for the Second Half• John Eade: President of Argus• Kevin Heal: Senior Analyst• Mark Arbeter: CMT

� New Coverage at Argus• AGNC Investment Corp.: Mortgage/CMO REIT• Carrier Global Corp. Leading HVAC provider• Otis Corp: Global elevator/escalator leader• Catalent Inc.: Contract research/lab provider to pharma industry• Global Payments: Card, check, & digital payment solutions• Idex Corp.: Fluid metering, precision pumps, fire suppression

� Argus Quick Notes • Bank Stress Tests• Defining Millennials• Focus List Changes• Top Financial Service Stocks

- 3 -

REAL GDP W/FORECASTS (%) TREASURY YIELD CURVE (%)

S&P 500 QUARTERLY EARNINGS GROWTH MARKET SECTOR DISTRIBUTION - PERCENT OF S&P 500

MACRO FORECASTS

-60

-40

-20

0

20

40

60

80

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

Source: Bureau of Economic Analysis, Argus Research Corp.0

1

2

3

4

3-Mo bill 2-Yr Note 5-Yr Note 10-Yr Bond 30-Yr Bond

Year-Ago Current 6-Month Forecast

-40%

-20%

0%

20%

40%

60%

80%

100%

'00 '02 '04 06 '08 '10 '12 '14 '16 '18 20E 0% 5% 10% 15% 20% 25% 30%

TechnologyFinancial Services

Real Estate

Healthcare

EnergyConsumer Staples

Industrial

Consumer DiscretionaryUtilities

Basic Materials

Communication Services

Sectors in Green are Recommended Overweight; Blue are Marketweight; Red are Underweight

- 4 -

MAJOR INDEX SECTOR

GLOBAL EQUITY MARKETS

MARKET PERFORMANCEDATA AS JUNE 26, 2020

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

Nasdaq Composite

Growth Stocks (Wilshire Large Growth)

Lehman US Aggregate Bond Index

S&P 500

DJIA

Russell 2000

Value Stocks (Wilshire Large Value)

-40% -30% -20% -10% 0% 10% 20%

Technology

Consumer Discretionary

Communication Services

Health Care

Consumer Staples

Materials

Real Estate

Utilities

Industrials

Financials

Energy

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

China

US

DJ World Index

Japan

Canada

Euro Zone

Mexico

India

UK

Brazil

Russia

- 5 -

8 FORECASTS FOR 2020 (REVISED)

11.. UUSS.. GGDDPP ggrroowwtthh turned negative in 1Q and will pplluunnggee ddeeeeppllyy nneeggaattiivvee iinn 22QQ. We think the ddeecclliinnee ccoouulldd bbee aass sstteeeepp aass 4400%% or more. The current fiscal stimulus program plan of $3.0 trillion could result in two sharply negative quarters in a row – 2Q and 3Q -- before stabilizing near year-end. We expect a strong rebound in 2021, with GDP in 4Q21 finally catching up to pre-pandemic GDP of 4Q19.

22.. TThhee eeccoonnoommiicc sseeccttoorrss hhiitt tthhee hhaarrddeesstt will be EEnneerrggyy,, FFiinnaanncciiaall SSeerrvviicceess,, CCoonnssuummeerr DDiissccrreettiioonnaarryy,, IInnffoorrmmaattiioonn TTeecchhnnoollooggyy aanndd IInndduussttrriiaall ----AAeerroossppaaccee.. Of these sectors, TTeecchh,, which led the economic expansion over the past few years, and was the first to decline in January, wwiillll bbee tthhee ffiirrsstt ttoo rreeccoovveerr.. EEnneerrggyy mmaayy nneevveerr rreeccoovveerr.. We think Financial Services will recover, as the banks had much stronger balance sheets in 2019 than they did in 2007, followed by Consumer.

33.. TThhee uunneemmppllooyymmeenntt rraattee,, recently historically low at 3.5%, has jumped ttoowwaarrdd 1155%% due to job losses in retail, leisure and manufacturing. Unemployment claims continue to surge, even as states reopen. By the eenndd ooff 22002211, we think the unemployment rate will be bbeellooww 1100%%..

44.. TThhee FFeeddeerraall RReesseerrvvee has acted aggressively to ccuutt rraatteess 22XX,, launch a QQEE pprrooggrraamm,, reinstate the CCoommmmeerrcciiaall PPaappeerr FFuunnddiinngg and the PPrriimmaarryy DDeeaalleerr CCrreeddiitt FFaacciilliittiieess,, and now gguuaarraanntteeee aallll mmoonneeyy mmaarrkkeett ffuunnddss. Additional steps could include more QE, buying municipal bonds or corporate bonds or equities. Fed Chair Jay Powell says central bank will use “whatever tools it can” and “for as long as it takes.” We expect the 1100--yyeeaarr TTrreeaassuurryy yyiieelldd to average 11..00%% in 2020-2021.

55.. TThhee FFeeddeerraall ssttiimmuulluuss ppllaann has included ddiirreecctt cchheecckkss to households; ffoorrggiivvaabbllee llooaannss ttoo ssmmaallll bbuussiinneesssseess; and bbaaiilloouuttss to specific industries, among other steps. WWee eexxppeecctt aannootthheerr rroouunndd of stimulus spending pprriioorr ttoo tthhee PPrreessiiddeennttiiaall eelleeccttiioonn..

66.. UU..SS.. ccoorrppoorraattee eeaarrnniinnggss are declining. Our current take is aa 1177%% ddrroopp for the year, but eexxppeecctt ffuurrtthheerr rreevviissiioonnss.

77.. SSttoocckk vvaalluuaattiioonnss hhaavvee sswwuunngg wwiillddllyy along with prices and interest rates. On our valuation model, stocks had been at a modest premium to fair value into February 2020. At bear market lows in March, the S&P 500 was priced at a 99%% ddiissccoouunntt, or about 1.5 standard deviations from normal. During 2008-2009, the discount was 3 standard deviations from normal. Our 22002200 SS&&PP 550000 ffaaiirr vvaalluuee level is 33000000.

88.. VVoollaattiilliittyy iiss hheerree ttoo ssttaayy. We noted in our 2020 Outlook call that investors were complacent. That is no longer the case, as the VVIIXX hhaass ssooaarreedd from 12 to 80 and traded recently between 25 and 40. The hheeaaddlliinneess wwiillll bbee nneeggaattiivvee – virus cases, political debates over bailouts, job losses, recession – for many more weeks. From a tactical standpoint, look to rreedduuccee ssttoocckkss ooff ffiinnaanncciiaallllyy wweeaakk ccoommppaanniieess and pocket the tax-loss carryforwards. HHoolldd oonnttoo ffiinnaanncciiaallllyy ssttrroonngg ccoommppaanniieess with capable management teams that are iinnnnoovvaattiivvee, follow best EESSGG practices and ggrrooww tthheeiirr ddiivviiddeennddss. SSttoocckkss wwiillll rreeccoovveerr bbeeffoorree tthhee eeccoonnoommyy.

- 6 -

3 LEVELS OF RECOVERY

IImmppoossssiibbllee ttoo ppiinnppooiinntt wwhheenn ““BBaacckk ttoo NNoorrmmaall””

RReeccoovveerryy ttoo HHeeaalltthh• Testing by mid-summer

• Treatment Options by the fall

• Vaccine early next year

RReeccoovveerryy ttoo EEccoonnoommyy• Sharp GDP decline in 2Q

• Lesser decline in 3Q

• Flat in 4Q & 1Q21 before rebound

• But not all segments rebound

RReeccoovveerryy iinn EEaarrnniinnggss && SSttoocckk MMaarrkkeett• 2Q EPS season uncertain, as many companies have withdrawn guidance

• Which companies can provide an outlook?

• Stocks will anticipate recovery

• But expect high volatility to continue

- 7 -

GDP DRIVERS

2

4

6

8

10

12

14

16

18

20

 1950  1960  1970  1980  1990  2000  2010  2020

U.S. UNEMPLOYMENT RATE (%)

Sources: St. Louis Federal Reserve, ArgusHistorical Rate: Jan. 1950-Mar. 2020Argus Estimate: Apr. 2020

A R G U S R E S E A R C H C O M P A N Y

- 6 -

GDP DRIVERS

-800

-600

-400

-200

0

200

400

600

-800

-600

-400

-200

0

200

400

600

'00 '03 '06 '09 '12 '15 '18

NONFARM PAYROLLS (Thousands of jobs)

Monthly ChangeSix Month Average

Source: US BLS200

400

600

800

1000

1200

1400

1600

-20

-15

-10

-5

0

5

10

15

20

Jan '08 Jan '10 Jan '12 Jan '14 Jan '16 Jan '18

HOUSING MARKET TRENDS

Monthly Home Price Change (left axis, % Change)

Building Permits (right axis, Thousands of Units)

Sources: Case, Shiller; US HUD

80

90

100

110

120

130

140

0.80.9

11.11.21.31.41.51.61.7

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

CURRENCY TRENDS

Euro v $ (left scale)

Trade-W $ (right scale)

Source: FRB St. Louis

0

10

20

30

40

50

60

China UK US EuroZone Germany

PMI SURVEY READINGS

Sources: Institute for Supply Management; IHS Markit

0

20

40

60

80

100

120

140

'90 '95 '00 '05 '10 '15 '20

OIL PRICE TRENDS ($/BBL)

WTI BRENT

Source: U.S. Energy Information Administration

-50

-30

-10

10

30

50

70

'80 '84 '88 '92 '96 '00 '04 '08 '12 '16  '20

GDP TRENDS & OUTLOOK (% Change)

Source: Bureau of Economic Analysis; Argus Economics

- 8 -

INTEREST RATE OUTLOOK

A R G U S R E S E A R C H C O M P A N Y

- 7 -

INTEREST RATE OUTLOOK

-6 -4 -2 0 2 4PPI Inter - UP Goods

PPI Inter -P GoodsPPI Final D

PPI Final D Ex F&EPCE Price Index

PPI Inter - SvcMB PCE Ex F&E

2-Yr T Note10-Yr TIP B-E iR

10-Yr T bondCPI

CPI Ex F&EAvg Hrly Earns Grwth

CURRENT INFLATION MEASURES (% Change Y/Y)

0

2

4

6

8

10

12

1984 1989 1994 1900 2004 2009 2014 2019

FEDERAL FUNDS TARGET RATE (%)

0

1000000

2000000

3000000

4000000

5000000

2003 2005 2007 2009 2011 2013 2015 2017 2019

FED BALANCE SHEET (FED Assets)

1.25

1.45

1.65

1.85

2.05

2.25

2.45

2.65

Fed Funds 3 Mo. Bill 2 Yr. 5 Yr. 10 Yr. 30 Yr.

TREASURY YIELD CURVE & OUTLOOK (%)

Current 2020 Argus Forecast

A R G U S R E S E A R C H C O M P A N Y

- 8 -

EARNINGS & VALUATION

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

0

50

100

150

200

250

1996 2000 2004 2008 2012 2016 2020E

S&P 500 EPS TRENDS & ESTIMATES

Annual Growth Rate % (right axis)EPS $ (left axis)

-4.0

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

1960 1970 1980 1990 2000 2010

BOND V STOCK BAROMETER (Standard Deviations)

0 = STOCK/BOND EQUILIBRIUM

> 0, FAVOR BONDS

< 0, FAVOR STOCKS

0

2

4

6

8

10

12

14

16

18

1960 1970 1980 1990 2000 2010

TREASURY NOTE YIELD MODEL (%)

T-Bond YieldT-Bond Fair ValueUpper FV BoundaryLower FV Boundary

-60

-40

-20

0

20

40

60

1960 1970 1980 1990 2000 2010

S&P 500 VALUATION MODEL (0% = Fair Value)

Market Overvalued

Market Undervalued

0

2

4

6

8

10

12

84 89 94 99 04 09 14 19

FEDERAL FUNDS TARGET RATE (%)

-

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

8,000,000

2005 2007 2009 2011 2013 2015 2017 2019

FED BALANCE SHEET (FED Assets - $ MIL.)

Source: Federal Reserve Board of Governors

- 9 -

EARNINGS & MARKET VALUATIONS

A R G U S R E S E A R C H C O M P A N Y

- 8 -

EARNINGS & VALUATION

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

0

50

100

150

200

250

1996 2000 2004 2008 2012 2016 2020E

S&P 500 EPS TRENDS & ESTIMATES

Annual Growth Rate % (right axis)EPS $ (left axis)

-4.0

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

1960 1970 1980 1990 2000 2010

BOND V STOCK BAROMETER (Standard Deviations)

0 = STOCK/BOND EQUILIBRIUM

> 0, FAVOR BONDS

< 0, FAVOR STOCKS

0

2

4

6

8

10

12

14

16

18

1960 1970 1980 1990 2000 2010

TREASURY NOTE YIELD MODEL (%)

T-Bond YieldT-Bond Fair ValueUpper FV BoundaryLower FV Boundary

-60

-40

-20

0

20

40

60

1960 1970 1980 1990 2000 2010

S&P 500 VALUATION MODEL (0% = Fair Value)

Market Overvalued

Market Undervalued

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

0

20

40

60

80

100

120

140

160

180

200

1996 2000 2004 2008 2012 2016 2020E

S&P 500 EPS TRENDS & ESTIMATES

Annual Growth Rate % (right axis)EPS $ (left axis)

-10%

-5%

0%

5%

10%

15%

20%

25%

CD ConS E F HC IND IT M ComS U RE

SECTOR CONTRIBUTION TO S&P EPS

Hist Avg. 1st 5 Last 5

Stocks 1-to 6 Mos Prior to Recession

Recession Start S&P 500 Low

Recession End

S&P 500 Change During

Recession

S&P 500 Low Price

S&P 500 Recession End Price

Gain from Bottom to

Recession End

-12% 11/30/48 6/14/49 10/31/49 9% 13.6 16.0 18%

-6% 7/31/53 9/15/53 5/31/54 18% 22.9 29.2 27%

5% 8/31/57 10/22/57 4/30/58 -4% 39.0 43.4 11%

-5% 4/30/60 10/25/60 2/28/61 17% 52.2 63.4 22%

-6% 12/31/69 5/26/70 11/30/70 -5% 69.3 87.2 26%

-9% 11/30/73 10/3/74 3/31/75 -13% 62.3 83.4 34%

10% 1/31/80 3/27/80 7/31/80 7% 98.2 121.7 24%

1% 7/31/81 8/12/82 11/30/82 6% 102.4 138.5 35%

8% 7/31/90 10/11/90 3/31/91 5% 295.5 375.2 27%

-19% 3/31/01 9/21/01 11/30/01 -2% 965.8 1139.5 18%

-2% 12/31/07 3/9/09 6/30/09 -37% 676.5 919.0 36%

1% 2/29/20 3/20/20 ???? 2304.9 ???? ????

STOCKS PRICES & RECESSIONS

- 10 -

THEMES & SECTORS FOR 2020

TThheemmeess• Strong Balance Sheets & Experienced Management• Dividend Growth

• ESG/Sustainable• Innovation

• Min-Vol

SSeeccttoorrss• Information Technology

• Healthcare• Industrial – Defense & Supply Chain

• Communication Services• Avoid Energy

- 11 -

S&P 500 60 MINUTE

- 12 -

S&P 500 DAILY CHANNEL

- 13 -

S&P 500 DAILY 5/13 EMA

- 14 -

S&P 500 WEEKLY MEGAPHONE

- 15 -

S&P 500 TECHNOLOGY (XLK)

- 16 -

CBOE 5-DAY EQUITY-ONLY P/C RATIO

- 17 -

CBOE 21-DAY EQUITY-ONLY P/C RATIO

- 18 -

WEEKLY NYSE MCCLELLANSUMMATION INDEX

The Argus trademark, service mark and logo are the intellectual property of The Argus Research Group, Inc. Investing in any security or investment strategy discussed in this presentation may not be suitable for you and it is recommended that you consult an independent investment advisor. Investments involve risk and an investor may incur either profits or losses. Past performance should not be taken as an indication or guarantee of future performance. Argus officers, employees, agents and/or affiliates may have positions in funds or stocks discussed in this presentation. The opinions and information contained herein have been obtained or derived from sources believed to be reliable, but Argus makes no representation as to their timeliness, accuracy or completeness or for their fitness for any particular purpose. Argus shall accept no liability for any loss arising from the use of this presentation or the materials contained in this presentation.

DISCLAIMER