the stock market is not the economy...stock market is above pre -pandemic levels • markets have...

Presented by:

David Jang, Managing [email protected]

Ken Couch, [email protected]

The Stock Market is Not The Economy

September 24, 2020

5502 N Nebraska AveTampa, FL 33604

WaterWalkerInvestments.com

This presentation is for Institutional Investors Only – Not for Public Distribution

Learning Objectives

Explore how the stock market and the economy have divergedUnderstand

What is a “K-Shaped Recovery”?Analyze

What will be the impacts to your budget?Assess

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The Stock Market

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Different Sectors, Different Results

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Recovery Different from the Past

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Fed Purchases Bonds

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Lower Interest Rates

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…But Debt Levels are Rising

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Impact on Large Businesses

• Raise funds through public markets• Take advantage of low interest rates

• Tax law change• Rebate from previous years taxes paid

Positive

• Higher debt burden• Generate cash flow to pay interest

expenses• Rising Bankruptcies

Negative

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Impact on Small Businesses

• Paycheck Protection Program (PPP) has worked• Sales have rebounded in certain industriesPositive

• Long-term solvency• Cannot make up for lost sales (i.e. meals, hair

cuts)• Rising Covid-19 cases as we enter the fall

• Onset of flu season• Campuses reopening

Negative

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K Shaped Recovery

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GDP Rebounds in the 3Q

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Mortgage Refinancing Surges

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Lending Standards More Strict

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Loan-Loss Reserves Rise

Source: FDIC

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Employment Rising

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Jobless Claims Mixed

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Long Term Unemployed

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Inverse Relationship between Income and Spending

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Spending Varies by Sector

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Food Banks are Stressed

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Food Insecurity Rising

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Grocery Prices Rise

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Housing Insecurity

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Small Business Landlords

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Impact on the Top Quartile of Households by Income

• Ability to work remotely• Financial safety net

• Top 10% own 84% of the stock marketPositive

• Juggle work, child care, and school work• Discretionary spending has droppedNegative

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Impact on the Bottom Quartile of Households By Income

• Enhanced Unemployment Benefits• Benefits ended on July 31• New expanded benefits are state driven

Positive

• Lack of health insurance and paid sick leave• Lowest paid workers deemed “essential”

• Have to work• Long-term unemployment• Housing and food insecurities

Negative

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State & Local Government Programs

https://www.npr.org/2020/03/26/821457551/whats-inside-the-senate-s-2-trillion-coronavirus-aid-package

$339.8 billion designated for programs that will go to state and local governments

$274 billion toward specific COVID-19 response efforts

Includes $150 billion in direct aid for those state and local governments running out of cash due to higher number of cases

$5 billion for Community Development Block Grants

$13 billion for K-12 schools

$14 billion for higher education

$5.3 billion for programs for children and families, including immediate assistance to child care centers

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CARES Act Funds for Texas

https://home.treasury.gov/policy-issues/cares/state-and-local-governments

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This presentation is for Institutional Investors Only – Not for Public Distribution30


Impact on Local Governments

• Strong home & auto sales• CARES Act funds to cover Covid-19 related

expenses• Cannot be used to supplement lost revenue

• Unrestricted reserve funds

Positive

• Assessed property values, especially commercial,may go down the following year

• Increased costs for first responders and healthcare facilities

• Must have a balanced budget

Negative

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Summary

Stock Market is Above Pre-pandemic levels

• Markets have liquidity• Low interest rates offset by volatile markets

• Large companies & top quartile of wage earners have benefitted from thelower interest rates

Structural Issues for the U.S. Economy

• Service sector workers are facing long term unemployment• Essentials workers tend to be the lower paid hourly workers• Lack affordable health insurance and no paid sick leave• Food insecurity and lack of affordable housing

Challenges for Local Government Budgets

• One-time stimulus funds has helped mitigate immediate budget issues• In 2021, how will the state mitigate $15 billion in federal aid?

• Balance budget requirement: borrow funds/reduce or delay expenses

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Questions

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Presenter’s BioDavid JangManaging Partner30 Years Investment Experience

David Jang is a Managing Partner at Water Walker Investments responsible for directing the firm’s marketing, business development and client advisory services. He serves on the firm’s investment committee and authors the firm’s weekly economic updates. David’s investment advisory experience coupled with his client focused approach enable him to work with each entities’ investment team then tailor advice to meet their unique investment goals, objectives and adherence to all applicable state investment statutes. His ability to understand and assess the multi-layered components affecting local governments has enabled him to provide valuable insight to the firm’s treasury management, investment management and consulting clients. David routinely speaks at Florida’s Government associations, chapters, annual conferences and various CPE seminars customizing his discussions to locale, current economic conditions as well as the challenges that face Florida’s entities.

Prior to joining Water Walker Investments, David spent 14 years working with Florida government clients and 28 years overall in investment advisory services.

David earned his Bachelor’s degree in Economics from the Wharton School, University of Pennsylvania. He earned the Association of Financial Professionals (AFP) designation of Certified Treasury Professional (CTP). David also has FINRA Series 7, 24, 63, and 65 licenses and is a Registered Investment Advisor with the Florida Department of Financial Regulation.

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Presenter’s Bio

Ken Couch, Director TexasClient Advisory Services24 Years Investment Experience

Ken Couch is the Director of the Client Advisory Services Team in Texas for Water Walker Investments. His focus is on client service and business development. Ken services Texas local governments with fixed-income investing of operating funds, reserve funds and bond proceeds and strategizes with clients to identify short and long-term investment options.

Prior to joining Water Walker Investments, Ken spent over 24 years working with various governmental entities encompassing counties, cities, school districts, universities and colleges, and special districts. He has also helped local Texas governments address Other Postemployment Benefit (“OPEB”) funding.

Ken earned his bachelor’s degree in Applied Arts and Sciences from Texas State University and holds FINRA Series 6 and Series 63 licenses. He is a member of the Government Finance Officers Association (GFOA), Government Finance Officers Association of Texas (GFOAT), Government Treasurers’ Organization of Texas (GTOT) and Texas Association of Business Officials (TASBO).

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Contact Information

Client Advisory Team

David Jang, Managing Partner• (407) 618-4269• [email protected]

Kim Thomas, Managing Director, Client Advisory Services • (813) 915-6675• [email protected]

Portfolio Management Team

Brent Wertz, Managing Partner• (813) 321-3249• [email protected]

Brian McMillin, Portfolio Manager• (813) 440-5088• [email protected]

Eric Ebersole, Senior Analyst• (813) 321-3253• [email protected]

Rika Gilbreath, Associate, Client Advisory Services• (813) 321-3254• [email protected]

Garrett Fisher, Advisor• (813) 321-4051• [email protected]

Jay Michael Johnson, Associate Advisor• (813) 321-4008• [email protected]

Hunter Sabety, Investment Analyst• (813) 440-5087• [email protected]

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DisclosuresThis presentation is only intended for institutional and/or sophisticated professional investors. This material is intended for informational purposes only and should not be relied upon to make an investment decision, as it was prepared without regard to any specific objectives, or financial circumstances. It should not be construed as an offer or to purchase/sell any investment. Any investment or strategy referenced may involve significant risks, including, but not limited to: risk of loss, illiquidity, unavailability within all jurisdictions, and may not be suitable for all investors. To the extent permitted by applicable law, no member of Water Walker Investments Team, US Fixed Income Trust and/or Texas Fixed Income Trust or any officer, employee or associate accepts any liability whatsoever for any direct or consequential loss arising from any use of this presentation or its contents, including for negligence. This material is not intended for distribution to, or use by, any person in a jurisdiction where delivery would be contrary to applicable law or regulation, or it is subject to any contractual restriction. No further distribution is permissible without prior written consent.

The views expressed within this material constitute the perspective and judgment of Water Walker Investments, US Fixed Income Trust and/or Texas Fixed Income Trust at the time of distribution and are subject to change. Any forecast, projection, or prediction of the market, the economy, economic trends, and equity or fixed-income markets are based upon current opinion as of the date of issue, and are also subject to change. Opinions and data presented are not necessarily indicative of future events or expected performance. Information contained herein is based on data obtained from recognized statistical services, issuer reports or communications, or other sources, believed to be reliable. No representation is made as to its accuracy or completeness.

Performance data quoted represents past performance; past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance of the fund may be lower or higher than the performance quoted.

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the stock market is not the economy...stock market is above pre -pandemic levels • markets have...

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