Market Navigator April 5, 2021

from the Investment Advisory Group,

Securities and insurance products and services – • Are not FDIC or any other government agency insured • Are not bank guaranteed • May lose value Monthly letter

We just reached the one-year anniversary of the bull market. characterized by positive but moderating returns, driven by And what a run it’s been. After seeing the S&P 500 plunge 34% earnings. Tensions are set to persist between better economic in just over one month last year, the rebound has also been growth and earnings prospects versus the potential of higher record setting, with the fastest start to a bull market in modern taxes and rising interest rates. history. Although faced with much uncertainty, our disciplined process led us to recommend increasing equities and Indeed, the 10-year U.S. Treasury yield has risen from 0.92% at rebalancing portfolios on March 23rd of last year, which the beginning of the year to 1.74%. This sharp rise in yields coincidentally was the day of the bear market low. We made coincided with significant upward revisions to U.S. economic that recommendation not because it was a heroic “this is the growth. That said, our fixed income team’s work shows there bottom call,” but because our work strongly suggested any have only been three other periods since the previous recession further market downside at that point would be more than when yields have moved with such vigor, and each time the Keith Lerner, CFA, CMT recovered on the subsequent rebound. Thus the risk/reward was upward movement in yields cooled. Chief Market Strategist very favorable. From a positioning standpoint, we still view equities as attractive The market has since travelled beyond what even the most on a relative basis. Even though we expect periodic setbacks, optimistic forecasters could have predicted. That rebound is U.S. stocks have risen 85% of the time during economic largely a function of how quickly the fiscal and monetary expansions, and valuations remain attractive relative to fixed authorities came in with brute force to stem the economic income. The U.S. remains in the leadership position, given decline and provide a bridge to the other side of the pandemic. stronger economic and earnings momentum, and our non- Although the economy And with additional fiscal stimulus and the acceleration in consensus view of stability in the U.S. dollar for the first half of is set to expand at the vaccinations, the U.S. economy has the potential this year to the year is playing out. Our favored areas have shifted over the highest rate in decades, deliver a higher economic growth rate than China for the first last six months from growth to cyclical parts of the market. the market continues to time since 1976. Also aiding the market rebound is corporate Catch-up potential remains for the value style, particularly, pure “ transition to the next America’s perseverance and adaptability. Surviving companies value, which lagged the broader market by almost 35% over the phase of the bull are emerging from this pandemic leaner and more productive past three years. REITs are also starting to appear more market. than ever, which we expect will lead to record corporate profits attractive on a selective basis after lagging the broader market this year. by the most since the financial crisis. While we still do not see a lot of value in government bonds, the sharp rise in rates has The equity market’s remarkable rise has stemmed from its slightly improved the risk/reward. High yield and bank loan anticipation of the strong economic rebound that is unfolding. returns should also moderate but remain supported by an Bull markets tend to be front-end loaded. Although the economy improving economic backdrop and a lower sensitivity to rising is set to expand at the highest rate in decades, the market rates. continues to transition to the next phase of the cycle that is

Keith Lerner, CFA, CMT Chief Market Strategist Asset class view, forecasts & valuation* We have not made any changes since our last publication of House Views.

Tactical outlook (3-12 months) Long-term capital market assumptions (10 yr)+

Less More Expected Expected Asset classes Attractive Attractive Equity Return Ris k Equity  Global equity 6.75% 16.4% Fixed income  U.S. large cap 6.75% 15.2% Cash  U.S. small cap 7.50% 19.0%

Less More International developed markets 6.50% 17.8% Global equity Attractive Attractive Int'l developed markets small caps 7.25% 19.0%

U.S. large cap  Emerging markets (EM) 7.25% 23.0% U.S. mid cap  Expected Expected U.S. small cap  Fixed income Return Ris k International developed markets  Intermediate-term municipals 1.50% 3.5% Int'l developed markets small caps  U.S. core taxable bonds 1.25% 3.3% Emerging markets (EM)  U.S. government bonds 0.75% 3.9% Growth style relative to value  U.S. IG corporate bonds 2.00% 6.0%

Less More U.S. HY corporate bonds 4.75% 10.0% U.S. fixed income Attractive Attractive U.S. government  Key IAG 2021 forecasts U.S. mortgage-backed securities  2021 global GDP forecast* 5.6% U.S. investment grade corporate (IG)  U.S. GDP range 5.5% - 6.3% U.S. high yield corporates (HY)  Year-end Fed Funds rate range 0.00% - 0.25% Leveraged loans  10-yr U.S. Treasury yield 1.00% - 2.00% Duration  S&P 500 12-month forward EPS** $182.25 *Bloomberg consensus **FactSet consensus estimates Global equity market valuation S&P 500 MSCI ACWI MSCI EAFE MSCI EM Current price-to-earnings (P/E) ratio 21.9x 19.8x 17.7x 15.1x 10-year average P/E ratio 15.9x 14.7x 13.7x 11.4x 10-year high P/E ratio 23.4x 20.8x 18.2x 17.0x 10-year low P/E ratio 10.0x 9.6x 9.1x 8.2x For domestic use only Past performance does not guarantee future results. Keep in mind that investing involves risk. The value of your investment will fluctuate over time, and you may gain or lose money. *In this document, we express our high-level investment strategy views without portfolio context constraints. We aim to represent relative opportunities within each broader asset class. This allows us to signal what we are watching and where things are changing at the margin within positions that may differ from our asset allocation guidance and Strategy Portfolios. Long-term expected risk, return and correlation statistics are derived from the Portfolio & Market Strategy team’s capital market assumptions process and are not guaranteed. Secular trends, such as demographics, global debt, inflation, etc. are initially assessed to determine the impact on global markets over the next decade. With an understanding of the current stage of the business cycle, a combination of quantitative and fundamental techniques is used to further analyze factors that include, but are not limited to: (1) the outlook for asset class return drivers; (2) the probability of sustained returns; (3) absolute and relative valuation measures; (4) the impact of economic drivers on asset class assumptions and (5) changes in investor sentiment and liquidity. +Capital market assumptions are reviewed and/or modified at least once a year and are currently as of 2020. Gold is considered a collectible for tax purposes. Performance summary as of March 31, 2021

Index % Total Return MTD QTD YTD 1 Yr Rates (%) 3/31/21 12/31/20 9/30/20 6/30/20 3/31/20 MSCI ACWI (net) 2.67 4.57 4.57 54.34 Fed Funds Target 0.25 0.25 0.25 0.25 0.25 S&P 500 4.38 6.17 6.17 56.08 Libor, 3-Month 0.19 0.23 0.23 0.30 1.45 MSCI EAFE (net) 2.30 3.48 3.48 44.36 MSCI Emerging Markets (net) -1.51 2.29 2.29 58.11 T-Bill, 3-Month 0.02 0.07 0.10 0.15 0.10 Dow Jones Industrials 6.78 8.29 8.29 53.53 2-Year Treasury 0.16 0.11 0.13 0.14 0.19 NASDAQ Composite 0.41 2.78 2.78 71.68 5-Year Treasury 0.93 0.36 0.27 0.28 0.37 FTSE NAREIT All Equity REITs Index 5.53 8.32 8.32 34.09 10-Year Treasury 1.73 0.91 0.68 0.65 0.68 Bloomberg Commodity Index -2.15 6.92 6.92 34.88 30-Year Treasury 2.42 1.64 1.45 1.40 1.31 Bloomberg Barclays Aggregate -1.25 -3.37 -3.37 0.71 Bloomberg Barclays Aggregate (YTW) 1.61 1.12 1.18 1.25 1.59 ICE BofA US High Yield 0.17 0.90 0.90 23.21 Bloomberg Barclays Municipal Bond Blend Bloomberg Barclays Municipal Bond 0.87 0.77 0.96 1.16 1.75 0.47 -0.32 -0.32 4.90 1-15 Year Blend 1-15 Year ICE BofA US High Yield 4.27 4.24 5.76 6.84 9.24 ICE BofA Global Government xUS -2.65 -6.50 -6.50 3.67 (USD Unhedged) Currencies 3/31/21 12/31/20 9/30/20 6/30/20 3/31/20 ICE BofA Global Government xUS 0.42 -2.14 -2.14 0.36 Euro ($/€) 1.18 1.22 1.17 1.12 1.10 (USD Hedged) Yen (¥/$) 110.50 103.25 105.53 107.89 107.96 JP Morgan GBI-EM Global Diversified -3.07 -6.68 -6.68 12.98 Composite Pound ($/£) 1.38 1.37 1.29 1.24 1.24 Commodities 3/31/21 12/31/20 9/30/20 6/30/20 3/31/20 Crude Oil (WTI) 59.16 48.52 40.22 39.27 20.48 Gold 1,716 1,895 1,896 1,801 1,597 Volatility 3/31/21 12/31/20 9/30/20 6/30/20 3/31/20 CBOE VIX 19.40 22.75 26.37 30.43 53.54

U.S. style % total returns (Russell indexes) S&P 500 sector % total returns MTD YTD MTD YTD Value Core Growth Value Core Growth 30.9 5.88 3.78 1.72 Large 11.26 5.91 0.94 16.0 11.4 10.5 8.1 8.2 8.9 7.6 9.1 6.8 9.0 5.16 2.71 -1.91 Mid 13.05 8.14 -0.57 5.8 3.9 3.1 3.7 3.1 1.1 2.8 3.2 1.7 2.0 2.8

5.23 1.00 -3.15 Small 21.17 12.70 4.88 Comm Cons Cons Energy Financials Health Industrials Info Tech Materials Real Estate Utilities Services Disc Staples Care

Disclosures – All information is as of title date unless otherwise noted. This document was prepared for clients of Truist Bank for informational purposes only. This material may not be suitable for all investors and may not be redistributed in whole or part. Neither Truist Financial Corporation, nor any affiliates make any representation or warranties as to the accuracy or merit of this analysis for individual use. Information contained herein has been obtained from sources believed to be reliable, but are not guaranteed. Comments and general market related projections are based on information available at the time of writing and believed to be accurate; are for informational purposes only, are not intended as individual or specific advice, may not represent the opinions of the entire firm and may not be relied upon for future investing. The views expressed may change at any time. The information provided in this report should not be considered a recommendation to purchase or sell any financial instrument, product or service sponsored or provided by Truist Financial Corporation or its affiliates or agents. Investors are advised to consult with their investment professional about their specific financial needs and goals before making any investment decisions. Past returns are not indicative of future results. An investment cannot be made into an index. ©2020 Truist Financial Corporation. SunTrust®, the SunTrust logo, and Truist are service marks of Truist Financial Corporation. All rights reserved.

Securities and insurance products and services: Are not FDIC or any other government agency insured | are not bank guaranteed | may lose value Divergent GDP recovery timeline to pre-crisis peak

China’s real GDP is already back above its pre-crisis level, and the U.S. recovery should follow suit by the middle of this year. Latin America and Europe, which entered the pandemic in a more fragile position and saw a sharper decline, will take longer to fully recover.

Russia France United China States Brazil UK Mexico Italy Canada Peru

2026 2020 2021 Q1 2021 2022 2023 2024 2025

Chile Japan S Korea Colombia S Africa Argentina

Germany Spain

Data Source: Truist IAG, International Monetary Fund, IHS Markit, Bloomberg U.S. fiscal stimulus fuels fastest GDP forecast revisions world wide

In 2021, the U.S. finalized $1.9 trillion worth of fiscal stimulus, pushing the cumulative amount well above its peers in terms of GDP. The U.S. is leading the globe in upward GDP revisions.

Fiscal stimulus 2020/2021 (% of GDP) Consensus 2021 GDP revisions: Fiscal stimulus announced in 2021 3-month change 14% 2.5% Fiscal stimulus announced in 2020 2.0% 12% 1.5%

10% 1.0%

8% 0.5% 0.0% 6% -0.5%

4% -1.0%

-1.5% 2% Italy Peru Brazil Egypt Spain China Japan France Taiwan Finland

0% Norway Canada Portugal Australia Denmark Germany Colombia Eurozone

U.S. Euro Area Japan Singapore Philippines Hong Kong South Korea United States Data Source: Truist IAG, OECD, Bloomberg European Union U.S. economic growth heading well above the pre-pandemic trend

With the additional stimulus from the American Trend of real gross domestic product (in $Trillions) Rescue Plan that was passed in March, we now expect U.S. GDP growth of about 5.7% year over $22 Actual Truist IAG forecast year for 2021. This would be the highest annual growth rate since 1984. It is also more than double the pre-pandemic pace of economic growth, which averaged 2.3%. There is room for further upside in economic growth in 2021, but that would take the perfect resolution of $18 many issues that are currently uncertain.

$14 Long-term trend of U.S. economy

$10 2007 2010 2013 2016 2019 2022

Data Source: Truist IAG, Bureau of Economic Analysis, IHS Markit. Real gross domestic product, actual for 2014 through 2020. f = Truist IAG forecast for 2021 through 2022 Daily vaccination pace hovers near three million

The rate of vaccinations has jumped almost 60% in the past month and should hasten reopening activities. At the current pace, the percentage of U.S. adults at least partially vaccinated will reach 50% in early May. It should top 90% by late July or four months sooner than prior CDC estimates.

U.S. vaccine doses administered per day Estimated vaccination timeline 3.5 (7-DMA, in millions) % of U.S. population partially vaccinated 2.9M

3.0 100% 24-Jul Updated CDC 90% 2.5 Estimate 16-Jun 2-Dec 75% 1.7M 70% 90% 2.0 19-Sep 9-May 70% 50% 1.5 50% 28-Mar 8-Jul Previous CDC 28% 50% 1.0 Estimate 25% 0.5 18-Feb 12%

0.0 0% Dec-20 Jan-21 Feb-21 Mar-21 Jan-21 Mar-21 May-21 Jul-21 Sep-21 Nov-21

Sources: Truist IAG, Bloomberg, Centers for Disease Control & Prevention (CDC). Left chart data as of March 31, 2021. Right chart CDC estimate as of March 31, 2021, previous estimate as of February 18, 2021. 7-day moving average (DMA). . Most consumers have elevated savings buffer, suggests pent-up demand

Americans have saved the bulk of the cash received through the CARES Act, including the stimulus checks and tax relief, with bank deposits topping $16 trillion. The annual increase to deposits in 2020 was roughly $2.8 trillion, or about 14% of U.S. gross domestic product. So far in 2021, deposits have already risen another $329 billion. And that’s before the latest COVID-19 relief checks, which began going out in mid-March.

Disposable personal income (in $Billions) Annual change in bank deposits Wages & other income (in $Trillions) Unemployment insurance $3.5 $19.0B CARES & ARP checks $19.2B $3.0 $2.8

$18.1B $18.0B $17.5B $16.5B $16.6B $17.3B $17.7B $2.5

$2.0

$1.5

$1.0

$0.3 $0.5

-$0.1 Jul-20 Apr-20 Oct-20 Jan-20 Jun-20 Jan-21 Mar-20 Feb-20 Feb-21 Nov-20 Dec-20 Aug-20 Sep-20 May-20 1973 1981 1989 1997 2005 2013 2021

Data Source: Truist IAG, Bloomberg. CARES & ARP checks generically refers to economic impact payments authorized by the CARES Act, Coronavirus Response and Relief Supplemental Appropriations Act of 2021, and American Rescue Plan (ARP). Inflation rebounding from lows, but not a return of hyper-inflation

After dropping sharply in 2020, the pace of inflation has rapidly recovered in 2021. While it will overshoot in mid-2021 due to energy prices and easier year-over-year comparisons as the economy gains momentum, we see several offsets helping to restrict inflation from getting out-of-hand thereafter.

Personal consumption expenditures (PCE) year-over-year change Personal consumption expenditures (PCE) price index Core PCE (less food & energy) Fed's 2% inflation target 6% 6% 5% 4% 4% 3% 2% 2% 1% 0% 0% -1% -2% -2% 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021

Reasons for more inflation Reasons for less inflation . Increased goods prices due to pandemic-related supply shortages . Shift in consumer spending towards services, where prices have been weaker, while upward pressure on goods pricing peaks as supply constraints ease . Pent-up demand with limited supply of goods . A large portion of the stimulus/relief checks will likely be saved and used to pay . Enormous amount of fiscal stimulus down debt (won’t be entirely spent on goods and services) . Labor force slack with 8.4M fewer employed compared to pre-pandemic . Uptick in wage pressures, including minimum wages (even without federal nationwide increase) . Rent trends are contained for both commercial and residential . Acceleration in productivity trends as a result of the pandemic . Stable/stronger U.S. dollar holds down prices of imported goods

Data Source: Truist IAG, Bloomberg, Bureau of Economic Analysis Labor force recovering but still well below pre-pandemic levels

Despite a sharp snapback in the past 11 months, there is a lot of slack remaining in the labor force. There are 8.4M fewer workers employed compared to before the pandemic, more than two-thirds of whom have dropped out of the labor force and don’t get captured within the unemployment rate. As the recovery progresses, we expect that many of these people will return to the labor force, which will offset some of the wage pressures.

Number of full-time U.S. workers Cumulative net change in jobs by major (in millions) industry since February 2020 (in millions) +62% recovered 160 in 11 months Utilities -0.01 Mining and logging -0.08 150 Financial Activities -0.09 Still 14.6% below Information February 2020 -0.24 140 Wholesale trade level, and 37% of -0.23 Construction all jobs lost -0.18 130 Transportation & warehousing -0.07 -2.6 million -8.7 million -22.2 million Other Services -0.40 over 2.5 years over 2 years 120 in 2 months Manufacturing -0.52 Government -1.22 Retail trade -0.38 110 Professional & business services -0.69 Education and health services -1.17 100 Leisure and hospitality -3.13 '00 '02 '03 '05 '06 '08 '10 '11 '13 '14 '16 '17 '19 '21 -4 -3 -2 -1 0

Data Source: Truist IAG, Bloomberg, Bureau of Labor Statistics Stock market outlook – bear versus bull case

The primary market trend remains higher, and we remain overweight equities. However, a tug of war between better economic data and improved earnings versus concerns about higher interest rates and potential shifts in Fed policy should lead to a choppier market environment.

Bear case vs. Bull case

Rising interest rates Rising earnings and improving economy

Market valuations are elevated Relative valuations still favor stocks

Market prices and investor expectations are stretched Strong momentum is a positive longer term

Still lots of uncertainty globally Unprecedented stimulus reducing outlier risk

Data Source: Truist IAG The second year of a bull market tends to be choppier with positive but moderating returns and periodic pullbacks

The current bull market just reached its one-year anniversary. The sharpest market decline in modern Bull market returns and drawdowns history was followed by the sharpest rebound in history. We still see market upside, but anticipate that Year bull First year Second year Second year: largest markets will move in a two steps forward, one step market began return return intra-year pullback back fashion as it transitions to the next phase of the bull market. 1957 31.5% 11.2% -9.2% 1962 33.9% 15.7% -6.5% 1966 32.9% 6.2% -10.0% 1970 45.7% 5.8% -11.0% 1974 33.2% 27.7% -5.1% 1982 56.3% 1.5% -14.4% 1987 21.7% 26.1% -7.6% 2002 33.1% 9.4% -8.2% 2009 68.3% 16.0% -16.0% 2020 76.1%

Average 43.3% 13.3% -9.8%

Data Source: Truist IAG, Bloomberg, Strategas Past performance does not guarantee future results Complacent sentiment a potential near-term headwind

Markets tend to rise or fall based on how data and events come in relative to investor expectations. When stocks bottomed in March of 2020, expectations were severely depressed—this allowed good news to go a long way. Investor expectations have since risen sharply, as evidenced by the lowest amount of bearishness since right before the pandemic and record monthly equity inflows. This suggests the hurdle rate for positive surprises is higher.

% AAII individual investors that are bearish Equity fund monthly flows (mutual funds + exchange traded funds) Bearishness spiked 60% as stocks bottomed 100 Record 52% 80 50% 60 40

40% $Billions 20

30% 0 -20 20% 20% 21% -40 Lowest percentage of bears -60 10% since before the pandemic -80

0% -100 Mar-19 Jul-19 Nov-19 Mar-20 Jul-20 Nov-20 Mar-21 '97 '99 '01 '03 '05 '07 '09 '11 '13 '15 '17 '19 '21

Data Source: Truist IAG Haver, FactSet, AAII, ICI; estimated fund flows through 3/24/2021 Past performance does not guarantee future results The rise in rates is a natural progression as the economic outlook improves

Just prior to the pandemic, the 10-year U.S. Treasury yield was closer to 2%. Given that we estimate that the U.S. economy will regain its pre-pandemic peak GDP level by mid-year and grow above-trend into next year, we view the rise in rates as a reflection of the improved economic outlook.

Stocks and yields fell going into the pandemic and are now rising alongside an improving economic outlook S&P 500 Price Index (l-axis) 10-year U.S. Treasury yield (r-axis) 4500 2.0% 10-year U.S. Treasury yield was 4000 near 2% before the pandemic 1.8% 3500 1.6% 1.4% 3000 1.2% 2500 1.0% 2000 0.8% 1500 0.6% 1000 0.4% 500 0.2% 0 0.0% Jan-20 Apr-20 Jun-20 Aug-20 Oct-20 Dec-20 Mar-21

Data Source: Truist IAG, FactSet Past performance does not guarantee future results. Stocks still appear attractive on a relative basis

Number of years to double your money based on the rule of 72

2,400

41 14

US Equity 10-Year US Treasury Cash

*Assumes 5% return Based on 1.74% yield Based on 0.03% yield

Data Source: SunTrust IAG, FactSet *5% return is below our long-term assumptions but instead used as an example Past performance does not guarantee future results After a roughly 14-year outperformance cycle, growth’s dominance relative to value peaked in the fall of 2020

We still see more upside in value relative to growth over the next 12 months given value’s dramatic longer-term underperformance as well as the U.S. economy being on the cusp of the best growth in more than 35 years.

Large cap growth price relative to large cap value

230

210

190

170 ~14-year growth outperformance cycle begins 150

130

110

50 1995 1997 1999 2001 2003 2006 2008 2010 2012 2014 2016 2019 2021

Data Source: Truist IAG, FactSet. Past performance does not guarantee future results. Large cap growth = Russell 1000 Growth; Large cap value = Russell 1000 Value REITs underperformance is the greatest since the financial crisis, while cash flows held up much better this time around

REIT NTM fund flows from operations* 80% REITs: Rolling 12 month % returns minus S&P 500 125 60%

115 40%

105 20%

95 0% Cash flows have 85 held up much -20% better than in 2008-2009 crisis

-40% 75 Extreme underperformance

-60% 65 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021

REITs are subject to risks, including; market, natural disasters, and interest rate increases. The dividend Data Source: Truist IAG, FactSet income received from REITS isn’t tax advantage like corporate dividend income. *iShares US Real Estate ETF used as proxy indexed to 3/2001 Regional – valuations & earnings

We hold a U.S. equity bias and expect the U.S. to maintain a premium valuation relative to the globe. U.S. profits were stronger relative to those of other regions prior to the decline and are rebounding more quickly, aided by better economic trends.

Global earnings Current forward P/E and range since 2003 indexed at 100 as of 12/31/2017 Average Current US EAFE Eurozone Japan EM 35x 140

130 30x U.S.

120 25x

110 20x 22.6 EM 17.5 100 EAFE 17.8 15x 17.1 Japan 14.9 90 Eurozone 10x 80

70 5x 2017 2018 2019 2020 2021 U.S.U.S. EAFE Eurozone Japan EM

Data Source: Truist IAG, FactSet, MSCI Past performance does not guarantee future results. Earnings are next twelve months’ earnings in local currency. U.S. = MSCI USA, Japan = MSCI Japan, EAFE = MSCI EAFE, EM = MSCI EM, Eurozone = MSCI EMU Higher U.S. yields synchronized with improving growth outlook

Rising yields in the U.S. are a normal byproduct of 10-year U.S. Treasury yields vs. 2021 GDP forecasts improving growth and healthier inflation expectations. 6.0% They currently reflect a durable recovery from the 1.7% 10-year (l-axis) pandemic’s severe disruption and optimism Bloomberg U.S. 2021 GDP Economic Forecast (r-axis) surrounding the U.S. vaccine rollout. 1.5% 5.5% 10-year yields have risen roughly 75 basis points year to date. Unprecedented policy accommodation and an unexpected degree of economic resilience 1.3% accelerated their ascent in early March. We expect 5.0% the rapid pace to slow now that yields more fully reflect the rosier economic outlook. 1.1%

4.5%

0.9%

4.0% 0.7%

0.5% 3.5% Jul-20 Sep-20 Nov-20 Jan-21 Mar-21

Data Source: Truist IAG, Bloomberg Data as of 3/31/2021 Past performance does not guarantee future results. Pace of steepening accelerated beyond average historical pace

Historically, the 2/10-year yield curve’s slope 2/10-year curve pre- and post-recessions (in basis points) steepens on average by 180 basis points in the first two years following the onset of a recession. So far, the curve has steepened by 140 basis points, '81, '90, '01, & '08 Recessions 2020 Historical Average 2020 Trend suggesting a steepening bias should prevail in 2021. 300

250 However, we expect downward yield pressures from factors such as the Fed and global demand to 200 weaken the pace of the latest trend. 150

100

-50

-100

-150

-200 -250 -200 -150 -100 -50 0 50 100 150 200 250 300 350 400 450 500 Trading days from recession onset

Data Source: Truist IAG, Bloomberg Data as of 3/31/2021 1 basis point = 0.01% Past performance does not guarantee future results. Sharp yield uptick suggests deceleration in near-term

On just three separate occasions since the Great Financial Crisis have 10-year yields moved as far above their 100- and 200-day moving averages as today. These previous periods of steep yield increases tended to forerun a rate reversal against an elevated volatility backdrop.

10-year U.S. Treasury yields since 2008 4.0% 10-year 100-DMA 200-DMA

3.5%

3.0%

2.5%

2.0%

1.5%

1.0%

0.5% Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 Dec-20

Data Source: Truist IAG, Bloomberg Past performance does not guarantee future results. History suggests yields will fall from overextended levels

There were four times during the previous expansion Median forward change in 10-year yields when 10-year yields rose by 120 basis points in less than one year. The rise in 10-year yields from their after 120 basis point rise August low surpassed the 120-basis-point threshold 1 month 2 months 3 months 6 months 9 months 12 months in late March.

In previous periods, yields tended to establish -0.03% equilibrium and ultimately fall following a rise of this degree. We expect that to be the case again near term. That said, over the next six to 12 months, rates -0.08% are likely to buck the historical trend and move higher -0.12% as a result of the U.S.’s robust stimulus measures and solid growth prospects.

-0.25%

-0.33% -0.35%

Data Source: Truist IAG, Bloomberg Relative value in fixed income

Yields for many fixed income asset classes have moved up and reflect improved absolute levels. Our constructive expectations for the economy continue to drive our preference for credit in the U.S. including investment grade, leveraged loans, and high yield corporate bonds where there is a measure of support from the Fed and incremental yield opportunities.

Current yield vs. 10-year range 10% Range Current Yield

0% MBS

-2% Munis IG Corp HY Corp HY Muni Preferreds EM Loc Cur EM Hard Cur Intl Dev Mrkts U.S. Core Taxable

U.S. 10-Yr Treasury 10-Yr U.S. High quality Higher risk

Data Source: Truist IAG, FactSet, yield to worst shown except for preferreds (yield to maturity) U.S. 10-Yr Treasury = Bloomberg Barclays U.S. Treasury Bellwethers (10-Yr), U.S. Core Taxable = Bloomberg Barclays U.S. Aggregate, Municipals = Bloomberg Barclays Municipal Bond 1-15 Year, U.S. Corporates = Bloomberg Barclays U.S. Corporate IG, MBS=Bloomberg Barclays U.S. MBS, Intl Dev Mkts = ICE BofA Global Government ex U.S. (U.S.D hedged), HY Corp = ICE BofA U.S. High Yield, HY Muni = Bloomberg Barclays Municipal High Yield, Preferreds = ICE BofA Fixed Rate Preferred, EM Hard Cur = JP Morgan EMBI Global Diversified, EM Loc Cur = JP Morgan GBI-EM Global Diversified. Past performance does not guarantee future results. Investing in the bond market is subject to certain risks, including market, interest rate, issuer and inflation risk – investments may be worth more or less than the original cost when redeemed. The value of most bond strategies and fixed income securities are impacted by changes in interest rates. Bonds and bond strategies with longer durations tend to be more sensitive and more volatile than securities with shorter durations – bond prices generally fall as interest rates rise, and values rise when interest rates decline. Past performance does not guarantee future results. Leveraged loans offer incremental yield with lower interest rate risk

Leveraged loans, also known as floating-rate bank Yield per unit of interest rate risk loans, offer incremental yield over high quality fixed income in addition to less interest rate sensitivity. The economic environment should remain constructive for this asset class and high yield corporate bonds, Leveraged loans* 12.1 especially given the ultra-accommodative monetary and fiscal policy stances. Furthermore, defaults are High yield corporate bonds 1.1 expected to decrease as economic activity returns to pre-crisis levels. Preferreds 0.9

Hard currency EM sovereign debt 0.7

HY municipal bonds 0.5

Mortgage-backed securities 0.4

Investment grade corporate bonds 0.3

U.S. core bonds 0.3

Municipal bonds 0.2

Securities with floating interest rates generally are less sensitive to interest Government bonds 0.1 rate changes but may decline in value if their interest rates do not rise as much, or as quickly, as prevailing interest rates. Unlike fixed-rate securities, floating rate securities generally will not increase in value if interest rates decline. Changes in interest rates also will affect the amount of interest Data Source: Truist IAG, FactSet, Morningstar income the Fund earns on its floating rate investments. Floating rate securities involve liquidity risk, which may affect the ability of investors to buy Data as of 3/31/2021 except for leveraged loans which uses yield and duration from the Eaton Vance Floating-Rate Fund as of and sell them at the desired time or price. 1/31/2021 reported in Morningstar Past performance does not guarantee future results. U.S. credit’s incremental yield advantage will support demand

Credit spreads between investment grade and high Investment grade and high yield spreads (basis points) yield corporate bonds versus U.S. Treasury yields held relatively steady despite the recent uptick in IG corporates (l-axis) HY corporates (r-axis) market volatility. Their resilience is a positive signal of overall market health. 650 1250

Investment grade and high yield corporates continue 550 1050 to attract investors for their incremental yield advantage. Going forward, they remain well positioned to outperform U.S. Treasury and agency debt, benefiting from growing risk appetites and 450 850 strong policy support.

350 650

250 450

150 250

50 50 Dec-17 Dec-18 Dec-19 Dec-20

Data Source: Truist IAG, Bloomberg IG corporates = Bloomberg Barclays U.S. Corporate Bond Index OAS, HY corporates = Bloomberg Barclays U.S. Corporate High Yield Bond Index OAS Publication details PUBLICATION DETAILS Contributors

Keith Chip Michael Lerner, CFA, CMT Hughey, CFA Skordeles, AIF Chief Market Strategist, Managing Director, Lead/Senior Investment Strategy Managing Director, Fixed Income Analyst, U.S. Macro Strategy, Portfolio & Market Strategy Portfolio & Market Strategy

Eylem Sabrina Shelly Senyuz Bowens-Richard, CFA, CAIA Simpson, CFA, CAIA Lead/Senior Investment Lead/Senior Investment Lead/Senior Investment Strategy Analyst, Global Strategy Analyst, Strategy Analyst, Macro Strategy, Portfolio & Market Strategy Portfolio & Market Strategy Portfolio & Market Strategy

Dylan Emily Jeff Kase, CFA Novick, CFA, CFP® Terrell, CFA Lead/Senior Investment Wealth Investment Analyst, Wealth Senior Investment Analyst, Strategy Analyst, Portfolio & Market Strategy Portfolio & Market Strategy Portfolio & Market Strategy

Additional Contributors to Sector Strategy Evan Moog, CFA Vernon Charles Plack, CFA, CMT, CAIA East Wealth IAG Associate, Equity Strategy Analyst Fixed Income Strategies Equity Strategy Analyst

Editor Oliver Merten, CFA Managing Director, Investment Communications Investment Advisory Group

Ernest Dawal, Jr., CFA Wealth Chief Investment Officer

Portfolio & Traditional manager evaluation Equity strategies Fixed income strategies market strategy Ric Mayfield, CFA, CAIA Aki Pampush, CFA Chip Hughey, CFA Managing Director Wealth Director, Equity Managing Director, Fixed Keith Lerner, CFA, CMT Strategy Income Managing Director, Chief Market Strategist Alison Majors, CFA, CFP® Tracey Devine Kelly Frohsin, CIMA®, CFP® Senior Due Diligence Senior Due Diligence Senior Due Diligence Charles East Evan Moog, CFA Mike Skordeles, AIF® Analyst Analyst Analyst Equity Strategy Analyst Wealth Investment Advisory Lead/Senior Investment Group Associate Strategy Analyst - U.S. Macro Chris Hett, CFA Thomas Toman Diane Schmidt Benardo Richardson Strategy Scott Yuschak, CFA Senior Due Due Diligence Due Diligence Due Diligence Equity Strategy Analyst Eylem Senyuz Diligence Analyst Analyst Analyst Analyst Lead/Senior Investment Strategy Analyst – Global Private equity & Alternative investments research Adam White, CFA Macro Strategy credit research Spencer Boggess Equity Strategy Analyst Investment Wealth Managing Director communications Jeff Terrell, CFA John Holecek Senior Vice President, Mohan Badgujar Ravi Ugale Len Lebov Wealth Investment Advisory Oliver Merten, CFA Lead/Senior Investment Private Equity & Alternative Managing Director Private Equity & Alternative Group Associate Managing Director, Strategy Analyst Investments Analyst Investments Analyst II Investment Communications Shelly Simpson, CFA, CAIA Ryan Taylor, CFA, CAIA Vernon Plack, CFA, CMT, Will Repath Noah Harris, CFA Julie Parham Lead/Senior Investment Wealth Investment Advisory CAIA Private Equity & Private Equity & Alternative Manager, Investment Strategy Analyst Group Associate Equity Strategy Analyst Alternative Investments Analyst Communications Sabrina Bowens-Richard, Investments Analyst II Colin Fox, CTFA Haley Lawson CFA, CAIA W. Moultrie Dotterer, CFA Wealth Investment Advisory Lead/Senior Investment Wealth Investment Advisory Equity Strategy Analyst Group Associate Group Associate Strategy Analyst Charles Redding Emily Novick, CFA, CFP® Equity Strategy Analyst Wealth Senior Investment Analyst Dylan Kase, CFA Wealth Investment Analyst Disclosures

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With 2,757 constituents, the index covers approximately 85% of the global investable equity opportunity set Fixed Income is represented by the Barclays Aggregate Index. The index measures the performance of the U.S. investment grade bond market. The index invests in a wide spectrum of public, investment-grade, taxable, fixed income securities in the United States – including government, corporate, and international dollar-denominated bonds, as well as mortgage-backed and asset-backed securities, all with maturities of more than 1 year. Disclosures

Commodities are represented by the Bloomberg Commodity Index which is a composition of futures contracts on physical commodities. It currently includes a diversified mix of commodities in five sectors including energy, agriculture, industrial metals, precious metals and livestock. The weightings of the commodities are calculated in accordance with rules that ensure that the relative proportion of each of the underlying individual commodities reflects its global economic significance and market liquidity. Cash is represented by the ICE BofAML U.S. Treasury Bill 3 Month Index which is a subset of the ICE BofAML 0-1 Year U.S. Treasury Index including all securities with a remaining term to final maturity less than 3 months. U.S. Large Cap Equity is represented by the S&P 500 Index which is an unmanaged index comprised of 500 widely-held securities considered to be representative of the stock market in general. 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With 921 constituents, the index covers approximately 85% of the free float-adjusted market capitalization in each country. Emerging Markets is represented by the MSCI Emerging Markets Index captures large and mid cap representation across 24 Emerging Markets (EM) countries*. With 1,125 constituents, the index covers approximately 85% of the free float-adjusted market capitalization in each country. Value is represented by the Russell 1000® Value Index which measures the performance of those Russell 1000® Index companies with lower price-to-book ratios and lower forecasted growth values. Growth is represented by the Russell 1000® Growth Index which measures the performance of those Russell 1000® Index companies with higher price-to-book ratios and higher forecasted growth values U.S. Government Bonds are represented by the Bloomberg Barclays U.S. Government Index which is an unmanaged index comprised of all publicly issued, non-convertible domestic debt of the U.S. government or any agency thereof, or any quasi-federal corporation and of corporate debt guaranteed by the U.S. government U.S. Mortgage-Backed Securities are represented by the U.S. Mortgage-Backed Securities (MBS) Index which covers agency mortgage-backed pass-through securities (both fixed-rate and hybrid ARM) issued by Ginnie Mae (GNMA), Fannie Mae (FNMA), and Freddie Mac (FHLMC). U.S. Investment Grade Corporate Bonds are represented by the Bloomberg Barclays U.S. Corporate Investment Grade Index which is an unmanaged index consisting of publicly issued U.S. Corporate and specified foreign debentures and secured notes that are rated investment grade (Baa3/BBB- or higher) by at least two ratings agencies, have at least one year to final maturity and have at least $250 million par amount outstanding. U.S. High Yield Corp is represented by the ICE BofAML U.S. High Yield Index tracks the performance of below investment grade, but not in default, U.S. dollar denominated corporate bonds publicly issued in the U.S. domestic market, and includes issues with a credit rating of BBB or below, as rated by Moody’s and S&P. Floating Rate Bank Loans are represented by the Credit Suisse Leveraged Loan Index. The index represents tradable, senior-secured, U.S.-dollar-denominated non-investment-grade loans. Global Equity is represented by the MSCI All World Country (ACWI) Index which is defined as a free float-adjusted market capitalization-weighted index that is designed to measure the equity market performance of developed and emerging markets. The MSCI ACWI Index consists of 48 country indices comprising 24 developed markets countries and 24 emerging markets countries. Emerging Markets Equity is represented by the MSCI EM Index which is defined as a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets countries Intermediate Term Municipal Bonds are represented by the Bloomberg Barclays Municipal Bond Blend 1-15 Year (1-17 Yr) is an unmanaged index of municipal bonds with a minimum credit rating of at least Baa, issued as part of a deal of at least $50 million, that have a maturity value of at least $5 million and a maturity range of 12 to 17 years. Disclosures

U.S. Core Taxable Bonds are represented by the Bloomberg Barclays U.S. Aggregate Bond Index is a broad-based flagship benchmark that measures the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market. The index includes Treasuries, government-related and corporate securities, MBS (agency fixed-rate and hybrid ARM pass-throughs), ABS and CMBS (agency and non-agency). Slide 50 – EU Corporate is represented by the Bloomberg Barclays Euro-Aggregate Corporates Index which is a benchmark that measures the corporate component of the Euro Aggregate Index and includes investment grade, euro-denominated, fixed-rate securities. U.S. Government Bonds are represented by the Bloomberg Barclays U.S. Government Index which is an unmanaged index comprised of all publicly issued, non-convertible domestic debt of the U.S. government or any agency thereof, or any quasi-federal corporation and of corporate debt guaranteed by the U.S. government. U.S. IG Corporate Bonds are represented by the Bloomberg Barclays U.S. Corporate Bond Index measures the investment grade, fixed-rate, taxable corporate bond market. It includes U.S.D denominated securities publicly issued by U.S. and non-U.S. industrial, utility and financial issuers. U.S. High Yield Corporate Bonds are represented by the ICE BofAML U.S. HY Master Index which is an index that tracks U.S. dollar denominated debt below investment grade corporate debt publicly issued in the U.S. domestic market. S&P 500 Information Technology Index – a capitalization-weighted index that is composed of those companies included in the S&P 500 that are classified as members of the information technology sector based on GICS® classification. S&P 500 Financials Index – a capitalization-weighted index that is composed of those companies included in the S&P 500 that are classified as members of the financials sector based on GICS® classification. S&P 500 Energy Index – a capitalization-weighted index that is composed of those companies included in the S&P 500 that are classified as members of the energy sector based on GICS® classification. S&P 500 Materials Index – a capitalization-weighted index that is composed of those companies included in the S&P 500 that are classified as members of the materials sector based on GICS® classification. S&P 500 Industrials Index – a capitalization-weighted index that is composed of those companies included in the S&P 500 that are classified as members of the industrials sector based on GICS® classification. S&P 500 Consumer Discretionary Index – a capitalization-weighted index that is composed of those companies included in the S&P 500 that are classified as members of the consumer discretionary sector based on GICS® classification. S&P 500 Communication Services Index – a capitalization-weighted index that is composed of those companies included in the S&P 500 that are classified as members of the communication services sector based on GICS® classification. S&P 500 Utilities Index – a capitalization-weighted index that is composed of those companies included in the S&P 500 that are classified as members of the utilities sector based on GICS® classification. S&P 500 Consumer Staples Index – a capitalization-weighted index that is composed of those companies included in the S&P 500 that are classified as members of the consumer staples sector based on GICS® classification. S&P 500 Health Care Index – a capitalization-weighted index that is composed of those companies included in the S&P 500 that are classified as members of the health care sector based on GICS® classification. S&P 500 Real Estate Index – a capitalization-weighted index that is composed of those companies included in the S&P 500 that are classified as members of the real estate sector based on GICS® classification.