Proprietary Research

Monthly InsightsJune 2020

Monthly CommentaryNo two recessions are the same - that has never been more true than today. The U.S. has not experienced an economic decline like the one that started in March since the Great Depression. Even more, the sheer speed of the decline is unparalleled. This might seem like a negative, but it is actually a positive. The quicker the decline, the quicker the recovery can begin.

Depths of Economic ActivityRecently released data suggests economic activity bottomed in April. This makes sense as April coincided with the most stringent stay-at-home orders. As states started to reopen in May, activity picked up. From jobless claims to manufacturing PMI to non-manufacturing NMI, the rebound is occurring.

For the past few months, the Allegiant team has talked about the transition from bad and weakening economic data to bad and improving data. (For more information read our Feature on Quadrants of Possibilities). This transition is important as markets are priced based on forward-looking expectations. This helps explain why markets have moved higher over the past couple months. Investors have now updated their pricing models to include the nascent recovery.

As I mentioned earlier, the speed of the decline is important. Instead of investors having to price in further economic declines over the coming months and quarters, the focus can quickly shift to the recovery.

A Second WaveWhile the economic recovery has begun it does not mean we are completely out of the woods. Data suggests we have flattened the COVID-19 curve. But flattening the curve is different from conquering the virus.

As I write this the U.S. is still averaging roughly 22,000 new cases per day. Even more, if we exclude the New York/New Jersey epicenter from the data it is less encouraging for the rest of the U.S. Looking at the data (ex-NY/NJ) shows average daily new cases near the highest level ever.

Increased testing explains some of this, but it does highlight a potential risk moving forward. There are still more cases than we would like. Inother words, the curve has flattened but the results could be better.

As more businesses return to full capacity the risk of another outbreak increases. If we do experience a second wave it will probably look different than the original outbreak. We are more prepared today to deal with an outbreak than we were three months ago. Now we can better isolate regions with outbreaks versus shutting down the entire country. Even this more targeted approach would negatively impact the economic recovery, but the damage would probably be less than what we experienced earlier this year.

Monthly CommentaryThe Newest “New Normal”Businesses and consumers alike are being forced to reevaluate how they operate. The short-term impacts from this pandemic are front and center, but there will be many long-term impacts as well. Consumers are realizing many things they previously viewed as non-discretionary spending are actually discretionary. Businesses are realizing that they need to shift how they operate to accommodate a more remote workforce and more distant customer. These changes are already occurring and will continue to play out over the coming years. This presents both risks and opportunities for investors.

From an investment standpoint, the new technological improvements over the past decade have allowed us to gather information from less traditional sources. We no longer have to wait for delayed government releases. We can now gather daily insights from Google search data, Apple map data, OpenTable, etc. The Allegiant team has scoured the universe of open source databases and from those we have curated a library of datasets that gives us an earlier look at the economic transition occurring. This leads to better insight and allows us to provide you with more interesting and relevant information.

In order to present you with a glimpse of curated data we constantly analyze through a variety of tools, I’m thrilled to release our newest Chart Book. This slimmed-down version of our Monthly Insights book provides updated easier-to-read graphics and a fresh glance at the most pertinent information we are examining today. As always, I welcome any feedback you have on this new tool. I hope it provides you with more valuable insight into what is happening in the world. Please feel free to pass along to your friends, family, or anyone you think might benefit from the information.

Benjamin W. Jones, CFP®, AIF®CERTIFIED FINANCIAL PLANNER ™President, Chief Investment Officer, Principal

ISM ServiceJob Openings

Consumer Confidence Y-o-Y Change

10-Year/3-Month Treasury Spread

S&P 500 & 20-Month Moving Average

Leading Index

Positive Indicator Negative IndicatorWarning Indicator

June 2020

Table of Contents

Economy7) U-3 & U-6 Unemployment8) Labor Force Participation Rate9) Long-Term & Short-Term

Unemployment10) Nonfarm Payrolls11) Job Openings12) Employment Statistics13) Global GDP14) U.S. Trade Statistics15) U.S. Manufacturing PMI 16) Foreign Manufacturing PMI17) U.S. Services PMI18) Foreign Services PMI19) Economic Activity20) Housing Supply & Demand21) Housing Prices22) Household Finances23) Consumer Default Rates24) Consumer Spending & Saving25) Consumer Confidence26) Consumer Confidence Y-o-Y27) Federal Government Finances28) Yield Curve Spread

Equities30) Corporate Profits31) S&P 500 & 20-month Moving

Average32) S&P 500 Earnings Yield & Baa

Bond Yield33) Corporate Finances34) Global Earnings35) Domestic Valuations36) Foreign Valuations37) Sector Valuations38) Sector Valuations39) Sector Valuations40) Sector Valuations

Fixed Income42) Consumer Prices43) Producer Prices44) M2 Money Supply & Velocity45) Global Central Bank Policy46) 10-Year Treasury Yield47) Global 10-Year Yields48) I/G Corporate Bond Spreads49) High Yield Spread50) Muni/Treasury Ratio51) State and Local Debt52) Emerging Market Bond Spread53) Mortgage Delinquency Rates

Commodities55) Energy56) Industrial & Precious Metals57) Agriculture58) Foreign Exchange

Economy

U-6 & U-3 UnemploymentM

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Economy

7

U-3 Unemployment & Participation RateM

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Economy

8

Long-Term & Short-Term UnemploymentM

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Economy

9

Nonfarm PayrollsM

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Economy

10

Job OpeningsM

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Economy

11

Employment StatisticsM

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Economy

12

Wage Growth Employment Cost Index

Average Weekly Hours Worked Total U.S. Productivity

Global GDP GrowthM

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Economy

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U.S. Trade StatisticsM

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U.S. Current Account Import/Export Growth Y-o-Y

Import/Export PricesImport Prices ex-Petroleum

U.S. Manufacturing PMIM

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Economy

15

Foreign Manufacturing PMIM

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Economy

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Euro Zone China

Japan UK

U.S. Services PMIM

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Economy

17

Foreign Services PMIM

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Economy

18

Euro Zone China

Japan UK

Economic ActivityM

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Economy

19

Light Vehicle Sales Durable Goods Orders

Industrial Production Capacity Utilization

Housing Supply & DemandM

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Economy

20

Housing Starts & NAHB Index Existing & New Home Sales

Housing Supply in Months Homeownership Rate

Housing PricesM

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Economy

21

Homebuyer Affordability

Case-Shiller 20-City Home Price Index

Household FinancesM

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Economy

22

Household Debt Service Ratio

Household Debt Y-o-Y Growth

Household Net Worth

Household Net Worth Y-o-Y Growth

Consumer Default RatesM

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Economy

23

Consumer Spending & SavingM

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Economy

24

Retail Sales

Personal Income & Spending

Savings Rate

Energy Expenditures a % of PCE

Consumer ConfidenceM

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Economy

25

Consumer Confidence Y-o-Y ChangeM

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Economy

26

Federal Government FinancesM

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Economy

27

Federal Budget Surplus/Deficit

Total Public Debt to GDP

Federal Debt Average Maturity

10-year/3-month Treasury SpreadM

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Economy

28

Equities

U.S. Corporate ProfitsM

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Equities

30

S&P 500 & 20-Month Moving AverageM

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Equities

31

S&P 500 Earnings Yield & Baa Bond YieldM

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Equities

32

Corporate FinancesM

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Equities

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S&P 500 Operating MarginS&P 500 Debt/Equity

S&P 500 Current Assets/Total Assets S&P 500 Dividend Payout Ratio

Global EarningsM

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Equities

34

Domestic ValuationsM

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Equities

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Foreign ValuationsM

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Sector ValuationsM

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Equities

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Health Care Consumer Staples

Utilities

Sector ValuationsM

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Equities

38

Consumer Discretionary Technology

Financials

Sector ValuationsM

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Equities

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Energy Materials

Industrials

Sector ValuationsM

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Equities

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MLP REIT

Fixed Income

Consumer PricesM

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Fixed Income

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Producer PricesM

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Fixed Income

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M2 Money Supply & VelocityM

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Fixed Income

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Global Central Bank PolicyM

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Fixed Income

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Fed Funds Rate

Bank of England Rate Japan Overnight Rate

European Reference Rate

10-year Treasury YieldM

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Fixed Income

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Global 10-year Government Bond YieldsM

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Fixed Income

47

Investment Grade Corporate Bond SpreadsM

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Fixed Income

48

High Yield Bond SpreadM

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Fixed Income

49

10-year AAA Muni/Treasury RatioM

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Fixed Income

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State & Local Debt Y-o-Y GrowthM

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Fixed Income

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Emerging Markets Bond Yield SpreadM

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Fixed Income

52

Mortgage Delinquency RatesM

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Fixed Income

53

Commodities

EnergyM

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Commodities

55

WTI Crude Oil Natural Gas

Heating Oil Coal

Industrial & Precious MetalsM

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Commodities

56

Gold Silver

Copper Aluminum

AgricultureM

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Commodities

57

Corn Wheat

Sugar Soybeans

Foreign ExchangeM

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Commodities

58

Dollar Index Euro/Dollar

Dollar/Yen Pound/Dollar

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Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. The Dow Jones Industrial Average is a price-weighted average of 30 actively traded blue-chip stocks. The S&P 500 Index is a broad-based measurement of changes in stock market

conditions based on the average performance of 500 widely held common stocks. The Russell 3000 is a market capitalization weighted equity index encompassing the 3,000 largest U.S. stocks. The MSCI EAFE Index is a float-adjusted market capitalization index designed to measure developed market equity performance, excluding the U.S. and Canada. The Emerging Markets Index is a float-adjusted market capitalization index that

consists of indices of 21 emerging economies. The CBOE Volatility Index is a key measure of market expectations of near-term volatility conveyed by S&P 500 stock index option prices. The Shanghai Composite Index is a stock market index of all stock (A shares and B shares) that are traded at the Shanghai Stock Exchange. The ISM Manufacturing Index is based on surveys of more than 300 manufacturing firms by the Institute of Supply Management. The Non-Manufacturing ISM Report on Business is a purchasing survey of the United States service economy, published by the Institute for Supply Management. Investments involve risk

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