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from the Investment Advisory Group,
Market Navigator – July 6, 2021
condensed edition
Securities and insurance products and services –
• Are not FDIC or any other government agency insured
• Are not bank guaranteed
• May lose value
Monthly letter
At the halfway point of 2021, capital markets have held 2) Are we concerned about the peak in economic
up very well, with global equities up double digits, credit growth and implications for the market?
spreads near record lows, and the economy on pace for
• No. Economic indicators, such as the ISM
the best annual growth in decades.
manufacturing survey, often show their strongest
As we look into the second half, with this month’s letter, growth rates early in an economic cycle as they
we focus on where we stand on six top-of-mind investor bounce from depressed levels. The peak in
questions. economic momentum often injects market
1) Is there still market upside after the strong gains volatility but does not typically end a bull market.
we have seen over the past 15 months? • In fact, the peak in the ISM manufacturing index
Keith Lerner, CFA, CMT occurred early in the bull markets that began in 2003
Chief Market Strategist
The weight of the evidence still suggests upside,
and 2009, but stocks continued to move higher.
albeit at a moderating pace with periodic pullbacks.
• Moreover, we expect the economy to grow above-
• Since 1950, the S&P 500 has risen 81% of the time
trend through 2023, supported by excess consumer
in the second half of the year when the first half was
savings, a pickup in capital spending, and a robust
up more than 10%, with an average return of 7.6%.
jobs market.
• The S&P 500 also just had five straight months of
The peak in economic
gains; markets have been higher 25 out of 26 3) Where do you stand on the “transitory” view of
momentum often inflation?
injects market volatility times one year later after similar monthly streaks.
• Consistent with the best economic growth in
but does not typically • Stocks have risen 85% of the time on a one-year
end a bull market. decades, we should also expect inflation to be
basis during expansionary economic periods, and
higher than average.
we see near-term recession risks as low.
• Our macro team’s view is the sharp rise in inflation is
• That said, the delta variant presents a risk, and the
primarily due to transitory factors, but it will likely
tug of war between a potential shift in Fed policy and
stay above pre-pandemic levels. Two of the biggest
discussion of taxes versus a strong economy and
contributors to the recent jump in inflation have been
earnings is likely to lead to setbacks.
vehicles and the reopening sectors, which should
• Markets have also gone an extended period of time dissipate as the economy continues to normalize.
without so much as a 5% pullback. Still, overall we
remain positive over the next 12 months. • Conversely, rents, which were softer in 2020, should
firm as the reopening continues to unfold, and oil
prices should remain stickier.Monthly letter (continued)
4) Is the peak in the 10-year U.S. Treasury yield already in for this 6) Is it time for international equities?
cycle?
• We begin the second half maintaining our U.S. bias, which
• No. Our fixed income group’s view is that earlier this year yields had has strongly outperformed this year, despite a strong
moved too far, too fast, and positioning had become too one sided. consensus that it was time for international markets to lead.
• However, we expect upside in yields to be supported by above- While the narrative for Europe—cheap markets, improvement
trend economic growth, as the discussion of Fed tapering gains in vaccinations, and the potential for better economic
traction and as a more synchronized global recovery takes hold. growth—has merits, to become more positive we want to see
comparative earnings and price trends improve.
• Moreover, the historical analysis of the yield curve during past
expansions also suggests upside to rates remains. • The underperformance of the international developed markets
over the past decade has gone hand-in-hand with weaker
5) After lagging earlier in the year, the growth style has
earnings trends relative to the U.S. There are signs of
rebounded strongly. Has your view on value changed?
stabilization in relative earnings, but we want to see follow
• Recent market action showed some rotation away from the cyclical through before increasing our allocation.
trade, which had become overcrowded on a short-term basis and
• Likewise, we remain underweight emerging markets (EM).
vulnerable to a setback given big gains during the last several
After breaking to the upside of a 10-year trading range in
months.
February, EM has lagged. The combination of the Chinese
• The factors behind our cyclical sector bias, which include above- government’s lowered projected economic growth rate, the
trend economic growth, attractive valuations, and better earnings crackdown on technology companies, and concerns of less
momentum remain intact. stimulus have weighed on markets. Offsetting this is that EM
• That said, our work is also showing some notable improvement in and China should benefit from stronger exports as the global
the technical trends for the growth sectors, which is a positive economy recovers, but so far comparative earnings trends
and to be respected. However, this has not yet been supported remain relatively weak.
by better earnings; this is one of the main factors we are
watching before becoming more constructive on the growth
style. We will be monitoring the upcoming earnings season closely
for any shift in trends.
Keith Lerner, CFA, CMT
Chief Market StrategistAsset class view, forecasts & valuation*
Since our last publication of House Views, we upgraded our U.S. GDP range forecast for 2021 to 6.2-7.3% from 5.9-7.3%.
Tactical outlook (3-12 months) Long-term capital market assumptions (10 yr)+
Less More Expected Expected
Asset classes Attractive Attractive Equity Return Risk
Equity l Global equity 6.75% 16.4%
Fixed income l U.S. large cap 6.75% 15.2%
Cash l U.S. small cap 7.50% 19.0%
Less More Real estate investment trusts (REITs) 5.25% 18.0%
Global equity Attractive Attractive International developed markets 6.50% 17.8%
U.S. large cap l Emerging markets (EM) 7.25% 23.0%
U.S. mid cap l Expected Expected
U.S. small cap l Fixed income Return Risk
Real estate investment trusts (REITs)*** l Intermediate-term municipals 1.50% 3.5%
International developed markets l U.S. core taxable bonds 1.25% 3.3%
Emerging markets (EM) l U.S. government bonds 0.75% 3.9%
Growth style relative to value l 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 l Key IAG 2021 forecasts
U.S. mortgage-backed securities l 2021 global GDP forecast* 6.0%
U.S. investment grade corporate (IG) l U.S. GDP range 6.2% - 7.3%
U.S. high yield corporates (HY) l Year-end Fed Funds rate range 0.00% - 0.25%
Leveraged loans l 10-yr U.S. Treasury yield 1.00% - 2.00%
Duration l S&P 500 12-month forward EPS** $201.95
*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 21.3x 19.2x 16.8x 14.3x
10-year average P/E ratio 16.1x 14.9x 13.8x 11.5x
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. ***REITs – Our asset class views can differ at times from our sector strategy as the latter has a much heavier emphasis on price momentum, whereas fundamentals play a greater role in our asset class view.
Investment and insurance products – Are not FDIC or any other government agency insured | are not bank guaranteed
| may lose valueW E E K LY M A R K E T
Performance summary
M Oas
N I Tof
O RJune 30, 2021
Index % Total Return MTD QTD YTD 1 Yr Rates (%) 6/30/21 3/31/21 12/31/20 9/30/20 6/30/20
MSCI ACWI (net) 1.32 7.39 12.30 39.09 Fed Funds Target 0.25 0.25 0.25 0.25 0.25
S&P 500 2.33 8.55 15.25 40.61 Libor, 3-Month 0.14 0.19 0.23 0.23 0.30
MSCI EAFE (net) -1.13 5.17 8.83 32.21 T-Bill, 3-Month 0.05 0.02 0.07 0.10 0.15
MSCI Emerging Markets (net) 0.17 5.05 7.45 40.72
2-Year Treasury 0.25 0.16 0.11 0.13 0.14
Dow Jones Industrials 0.02 5.08 13.79 36.18
NASDAQ Composite 5.49 9.49 12.54 43.99 5-Year Treasury 0.87 0.93 0.36 0.27 0.28
S&P United States REITs 2.66 11.94 21.70 37.65 10-Year Treasury 1.44 1.73 0.91 0.68 0.65
Bloomberg Commodity Index 1.85 13.30 21.15 45.40 30-Year Treasury 2.06 2.42 1.64 1.45 1.40
Bloomberg Barclays Aggregate 0.70 1.83 -1.60 -0.33 Bloomberg Barclays Aggregate (YTW) 1.50 1.61 1.12 1.18 1.25
ICE BofA US High Yield 1.37 2.77 3.70 15.56 Bloomberg Barclays Municipal Bond Blend
0.76 0.87 0.77 0.96 1.16
Bloomberg Barclays Municipal Bond 1-15 Year
0.13 0.90 0.57 3.07
Blend 1-15 Year ICE BofA US High Yield 3.85 4.27 4.24 5.76 6.84
ICE BofA Global Government xUS (USD Currencies 6/30/21 3/31/21 12/31/20 9/30/20 6/30/20
-2.00 0.33 -6.19 1.89
Unhedged)
ICE BofA Global Government xUS (USD Euro ($/€) 1.19 1.18 1.22 1.17 1.12
0.38 0.19 -1.95 -0.43
Hedged) Yen (¥/$) 110.99 110.50 103.25 105.53 107.89
JP Morgan EMBI Global Diversified 0.73 4.06 -0.66 7.50 Pound ($/£) 1.38 1.38 1.37 1.29 1.24
Commodities 6/30/21 3/31/21 12/31/20 9/30/20 6/30/20
Crude Oil (WTI) 73.47 59.16 48.52 40.22 39.27
Gold 1,772 1,716 1,895 1,896 1,801
Volatility 6/30/21 3/31/21 12/31/20 9/30/20 6/30/20
CBOE VIX 15.83 19.40 22.75 26.37 30.43
U.S. style % total returns (S&P indexes) S&P 500 sector % total returns
Week YTD MTD YTD
Value Core Growth Value Core Growth
45.6
-1.17 2.33 5.68 Large 16.30 15.25 14.31 25.7 23.3
19.7 16.4
10.3 11.9 13.8 14.5
2.7 3.8 5.0 4.6 2.3 7.0 3.2 2.4
-2.81 -1.02 1.07 Mid 22.97 17.59 12.28
-0.2 -3.0 -2.2 -5.3 -2.2
-0.69 0.33 1.56 Small 30.59 23.56 16.49 Comm Cons Disc Cons Energy Financials Health Industrials Info Tech Materials Real Estate Utilities
Services 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 valueMajor global economic regions
United States
GDP growth estimates
Emerging Asia
2020 2021
2020 2021
6.2% - 7.3% 7.4%
-3.5%
-2.4%
Our updated growth outlook for 2021 is a
range of 6.2% to 7.3% year over year, the
Inflation at the producers’ level
fastest pace in nearly 40 years with the
is running higher than expected,
highest inflation in 30 years.
indicating strong external demand.
On the other hand, benign
Europe consumer inflation means slower
2020 GDP local economic activity in many
($83.8 trillion total) 2020 2021 major Asian economies, raising
4.6% prospects of further downgrades to
23% growth estimates.
Other $20.8 25%
-7.2%
$22.9 $20.8 In Europe, social mobility is returning to normal levels,
27% 25% lifting economic growth forecasts for this year and the next.
Within the three major global economic regions, Europe is
still on track to deliver the slowest growth rate in 2021.
Data Source: Truist IAG, International Monetary Fund, Bloomberg, IHS Markit
Europe includes developed countries and economies considered to be “emerging,” such as Russia.U.S. will grow well-above the pre-pandemic trend for at least 3 years
Thanks to the massive fiscal support from COVID-19 relief programs, we expect faster growth for U.S. GDP, considerably above the pre-pandemic pace,
through 2022. While growth will step down in 2023 as many of those programs fade, it should remain above the pre-pandemic pace which assumes no
additional federal spending programs beyond the recently agreed to bipartisan infrastructure deal.
Growth of gross domestic product (GDP) by year
8% 2021
Average 2010-2019 = 2.3%
Forecast range
6% 6.2% to 7.3%
4.3%
4% 3.1%
2.6% 2.2% 3.0% 2.7%
1.8% 2.5% 1.7% 2.3% 2.2%
1.6%
2%
0%
-2%
-4% -3.5%
-6%
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021f 2022f 2023f
Data Source: Truist IAG, Bureau of Economic Analysis, IHS Markit. Real gross domestic product, actual for 2014 through 1Q2021.
f = Truist IAG forecast for 2Q2021 through 2023Growth boosted by capital goods spending surge
After declining sharply during 2020, new orders for
New orders for core capital goods
core capital goods have surged in late 2020 and into
2021 as businesses continue to catch up from the
(excludes aircraft & defense, in $billions)
pandemic. They are a leading economic indicator and
show that businesses are spending again. $80 New all-
time high
Capital goods are generally buildings, equipment,
furniture, and machines, and are used by businesses $70
to produce other goods.
We exclude commercial aircraft and defense orders $60
since those are extremely large and volatile orders
with production spread over multiple years. $50
$40
$30
$20
$10
$-
1971 1976 1981 1986 1991 1996 2001 2006 2011 2016 2021
Data Source: Truist IAG, Bloomberg, U.S. Census Bureau; data through May 2021. Monthly change, seasonally adjusted nominal
dollars in billions.Faster job recovery and worker pay growth faster than pre-pandemic levels
From an employment perspective, this is not a typical recession or recovery. Following the 2008-2009 recession, it took roughly 4.5 years to recover the
jobs lost. In 14 months, the U.S. has clawed back about 95% of jobs lost. Also, average hourly earnings have increased 3.6% from a year ago, which is
well above the average of 3.3% year-over-year growth during 2019. Further labor gains are set to support the recovery.
Number of full-time U.S. workers Average hourly earnings
(in millions) (change year-over-year)
160
9%
150 8%
7%
140
6%
5%
130
3.6%
Still, 6.8 million, or 4%
120 -4.4%, below pre-
3%
pandemic levels
2%
110
1%
0%
100 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21
'01 '03 '05 '07 '09 '11 '13 '15 '17 '19 '21
Data Sources: Truist IAG, Bloomberg, Bureau of Labor Statistics; monthly data through June 2021.Look for consumer spending to continue shifting back towards services
Retail sales had a quick, V-shaped recovery, much faster than the last two recessions. However, spending on services, which is steadily improving,
continues to lag and is just now getting to pre-pandemic levels. We expect that consumer spending will continue shifting back towards services as
service-oriented activities resume and reopen, including restaurants, hotels, concerts, and airlines.
Retail sales comparison during Change in card spending by category
recessions/recoveries
Overall Spending Goods Services
125
2001 2008 2020 40%
120
115 20%
110
0%
105
100 -20%
95
-40%
90
85 -60%
80
-80%
75
Mar-20
Apr-20
May-20
Jul-20
Mar-21
Apr-21
May-21
Feb-20
Oct-20
Feb-21
Jun-20
Aug-20
Sep-20
Nov-20
Dec-20
Jan-21
0 4 8 12 16 20 24 28 32 36 40 44 48
Number of Months
Data Sources: left chart: Truist IAG, Bloomberg, U.S. Census Bureau. Index constructed based on monthly
retail and food service sales in nominal dollars; data through May 2021. Right chart: Truist IAG, Haver, Affinity
Solutions via Opportunity Insights; including credit and debit card spending; daily data through June 4, 2021.U.S. reopening efforts aided by vaccinations, but complicated by the Delta
variant
The reopening of activities has been hastened by the proportion of fully-vaccinated Americans, which is now at 55%. At the current pace, the percentage
of Americans at least partially vaccinated should top 90% in October. But, the surge of the highly-contagious Delta variant may complicate reopening
efforts. However, a U.K. study showed that two-dose vaccinations were 92% effective in reducing Delta-related hospitalizations.1
U.S. vaccinations (percentage of population) U.S. cases by strain
Fully vaccinated At least one dose
Delta,
9.5% Delta, 26.1%
88.2%
78.3%
66.7% Alpha,
63.9% Alpha, 47.8%
60.3%
54.6% 54.9% 57.7%
47.0%
Gamma,
Gamma, 14.5%
11.2% Other, 5.9%
Other,
9.7% Iota, 26.1%
Iota,
9.3%
% of total % of Americans % of adults % of Americans As of 6/5/2021 As of 6/19/2021
population age 12 and over over 65
Data Source: Truist IAG, Our World in Data, Centers for Disease Control & Prevention (CDC). Left chart data through July 1, 2021; adults are 18 years of age and over. Right chart data through June 19, 2021.
1 Effectiveness of COVID-19 vaccines against hospital admission with the Delta (B.1.617.2) variant; Public Health England.Inflation is up due to transitory factors that should pass, but likely stays
elevated relative to pre-pandemic levels
Two of the biggest contributors to the recent jump in inflation have been vehicles and the reopening sectors, such as airlines, rental cars, recreational
goods and services, and apparel. Much of this will dissipate as the economy continues to normalize (i.e., production and supply chains recover, consumer
spending shifts back towards services, etc.). Meanwhile, shelter, which was softer in 2020, should firm as the reopening continues to unfold. Ultimately,
we anticipate inflation will remain somewhat higher relative to pre-pandemic levels.
Core consumer price index contributors YoY 3.8%
4
Shelter Vehicles Reopening sectors Other
3.0% 0.76
2019
3 YoY
Average
Change 1.7% 1.7%
1.6% 1.6% 0.73 1.00 2.2%
1.2% 1.2% 1.6% 1.6%
1.4% 1.6%
2 1.3% 0.58 0.57
Percentage Points
1.04 1.00 0.83 0.79
0.97 0.96 1.03 0.74 1.11 0.17
0.71 0.69 0.69 0.05
0.77
1 0.15 0.35 0.41 0.39 0.41 0.38 0.35 0.37
1.41
1.07 1.00 0.98 0.97 0.86 0.86 0.88 0.93
0.81 0.77 0.67 0.61 0.71
0 -0.02 -0.09
-0.45 -0.42 -0.50 -0.49 -0.34 -0.31 -0.36 -0.37 -0.12
-0.80 -0.68
-1
May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Jan-21 Feb-21 Mar-21 Apr-21 May-21 2019
Average
Data Source: Truist IAG, Haver, Bureau of Labor Statistics. Core consumer price index excludes food and energy. Vehicles includes new vehicles, used cars and trucks. Shelter includes owners' equivalent rent of
residences, rent of primary residence, and lodging away from home. Reopening sectors includes transportation services, recreation services, recreation commodities, and apparel. Other includes all other components.Inflation pressure in most commodities is easing
Lumber is a prime example of what happens when
Lumber ($/1,100 board feet)
higher than normal demand meets supply chain
issues and bottlenecks.
all-time
$1,800
As home renovations and building activity quickly high
recovered, softwood lumber use jumped over 5%
year-over-year in 2020 to nearly 51 billion board feet, $1,600
the most in 15 years. Meanwhile, Canadian lumber
imports to the U.S. were down by 20% early in the $1,400
pandemic but caught up by year end. U.S. lumber
production has increased along with imports from $1,200
other countries.
$1,000
Similarly, copper prices surged throughout 2020 but
have dropped more than 10% in recent weeks.
$800
$600
-58%
from high
$400
$200
$0
2016 2017 2018 2019 2020 2021
Data Source: Truist IAG, Bloomberg; data through June 30, 2021. Random length lumber futures contracts for 1,100 board feet of 8 to
20 foot softwood 2x4s.Stocks reached a new record after a period of consolidation
S&P 500 price
+27% from
4500 pre-pandemic market peak
+92%
4000
3500
3000
2500
2000 -34%
1500
2019 2020 2021
Data Source Truist IAG, FactSet
Past performance does not guarantee future results.Bull markets tend to be front-end loaded, but history suggests upside
potential remains, though at a moderating pace
S&P 500 bull markets price change S&P 500 bull markets duration
since 1957 since 1957
179% 5.8 Years
5 Years
101%
92%
1.3 Years
Current Average Median CurrentCurrent Average Median
Current based on June 2021 peak
Data Source: Truist IAG, FactSet
Past performance does not guarantee future results.The second year of a bull market tends to be choppier with positive but
moderating returns and periodic pullbacks
We see a lot of similarities in the market setup with what we experienced in 2004 and 2010, the second year of each of those bull markets. That is, after
the large initial snapback rallies, markets moved to a choppier phase. Ultimately, though, the bull markets in both cases still had several years left.
S&P 500: Bull market that started in 2003 S&P 500: Bull market that started in 2009
1,500
1,900
1,400
Choppier 1,700
1,300
period after
1,200 snapback 1,500 Choppier
period after
1,100 1,300 snapback
1,000
1,100
900
900
800
700
700
600 500
500 300
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Data Source: Truist IAG, FactSet. Past performance does not guarantee future resultsA strong first half has historically implied a higher probability of gains in the
second half
Historically, strong momentum in the first half tends to
S&P 500 second half average price gains
carry over to the second half.
based on first half returns (Since 1950)
When the S&P 500 has seen a price gain of more
than 10% in the first six months of the year—the
market was up 14.4% in the first half of this year—the
average returns and probabilities of higher markets in Average % of second half
First half return
the second half tend to be stronger than normal. second half return periods positive
10% 7.6% 81%
All 4.2% 70%
Data Source: Truist IAG, FactSet. Past performance does not guarantee future resultsPeak economic momentum does not mean a peak in stock prices
Economic indicators, such as the ISM manufacturing survey, often show their strongest growth rates early in an economic cycle as they bounce from
depressed levels. The peak in economic momentum often injects market volatility but does not typically end a bull market. In fact, the peak in the ISM
manufacturing index occurred early in the bull markets that began in 2003 and 2009, but stocks continued to move higher.
S&P 500 vs. ISM Manufacturing
S&P 500 - Price (Left) USA - ISM Manufacturing (Right)
70
4,500
Peak ISM
manufacturing Peak ISM
manufacturing
60
1,500 50
40
500 30
2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021
Data Source: Truist IAG, FactSet. Past performance does not guarantee future results
18S&P 500 – Entire YTD price gains driven by earnings; P/E slightly down
4400 S&P 500
One of our key calls coming YTD price change = +14.4%
into the year was that earnings 4000
were underappreciated and
had upside. 3600
3200
Accordingly, we have seen
2800
significant upward earnings Forward price-to-earnings
revisions this year as the
economy recovers. Earnings 24x 23.4
have been the entire driver of 23x 22.5
market gains this year.
YTD P/E change = -4.8%
22x 21.3
21x
20.8
20x 20.2
Forward 12-month earnings estimates
$210 YTD earnings
$200 estimate change = +20.7%
$190
$180
$170
$160
$150
$140
Jun-20 Jul-20 Sep-20 Nov-20 Jan-21 Mar-21 Apr-21 Jun-21
Data Source: Truist IAG, FactSet
Past performance does not guarantee future results.Value style is outpacing growth this year, but we have seen sharp rotations
from month to month
We have seen a tug-of-war between the growth and value style this year as investors debate economic growth, Fed policy, interest rates, and inflation.
Based on above-trend economic growth, stronger earnings trends, and relative valuations, we maintain a value bias.
Monthly and YTD Style Performance
January February March April May June YTD
Small Cap Equity Small Cap Value Mid Cap Value Large Cap Growth Small Cap Value Large Cap Growth Small Cap Value
6% 11% 7% 7% 4% 6% 31%
Small Cap Value Mid Cap Value Large Cap Value Large Cap Equity Large Cap Value Large Cap Equity Small Cap Equity
6% 10% 6% 5% 2% 2% 24%
Small Cap Growth Small Cap Equity Small Cap Value Mid Cap Value Small Cap Equity Small Cap Growth Mid Cap Value
6% 8% 5% 5% 2% 2% 23%
Mid Cap Growth Mid Cap Equity Mid Cap Equity Mid Cap Equity Mid Cap Value Mid Cap Growth Mid Cap Equity
2% 7% 5% 5% 2% 1% 18%
Mid Cap Equity Large Cap Value Large Cap Equity Mid Cap Growth Large Cap Equity Small Cap Equity Small Cap Growth
2% 6% 4% 4% 1% 0% 16%
Mid Cap Value Small Cap Growth Small Cap Equity Large Cap Value Mid Cap Equity Small Cap Value Large Cap Value
1% 4% 3% 4% 0% -1% 16%
Large Cap Growth Mid Cap Growth Large Cap Growth Small Cap Growth Small Cap Growth Mid Cap Equity Large Cap Equity
-1% 4% 3% 2% 0% -1% 15%
Large Cap Equity Large Cap Equity Mid Cap Growth Small Cap Equity Large Cap Growth Large Cap Value Large Cap Growth
-1% 3% 2% 2% -1% -1% 14%
Large Cap Value Large Cap Growth Small Cap Growth Small Cap Value Mid Cap Growth Mid Cap Value Mid Cap Growth
-2% 0% 1% 2% -2% -3% 12%
Data Source: Truist IAG, Morningstar. Past performance does not guarantee future results. Returns represented by the S&P style indices.Technology earnings momentum relative to the broader market peaked last
May, though relative price trends have improved recently
The strong earnings momentum for the technology (tech) sector, the largest weighting in growth, was a big driver of its outperformance during the slow
economic recovery period of the last decade. However, the comparative earnings trends of the tech sector peaked last May. More recently, relative price
trends for tech have improved, which is a positive, though this has not yet been supported by better earnings; this is one of the main factors we are
watching before becoming more constructive on the growth style.
S&P 500 Technology earnings and
price trends relative to the S&P 500
Tech price relative to the S&P 500 Tech earnings relative to the S&P 500
220
200
180
160
140
120
100
80
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Data Source: Truist IAG, FactSet. Past performance does not guarantee future resultsRegional – U.S. earnings still leading the globe
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
150
140 U.S. 30x
130
25x
120
EM 22.2
110 20x
EAFE 16.1
100 Japan
Eurozone 15x 16.3 16.8
90 14.1
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 EMUFurther curve flattening inconsistent with inflation and growth data
In June, the 2/10-year U.S. Treasury curve flattened by 23 basis points to its lowest spread since February. As opposed to an isolated decline in 10-year
yields, rising 2-year yields were responsible for half of the narrowing between 2- and 10-year yields. The market’s hawkish interpretation of the June Fed
meeting pushed short-term yields to their highest point since April 2020. We maintain that, despite recent tapering discussions, the Fed will tighten at a
gradual pace to allow robust growth and pockets of inflationary pressures to steepen the U.S yield curve in the second half of the year.
2- & 10-year U.S. Treasury yields 2/10-year U.S. Treasury curve
2-year 10-year 1.8%
3.5%
3.24%
1.6%
3.0%
1.4%
2.63%
2.5% 1.2% 1.22%
1.0%
2.0%
0.8%
1.5% 0.6%
1.47%
1.0% 0.4%
0.2%
0.5%
0.25% -0.1%
0.0% -0.3%
2016 2017 2018 2019 2020 2021 2016 2017 2018 2019 2020 2021
Data Source: Truist IAG, Bloomberg
Data as of 6/30/2021
Past performance does not guarantee future results.Concerns over potential Fed policy mistake drove last month’s U.S. yield
reaction
Two primary changes that emerged from the June Federal Open Market Committee (FOMC) meeting created a flight-to-quality response that forced U.S.
yields downward: 1) the number of FOMC officials that foresee at least one rate hike in 2023 almost doubled between the March and June meetings; and
2) the Fed revised its 2021 core PCE outlook upward to 3.0% from 2.2%. Concerns intensified that the Fed may ultimately move too soon or too
aggressively and disrupt the reflation narrative that has supported the exceptional equity rally for the past 14 months.
FOMC members (18 total) projecting at least Fed Core PCE inflation projections
one rate hike by end of each year
13 2021 2022
2022 2023
3.0%
7 7 2.2%
2.1%
2.0%
5 1.9%
1.8%
4
1
Dec 2020 meeting Mar 2021 meeting Jun 2021 meeting Dec 2020 meeting Mar 2021 meeting Jun 2021 meeting
Data Source: Truist IAG, Bloomberg
Data as of 6/30/2021
Past performance does not guarantee future results.Recent yield decline pulls 10-year back into longer-term channel
The rapid yield ascent between February and March
10-year U.S. Treasury yields
likely pulled forward some of the steepening we
expected in 2021. In March, we stated that yields had 1.9%
moved too far, too fast based on optimism 1.74%
surrounding vaccinations and the fiscal stimulus
1.7%
package. Its subsequent pause over the past several
months has returned the pace of rising yields to its
longer-term channel established last summer. 1.5%
1.47%
We expect intermediate and long yields to gradually
In February, 10-year yields
rise at a pace that more resembles the channel 1.3% broke sharply to the upside
formed between August 2020 and early February
on vaccine and stimulus
2021. A still-accommodative Fed, higher inflation, and
1.1% optimism
our healthy growth expectations inform our outlook.
0.9%
0.7%
0.5% 0.51%
0.3%
Dec-19 Mar-20 Jun-20 Sep-20 Dec-20 Mar-21 Jun-21
Data Source: Truist IAG, Bloomberg
Data as of 6/30/2021
Past performance does not guarantee future results.Tapering may provide catalyst for real yields to rise
U.S. real (i.e., inflation-adjusted) yields have dropped dramatically during the Fed’s current quantitative easing (QE) program. Their plummet into negative
territory appears similar to real yields’ move in 2012-2013 as the Fed accelerated its asset purchases in response to the financial crisis. In 2013, once the
Fed announced its intention to slow asset purchases, real yields spiked. Once again, we anticipate real yields will rise as taper discussions intensify.
However, the Fed’s more transparent playbook should result in a less dramatic response in real yields this time around.
Real 10-year yield in previous taper cycle Current real 10-year yield
2.0%
2.0%
QE2 QE3 QE4
1.5%
1.5%
1.0%
1.0%
0.5%
0.5%
0.0%
0.0%
-0.5%
-0.5%
-1.0%
-1.0% QE taper
QE taper
discussions discussions
-1.5% begin
-1.5% begin
2018 2019 2020 2021 2022
2010 2011 2012 2013 2014
Data Source: Truist IAG, Bloomberg
Data as of 6/30/2021
Past performance does not guarantee future results.Relative value in fixed income
Our constructive expectations for the economy continue to drive our preference for U.S. credit sectors, including leveraged loans and high yield corporate
bonds where incremental yield opportunities exist. We find investment grade corporate bonds less attractive given spreads are at their lowest levels in a
decade and our preference for less interest-rate sensitive sectors.
Current yield vs. 10-year range
10% Range Current Yield
8%
6%
4%
2%
0%
Munis
HY muni
HY corp
EM hard cur
EM loc cur
MBS
Lev loans
U.S. core taxable
IG corp
Intl dev mrkts
Preferreds
U.S. 10-yr Treasury
-2%
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, Lev Loans = S&P/LSTA U.S.
Leveraged Loan 100 Index, 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.Strong reinvestment activity in July will preserve rich muni valuations
The very front of the muni curve currently offers the
Muni yields as a % of U.S. Treasury yields
best value, especially when compared to the 3- to 10-
year range. Among investment grade issues, A-rated 12/31/2019 12/31/2020 3/31/2021 6/30/2021
and BBB-rated munis currently offer a more
compelling risk-reward. July typically hosts a flurry of
muni reinvestment activity each year, which suggests
low ratios will persist in the weeks ahead.
98%
Those sectors most negatively impacted by the
pandemic—transportation, sales tax, healthcare, and 88% 87%
higher education revenues—offer better value 84% 85%
opportunities albeit with greater credit risk. These 77% 76%
74%
sectors should benefit the most from the reopening 68% 68%
63% 65% 65% 67%
process following more uneven performance over the 61%
past year. 58% 57% 61%
52%
49%
1-year 3-year 7-year 10-year 20-year
Data Source: Truist IAG, Bloomberg. Interest income may be subject to the federal alternative minimum tax. Other state and local taxes
may apply.
Past performance does not guarantee future results.Publication details PUBLICATION DETAILS
Contributors
Keith Chip Michael
Lerner, CFA, CMT Hughey, CFA Skordeles, AIF
Chief Market Strategist, Managing Director, Senior U.S. Macro Strategist,
Managing Director, Fixed Income Portfolio & Market Strategy
Portfolio & Market Strategy
Eylem Sabrina Shelly
Senyuz Bowens-Richard, CFA, CAIA Simpson, CFA, CAIA
Senior Global Macro Senior Investment Strategy Senior Investment Strategy
Strategist, Analyst, Analyst,
Portfolio & Market Strategy Portfolio & Market Strategy Portfolio & Market Strategy
Dylan Emily
Jeff
Kase, CFA Novick, CFA, CFP®
Terrell, CFA
Senior Investment Strategy Investment Strategy Analyst, Senior Portfolio Construction Analyst,
Analyst, Portfolio & Market Strategy Portfolio & Market Strategy
Portfolio & Market Strategy
Ad d i t i o n a l Co n t r i b u t o rs t o Se c t o r St r a t e g y
Evan
Moog, CFA Vernon Charles
Plack, CFA, CMT, CAIA East
Wealth IAG Associate,
Equity Strategy Analyst Equity Strategy Analyst
Fixed Income Strategies
Editor
Oliver
Merten, CFA
Managing Director,
Investment CommunicationsInvestment Advisory Group
Ernest Dawal, Jr., CFA
Wealth Chief Investment Officer
Portfolio & Manager research Equity strategies Fixed income strategies
market strategy Ric Mayfield, CFA, CAIA Alison Majors, CFA, CFP® Aki Pampush, CFA Chip Hughey, CFA
Managing Director, Manager Research Senior Manager Research Managing Director, Equity Managing Director,
Keith Lerner, CFA, CMT Analyst Strategies Fixed Income
Managing Director,
Chief Market Strategist Tracey Devine Kelly Frohsin, CIMA®, CFP® Chris Hett, CFA Charles East
Senior Manager Senior Manager Research Senior Manager Evan Moog, CFA
Senior Equity Strategy
Mike Skordeles, AIF® Research Analyst Analyst Research Analyst Analyst Investment Advisory Associate
Senior U.S. Macro Strategist
Thomas Toman Diane Schmidt Benardo Richardson Elsa Wartner, CFA, CIMA® Scott Yuschak, CFA
Eylem Senyuz Manager Research Manager Manager Research Investment Advisory Senior Equity Strategy
Senior Global Macro Analyst Research Analyst Analyst Associate Analyst
Strategist
Adam White, CFA
Jeff Terrell, CFA Private equity & Alternative investments Senior Equity Strategy Investment
credit Analyst
Senior Investment Strategy Spencer Boggess communications
Analyst Managing Director, Alternative Investments John Holecek, CFA
Ravi Ugale Oliver Merten, CFA
Investment Advisory
Managing Director, Mohan Badgujar Len Lebov Managing Director,
Shelly Simpson, CFA, CAIA Associate
Private Equity & Senior Private Equity & Senior Private Equity & Investment Communications
Senior Investment Strategy
Credit Alternative Investments Alternative Investments Vernon Plack, CFA, CMT,
Analyst
Analyst Analyst CAIA Julie Parham
Will Repath Lead Equity Strategy Analyst Investment
Sabrina Bowens-Richard, Senior Private Equity Noah Harris, CFA Rich Cheung
Communications Manager
CFA, CAIA & Credit Analyst Senior Private Equity & Senior Private Equity & W. Moultrie Dotterer, CFA
Senior Investment Strategy Alternative Investments Alternative Investments Senior Equity Strategy
Analyst Analyst Analyst Analyst
Emily Novick, CFA, CFP® Colin Fox, CTFA Ryan Taylor, CFA, CAIA Charles Redding
Senior Portfolio Construction Investment Advisory Investment Advisory Senior Equity Strategy
Analyst Associate Associate Analyst
Haley Lawson
Dylan Kase, CFA Investment Advisory
Investment Strategy Analyst Associate
All teammates listed are investment adviser representatives of Truist Advisory Services, Inc.Disclosures Advisory managed account programs entail risks, including possible loss of principal and may not be suitable for all investors. Please speak to your advisor to request a firm brochure which includes program details, including risks, fees and expenses. International investments are subject to special risks, such as political unrest, economic instability, and currency fluctuations. Emerging Markets – Investing in the securities of such companies and countries involves certain considerations not usually associated with investing in developed countries, including unstable political and economic conditions, adverse geopolitical developments, price volatility, lack of liquidity, and fluctuations in currency exchange rate. Truist, Truist®, GFO Advisory Services®, BB&T® and Sterling Capital® are service marks of Truist Financial Corporation. All rights reserved. All other trademarks are the property of their respective owners. Truist Wealth is a marketing name used by Truist Financial Corporation. Services offered by the following affiliates of Truist Financial Corporation: Banking products and services, including loans and deposit accounts, are provided by SunTrust Bank and Branch Banking and Trust Company, both now Truist Bank, Member FDIC. Trust and investment management services are provided by SunTrust Bank and Branch Banking and Trust Company, both now Truist Bank, and Truist Delaware Trust Company. Securities, brokerage accounts and /or insurance (including annuities) are offered by Truist Investment Services, Inc., and P.J. Robb Variable Corp., which are each SEC registered broker-dealers, members FINRA, SIPC, and a licensed insurance agency where applicable. Life insurance products are offered through Truist Life Insurance Services, a division of Crump Life Insurance Services, Inc., AR license #100103477, a wholly owned subsidiary of Truist Insurance Holdings, Inc. Investment advisory services are offered by Truist Advisory Services, Inc., GFO Advisory Services, LLC, Sterling Capital Management, LLC, and Precept Advisory Group, LLC, each SEC registered investment advisers. Sterling Capital Funds are advised by Sterling Capital Management, LLC. While this information is believed to be accurate, Truist Financial Corporation, including its affiliates, does not guarantee the accuracy, completeness or timeliness of, or otherwise endorse these analyses or market data. The opinions and information contained herein have been obtained or derived from sources believed to be reliable, but Truist Financial Corporation makes no representation or guarantee as to their timeliness, accuracy or completeness or for their fitness for any particular purpose. The information contained herein does not purport to be a complete analysis of any security, company, or industry involved. This material is not to be construed as an offer to sell or a solicitation of an offer to buy any security. Opinions and information expressed herein are subject to change without notice. TIS and/or its affiliates, including your Advisor, may have issued materials that are inconsistent with or may reach different conclusions than those represented in this commentary, and all opinions and information are believed to be reflective of judgments and opinions as of the date that material was originally published. TIS is under no obligation to ensure that other materials are brought to the attention of any recipient of this commentary. Comments regarding tax implications are informational only. Truist and its representatives do not provide tax or legal advice. You should consult your individual tax or legal professional before taking any action that may have tax or legal consequences. 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. TIS/TAS shall accept no liability for any loss arising from the use of this material, nor shall TIS/TAS treat any recipient of this material as a customer or client simply by virtue of the receipt of this material. The information herein is for persons residing in the United States of America only and is not intended for any person in any other jurisdiction. Investors may be prohibited in certain states from purchasing some over-the-counter securities mentioned herein. The information contained in this material is produced and copyrighted by Truist Financial Corporation and any unauthorized use, duplication, redistribution or disclosure is prohibited by law. TIS/TAS’s officers, employees, agents and/or affiliates may have positions in securities, options, rights, or warrants mentioned or discussed in this material. Asset classes are represented by the following indexes. An investment cannot be made directly into an index. S&P 500 Index is comprised of 500 widely-held securities considered to be representative of the stock market in general. Equity is represented by the MSCI ACWI captures large and mid cap representation across 23 Developed Markets (DM) and 24 Emerging Markets (EM) countries*. 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. U.S. Mid Cap is represented by the S&P MidCap 400® provides investors with a benchmark for mid-sized companies. The index, which is distinct from the large-cap S&P 500®, measures the performance of mid- sized companies, reflecting the distinctive risk and return characteristics of this market segment. U.S. Small Cap Core Equity is represented by the Russell 2000 Index which is a measure of the performance of the small-cap segment of the U.S. equity universe. The Russell 2000 is a subset of the Russell 3000® Index representing approximately 10% of the total market capitalization of that index. It includes approximately 2000 of the smallest securities based on a combination of their market cap and current index membership. International Developed Markets is represented by the MSCI EAFE Index is an equity index which captures large and mid cap representation across 21 Developed Markets countries* around the world, excluding the U.S. and Canada. 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. ©2021 Truist Financial Corporation. Truist®, the Truist logo, and Truist purple are service marks of Truist Financial Corporation. All rights reserved. CN2021-2623 EXP12-2021
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