THE CORONAVIRUS MARKET SELL OFF: NEXT STEPS!June 13, 2016, REPRINTED WITH PERMISSION FROM 361...

THE CORONAVIRUS MARKET

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Presented By

Louis P. Stanasolovich, CFP®,

CEO and President

(412) 635-9210 Or (888) 236-5960

LOU STANASOLOVICH, CFP®, CEO & PRESIDENT

Lou is founder, CEO and President of Legend Financial

Advisors, Inc.® and EmergingWealth Investment

Management, Inc. ®

Mr. Stanasolovich is also the Chief Investment Officer at

both Legend and EmergingWealth.

Lou is the Editor of The Global Investment Pulse, a publication designed to guide investors on how to build better investment portfolios and improve their investment decision-making.

Lou has served as the Editor of Global Economic & Investment Analytics, an events service for financial advisory professionals. He has also served as the Editor of Risk-Controlled Investing, a subscription service that guides financial advisors on how to build investment portfolios with lower risk.

With over 35 years advising clients, he has shared his financial planning and investment management expertise through dozens of speeches, radio and television broadcasts, Webcasts, and hundreds of times as an interviewee, writer and publisher.

The Center for Disease

Control and Prevention

www.cdc.gov

(800) 232-4636

Source: 361 Capital LLC, Market Commentary, February 24, 2020,

www.361capital.com

REPRINTED WITH PERMISSION FROM 361 CAPITAL, LLC

As of: February 24, 2020

COPYRIGHT 2020 361 CAPITAL, LLC

Source: Worldometers, Sourced From Many Organizations Including

World Health Organization (WHO) and The Centers for Disease Control (CDC)

AS OF: 3/16/2020 11:20 A.M. ET

I. Coronavirus Also Called COVID-19

A. More Than 189,674 Cases Worldwide

B. Over 7,513 Reported Deaths And Rising

C. China Has Over 80,880 Of These Cases

D. The Virus is In Over 163 Countries Currently

E. 80,874 People Worldwide Have Recovered

F. Roughly 2.0% Who Contract Coronavirus Die From It (Men Over 60

Are Most Susceptible)

G. The Virus Is 3X More Infectious Than Normal Influenza (Flu)

CORONAVIRUS STATUS

NORMAL INFLUENZA (FLU)

Source: World Health Organization (WHO)

I. Normal Influenza

A. The Center for Disease Control and Prevention (CDC)

estimates that up to 31 million Americans have caught

the flu this season

B. 210,000 to 370,000 flu sufferers hospitalized

C. Flu season is hitting its stride right now in the U.S.

D. So far, the CDC has estimated (based on weekly

influenza surveillance data) that at least 12,000 people

have died from normal influenza between October 1,

2019 through February 1, 2020 and the number of deaths

may eventually be as high as 30,000.

CENTRAL BANK

INFORMATION

CENTRAL BANK TERMINOLOGY

QE = Quantitative Easing

ZIRP = Zero Interest Rate Policy

NIRP = Negative Interest Rate Policy

20-YEAR ANNUALIZED RETURNS BY ASSET CLASS

(1998-2018)

Source: J.P. Morgan Asset Management. Dalbar Inc.

COPYRIGHT 2020 J.P. MORGAN ASSET MANAGEMENT

REPRINTED WITH PERMISSION OF J.P. MORGAN ASSET MANAGEMENT

As of: September 30, 2018

DEBT INVESTMENTS

Source: Bank of America Merrill Lynch Global Investment Strategy, Bank of England, Global Financial

Data, Homer and Sylla “A History of Interest Rates” via 361 Capital, LLC, Weekly Research Briefing,

June 13, 2016, www.361capital.com

REPRINTED WITH PERMISSION FROM 361 CAPITAL, LLC

As of: June 13, 2016

COPYRIGHT 2016 361 CAPITAL, LLC

THE LOWEST INTEREST RATES IN 5,000 YEARS

Note: The intervals on the X-Axis change through time up to 1700. From 1700 onwards, they are annual intervals. Full methodology available

upon request.

20.0%

18.0%

16.0%

14.0%

12.0%

10.0%

8.0%

6.0%

4.0%

2.0%

0.0%

3000 BC 300 1720 1755 1790 1825 1860 1895 1930 1965 2000 2035

Short-term rates Long-term rates

http://www.361capital.com/

Source: Bloomberg Investment Services

COPYRIGHT 2020 LEGEND FINANCIAL ADVISORS, INC.®

REPRINTED WITH PERMISSION OF LEGEND FINANCIAL ADVISORS, INC.®

As of: March 6, 2020

U.S. LONG TERM IMPLIED INFLATION RATE IS BELOW 1.5%

Source: Barclays Capital, JP Morgan, BofA Merrill Lynch and Standard & Poor’s via

Eaton Vance Monthly Market Monitor, www.eatonvance.comAs of: March 2020

REPRINTED WITH PERMISSION OF EATON VANCE DISTRIBUTORS, INC.

INTEREST GENERATING SECURITIES ANALYSIS

Averages

IndexCoupon

(%)

Price

($)

Yield to

Worst

(%)

Spread

(bps)

Maturity

(yrs.)

Duration

(yrs.)

Bloomberg Barclays U.S. Aggregate Index 3.12 109.1 1.68 50 8.0 5.9

U.S. Treasury 2.31 109.1 1.67 - 8.4 6.9

U.S. Agency 2.73 109.3 1.79 13 5.7 4.0

U.S. Mortgage Backed Securities 3.52 105.5 2.45 54 3.9 2.2

U.S. Asset Backed Securities 2.67 103.0 1.96 37 2.3 2.2

U.S. Commercial Mortgage Backed Securities 3.37 108.7 2.29 73 6.0 5.3

U.S. Corp. Investment Grade 3.98 112.7 2.84 122 11.7 8.2

Bloomberg Barclays Municipal Bond Index 4.59 114.8 1.83 - 13.2 5.0

Bloomberg Barclays Taxable Municipal Bond Index 5.00 124.3 2.88 - 17.6 9.7

ICE BofAML US Inflation-Linked Treasury Index .081 109.9 -0.26 - 9.0 5.9

ICE BofAML Preferred Index (Fixed Rate) 5.62 103.4 3.81 169 - 5.2

ICE BofAML US High Yield Index 6.24 98.2 5.89 504 6.2 4.0

S&P/LSTA Leveraged Loan Index L+3.45 95.2 6.73 510 4.9 -

J.P. Morgan EM Bond Index (EMBI) Global Diversified 5.70 106.7 5.09 372 - 7.7

J.P. Morgan Corp. EM Bond Index (CEMBI) Board Diversified 5.18 104.8 4.64 321 - 5.0

J.P. Morgan Govt. Bond I Index-EM (GBI-EM) Global Diversified 5.94 - 5.13 - - 5.5

Bloomberg Barclays Global Aggregate Ex-U.S. Index 2.13 113.1 0.57 - 9.8 8.3

1.27

2.29

1.09

1.25

1.88

1.31

1.74

2.40

6.25

6.34

4.97

4.29

4.95

Averages

Source: Bloomberg Barclays, LCD, and Morningstar

Eaton Vance Monthly Market Monitor, www.eatonvance.com

CORPORATE DEBT MARKET ANALYSIS

REPRINTED WITH PERMISSION OF EATON VANCE DISTRIBUTORS, INC.

As of: March 2020



REPRINTED WITH PERMISSION OF LEGEND FINANCIAL ADVISORS, INC..

YIELD CURVE: ALL U.S. ISSUERS

As Of: March 16, 2020





All Yields Denominated in Local Currency

SWITZERLAND YIELD CURVE

ALL NEGATIVE FOR THE FIRST 50 PLUS YEARS





SOURCE: BLOOMBERG INVESTMENT SERVICE

COPYRIGHT 2020 LEGEND FINANCIAL ADVISORS, INC.®As of: January 2020

STOCK MARKET RISK

As Of: March 16, 2020 Source: Bloomberg Investment Services, L.P.


Source: The Leuthold Group, LLC, Perception Express, March 6, 2020,

http://leuth.us/macro-monitor

REPRINTED WITH PERMISSION FROM THE LEUTHOLD GROUP, LLC


COPYRIGHT 2020 THE LEUTHOLD GROUP, LLC

Note: The Risk Aversion Index combines ten market-based measures including various credit and swap spreads,

implied volatility, currency movements, commodity prices and relative returns among various high- and low-risk

assets.

MONTHLY RISK AVERSION INDEX (RAI)RISK INDEX INCREASES SLIGHTLY-STILL NEAR LOWEST LEVEL EVER

4

3

2

1

0

1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019

4

3

2

1

0


FINANCIAL CONDITIONS INDEXES



European Financial Conditions -3.016

U.S. Financial Conditions -5.023

S&P 500 Index 2386.13



24As of: March 16, 2020



25As of: March 16, 2020



As of: March 16, 2020 26

STOCK MARKETS

CHARACTERISTICS OF CYCLICAL AND

SECULAR STOCK MARKETS

Source: Legend Financial Advisors, Inc.®

COPYRIGHT 2016 LEGEND FINANCIAL ADVISORS, INC.® REPRINTED WITH PERMISSION OF LEGEND FINANCIAL ADVISORS, INC.®

S&P COMPOSITE INDEX

Source: FactSet, NBER, Robert Shiller, J.P. Morgan Asset Management

Data shown in log scale to best illustrate long-term index patterns.



As of: December 31, 2019

A TALE OF TWO MARKETSA SECULAR BEAR IN TWO PARTS

COPYRIGHT 2017 LEGEND FINANCIAL ADVISORS, INC. ®

REPRINTED WITH PERMISSION OF LEGEND FINANCIAL ADVISORS, INC. ®

April 1, 2000 to

December 31, 2011

(11 years and 9 months)

January 1, 2012 to

December 31, 2014

(3 years and 0 months)

Annual

Compound

Return

Total

Return

Annual

Compound

Return

Total

Return

Consumer Price Index (Inflation) 2.38% 31.82% 1.33% 4.05%

90-Day Treasury Bills Index-Total Return 2.22% 29.44% 0.06% 0.18%

Barclays Aggregate Bond Index-Total Return 6.41% 107.69% 2.66% 8.20%

HFRX Global Hedge Fund Index 2.65% 36.07% 3.17% 9.83%

S&P 500 Index (U.S. Stock Market) 0.37% 4.42% 20.34% 74.47%

MSCI EAFE Index (Developed Foreign Equities) 1.21% 15.17% 11.79% 39.80%

MSCI Emerging Market Index (Equities) 8.07% 149.14% 4.37% 13.73%

Newedge CTA Index (Managed Futures) 6.03% 99.06% 4.20% 13.17%

Dow Jones-UBS Commodity Index-Total Return (USD)** 3.08% 42.79% -9.47% -25.84%

Dow Jones U.S. Real Estate Index-Total Returns (USD)** 10.61% 227.26% 15.45% 54.00%

Gold Bullion 15.83% 462.79% -8.90% -24.43%

* Compound and Total Returns include reinvested dividends. MSCI Indexes do not include dividends prior to 2002. Newedge Index is equally-

weighted.

** USD = U.S. Dollar


As Of: March 16, 2020 Source: Bloomberg Investment Services, L.P.


Source: The Leuthold Group, LLC, Perception Express, May 5, 2018, http://leuth.us/stock-market


As of: May 5, 2018


22.51

SHILLER PRICE/EARNINGS RATIOSLong-Term Stock Market P/E Valuations Fell A Bit In December-Still In Highest Valuation Levels

Note: Created by Robert J. Shiller, Professor at Yale University, this Price Earnings Ratio is based on

average inflation-adjusted earnings from the previous 10 years (Each year of earnings is inflated

and quoted in current dollars), known as the Cyclically Adjusted P/E Ratio, also known as the

Shiller PE Ratio, or PE 10 Ratio. Because this factors in earnings from the previous ten years, it is

less prone to wild swings in any one year. The bad news: Because of the current high P/E valuation

of 22.51 returns on the S&P 500 are likely to be in the very low single digits over the next ten years.

45

40

35

30

25

20

15

10

5

0

Black Tuesday

Black Monday

1880 1900 1910 1920 1930 19401950 1960 1970 1980 1990 2000 2010

P/E

1

1

11

1

2


REPRINTED WITH PERMISSION OF LEGEND FINANCIAL ADVISORS, INC.®Source: www.multpl.com


1881-01-01 21 Great Time To Buy Good Time To Buy Terrible Time To Buy

1890

1

U.S. STARTING VALUATIONS HAVE DEMONSTRATED A STRONG

IMPACT ON FUTURE RETURNS

Subsequent nominal returns (annualized)*

Source: Robert Shiller Online Data; Via PIMCO

* Median of the annualized subsequent returns calculated at each month end, using Shiller P/E and S&P 500 monthly

returns from December 31, 1927 to November 21, 2014

Current level: 22.51



U.S. STOCK MARKET FLUCTUATIONS

What Past Market Declines Can Teach Us

A History Of Declines (January 1, 1900 – February 29, 2020)

Type of

Decline

Percentage

Decline

Number of

Declines

Average

Frequency

Average

Length

Dip -5.0% to -10.0% 391 About 3 times a

year

46 days

Correction -10.0% to -15.0% 127 About once a

year

115 days

Severe

Correction

-15.0% to -20.0% Included in

corrections

total

About once

every 2 years

216 days

Bear Market* -20.0% to -30.0% 17 About once

every 6.25 years

11 months

Severe Bear

Market*

-30.0% or more 14 About once

every 8.25 years

22.8

months

Source: American Funds Distributors, Inc., Bloomberg, Dow Jones,

Ned Davis Research, Edward Jones, The Leuthold Group, LLC

* Either a Bear Market or a Severe Bear Market occurs approximately every 3.7 years.

100 YEARS OF BEAR MARKET RECOVERIES

(DJIA: 1900-1926; S&P 500 1926 to Present)

As Of: September 30, 2018 COPYRIGHT 2020 THE LEUTHOLD GROUP, LLC

Source: The Leuthold Group

BEAR MARKET DECLINES OF 45% OR MORE

100 YEARS OF BEAR MARKET RECOVERIES

(DIJA: 1900-1926; S&P 500 TO PRESENT)

As Of: September 30, 2018


69% 103%95%

Source: The Leuthold Group, LLC, Perception Express, February, 2018, http://leuth.us/stock-market


As of: September, 2019


PERFORMANCE OF PRECIOUS METALS

DURING BEAR MARKETS IN STOCKS

http://leuth.us/stock-market

RETURNS NEEDED TO REACH BREAK-EVEN POINTS AFTER LOSSES

PERCENTAGE RETURN NEEDED

PERCENTAGE LOSS TO REACH BREAK-EVEN

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

45.00%

50.00%

55.00%

60.00%

65.00%

70.00%

75.00%

80.00%

85.00%

90.00%

95.00%

5.26%

11.11%

17.65%

25.00%

33.33%

42.86%

53.85%

66.67%

81.82%

100.00%

122.22%

150.00%

185.71%

233.33%

300.00%

400.00%

566.67%

900.00%

1900.00%

RECESSION RISK

ECONOMIC CONTRACTION DEFINITIONS

Two or more consecutive quarters of contracting real GDP Of Between 0.0% and 5.0%.

A Recession where real GDP contracts between 5.0% and 10.0%.

An Economic Contraction where real GDP contracts between 10.0% And 25.0%

A Depression with peak-to-trough contraction in real GDP that exceeds 25.0%.

Recession:

Depression:

Great

Depression:

Severe or Deep Recession:

Source: Legend Financial Advisors, Inc.®



As of: September, 2019

Source: National Bureau of Economic Research (NBER), BEA, J.P. Morgan Asset Management



THE GREAT DEPRESSION AND POST-WAR RECESSIONS

LENGTH AND SEVERITY OF RECESSION

Note: Bubble size reflects the severity of the recession, which is calculated as the decline in real GDP from the peak quarter to the trough quarter

except in the case of the Great Depression, where it is calculated from the peak year (1929) to the trough year (1933), due to a lack of

available quarterly data.

-5.1%

2007-09 Recession:

5.1 decline in GDP

Source: Bloomberg Investment Services, L.P.

COPYRIGHT 2020 LEGEND FINANCIAL ADVISORS, INC.®As of: February 29, 2020

S&P 500 COMPOSITE BEAR MARKETS

DECLINES FROM ALL-TIME HIGHS

Source: FactSet, NBER, Robert Shiller, Standard & Poor’s J.P. Morgan Asset Management



As of: September 30, 2019

Source: FactSet, MBER, Robert Shiller, Standard & Poor’s, J.P. Morgan Asset Management.

*A bear market is defined as a 20% or more decline from the previous market high. The related market return is the peak to

trough return over the cycle. Periods of “Recession” are defined using NBER business cycle dates. “Commodity spikes”

are defined as movement in oil prices over 100% over an 18-month period. Periods of “Extreme Valuations” are those

where S&P 500 last 12 months’ P/E levels were approximately two standard deviations above long-run averages, or time

periods where equity market valuations appeared expensive given the broader macroeconomic environment. “Aggressive

Fed Tightening” is defined as Federal Reserve monetary tightening that was unexpected and/or significant in magnitude.

Bear and Bull returns are price returns.

QUESTIONS AND ANSWERS

Call Us With Any Questions

(412) 635-9210

THE CORONAVIRUS MARKET SELL OFF: NEXT STEPS!June 13, 2016, REPRINTED WITH PERMISSION FROM 361...

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