STEP Cayman September 2020 Ian B. Zinn—Principal, Wealth Advisor Moira A. McLachlan, CFA—Senior Investment Strategist This presentation is provided by Bernstein. This presentation booklet has been provided to you for use in a private and confidential meeting to discuss a potential or existing investment- advisory relationship. This presentation is not an advertisement and is not intended for public use or distribution beyond our private meeting. Bernstein does not provide tax, legal, or accounting advice. In considering this material, you should discuss your individual circumstances with professionals in those areas before making any decisions.
About Asse Assets s Under Manageme ment Di Diver ersi sity y an and d Inc Inclusi usion on Resea search An Analyst ysts $596 285 Bil. Co Corporate Respo sponsi sibil ility Reven enue ue Hist stor ory 50+ 100% Years helping From investment clients reach their research and financial goals management De Debt Priv Pr ivate Wealt lth AUM Offices $0.00 $93 Bil. 51 cities in Long-term debt 25 countries on Bernstein’s balance sheet The number of research analyst reference relates to all analysts working at AllianceBernstein L.P. affiliated subsidiary companies. Please note, Bernstein Research does not provide investment management services to Bernstein Private Wealth Management clients As of May 31, 2020 Source: AB 2
Our Sophisticated Solutions Help Simplify Complex Planning Challenges Seamless Advice Flexible Footprint Holistic View ▪ ▪ ▪ A single, unified advisory Onshore and offshore Integrated advice/fees for team platforms multiple family members, regardless of geography ▪ ▪ Serves the family Income- and transfer-tax or platform anywhere in the world efficient investment ▪ options Easy-to-read reporting ▪ No transitioning due to with a robust snapshot of jurisdiction changes portfolios and performance 3
The Rally Stocks Snapped Back From First Quarter Sell-off Risk Assets Bounced Following Historic Sell-Off 1.1 1.0 MSCI World Cumulative Drawdown 0.9 0.8 0.7 2020 All other 5%+ declines since 1965 0.6 0.5 1 11 21 31 41 51 61 71 81 91 101 111 121 131 141 151 161 171 181 191 201 211 221 231 241 251 261 271 281 291 301 Days From Start of Drawdown As of June 30, 2020. Past performance is not necessarily indicative of future results. There is no guarantee that any estimates or forecasts will be realized. Lines represent all global equity drawdowns greater than 5% since 1965. Global Equities as represented by the MSCI World Index (USD). Source: Bloomberg and AB 4
The Rally Sticking To One’s Long -Term Allocation Proved Beneficial COVID-19 Event Timeline (YTD 2020) Moderate Allocation Growth of $1* $1.05 Oxford scientists Hubei locks down Italian cases surge announce first proven treatment (Dexamethasone) $1.00 Value of $1 Invested December 31, 2019 $0.98 SXSW cancelled 60/40 $0.95 US stimulus bill signed POTUS Oval Office address US blocks European visitors $0.90 Vaccine trial planning announced US declares national $0.88 emergency 60/40, then Cash $0.85 NY cases peak Federal Reserve cuts rates to zero NYC and California schools close $0.80 In the two weeks s betw tween n the US decla clari ring ng a nationa nal emerg mergency ncy and d Congre ngress s signi ning ng the CARES S Act, t, $330B 0B move ved d into mone ney marke rkets. ts. (No Note te: During ng the first t two weeks ks of Februa bruary, ry, that t figure ure was s $13B. B.) $0.75 12/31/19 1/20/20 2/9/20 2/29/20 3/20/20 4/9/20 4/29/20 5/19/20 6/8/20 6/28/20 As of June 30, 2020. Past performance is not necessarily indicative of future results. There is no guarantee that any estimates or forecasts will be realized. *Moderate allocation is 60% global equities and 40% municipal bonds. Global equities represented by the MSCI ACWI and municipal bonds by the Bloomberg Barclays 1-10 Year Index. Allocation interrupted represents an allocation change to 100% cash, represented by ICE BofA 3-Month Treasury Bill Index, on the date that the US declared a national emergency — March 13, 2020. 5 Source: Bloomberg-Barclays, EPFR, Bloomberg, MSCI, and AB
The Reasons Four Key Catalysts Sparked The Market Rally Fiscal Stimulus Amount (USD Billions) Fed Funds Target Rate (Percent) 3,000 6 Coronavirus 5 Global Financial Crisis 2,000 4 3 Global Financial Crisis 1,000 2 Coronavirus 1 0 0 0 50 100 150 200 250 300 350 400 450 500 550 600 0 50 100 150 200 250 300 350 400 450 500 550 600 Days Since Start of Crisis Days Since Start of Crisis COVID-19 Cases >100 (All US States) Vaccine Timeline 1000000 Comp Co mpany Ph Phase 1 Interm Da Data Phase 2/3 Ph /3 Ap Approval Number of Confirmed Cases AZN / Vaccitech / 100000 April June Late Summer TBA Oxford CanSino March May 22 TBA TBA JNJ / Emergent September 2H20 N/A Early 2021 10000 Moderna March May 18 July 4Q20 Pfizer / BioNTech May June/July TBA TBA 1000 Sanofi / 4Q20 Early 2021 TBA TBA Translate Bio Early CureVac 3Q20 TBA TBA 100 Summer 1 11 21 31 41 51 61 71 81 91 101 111 Inovio April Late June July/August YE2020 Days Since Cases Exceeded 100 Sanofi / GSK 2H20 Early 2021 TBA TBA Top left and top right charts as of April 30, 2020. Bottom left chart as of June 30, 2020. Bottom right chart as of June 25, 2020. 6 Past performance is not necessarily indicative of future results. There is no guarantee that any estimates or forecasts will be realized. Source: Bloomberg, Congressional Budget Office, Peter G. Peterson Foundation, Wall Street Journal, JHU, company disclosures, and Bernstein Analysis
The Risks Economy Opening Up, But Progress Will Be Bumpy and Uneven Credit Card Spending YoY Change (Weekly Average) Total TSA Travel Numbers Grocers Restaurants 2,500,000 90 % Total Traveler Throughput 2,000,000 60 % 1,500,000 30 % 1,000,000 0 % 500,000 0 (30) % 3/20 4/20 5/20 6/20 6/19 11/19 4/20 NYC Subway Use Las Vegas Casino Traffic 6000 50 Weekly Entries (Millions) 5000 Number of Players 40 4000 30 3000 20 2000 10 1000 0 0 6/19 7/19 8/19 9/19 10/1911/1912/19 1/20 2/20 3/20 4/20 5/20 6/19 7/19 8/19 9/19 10/1911/19 12/19 1/20 2/20 3/20 4/20 5/20 MTA Turnstile Entries Total CZR GDEN LVS MGM PENN Private WYNN Top left chart as of June 27, 2020. Top right chart as of June 30, 2020. Bottom left chart as of June 26, 2020. Bottom right chart as of June 28, 2020. Past performance is not necessarily indicative of future results. There is no guarantee that any estimates or forecasts will be realized. Casino traffic represents casino players, which is distinct from foot traffic and includes table and slots machine users. 7 Source: MScience, US Transportation Security Administration, Metropolitan Transportation Authority, Bloomberg, and AB
Market Implications of US Election
I Know “It’s Different This Time” But… …There’s Little Relationship Between Political Power and the Stock Market Democratic President Republican President 9.2% 9.1% Divided Government Unified Government 10.0% 8.2% Past performance does not guarantee future results. Returns reflect annualized returns for each Presidential Term dating back to 1937, based off the Dow Jones Industrial Average. As of December 31, 2019 Source: Bloomberg and AB 9
How Can We Think About the Potential Market Impact? What We Know What We Don’t Know o The balance of power in the White House, Senate, o How closely the election results will match the polls and House will affect the economy and markets o How actual policy proposals will compare to o What current polls are saying campaign platforms and how much they’ll change as they’re debated and voted on o We shouldn’t let personal political views cloud our investment judgment o How much different election results or policies are already being factored in by the market or when they will be On balan ance, w we do not r recommen end t tactical as asset a allocation s shifts d driven b by e elec ection h han andi dicap apping Our investment teams are working every day to make sure we’re taking advantage of market mispricings while minimizing the downside risk to the portfolio from any individual event 10
Markets Tend to Ignore Politics Until a Month Before the Election In Recent Elections, the Correlation Between Stocks and Poll Results Is Minimal Until October; Then They Become More Closely Linked Correlation Between Polling Spread and Stock Price Changes 2016 2012 2008 2004 2000 1996 Ave Average 1996 1996–2016 016 Real eally ab about Real eally ab about en end of Glo lobal F Fin inancial C l Cris isis is dot-com b bubble 61 52 31 25 24 24 19 8 8 7 4 3 2 1 Jan–Sep Oct. to Jan–Sep Oct. to Jan–Sep Oct. to Jan–Sep Oct. to Jan–Sep Oct. to Jan–Sep Oct. to Jan–Sep Oct. to Election Election Election Election Election Election Election Historical analysis does not guarantee future results. Polling spread is the absolute difference in polling percentage between the two major presidential candidates. Source: Bernstein US Economics Research 11
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