S&P 500 Sector Performance Month -to-Date

Before the Bell

Morning Market Brief

October 25, 2018

FOR IMPORTANT DISCLOSURES, PLEASE SEE THE DISCLOSURE PAGES AT THE END OF THIS DOCUMENT

MORNING MARKET COMMENTARY: Anthony M. Saglimbene, Global Market Strategist

? Quick Take: U.S. futures are pointing to a higher open; Europe is trading mostly in the green; Asia finished mostly lower overnight; West Texas Intermediate (WTI) oil at $67.25; 10-year U.S. Treasury yield at 3.13%.

? Markets in Risk-off Mode: On Wednesday, stocks closed the session sharply lower. The S&P 500 Index fell over 3.0% yesterday, while the NASDAQ was off by nearly 4.5%. Please see yesterday's `After The Close' for more detail. The slide in stock prices during October has put both the Dow Jones Industrial Average and S&P 500 squarely into negative territory for the year. October's stock rout stands in stark contrast to the +10.6% total return gain the S&P 500 had notched through the first nine months of 2018. Over the last three weeks, the S&P 500 is down 9.2%. Importantly, a solid year of gains for the market has mostly evaporated, and without a turnaround heading into year-end, 2018 is quickly shaping up to be a disappointing year for investors.

? As the charts below show, Materials, Energy, Consumer Discretionary, Industrials, and Information Technology are all lower by more than 10.0% month-to-date. Seven of eleven S&P 500 sectors are also now firmly in the red year-to-date. Concerns over peak earnings growth, slowing economic trends across the world, tighter financial conditions, and escalating geopolitical tensions (including trade) are roiling markets at the moment, sending investors into the arms of U.S. Treasuries and gold. With investors starting to soak up Treasuries more aggressively, the yield on the 10-year has fallen from a recent high of 3.23% down to 3.12% yesterday. Gold, usually a safe-haven trade, has moved from $1191 an ounce at the start of the month to $1238 an ounce on Wednesday.

-15.00

S&P 500 Sector Performance Month-to-Date

Utilities Energy Consumer Staples Financials Real Estate Health Care Industrials S&P 500 Materials Comms Services Technology Consumer Discretionary

-10.00 -5.00

0.00

5.00

10.00

Notations:

? For further information on any of the topics mentioned, please contact your Financial Advisor.

? Unless specifically stated otherwise, comments contained in this document should not be construed as an investment opinion or

recommendation of any securities mentioned. Charts depicted are from FactSet unless otherwise noted.

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Page 1 of 12

Before The Bell

October 25, 2018

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-15.00

S&P 500 Sector Performance Year-to-Date

-10.00

-5.00

0.00

5.00

Health Care Technology Consumer Discretionary S&P 500 Utilities Energy Industrials Real Estate Financials Consumer Staples Comms Services Materials

10.00

? As the embedded FactSet chart below demonstrates, the S&P 500 closed materially below its longer-term trend line yesterday (i.e., the 200-day moving average). Certainly not a good sign for the bulls near-term. Without a catalyst or a reason for fundamental buyers to willingly step in front of the selling pressure, we believe near-term direction for stock prices could be mixed at best. We won't pretend to know when the selling pressure will eventually abate, but we believe somewhere between 10% and 20% off the highs seems reasonable. 20% or more declines from market tops are typically associated with recessions, and we do not believe we are heading for such a scenario.

? Looking ahead, Friday's Q3 GDP report could provide some relief for the bulls, as most expect an advance print of +3.0% or more growth q/q annualized. However, we would caution investors on placing too much emphasis on `backward-looking' data at this point. Based on reactions to Q3 earnings reports thus far, investors are clearly looking ahead, and guidance and the outlook for growth are what matter most.

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Page 2 of 12

Before The Bell

October 25, 2018

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? Coming into Wednesday, 66% of stocks in the S&P 500 were oversold, which is likely even higher after the beating stocks took on Wednesday. Based on Bespoke Investment Group data, seven of eleven S&P 500 sectors are now in oversold or extreme oversold conditions. The bright side? This data tends to mean-revert over time, and at some point, investors could see this correction as an opportunity to buy stocks.

? This morning, U.S. equity futures are pointing to a positive open and a bounce from yesterday's sharp declines. It is very difficult for the average investor to react to the speed at which markets move today. As we have said all month, it is better to stand still and let the smoke clear before deciding your next move. Because the sell-offs are so sharp and sudden in today's environment, due to technical trading, the extreme volatility associated with such moves tends to be fleeting. Our advice: stay the course, maintain a diversified portfolio, and remain focused on the longer-term.

? Asia-Pacific: Equities finished mostly lower on Thursday. Regional news flow was light, as stocks mostly traded in sympathy with the weaker tape in the U.S. on Wednesday. After a rebound in local Chinese markets earlier in the week, the euphoria surrounding the mainland bounce appears to be fading. A number of reports across the region are noting concerns that the central government in China will need to do more to engineer a turnaround in its markets. According to Bloomberg, there are several constraints on China at the moment, including a tighter lending stance across banks, shadow banking scrutiny, and unfavorable bond issuance conditions for firms with lower credit ratings.

? Europe: Markets across the region are trading mostly higher at mid-day. As expected, the European Central Bank (ECB) left interest rate policy on hold today. Investors will likely focus on the ECB's outlook amid weakening economic conditions across Europe as of late. In the past, ECB President Mario Draghi has signaled confidence in Europe's economic outlook and meeting a 2.0% inflation target. We suspect Draghi will be pressed on these views at today's press conference considering the growing risks to global growth. The ECB President could also be asked to provide more clarity on bond reinvestment, as the ECB is still on track to end its QE program at the end of this year.

? U.S.: Equity futures are pointing to a rebound this morning after the S&P 500 turned negative for the year on Wednesday. In our view, a bit of cautious optimism is still called for. The resumption of corporate share buybacks could provide some support for equity prices over the next few weeks. Not discussed above, but also a key factor to consider is that stock valuations are now more attractive following the sell-off. The forward price-to-earnings (P/E) ratio for the S&P 500 has fallen below its five-year average, and over time, may lead fundamental investors back into this market who believe good stocks have unjustifiably been sold-off too aggressively. Separately, with 33% of S&P 500 companies reporting third quarter results, the blended earnings per share (EPS) growth rate currently stands at +20.4% y/y on sales growth of +7.3% y/y. This marks the third consecutive quarter of 20% plus earnings growth for S&P 500 companies. We believe in any other market environment this important fundamental component would be a tailwind for stock prices. Lastly, President Trump is expected to outline a plan this afternoon that calls for an overhaul of how Medicare pays for certain drugs. The plan is expected to include several proposals that attempt to lower drug prices, including negotiating for some drugs directly administered by doctors. However, the plan would not affect most prescriptions purchased at local pharmacies.

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Page 3 of 12

Before The Bell

October 25, 2018

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WORLD CAPITAL MARKETS (all data as of approximately 8:00 AM ET)

Americas

% chg. % YTD

Value Europe (Intra-day)

S&P 500

Dow Jones NASDAQ Russell 2000 Brazil Bovespa S&P/TSX Comp. (Canada) Mexico IPC

-3.09% -2.41% -4.43% -3.79% -2.62% -2.46% -1.05%

0.88% 1.22% 3.83% -3.42% 8.72% -5.79% -5.43%

2,656.1 24,583.4

7,108.4 1,468.7 83,063.6 14,909.1 45,959.0

DJSTOXX 50 (Europe)

FTSE 100 (U.K.) DAX Index (Germany) CAC 40 (France) FTSE MIB (Italy) IBEX 35 (Spain) Russia TI

% chg. %YTD

Value

0.62% -7.22% -0.04% -6.24% 0.28% -13.12% 1.19% -2.99% 1.60% -14.06% 1.02% -9.98% -0.57% 7.40%

3,149.8 6,960.0 11,223.5 5,012.1 18,780.7 8,765.6 4,171.9

Asia/Pacific (Last Night)

Nikkei 225 (Japan) HK Hang Seng ( H. Kong) Korea Kospi 100 Singapore STI Shanghai Comp. (China) Bombay Sensex (India) S&P/ASX 200 (Australia)

% chg. %YTD

-3.72% -5.04% -1.01% -13.62% -1.63% -16.04% -0.63% -8.43% 0.02% -19.36% -1.01% 0.02% -2.83% -2.24%

Value

21,268.7 24,994.5

2,063.3 3,012.8 2,603.8 33,690.1 5,664.1

Global

% chg. % YTD

Value Developed International % chg. %YTD

Value

MSCI All-Country World Idx -2.07% -5.01%

477.3 MSCI EAFE

-0.64% -9.75% 1,797.6

Note: International market returns shown on a local currency basis. Equity index data is total return, inclusive of dividends.

Emerging International MSCI Emerging Mkts

% chg. %YTD -0.78% -15.80%

Value 953.1

S&P 500 Sectors

Consumer Discretionary Consumer Staples Energy Financials Real Estate Health Care Industrials Materials Technology Communication Services Utilities

% chg. % YTD

-3.31% 5.91% 0.49% -1.77% -3.79% -5.93% -2.69% -8.53% 1.13% -0.45% -3.29% 7.08% -3.43% -7.31% -3.15% -15.41% -4.43% 7.64% -4.88% -7.94% 2.30% 7.59%

Value

823.4 563.0 490.8 418.2 197.5 1,010.2 582.4 315.8 1,179.0 146.3 280.0

Equity Income Indices

JPM Alerian MLP Index FTSE NAREIT Comp. DJ US Select Dividend DJ Global Select Dividend S&P Div. Aristocrats

% chg. % YTD

-3.09% -6.51% 0.93% -1.04% -1.21% -0.72% -0.46% -11.98% -1.88% -1.40%

Value

25.7 17,115.5

1,963.8 218.8

2,429.8

Bond Indices Barclays US Agg. Bond Barclays HY Bond

% chg. 0.17% 0.05%

% YTD -2.13% 1.32%

Value 2,002.7 1,975.8

Commodities

Futures & Spot (Intra-day) CRB Raw Industrials NYMEX WTI Crude (p/bbl.) ICE Brent Crude (p/bbl.) NYMEX Nat Gas (mmBtu) Spot Gold (troy oz.) Spot Silver (troy oz.) LME Copper (per ton) LME Aluminum (per ton) CBOT Corn (cents p/bushel) CBOT Wheat (cents p/bushel)

% chg. % YTD -0.11% -5.89% 0.43% 11.07% 0.68% 14.69% 1.11% 8.40% -0.19% -5.47% 0.28% -13.06% -0.10% -14.14% -0.25% -12.34% -0.34% -4.43% -0.80% 2.80%

Value 484.2

67.1 76.7

3.2 1,231.5

14.7 6,188.0 1,977.5

367.0 495.5

Foreign Exchange (Intra-day) Euro (/$) British Pound (?/$) Data/Price Source: Bloomberg

% chg. 0.2% 0.1%

% YTD -4.9% -4.6%

Value 1.14 1.29

Japanese Yen ($/?) Australian Dollar (A$/$)

Ameriprise Global Asset Allocation Committee

Global Equity Region - Tactical View

% chg. -0.12% 0.44%

% YTD 0.27% -9.19%

Value 112.39

0.71

Canadian Dollar ($/C$) Swiss Franc ($/CHF)

% chg. 0.1% -0.2%

% YTD -3.7% -2.5%

Value 1.30 1.00

Region

MSCI All-Country World Index Weight

GAAC Tactical View

GAAC

GAAC

Tactical Recommended

Overlay

Weight

Region

MSCI All-Country World Index Weight

GAAC Tactical View

GAAC Tactical Overlay

GAAC Recommended

Weight

1) United States

55.1%

Overweight

+5.0%

60.1%

5) Latin America

1.2%

Equalweight

-

1.2%

2) Canada

3.0%

Underweight

- 1.0%

2.0%

6) Asia-Pacific ex Japan

11.8%

Equalweight

-

11.8%

3) United Kingdom

5.5%

Underweight

- 1.0%

4.5%

7) Japan

7.6%

Underweight

- 1.0%

6.6%

4) Europe ex U.K.

14.8%

Underweight

- 1.0%

13.8%

8) Middle East / Africa

1.0%

Underweight

- 1.0%

-

Index weighting represents relative weightings based on the regional market capitalization balance of the MSCI All-Country World Index; may not add due to rounding. The GAAC Tactical Overlay, as well as Recommended Tactical Weights, is derived from the Ameriprise Global Asset Allocation Committee (GAAC).Views are expressed relative to the Index and are provided to represent investment conviction in each region. Tactical Allocations are designed to augment Index returns over a 6-12 month time horizon. Index weights as of 9/26/18. Numbers may not add due to rounding.

Ameriprise Global Asset Allocation Committee U.S. Equity Sector - Tactical View

Sector

S&P 500 Index Weight

GAAC Tactical View

GAAC Tactical Overlay

GAAC Recommended

Weight

Sector

S&P 500 Index Weight

GAAC Tactical View

GAAC

GAAC

Tactical Recommended

Overlay

Weight

1) Communication Services 10.0% Equalweight

-

10.0%

6) Health Care

15.0% Equalweight

-

15.0%

2) Consumer Discretionary 10.3%

Overweight

+2.0%

12.3%

7) Industrials

9.7%

Overweight

+2.0%

11.7%

3) Consumer Staples

6.7%

Underweight

- 3.2%

3.5%

8) Information Technology 20.9% Equalweight

-

20.9%

4) Energy

6.0%

Overweight

+2.0%

8.0%

9) Materials

2.5%

Equalweight

-

2.5%

5) Financials

13.5% Equalweight

-

13.5%

10) Real Estate

2.6%

Equalweight

-

2.6%

11) Utilities

2.8%

Underweight

- 2.8%

0.0%

Index weighting represents relative weightings based on the regional market capitalization balance of the MSCI All-Country World Index; may not add due to rounding. The GAAC Tactical Overlay, as well as Recommended Tactical Weights, is derived from the Ameriprise Global Asset Allocation Committee (GAAC).Views are expressed relative to the Index and are provided to represent investment conviction in each region. Tactical Allocations are designed to augment Index returns over a 6-12 month time horizon. Index weights as of 9/26/18. Numbers may not add due to rounding.

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Page 4 of 12

Before The Bell

October 25, 2018

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ECONOMIC NEWS OUT TODAY:

Economic Releases for Thursday, October 25, 2018. All times Eastern. Consensus estimates via Bloomberg.

Time 8:30 AM 8:30 AM 8:30 AM 8:30 AM 8:30 AM 10:00 AM 10:00 AM

Period Oct. 20 Oct. 13 SEP SEP SEP SEP SEP

Release Initial Jobless Claims Continuing Claims New Orders for Durable Goods New Orders ? ex. transports Advance Goods Trade Balance Pending Home Sales (MoM) Pending Home Sales (YoY)

Consensus Est. 215k 1644k -1.5% 0.4% -$75.1B 0.0% -2.6%

Actual 213K 1641k 0.8% 0.1% -$76.0B

Prior Revised to 210k 1640k 1641k +4.4% +4.6% 0.0% 0.3% -$75.5B -1.8% -2.5%

Economic Perspective: Russell T. Price, CFA ? Chief Economist

? Two factors offer considerable uncertainty to tomorrow's Q3 GDP report. The Commerce Department releases its

first estimate of Q3 real Gross Domestic Product (GDP) tomorrow. The Bloomberg consensus estimate of +3.4%

suggests another solid quarter (an assessment we would agree with despite the issues described below) but there

is considerable room for a "surprise" on both the upside and down.

? Two factors offer considerable uncertainty to the GDP figures this quarter: business inventories and trade.

? First, business inventories could offer a big boost.:

Business inventory levels suffered a surprisingly sharp 2.5

decline of $36.8 billion in Q2. The drop is largely reflective of demand exceeding business expectations. 2.0

Impact of inventory change on Real GDP

(percentage point addition or subtraction)

However, the drop shaved a hefty 1.2 percentage points (pp) from the period's overall real GDP growth rate of 1.5

+4.2%. Changes in business inventory levels usually fly 1.0 under the radar, but as reflected in the numbers for Q2

they can be a very important "swing factor" in GDP 0.5 results. Unfortunately, they are also VERY difficult to

predict. In Q3, business inventories should bounce back 0.0

strongly, but just how strongly is the question. Over longperiods of time business inventories should expand at a -0.5

pace just under the rate of overall economic expansion,

leaving little impact on overall GDP.

-1.0

? We are forecasting a Q3 rebound in inventories of $80 -1.5 billion, adding 1.7 pp to our GDP estimate for the period

of +3.3%. The Atlanta Federal Reserve, meanwhile,

currently estimates the gain in inventories at $111

billion, offering 2.2 pp to their estimate of +3.9%.

? Trade, meanwhile, could be a big subtraction.: Offsetting the expected strong rebound in inventories is net trade. A

rise in exports is a direct contributor to GDP; higher

imports, however, are a direct subtraction.

? Here too there is a big quarter-to-quarter fluctuation. In

Q2, while inventories were dropping and causing a 1.2

pp subtraction from GDP, net exports (exports ?

imports) improved and ADDED 1.2 pp to GDP. So, the

two items were a "wash." Evidence from the first two

months of Q3 suggests that exports have declined in

absolute terms (likely do to reciprocal tariffs) but

imports have surged. In Q3, we expect net exports to

shave 1.6 pp from GDP while the Atlanta Fed model

forecasts a subtraction of 1.1 pp.

? Import volumes could remain stronger than average

through the fourth quarter as businesses look to get-in

all of the Chinese sourced supply they can before the

U.S. tariff rate jumps from 10% to 25% on January 1,

2019. The tariffs currently affect $250 billion in

Chinese made goods (2017 figure). As a result, we

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Page 5 of 12

Before The Bell

October 25, 2018

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could see Q4 GDP estimates come down somewhat, but the issue would be unlikely to change our 2018 full-year GDP estimate of +3.0%. On the other-side, the influence would also likely result in a drop in imports in Q12019, thus offering a temporary boost to GDP results.

? Aside from the near-term volatility we expect from various GDP components, our basic economic outlook remains solid. In 2019 we currently forecast real GDP growth to decelerate somewhat as trade issues have a greater negative influence and the boost from tax cuts loses some traction. A modest uptick in inflation should also curb consumer purchasing power as well. The 2.4% real rate we currently project, however, would still be better than what we see as the U.S. economy's current "speed limit" given underlying demographics.

? All charts at right are sourced from American Enterprise Investment Services, Inc. and reflect data from the Commerce Department. Forecasts via American Enterprise Investment Services, Inc.

? Note: the red line in the GDP forecast chart at right represents the year-over-year pace of real GDP growth.

FIXED INCOME NEWS & VIEWS: Brian M. Erickson, CFA, Fixed Income Research & Strategy

Treasury Yields Dip Lower; Technical Levels Hold

? Treasury yields pressed lower once again Wednesday as U.S. investors mulled the range risks surrounding markets

and waited for a more decisive market direction to form. Treasury yields dipped 4 to 7 basis points on the day (see chart below left) shifting the curve lower on a week over week basis as well. Technical resistance levels held for both 10-year and 30-year Treasuries so far. We believe a more concerted sell-off could temporarily push 10-year yields back below 3.12% but that the overall top end of the trading range has been defined by 3.22% at this point based on fundamentals.

? Credit spreads gapped wider as buyers made sellers pay up for liquidity amidst market flux (see chart below right).

U.S. Treasury Yield Change (As of Yesterday's Close, in basis points)

Bloomberg Barclay's Index Credit Spreads Option adjusted spread (OAS), in basis points

125

400

0

-5

100

-10 75

-15 2yr

3yr

5yr

7yr 10yr 30yr

1-Day 1-Week

300

IG Corp (LHS)

HY Corp (RHS)

Source: Bloomberg

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Page 6 of 12

Before The Bell

October 25, 2018

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Evolving Risk Appetite Visible In Markets Require Evolving Approach to Investing

? While Fed accommodation adds money to the supply of investment dollars seeking risk assets, Fed tightening

reduces the supply of funds looking for risk investment. Since 2014 the Fed has taken three key steps to reduce excess liquidity needed in the wake of the financial crisis.

? First, the Fed began hiking the fed funds target rate from 0.00%-0.25% beginning in December 2015, to 2.00% to

2.25% today. The return of yield to short term, high quality investments attracts more investors looking for a reasonable yield to Treasury, agency, and investment grade corporate bond markets that may have reached for yield in non-core fixed income or even stock dividends.

? Second, the Fed ended asset purchases, quantitative easing (QE), in 2014 reducing efforts to lower intermediate

and long-term yields that served to push investors into real assets and equities.

? Third, the Fed began reducing its balance sheet accumulated through QE to markets, further increasing the supply

of Treasuries and mortgages and soaking up available funds looking for risk investment. The return of Treasuries from the Fed's balance sheet is happening at the same time the Treasury is heavily increasing borrowing for to fund deficit spending. Growing Treasury supply adds to the reduction of risk investment dollars as Treasury borrowing crowds out risk assets with greater supply of high quality investments.

Federal Reserve Balance Sheet Treasuries and MBS Assets ($ in trillions)

5.0

4.0

3.0

2.0

1.0

0.0

Fed's Balance Sheet Reduction Program Treasuries and MBS Assets ($ in billions)

60 50 40 30 20 10

0

Treasuries MBS

Increase in Public Treasuries Outstanding And impact of Fed unwind ($ in billions)

25,000 20,000 15,000 10,000

5,000 0

Treasuries MBS

U.S. Treasury Funding Needs Net new issuance ($ in billions)

1,750 1,500 1,250 1,000

750 500 250

0

Avg $1.2T Avg $671B

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019est 2020est 2021est 2022est

CBO Historical CBO Projection

Treasury Actual CBO Estimate

Source: Bloomberg, Congressional Budget Office, Federal Reserve, Ameriprise Enterprise Investment Services, Inc.

? A helpful analogy: This dynamic didn't unfold in a single day, it slowly builds over time in a way that is difficult to

visibly see, somewhat like the changing of the seasons from summer into Fall. It doesn't happen on a day, yet by contrasting mid-august with mid-October the difference becomes visible.

? We recommend: The collective reduction of liquidity has re-geared how investors and markets respond to market

events. While we believe the current trend toward risk-off is temporary and that fundamentals support a buy the dip approach, we believe it is critical for investors to evolve their approach to investment with the changing environment.

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Page 7 of 12

Before The Bell

October 25, 2018

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? Adjust risk tolerances if necessary. If the increase in market volatility has been especially unnerving for overall

portfolios, consider if a more conservative risk tolerance would be more appropriate. The relative tranquility of 2016 and 2017 are not likely to mirror conditions in 2018, 2019, or 2020 in our view. This would be as easy as shifting from Moderate to Moderate Conservative.

? Intentionally design fixed income portfolios. We believe in the positions in fixed income portfolios matter to a

great degree today than they have through the balance of the cycle. Our defensive approach to fixed income investing today in the late stages of the economic cycle begs for short duration targets and a less aggressive approach to credit exposures. This year we have reduced our tactical (3 to 12 month guidance) to Equalweight. This also spotlights the role that core fixed income, and Treasury components in particular have for fixed income allocations. We believe there is no better diversifier for equity market volatility than Treasury duration exposure.

? Avoid leverage in fixed income investments. Leverage is a catalyst that accelerates both gains and losses. When

markets are near full value (narrow spreads and potential for higher yields) there is only one direction for leverage to take returns; lower.

? For more on our positioning guidance, see our Quarterly Capital Market Digest report dated 10/19/18.

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