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Market Views - Economic Outlook 2020

Outlook 2020

Stocks

Bull markets rarely die of old age. This is good since the current stock market rally, which began in March 2009, is the longest bull market in history. It has also produced one of the highest 10-year total returns on the S&P 500.

As a result, valuations are now extremely elevated. Fortunately, the momentum of the stock market is still positive.

Corporate profit growth has stagnated since 2011, so corporations have been buying back shares to increase earnings per share. Corporate stock repurchases have amounted to $2.4 trillion over the past 10 years, one of the reasons the market had such strong returns. In addition, low interest rates have allowed corporations to issue debt to repurchase shares. Unfortunately, these extreme corporate debt levels pose a risk for investors.

Typically, this phase of the Presidential cycle is favorable for stocks. However, due to the uncertainty about the trade war and impeachment, stocks may have already enjoyed most of this benefit in 2019.

We are finding some relative value opportunities in the Finance and Energy sectors. Due to the lateness in the economic cycle and the popularity of passive investing, we believe large stocks should hold up but opportunities are rising in smaller stocks. International stocks have underperformed U.S. stocks for many years. We believe valuations are very attractive in some developed and emerging markets providing potential opportunities.

Overall, we anticipate modest gains in the market and we should see some rotation into unloved areas.

Positives Negatives
Positive Positive Momentum Is Our Friend Negative U.S. Gross Domestic Product (GDP) Growth Slowing
Positive Corporate Buybacks Still Strong Negative Unprecedented Corporate Debt Levels
Positive Presidential Cycle Is Favorable Negative Election Uncertainty
Positive Relatively Attractive International Valuations
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Disclosure

This information is of a general nature and does not constitute financial advice. It does not take into account your individual financial situation, objectives or needs, and should not be relied upon as a substitute for financial or other professional advice to assess, among other things, whether any such information is appropriate for you and/or applicable to your particular circumstances. In addition, this does not constitute an offer to sell, or the solicitation of an offer to buy, any financial product, service or program. The information contained herein is based on public information we believe to be reliable, but its accuracy is not guaranteed.

Investing involves risks, including loss of principal.

Past performance is no guarantee of future results.

ALPS Distributors, Inc. 1290 Broadway, Ste. 1100, Denver, CO 80203 (Member FINRA). ALPS is not affiliated with James Investment Research, Inc. or James Capital Alliance, Inc.

Quantitative Easing: a course of action undertaken by the Federal Reserve to increase the money supply by flooding financial institutions with capital in an effort to promote increased lending and liquidity.

Yield Curve: a line that plots interest rates of bonds.

Contagion effect: a situation where a shock in a particular economy spreads out and affects others.

CCC Bond: Represents an extremely high risk bond or investment.

JAF000587 Exp. 12/31/2020

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You should carefully consider the investment objectives, potential risks, management fees, and charges and expenses of the Fund before investing. The Fund's prospectus contains this and other information about the Fund, and should be read carefully before investing. You may obtain a current copy of the Fund's prospectus by calling 1-800-995-2637 or click here to view or download a prospectus online.

Mid, Small and Micro Cap investing involve greater risk not associated with investing in more established companies, such as greater price volatility, business risk, less liquidity and increased competitive threat. Fund holdings and sector weightings are subject to change without notice. Past performance is no guarantee of future results.
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