2020 US Presidential Election - Invesco

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2020 US
Presidential Election
 10 TRUTHS NO MATTER WHO WINS
Markets Have Performed Well Under Both Parties
                                                                                                                                                                                                                                                2

Presidential term stock market returns vs. economic growth (1957-present)
                                              25

                                              20                                                           Ford
      Annualized Stock Market Performance %

                                                          Obama                                                                                      Clinton
                                                                                                                         Reagan
                                              15
                                                        Bush           Eisenhower      Carter                                                                                              Johnson
                                              10
                                                               Trump
                                                                                                                                                                                                              Kennedy
                                               5

                                               0
                                                                                    Nixon
                                               -5
                                                        G.W. Bush

                                              -10
                                                 1.5%           2.0%            2.5%             3.0%                      3.5%                      4.0%                      4.5%                      5.0%                      5.5%

                                                                                                                           Annualized Real GDP Growth During Presidential Term %
Sources: Haver, Invesco, 6/30/20. Note: President Trump stock market performance data from 1/20/17-6/30/20., real GDP data from 12/31/2016 to 3/31/2020 as GDP is reported with a lag. Stock market performance is defined by the total return of the S&P 500
Index. Index definitions can be found on page 12. Past performance does not guarantee future results.
Investors Are Better Off Staying Fully Invested
                                                                                                                                                                                                                                                      3

Growth of $10,000 in the Dow Jones Industrial Average since 1896
                                     Only Invested for Dems                                                             Only Invested for Reps                             Fully Invested
       $8,000,000

       $7,000,000

       $6,000,000

       $5,000,000

       $4,000,000

       $3,000,000

       $2,000,000

       $1,000,000

                       $0
                             1900
                                    1904
                                           1908
                                                  1912
                                                         1916
                                                                1920
                                                                       1924
                                                                              1928
                                                                                     1932
                                                                                            1936
                                                                                                   1940
                                                                                                          1944
                                                                                                                 1948
                                                                                                                        1952
                                                                                                                               1956
                                                                                                                                      1960
                                                                                                                                             1964
                                                                                                                                                    1968
                                                                                                                                                           1972
                                                                                                                                                                  1976
                                                                                                                                                                         1980
                                                                                                                                                                                1984
                                                                                                                                                                                       1988
                                                                                                                                                                                              1992
                                                                                                                                                                                                     1996
                                                                                                                                                                                                            2000
                                                                                                                                                                                                                   2004
                                                                                                                                                                                                                          2008
                                                                                                                                                                                                                                 2012
                                                                                                                                                                                                                                        2016
                                                                                                                                                                                                                                               2020
Sources: Haver, Invesco, 6/30/20. For illustrative purposes only. Index definitions can be found on page 12. Past performance does not guarantee future results.
We Do Not Radically Reengineer the US Economy
                                                                                                                                                                                                                                                                        4

Breakdown of Major Components of GDP as a % of Total Spending In the United States Since 1957

                                                                      Government Expenditures                                Business Investment                          Consumption
                100%

                   50%

                     0%
                           1957
                                  1959
                                         1961
                                                1963
                                                       1965
                                                              1967
                                                                     1969
                                                                            1971
                                                                                   1973
                                                                                          1975
                                                                                                 1977
                                                                                                        1979
                                                                                                               1981
                                                                                                                      1983
                                                                                                                             1985
                                                                                                                                    1987
                                                                                                                                           1989
                                                                                                                                                  1991
                                                                                                                                                          1993
                                                                                                                                                                 1995
                                                                                                                                                                        1997
                                                                                                                                                                               1999
                                                                                                                                                                                      2001
                                                                                                                                                                                             2003
                                                                                                                                                                                                     2005
                                                                                                                                                                                                             2007
                                                                                                                                                                                                                     2009
                                                                                                                                                                                                                             2011
                                                                                                                                                                                                                                     2013
                                                                                                                                                                                                                                             2015
                                                                                                                                                                                                                                                     2017
                                                                                                                                                                                                                                                             2019
                                                   1965                                                    1981                                                    1996                                               2010
                                             Great Society                                         Economic Recovery                                     Personal Responsibility                                    Affordable
                                          (Medicare, Medicaid)                                          Tax Act                                          and Work Opportunity                                        Care Act
                                                                                                                                                                  Act

   S&P 500 Total Return Index (Growth of $100)
      100,000                                                                                                  1981
                                                   1965                                             Economic Recovery                                                                                                                                                S&P 500 Index
             10,000                           Great Society                                              Tax Act                                                                                                                                                    Returned 10.07%
                                           (Medicare, Medicaid)                                                                                                                                                                                                     annualized from
               1,000                                                                                                                                                                                                                                                1957-6/30/2020
                                                                                                                                                                   1996                                               2010
                                                                                                                                                                                                                    Affordable
                   100                                                                                                                              Personal Responsibility and
                                                                                                                                                                                                                     Care Act
                                                                                                                                                      Work Opportunity Act

                     10
                           1957
                                  1959
                                         1961
                                                1963
                                                       1965
                                                              1967
                                                                     1969
                                                                            1971
                                                                                   1973
                                                                                          1975
                                                                                                 1977
                                                                                                        1979
                                                                                                               1981
                                                                                                                      1983
                                                                                                                             1985
                                                                                                                                    1987
                                                                                                                                           1989
                                                                                                                                                  1991
                                                                                                                                                         1993
                                                                                                                                                                 1995
                                                                                                                                                                        1997
                                                                                                                                                                               1999
                                                                                                                                                                                      2001
                                                                                                                                                                                             2003
                                                                                                                                                                                                    2005
                                                                                                                                                                                                            2007
                                                                                                                                                                                                                    2009
                                                                                                                                                                                                                            2011
                                                                                                                                                                                                                                    2013
                                                                                                                                                                                                                                            2015
                                                                                                                                                                                                                                                    2017
                                                                                                                                                                                                                                                            2019
Sources: FRED, Global Financial Data, 6/30/20. Index definitions can be found on page 12. Past performance does not guarantee future results. Scale is logarithmic.
Signature Legislation Is Infrequent and Its Impact Often Unexpected
                                                                                                                                                                                                                              5

       Example 1: Patient Protection and Affordable Care Act
       Employers with 50 or more full-time employees are considered “large business” and therefore required to offer
       employee health coverage or pay a penalty.
       Nonfarm private medium payroll employment (50–499)
        24000                                                                    ACA Signed GOP wins majority in
        23000                                                                    (03/23/10) House of Representatives
                                                                                            (11/02/10)
        22000                                                                                                                                                                                             3.4M Jobs added by
        21000                                                                                                                                                                                           medium-sized firms from
                                                                                                                                                                                                          3/2010 to 12/2019
        20000
             2005                 2006            2007           2008           2009            2010           2011            2012           2013           2014            2015   2016   2017      2018       2019

       Example 2: Tax Cuts and Jobs Act of 2017
       Section 179 allows taxpayers to deduct the cost of certain property (such as machinery and equipment purchased for use in trade or business) as an expense when the
       property is placed in service.
       US capital goods new orders (nondefense ex-aircraft & parts)
                                                                                                                                                                                              Tax cuts Signed
                   25                                                                                                                                                                           (12/22/17)
Percent Change
Year over Year

                                                                                                                                                           Average
                     5

                  -15                                                                                                                                                                             Democrats win majority in
                                                                                                                                                                                                  House of Representatives
                  -35                                                                                                                                                                                   (11/21/18)
                     2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

       Sources: Bloomberg, L.P., FRED, 3/31/20. Most recent data available. Index definitions can be found on page 12. Past performance does not guarantee future results.
The Historical Narrative Is Not Always as You Remember It
                                       The Predictions Are Not Always Accurate                                                                                                                                                                             6

                                President Jimmy Carter and Jobs                                                                                                           President Reagan and income gains
                                Nonfarm payrolls                                                                                                                          Median weekly earning growth
   Total employed (thousands)

                                                  Actual Job Gains                  Post-WWII Trend                                                                                       Median Weekly Earnings           Post-1971 Trend
                                                                                                                                                                           120
                                170,000

                                                                                                                                             Indexed to 100
                                                                                                                                                                           115
                                165,000                                                                                                                                    110
                                160,000                                                                                                                                    105
                                                                                                                                                                           100
                                155,000
                                                                                                                                                                            95
                                150,000                                                                                                                                       1980      1981   1982    1983    1984     1985     1986       1987          198
                                          1976                 1977              1978                         1979

                                President Barack Obama and inflation                                                                                                      President Trump and business investment
  Indexed to 12/31/08 = 100

                                CPI trend vs. actual

                                                                                                                                              Indexed to 12/31/16 = 100
                                                                                                                                                                          Capital expenditures
                                                          Actual CPI      Post-WWII Trend                                                                                                         Actual           Post-WWII Trend
                                    140                                                                                                                                    120
                                    130                                                                                                                                    115
                                    120                                                                                                                                    110
                                                                                                                                                                           105
                                    110
                                                                                                                                                                           100
                                    100

                                                                                                                                                                                 2016

                                                                                                                                                                                                       2017

                                                                                                                                                                                                                                2018
                                       2008      2009   2010    2011   2012   2013      2014        2015       2016

Sources: Bureau of Economic Analysis, Bureau of Labor Statistics and Haver Analytics, 3/31/20. Note: Long-term trends are all averages since the end of World War II in 1945 except for Median Weekly Earnings, which is an average of the change since
1971, when data collection began on that statistic. Capital expenditures are not yet available for 6/30/20.
The Economic Environment and Market Leadership Rarely
                                  Change                                                                                                                                                    7

                           Nominal US 10-Year Yield
                                                                                 Average 10-Year yield:                                                      Average 10-Year yield:
                                                                                  2.45% (2009-2016)                                                          2.25% (2016-6/2020)
                           4
                           3
Yield %

                           2
                           1
                           0
                            2009      2010       2011              2012               2013                2014                2015          2016   2017   2018       2019            2020
                                                                                                                           Yield

                                                               2009-2016                                                                                         2016-6/2020
Cumulative Performance %

                                                                                                                                                   100%     92.08%
                                                      Russell 1000 Growth              Russell 1000 Value
                                                                                                                                                    80%
                           250%                          223.31%
                           200%                                                                       176.57%                                       60%
                           150%
                                                                                                                                                    40%
                           100%
                            50%                                                                                                                     20%                        10.43%
                             0%                                                                                                                      0%
                                                                         Cumulative Return                                                                       Cumulative Return

Sources: Bloomberg L.P., Russell, 6/30/20. Index definitions can be found on page 12. Past performance does not guarantee future results.
Monetary Policy Matters More
                                                                                                                                                                                                                                                                         8

Financial conditions and S&P 500 performance during easing conditions
                                                                                 S&P                                                   S&P                                         S&P
                                                                                +227%                                                                                             +217%                                                               A weighted average* of:
                                                                                                                                       +99%
                       105                                                                                                                                                                                                                            • riskless interest rates
                                                                                                                                                                                                                                                      • yield curve
                                                                                                                                                                                                                                                      • the exchange rate
                       104
                                                                                                                                                                                                                                                      • credit spreads
                                                                                                                                                                                                                                                      • equity valuations
                       103
Financial Conditions

                       102

                       101

                       100

                       99

                       98
                             1990
                                    1991
                                           1992
                                                  1993
                                                         1994
                                                                1995
                                                                       1996
                                                                              1997
                                                                                     1998
                                                                                            1999
                                                                                                   2000
                                                                                                          2001
                                                                                                                 2002
                                                                                                                        2003
                                                                                                                               2004
                                                                                                                                      2005
                                                                                                                                             2006
                                                                                                                                                    2007
                                                                                                                                                           2008
                                                                                                                                                                  2009
                                                                                                                                                                         2010
                                                                                                                                                                                2011
                                                                                                                                                                                       2012
                                                                                                                                                                                              2013
                                                                                                                                                                                                     2014
                                                                                                                                                                                                            2015
                                                                                                                                                                                                                   2016
                                                                                                                                                                                                                          2017
                                                                                                                                                                                                                                 2018
                                                                                                                                                                                                                                        2019
                                                                                                                                                                                                                                               2020
Sources: Goldman Sachs, Bloomberg L.P., 6/30/20. See index definitions on page 12. An investment cannot be made in an index. Past performance does not guarantee future results.
Markets Don’t Care If You Don’t Like Who’s President
                                                                                                                                                                                                  9

Gallup poll presidential approval ratings and the S&P 500 Index Growth of $100,000
                                                                                                                                                                                      Log Scale
                               100 %                                                                                                                                                  $6,000,000
Gallup approval poll numbers

                                90
                                                                                                                                                                                      $5,000,000

                                                                                                                                                                                                      Growth of $100,000
                                80
                                70                                                                                                                                                    $4,000,000
                                60
                                50                                                                                                                                                    $3,000,000
                                40
                                30                                                                                                                                                    $2,000,000
                                20                                                                                                                                                    $1,000,000
                                10
                                 0                                                                                                                                                    $0

                                        1961   1963      1969            1974              1977       1981               1989           1993                    2001    2009   2017
                               Presidential Approval Rating                 Gain/Annum                                                                      % of Time
                               >65                                          5.4%                                                                            13.9%
                               50-65                                        4.2%                                                                            36.2%
                               35-50                                        15.3%                                                                           36.8%
No, This Is Not the Most Vitriolic Election
                                                                                                                         10

Newspaper Laments                                                       A Deadly Duel
Even though early presidents were staunch defenders of a free           While political debates and sound bites make
press, they still were upset by newspaper coverage.                     for contentious TV today, fortunately, nothing
                                                                        in recent memory compares to the personal
                                                                        vendetta between sitting vice president Aaron
                            George Washington                           Burr and former treasury secretary Alexander
                            Newspapers filled “with all the invective   Hamilton that led to a duel with pistols.
                            that disappointment, ignorance of facts,
                            and malicious falsehoods could invent to
                            misrepresent my politics.”

                            Thomas Jefferson
                            “Nothing can now be believed which is
                            seen in a newspaper. Truth itself
                            becomes suspicious by being put into
                            that polluted vehicle.”

All quotes are in the public domain.
Misery Index Tends to be Better At Predictions Than Are the Pundits
                                                                                                                                                                                                                         11

           Unemployment Plus Inflation

                                                                                                                                   Misery Index
                  25                                                             Incumbent
                  20                                                                Lost
                                                         Incumbent
                                                                                                                            Incumbent                                          Incumbent
                                                            Lost                                                                                                                                          Incumbent
                  15                                                                                                           Lost                                               Lost
                                                                                                                                                                                                             Lost
                  10
                    5
                    0
                     1961        1963       1966       1969        1972       1975       1978        1981       1984       1987     1990     1993   1996     1998      2001   2004   2007    2010    2013   2016      2019

               US Stock Market Performance
                                                                                                             Dow Jones Industrial Average Index            S&P 500

                   35000                                                                                                                                                                                              3500
                            In 2009, a Stanford professor claimed that
                   30000                                                                                                                                                                                              3000
Index Levels

                            Obama’s new policies are destroying the
                   25000    DJIA and that they are designed to                                                                                                                                                        2500

                                                                                                                                                                                                                              Index Level
                   20000    restructure the market-based economy.                                                                                                                                                     2000
                   15000                                                                                                                                     In 2016, a billionaire NBA team owner said               1500
                   10000                                                                                                                                     that there was no doubt that markets will                1000
                    5000                                                                                                                                     fail if Donald Trump was elected.                        500
                       0                                                                                                                                                                                              0
                         2008                     2010                                                2012                              2014                         2016                    2018
               Sources: Bloomberg L.P., Haver Analytics, S&P, as of 6/30/20. Past performance does not guarantee future results.
12

Index         Consumer Price Index (CPI) program produces monthly data on changes in the prices paid by urban consumers for a
              representative basket of goods and services.

Definitions   The Dow Jones Industrial Average is a price-weighted index of the 30 largest, most widely held stocks traded on the New
              York Stock Exchange.
              The S&P 500 Index is a market-capitalization-weighted index of the 500 largest domestic US stocks.
              The Russell 1000 Value is an unmanaged index considered representative of large-cap value stocks. The Russell 1000
              Value Index is a trademark/service mark of the Frank Russell Co. Russell® is a trademark of the Frank Russell Co.
              The Russell 1000 Growth is an unmanaged index considered representative of large-cap growth stocks. The Russell 1000
              Growth Index is a trademark/service mark of the Frank Russell Co. Russell® is a trademark of the Frank Russell Co.
              The Misery Index is an economic indicator calculated by adding the current unemployment rate and the inflation rate.
              Indexes are unmanaged and cannot be purchased directly by investors. Index performance is shown for illustrative
              purposes only and does not predict or depict the performance of any investment. Past performance does not guarantee
              future results.
13

Risk warnings
The value of investments and any income will fluctuate (this may partly be the result of exchange rate fluctuations) and investors may not get back the full amount
invested.

Important information
This marketing document is exclusively for use by Professional Clients and Financial Advisers in Continental Europe as defined below, Qualified Investors in Switzerland, Qualified Clients/Sophisticated Investors in
Israel and Professional Clients in Dubai, Ireland, Isle of Man, Jersey, Guernsey and the UK. It is not intended for and should not be distributed to, or relied upon, by the public. By accepting this document, you
consent to communicate with us in English, unless you inform us otherwise.
This document is marketing material and is not intended as a recommendation to invest in any particular asset class, security or strategy. Regulatory requirements that require impartiality of
investment/investment strategy recommendations are therefore not applicable nor are any prohibitions to trade before publication. The information provided is for illustrative purposes only, it should not be relied
upon as recommendations to buy or sell securities.
Where individuals or the business have expressed opinions, they are based on current market conditions, they may differ from those of other investment professionals, they are subject to change without notice
and are not to be construed as investment advice.
These views represent the opinions of the authors and are not intended as investment advice or as a prediction of the performance of any investment. These views are as of the open of business on December
31, 2019, and are subject to change on the basis of subsequent developments. Forward-looking statements are not guarantees of future results. They involve risks, uncertainties and assumptions, there can be
no assurance that actual results will not differ materially from expectations.
Equities are subject to market risk and volatility; they may gain or lose value. Fixed income investing entails credit and interest rate risks. Bonds are exposed to credit and interest rate risk. When interest rates
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Authorised and regulated by the Financial Conduct Authority; Invesco Asset Management Deutschland GmbH, An der Welle 5, 60322 Frankfurt am Main, Germany.
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