7-28-23_StoneX-KRV-Powerpoint 07-2003

StoneX Connects. Kathryn Rooney Vera Chief Market Strategist

Recent history has heavily favored the Goldilocks environment. In fact, it is what we market participants are almost singularly used to. With notable and seismic exceptions (2001, 2008, 2020). This should be considered in terms of behavioral economics and conditioning. Sources: Bloomberg, StoneX

Leading indicators have never been this negative (% change y/y) this long and not resulted in recession. Is this time going to be different or rather delayed do to the longevity of the most recent fiscal and monetary liquidity injections? US--Leading Indicator Index, % chg y/y (recessions shaded) 16.0 12.0 8.0 4.0 0.0 -4.0 -8.0 -12.0 -16.0 -20.0 Oct-66 Oct-69 Oct-72 Oct-75 Oct-78 Oct-81 Oct-84 Oct-87 Oct-90 Oct-93 Oct-96 Oct-99 Oct-02 Oct-05 Oct-08 Oct-11 Oct-14 Oct-17 Oct-20 Source: Bloomberg, StoneX 3

Wage growth, while decelerating, remains at levels inconsistent with the Fed’s 2% inflation target. We estimate that ‘market-clearing’ level to be 3.5% y/y wage growth. US--Core PCE vs Wage Growth 9.00 6.50 5.50 8.00 Average hourly earnings growth, SA % y/y 4.50 (LHS) 3.50 2.50 7.00 Core PCE, % chg y/y (RHS) 1.50 0.50 6.00 5.00 4.00 3.00 2.00 1.00 0.00 Jan-1995 Jun-1997 Nov-1999 Apr-2002 Sep-2004 Feb-2007 Jul-2009 Dec-2011 May-2014 Oct-2016 Mar-2019 Aug-2021 Source: Bloomberg, Stonex 4

Wage growth, while decelerating, remains at levels inconsistent with the Fed’s 2% inflation target. We estimate that ‘market-clearing’ level to be 3.5% y/y wage growth.

YoY Core PCE Inflation Component Attribution (%) Latest Core Core PCE almost entirely service-sector driven. PCE Print: 4.6% 7 Goods Below, StoneX Core PCE forecasts from today through 6 Services - Housing and Utilities 2024, mean projection and with confidence intervals. Services - Health Care FRBNY DSGE Model Core PCE Forecast (%) 5 Services - Other Historical 4 PCE incl Food & Energy 3 6 10% CI 2 1 90% CI 0 -1 5 Mean DSGE Projection 4 StoneX YE23 Forecast: 4.0% 3 Source: Bureau of Economic Analysis, StoneX *SAAR - approximated using BEA weights and values within each respective sub-category 2 Goods PCE vs Supply Chain Disruptions 1 Goods contribution to Core PCE (LHS, %) 0 2.50 FRBNY Global Supply Chain Index (RHS) 5 4 2.00 3 1.50 2 1.00 1 Dec-19 Mar-20 0 Jun-20 0.50 Sep-20 Dec-20 -1 Mar-21 Jun-21 Sep-21 Dec-21 Mar-22 Jun-22 Sep-22 Dec-22 Mar-23 Jun-23 Sep-23 Dec-23 Mar-24 Jun-24 Sep-24 Dec-24 - -2 Source: FRBNY, StoneX Dec Feb Apr Jun Aug Oct Dec Feb Apr Jun Aug Oct Dec Feb Apr 2020 2021 2021 2021 2021 2021 2021 2022 2022 2022 2022 2022 2022 2023 2023 Source: Bureau of Economic Analysis, FRBNY, StoneX

Consumer confidence is strong and the misery index (inverted, rhs) shows a contented consumer. And why not? Real wage growth is positive, 401k’s are in the green, and jobs remain aplenty. This combination is great for growth, not so hot for the service component of inflation. US--Consumer Confidence Vs Misery Index (rhs, inverted) 160.00 4 6 140.00 8 10 120.00 12 14 100.00 16 80.00 60.00 40.00 20.00 Jan-92 Jan-94 Jan-96 Consumer Confidence (LHS) Jan-08 Jan-10 Jan-12 Jan-14 Jan-16 Jan-18 Jan-20 Jan-22 Misery Index, inverted (RHS) 0.00 Jan-98 Jan-00 Jan-02 Jan-04 Jan-06 Jan-90 Source: Bloomberg, StoneX

US--Case-Shiller Home Price Index 25 With 92% of homeowners having mortgages below 6% 20 rate, 82% below 5% and 62% below 4% compared to 7.2% 350 15 interest rate average currently, people are not selling, and 10 defaults/delinquencies are low. Home prices remain historically 300 5 elevated although price growth has flat-lined. 0 250 -5 Average 30Y Mortgage Rates -10 200 -15 8.0 7.0 150 6.0 5.0 100 4.0 3.0 50 Jan-92 Jan-94 Case-Shiller National Home Price Index (LHS) Jan-10 Jan-12 Jan-14 Jan-16 Jan-18 Jan-20 Jan-22 2.0 National Average Fixed-Rate for 30-Year Mortgages Case-Shiller National Home Price Index, % chg y/y (RHS) 1.0 12mma 0 Jan-96 Jan-98 Jan-00 Jan-02 Jan-04 Jan-06 Jan-08 0.0 Jan-90 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 Jan-20 Jan-21 Jan-22 Jan-23 Source: Bloomberg, StoneX Source: Bloomberg, StoneX US--Mortgage Defaults and Delinquencies 8 12 10 Defaults Delinquencies 8 6 4 2 0 Jun-06 Jun-08 Jun-10 Jun-12 Jun-14 Jun-16 Jun-18 Jun-20 Jun-22 Jun-04 Source: Bloomberg, StoneX

The consumer remains resilient despite 525bps in Fed hikes and tightening lending standards across the board. Consumer loan delinquencies are ticking up but remain low. Total US Delinquency Rates, % of All Consumer Loans US--Percent of Banks Tightening Standards, Delinquency 6 US Recessions Net % of Banks Tightening Standards for C/I Loans (LHS) Comm/Ind Delinquency Rates, % (SA) (RHS) 100 7 5 80 6 4 60 5 3 40 4 20 3 2 02 1 -20 1 0 Jun-2001 Mar-2004 Dec-2006 Sep-2009 Jun-2012 Mar-2015 Dec-2017 Sep-2020 -40 0 Mar-1993 Dec-1995 Sep-1998 Apr-90 Apr-92 Apr-94 Apr-96 Apr-98 Apr-00 Apr-02 Apr-04 Apr-06 Apr-08 Apr-10 Apr-12 Apr-14 Apr-16 Apr-18 Apr-20 Apr-22 Source: Bloomberg Source: Bloomberg, Federal Reserve, StoneX US--Business And Consumer Confidence 110 Net % of Respondents Tightening Standards On Car Loans 110 60 105 100 50 90 40 80 100 70 30 60 95 50 20 40 90 10 85 NFIB Small Business Optimism Index 0 Umich Consumer Sentiment Index -10 80 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 Jan-20 Jan-21 Jan-22 Jan-23 -20 -30 Jul-2019 Jan-2020 Jul-2020 Jan-2021 Jul-2021 Jan-2022 Jul-2022 Jan-2023 Jul-2017 Jan-2018 Jul-2018 Jan-2019 Source: Bloomberg Source: Bloomberg, StoneX 9

This is not 2008. The consumer is not over-levered. Leverage is ticking up but remains historically low. Thank you Sources: Bloomberg, StoneX Presentation Heading | 1 0

Fiscal deficits remain wide and this is stimulative and inflationary. US--US Budget Deficit, % of GDP 0 -5 -10 -15 -20 1956 1959 1962 1965 1968 1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013 2016 2019 2022 Source: Bloomberg

QT has not made a meaningful dent in the Fed’s enormous, still-$8 trillion balance sheet. This is 34% of US nominal GDP. 10.0 Fed Balance Sheet, USDtrn 9.0 8.0 MBS Holdings USTs Holdings Other Holdings 7.0 6.0 Thank you 5.0 4.0 Jul-2016 Jul-2017 Jul-2018 Jul-2019 Jul-2020 Jul-2021 Jul-2022 Jul-2023 3.0 2.0 1.0 0.0 Jul-2015 Source: Bloomberg, StoneX Presentation Heading | 1 2

Long-term inflation expectations are above the Fed’s 2% target but stable and anchored, good news for the central bank. US ECONOMY--5Y, 10Y, & 30Y Breakeven Inflation, % 4.0 5Y Breakevens 3.0 10Y Breakevens 30Y Breakevens 2.0 1.0 0.0 -1.0 -2.0 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13 Sep-14 Sep-15 Sep-16 Sep-17 Sep-18 Sep-19 Sep-20 Sep-21 Sep-22 Source: Bloomberg Presentation Heading | 1 3

Given the surge in deficits, debt emissions and rates, interest payments/GDP has surged to 3.5%. US--Interest Expenditure Vs Public Debt 145 135 3.8 125 115 3.6 105 95 3.4 85 75 3.2 65 55 3.0 2.8 2.6 2.4 Interest Payments, % of GDP (LHS) Total US Public Debt, % of GDP (RHS) Aug-10 Sep-11 Oct-12 Nov-13 Dec-14 Jan-16 Feb-17 Mar-18 Apr-19 May-20 Jun-21 Thank you2.2Jul-09 Jul-22 2.0 Mar-05 Apr-06 May-07 Jun-08 Source: Bloomberg, StoneX US Treasury Securities Held By China, USDbn 1 4 1,500.0 1,300.0 1,100.0 900.0 700.0 500.0 300.0 100.0 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 Jan-20 Jan-21 Jan-22 Jan-23 Presentation Heading | Source: Bloomberg, StoneX

Market Strategies—Equities: Know your sectors and their respective performances in different phases of the economic cycle. Thank you Sources: Bloomberg data, StoneX Presentation Heading | 1 5

Market Strategies—Equities: Investment Strategies Should be Influenced by Where We Are and Where We’re Going in the Economic Cycle. Large Cap Real Return By Inflation/Growth Environment 2.5 2.0 1.5 2004 1.0 2005 0.5 0.0 Thank you-0.5 Growth 10Y Z-Score 1991279091284012212150101909129099190093932145129291099092222600200101962170811 2021 -1.0 2006 2000 -1.5 2020 2007 -2.0 2019 -2.5 2001 -3.0 -3.5 2008 Positive Returns -4.0 -4.5 Negative Returns -5.0 2022 -5.5 -6.0 -6.5 -4.0 -3.5 -3.0 -2.5 -2.0 -1.5 -1.0 -0.5 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 5.5 6.0 6.5 7.0 7.5 8.0 8.5 9.0 9.5 10.010.5 Inflation 10Y Z-Score Sources: Bloomberg data, StoneX 1 6 Presentation Heading |

Market Strategies—Fixed Income: Investment Strategies Should be Influenced by Where We Are and Where We’re Going in the Economic Cycle. US Fixed Income Real Return By Inflation/Growth Environment 2.5 2.0 1.5 2004 1.0 2005 0.5 0.0 -0.5 -1.0 Thank you-1.5 Growth 10Y Z-Score 19912790291084211211015909291909190909332145122910990929222060200101296170811 2021 2006 Positive 2000 Returns -2.0 2020 2019 2007 -2.5 2001 -3.0 -3.5 2008 -4.0 -4.5 -5.0 2022 -5.5 -6.0 -6.5 -4.0-3.5-3.0-2.5-2.0-1.5-1.0-0.5 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 5.5 6.0 6.5 7.0 7.5 8.0 8.5 9.0 9.510.010.5 Inflation 10Y Z-Score Sources: Bloomberg data, StoneX Presentation Heading | 1 7

Market Strategies—Fixed Income: Is this time different? The massive inversion of the yield curve has not - as yet - accurately predicted recession. We think this is a temporary, liquidity and exogenous shock driven phenomenon rather than a structural change. 3M-10Y Spread/Yield Curve Inversion As A Recession/Market Top Indicator US Recessions Inversion indicator SPX Index 3M-10Y Spread Spread zero line 4,600.0 500 4,100.0 400 3,600.0 300 3,100.0 200 2,600.0 100 2,100.0 0 1,600.0 -100 1,100.0 -200 600.0 100.0 -300 Jan-78 Jan-81 Jan-84 Jan-87 Jan-90 Jan-93 Jan-96 Jan-99 Jan-02 Jan-05 Jan-08 Jan-11 Jan-14 Jan-17 Jan-20 Jan-23 Source: Bloomberg, StoneX 1 8

Market Strategies—Fixed Income: Indicative chart of historical yield movement in the world’s major developed markets…Opportunities are opening in this space. Developed Markets--10Y Yields, % 5.00 4.00 3.00 Thank you 2.00 1.00 0.00 -1.00 UST 10Y German 10Y Bunds UK 10Y Gilts Japanese 10Y Bonds Jul-19 Jan-20 Jul-20 France 10Y Jul-17 Jan-18 Jul-18 Jan-19 -2.00 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jan-21 Jul-21 Jan-22 Jul-22 Jan-23 Jul-23 Source: Bloomberg, StoneX Presentation Heading | 1 9

EM LC has outperformed hard currency bonds due to FX appreciation. Risk-on sentiment has favored EM, which have have generally done well, particularly Colombia, and are historically trading tight to USHY. EM LC paper, FX and hard currency has room to run as a tactical, short term play. Sources: Bloomberg data, StoneX 1,000 High Yield Corp Vs EM Sovereign Bond Yields, bps 900 800 JP Morgan EMBI Global Spread BarCap HY YTW-10Y Spread 700 600 500 400 300 200 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 Jan-20 Jan-21 Jan-22 Jan-23 Source: Bloomberg, StoneX Presentation Heading | 2 0

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