Capital Markets Spring 2020

I

Balance Sheets Matter Navigating Through a Crisis

• In times of economic stress, we believe strong balance sheets are important:

I

‒ As cash flows decline, companies still able to invest can drive market share

‒ Corporations must not be overly reliant on capital markets to roll over debt

II

Leverage Underperformed in the Coronavirus Pandemic

Leverage Underperformed in the Global Financial Crisis

0%

0% 1%

III

-9% -8% -7% -6% -5% -4% -3% -2% -1%

-1%

IV

-2%

-3% Performance

Performance

V

Cumulative Relative Factor

Cumulative Relative Factor

-4%

VI

Jan-20

Jun-08

Feb-20

Mar-20

Dec-19

Mar-08

Dec-07

Dec-08

Sep-08

Source: Axioma, FactSet. This analysis measures leverage after accounting for overall market sensitivity (Beta) as well as other factors so it is the pure impact of debt/leverage. The performance data quoted represents past performance, which is not an indication or a guarantee of future results.

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