US corporate earnings keep surprising, and strength in the US economy seems real. Until last week, markets were hitting new highs – ignoring fractures in US service industries, the coronavirus spread, and a flatlining GDP in Germany + Japan. - Will coronavirus kill the rally? - Can US GDP rise while Germany + Japan go negative? - Is this sunset for the business cycle or just another buy-the-dip moment? Join us as we update Coronavirus outcomes and introduce a new scenario on Global Recession, in the next HiddenLevers War Room.

1. Recession Immunity
26 February 2020

2. War Room
Idea Generation
Macro Coaching
Scenario Updates
HiddenLevers runs on SCENARIOS like Instagram runs on PHOTOS

3. RECESSION IMMUNITY: Coronavirus Draw Down
sources: HiddenLevers, Al Jazeera, CNBC
interactive version at hiddenlevers.com
S+P500 vs SHANGHAI
07 Jan
China News
14 Jan
China 2020
Stimulus
03 Feb
1 MONTH DRAWDOWN
S+P500
SHANGHAI
-12%
DRAWDOWN
19 Feb
Italy News
Shanghai Index has recovered since PBOC made stimulus announcements
-7.5%
S+P500
coronavirus
global recession

4. sources: HiddenLevers, Johns Hopkins
Feb 26th 2020: 81,245 Cases / 2770 Deaths
China cases flatlining
Global cases rising fast
Total Cases: Log Scale
Chinese New Year
Post-Holiday Crash
S&P 500
DAX
CAC40
NIKKEI
FTSE
Shanghai:
Rapid Recovery
New cases in China decelerating + PBOC stimulus
China markets calm
RECESSION IMMUNITY: Global Outbreak Started

5. RECESSION IMMUNITY: Global Dependency on China
sources: HiddenLevers, Nikkei Asian Review
CHINA % OF WORLD TRADE + FOREIGN DIRECT INVESTMENT
2003 SARS 6%
2020 CORONAVIRUS 12%

6. BRITAIN
RECESSION IMMUNITY: Global Economic Snapshot
sources: HiddenLevers, BBC, NYTimes, CNBC, Countryeconomy.com, Guardian, Reuters 1, Reuters 2
CHINA EUROPE JAPAN
sales tax hike
Oct 2019
8%  10%
domestic
consumption
dropping
capex dropping
Q4 2019 GDP
-0.4%
domestic
consumption
60% of GDP
manufacturing exodus
predates coronavirus
+ trade war
Debt-to-GDP
150%
Imports > Exports
unprecedented supply
shock
Q4 2019 GDP
France -0.1%
Italy -0.3%
Germany FLAT
Eurozone +0.1%
EUR-USD
Feb 2018 $1.25
Feb 2020 $1.08
inflation
food / alcohol / energy
domestic consumption
weak recovery
Q4 2019 GDP
FLAT
GBP-USD
Feb 2018 $1.41
AUG 2019 $1.19
Feb 2020 $1.29
post Brexit optimism

7. RECESSION IMMUNITY: Global GDP Comparison
sources: HiddenLevers
USA
China
Germany
Major world economies all flatlining or in recession, so far US immune
-100bp down into
Q4 2019
Stuck at 2% growth
France
Europe
Growth
headed to
recession
Japan Q4 2019 =
-6.3% annualized
(-0.4 YoY)
UK
Steady Downtrend

8. RECESSION IMMUNITY: US Economic Snapshot
sources: HiddenLevers
COMPANY LAYOFFS
GE 78000
US Steel 1545
Expedia 3000
Wayfair 550
Uber 1000
Waitr 2300
Tech Start Ups 8000
Boeing 2800
Walmart TBA
3M 1500
Q4 2019 – NOW
interactive version at hiddenlevers.com
Purchasing Managers Index vs US GDP
USA TOTAL LAYOFFS UP 28% YoY
JAN 2019 52,988
JAN 2020 67,735
US GDP follows PMI (still) 5Y USD

9. RECESSION IMMUNITY: US Recession History
sources: HiddenLevers, National Bureau of Econ Research
Recession Dates Recession Length GDP Contraction S+P 500 Index MDD S+P MDD Length
Nov 1973 – Mar 1975 16 months -3.2% -42% 21 months
Jan 1980 – Jul 1980 6 -2.2% -17% 2
Jul 1981 – Nov 1982 16 -2.7% -36% 20
Jul 1990 – Mar 1991 8 -1.4% -19% 3
Mar 2001 – Nov 2001 8 -0.3% -47% 30
Dec 2007 – Jun 2009 18 -5.1% -55% 17
2008 Crisis
2000
Tech Crash
1973
Oil Embargo
S+P 500 Log Scale
Average Recession Length 12 months
Average GDP Contraction - 2.5%
Average S+P MDD - 36%
Average S+P MDD length 16 months

10. RECESSION IMMUNITY: Buy the Coronavirus Dip?
sources: HiddenLevers, CBO Pandemic Scenario Paper
Solid Correction amidst Uptrend Start of Bear Market
Unprecedented supply chain disruption
Global recession = US recession
temporary supply chain disruption which will
be made up for by pent up demand
US GDP = 70-75% domestic
US GDP = 12% exports
Coronavirus is coming to USA
and cancelling the Olympics
2020 Rate Cuts expected = 3
pre-crash valuations not crazy
Macro Themes
Short Airlines
Short High Beta
Short Commodities
Long Biotech
Long India
Long USD
2/10 Treasury Spread may re-invert
-15%
-36%

11. US Immunity
GOOD
S+P 500
1990
-36%
S+P 500
3420
+9%
S+P 500
2630
-16%
Europe + Japan
Negative GDP
UGLY
US / China
Negative GDP
UNPRECEDENTED SUPPLY
SHOCK SLAYS WORLD’S TWO
BIGGEST ECONOMIES
SUCCESSFUL FED ACTION
MAKES CORONAVIRUS
FALLOUT MOMENTARY
CORONAVIRUS FALLOUT TIPS
FLATLINING ECONOMIES
INTO RECESSION
GLOBAL RECESSION: Scenario Outcomes
US GDP
-0.5%
(-1.8%)
US GDP
1.8%
(-0.5%)
US GDP
1.0%
(-1.3%)
10Y
1.80
+50 bps
10Y
1.00
-30 bps
10Y
0.75
-55 bps
BASELINE

12. RECESSION IMMUNITY: What to Say
Coronavirus will be scapegoat, but global
economy was quite fragile end of 2019
Separate bigger US GDP hit from global recession
and lesser GDP hit from coronavirus global
outbreak
Recession in Europe + Japan unavoidable
US GDP takes a hit in all outcomes because
domestic consumption dropping worldwide