Treasury Yields 90D 10 Yr 30 Yr - Raymond James …

1 morning tack Published by Raymond James & Associates Please read domestic and foreign disclosure/risk information beginning on page 4. 2018 Raymond James & Associates, Inc., member New York Stock Exchange/SIPC. All rights reserved. International Headquarters: The Raymond James Financial Center | 880 Carillon Parkway | St. Petersburg, Florida 33716 | 800-248-8863 Jeffrey D. Saut, Chief Investment Strategist, (727) 567-2644, March 16, 2018 Investment Strategy _____ "Master Limited Partnerships (MLPs)" Sometimes when we do not have anything on our schedule for the day we work out of the house. Yesterday was such a day, but it was a day when we really should have been in the office.

2 The problem was with a blow up in the midstream Master Limited Partnership (MLP) space, a space we have been favorable on for the past six months. The onslaught of emails and phone calls reminded me of the line from the movie Airplane where Steven McCroskey (Lloyd Bridges) says, Looks like I picked the wrong week to quit sniffing glue (glue)! The carnage arose when this headline hit the broadtape, FERC Revises Policies, Will Disallow Income Tax Allowance Cost Recovery in MLP Pipeline Rates. POW, the selling was on and the MLPs cratered. As tends to be the case, the initial selling appears to be an overreaction. In a rushed email our MLP analyst (Darren Horowitz) wrote this yesterday: FERC report on tax allowance removal for cost of service long haul pipes, it is an overreaction in our view.

3 It will take years for the FERC to sort through what contracts were cost-of-service vs. negotiated rate, and then address the tax allowance. We think the quantifiable impact of some contracts losing the tax allowance likely doesn t justify the stocks getting hit this hard. We will have something more comprehensive out shortly (see his comments). Later in the session carried this quip from Enterprise Products (EPD/$ Buy): Enterprise Products says FERC policy revision not expected to have a material impact to the earnings and cash flow of Enterprise. "We do not expect the revisions to the FERC's policy on the recovery of income taxes to materially impact our earnings and cash flow," said "Jim" Teague, chief executive officer of Enterprise's general partner.

4 "The cost-based tariff rates that are in effect for all of our interstate pipelines are based on a cost of service for those pipelines whereby the disallowance for the recovery of an income tax allowance will not have a material effect, if any, to the posted tariffs." (Continued on page 2) Looks like I picked the wrong week to quit sniffing glue! .. Steven McCroskey, played by Lloyd Bridges, in the film Airplane MarketsCloseNet1 Day % YTD %Dow Jones Jones 400 600 2000 (Smallcaps) (Banking) (Biotech) (Oil Index) (Semiconductor) (Gold/Silver) FutureChange24, , , Day VolumeVolumeIssuesNYSE812,286, ,966,132, MarketsIntradayNet% 1007,140 nyGerma ny DAX (TR)

5 12,411 zilBra zil Bovespa Index84,928 pa n Ja pa n Nikkei 22521,677 KongHa ng Seng Index31,502 Chg1 mo %S&P 500 / Consumer Discretiona ry 500 / Consumer Sta ples 500 / Hea lth Ca re 500 / Informa tion Technology 500 / Telecommunica tions Services 500 / Energy 500 / Fina ncia ls 500 / Industria ls 500 / Ma teria ls 500 / Utilities 500 / Rea l Esta te - Commodity PricesLastNetCrude Oil WTI (NYM $/bbl) tura l Ga s (NYM $/mmbtu) Ga soline (NYM $/ga l) (NYM $/ozt) Continuous (NYM $/ozt) Sta tes Dolla r Copper (NYM $/lbs) #2 (IFUS $/lbs) Valuation2017E2018E2019 EConsensus S&P 500 EPS$125$156$173 rnings Risk Premium (10 yr) Yields90D10 Yr30 : Fa ctSet Da ta a s of: 3/16/2018S&P 500 (So urce: Sto m)IndexDow JonesS&P 500 NASDAQS&P Sectors A DV / DECR aymond James morning tack 2018 Raymond James & Associates, Inc.

6 , member New York Stock Exchange/SIPC. All rights reserved. International Headquarters: The Raymond James Financial Center | 880 Carillon Parkway | St. Petersburg, Florida 33716 | 800-248-8863 2 We will defer to our MLP fundamental analysts for further comments, but I did not sell any of my MLP positions. Turning to the stock market, despite the Dow s win (+115 points), the S&P 500 ( ) actually closed down on the day by points and in the process failed to recapture it 50-day moving average at The Advance/Decline line was marginally negative and volumes were subpar. Yet, our short//intermediate models remain positively configured and the energy model still has a bunch of internal energy.

7 So if the SPX can travel back above 2800 we think it should be able to trade out to new all-time highs. Today is option expiration so manipulation is the word of the day. Professional traders will be very sensitive to yesterday s high ( ) and low ( ) for the S&P 500 Index, especially with SPY options expiring. Raymond James morning tack 2018 Raymond James & Associates, Inc., member New York Stock Exchange/SIPC. All rights reserved. International Headquarters: The Raymond James Financial Center | 880 Carillon Parkway | St. Petersburg, Florida 33716 | 800-248-8863 3 Markets Index Information: Treasury securities are guaranteed by the government and, if held to maturity, offer a fixed rate of return and guaranteed principal value.

8 The Dow Jones Industrial Average is an unmanaged index of 30 widely held securities. The Dow Jones Transportation Average is the most widely recognized gauge of the American transportation sector. The Dow Jones Utility Average keeps track of the performance of 15 prominent utility companies. The S&P 500 is an unmanaged index of 500 widely held stocks. The S&P Mid Cap 400 Index is a capitalization-weighted index that measures the performance of the mid-range sector of the stock market. The S&P Small Cap 600 Index is an unmanaged index of 600 small-cap stocks. The NASDAQ Composite Index is an unmanaged index of all stocks traded on the NASDAQ over-the-counter market. The Russell 2000 index is an unmanaged index of small cap securities which generally involve greater risks.

9 The KBW Bank Sector (BKX) is a capitalization-weighted index composed of 24 geographically diverse stocks representing national money center banks and leading regional institutions. The NYSE Arca Biotechnology Index (BTK) is an equal dollar weighted index designed to measure the performance of a cross section of companies in the biotechnology industry that are primarily involved in the use of biological processes to develop products or provide services. The NYSE Arca Oil Index (XOI) is a price-weighted index of the leading companies involved in the exploration, production, and development of petroleum. The PHLX Semiconductor Sector Index (SOXX) measures the performance of securities of companies engaged in the semiconductor business, which includes companies engaged in the design, distribution, manufacture, and sales of semiconductors.

10 The Philadelphia Gold and Silver Index (XAU) is an index of 16 precious metal mining companies that is traded on the Philadelphia Stock Exchange. Futures: Futures prices are current as of the publication of this report, but will fluctuate. Please contact your financial advisor for updated information. Foreign Markets Information: The FTSE 100 Index is a share index of the stocks of the 100 companies with the highest market capitalization listed on the London Stock Exchange. The DAX (German stock index) is a blue chip stock market index consisting of the 30 major German companies trading on the Frankfurt Stock Exchange. The Bovespa Index is a gross total return index weighted by traded volume and is comprised of the most liquid stocks traded on the Sao Paulo Stock Exchange.