October 23, 2020

State Street Associates | In Practice

Tracking the Business Cycle and Recession Risk

By David Turkington, Nan Zhang and Yaonan Zhang

In January 2020, we released a working paper proposing a new index of the business cycle (view). At the time, it
was projecting a 70% chance of recession within 6 months. We have used the index to help track U.S. economic
conditions throughout the events of 2020, and as of October we now publish the U.S. Recession Likelihood Indicator
on a regular basis as part of our suite of risk indicators.

In this In Practice paper, we review the construction of the indicator, describe the multiple time series we publish
which underlie the headline recession indicator, present historical trends, and discuss various applications.

Indicator construction

In brief, the U.S. Recession Likelihood Indicator synthesizes two key variables of the real economy (industrial
production and payrolls) along with two from financial markets (stock returns and yield curve) to estimate the relative
likelihood of recession versus robust growth. Using the Mahalanobis distance, it accounts for patterns of co-
movement in addition to single-variable trends. In the sections below, we describe its construction in detail.

Headline indicator

The U.S. Recession Likelihood Indicator provides a value between 0 and 1 that represents the degree to which
current economic conditions are similar to past recessions (a value close to 1) rather than similar to past periods of
robust economic growth (a value close to 0). The key value proposition of the indicator is that it draws these
comparisons in a statistically rigorous way, taking into account the standard deviations and correlations of four
individual variables in each of two distinct regimes, and presents the result as a single number that is easy to
interpret.

3299718.1.1.GBL.
Information Classification: General STATE STREET CORPORATION 1
TRACKING THE BUSINESS CYCLE AND RECESSION RISK

The index construction begins with the following four variables:

• Industrial Production (one-year percentage change, measured monthly)

• Nonfarm Payrolls (one-year percentage change, measured monthly)
• Return of the Stock Market (one-year return, measured monthly)
• Slope of the Yield Curve (10-year rate minus the Federal Funds Rate)

Each month, starting in January 1926, the indicator value is computed based on comparison with samples of
historical recessions that occurred from 1916 to that point in time, as defined by the National Bureau of Economic
Research (NBER), and periods of robust growth, which we define as months in which the year-over-year percentage
change in industrial production ranked above the 75 th percentile relative to its values in the prior 10 years. (It is
important to bear in mind that the economic data prior to 1956 contains subsequent revisions, while the data after
1956 and therefore the indicator values after 1956 reflect point-in-time economic data releases.) We measure the
similarity of current economic conditions to past episodes of recession and robust growth using Mahalanobis
distance, which was originally introduced in 1927 and modified in 1936 to compare human skull samples in India.
It was later applied to measure financial turbulence, diagnose diseases and detect anomalies in self-driving cars.
The formula of Mahalanobis distance is the following:

𝑑 = (𝑥 − µ)∑−1 (𝑥 − µ)′ (1)

In Equation 1, 𝑥 is a vector of real economic and financial market variables representing the current economic
conditions, µ is a vector of average values of these variables from the sub-sample of recessions or robust growth in
the history, and ∑ is the covariance matrix of each of the sub-samples. Therefore, Equation 1 measures the distance
of current economic conditions to an average observation under recession or robust growth with the correlations of
the dataset taken into account. For more details, please see the working paper (view).

Exhibit 1 shows the indicator values from January 1926 through September 2020. The shaded areas in the
background correspond to U.S. recessions defined by NBER. The indicator rises notably leading up to every recession
in the historical sample and persists for some months after the official end of the recession periods. In March 2020,
it jumped from 70% to 92% when industrial production took a massive hit due to the unexpected pandemic. The
U.S. Recession Likelihood Indicator signaled a high chance of recession in the following months because the
environment was much more similar to historical recessions than to historical growth periods. Since then, and up
to the latest observation in September, the indicator has remained above 90% as the public health and economic
crisis continues.

3299718.1.1.GBL.
Information Classification: General STATE STREET CORPORATION 2
TRACKING THE BUSINESS CYCLE AND RECESSION RISK

Exhibit 1: Monthly U.S. likelihood of recession

100%

80%

60%

40%

20%

0%
Mar-51

Mar-84
Jun-26
Mar-29

Jun-37
Mar-40

Jun-48

Jun-59
Mar-62

Jun-70
Mar-73

Jun-81

Jun-92
Mar-95

Jun-03
Mar-06

Jun-14
Mar-17
Dec-31
Sep-34

Dec-42
Sep-45

Dec-53
Sep-56

Dec-64
Sep-67

Dec-75
Sep-78

Dec-86
Sep-89

Dec-97
Sep-00

Dec-08
Sep-11

Dec-19
NBER Recession Recession Likelihood Indicator

Source: State Street Global Markets.

Attribution of variable importance

The indicator’s consideration of two distinct regimes (recession and robust growth) causes it to dynamically increase
and decrease the emphasis it places of each of the four data inputs. Depending on current conditions, the behavior
of some variables may matter a lot in distinguishing between recession and growth while others matter very little.
This feature of the index leads to insights that are not apparent from a linear regression analysis, which implicitly
maintains a constant emphasis on each data input over time. Therefore, we compute and publish the attribution of
each variable. We arrive at these values by computing the sensitivity (partial derivative) of the index value with
respect to changes in each of the four input variables, multiplying each of them by a representative one standard
deviation move in that variable, and rescaling so that the absolute value sum of these standardized sensitivities
equals one. The formula of variable attribution is in Equation 2. For details please see the working paper (view).

𝜕𝑝𝑟𝑒𝑐
𝜊𝜎
𝑉𝑎𝑟𝑖𝑎𝑏𝑙𝑒 𝑎𝑡𝑡𝑟𝑖𝑏𝑢𝑡𝑖𝑜𝑛 = 𝜕𝑥
𝜕𝑝 (2)
| 𝑟𝑒𝑐 𝜊𝜎|
𝜕𝑥

In the latest observation of September 2020, the attribution of which factors are driving the indicator shows that
50% is from industrial production followed by 31% from the stock market, 14% from the yield curve, and only 4%
from nonfarm payrolls.

3299718.1.1.GBL.
Information Classification: General STATE STREET CORPORATION 3
TRACKING THE BUSINESS CYCLE AND RECESSION RISK

Exhibit 2: Relative importance of variables for recession probability

Source: State Street Global Markets. Importance is calculated by applying the sensitivity (partial derivative) of the recession probability to a
typical one standard deviation move in each variable, and scaling the results to obtain a relative size.

Daily series

Although the industrial production and payroll inputs are only published once per month by statistical agencies, the
stock market and yield curve inputs represent market prices and are available daily. In the monthly headline version
of the index, we use market prices over the same historical window as the economic data represent, even though
they are available at a roughly half-month lag from the statistical agencies. For the daily index (see Exhibit 3), we
update the market variables to the latest daily observations available at each point in time while forward padding
(i.e. holding constant) the economic data inputs using their latest available monthly value. This daily version provides
a very useful gauge of intra-month trends, as it projects in near real-time how market variables impact the indicator
values. Overall, the daily indicator tracks the monthly version closely. Due to the input data differences mentioned
above, the intra-month trends in the daily version may not persist to the next month end and may register different
values from the monthly series.

3299718.1.1.GBL.
Information Classification: General STATE STREET CORPORATION 4
TRACKING THE BUSINESS CYCLE AND RECESSION RISK

Exhibit 3: Daily indicator overlaid on monthly values

Source: State Street Global Markets.

Indicator properties and applications

The U.S. Recession Likelihood indicator has some interesting properties and applications. We find that the
correspondence between the indicator level and the incidence of recessions is strong, and it has many advantages
over other widely followed indices and methods as a signal of the economic cycle. It is also useful as a complement
to the other State Street risk indicators. We have observed that the indicator’s historical turning points are followed
by asset price movements. And finally, we offer some interesting observations on the indicator level in the
recovery/expansion stage of an economic cycle.

Interpreting the likelihood of recession over various horizons

The U.S. Recession Likelihood Indicator provides a convenient and objective assessment of the current economic
conditions with respect to the development of business cycles. Exhibit 5 compares the level of the Recession
Likelihood Indicator to realizations of recessions within various time spans. The realization of the recessions in the
near future is strongly correlated with the indicator level. When the recession likelihood indicator reaches 90%, the
empirical probability of a recession in the next six month is 96%. To put this in perspective, the unconditional
probability of a recession in the same horizon is only 20%.

3299718.1.1.GBL.
Information Classification: General STATE STREET CORPORATION 5
TRACKING THE BUSINESS CYCLE AND RECESSION RISK

Exhibit 5: Frequency of NBER recession occurrence within different time windows

Rising and
above Unconditional
threshold: 50% 60% 70% 80% 90% Frequency
This month 36% 43% 53% 62% 87% 14%
Next 1m 40% 48% 57% 66% 91% 14%
Next 3m 47% 55% 64% 73% 96% 16%
Next 6m 59% 66% 77% 82% 96% 20%
Next 12 m 73% 78% 87% 89% 96% 28%
Next 18m 78% 82% 87% 89% 96% 34%

Source: State Street Global Markets. Will Kinlaw, Mark Kritzman, and David Turkington. 2020. “A New Index of the Business Cycle” (View).

Comparison to other measures of the business cycle

The Recession Likelihood Indicator has the advantage of combining data with Mahalanobis distance compared to
using a weighted average like the Conference Board indicators, and it also uses different input variables from the
ones used in the Conference Board indicators. The Coincident Index has risen in tandem with the six NBER
recessions since 1980, but it is important to keep in mind that this result likely occurred because the Conference
Board and NBER follow nearly identical procedures to define and identify recessions. The NBER defines a recession
as “a period of falling economic activity spread across the economy, lasting more than a few months, normally
visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.” With the exception
of GDP, these indicators match the four variables that make up the Conference Board’s Coincident Index. By using
a different set of variables that include market conditions in addition to economic growth and employment, the
Recession Likelihood Indicator provides a complimentary and differentiated view on the business cycle. The major
spikes in the Conference Board’s Leading Economic Index tend to coincide with recessions rather than antici pate
them. The Recession Likelihood Indicator rises leading up to every recession so that the combination of its trajectory
and level provides a reliable indicator of the recession likelihood. As of late 2019, the Conference Board’s Leading
Index remained flat while the Recession Likelihood Indicator increased sharply.

The time-varying importance of each variable in driving indicator changes is a key feature that distinguishes our
methodology from more conventional regression-based approaches. It allows the index to treat data differently during
different phases of the business cycle. This stands in contrast to Probit and Logit models, which are two of the most
common methods used to forecast probabilities. In Probit and Logit models, the importance is determined by β and
does not vary with the current economic conditions as it does in the Recession Likelihood Index. Traditional linear
regression models evaluate data points in the context of one overall distribution of data. The Recession Likelihood

3299718.1.1.GBL.
Information Classification: General STATE STREET CORPORATION 6
TRACKING THE BUSINESS CYCLE AND RECESSION RISK

indicator evaluates data points in the context of two distinct distributions, where the differences in covariance
between the distributions contributes information. Therefore, we may view the Recession Likelihood Indicator as an
extension to, or variant of, regression-based approaches. We calibrate the index to identify the business cycle
conditions that prevail in each month, which is akin to using a Probit or Logit model to forecast (or “now-cast” as
it is sometimes called) whether the economy is currently in a recession.

Relationship to other State Street risk indicators

The U.S. Recession Likelihood Indicator is a gauge of the business cycle risks in the real economy. It provides a
perfect complement to the existing Turbulence Index and Systemic Risk Index, which focus on the risks in the
financial markets.

The turbulence index provides a unique daily measure of market turbulence based on the collective unusualness of
a given set of investment returns. Turbulence also uses the Mahalanobis distance in its methodology, but in a
different way. In addition to using very different data inputs such as equity sector returns, turbulence calculates the
Mahalanobis distance of a current day to a window of historical daily data, while the Recession Likelihood Indicator
calculates the Mahalanobis distances to two subgroups of historical data and then compares the relative magnitudes
of them. The output of Turbulence Index is expressed in multivariant distance itself then percentiles according to
historical time series, while the Recession Likelihood converts the multivariant distance to likelihood. In Exhibit 6,
we find that the correlation between these two products at State Street are around 10%-20%.

The Systemic Risk Index quantifies fragility using the “absorption ratio,” which is based on Principle Components
Analysis. High levels of systemic risk indicate that unexpected shocks are likely to propagate quickly and broadly
through the equity markets, potentially leading to significant drawdowns. Low levels of systemic risk indicate that
markets are loosely linked and may be more robust to shocks. Exhibit 6 shows that the U.S. Recession Likelihood
Index is about 50% correlated with the standard shift of the U.S. Equity Absorption Ratio. While the two indicators
capture quite different information, it is intuitive that financial market fragility and risk of economic recession
sometimes coincide.

3299718.1.1.GBL.
Information Classification: General STATE STREET CORPORATION 7
TRACKING THE BUSINESS CYCLE AND RECESSION RISK

Exhibit 6: Correlation between the U.S. Recession Likelihood Indicator and other State Street risk indicators

Monthly indicator Daily indicator

60%
50%
Correlation

40%
30%
20%
10%
0%
Equity Turbulence U.S. Fixed Income U.S. Equity Absorption
Index-5yr_pct Turbulence Index- Ratio Standard Shift
5yr_pct

Source: State Street Global Markets.

Asset returns and turning points

The U.S. Recession Likelihood Indicator experienced many turning points in its history, which we define as the one
year standard shift exceeding certain threshold values. We consider the times when the indicator is rising and the
standard shifts are larger than 0, 1, and 1.5, as well as when the indicator is falling and the standard shifts are
falling below 0, -1, and -1.5. We also put these conditions into the background that the headline indicator is strongly
signaling recessionary conditions (above 90%) or robust growth conditions (below 10%).

Exhibit 7 shows the annualized returns of buying equity and selling bonds in the 6 months after such a turning
point in the indicator. It turns out that the turning points signal some unanticipated aspect of stock versus bond
performance. In the extreme cases, the average return is -15.7% in the next 6 months after the economy goes into
a recession (shifts are positive and recession likelihood is above 90%) versus +9.5% when the economy leaves a
recession (shifts are negative while recession likelihood is above 90%), and 2% after the economy goes into robust
growth (standard shifts are negative and recession likelihood is below 10%) versus -1.1% leaving robust growth
(shifts are positive and recession likelihood is below 10%). The relationship of the indicator with the subsequent
performance of growth assets such as equity and defensive assets such as bonds tends to align with our intuition.

3299718.1.1.GBL.
Information Classification: General STATE STREET CORPORATION 8
TRACKING THE BUSINESS CYCLE AND RECESSION RISK

Exhibit 7: Conditional equity minus bond returns in the 6 months after an inflection point

(a) During Recessionary Conditions (b) During Robust Growth Conditions

(Indicator value above 90%) (Indicator value below 10%)

Source: State Street Global Markets

The recovery after a recession

The U.S. Recession Likelihood Indicator can also be a useful barometer of the recovery after a recession. In Exhibit
8, we list the variables that are most influential at the beginning and the end of each recession since 1926, as well
as the length of each recession (red bars) and its subsequent expansion (gray bars). Historically, recessions tend to
be driven more by real economy inputs (industrial production and nonfarm payrolls) than by financial market inputs.
Since 1980, financial markets started to play a more important role, especially in driving the onset of recessions.

3299718.1.1.GBL.
Information Classification: General STATE STREET CORPORATION 9
TRACKING THE BUSINESS CYCLE AND RECESSION RISK

Exhibit 8: Length of the recession and the expansion afterwards, and the most important variable at the beginning
and ending of each recession since 1926

Source: State Street Global Markets, NBER

Exhibit 9 shows the indicator values six months after the recessions versus the length of the subsequent expansions.
Recessions with less than three years of subsequent expansions cluster at the bottom right of the chart (e.g. 1926,
1945, 1953, 1957, 1970 and 1980), showing high indicator levels six months after the recession ended. Compared
to the recoveries that lasted longer than three years, in those “shallow recoveries” the recession likelihood indicator
value stayed much higher months after the recession ended (see Exhibit 10). With insights from these past trends,
the U.S. Recession Likelihood Indicator may help investors navigate through the uncertainties of the current
recession and the upcoming recovery.

3299718.1.1.GBL.
Information Classification: General STATE STREET CORPORATION 10
TRACKING THE BUSINESS CYCLE AND RECESSION RISK

Exhibit 9: Comparison between the length of the expansion and the indicator level at 6 months after previous
recession

140
2008
120 1990
Months of expansion

1960
100
1981
80 1937
2001
60 1973
1929
1948 1953
40 1945
1970
20 1957
1926
1980
0
0% 20% 40% 60% 80% 100% 120%
Indicator level after 6 months

Source: State Street Global Markets

Exhibit 10: Average indicator value before and after recession.

Shallow Recovery Others

120%
Average indicator Level

100%
80%
60%
40%
20%
0%
End
Begin
Begin-5m

End+1m
End+2m
End+3m
End+4m
End+5m
End+6m
Begin-6m

Begin-4m
Begin-3m
Begin-2m
Begin-1m

Prior and after recession

Source: State Street Global Markets

3299718.1.1.GBL.
Information Classification: General STATE STREET CORPORATION 11
TRACKING THE BUSINESS CYCLE AND RECESSION RISK

Disclaimers and Important Risk Information

State Street Global Markets® is the business name and a registered trademark of State Street Corporation® and is used for its
financial markets business and that of its affiliates. State Street Associates® is a registered trademark of State Street
Corporation, and the analytics and research arm of State Street Global Markets.
The products and services outlined herein are only offered to professional clients or eligible counterparties through State Street
Bank and Trust Company, authorized and regulated by the Federal Reserve Board. State Street Bank and Trust Company is
registered with the Commodity Futures Trading Commission as a Swap Dealer and is a member of the National Futures
Association. Please note that certain foreign exchange business, including spot and certain forward transactions, are not
regulated.
This document is a communication intended for general marketing purposes, and the information contained herein has not
been prepared in accordance with legal requirements designed to promote the independence of investment research. It is for
clients to determine whether they are permitted to receive research of any nature. It is not intended to suggest or recommend
any transaction, investment, or investment strategy, does not constitute investment research, nor does it purport to be
comprehensive or intended to replace the exercise of an investor’s own careful independent review and judgment regarding
any investment decision.
This communication is not intended for retail clients, nor for distribution to, and may not be relied upon by, any person or entity
in any jurisdiction or country where such distribution or use would be contrary to applicable law or regulation. This
communication and the information herein does not constitute investment, legal, or tax advice and is not a solicitation to buy or
sell securities or any financial instrument nor is it intended to constitute a binding contractual arrangement or commitment by
State Street of any kind. The information provided does not take into account any particular investment objectives, strategies,
investment horizon or tax status. This communication or any portion hereof may not be reprinted, sold or redistributed without
the prior written consent of State Street Global Markets.
The views expressed herein are the views of State Street Global Markets as of the date specified and are subject to change,
without notice, based on market and other conditions. The information provided herein has been obtained from sources believed
to be reliable at the time of publication, nonetheless, we make no representations or assurances that the information is complete
or accurate, and you should not place any reliance on said information. State Street Global Markets hereby disclaims any
warranty and all liability, whether arising in contract, tort or otherwise, for any losses, liabilities, damages, expenses or costs,
either direct, indirect, consequential, special, or punitive, arising from or in connection with any use of this document and/or the
information herein.
State Street Global Markets may from time to time, as principal or agent, for its own account or for those of its clients, have
positions in and/or actively trade in financial instruments or other products identical to or economically related to those discussed
in this communication. State Street Global Markets may have a commercial relationship with issuers of financial instruments or
other products discussed in this communication.
This document may contain statements deemed to be forward-looking statements. These statements are based on
assumptions, analyses and expectations of State Street Global Markets in light of its experience and perception of historical
trends, current conditions, expected future developments and other factors it believes appropriate under the circumstances. All
information is subject to change without notice. Clients should be aware of the risks trading foreign exchange, equities, fixed
income or derivative instruments or in investments in non-liquid or emerging markets. Derivatives generally involve leverage
and are therefore more volatile than their underlying cash investments. Past performance is no guarantee of future results.
The products and services outlined in this document are generally offered in the United States and Latin America by State
Street Bank and Trust Company. This communication is made available in Japan by State Street Bank and Trust Company, Tokyo Branch,
which is regulated by the Financial Services Agency of Japan and is licensed under Article 47 of the Banking Act. EMEA: (i) State Street
Bank and Trust Company, London Branch, authorised and regulated by Federal Reserve Board, authorised by the Prudential Regulation
Authority, subject to regulation by the Financial Conduct Authority and limited regulation by the Prudential Regulation Authority. Details
about the extent of regulation by the Prudential Regulation Authority are available upon request; and/or (ii) State Street Bank International
GmbH, authorised by Deutsche Bundesbank and the German Federal Financial Supervisory Authority and, in respect of State Street Bank
International GmbH, London Branch, subject to limited regulation by the Financial Conduct Authority and Prudential Regulation Authority.
Details about the extent of regulation by the Financial Conduct Authority and Prudential Regulation Authority are available upon request.
Brazil: The products in this marketing material have not been and will not be registered with the Comissão de Valores
Mobiliários - the Brazilian Securities and Exchange Commission ("CVM"), and any offer of such products is not directed to the
general public within the Federative Republic of Brazil ("Brazil"). The information contained in this marketing material is not
provided for the purpose of soliciting investments from investors residing in Brazil and no information in this marketing material
should be construed as a public offering or unauthorized distribution of the products within Brazil, pursuant to applicable
Brazilian law and regulations. The products and services outlined in this document are generally offered in Canada by State

3299718.1.1.GBL.
Information Classification: General STATE STREET CORPORATION 12
TRACKING THE BUSINESS CYCLE AND RECESSION RISK

Street Bank and Trust Company. This communication is made available in Hong Kong by State Street Bank and Trust
Company which accepts responsibility for its contents, and is intended for distribution to professional investors only (as defined
in the Securities and Futures Ordinance). This communication is made available in Australia by State Street Bank and Trust
Company ABN 70 062 819 630, AFSL 239679 and is intended only for wholesale clients, as defined in the Corporations Act
2001. This communication is made available in Singapore by State Street Bank and Trust Company, Singapore Branch
(“SSBTS”), which holds a wholesale bank license by the Monetary Authority of Singapore. In Singapore, this communication is
only distributed to accredited, institutional investors as defined in the Singapore Financial Advisers Act (“FAA”). Note that
SSBTS is exempt from Sections 27 and 36 of the FAA. When this communication is distributed to overseas investors as defined
in the FAA, note that SSBTS is exempt from Sections 26, 27, 29 and 36 of the FAA. This advertisement has not been reviewed
by the Monetary Authority of Singapore. The products and services outlined in this document are made available in South
Africa through State Street Bank and Trust Company, which is authorized in South Africa under the Financial Advisory and
Intermediary Services Act, 2002 as a Category I Financial Services Provider; FSP No. 42671. This communication is made
available in Israel by State Street Bank and Trust Company, which is not licensed under Israel’s Regulation of Investment
Advice, Investment Marketing and Portfolio Management Law, 1995. This communication may only be distributed to or used
by investors in Israel which are “eligible clients” as listed in the First Schedule to Israel’s Regulation of Investment Advice,
Investment Marketing and Portfolio Management Law 1995. This communication is made available in Qatar by State Street
Bank and Trust Company and its affiliates. The information in this communication has not been reviewed or approved by the
Qatar Central Bank, the Qatar Financial Markets Authority or the Qatar Financial Centre Regulatory Authority, or any other
relevant Qatari regulatory body. This communication is made available in Malaysia by State Street Bank and Trust Company,
which is authorized and regulated by the Federal Reserve Board. State Street Bank and Trust Company is not licensed within
or doing business within Malaysia and the activities that are being discussed are carried out off-shore. The written materials do
not constitute, and should not be construed as constituting: 1) an offer or invitation to subscribe for or purchase securities or
futures in Malaysia or the making available of securities or futures for purchase or subscription in Malaysia; 2) the provision of
investment advice concerning securities or futures; or 3) an undertaking by State Street Bank and Trust Company to manage
the portfolio of securities or futures contracts on behalf of other persons. This communication is made available in Turkey by
State Street Bank and Trust Company and its affiliates. The information included herein is not investment advice. Investment
advisory services are provided by portfolio management companies, brokers and banks without deposit collection licenses
within the scope of the investment advisory agreements to be executed with clients. Any opinions and statements included
herein are based on the personal opinions of the commentators and authors. These opinions may not be suitable to your
financial status and your risk and return preferences. Therefore, an investment decision based solely on the information herein
may not be appropriate to your expectations. This communication is made available in United Arab Emirates by State Street
Bank and Trust Company and its affiliates. This communication does not, and is not intended to, constitute an offer of securities
anywhere in the United Arab Emirates and accordingly should not be construed as such. Nor does the addressing of this
communication to you constitute, or is intended to constitute, the carrying on or engagement in banking, financial and/or
investment consultation business in the United Arab Emirates under the rules and regulations made by the Central Bank of the
United Arab Emirates, the Emirates Securities and Commodities Authority or the United Arab Emirates Ministry of Economy.
Any public offer of securities in the United Arab Emirates, if made, will be made pursuant to one or more separate documents
and only in accordance with the applicable laws and regulations. Nothing contained in this communication is intended to endorse
or recommend a particular course of action or to constitute investment, legal, tax, accounting or other professional advice.
Prospective investors should consult with an appropriate professional for specific advice rendered on the basis of their situation.
Further, the information contained within this communication is not intended to lead to the conclusion of any contract of
whatsoever nature within the territory of the United Arab Emirates. This communication has been forwarded to you solely for
your information, and may not be reproduced or passed on, directly or indirectly, to any other person or published, in whole or
in part, for any purpose. This communication is addressed only to persons who are professional, institutional or otherwise
sophisticated investors. This communication is made available in Saudi Arabia by State Street Bank and Trust Company and
its affiliates. The information contained in this communication is not intended to invite or induce any person to engage in
securities activities nor does it constitute an offer to sell securities or the solicitation of an offer to buy, or recommendation for
investment in, any securities within the Kingdom of Saudi Arabia or any other jurisdiction. The information in this communication
is not intended as financial advice. Moreover, this communication is not intended as a prospectus within the meaning of the
applicable laws and regulations of the Kingdom of Saudi Arabia or any other jurisdiction and this communication is not directed
to any person in any country in which the distribution of such communication is unlawful. This communication provides general
information only. The information and opinions in this communication are stated as at the date indicated. The information may
therefore not be accurate or current. The information and opinions contained in this communication have been compiled or
arrived at from sources believed to be reliable in good faith, but no representation or warranty, express or implied, is made by
State Street Bank and Trust Company and its affiliates as to their accuracy, completeness or correctness. This communication
is made available in South Korea by State Street Bank and Trust Company and its affiliates, which accept responsibility for its
contents, and is intended for distribution to professional investors only. State Street Bank and Trust Company is not licensed
to undertake securities business within South Korea, and any activities related to the content hereof will be carried out off-shore

3299718.1.1.GBL.
Information Classification: General STATE STREET CORPORATION 13
TRACKING THE BUSINESS CYCLE AND RECESSION RISK

and only in relation to off-shore non-South Korea securities. This communication is made available in Indonesia by State Street
Bank and Trust Company and its affiliates. Neither this communication nor any copy hereof may be distributed in Indonesia or
to any Indonesian citizens wherever they are domiciled or to Indonesian residents except in compliance with applicable
Indonesian capital market laws and regulations. This communication is not an offer of securities in Indonesia. Any securities
referred to in this communication have not been registered with the Capital Market and Financial Institutions Supervisory Agency
(BAPEPAM-LK) pursuant to relevant capital market laws and regulations, and may not be offered or sold within the territory of
the Republic of Indonesia or to Indonesian citizens through a public offering or in circumstances which constitute an offer within
the meaning of the Indonesian capital market law and regulations. This communication is made available in Oman by State
Street Bank and Trust Company and its affiliates. The information contained in this communication is for information purposes
and does not constitute an offer for the sale of foreign securities in Oman or an invitation to an offer for the sale of foreign
securities. State Street Bank and Trust Company is neither a bank nor financial services provider registered to undertake
business in Oman and is neither regulated by the Central Bank of Oman nor the Capital Market Authority. Nothing contained
in this communication report is intended to constitute Omani investment, legal, tax, accounting, investment or other professional
advice. This communication is made available in Taiwan by State Street Bank and Trust Company and its affiliates, which
accept responsibility for its contents, and is intended for distribution to professional investors only. State Street Bank and Trust
Company is not licensed to undertake securities business within Taiwan, and any activities related to the content hereof will be
carried out off-shore and only in relation to off-shore non-Taiwan securities. Peoples Republic of China (“PRC”). This
communication is being distributed by State Street Bank and Trust Company. State Street Bank and Trust Company is not
licensed or carrying on business in the PRC in respect of any activities described herein and any such activities it does carry
out are conducted outside of the PRC. These written materials do not constitute, and should not be construed as constituting:
1) an offer or invitation to subscribe for or purchase securities or futures in PRC or the making available of securities or futures
for purchase or subscription in PRC; 2) the provision of investment advice concerning securities or futures; or 3) an undertaking
by State Street Bank and Trust Company to manage the portfolio of securities or futures contracts on behalf of other persons.
Products and services may not be available in all jurisdictions. Please contact your State Street representative for further
information. SSA MMD 2020-09.
To learn how State Street looks after your personal data, visit: http://www.statestreet.com/utility/data-processing-and-privacy-
notice.html

© 2020 State Street Corporation – All Rights Reserved

3299718.1.1.GBL.
Information Classification: General STATE STREET CORPORATION 14