#1Investor Advisory Committee on Financial Markets Member Presentation Materials October 20th, 2021#2Q4 2021 IACFM Meeting Discussion Materials Pershing = Square William A. Ackman October 2021#3Situation Overview ▸ Economy has made substantial progress towards the Fed's employment and inflation targets Economy is likely to experience a significant boost as we fully emerge from the pandemic, which is not yet reflected in employment and inflation figures Government has provided an unparalleled level of economic stimulus during the pandemic and is likely to provide additional stimulus $5.1tr of stimulus since the beginning of the pandemic (~25% of GDP) ■ Future infrastructure and "Build Back Better" spending may be $2tr to $3tr (10% to 15% of GDP) ▸ Fed funds rate at historically low levels ► Current Fed policy is to begin tapering shortly but wait on raising interest rates until further evidence of progress on employment and continued inflation A "wait and see" approach to raising interest rates creates significant risks given the substantial progress to date on employment and inflation combined with the unprecedented economic backdrop 3#4Substantial Progress Towards Full Employment More than 25 million jobs were lost due to the pandemic between February and April 2020, but the economy has since recovered 20 million jobs (~80%) Current vs Pre-Pandemic Employment Summary (numbers in millions): Feb-20 Sep-21 Difference 158.7 153.7 (5.1) Total employed in labor force Unemployed in labor force 5.7 7.7 2.0 Headline U-3 unemployment rate 3.5% 4.8% 1.3% 1 U-6 unemployment rate 7.0% 8.5% 1.6% Total civilian labor force 164.4 161.4 (3.1) Labor force participation rate 63.3% 61.6% Total civilian non-institutional population (16+) 259.6 261.8 2.1 Employed / Population 61.1% 58.7% Total employment is only five million jobs lower today than its pre-pandemic level in February 2020 Source: Bureau of Labor Statistics (1) U-6 unemployment rate represents total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all persons marginally attached to the labor force 4#5Robust Pace of Monthly Employment Additions At the current pace of ~500K monthly job additions, we expect the five million employment gap to pre-pandemic levels to close within the next 10 months Monthly Employment Additions (numbers in thousands): Monthly Additions Monthly Mar-21 Apr-21 May-21 Jun-21 Jul-21 Aug-21 Sep-21 Average Nonfarm payroll employees 785 Farm workers / proprietors / other¹ Total employed in labor force (176) 269 59 614 (170) 609 328 444 962 1,091 (980) (48) (18) 1,043 366 194 612 143 332 (120) 509 526 492 Current employment figures do not yet reflect the full impact of the ending of unemployment benefits, which began to expire through August and September Source: Bureau of Labor Statistics (1) Includes agricultural workers, unincorporated self-employed workers, private household workers and other employment categories that are reflected in the Bureau of Labor Statistics' Household Survey but are excluded from the Establishment Survey of non-farm businesses 5#6Job Openings at Historic Highs There are currently 10.4 million job openings in the economy, an all-time high level, and 2.8 million more openings than the number of unemployed persons Number of Job Openings and Total Unemployed Persons in Labor Force (numbers in millions): 20.0 18.0 16.0 14.0 12.0 10.0 8.0 6.0 4.0 2.0 0.0 Dec-2001 Dec-2002 Source: Bureau of Labor Statistics Dec-2003 Dec-2004 Dec-2005 Dec-2006 Dec-2007 -Total Job Openings Dec-2008 Dec-2009 Dec-2010 Dec-2011 Dec-2012 Dec-2013 6 -Total Unemployed Persons in Labor Force Dec-2014 Dec-2015 Dec-2016 Dec-2017 Dec-2018 Dec-2019 Dec-2020 10.4 million Job Openings 7.7 million Unemployed Persons#7COVID-Impacted Sectors Account for Majority of Employment Shortfall COVID-impacted industries such as leisure & hospitality and education account for a majority of the employment gap to pre-pandemic levels despite representing less than a quarter of total employment Current vs Pre-Pandemic Employment Levels by Sector (numbers in millions): Category Difference as % of Total Feb-20 Sep-21 # % Change % Contribution Employees Leisure & hospitality 16.9 15.3 (1.6) (9%) 32% 11% State & local, education 10.6 10.1 (0.5) (5%) 10% 7% Private education services 3.8 3.6 (0.2) (5%) 3% 2% Nursing and residential care 3.4 3.0 (0.4) (13%) 8% 2% Industries most impacted by COVID 34.7 32.0 (2.7) (8%) 53% 22% All other industries 124.0 121.7 (2.4) (2%) 47% 78% Total employed in labor force 158.7 153.7 (5.1) (3%) 100% 100% Source: Bureau of Labor Statistics (1) Includes agricultural workers, unincorporated self-employed workers, private household workers and other employment categories that are reflected in the Bureau of Labor Statistics' Household Survey but are excluded from the Establishment Survey of non-farm businesses 7#8COVID-Impacted Sectors Poised for Continued Recovery As Delta Variant Subsides COVID-impacted industries were a material contributor to overall employment growth prior to a slowdown in August and September Monthly Employment Additions in Industries Most Impacted by COVID (numbers in thousands): Average Monthly Additions Prior to August: 485K 319 330 427 704 Delta Variant 644 89 Mar-21 Apr-21 May-21 Jun-21 Jul-21 Aug-21 Sep-21 (143) ■Leisure & hospitality State & local, education Private education services Nursing and residential care Source: Bureau of Labor Statistics 8#9U.S. COVID-19 Cases and Vaccinations Over Time As the economy fully emerges from the pandemic and unemployment benefits rollover, we expect the pace of total job additions to meaningfully accelerate in the coming months Daily New Case Count (Trailing 7-Day Average) and Total Vaccine Doses Administered : 250 The most recent employment report in September is based off a mid-month reference period¹ and does not fully capture the declining impact of the Delta variant 500 Daily New COVID-19 Cases (Trailing 7-Day Average, in thousands) 200 150 100 50 50 0 Jan-21 Feb-21 Mar-21 0 Apr-21 May-21 Jun-21 Jul-21 Aug-21 Sep-21 Oct-21 Daily New COVID-19 Cases -Total Vaccine Doses Administered 100 200 300 300 400 Total Vaccine Doses Administered (in millions) Source: Bloomberg (1) Employment report reflects data from the Bureau of Labor Statistic's monthly household and establishment survey. In the household survey, the reference period is generally the calendar week that contains the 12th day of the month. In the establishment survey, the reference period is the pay period including the 12th 9#10Mid to High-Single-Digit Annualized Inflation The annualized pace of growth across several key inflation measures, including wage inflation, has remained elevated in the mid to high-single-digit range, considerably in excess of the Federal Reserve's long-term target of 2% % Month-over-Month and Annualized Change in Key Inflation Metrics: Apr-21 May-21 Jun-21 Jul-21 Aug-21 Sep-21 Average CPI 0.8% 0.6% 0.9% 0.5% 0.3% 0.4% 0.6% Annualized 9.6% 7.2% 10.8% 6.0% 3.6% 4.8% 7.2% Core CPI 0.9% 0.7% 0.9% 0.3% 0.1% 0.2% 0.5% Annualized 10.8% 8.4% 10.8% 3.6% 1.2% 2.4% 6.4% Core PCE 0.6% 0.6% 0.5% 0.3% 0.3% N.A. 0.5% Annualized 7.4% 6.8% 5.8% 3.8% 4.0% N.A. 5.7% Wage Inflation¹ 0.7% 0.5% 0.4% 0.4% 0.4% 0.6% 0.5% Annualized 8.4% 6.0% 4.8% 4.8% 4.8% 7.2% 6.2% Source: Bureau of Labor Statistics (1) Represents the month over month change in the seasonally adjusted, average hourly earnings of all nonfarm payroll employees as published in the BLS' Employment Situation Report 10#11CPI Inflation by Expenditure Category Even excluding the impact of new vehicles and used cars and trucks, which have experienced heightened inflation, CPI has been increasing at an annualized growth rate of approximately 5% CPI Inflation by Expenditure Category: Trailing 6 Month Average Weighting % MOM Annualized Contribution CPI All items Food Food at home Food away from home Energy Energy commodities (motor fuel) 100% 0.6% 7.2% 7.2% 14% 0.6% 7.4% 1.0% 8% 0.6% 8.1% 0.6% 6% 0.5% 6.8% 0.4% 7% 1.0% 13.3% 1.0% 4% 1.1% 14.5% 0.6% Energy services (electricity and gas) 3% 0.9% 11.6% 0.4% Core CPI - All items less food and energy 79% 0.5% 6.4% 5.0% Commodities (ex. food and energy) 21% 1.2% 14.9% 3.1% New vehicles 4% 1.4% 17.9% 0.7% Used cars and trucks 3% 4.2% 63.4% 2.2% Apparel 3% 0.2% 3.0% 0.1% Medical care commodities 1% 0.1% 1.0% 0.0% Household furnishings and supplies 4% 0.7% 9.4% 0.3% Recreation commodities 2% 0.4% 5.3% 0.1% Other commodities 4% (0.1%) (0.9%) (0.0%) Services (ex. Energy) 58% 0.3% 3.7% 2.1% Shelter 33% 0.4% 4.5% 1.5% Transportation services 5% 0.3% 3.9% 0.2% Medical care services 7% 0.1% 0.8% 0.1% Other services 13% 0.2% 3.0% 0.4% Memo: CPI excluding new vehicles and used cars and trucks Core CPI excluding new vehicles and used cars and trucks Source: Bureau of Labor Statistics 4.7% 3.0% 11#12Economic Context of Historical Tightening Cycles Both the unemployment rate is lower AND inflation measures are substantially higher today than at the beginning of prior rate hike cycles Summary of Recent Fed Funds Rate Hike Cycles: Date of First Rate Hike Historical Tightening Cycles Apr-87 Feb-94 Jun-99 Jun-04 Dec-15 Average Current Key Economic Indicators at First Rate Hike:1 U-3 Headline Unemployment Rate 6.3% 6.6% 4.3% 5.6% 5.0% i 5.6% 4.8% U-6 Unemployment Rate N.A. 11.4% 7.5% 9.6% 9.9% 9.6% 8.5% Core CPI Inflation (Trailing 6 Month) 4.3% 2.6% 1.4% 2.6% 2.0% 2.6% 6.4% CPI Inflation (Trailing 6 Month) 4.7% 2.6% 2.2% 3.7% 0.2% 2.7% 7.2% Core PCE Inflation (Trailing 6 Month) 3.0% 1.9% 1.1% 2.3% 1.0% 1.9% 5.7% Total Fed Funds Rate Increase 3.75% 3.00% 1.75% 4.25% 2.25% 3.00% ? Average Rate Increase Per Quarter 0.51% 0.75% 0.48% 0.53% 0.19% 0.49% ? Starting Fed Funds Upper Bound 6.00% 3.00% 4.75% 1.00% 0.25% 3.00% 0.25% Source: Federal Reserve Board, Bureau of Labor Statistics (1) Unemployment figures are as of the month of the first Fed Funds rate hike. Inflation figures represent the annualized, average month-over-month increases of the trailing six months prior to the first Fed Funds rate hike. 12#13Bank of England Has Revised its Views on Inflation The Bank of England recently shifted its perspective to acknowledge the growing need to counteract inflation with tighter monetary policy Andrew Bailey insists BoE is not 'whistling in the wind' on inflation Central bank governor uses Mansion House speech to stress that sharp growth in prices is likely to be temporary ""It is important not to overreact to temporarily strong growth and inflation, to ensure that the recovery is not undermined by a premature tightening in monetary conditions," he said. - Financial Times, July 1, 2021 Bank of England chief warns it 'will have to act' to curb inflation Andrew Bailey makes no attempt in speech to central bankers to quell expectations of rate rise this year "The energy story means [the period of high inflation] will last longer," he said. While he said the BoE could do nothing about the initial price rises in energy and in goods hit by supply chain turmoil, the rate- setting Monetary Policy Committee was increasingly concerned about higher prices raising "medium-term inflation and medium-term inflation expectations". "That's why we, at the Bank of England, have signalled, and this is another such signal, that we will have to act," Bailey said. "But of course that action comes in our monetary policy meetings," he added. 13 - Financial Times, October 17, 2021#14Commentary from International Monetary Fund IMF warns on inflation, says the Fed and others should be prepared to tighten policy Central banks such as the Fed should be preparing to tighten policy in case inflation gets out of control, the IMF warned Tuesday. The cautionary tone mentioned the U.S., as well as the U.K. and other developed economies, as places where "inflation risks are skewed to the upside." "While monetary policy can generally look through transitory increases in inflation, central banks should be prepared to act quickly if the risks of rising inflation expectations become more material in this uncharted recovery," Gita Gopinath, the IMF's economic counselor and director of research, said in an executive summary accompanying the report. "Central banks should chart contingent actions, announce clear triggers, and act in line with that communication," she added. Though the IMF did not single out the Fed, much of its assessment on inflation indirectly addresses a major policy adjustment the U.S. central bank made in September 2020, when it said it would be willing to allow inflation to run hotter than normal in the interest of generating full and inclusive employment. That type of policy carries some danger with it if inflation expectations start to surge, the IMF said. "In settings where inflation is rising amid still-subdued employment rates and risks of expectations de-anchoring are becoming concrete, monetary policy may need to be tightened to get ahead of price pressures, even if that delays the employment recovery," the report said. Waiting for employment to rebound more strongly "runs the risk that inflation increases in a self-fulfilling way," which then would undermine Fed policy, the IMF said. 14 - CNBC, October 12, 2021#15Risk Factors ► Weakening China growth ▸ Emergence of new COVID variants Second-order impacts from supply chain constraints ► Geopolitical risk ► Cybersecurity risk 15