Weekly Review May 26, 2017

Transcription

1 Weekly Market Review Weekly Review Chart of the Week % Real GDP Growth Rate - Annualized - Trailing 12 Qtrs. Jun-14 Dec-14 Jun-15 Dec-15 Jun-16 Dec-16 Weekly Highlights Domestic stocks were up for the week after upbeat retail sales brought the S&P 500 to near record highs. Developed markets were flat for the week, although emerging markets posted positive gains after last week s higher volatility. U.S. Treasury yields were flat for the week, increasing by 4 basis points midweek before declining again. Commodity indexes were down for the week, with the sell-off in oil driving the majority of negative returns. Talking Points Among equities, small caps slightly underperformed large caps; growth stocks slightly outperformed value-oriented equities; domestic stocks outperformed international equities; developed markets underperformed emerging markets stocks. Treasury yields remained flat for the week. Commodity indexes were down, as the market was disappointed regarding the extent of OPEC s oil production cut. The dollar index rose slightly this week against a basket of six major currencies. Among economic data released this week, new and existing home sales disappointed, jobless claims were in line, and GDP was revised up from a median forecast of 0.9% to 1.2%. 1

2 Weekly Market Review-May Market Dashboard Last Price Change % Chg. YTD % Last Price Change % Chg. YTD % S&P 500 2, % 7.9% Russell Global EM 3, % 17.0% Dow Industrials 21, % 6.7% 10-Year US Treas bps NM NM Nasdaq 6, % 15.4% DJ UBS Comm. Idx % -4.0% Russell , % 1.9% Gold $1, $ % 10.4% Euro Stoxx % 8.3% Crude Oil $ $ % -12.3% Shanghai Composite 3, % 0.2% Dollar % -4.7% Russell Global 1, % 10.0% VIX % -30.1% ; % change is based on price. S&P 500 : Trailing 180 Days One Week YTD Value Growth Value Growth L 0.85% 0.95% 1.51% 1.13% 2.09% 1.35% 2.02% 3.07% 8.36% 6.41% 14.52% 10.63% S 0.86% 1.09% 1.33% -2.51% 1.85% 6.71% Sector Performance: S&P/Global Industry Classification Sectors (GICS) % Wgt in S&P 500 Week % Chg. YTD % Chg. Consumer Discretionary % 11.4% Consumer Staples % 9.1% Energy % -12.1% Financials % 1.3% Health Care % 9.8% Industrials % 7.0% Information Technology % 19.7% Materials % 6.2% Real Estate % 3.6% Telecom Services % -11.7% Utilities % 9.2% VIX : Trailing 180 Days 10 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr Wealth Growth of $1: Trailing 24 Months S&P 500 Dow Industrials Small Cap EAFE Emerging Mkts. 0.7 Apr-15 Jun-15 Aug-15 Oct-15 Dec-15 Feb-16 Apr-16 Jun-16 Aug-16 Oct-16 Dec-16 Feb-17 Apr-17 2

3 Weekly Market Review-May The Economy and Markets A Macro View: Housing Back to the Top but for a Different Reason Housing prices continue to climb and are less than 5% below peak prices in 2006, according to the S&P/Case-Shiller 20 City Composite Home Price. Those who either cannot afford or find a home in the next year or two might be disappointed in the short run, but given the strong price appreciation, they might be grateful in the long run. Remember that those who purchased a home at the peak in 2006 are still under water. In 2006, the reason for the large increase in housing prices was sub-prime lending, where anyone willing to sign a mortgage while providing no documentation to their lender could walk away with a set of keys. The mortgages were packaged by Wall Street and sold to investors around the world. When mortgages couldn t be generated fast enough, traunches were then re-packaged and credit default swaps were written on re-packaged traunches. Anyone could own a home they couldn t afford as long as the machine kept churning out re-packaged mortgages. But eventually it all came crashing down. Although the reason for today s rising home prices is different, potential home buyers in today s market should remember Mark Twain s saying that history does not repeat itself, but it does rhyme. On the surface, the good news for today s buyers is that despite prices reaching near 2006 levels, the ratio of house price to income is still 18% below 2006 s peak. In other words, housing prices might be near the top, but income levels have increased since 2006, so the average buyer has more income to spend on a home. That said, the price-to-income ratio is 8% higher than its average since 1980, according to The Economist. The bad news is the average price-to-income ratio since 1980 is distorted by the bubble, so if you exclude that bubble, people are paying much more for a house compared to their income level. The reason for such a spike in housing prices has less to do with cheap and widely available credit, as was the case in , and more to do with low supply and an influx of central bank liquidity. Over the past several years, mortgage rates have dipped to historic lows, so home buyers who qualify for a mortgage pay less in monthly payments for the dollars borrowed than in the 2000s, 1990s, and 1980s. Given such cheap rates, future home buyers can purchase a more expensive home per dollar in mortgage payment, compared to the last 30 years. According to the St. Louis Federal Reserve Bank, the average mortgage rate on a 30-year conforming loan in 2005 was 5.87%, compared to 2016 s average rate of 3.65%. This amounts to a monthly savings of $134 per $100,000 in mortgage loan. In other words, buyers can get a much more expensive house for their average monthly payment, which drives up housing prices. The second reason for rising home prices is the lack of supply. Since 1980, average housing starts as a percentage of the US population have been 0.51%, according to the Federal Reserve. But since the housing bubble burst in 2006, average housing starts are 0.29% almost half. So America is building fewer homes per person, depressing the supply of new homes added to the market. According to The Wall Street Journal, home inventory is at a 20-year low and keeps decreasing. For the past 23 consecutive months, supply has decreased each month, so now there are fewer homes for sale, resulting in an increase in prices. What does all this mean for the housing market? For one thing, it appears we may be approaching stretched valuation territory, although it might not be similar to 2006 levels. In 2006, anyone could buy a home as long as they were willing to sign on the dotted line and lie about their income, resulting in a rapid increase of defaults once the actual mortgage payment came due. In today s market, a combination of lack of supply and low rates is fueling the increase in housing prices. The question is, what would cause today s housing market to burst? An increase in rates could reduce the amount people can spend on a house, which should cause prices to cool, or builders could add to the supply. Either one of these events could happen quickly, as rate increases are already priced into the market, and the turnaround time to build a new house is less than a year. Also, last year home builders built 30% more homes than they have averaged since the housing crisis, so the trend for an increase in supply is rising. Future home buyers need to be aware of this issue, as things could change rapidly in less than a year s time, just like they did in In other words, future home buyers should brush up on their Latin: caveat emptor. 3

4 Weekly Market Review-May Economic Data Real GDP Growth Rate - Annualized - 12 Qtrs. 6.0 Non-Farm Payrolls-Trailing 12 Mos. 350 % Thousands Jun-14 Dec-14 Jun-15 Dec-15 Jun-16 Dec-16 0 May-16 Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 % Unemployment Rate-Trailing 12 Mos May-16 Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 Monthly % Chg. Consumer Price -Trailing 12 Mos May-16 Jul-16 Sep-16 Nov-16 Jan-17 Mar Headline CPI Core CPI Initial Jobless Claims-Trailing 12 Wks Consumer Board Confidence - Trailing 12 Mos Thousands /3 3/17 3/31 4/14 4/28 5/ May-16 Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 4

5 Weekly Market Review-May Eurozone SELECTED EUROPEAN SOVEREIGN YIELD PERFORMANCE Last Change % Chg. YTD % Last Change % Chg. YTD % Germany 10-Yr. Govt bps NM NM France 10-Yr. Govt bps NM NM Greece 10-Yr. Govt bps NM NM Ireland 10-Yr. Govt bps NM NM Italy 10-Yr. Govt bps NM NM Portugal 10-Yr. Govt bps NM NM Spain 10-Yr. Govt bps NM NM Netherlands 10-Yr. Govt bps NM NM Belgium 10-Yr. Govt bps NM NM U.K. 10-Yr. Govt bps NM NM Basis points (bps) % Germany 10-Year Government Bond Yield Spain 10-Year Government Bond Yield % 2.7 Italy 10-Year Government Bond Yield 8.0 Greece 10-Year Government Bond Yield % 1.9 %

6 Weekly Market Review-May Equities WORLD MARKET PERFORMANCE Last Change % Chg. YTD % Last Change % Chg. YTD % S&P 500 2, % 7.91% Swiss Market 9, % 10.00% Dow Industrials 21, % 6.67% CAC 40 (France) 5, % 9.76% Nasdaq Composite 6, % 15.36% DAX (Germany) 12, % 9.76% Russell Global 1, % 10.0% Irish Overall 6, % 7.01% Russell Global EM 3, % 17.0% Nikkei , % 2.99% S&P/TSX (Canada) 15, % 0.85% Hang Seng 25, % 16.54% Mexico IPC 49, % 8.86% Shanghai Composite 3, % 0.21% Brazil Bovespa 64, % 6.41% Kospi (S. Korea) 2, % 16.23% Euro Stoxx % 8.28% Taiwan Taiex 10, % 9.17% FTSE 100 7, % 5.67% Tel Aviv 25 1, % -3.22% IBEX 35 (Spain) 10, % 16.60% MICEX (Russia) 1, % % ; % change is based on price. 21,200 Dow Jones Industrial Average -Trailing 90 Days 6,300 Nasdaq Composite-Trailing 90 Days 21,000 20,800 6,200 6,100 6,000 20,600 20,400 20,200 20,000 5,900 5,800 5,700 5,600 5,500 3,400 Shanghai Composite -Trailing 90 Days 420 Euro Stoxx -Trailing 90 Days 3, ,000 2,800 2,600 2, , ,

7 Weekly Market Review-May Equities Emerging and Frontier Markets EMERGING AND FRONTIER MARKET PERFORMANCE Last Change % Chg. YTD % Last Change % Chg. YTD % Mexico IPC 49, % 8.9% Hang Seng 25, % 16.5% Brazil (Bovespa ) 64, % 6.4% India (Sensex 30) 31, % 16.5% MICEX (Russia) 1, % -13.4% Malaysia (KLCI ) 1, % 8.0% Czech Republic (Prague) 1, % 10.3% Singapore (Straits Times ) 3, % 11.8% Turkey (Istanbul) 97, % 24.8% Thailand (SET ) 1, % 1.7% Egypt (Hermes ) 1, % 8.8% Indonesia (Jakarta) 5, % 7.9% Kenya (Nairobi 20 ) 3, % 8.0% Pakistan (Karachi KSE 100) 52, % 10.1% Saudi Arabia (TASI ) 6, % -4.7% Vietnam (Ho Chi Minh) % 11.8% Lebanon (Beirut BLOM ) 1, % -4.6% Sri Lanka (Colombo) 6, % 7.5% Palestine % -0.2% Cambodia (Laos) 1, % -0.5% ; % change is based on price. 75,000 Brazil (Bovespa )-Trailing 90 Days 31,500 India (Sensex )-Trailing 90 Days 70,000 31,000 65,000 30,500 60,000 55,000 50,000 45,000 30,000 29,500 29,000 40,000 28,500 35,000 28,000 30,000 3/1 3/15 3/29 4/12 4/26 5/10 5/24 27,500 1,300 Egypt (Hermes )-Trailing 90 Days 3,300 Singapore (Straits Times )-Trailing 90 Days 1,200 1,100 3,250 1,000 3, , , , /26 3/12 3/26 4/9 4/23 5/7 5/21 3,000 7

8 Weekly Market Review-May Interest Rates SELECTED INTEREST RATES Last Change % Chg. YTD % Last Change % Chg. YTD % 2-Yr. U.S. Treasury 1.30% 0 bps NM NM Prime Rate 4.00% 0.00 NM NM 5-Yr. U.S. Treasury 1.79% 0 bps NM NM Fed Funds Rate 1.00% 0.00 NM NM 10-Yr. U.S. Treasury 2.25% 0 bps NM NM Discount Rate 1.50% 0.00 NM NM 30-Yr. U.S. Treasury 2.92% 1 bps NM NM LIBOR (3 Mo.) 1.20% 1 bps NM NM German 10-Yr. Govt. 0.33% 4 bps NM NM Bond Buyer 40 Muni 3.70% -6 bps NM NM France 10-Yr. 0.75% 5 bps NM NM Bond Buyer 40 G.O. 3.69% NA NM NM Italy 10-Yr. 2.09% 3 bps NM NM Bond Buyer 40 Rev. 3.87% NA NM NM Fed 5-Yr Fwd BE Inf. 1.88% -4 bps NM NM YIELD CURVES 4.00 US Treasury Actives Curve US Treasury Actives Curve USD Composite (A) BFV Curve USD Composite (BBB) BFV Curve M 1Y 3Y 5Y 8Y 10Y 15Y 20Y 30Y Year Treasury Yield - Trailing 180 Days 1.70 BBB/Baa- 10-Yr Treas. Spread Rising Line = Risk Aversion Yield %

9 Weekly Market Review-May Currencies SELECTED CURRENCY PERFORMANCE Last Change % Chg. YTD % Last Change % Chg. YTD % Dollar % -4.67% Chinese Yuan % 1.31% Euro % 6.27% Swiss Franc % 4.56% Japanese Yen % 5.09% New Zealand Dollar % 1.87% British Pound % 3.80% Brazilian Real % -0.46% Canadian Dollar % -0.07% Mexican Peso % 11.93% U.S. Dollar - Trailing Six Months Euro - U.S. Dollars per Euro Chinese yuan - yuan per U.S. Dollar Japanese yen - Yen per U.S. Dollar

10 Weekly Market Review-May Commodities SELECTED COMMODITY MARKET PERFORMANCE Last Change % Chg. YTD % Last Change % Chg. YTD % Bloomberg Comm. Idx % -4.01% Platinum Spot $ $ % 6.30% Crude Oil $ $ % % Corn % 2.75% Natural Gas $3.29 -$ % -8.03% Wheat % 0.92% Gasoline ($/Gal.) $2.37 $ % 1.63% Soybeans % -9.08% Heating Oil % % Sugar % % Gold Spot $1, $ % 10.41% Orange Juice % % Silver Spot $17.34 $ % 8.89% Aluminum 1, % 15.77% ; % change is based on price. Copper 5, % 3.41% 70 Crude Oil - Light Crude ($ per barrel) 1,350 Gold - Spot gold price ($ per ounce) 60 1, ,250 $ per barrel $ per ounce 1,200 1,150 1,100 1, ,000 6,200 Copper 400 Corn - Active Contract 6, ,800 5,600 5,400 $ per bushel , ,

11 Weekly Market Review-May Alternative Investments SELECTED ALTERNATIVE INVESTMENT INDEX PERFORMANCE Last Change % Chg. YTD % Last Change % Chg. YTD % HFRX Global Hedge Fund % 2.44% HFRX Distressed % 2.01% HFRX Equity Market Neutral % 0.11% HFRX Merger Arbitrage % 0.82% HFRX Equity Hedge % 3.12% HFRX Convertible Arbitrage % 3.59% HFRX Event-Driven % 4.68% HFRX Macro CTA % -0.43% HFRX Absolute Return % 1.20% IQ Fixed Income Beta Arb % 1.79% ; % change is based on price. HFRX Global Hedge Fund - Trailing 90 Days 1,235 1,230 1,225 1,205 1,200 1,195 1,190 HFRX Equity Hedge - Trailing 90 Days 1,220 1,185 1,180 1,215 1,175 1,170 1,210 1,165 1,010 HFRX Equity Market Neutral - Trailing 90 Days 1,450 IQ Fixed Income Beta Arb - Trailing 90 Days 1,005 1,445 1,440 1,000 1, ,430 1,425 1,420 1,415 1,410 11

12 Weekly Market Review-May Portfolio Construction 4.00 S&P 500/MSCI EAFE - Trailing 180 Days 7.00 S&P 500/MSCI EM - Trailing 180 Days MSCI EAFE/MSCI EM - Trailing 180 Days Large Cap/Small Cap - Trailing 180 Days Growth/Value - Trailing 180 Days

13 Weekly Market Review-May Portfolio Construction (continued) Info Tech/S&P Trailing 180 Days 1.86 Inv. Grade Bonds/Int. Govt. Bonds - Trailing 180 Days High Yield Bonds/Int. Govt. Bonds - Trailing 180 Days High Yield/Inv. Grade Bonds - Trailing 180 Days

14 Weekly Market Review-May WEEKLY ASSET CLASS PERFORMANCE (Prior 12 weeks ending Thursday) 3/9 3/16 3/23 3/30 4/6 4/13 4/20 4/27 5/4 5/11 5/18 5/25 Equity Domestic Equity Large Cap (R200) Small Cap (R2000) -0.48% 0.58% -1.57% 0.90% -0.41% -1.20% 1.01% 1.47% 0.24% 0.08% -1.17% 2.09% -2.55% 1.90% -2.35% 2.14% -1.30% -1.41% 2.89% 2.38% -2.00% 0.10% -2.09% 1.64% Int'l. Equity MSCI EAFE -0.60% 2.80% -0.21% 0.51% -1.20% -0.03% 0.21% 2.93% 0.94% 0.28% 0.55% 1.27% MSCI Em. Mkts % 4.36% 0.49% 0.16% -0.64% -0.05% -0.46% 2.21% 0.04% 2.07% -1.20% 2.65% Fixed Income Commodities Alternatives BarCap Agg. (AGG) High Yield (JNK) Bloomberg Commodity Hedge Funds (HFRX Global) 1.07% -2.33% 4.11% -1.66% 17.34% 29.55% -4.73% -2.04% -3.28% -1.23% -1.56% -7.92% -2.05% 0.85% -0.71% 1.59% -0.54% -0.16% 0.54% 0.62% -0.81% 0.68% 0.03% 0.59% -2.77% 0.35% -0.33% 0.90% 0.47% 0.64% -2.15% -0.98% -1.68% 1.11% 0.36% 0.34% -0.49% 0.38% -0.39% 0.28% 0.05% -0.21% 0.17% 0.46% -0.02% 0.17% -0.38% 0.56% 60/40* -0.29% 0.23% 0.69% 0.07% 5.57% 9.83% -1.03% 0.54% -1.17% -0.22% -1.08% -1.63% Asset Allocation 48/32/20 (w/alts.)** -0.33% 0.26% 0.47% 0.11% 4.47% 7.82% -0.79% 0.53% -0.94% -0.14% -0.94% -1.19% ; *60/40 portfolio = 30% Large Cap/10% Small Cap/15% EAFE/5% Emerging Markets/35% BarCap Agg./5% High Yield. **48/32/20 portfolio = 24% Large Cap/8% Small Cap/12% EAFE/4% Emerging Markets/28% BarCap Agg./4% High Yield/20% HFRX Global. Large Cap Core Large Cap Growth Large Cap Value Mid Cap Core RELATIVE STRENGTH MATRIX (BASED ON 30-DAY RSI) Mid Cap Growth Mid Cap Value Small Cap Core Small Cap Growth Small Cap Value Int'l. Emerging Developed Markets REITs Comm. Int. Bond High Yield Large Cap Core Large Cap Growth Large Cap Value Mid Cap Core Mid Cap Growth Mid Cap Value Small Cap Core Small Cap Growth Small Cap Value Int'l. Developed Emerging Markets REITs Commodities Int. Bond High Yield The Relative Strength Matrix provides an indication of how the various asset classes have performed relative to one another over the past 30 days. A number greater than 1.0 indicates that the asset class in the far left column has outperformed the corresponding asset class in the top row over the past 30 days. A number below 1.0 means the asset class on the left has underperformed the asset class at the top. The green shading indicates outperformance, and the red shading indicates underperformance. 14

15 Weekly Market Review-May INDEX OVERVIEW The S&P 500 is an unmanaged index comprised of 500 widely held securities considered to be representative of the stock market in general. The S&P/Case-Shiller Home Price Indices measure the residential housing market, tracking changes in the value of the residential real estate market in 20 metropolitan regions across the United States. The Nasdaq Composite is a stock market index of the common stocks and similar securities listed on the NASDAQ stock market. The MSCI EAFE represents 21 developed markets outside of North America. The MSCI EAFE Growth is an unmanaged index considered representative of growth stocks of Europe, Australasia and the Far East. The MSCI EAFE Value is an unmanaged index considered representative of value stocks of Europe, Australasia and the Far East. The MSCI Emerging Markets is a free float-adjusted market capitalization index that is designed to measure equity market performance in the global emerging markets. The MSCI Europe is an unmanaged index considered representative of stocks of developed European countries. The MSCI Pacific is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of the developed markets in the Pacific region. The Barclays US Credit is an unmanaged index considered representative of publicly issued, SEC-registered US corporate and specified foreign debentures and secured notes. The Barclays US Aggregate Bond is a market capitalization-weighted index of investment-grade, fixed-rate debt issues, including government, corporate, asset-backed, and mortgage-backed securities, with maturities of at least one year. The Barclays US Corporate High Yield covers the USD-denominated, non-investment grade, fixed-rate, taxable corporate bond market. Securities are classified as high-yield if the middle rating of Moody s, Fitch and S&P is Ba1/BB+/BB+ or below. The index may include emerging market debt. The Barclays Capital Municipal Bond is an unmanaged index comprised of investment-grade, fixed-rate municipal securities representative of the tax-exempt bond market in general. The Barclays US Treasury Total Return is an unmanaged index of public obligations of the US Treasury with a remaining maturity of one year or more. The Citigroup World Government Bond is a market capitalization weighted bond index consisting of the government bond markets of Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Ireland, Italy, Japan, Malaysia, Mexico, the Netherlands, Norway, Poland, Portugal, Singapore, Spain, Sweden, Switzerland, the United Kingdom and the United States. The DJ-UBS Commodity Total Return SM measures the collateralized returns from a basket of 19 commodity futures contracts representing the energy, precious metals, industrial metals, grains, softs and livestock sectors. The Russell 1000 is a market capitalization-weighted benchmark index made up of the 1000 largest U.S. companies in the Russell The Russell 1000 Growth is an unmanaged index considered representative of large-cap growth stocks. The Russell 1000 Value is an unmanaged index considered representative of large-cap value stocks. The Russell 2000 is an unmanaged index considered representative of small-cap stocks. The Russell 2000 Growth is an unmanaged index considered representative of small-cap growth stocks. The Russell 2000 Growth is an unmanaged index considered representative of small-cap value stocks. The Russell 3000 is an unmanaged index considered representative of the US stock market. The Russell Midcap is a subset of the Russell It includes approximately 800 of the smallest securities based on a combination of their market cap and current index membership. The Russell Midcap Growth is an unmanaged index considered representative of mid-cap growth stocks. The Russell Midcap Value is an unmanaged index considered representative of mid-cap value stocks. The HFRX Indices are a series of benchmarks of hedge fund industry performance which are engineered to achieve representative performance of a larger universe of hedge fund strategies. Hedge Fund Research, Inc. employs the HFRX Methodology (UCITS compliant), a proprietary and highly quantitative process by which hedge funds are selected as constituents for the HFRX Indices. The ISM Non-Manufacturing is an index based on surveys of more than 400 nonmanufacturing firms' purchasing and supply executives, within 60 sectors across the nation, by the Institute of Supply Management (ISM). The ISM Non- Manufacturing tracks economic data, like the ISM Non-Manufacturing Business Activity. A composite diffusion index is created based on the data from these surveys that monitors economic conditions of the nation. The ISM Manufacturing is an index based on surveys of more than 300 manufacturing firms by the Institute of Supply Management. The ISM Manufacturing monitors employment, production inventories, new orders and supplier deliveries. A composite diffusion index is created that monitors conditions in national manufacturing based on the data from these surveys. The Consumer Price (CPI) measures the change in the cost of a fixed basket of products and services. The Gross Domestic Product (GDP) rate is a measurement of the output of goods and services produced by labor and property located in the United States. Basis Point(s) is a unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly used for calculating changes in interest rates, equity indexes and the yield of a fixed-income security. The CBOE Volatility (VIX) is an up-to-the-minute market estimate of expected volatility that is calculated by using real-time S&P 500 option bid/ask quotes. The uses nearby and second nearby options with at least 8 days left to expiration and then weights them to yield a constant, 30-day measure of the expected volatility of the S&P 500. The MSCI World ex-u.s. - captures large and mid-cap representation across 22 of 23 Developed Markets DM countries*--excluding the United States. With 1,002 constituents, the index covers approximately 85% of the free float-adjusted market capitalization in each country. (* DM countries include: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland and the UK.) The MSCI Japan - is designed to measure the performance of the large and mid-cap segments of the Japanese market. With 320 constituents, the index covers approximately 85% of the free float-adjusted market capitalization in Japan. The Barclays Global Aggregate ex-u.s. - is a market capitalization-weighted index, meaning the securities in the index are weighted according to the market size of each bond type. Most U.S. traded investment grade bonds are represented. Municipal bonds, and Treasury Inflation-Protected Securities are excluded, due to tax treatment issues. The index includes Treasury securities, Government agency bonds, Mortgage-backed bonds, Corporate bonds, and a small amount of foreign bonds traded in U.S. The University of Michigan Consumer Sentiment (MCSI) is a survey of consumer confidence conducted by the University of Michigan. The Michigan Consumer Sentiment (MCSI) uses telephone surveys to gather information on consumer expectations regarding the overall economy. A separately managed account (SMA) is an individual managed investment account offered typically by a brokerage firm through one of their brokers or financial consultants and managed by independent investment management firms (often called money managers for short) and have varying fee structures. An open-end index fund continuously issues and redeems shares based on investor demand. As an index fund, its investment objective is to duplicate the performance of the index it uses as a benchmark. Investment Grade or Investment Grade Bond The broad credit designation given to corporate and municipal bonds which have a high probability of being paid and minor, if any, speculative features. Bonds rated Baa and higher by Moody s Investor Services or BBB and higher by Standard & Poor's are deemed by those agencies to be "investment grade. Non- Investment Grade - By definition, junk bonds are non-investment grade. A bond rated lower than Baa/BBB, also called a "high-yield" bond. Junk bonds are speculative compared with investment grade bonds. Risk-On Risk-Off - An investment setting in which price behavior responds to, and is driven by, changes in investor risk tolerance. Risk-on risk-off refers to changes in investment activity in response to global economic patterns. During periods when risk is perceived as low, risk-on risk-off theory states that investors tend to engage in higher-risk investments. When risk is perceived as high, investors have the tendency to gravitate toward lower-risk investments. 15

16 Weekly Market Review-May The information, analysis, and opinions expressed herein are for general and educational purposes only. Nothing contained in this weekly review is intended to constitute legal, tax, accounting, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. All investments carry a certain risk, and there is no assurance that an investment will provide positive performance over any period of time. An investor may experience loss of principal. Investment decisions should always be made based on the investor s specific financial needs and objectives, goals, time horizon, and risk tolerance. The asset classes and/or investment strategies described may not be suitable for all investors and investors should consult with an investment advisor to determine the appropriate investment strategy. Past performance is not indicative of future results. Information obtained from third party sources are believed to be reliable but not guaranteed. Endowment Wealth Management makes no representation regarding the accuracy or completeness of information provided herein. All opinions and views constitute our judgments as of the date of writing and are subject to change at any time without notice. Investments in smaller companies carry greater risk than is customarily associated with larger companies for various reasons such as volatility of earnings and prospects, higher failure rates, and limited markets, product lines or financial resources. Investing overseas involves special risks, including the volatility of currency exchange rates and, in some cases, limited geographic focus, political and economic instability, and relatively illiquid markets. Income (bond) securities are subject to interest rate risk, which is the risk that debt securities in a portfolio will decline in value because of increases in market interest rates. Exchange Traded Funds (ETFs) are subject to risks similar to those of stocks, such as market risk. Investing in ETFs may bear indirect fees and expenses charged by ETFs in addition to its direct fees and expenses, as well as indirectly bearing the principal risks of those ETFs. ETFs may trade at a discount to their net asset value and are subject to the market fluctuations of their underlying investments. Investing in commodities can be volatile and can suffer from periods of prolonged decline in value and may not be suitable for all investors. Performance is presented for illustrative purposes only and does not represent the performance of any specific investment product or portfolio. An investment cannot be made directly into an index. Alternative Investments may have complex terms and features that are not easily understood and are not suitable for all investors. You should conduct your own due diligence to ensure you understand the features of the product before investing. 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