Weekly Commentary November 30, 2015

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1 Week in Review: The Dow Jones Industrial Average finished the week down 25 points, off -0.1% to close at 17,798. The S&P 500 Index added 1 point to end the week relatively flat at 2,090. The Nasdaq Composite was up 0.4% to close at 5,128. The S&P MidCap 400 Index closed the week at 1,469, ending up 1.5%. The Russell 2000 advanced 2.3% to end the week at 1,202. The ETF "EFA", the proxy for developed international equity markets, fell -0.4% for the week. Emerging markets, as represented by the ETF "EEM", finished down -3.4%. Domestic high yield corporate bonds fell -0.1% for the week, as measured by the Bank of America Merrill Lynch US High Yield Master II Index. Stocks were mostly unchanged during the holiday-shortened week, despite escalating geopolitical tensions after Turkey shot down a Russian jet near the Syrian border on Tuesday. Among S&P 500 sectors with weekly gains, Consumer Staples advanced the most, followed by Energy, Healthcare, Consumer Discretionary, and Materials stocks. Among sectors posting weekly losses, Utilities fell the most, followed by Technology, Industrials, and Financials. The yield on the benchmark 10-year US Treasury note declined to 2.22%. Oil prices rose mid-week due to increased global risks, but ended the week with only slight gains. West Texas Intermediate finished around $42 a barrel and Brent Crude was trading around $45 as of Friday afternoon. The US oil rig count fell by 9 to 555 according to Baker Hughes. The latest count reflects a -65% decrease from a year ago, when US drillers had 1,572 rigs active. High yield bonds continued to sell off, driving the Effective Yield on the Bank of America Merrill Lynch High Yield Master II index up to 8.11%. Highly speculative CCC rated bonds once again bore the brunt of the price declines, pushing the CCC Effective Yield to 15.19%. The yield on CCC debt is now a relative 35% higher than at the beginning of the year, when it stood at 11.26%. BB rated bonds also sold off to a lesser degree, yielding 5.88% as of November 24th. CCC's are now yielding 9.31% over BBB's, indicative of investors' clear preference for the higher-rated debt and avoidance of anything energy-related. In the week ended November 20th, $5.5 billion in new high yield debt was issued across 10 transactions. Rating agency high yield downgrades are outpacing upgrades at a 2 to 1 ratio year-to- date. Standard and Poor's has issued 426 high yield ratings downgrades in 2015, compared to just 210 upgrades. Monthto-date has been even more negative, with 51 downgrades and just 10 upgrades. For the week ended November 25th, investors withdrew roughly $501 million from high yield mutual funds and ETFs. In US economic news, third quarter GDP was revised upward to 2.1% from the initial 1.5% reading reported last month. The upward revision was in line with estimates and was largely attributed to revised data on inventories, which showed businesses restocking shelves at a faster pace than initially estimated. Annual GDP growth for 2015 is anticipated to finish around 2.5%, only slightly up from the 2.4% recorded in The Personal Consumption Expenditures (PCE) price index, the Fed's preferred measure of inflation, continued to trail the annual goal of 2% set by Fed policymakers. The PCE data showed only a 0.1% seasonally adjusted rise for October, for a year-on-year rise of just 1.3%. While the Fed is on record as being "reasonably confident" that inflation will hit 2% in the near future, the PCE readings show inflation has failed to reach that hurdle for over 3 ½ years. Orders for durable goods increased to a seasonally adjusted 3% in October, well above analysts' estimates of a 1.8% increase. The positive manufacturing data was countered however by a negative reading of US consumer confidence. As the holiday shopping season begins, the University of Michigan's November consumer sentiment index fell to 91.3, down from a mid-month reading of In addition, Americans are beginning to spend less and saving more, pushing the personal savings rate to its highest level in nearly three years. Weekly jobless claims fell sharply for the week ended November 21st, declining by 12,000 to 260,000. The four week moving average was unchanged at 271,000. Continuing claims, reported on a one week lag, were up 34,000 to million, the largest increase since mid-july. 60% small-cap stocks/40% intermediate-term bonds 75% municipal bonds/15% cash/10% treasuries 40% high yield/40% inverse high yield/20% cash 33% convertibles/33% income funds/16.6% dividend equities/16.6% inverse treasuries 100% mid-cap stocks 60% short NASDAQ/40% long S&P % long NASDAQ 75% cash/25% long treasuries

2 In international economic news, the Markit Purchasing Managers' Index (PMI) for the Eurozone rose to its highest level in three months as job creation hit its best rate in over four years. PMI rose to 54.4, up from 53.9 the prior month, well above the 50 mark that separates expansion from contraction. In Asian market news, Chinese stocks plummeted on Friday after several large brokerages confirmed that they are being investigated by the China Securities Regulatory Commission. The state-run Regulatory Commission has put increased pressure on brokerages in recent weeks as it investigates insider trading and information leaks, which the agency believes were the cause of the wild market swings in Chinese stocks earlier this year. Taking a comprehensive look at the overall current stock market, you can see the chart below representing eight major indices and their returns through the week ending November 27, In a truly diversified portfolio, the portfolio s total return is determined by the performance of all of the individual positions in combination not individually. So, understanding the combined overall performance of the indices below, simply average the 8 indices (excluding the BofA Merrill Lynch US High Yield Master II Index) to get a better overall picture of the market. The combined average of all 8 indices is -.63% year to date. QUOTE OF THE WEEK The excellence of a gift lies in its appropriateness rather than in its value. -Charles Dudley Warner 60% small-cap stocks/40% intermediate-term bonds 75% municipal bonds/15% cash/10% treasuries 40% high yield/40% inverse high yield/20% cash 33% convertibles/33% income funds/16.6% dividend equities/16.6% inverse treasuries 100% mid-cap stocks 60% short NASDAQ/40% long S&P % long NASDAQ 75% cash/25% long treasuries

3 Summary In utilizing an approach that seeks to limit volatility, it is important to keep perspective of the activity in multiple asset classes. At Wendel Retirement Planning we seek to achieve lower risk with higher returns. More specifically, we seek to achieve superior risk-adjusted returns over a full market cycle to a traditional 60% equities / 40% bonds asset allocation. We do this by implementing global mandates of several tactical managers within different risk buckets. For those investors who are unwilling to stomach anything more than minimal downside risk, our goal is to provide a satisfying return over a full market cycle compared to the Barclays Aggregate Bond Index. At Wendel Retirement Planning we realize how confusing the financial markets can be. It is important to keep our clients up-to-date on what it all means, especially with how it relates to our private wealth managers and their models. We are now in year 7 of the most recent bull market, one of the longest bull markets in U.S. history. At this late stage of the market cycle, it is extremely common for hedged managers to underperform, as they are seeking to limit risk. While none of us know when a market correction will come, even though the movement and volatility sure are starting to act like a correction, our managers have been hired based on our belief that they can accomplish a satisfying return over a full market cycle, -- while limiting risk in comparison to a traditional asset allocation approach. At Wendel Retirement Planning we continue to monitor all of the markets and how our managers are actively managing their portfolios. We remind you there are opportunities to consider with all of our managers. Hopefully this recent market commentary is helpful and thanks for your continued trust and loyalty. Chart of the Week: Our Chart of the Week displays the S&P 500 index that has rallied (solid blue line and arrow) smartly off of a double bottom (orange text and arrows) that it formed in late August and late September. The S&P 500 is currently consolidating its gains above its 200 day moving average. This is technically positive and bodes well for a potential run at the old highs as we near the time when many Christmas rallies begin and are in a historically favorable time of the year. Market Perspectives (through 11/27/15) 60/40 Allocation: 1.24% YTD (60% S&P 500/40% Barclays US Aggregate Bond Index) S&P 500: 1.52% YTD Barclays Agg:.82% YTD 60% small-cap stocks/40% intermediate-term bonds 100% mid-cap stocks 75% municipal bonds/15% cash/10% treasuries 60% short NASDAQ/40% long S&P % long NASDAQ 40% high yield/40% inverse high yield/20% cash 33% convertibles/33% income funds/16.6% dividend 75% cash/25% long treasuries equities/16.6% inverse treasuries

4 Articles of Interest What History Says About Fed Rate Hike Cycles and Stocks Investors have been searching for some context around the market s indecisive and whipsaw behavior in As we go through the historical examples of Fed rate hike cycles below, it is easy to see that it is quite common and rational for markets to be more difficult and indecisive when the Fed is opening up an almost limitless number of what if scenarios as they begin to shift interest rate policy. S&P 500 Seasonality Trends Turn Positive Post- Thanksgiving It s been a tricky year for investors. The stock market spent first half of the year churning sideways before the sharp turn lower in August. Then came the October rally that reversed most of August s losses. But either way you slice it, it s been a volatile year and much is still undecided for Mr. Market. With 5 weeks remaining in 2015, the S&P 500 will either decide to move higher and close out another successful year or drift sideways to lower and open the door to more uncertainty into early The Lingering Effects of the Financial Crisis What Should Investors Expect If the Market Finishes Flat for 2015? We re well into the seventh year of an economic and stock market recovery. The economic expansion hasn t been as robust as many would like and the recovery has been uneven, as some have fared better than others in the aftermath of the worst economic contraction since the Great Depression. But you can t deny that things are much better than they were during that fateful period. locations 60% small-cap stocks/40% intermediate-term bonds Strategy#1 100% mid-cap stocks 75% municipal bonds/15% cash/10% treasuries 60% short NASDAQ/40% long S&P % long NASDAQ 40% high yield/40% inverse high yield/20% cash 33% convertibles/33% income funds/16.6% dividend 75% cash/25% long treasuries equities/16.6% inverse treasuries

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