Weekly Market Commentary March 27, 2017

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1 The Drew Report BAC drops 11% since March 1st while XLF, the Financial Sector ETF, is down about 7% since March 1st. The Financial Sector could continue to suffer as demand for the sector has weakened. -Drew Major bank funds SPDR S&P Bank ETF (KBE) and SPDR S&P Regional Bank ETF (KRE) hit bull market highs on the first day of March and rolled into declines that continued after last week s Fed decision to raise rates by one quarter-point. The sell-the-news reaction signals a bearish divergence because higher rates should underpin sector profits, due to the widening spread between overnight lending rates and the rates charged to customers. Both instruments closed below their 50-day EMAs for the first time since October earlier this week, adding to red flags that could signal the end of the bank rally and start of an intermediate correction lasting many months. Given impressive gains since post-election breakouts, the decline could cause considerable pain while shaking out weak-handed shareholders. With that in mind, let s see what the charts are telling us about two major sector players. Bank of America Corp. (BAC) plunged during last decade s bear market, dropping from the mid-50s to a February 2009 low at $2.53. A bounce into 2010 stalled at $19.86, with that peak marking range resistance (red line) that was tested unsuccessfully in 2014 and A decline into 2016 dropped the stock to a three-year low at $10.99, marking a selling climax, ahead of a strong recovery wave that reached multi-year range resistance after the presidential election. The stock broke out with the banking sector, heading into a powerful trend advance that stalled in December in the low- 20s, right at the.386 Fibonacci bear market retracement level. A two-month consolidation eased overbought technical conditions, yielding a secondary breakout that hit an 8-year high at the start of March. Click here to read more

2 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 March 24, 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 5.82% year to date. Market Perspectives (through 03/24/2017) 60/40 Allocation: 3.17 % YTD (60% S&P 500/40% Barclays US Aggregate Bond Index) S&P 500: 4.70% YTD Barclays Agg: 0.87% YTD QUOTE OF THE WEEK Of the five most important things in life, health is first, education or knowledge is second, and wealth is third. I forget the other two. -Chuck Berry

3 The Dow Jones Industrial Average slipped 318 points to end the week down -1.5% at 20,597. The S&P 500 Index fell -1.4% to finish the week down 34 points at 2,344. The Nasdaq Composite was down -1.2% to end the week at 5,829. The S&P MidCap 400 Index was off -2.1% to close the week at 1,694. The Russell 2000 fell -2.7% ending the week at 1,355. The ETF "EFA", the proxy for developed international equity markets, finished the week down -0.1%. Emerging markets, as represented by the ETF "EEM", gained 0.8%. Domestic high yield corporate bonds fell -0.3% during the week, as measured by the Markit iboxx USD Liquid High Yield Index. US and foreign stocks slipped during weekly trading, with the American Health Care Act vote weighing on domestic markets. The replacement for the Affordable Care Act of the Obama administration is President Trump's first key agenda item to face a Congressional vote. Concerns that the legislation would not pass led to speculation that some of President Trump's other initiatives could face opposition or delays, casting doubt on the pro-growth "Trump trade" that has propelled markets to new all-time highs. By late Friday afternoon it became apparent that the bill would not gather sufficient support and it was withdrawn without being put to a vote. The yield on the benchmark 10-Year US Treasury note eased to 2.41%, 10 basis points lower than the week prior. A 5-million-barrel increase in domestic crude inventories put further pressure on oil prices, with US West Texas Intermediate trading just under $48 a barrel and international Brent Crude around $50.80 as of Friday afternoon. but spreads will likely spike sharply on perceived default risk. After consecutive weeks of huge outflows, high yield bond mutual funds and ETFs reversed course with a small inflow of $736 million in the weekly period ended March 22nd. In US economic news, home sales data was mixed as new home sales surged 6.1% in February while existing home sales slipped 3.7%. Durable goods orders rose 1.7% in February, beating consensus estimates of 1.5%. Weekly jobs data was mixed, with initial claims up 15,000 to a 17-week high of 258,000 while the 4-week average barely budged, up 1,000 to 240,000. Continuing claims, reported on a 1-week lag, fell 39,000 to 2 million. In international economic news, the UK will officially notify the European Union of its intent to exit on March 29th. The Brexit process will take two years and is expected to be contentious. Several large financial institutions have already cited plans to move their offices from London to alternate Eurozone locations, and Scotland could potentially hold another referendum to split from the UK in response. The Eurozone composite Purchasing Managers' Index rose to 56.7, the highest level in nearly six years, as economic activity continues to pick up. Domestic high yield bonds spreads over Treasuries reached their widest levels year-to-date, at 4.16% mid-week. Energy bond spreads widened to 4.64% on fears that oil, already below $50, could fall further and create cash flow issues for US shale drillers. UBS research notes that the average breakeven oil price for US drillers has declined from $65 in 2014 to a low of $43 as of mid If oil prices test the low $40s there may not necessarily be widespread defaults,

4 Summary In utilizing an approach that seeks to limit volatility, it is important to keep perspective of the activity in multiple asset classes. At Horter Investment Management 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 Horter Investment Management 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 nine 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 Horter 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: The Chart of the Week shows BlackRock's ishares iboxx High Yield Corporate Bond ETF (HYG). Since March 2nd HYG started a downtrend, breaking its 50-day moving average (blue line) shortly thereafter and is now testing its support (green dotted lines).

5 Are We in a Baby Boomer Retirement Crisis? Baby boomers, born between 1946 and 1964, are heading into retirement in droves (about 10,000 a day, in fact). Along with the aging of this iconic cohort come lots of data about their poor preparation for their golden years. Insufficient preparedness and lack of financial resources for decades without steady employment paint a gloomy picture for many retirees. One Part of Funds Market Where Cash Rushes to Human Managers Are we facing a Baby Boomer retirement crisis? There may not be an easy answer, but read on for data that helps shed some light into this large generation's economic situation. Last year, GoBankingRates published research conducted with 1,504 adults over the age of 55 (4.3% margin of error). About 30% of the respondents age 55 and over claimed to have no retirement savings. An additional 26% reported less than $50,000 saved for retirement. When considering typical benchmarks needed for a successful retirement, 54% of the older Americans in this survey lacked sufficient retirement funds. But not all baby boomers lack retirement reasonable retirement assets. At the other end of the spectrum, 26% of those 55 to 65 years old have balances greater than $200,000. Of the over-65-year olds, 31% had $200,000 or more in their retirement accounts. That's a bit heartening, but this chart paints a gloomier picture for those closest to retirement age: Click here to read more Plenty of investors are still willing to pay extra to have humans look after their wealth. Just ask Garth Taljard, who runs 50 multi-asset funds for Schroders Plc, the U.K. s biggest asset manager. As mutual funds lost more than $300 billion in the U.S. since 2014 amid the rush into cheaper passive funds that mimic indexes, he was hiring to keep up with demand that doubled over five years. Investors realize it s quite challenging for themselves to do asset allocation, it s very much a full-time job, said Taljard, who added two new money managers this year to a global team of 85, responsible for divvying up 64 billion pounds ($80 billion) of clients cash. Funds like his haven t suffered the same fate as other active portfolios because they offer something that isn t easy to automate: a one-stop-shop where risk-averse insurers or pension funds can spread money across assets as diverse as U.S. blue-chip stocks and emerging-market currencies. This strategy gained popularity after the global financial crisis -- Morgan Stanley says $2 trillion flooded into multi-asset funds since then -- because investors wanted to shield their wealth from future market shocks. Political turbulence from the election of Donald Trump and the rise of European antieuro parties will only fuel demand. Click here to read more