Weekly Review May 12, 2017

Transcription

1 Weekly Market Review Weekly Review Chart of the Week Thousands Non-Farm Payrolls-Trailing 12 Mos May-16 Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 Weekly Highlights Stocks in the US fell late in the week, as several retail stocks disappointed with earnings that were below expectations. Crude oil received a boost during the week on the back of investor sentiment, which was more optimistic about production cuts in the Organization of the Petroleum Exporting Countries (OPEC). Data released during the week showed production by OPEC countries fell during April. In France, Emmanuel Macron won the presidency in a runoff election against anti-european Union (EU) candidate Marine Le Pen. The result bolstered confidence in the EU, but the euro fell slightly on the European Central Bank s statements regarding the need for continued monetary stimulus. Talking Points In US equities, small cap stocks underperformed large cap stocks; growth stocks led value stocks; international stocks and US stocks were roughly even; and emerging markets beat developed markets by a relatively wide margin. Treasury rates were largely unchanged. The yield on the 10-year Treasury note remained stable at around 2.4%. Commodity prices were up slightly, largely buoyed by crude oil. The dollar index rose during the week. Market participants looked for evidence that inflation and retail sales were firming, which could lead to the Federal Reserve (Fed) increasing interest rates. In economic data released this week: US nonfarm employers added 211,000 jobs during April, while the unemployment rate fell 0.1% to 4.4%. The unemployment reading marks a low since the end of the global financial crisis. The producerprice index (PPI) rose 2.5% in April from a year earlier, firming up a soft patch experienced in March. 1

2 Weekly Market Review-May Market Dashboard Last Price Change % Chg. YTD % Last Price Change % Chg. YTD % S&P 500 2, % 6.8% Russell Global EM 3, % 15.8% Dow Industrials 20, % 5.7% 10-Year US Treas bps NM NM Nasdaq 6, % 13.7% DJ UBS Comm. Idx % -4.6% Russell , % 1.9% Gold $1, $ % 7.0% Euro Stoxx % 9.5% Crude Oil $47.88 $ % -15.2% Shanghai Composite 3, % -0.6% Dollar % -3.0% Russell Global 1, % 8.7% VIX % -25.9% ; % change is based on price. S&P 500 : Trailing 180 Days One Week YTD Value Growth Value Growth L -0.72% -0.99% -0.34% -0.59% -0.01% -0.11% 1.57% 2.24% 7.29% 5.20% 12.83% 8.95% S -1.50% -1.02% -0.51% -2.26% 1.89% 6.51% Sector Performance: S&P/Global Industry Classification Sectors (GICS) % Wgt in S&P 500 Week % Chg. YTD % Chg. Consumer Discretionary % 10.4% Consumer Staples % 6.1% Energy % -10.3% Financials % 1.0% Health Care % 9.1% Industrials % 5.5% Information Technology % 17.8% Materials % 5.7% Real Estate % 1.7% Telecom Services % -10.9% Utilities % 6.0% 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 En Marche Europe! In the run-up to the Brexit vote in June 2016, few pundits and experts anticipated its outcome. The markets seemed to be complacent, as few investors were positioned for the result. To nearly everyone s shock, the United Kingdom voted to exit the European Union (EU). Generally speaking, an economic and cultural anxiety influenced Brexit voters who were uncomfortable with the EU principal of free movement of goods and people. A few months later, Donald Trump won the US presidency on an antiglobalism, populist platform. With a litany of continental European elections coming in 2017, threatening to upend the very existence of the EU, how likely is the continued march of anti-eu populism? The logical follow up to the previous question is, what are the implications for the EU s economic recovery, and what is the investment opportunity set? France and the Netherlands each had elections scheduled to determine control of their respective governments, in which populist, anti-eu candidates or parties garnered significant traction in polls. The Netherlands Geert Wilders and his anti-islam and anti-eu Party for Freedom was rebuffed at the polls in March by the establishment center-right party. In France, Marine Le Pen heads the far-right National Front on a platform of removing France from the EU and limiting immigration. In the runoff of the French presidential election on Sunday, centrist Emmanuel Macron resoundingly defeated Ms. Le Pen by over 30%. Mr. Macron s political rise, in and of itself, is highly unusual, as the party he heads, En Marche! or Onward!, was only created roughly a year ago. Mr. Macron ran on a platform of reforming France s economy to make it more competitive internationally while maintaining strong EU ties. In a rebuke to the National Front and Ms. Le Pen, Mr. Macron came out to address his supporters after his victory accompanied by Beethoven s Ode to Joy, the European anthem. Given the electoral results across Europe, can we conclude the anti-eu populist movement is at an end? Looking forward, Germany has upcoming parliamentary elections in the fall, but its populist, far-right party, Alternative for Germany, is trailing badly in the polls. It appears as though Europe is turning the corner in terms of near-term political threats to the EU s existence. However, it is important to note that the economic and cultural anxiety that caused these parties to gain ground in parliaments across Europe are still in place. So, even though many of the populist parties, such as the National Front in France and Party for Freedom in the Netherlands, failed to win control of their respective governments, they still will wield power in parliament. In fact, for Mr. Macron to enact the aggressive reform agenda on which he ran, En March! must build out a broader party and find candidates to run for parliamentary seats in an election that will occur in less than a month. This will be a Herculean task, no doubt, especially given the fact that many in France voted against Le Pen, rather than for Macron and his aggressive reform agenda. We can conclude that it appears as though the anti-eu movement is waning and the immediate threat to the EU s existence is removed. At the same time that the political risk revolving around the continued existence of the EU is no longer an immediate concern, Europe s economic environment appears to be strengthening. The Eurozone economy grew by an annualized 1.8% during the first quarter, easily outpacing the US s anemic 0.7% growth rate. In addition, the composite Purchasing Manager s (PMI) for the Eurozone rose to 56.8 in April a six-year high. The European Central Bank is also set to keep monetary policy extremely loose for the foreseeable future. Although unemployment remains relatively high 9.5% in the EU as of March retail sales rose each month during the first quarter. Earnings for the Stoxx Europe 600 are expected to increase 5.5% over the first quarter from a year earlier, adding yet another positive indicator to the ledger. Not only is the economic backdrop in Europe appealing, but stocks are cheap relative to their US peers. The Stoxx Europe 600 is trading at 15.3 times the projected next twelve months earnings, while stocks in the S&P 500 are trading at 18.3 times next twelve month s (NTM) earnings. With the immediate threat to the EU dissipating and the economic picture brightening, perhaps it s time to begin looking to Europe for equity investing opportunities. 3

4 Weekly Market Review-May Economic Data Real GDP Growth Rate - Annualized - 12 Qtrs. 6.0 Non-Farm Payrolls-Trailing 12 Mos % 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 /17 3/3 3/17 3/31 4/14 4/ 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, % 6.79% Swiss Market 9, % 10.99% Dow Industrials 20, % 5.74% CAC 40 (France) 5, % 11.17% Nasdaq Composite 6, % 13.71% DAX (Germany) 12, % 11.23% Russell Global 1, % 8.7% Irish Overall 7, % 7.93% Russell Global EM 3, % 15.8% Nikkei , % 4.03% S&P/TSX (Canada) 15, % 1.64% Hang Seng 25, % 14.34% Mexico IPC 49, % 8.29% Shanghai Composite 3, % -0.65% Brazil Bovespa 68, % 13.27% Kospi (S. Korea) 2, % 12.81% Euro Stoxx % 9.47% Taiwan Taiex 9, % 7.92% FTSE 100 7, % 4.10% Tel Aviv 25 1, % -3.28% IBEX 35 (Spain) 10, % 16.52% MICEX (Russia) 1, % % ; % change is based on price. 21,200 Dow Jones Industrial Average -Trailing 90 Days 6,200 Nasdaq Composite-Trailing 90 Days 21,000 6,100 20,800 20,600 20,400 6,000 5,900 5,800 5,700 20,200 5,600 20,000 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, % 8.3% Hang Seng 25, % 14.3% Brazil (Bovespa ) 68, % 13.3% India (Sensex 30) 30, % 13.4% MICEX (Russia) 1, % -10.7% Malaysia (KLCI ) 1, % 8.2% Czech Republic (Prague) 1, % 10.5% Singapore (Straits Times ) 3, % 13.0% Turkey (Istanbul) 94, % 21.6% Thailand (SET ) 1, % 0.1% Egypt (Hermes ) 1, % 7.4% Indonesia (Jakarta) 5, % 7.1% Kenya (Nairobi 20 ) 3, % 1.8% Pakistan (Karachi KSE 100) 51, % 8.2% Saudi Arabia (TASI ) 6, % -4.5% Vietnam (Ho Chi Minh) % 9.1% Lebanon (Beirut BLOM ) 1, % -3.5% Sri Lanka (Colombo) 6, % 7.1% Palestine % -0.3% Cambodia (Laos) 1, % 2.2% ; % change is based on price. 75,000 Brazil (Bovespa )-Trailing 90 Days 30,500 India (Sensex )-Trailing 90 Days 70,000 30,000 65,000 60,000 29,500 55,000 50,000 29,000 28,500 45,000 40,000 28,000 35,000 27,500 30,000 27,000 1,300 Egypt (Hermes )-Trailing 90 Days 3,300 Singapore (Straits Times )-Trailing 90 Days 1,200 3,250 1,100 1,000 3, ,150 3,100 3,050 3, /12 2/26 3/12 3/26 4/9 4/23 5/7 2,950 7

8 Weekly Market Review-May Interest Rates SELECTED INTEREST RATES Last Change % Chg. YTD % Last Change % Chg. YTD % 2-Yr. U.S. Treasury 1.29% 0 bps NM NM Prime Rate 4.00% 0.00 NM NM 5-Yr. U.S. Treasury 1.85% -3 bps NM NM Fed Funds Rate 1.00% 0.00 NM NM 10-Yr. U.S. Treasury 2.34% -2 bps NM NM Discount Rate 1.50% 0.00 NM NM 30-Yr. U.S. Treasury 2.99% 1 bps NM NM LIBOR (3 Mo.) 1.18% 0 bps NM NM German 10-Yr. Govt. 0.39% 3 bps NM NM Bond Buyer 40 Muni 3.97% -3 bps NM NM France 10-Yr. 0.84% 0 bps NM NM Bond Buyer 40 G.O. 3.81% NA NM NM Italy 10-Yr. 2.24% -7 bps NM NM Bond Buyer 40 Rev. 4.01% NA NM NM Fed 5-Yr Fwd BE Inf. 1.93% -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 % -2.96% Chinese Yuan % 0.66% Euro % 3.94% Swiss Franc % 1.81% Japanese Yen % 3.26% New Zealand Dollar % -1.05% British Pound % 4.43% Brazilian Real % 4.02% Canadian Dollar % -2.00% Mexican Peso % 10.42% 104 U.S. Dollar - Trailing Six Months 1.15 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 % -4.61% Platinum Spot $ $ % 2.01% Crude Oil $47.90 $ % % Corn % 1.85% Natural Gas $3.41 $ % -4.13% Wheat % -0.35% Gasoline ($/Gal.) $2.34 -$ % 0.17% Soybeans % -5.50% Heating Oil % % Sugar % % Gold Spot $1, $ % 7.05% Orange Juice % % Silver Spot $16.46 $ % 3.32% Aluminum 1, % 10.75% ; % change is based on price. Copper 5, % 0.14% 60 Crude Oil - Light Crude ($ per barrel) 1,350 Gold - Spot gold price ($ per ounce) 50 1, ,250 $ per barrel $ per ounce 1,200 1,150 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 % 2.26% HFRX Distressed % 2.21% HFRX Equity Market Neutral % 1.82% HFRX Merger Arbitrage % 0.65% HFRX Equity Hedge % 3.46% HFRX Convertible Arbitrage % 3.06% HFRX Event-Driven % 4.47% HFRX Macro CTA % -0.99% HFRX Absolute Return % 1.22% IQ Fixed Income Beta Arb % 1.58% ; % 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 1,008 HFRX Equity Market Neutral - Trailing 90 Days 1,445 IQ Fixed Income Beta Arb - Trailing 90 Days 1,006 1,004 1,440 1,002 1,435 1, ,430 1, , , ,410 11

12 Weekly Market Review-May Portfolio Construction S&P 500/MSCI EAFE - Trailing 180 Days 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 1.85 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) 2/23 3/2 3/9 3/16 3/23 3/30 4/6 4/13 4/20 4/27 5/4 5/11 Equity Domestic Equity Large Cap (R200) Small Cap (R2000) 0.83% 0.84% -0.48% 0.58% -1.57% 0.90% -0.41% -1.20% 1.01% 1.47% 0.24% 0.08% -0.32% 0.07% -2.55% 1.90% -2.35% 2.14% -1.30% -1.41% 2.89% 2.38% -2.00% 0.10% Int'l. Equity MSCI EAFE 0.27% -0.32% -0.60% 2.80% -0.21% 0.51% -1.20% -0.03% 0.21% 2.93% 0.94% 0.28% MSCI Em. Mkts. 0.69% -1.65% -1.43% 4.36% 0.49% 0.16% -0.64% -0.05% -0.46% 2.21% 0.04% 2.07% Fixed Income Commodities Alternatives BarCap Agg. (AGG) High Yield (JNK) Bloomberg Commodity Hedge Funds (HFRX Global) 3.04% -1.27% 1.07% -2.33% 4.11% -1.66% 17.34% 29.55% -4.73% -2.04% -3.28% -1.23% 0.57% -0.16% -2.05% 0.85% -0.71% 1.59% -0.54% -0.16% 0.54% 0.62% -0.81% 0.68% -1.25% -0.44% -2.77% 0.35% -0.33% 0.90% 0.47% 0.64% -2.15% -0.98% -1.68% 1.11% 0.07% 0.11% -0.49% 0.38% -0.39% 0.28% 0.05% -0.21% 0.17% 0.46% -0.02% 0.17% 60/40* 1.39% -0.32% -0.29% 0.23% 0.69% 0.07% 5.57% 9.83% -1.03% 0.54% -1.17% -0.22% Asset Allocation 48/32/20 (w/alts.)** 1.12% -0.24% -0.33% 0.26% 0.47% 0.11% 4.47% 7.82% -0.79% 0.53% -0.94% -0.14% ; *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 April 7, 2017 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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We are different from many other firms, in the way we build our portfolios on behalf of our clients. For more information on Endowment Wealth Management, Inc., please call (920) and/or visit 16