Shutdown Showdown

Americans seemed to be more interested in television’s Breaking Bad finale than Washington proceedings last weekend, but we turned the calendar to October only to welcome the first government shutdown since 1996. With negotiations tied to blockage of new insurance exchanges, it is difficult to see how Republicans and Democrats will ultimately come to agreement and open up America for business as usual.

Here are our economic and investment thoughts on the shutdown:

• Where only chaos sparks results: You have to wonder if Congress was looking for a very bad reaction to the shutdown in order to spark an incentive to start negotiating with each other. Crisis policy seems to have had the most reliable results when it comes to any semblance of political leadership in the past five years. Our leaders didn’t get such a crisis as US stock markets opened higher on the first day of shutdown (Tuesday, October 1st).
• Unpopular politics: Voter frustration can be measured in poll results which show that the health care law is unpopular but the government shutdown is even less desirable. Bloomberg reported Tuesday that 72% of American’s opposed a shutdown tied to ObamaCare in a Quinnipiac University poll.
• The hit to GDP: Growth numbers in the US have already been stymied by fiscal austerity in the form of higher taxes and less spending this year. The biggest impact to those who don’t cash a paycheck from the government or have a trip to a national park planned may be a hit to the US GDP. The 800,000 employees who were sent home represent a workforce larger than Target, Exxon Mobil, General Motors, and Google combined (Tom Keane, Bloomberg Radio, 10/2/13). We should note that the hit might have been higher in past shutdowns as US employment in government jobs has been falling. I tried to pull the exact numbers by accessing the US Census Bureau, but the site was down due to the government shutdown.
• Silver lining: All the rotten tomatoes being thrown at Congress mask the surprising statistic that the US government budget deficit has been falling rapidly in the last twelve months with an even larger decline anticipated. This does not excuse a failure of governance and does not balance the books overall, but it should be noted as we mourn the loss of decorum or certainty in the function of business in Washington DC.
• Avoid at all costs: The government shutdown seems to be a prelude to another debt ceiling standoff which many market watchers consider to be much more threatening. It seems absurd that US policymakers would manufacture a crisis rather than providing the ability to pay bills. Given the beltway dysfunction, though, never say never. We’ll keep you posted with our upcoming quarterly investment commentary.

All this bad news masks a US economy whose private sector continues to grow and a growing chorus of statistics that seem to support global recovery from recessions, especially in Europe. Our advice for investors right now is not to let the political tail wag your investment dog. Excepting short-term cash-flow needs, focusing on the long-term may benefit reward investors by using dips as buying opportunities rather than selling to duck and cover.

Melissa Joy, CFP®is Partner and Director of Investments at Center for Financial Planning, Inc. In 2011 and 2012, Melissa was honored by Financial Advisor magazine in the inaugural Research All Star List. In addition to her frequent contributions to Money Centered blogs, she writes frequent investment updates at The Center and is regularly quoted in national media publications including The Chicago Tribune, Investment News, and Morningstar Advisor.

Financial Advisor magazine's inaugural Research All Star List is based on job function of the person evaluated, fund selections and evaluation process used, study of rejected fund examples, and evaluation of challenges faced in the job and actions taken to overcome those challenges. Evaluations are independently conducted by Financial Advisor Magazine.

The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Melissa Joy and not necessarily those of Raymond James.

Investment Commentary - 2nd Quarter 2013

While excellent equity market returns coupled with very low volatility have been the name of the game for much of this year, volatility has become the theme in recent weeks as returns across markets have varied quite widely.  Despite this recent volatility Equity returns still look strong to date this year as well as for the past year while bonds and commodities continue to struggle.

In recent weeks the Federal Reserve Bank (the FED) led by Ben Bernanke has been busy!  At their meeting in mid-June they started to give some guidance in which the seemingly unending stimulus that was termed “QE3” (Quantitative Easing) would start to be tapered off.  In September 2012 the FED started buying $40 billion per month of mortgaged backed securities, accelerating that buying to $85 billion per month in December 2012.  Their continued purchasing of this debt was pending the economy improving as measured by the Unemployment rate.  Recently Bernanke stated:

The Committee currently anticipates that it would be appropriate to moderate the monthly pace of purchases later this year; and if subsequent data remain broadly aligned with our current expectations for the economy, we would continue to reduce the pace of purchases in measured steps through the first half of next year, ending purchases around midyear. In this scenario, when asset purchases ultimately come to an end, the unemployment rate would likely be in the vicinity of 7%, with solid economic growth supporting further job gains – a substantial improvement from the 8.1% unemployment rate that prevailed when the Committee announced this program.

Bernanke also stated that the federal funds rate would be kept in the current 0-0.25% range until the unemployment rate headed below 6.5%.  Immediately after this announcement the markets, all markets, sold off.  Domestic and International Equities, Bonds and commodities (most notoriously Gold) all sold off as investors sold first and asked questions later.  Interest rates on the much quoted 10 year Treasury note shot up significantly in the past month.

The selloff in the fixed income markets seemed justified to us, although maybe not across the board.  For the stock markets the reaction seemed  rather extreme because over the course of two days, June 19^th and 20^th, the S&P 500 was off more than 3 times what the Barclays US Aggregate Bond Index was off, ‑3.84% versus -1.21%. 

Since then positive news has been negative for markets while negative news has been positive.  Signs of an improving economy are met with negative returns because people fear this will accelerate the tapering schedule the FED has laid out.  On the other hand stocks have rallied into poor economic data headlines such as “1^st quarter GDP revision of economic growth going from 2.4% to 1.8%.” As equity markets find their footing again we would anticipate this to be a short term anomaly and an improving economy should be met with a positive note by markets going forward but only time will tell.

The bottom line is that QE3 was one of the largest forms of stimulus the FED has applied in its history.  Although 2008 is not yet a distant memory for most, the economy has been improving consistently now for four years.  When put that way it is hard to rationalize these extreme QE measures for too long.  We applaud the FED for its transparency as uncertainty is usually a more negative force in the markets than the actual facts.

On behalf of everyone here at The Center,

Angela Palacios, CFP®

Portfolio Manager

On a lighter note, as many of you know Melissa Joy, Partner and Director of Investments here at the Center, generally brings you our investment commentary.  However, she is taking a much deserved maternity leave after the birth of Josephine Pearl on June 18th!

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Required Disclaimers: The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Any opinions are those of Angela Palacios and not necessarily those of RJFS or Raymond James. Investments mentioned may not be suitable for all investors.

There is an inverse relationship between interest rate movements and fixed income prices. Generally, when interest rates rise, fixed income prices fall and when interest rates fall, fixed income prices generally rise. U.S. government bonds are issued and guaranteed as to the timely payment of principal and interest by the federal government. Please note that international investing involves special risks, including currency fluctuations, different financial accounting standards, and possible political and economic volatility. Commodities may be subject to greater volatility than investments in traditional securities. Gold is subject to the special risks associated with investing in precious metals, including but not limited to: price may be subject to wide fluctuation; the market is relatively limited; the sources are concentrated in countries that have the potential for instability; and the market is unregulated.

Investment Performance - 2nd Quarter 2013

Source: Morningstar

Bonds represented by Barclay's Aggregate Bond Index a market-weighted index of US bonds. US Large Companies per S&P 500 Index a market-cap weighted index of large company stocks. Barclay’s Global Bond index is a market-cap weighted index of global bonds. US Small Companies per Russell 2000 Index a market-cap weighted index of smaller company stocks. International stocks measured by MSCI EAFE is a stock market index designed to measure the equity market performance of developed markets outside of the US and Canada. Commodities per Morgan Stanley Commodity Index a broadly diversified index designed to track commodity futures contracts on physical commodities. Barclays Capital US Corporate High Yield Index is an unmanaged index that covers the universe of fixed-rate, noninvestment-grade debt. Barclays Capital US Corporate High Yield Index is an unmanaged indexthat covers the universe of fixed-rate, noninvestment-grade debt.

Inclusion of these indexes is for illustrative purposes only. Keep in mind that individuals cannot invest directly in any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance. Individual investor’s results will vary. Past performance does not guarantee future results.

Investment Performance - 1st Quarter 2013

Source: Morningstar

Bonds represented by Barclay's Aggregate Bond Index a market-weighted index of US bonds. US Large Companies per S&P 500 Index a market-cap weighted index of large company stocks. Barclay’s Global Bond index is a market-cap weighted index of global bonds. US Small Companies per Russell 2000 Index a market-cap weighted index of smaller company stocks. International stocks measured by MSCI EAFE is a stock market index designed to measure the equity market performance of developed markets outside of the US and Canada. Commodities per Morgan Stanley Commodity Index a broadly diversified index designed to track commodity futures contracts on physical commodities. Barclays Capital US Corporate High Yield Index is an unmanaged index that covers the universe of fixed-rate, noninvestment-grade debt. Barclays Capital US Corporate High Yield Index is an unmanaged indexthat covers the universe of fixed-rate, noninvestment-grade debt.

Inclusion of these indexes is for illustrative purposes only. Keep in mind that individuals cannot invest directly in any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance. Individual investor’s results will vary. Past performance does not guarantee future results.

Sequestration Frustration

After a debt-ceiling reprieve, the US government’s next big hurdle is the March 1st Sequester. What is sequestration and how does it affect you?

During the debt ceiling showdown in the summer of 2011, a group of arbitrary across-the-board spending cuts deemed unacceptable to both Democrats and Republicans was drafted to ensure action on deficit reduction. It wasn’t a solution, it was just a way to buy time and it’s called a sequester. Through a series of compromises, the deadline for the sequester has been moved to March 1, 2013 and separated from other components of the “fiscal cliff”.

When totaled, the sequester’s automatic spending cuts reduce government spending in 2013 by $85 billion (source: JP Morgan Market Bulletin, 2/19/13). Here’s a breakdown of cuts mapped out in the legislation through 2021.

What does the sequester mean to you as a citizen and investor?

Fiscal drag.The Congressional Budget Office estimates the initial impact to GDP in 2013 of around 0.56% if the sequester lasts from March through the end of the year (source: Washington Post, “The Sequester”, 2/20/2013).  This could mean uneasy stock markets, less hiring, and more muted recovery.

Arbitrary cuts. The punitive nature of across the board cuts may have an impact for you in other ways. Those most affected probably work within the government. Some could lose their jobs and those that don’t could find themselves working in a very constricted environment. For the average citizen,  daily encounters with the government may be slowed or changed. Some examples? Fewer food safety inspections, flight back-ups due to cuts at the FAA, slower federal court systems with lighter dockets meaning delays to cases, cuts to federally-funded scientific research, defense contracts, and reduced military benefits.

Market disruption.The idea of a sequester is popular with almost no one. This could translate into less confidence in stock markets and increased volatility. In the longer term, the failure to address debt and deficit issues could have even larger implications.

We can’t predict how everything relating to a spending sequester will fall out. Markets so far this year have turned the other cheek whether from fatigue with politically-inspired deadline drama or positive reaction to other news. We’ll keep you posted as Capitol Hill sorts things out in the coming weeks and months.

Required Disclaimer: The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Any opinions are those of Melissa Joy, CFP® and not necessarily those of RJFS or Raymond James.

Markets Welcome the New Year - 1st Quarter 2013

“Happy New Year!”  At least that’s what stock markets seem to be thinking. While 2012 posted solid returns across asset classes, 2013 has had a more exaggerated “off to the races” feeling for stocks. Money which was piled up on the sideline, whether from fear of the fiscal cliff or general concerns or fatigue, seems to be rushing back in to riskier investments like stocks.

Who hasn’t been happy in the new year? Government bond holders have a slight taste of potential negative returns as interest rates rose. The Barclay’s Capital Aggregate Bond Index returns fell by 0.70% through the end of January. Interest rates have risen in several small periods over the past year with some corresponding bond losses, but a clean slate of fresh “Year to Date” performance numbers may highlight these negatives more easily than hiccups buried within the year.

US GDP growth from the 4th quarter was markedly lower than expected falling by 0.1% as reported by the Commerce Department. What was ailing the US economy? Much of the blame goes to reduced spending, especially in the defense sector as there was anticipation of spending cuts related to the fiscal cliff. This is likely to be revised upward, though, because the trade deficit narrowed unexpectedly during the end of the year.

Washington’s grip on business page headlines is not done, but an agreement to avoid the so-called fiscal cliff as well as delay the debt ceiling limits seems to have been a welcome break from posturing and threats for a few weeks. We still have spending cuts to deal with in the next couple months so the respite may be short-lived. We are not fans of can kicking, but we also do not want government dysfunction to hijack the investment realm. We’ll keep you posted as developments unfold.

While growth has been muted, employment numbers continue to slowly look better as more people return to look for jobs and less new unemployment claims are registered. These numbers are an important factor in our economic picture today and while the US unemployment recovery is certainly sluggish, the direction of the numbers (more jobs, less unemployed) remains critical. In tandem with unemployment is housing which has been a major drag to the economy since 2008. Encouraging positive numbers have been reported from 2012 into 2013 for both housing prices and activity. This is a welcomed trend!

US economic reports aren’t the only positives. The notion of recovery is starting to be contemplated in Europe and while the Euro economies certainly aren’t out of the woods, the Euro itself seems more viable. In China, new leadership has also allayed fears of a hard landing in Asia. In the US, corporations continue to post strong earnings and a new reality in domestic energy production is starting to change some dynamics for US competitiveness.

January’s buying stampede cannot sustain itself for 12 months and we’re sure 2013 will have its investing ups and downs as does any other year. That said, those who continually forecast doom and gloom for US markets would be hard-pressed to explain the rising tide we’ve witnessed since the beginning of 2012.

Things are never as good or as bad as they may appear. Better returns may tip the investing scales from fear to greed. Don’t get too excited chasing returns of yesterday. We still recommend a prudent, diversified and consistent approach to investing as you strive to reach the finish line for each of your personal financial planning goals.

On behalf of everyone here at The Center,

Melissa Joy, CFP®

Partner, Director of Investments

Required Disclaimer: The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Any opinions are those of Melissa Joy, CFP® and not necessarily those of RJFS or Raymond James. Investing involves risk and diversification does not ensure a profit or protect against a loss. There is an inverse relationship between interest rate movements and bond prices. Generally, when interest rates rise, bond prices fall and when interest rates fall, bond prices generally rise. The Barclays Capital Aggregate Bond Index is a broad base index maintained by Barclays Capital and is often used to represent investment grade bonds being traded in United States. Keep in mind that individuals cannot invest directly in any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance. Individual investor's results will vary. Past performance does not guarantee future results.

Investment Performance - 4th Quarter 2012

Source: Morningstar

Bonds represented by Barclay's Aggregate Bond Index a market-weighted index of US bonds. US Large Companies per S&P 500 Index a market-cap weighted index of large company stocks. Barclay’s Global Bond index is a market-cap weighted index of global bonds. US Small Companies per Russell 2000 Index a market-cap weighted index of smaller company stocks. International stocks measured by MSCI EAFE is a stock market index designed to measure the equity market performance of developed markets outside of the US and Canada. Commodities per Morgan Stanley Commodity Index a broadly diversified index designed to track commodity futures contracts on physical commodities. Barclays Capital US Corporate High Yield Index is an unmanaged index that covers the universe of fixed-rate, noninvestment-grade debt. Barclays Capital US Corporate High Yield Index is an unmanaged indexthat covers the universe of fixed-rate, noninvestment-grade debt.

Inclusion of these indexes is for illustrative purposes only. Keep in mind that individuals cannot invest directly in any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance. Individual investor’s results will vary. Past performance does not guarantee future results.

Fiscal Cliff Limbo

It’s December 21st as I write this which is the artificial deadline we circled for a fiscal cliff resolution in 2012. By the time that you read this we may have a resolution, but as of this writing we do not. Last night the House of Representatives abruptly adjourned without voting on Speaker of the House John Boehner’s “Plan B”.

No insider expected Plan B to be the ultimate resolution of the fiscal cliff debate. It was a bargaining chip for Speaker Boehner to show united resolve from House GOP during negotiations with President Obama. With that resolve now shattered, eyes turn toward an increased role of Senate Leaders: Republican Mitch McConnell and Democrat Harry Reid.

Without action between now and year-end, a bundle of tax increases and spending cuts will become effective January 1. It is important to keep in mind that this bundle of changes accumulates over a full calendar year to equal the billions of dollars that have been estimated to reduce the economy. While it looks like a compromise will be difficult in the next few days, any action in 2013 could be retroactive to the end of 2012, especially on the income tax front.

Greg Valliere, Chief Political Strategist at Potomac Research, has noted this week that we are now in a worst case scenario. This doesn’t mean the full “cliff” will necessarily be realized, but Washington may look to the markets for a “crisis” prior to acting. As of yesterday’s close, the US stock market as measured by the S&P 500 is trading above Election Day values. A pullback is not out of the question but recognize the fickle nature of political negotiations which make it very difficult to time peaks and valleys.

During this time, as always, we manage your portfolios with a steady hand recognizing that there are ebbs and flows in investing. You have stated goals for your investments related to your life needs. Our enduring purpose is to help you to achieve those goals through our investment and financial planning decisions. If you have any questions as we continue to navigate these choppy fiscal waters, please feel free to contact us.

On behalf of everyone at The Center,

Melissa Joy, CFP®

Partner, Director of Investments

Required Disclosure: The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material, are not a complete summary or statement of all available data necessary for making an investment decision, and do not constitute a recommendation. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Melissa Joy and not necessarily those of RJFS or Raymond James. The S&P 500is an unmanaged index of 500 widely held stocks that’s generally considered representative of the U.S. stock market.

Post-Election Investment Update: Cold Shoulder and the Fiscal Cliff

It’s been a year and almost $6 billion dollars since the kick-off of the presidential campaign cycle. After all that, we are left with relatively few changes in terms of the composition of the executive and legislative branches. President Barack Obama decisively won in the Electoral College race, but when all was said and done, he garnered less than a 3% advantage over Mitt Romney. In the election aftermath or afterglow, depending on your perspective, all eyes are now on the Fiscal Cliff and other looming issues that the president and Congress were unable to tackle in the last four years. Here are our thoughts on the impact of the election for the economy and your investments.

The Fiscal Cliff

There are wide-ranging tax increases and spending cuts set to occur after January 1^st. These included mandatory spending cuts across the board, the end of the Bush-era tax cuts, Alternative Minimum Tax expansion and the Affordable Care Act (Obamacare), investment income taxes, payroll tax holiday coming to an end, and more. All of this adds up to about $650 billion.

Some hoped for shifting control on Capitol Hill to address these issues, but this was not to be. With the same actors who could not resolve these issues for the last two years remaining in office, that seems to be wishful thinking. Some potential considerations:

• Compromise possible: Some components of the Fiscal Cliff are not attractive to either party and government doesn’t have to figure out everything at once. Look for the possibility of compromises for things like AMT and mandatory spending cuts to occur prior to congressional recess in December.
• Bush Tax Cuts: With much of the Republican House beholden to a “no tax increase” pledge, the expiration of Bush tax cuts as of the end of the year and then a roll-back of some of those increases for lower brackets is a threat favored by the most liberal wing of the Democratic Party. To us, this would be a disappointing result, but not out of the realm of possibility. Keep an eye on the discussion of what income level is left out. President Obama has said he wants tax increases for those making over $250,000. This is a starting point, but others have talked about levels upwards of $500,000 or $1,000,000.
• Kicking the Can Down the Road:  It’s certainly possible that a compromise will not be reached or mapped out prior to year-end. In the past, this has resulted in an infuriating form of procrastination by agreeing to delay a decision until some date down the road. The more this occurs, the worse off we are. We are especially concerned if there is a delay today because of the impact on corporate decision-making which is thirsting for some clear guidance about the road ahead. Further, if the arbitrary date gets too close to mid-term elections, we’ll be left with even longer odds for an agreement. That said, if there is true desire from those involved to tackle more significant tax overhaul, buying more time may be critical. The last major tax policy shift occurred in 1986. President Reagan and a Democrat-controlled Congress took two years to put a deal together, and they were more agreeable counterparties.
  
• Return of Volatility: Markets this year have had exceptionally low volatility when compared to recent years. Uncertainty and extreme possibilities will likely usher in very volatile returns through at least the end of the year and we’re already seeing this today. The more pain there is in the markets, the more likely that estranged parties become willing to work together for a solution. Do not be surprised if stock prices respond very positively and quickly if a compromise is reached.

Also on the Horizon

The Fiscal Cliff is not all that we should focus on as a result of the election. We are also watching:

• Federal Reserve: A Romney win would have meant much more uncertainty as to the future leader of the Federal Reserve vs. President Obama’s continued allegiance to Chairman Ben Bernanke. While Bernanke has said that he does not want to stay for another term (which ends in 2014), it is likely that the low interest rate mandate will remain with a Bernanke-esque nominee. Possible reasons for a change to the current zero interest rate policy? Robust GDP growth or significant inflation which we think may be more likely the longer easy money sticks around.
  
• Debt Ceiling: The current debt ceiling limit would be breached in early 2013 and coincides with the Fiscal Cliff discussions. Washington needs to remain on speaking terms to avoid the detriments of another failure to act on this issue.
  
• Treasury Secretary: Timothy Geithner has said he is not interested in remaining at the Treasury. President Obama’s nomination for replacement will be very important in terms of cooperation with Congress as well as opportunities to tackle the long-term debt issues for the US. Watch to see if the nominee has a reputation of bipartisanship and dealing with Congress or a more ideological persona. While the Fiscal Cliff is in the spotlight today, we believe a long-term path to sustainable growth coupled with lower government debt is a much more critical issue.

We are encouraged by several factors that may lead to better resolutions to the serious issues that must be resolved by Washington powers today. A second-term president moves from a focus on reelection to the desire for a lasting legacy. In our estimation, nothing would be deemed more critical, both by Americans today and the history books, than creating a long-term plan for debt while leaving the economy in better shape than it is today. While Republicans, especially in the House of Representatives, spent the last two years working to deny President Obama reelection, they will need more constructive accomplishments on their resume as they look toward mid-term elections in two years. Finally, there seems to be stronger organized encouragement from the business community led by Fortune 500 CEO’s encouraging both sides to set aside their differences and to come to the table.

While markets have welcomed the election results with a cold shoulder, year-to-date returns remain positive for many investments. As stated earlier, we are not surprised by more disrupted markets post-election. Uncertainty breeds volatility and we expect weeks and possibly months of posturing before we have a more clear direction going forward.

I encourage you to follow the 80/20 rule when it comes to concerns with the market: spend 80% of your time focusing on financial decisions you can control and less than 20% of your time on external worry and fear. As always, we’re here to help. Please don’t hesitate to contact us if you have any questions or concerns.

On behalf of everyone at The Center,

Melissa Joy, CFP®
Partner, Director of Investments

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The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Melissa Joy, CFP® and not necessarily those of RJFS or Raymond James. Links are being provided for information purposes only. Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed websites or their respective sponsors. Raymond James is not responsible for the content of any website or the collection or use of information regarding any website's users.

Investment Performance - 3rd Quarter 2012

Source: Morningstar

Bonds represented by Barclay's Aggregate Bond Index a market-weighted index of US bonds. US Large Companies per S&P 500 Index a market-cap weighted index of large company stocks. Barclay’s Global Bond index is a market-cap weighted index of global bonds. US Small Companies per Russell 2000 Index a market-cap weighted index of smaller company stocks. International stocks measured by MSCI EAFE is a stock market index designed to measure the equity market performance of developed markets outside of the US and Canada. Commodities per Morgan Stanley Commodity Index a broadly diversified index designed to track commodity futures contracts on physical commodities. Barclays Capital US Corporate High Yield Index is an unmanaged index that covers the universe of fixed-rate, noninvestment-grade debt. Barclays Capital US Corporate High Yield Index is an unmanaged indexthat covers the universe of fixed-rate, noninvestment-grade debt.

Inclusion of these indexes is for illustrative purposes only. Keep in mind that individuals cannot invest directly in any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance. Individual investor’s results will vary. Past performance does not guarantee future results.