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April 2016 QUARTERLY NEWSLETTER

Many of you may remember Lakeside Amusement Park. I was fairly young still when it was closed; however, the thing I remember most were the bees everywhere. Most everyone else remembers the “coasters”! Roller coasters are fun…but only because you can get off of them after 3 – 5 minutes. By being investors, we’ve all chosen to stay on the proverbial “market roller coaster” that at times feels like one you ride with your children, but not lately…this one has been like the one only the brave dare to ride. What started off as one of the worst starts to a market year turned into a comeback like no other in over 70 years.

Three months in and all we can say is that 2016 has been truly unique…and downright scary at times.

Let’s begin by taking a broader look at market dynamics going back to the second half of 2014 as this marked the general beginning of wide spread US Dollar strength that drove various asset classes worldwide into what was a wild start to this year. Developed world central bank policy going in the opposite direction of the U.S. has been a core issue as the Federal Reserve has been effectively tightening monetary policy while many other central banks around the globe have been adding stimulus. They are seemingly doing this in an attempt to kick start their respective economies that have continued to languish. Amidst a global economic backdrop of vast amounts of US Dollar-denominated debt, weak global demand and significant oversupply in the commodity markets at large; the strong US Dollar helped create significant weakness in various asset classes such as Oil and Emerging Market stocks going into the start of this year. As 2016 began, sentiment amongst market participants began to price in increased concerns over the effects of a collapsing commodity complex and a weakening global economic backdrop as unease over the possibility of further Chinese currency devaluation, that began last summer, threatened to pull the U.S. economy into the doldrums of anemic growth that much of the world was already experiencing. The result was the worst start to a year in history for the S&P 500, accompanied by a wide spread collapse in global assets as commodities plummeted to levels not seen in well over a decade. Fear seemed to dominate the mood surrounding markets and we are pleased to have added value by maintaining a logic driven approach buffered by the fact that our allocations had been prepared for such risk months in advance as seen in our prior letters.

Disclosures: The information provided in this publication is for general informational purposes only and should not be considered an individualized recommendation of any particular security, strategy or investment product, and should not be construed as investment,

legal or tax advice. Capital Investment Advisory Services, LLC makes no warranties with regard to the information or results obtained by third parties and its use and disclaim any liability arising out of or reliance on the information. This information is subject to change and,

although based on information that Capital Investment Advisory Services, LLC considers reliable, it is not guaranteed as to accuracy or completeness. Source information is obtained from independent financial data supplies. Past performance is no guarantee of future

results. Advisory services through Capital Investment Advisory Services, LLC, an SEC-registered Investment Advisor. Additional information is described in the firm’s Form ADV Part 2, which is available by calling (919) 831-2370. Securities offered through Capital Investment Group, Inc., Member FINRA/SIPC. Both firms are located at 100 E. Six Forks Rd,, Ste 200, Raleigh, NC 27609 919/831-2370

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What occurred next was a dramatic rebound from the low levels of mid-February as global markets staged a powerful rally into the end of March. Both equities and commodities surged higher and as a result, punished those who sold in a state of panic on the heels of the decline seen in the first six weeks of the year. The catalyst for what was a historic rebound was the reversal of US Dollar strength as its weakness eased the deflationary pressures on global markets and the greater worldwide economy. The Federal Reserve lowered its expectations for future rate hikes and despite increased stimulus from both the European Central Bank and Bank of Japan, the dollar moved lower as the markets moved higher. Commodities and emerging markets notably outperformed developed world stocks going into the end of the quarter. We participated by ultimately not selling out in the early year panic and through the significant minimization of concentration to strong US Dollar factors in anticipation of what ultimately occurred.

With that being said, here are a few points we find important in the current environment:

All global markets have been largely driven by macro-economic factors with the currency markets playing a massive role in determining the outlook for both investments and the global economy. It appears that US Dollar weakness going into the end of the quarter reduced deflationary pressures while also lowering the possibility that the Chinese would need to devalue their currency and potentially push the world closer to a collective recession.

The Federal Reserve has recently stated that they will be patient in regard to future rate hikes in an attempt to not stoke further dramatic US Dollar strength as many areas of the globe are still weak economically and as a result, they are attempting to stimulate their economies. {Source: Bloomberg 3/16/16}

U.S. companies have suffered two straight quarters of declining profits which we believe is the result of a strong US Dollar that lowered the domestic value of earnings made overseas in foreign currencies. In our opinion, recent US Dollar weakness could relieve this downward earnings pressure on many of our country’s largest corporations.

U.S. Treasuries at large have had their best start to any year since 2008 {Source: Interactive Data) as both early year chaos and the recent lowering of the Fed’s outlook for future monetary tightening seem to have been beneficial to this “risk-off” asset class. This has been a core position of ours that we will maintain for the time being albeit with the flexibility to adjust course if the prevailing reasoning that supports such a position changes.

Having remained grounded in our process during what have been extremely uncertain times to start 2016; we are now focused on the road ahead as risk management and strategic diversification are of considerable importance in the current environment.

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Our current portfolios could be viewed as slightly defensive, but we believe they are still positioned to collect yield and capture possible upside in select markets. As we continue our journey together in times that we strongly believe are largely unprecedented versus any other time in history; we will remain diligent in our constant efforts to identify risk proactively while refusing to act emotionally amidst chaos.

While we continue to anticipate increased volatility, we remain steadfast in our efforts to work hard in order to properly manage any and all situations that may arise with your best interests at the core of our process.

Thank You,

J. ANDY INGRAM

Disclosures: The information provided in this publication is for general informational purposes only and should not be considered an individualized recommendation of any particular security, strategy or investment product, and should not be construed as investment,

legal or tax advice. Capital Investment Advisory Services, LLC makes no warranties with regard to the information or results obtained by third parties and its use and disclaim any liability arising out of or reliance on the information. This information is subject to change and,

although based on information that Capital Investment Advisory Services, LLC considers reliable, it is not guaranteed as to accuracy or completeness. Source information is obtained from independent financial data supplies. Past performance is no guarantee of future

results. Advisory services through Capital Investment Advisory Services, LLC, an SEC-registered Investment Advisor. Additional information is described in the firm’s Form ADV Part 2, which is available by calling (919) 831-2370. Securities offered through Capital Investment Group, Inc., Member FINRA/SIPC. Both firms are located at 100 E. Six Forks Rd,, Ste 200, Raleigh, NC 27609 919/831-2370