Quarterly Market Review, Q2 2016

Q2 Quarterly Market Review

Second Quarter 2016

Quarterly Market Review Second Quarter 2016

Overview:

Market Summary

World Stock Market Performance

World Asset Classes

US Stocks

International Developed Stocks

Emerging Markets Stocks

Select Country Performance

Real Estate Investment Trusts (REITs)

Commodities

Fixed Income

Global Diversification

Quarterly Topic: Brexit vote provided a useful lesson

This report features world capital market performance and a timeline of events for the past quarter. It begins with a global overview, then features the returns of stock and bond asset classes in the US and international markets.

The report also illustrates the performance of globally diversified portfolios and features a quarterly topic.

Market Summary

3

Past performance is not a guarantee of future results. Indices are not available for direct investment. Index performance does not reflect the expenses associated with the management of an actual portfolio. Market segment (index representation) as follows: US Stock Market (Russell 3000 Index), International Developed Stocks (MSCI World ex USA Index [net div.]), Emerging Markets (MSCI Emerging Markets Index [net div.]), Global Real Estate (S&P Global REIT Index), US Bond Market (Barclays US Aggregate Bond Index), and Global Bond ex US Market (Citigroup WGBI ex USA 1−30 Years [Hedged to USD]). The S&P data are provided by Standard & Poor's Index Services Group. Frank Russell Company is the source and owner of the trademarks, service marks, and copyrights related to the Russell Indexes. MSCI data © MSCI 2016, all rights reserved. Barclays data provided by Barclays Bank PLC. Citigroup bond indices © 2016 by Citigroup.

Index Returns

US StockMarket


EmergingMarketsStocks

GlobalReal Estate

US Bond Market

Global Bond Market ex US

2Q 2016 STOCKS BONDS

2.63% -1.05% 0.66% 4.48% 2.21% 3.11%

Since Jan. 2001

Avg. Quarterly Return 1.7% 1.3% 2.9% 2.9% 1.3% 1.2%

Best 16.8% 25.9% 34.7% 32.3% 4.6% 5.5%Quarter Q2 2009 Q2 2009 Q2 2009 Q3 2009 Q3 2001 Q4 2008

Worst -22.8% -21.2% -27.6% -36.1% -2.4% -3.2%Quarter Q4 2008 Q4 2008 Q4 2008 Q4 2008 Q2 2004 Q2 2015


4 Graph Source: MSCI ACWI Index. MSCI data © MSCI 2016, all rights reserved. It is not possible to invest directly in an index. Performance does not reflect the expenses associated with management of an actual portfolio. Past performance is not a guarantee of future results.

MSCI All Country World Index with selected headlines from Q2 2016

These headlines are not offered to explain market returns. Instead, they serve as a reminder that investors should view daily events from a long-term perspective and avoid making investment decisions based solely on the news.

170

180

190

200

Apr May Jun

“Mortgage Refis Return as Interest Rates Plummet”

“US Budget Deficit Expands In First Half of Fiscal Year”

“US Jobless Claims Fall to Four-Decade Low”

“Fed Signals No Rush to

Raise Rates”

“Anemic Wage Growth Restraining Economy”

“Eurozone Economic Recovery Gathers Pace”

“Rising US Rents Squeeze the Middle Class”

“Greece Passes Austerity Measures as Creditors Remain Deadlocked over Bailout Terms”

“US Treasury Yield Curve Is Flattest Since 2007”

“Eurozone Slides Back into Deflation”

“US Consumer Spending Climbed at Fastest Pace in Nearly Seven Years”

“Weak Hiring Pushes Back Fed’s Plans”

“Oil Prices’ Rebound Leaves Investors Guessing What’s Next”

“US Stocks Rise to Cap Rocky First Half”

“Brexit Vote Pushes Britain into Uncharted Waters”


5

These headlines are not offered to explain market returns. Instead, they serve as a reminder that investors should view daily events from a long-term perspective and avoid making investment decisions based solely on the news. Graph Source: MSCI ACWI Index. MSCI data © MSCI 2016, all rights reserved. It is not possible to invest directly in an index. Performance does not reflect the expenses associated with management of an actual portfolio. Past performance is not a guarantee of future results.

MSCI All Country World Index with selected headlines from past 12 months

140

160

180

200

Jun-2015 Sep-2015 Dec-2015 Mar-2016 Jun-2016

Long Term (2000–Q2 2016)

0.000

50.000

100.000

150.000

200.000

250.000

2000 2004 2008 2012 2016

Last 12 months

“Iran, World Powers Reach Nuclear Deal”

“Oil Prices’ Rebound Leaves Investors Guessing What’s Next”

“Eurozone Slides Back into Deflation”

“Weak Hiring Pushes Back Fed’s Plans”

“Rising US Rents Squeeze the Middle Class”

“US Jobless Claims Fall to Four-Decade Low”

“S&P 500 Turns Positive for the Year”

“Net Worth of US Households Rose to Record $86.8 Trillion in Fourth Quarter”

“British Pound Sinks to Seven-Year Low on ‘Brexit’ Fears”

“Dow, S&P Off to the Worst Starts Ever for Any Year”

“European Markets to Finish 2015 among World’s Top Performers”

“Paris Attacks Leave More than 100 Dead”

“IMF Downgrades Global Economic Outlook Again”

“US Second Quarter GDP Grows 3.9%”

“US Consumer Prices Rise for Sixth Straight Month”

“US Oil Prices Fall to Six-Year Low”

Short Term (Q3 2015–Q2 2016)

World Asset Classes

6

Past performance is not a guarantee of future results. Indices are not available for direct investment. Index performance does not reflect the expenses associated with the management of an actual portfolio. The S&P data is provided by Standard & Poor's Index Services Group. Frank Russell Company is the source and owner of the trademarks, service marks, and copyrights related to the Russell Indexes. MSCI data © MSCI 2016, all rights reserved. Dow Jones data (formerly Dow Jones Wilshire) provided by Dow Jones Indexes. Barclays data provided by Barclays Bank PLC.

Looking at broad market indices, the US outperformed developed markets outside the US and emerging markets. US REITs recorded the highest returns, outperforming the broad equity market.

The value effect was positive in the US but negative in developed and emerging markets. Small caps outperformed large caps in the US but slightly underperformed in the developed and emerging markets.

Second Quarter 2016 Index Returns (%)

5.42

4.58

4.31

3.79

2.46

2.21

1.31

0.66

0.40

0.04

-0.35

-1.05

-1.28

-2.17

Dow Jones US Select REIT Index

Russell 1000 Value Index

Russell 2000 Value Index

Russell 2000 Index

S&P 500 Index

Barclays US Aggregate Bond Index

S&P Global ex US REIT Index (net div.)

MSCI Emerging Markets Index (net div.)

MSCI Emerging Markets Small Cap Index (net div.)

One-Month US Treasury Bills

MSCI Emerging Markets Value Index (net div.)

MSCI World ex USA Index (net div.)

MSCI World ex USA Small Cap Index (net div.)

MSCI World ex USA Value Index (net div.)

0.61

2.46

2.63

3.24

3.79

4.31

4.58

Large Cap Growth

Large Cap

Marketwide

Small Cap Growth

Small Cap

Small Cap Value

Large Cap Value

Ranked Returns for the Quarter (%)

US Stocks

7

Second Quarter 2016 Index Returns

Past performance is not a guarantee of future results. Indices are not available for direct investment. Index performance does not reflect the expenses associated with the management of an actual portfolio. Market segment (index representation) as follows: Marketwide (Russell 3000 Index), Large Cap (S&P 500 Index), Large Cap Value (Russell 1000 Value Index), Large Cap Growth (Russell 1000 Growth Index), Small Cap (Russell 2000 Index), Small Cap Value (Russell 2000 Value Index), and Small Cap Growth (Russell 2000 Growth Index). World Market Cap represented by Russell 3000 Index, MSCI World ex USA IMI Index, and MSCI Emerging Markets IMI Index. Russell 3000 Index is used as the proxy for the US market. Frank Russell Company is the source and owner of the trademarks, service marks, and copyrights related to the Russell Indexes. The S&P data are provided by Standard & Poor's Index Services Group.

The broad US equity market recorded positive absolute performance for the quarter.

Value indices outperformed growth indices across all size ranges.

Small caps outperformed large caps.

53%

US Market $21.9 trillion

World Market Capitalization—US

Period Returns (%) * Annualized

Asset Class YTD 1 Year 3 Years** 5 Years** 10 Years**

Marketwide 3.62 2.14 11.13 11.60 7.40Large Cap 3.84 3.99 11.66 12.10 7.42Large Cap Value 6.30 2.86 9.87 11.35 6.13Large Cap Growth 1.36 3.02 13.07 12.35 8.78Small Cap 2.22 -6.73 7.09 8.35 6.20Small Cap Value 6.08 -2.58 6.36 8.15 5.15Small Cap Growth -1.59 -10.75 7.74 8.51 7.15


8


Past performance is not a guarantee of future results. Indices are not available for direct investment. Index performance does not reflect the expenses associated with the management of an actual portfolio. Market segment (index representation) as follows: Large Cap (MSCI World ex USA Index), Small Cap (MSCI World ex USA Small Cap Index), Value (MSCI World ex USA Value Index), and Growth (MSCI World ex USA Growth). All index returns are net of withholding tax on dividends. World Market Cap represented by Russell 3000 Index, MSCI World ex USA IMI Index, and MSCI Emerging Markets IMI Index. MSCI World ex USA IMI Index is used as the proxy for the International Developed market. MSCI data © MSCI 2016, all rights reserved.

In US dollar terms, developed markets outside the US lagged both the US equity market and emerging markets indices during the quarter.

Small caps slightly underperformed large caps in non-US developed markets.

The value effect was negative in non-US developed markets using broad market indices across all size ranges.

-1.28

-2.17

-1.05

0.07

-1.55

-1.27

-0.35

0.57

Small Cap

Value

Large Cap

Growth

Ranked Returns (%) Local currency US currency

36% International Developed Market $14.9 trillion

World Market Capitalization—International Developed Period Returns (%) * Annualized


Large Cap -2.98 -9.84 1.88 1.23 1.63Small Cap -0.69 -3.35 6.34 3.61 3.33Value -4.68 -14.35 -0.24 -0.17 0.43Growth -1.29 -5.25 3.94 2.58 2.75

Emerging Markets Stocks

9


Past performance is not a guarantee of future results. Indices are not available for direct investment. Index performance does not reflect the expenses associated with the management of an actual portfolio. Market segment (index representation) as follows: Large Cap (MSCI Emerging Markets Index), Small Cap (MSCI Emerging Markets Small Cap Index), Value (MSCI Emerging Markets Value Index), and Growth (MSCI Emerging Markets Growth Index). All index returns are net of withholding tax on dividends. World Market Cap represented by Russell 3000 Index, MSCI World ex USA IMI Index, and MSCI Emerging Markets IMI Index. MSCI Emerging Markets IMI Index used as the proxy for the emerging market portion of the market. MSCI data © MSCI 2016, all rights reserved.

In US dollar terms, emerging markets indices underperformed the US but outperformed developed markets outside the US.

The value effect was negative in emerging markets using broad market indices. Large cap value indices underperformed large cap growth indices. The opposite was true among small caps: Small cap value indices outperformed small cap growth indices.

Small cap indices slightly underperformed large cap indices in emerging markets.

1.79

0.70

0.95

-0.36

1.71

0.66

0.40

-0.35

Growth

Large Cap

Small

Value

Ranked Returns (%) Local currency US currency

11% Emerging Markets $4.4 trillion

World Market Capitalization—Emerging Markets Period Returns (%) * Annualized


Large Cap 6.41 -12.05 -1.56 -3.78 3.54Small Cap 1.38 -12.76 -0.01 -2.29 5.98Value 7.41 -14.41 -3.30 -5.53 3.29Growth 5.43 -9.83 0.08 -2.11 3.71

-0.14 -1.48

-4.50 -4.93 -5.13

-5.92 -5.98

-6.74 -7.84

-12.01 -17.00

18.19 14.44

6.74 4.64 4.61 4.61

3.94 2.61

2.03 1.70

0.60 0.14

Peru Brazil

Philippines Russia

India Indonesia Thailand

Colombia Chile

South Africa UAE

Taiwan China Korea

Hungary Egypt Qatar

Czech Republic Malaysia

Mexico Turkey Greece Poland

Ranked Emerging Markets Returns (%)

-1.21 -1.22

-2.07 -3.12

-4.24 -5.36 -5.44 -5.46

-7.48 -8.41

-9.24 -10.67 -10.99

5.30 4.72

2.98 2.62

1.88 1.77 1.50

0.64 0.49 0.38

New Zealand Canada Norway

US Belgium

Switzerland Japan

Australia Singapore

Hong Kong Finland

Denmark UK

Israel France

Germany Netherlands

Sweden Spain

Portugal Austria Ireland

Italy

Ranked Developed Markets Returns (%)

Select Country Performance

10

Past performance is not a guarantee of future results. Indices are not available for direct investment. Index performance does not reflect the expenses associated with the management of an actual portfolio. Country performance based on respective indices in the MSCI World ex US IMI Index (for developed markets), Russell 3000 Index (for US), and MSCI Emerging Markets IMI Index. All returns in USD and net of withholding tax on dividends. MSCI data © MSCI 2016, all rights reserved. Frank Russell Company is the source and owner of the trademarks, service marks, and copyrights related to the Russell Indexes. UAE and Qatar have been reclassified as emerging markets by MSCI, effective May 2014.

New Zealand recorded the highest country performance in developed markets, while Italy and Ireland posted the lowest performance for the quarter. In emerging markets, Peru and Brazil again posted the highest country returns, while Poland and Greece recorded the lowest performance.


Real Estate Investment Trusts (REITs)

11


Past performance is not a guarantee of future results. Indices are not available for direct investment. Index performance does not reflect the expenses associated with the management of an actual portfolio. Number of REIT stocks and total value based on the two indices. All index returns are net of withholding tax on dividends. Total value of REIT stocks represented by Dow Jones US Select REIT Index and the S&P Global ex US REIT Index. Dow Jones US Select REIT Index used as proxy for the US market, and S&P Global ex US REIT Index used as proxy for the World ex US market. Dow Jones US Select REIT Index data provided by Dow Jones ©. S&P Global ex US REIT Index data provided by Standard and Poor's Index Services Group © 2016.

US REITs had very strong positive returns for the quarter, outperforming the broad equity market. REITs in developed markets recorded positive returns, also outperforming broad developed equity markets indices.

60% US $662 billion 99 REITs

40% World ex US $437 billion 246 REITs (22 other countries)

Total Value of REIT Stocks

5.42

1.31

US REITs

Global REITs (ex US)

Ranked Returns (%)

Period Returns (%) * Annualized


US REITs 10.82 22.85 13.55 12.30 6.86 Global REITs (ex US) 10.02 7.25 6.96 5.91 3.31

Commodities

12


Past performance is not a guarantee of future results. Index is not available for direct investment. Index performance does not reflect the expenses associated with the management of an actual portfolio. All index returns are net of withholding tax on dividends. Securities and commodities data provided by Bloomberg.

Commodities were broadly positive during the quarter. The Bloomberg Commodity Index Total Return gained 12.78%. Energy turned positive with natural gas gaining 30.88%, Brent crude oil 19.51%, and WTI crude oil 18.64%.

The Softs complex was also positive with sugar gaining 29.84%, coffee 10.90%, and cotton 10.29%.

Grains were mixed: Soybeans returned 27.68%, yet Kansas wheat and Chicago wheat declined 16.26% and 9.28%, respectively.

Period Returns (%)


Commodities 13.25 -13.32 -10.55 -10.82 -5.59

* Annualized

-0.04

-4.74

-9.00

-9.28

30.88

29.84

27.68

23.09

19.78

19.51

18.64

15.47

10.90

10.73

10.29

8.06

6.67

3.01

2.19

1.33

Natural Gas

Sugar

Soybeans

Heating Oil

Silver

Brent Oil

WTI Crude Oil

Zinc

Coffee

Nickel

Cotton

Aluminum

Gold

Unleaded Gas

Corn

Lean Hogs

Copper

Live Cattle

Soybean Oil

Wheat

Ranked Returns for Individual Commodities (%)

1.49

3.18

2.16

3.00

10-Year US Treasury

State and Local

Municipals

AAA-AA Corporates

A-BBB Corporates

Bond Yields across Issuers (%)

Fixed Income

13

Past performance is not a guarantee of future results. Indices are not available for direct investment. Index performance does not reflect the expenses associated with the management of an actual portfolio. 1. Barclays US Corporate Bond Index. 2. Barclays Municipal Bond Index. Yield curve data from Federal Reserve. State and local bonds are from the Bond Buyer Index, general obligation, 20 years to maturity, mixed quality. AAA-AA Corporates represent the Bank of America Merrill Lynch US Corporates, AA-AAA rated. A-BBB Corporates represent the Bank of America Merrill Lynch US Corporates, BBB-A rated. Barclays data provided by Barclays Bank PLC. US long-term bonds, bills, inflation, and fixed income factor data © Stocks, Bonds, Bills, and Inflation (SBBI) Yearbook™, Ibbotson Associates, Chicago (annually updated work by Roger G. Ibbotson and Rex A. Sinquefield). Citigroup bond indices © 2016 by Citigroup. The BofA Merrill Lynch Indices are used with permission; © 2016 Merrill Lynch, Pierce, Fenner & Smith Incorporated; all rights reserved. Merrill Lynch, Pierce, Fenner & Smith Incorporated is a wholly owned subsidiary of Bank of America Corporation.


Interest rates across the US markets generally decreased during the quarter. The yield on the 5-year Treasury note fell 20 basis points (bps) to end at 1.01%. The yield on the 10-year T-note decreased 29 bps to 1.49%. The 30-year Treasury bond declined 31 bps to finish with a yield of 2.30%.

The 1-year T-bill ended the quarter yielding 0.45% and the 2-year T-note finished at 0.58%, for declines of 14 and 15 bps, respectively. The 3-month T-bill increased 5 bps to yield 0.26%, while the 6-month T-bill dipped 3 bps to 0.36%.

Short-term corporate bonds gained 1.05%. Intermediate-term corporates returned 2.24%, while long-term corporate bonds returned 6.64%.1

Short-term municipal bonds returned 0.66%, while intermediate-term municipal bonds gained 1.84%. Revenue bonds slightly outperformed general obligation bonds.2

Period Returns (%)


BofA Merrill Lynch Three-Month US Treasury Bill Index 0.15 0.19 0.09 0.09 1.04BofA Merrill Lynch 1-Year US Treasury Note Index 0.65 0.59 0.38 0.34 1.69Citigroup WGBI 1–5 Years (hedged to USD) 1.86 2.36 1.82 1.84 2.98Barclays Long US Government Bond Index 14.94 18.98 10.38 10.17 8.69Barclays US Aggregate Bond Index 5.31 6.00 4.06 3.76 5.13Barclays US Corporate High Yield Index 9.06 1.62 4.18 5.84 7.56Barclays Municipal Bond Index 4.33 7.65 5.58 5.33 5.13Barclays US TIPS Index 6.24 4.35 2.31 2.63 4.76

* Annualized

6/30/2016 3/31/2016 6/30/2015

0

1

2

3

4

US Treasury Yield Curve (%)

1 Yr

5 Yr

10 Yr

30 Yr

$0

$30,000

$60,000

$90,000

12/1988 12/1993 12/1998 12/2003 12/2008 12/2013

Growth of Wealth: The Relationship between Risk and Return

Stock/Bond Mix

Global Diversification

14


Diversification does not eliminate the risk of market loss. Past performance is not a guarantee of future results. Indices are not available for direct investment. Index performance does not reflect expenses associated with the management of an actual portfolio. Asset allocations and the hypothetical index portfolio returns are for illustrative purposes only and do not represent actual performance. Global Stocks represented by MSCI All Country World Index (gross div.) and Treasury Bills represented by US One-Month Treasury Bills. Globally diversified allocations rebalanced monthly, no withdrawals. Data © MSCI 2016, all rights reserved. Treasury bills © Stocks, Bonds, Bills, and Inflation Yearbook™, Ibbotson Associates, Chicago (annually updated work by Roger G. Ibbotson and Rex A. Sinquefield).

These portfolios illustrate the performance of different global stock/bond mixes and highlight the benefits of diversification. Mixes with larger allocations to stocks are considered riskier but have higher expected returns over time.

0.04

0.33

0.61

0.90

1.19

100% Treasury Bills

25/75

50/50

75/25

100% Stocks

Ranked Returns (%)


100% Stocks 1.58 -3.17 6.60 5.95 4.82

75/25 1.29 -2.16 5.06 4.62 4.12

50/50 0.95 -1.28 3.45 3.19 3.23

25/75 0.54 -0.52 1.78 1.66 2.16

100% Treasury Bills 0.09 0.10 0.04 0.04 0.91

* AnnualizedPeriod Returns (%)

6/2016

100% Stocks

75/25

50/50

25/75

100% Treasury Bills

The Brexit Vote and the Importance of Your Investment Plan

15

1 Brexit vote triggers 'redemptions day' for equity funds: BAML, Reuters, 7/1/16 2 Dow, S&P 500 shake off Brexit, log best week of 2016, MarketWatch, 7/1/16 3 Global stocks shrug off BoE rate inaction, Financial Times, 7/14/16 4 Stock Market Extremes and Portfolio Performance 1926-2004, Seyhun, University of Michigan

5 Market Timing: A two-sided coin, Bennyhoff and Zilbering, Vanguard Group 6 “The evidence on investment mangers’ success with market timing is impressive- and overwhelmingly negative.” Charles D. Ellis, Investment Policy, Irwin Professional Publishing 1985

The recent British referendum on whether to leave the European Union (“Brexit”) provided a refresher lesson on the false promise of market timing and the importance of sticking to an investment plan. Monday, June 27th saw the 7th largest day of global equity outflows ($9.5 billion) in the past decade1. Investors pulled $21 billion from global equity mutual funds and exchange-traded funds for the week as a whole, making it the highest weekly outflow since August 20152. And yet in the wake of that selling, major equity indices rallied hard, rising 5% from their lows by week’s end. It was the strongest weekly gain since November 2015. Global equity markets have continued to rally and, as of mid-July, the S&P 500 has set several consecutive record highs3.

Several studies have been done that show how missing just a few of the best days in the market can cut into returns4. This recent episode is a perfect illustration. No doubt, those investors who sold to avoid further downside risk, planned to re-enter their positions, but when? The sharpest gains have

frequently followed the sharpest losses within a relatively short period5. Selling may mean missing the rebound. As we see it, in order to increase returns, market timers must correctly call two decisions each time they try to execute their strategy.

The fact that the market rose when many if not most investors were so certain that it would fall, demonstrates how hard it is to correctly call the short term direction. The media was replete with dire warnings from experts about what would happen to the financial markets if the voters chose to leave the E.U. Events such as these with seemingly clear warnings exert strong psychological pressure to sell, but a careful review of market history shows from our vantage point that investors are better served by designing and adhering to a disciplined investment strategy.

The market repercussions of the Brexit vote remain impossibly hard to predict. A forecaster first has to correctly assess the future paths of complex political negotiations and then

secondly he must handicap the resulting effect on many different markets which are simultaneously subject to a multitude of other factors. Should any investor heed the advice of someone who says that they know what the correct course of action is based on something like Brexit?

Our view, backed by decades of financial research6, is that market timing is like the siren call of Greek mythology- hard to resist and inevitably harmful.

Instead of reacting to events or attempting to anticipate market movements we believe that investors should focus on the elements that they can control. We are strong proponents of financial planning and crafting a personalized investment strategy based on real needs, time-horizon and volatility-tolerance. With a solid plan in place, these occasions of market volatility can be managed and sometimes even provide opportunity.

Mark Stern

IMPORTANT DISCLOSURES

Past performance is not an indication of future performance. The information provided in this article is for informational purposes only and should not be considered

investment advice or a recommendation to buy or sell any types of securities. There is a risk of loss from investments in securities, including the risk of loss of principal.

Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment will be profitable or suitable for a particular

investor's financial situation or risk tolerance. Asset allocation and portfolio diversification cannot assure or guarantee better performance and cannot eliminate the risk of

investment losses.

No client or prospective client should assume that any discussion serves as the receipt of, or a substitute for, personalized advice from LWA or from any other investment

professional. LWA is neither an attorney nor an accountant, and no portion of the publication content should be interpreted as legal, accounting, or tax advice.

The information contained herein reflects Laurel Wealth Advisors’ views as of the date of this presentation. Such views are subject to change at any time without notice due

to changes in market or economic conditions and may not necessary come to pass. Laurel Wealth Advisors has obtained the information provided herein from various third

party sources believed to be reliable but such information is not guaranteed. Any forward looking statements or forecasts are based on assumptions and actual results are

expected to vary from any such statements or forecasts. No reliance should be placed on any such statements or forecasts when making any investment decision. Laurel

Wealth Advisors is not responsible for the consequences of any decisions or actions taken as a result of information provided in this presentation and does not warrant or

guarantee the accuracy or completeness of this information.

DEFINITIONS:

Barclays Long US Government Bond Index - includes all publicly issued, U.S. Treasury securities that have a remaining maturity of 10 or more years, are rated investment

grade, and have $250 million or more of outstanding face value. . An investor cannot invest directly in an index.

Barclays US Aggregate Bond Index - 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. An investor cannot invest directly in an index.

Barclays US Corporate High Yield Index - represents the universe of fixed rate, non-investment grade debt. Eurobonds and debt issues from countries designated as

emerging markets (e.g., Argentina, Brazil, Venezuela, etc.) are excluded but, Canadian and global bonds (SEC registered) of issuers in non- emerging market countries are

included. An investor cannot invest directly in an index.

Barclays Municipal Bond Index - Unmanaged index that is considered representative of the broad market for investment grade, tax exempt bonds with a maturity of at least

one year. An investor cannot invest directly in an index.

16

Barclays US TIPS Index - consists of inflation-protection securities issued by the US Treasury. They must have at least one year until final maturity and at least $250 million

par amount outstanding. An investor cannot invest directly in an index.

BofA Merrill Lynch 1-Year US Treasury Note Index - Is an unmanaged index tracking U.S. government securities. The index is produced by Bank of America Merrill Lynch,

Pierce, Fenner & Smith, Inc. An investor cannot invest directly in an index.

BofA Merrill Lynch Three-Month US Treasury Bill Index - an unmanaged market index of U.S. Treasury securities maturing in 90 days that assumes reinvestment of all

income. An investor cannot invest directly in an index.

Commodities - A basic good used in commerce that is interchangeable with other commodities of the same type. Commodities are most often used as inputs in the

production of other goods or services.

Dow Jones US Select REIT Index - represents equity real estate investment trusts (REITs) and real estate operating companies (REOCs) traded in the U.S. An Investor

cannot invest directly in an index.

Emerging Markets - s a term that investors use to describe a developing country, in which investment would be expected to achieve higher returns but be accompanied by

greater risk.

Global Bond Market - The environment in which the issuance and trading of debt securities occurs anywhere in the world, including the investor's own country.

Global Real Estate - Property comprised of land and the buildings on it as well as the natural resources of the land including uncultivated flora and fauna, farmed crops and

livestock, water and minerals located anywhere in the world, including the investor's own country.

Global REITs - A real estate investment trust (REIT) is a closed-end investment company that owns assets related to real estate anywhere in the world, including the

investor's own country such as buildings, land and real estate securities. REITs sell on the major stock market exchanges just like common stock.

Growth - A strategy whereby an investor seeks out stocks with what they deem good growth potential. In most cases a growth stock is defined as a company whose

earnings are expected to grow at an above-average rate compared to its industry or the overall market.

International - The strategy of selecting globally-based investment instruments as part of an investment portfolio. International investing includes such investment vehicles as

mutual funds, American Depository Receipts, exchange-traded funds (ETFs) or direct investments in foreign markets.

Junk Bonds - a high-yield, high-risk security, typically issued by a company seeking to raise capital quickly in order to finance a takeover.

Large Cap - A term used by the investment community to refer to companies with a market capitalization value of more than $10 billion. Large cap is an abbreviation of the

term "large market capitalization". Market capitalization is calculated by multiplying the number of a company's shares outstanding by its stock price per share.

17

MSCI All Country World Index - A market capitalization weighted index designed to provide a broad measure of equity-market performance throughout the world. An Investor

cannot invest directly in an index.

MSCI Emerging Markets Index (net div.) - The MSCI Emerging Markets Index captures large and mid-cap representation across 23 Emerging Markets (EM) countries. An

investor cannot invest directly in an index.

MSCI Emerging Markets Small Cap Index (net div.) - The MSCI Emerging Markets Small Cap Index includes small cap representation across 23 Emerging Markets

countries. An investor cannot invest directly in an index.

MSCI Emerging Markets Value Index (net div.) - captures large and mid-cap securities exhibiting overall value style characteristics across 23 Emerging Markets (EM)

countries. An investor cannot invest directly in an index.

MSCI World ex USA Index (net div.) - The MSCI World Index captures large and mid-cap representation across 23 Developed Markets (DM) countries. (excluding the United

States). An investor cannot invest directly in an index.

MSCI World ex USA Small Cap Index (net div.) - The MSCI World ex USA Small Cap Index captures small cap representation across 22 of 23 Developed Markets countries

(excluding the United States). An investor cannot invest directly in an index.

NASDAQ - the National Association of Securities Dealers (NASD) to enable investors to trade securities on a computerized, speedy and transparent system, and

commenced operations on February 8, 1971.

One-Month US Treasury Bills - A short-term debt obligation backed by the U.S. government with a maturity of one month (four weeks). T-bills are sold in denominations of

$1,000 up to a maximum purchase of $5 million.

Russell 1000 Value Index - An index of approximately 1,000 of the largest companies in the U.S. equity markets, the Russell 1000 is a subset of the Russell 3000 Index. An


Russell 2000 Index - The Russell 2000 Index is a small-cap stock market index of the bottom 2,000 stocks in the Russell 3000 Index. An investor cannot invest directly in an

index.

Russell 2000 Value Index - A market-capitalization weighted equity index maintained by the Russell Investment Group and based on the Russell 2000 Index, which

measures how U.S. stocks in the equity value segment perform. An investor cannot invest directly in an index.

S&P 500 Index - is an American stock market index based on the market capitalizations of 500 large companies having common stock listed on the NYSE or NASDAQ. An


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S&P Global ex US REIT Index (net div.) - the S&P Global REIT serves as a comprehensive benchmark of publicly traded equity REITs listed in both developed and emerging

markets (excluding the United States). An investor cannot invest directly in an index.

Small Cap - Refers to stocks with a relatively small market capitalization. The definition of small cap can vary among brokerages, but generally it is a company with a market

capitalization of between $300 million and $2 billion.

Value - The strategy of selecting stocks that trade for less than their intrinsic values. Value investors actively seek stocks of companies that they believe the market has

undervalued. They believe the market overreacts to good and bad news, resulting in stock price movements that do not correspond with the company's long-term

fundamentals.

US Bond Market - The environment in which the issuance and trading of debt securities occurs in the United States.

US REITs - A real estate investment trust (REIT) is a closed-end investment company that owns assets related to real estate in the United States such as buildings, land and

real estate securities. REITs sell on the major stock market exchanges just like common stock.

US Treasury Yield - The return on investment, expressed as a percentage, on the U.S. government's debt obligations (bonds, notes and bills).

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Quarterly Market Review, Q2 2016

Economy & Finance

Transcript of Quarterly Market Review, Q2 2016