Quarterly Market Perspective

Summary

• It is emotionally stressful watching markets go up and down over short periods of time.

• Following a disciplined process aligned with your financial goals can help you overcome these challenging periods.

• The U.S. continues to grow, supported by a healthy labor market and growing wages, but we’re seeing signs of rising inflation.

Q1 2016

Bruce HerringPresident Strategic Advisers, Inc.

Over the last few years — in messages like this one — I have continually emphasized

the importance of patience and a long-term perspective. While easy to state, it can be

difficult in practice. That’s because it’s emotionally stressful watching your investments

go up and go down — particularly when markets shift rapidly over short periods

of time.

It is during times like these that I am reminded of a quote from a former mentor of

mine, Peter Lynch, who said: “Far more money has been lost by investors preparing

for corrections, or trying to anticipate corrections, than has been lost in corrections

themselves.”

This is where we hope to help and why we are so passionate and committed to what

we do for each and every client. We want to provide you with added emotional

discipline during challenging and ever-changing market environments by stringently

following an investment process that aligns with your objectives and goals. More

recently, this belief has been reinforced as markets have moved up and down with

greater frequency.

Recent Market Shifts: Down Then Up

The year began with markets selling off. By February 11, U.S. large- and small-cap stocks fell by 10% and 16%,1 respectively. Overseas, stocks fell 12%.2 These negative stock returns were largely driven by recurring concerns over weaker global growth, including a slowing Chinese economy and falling oil prices. However, adding to these well-known concerns was the uncertainty of how fast the Federal Reserve might raise future interest rates.

As we always do in times like these, we analyzed the situation and retested our investment views. We concluded that

despite these near-term challenges, many developed markets, led by the United States, were growing, and most importantly, we believed that a U.S. recession was not imminent. By mid-February, markets started to refocus on the long term, including the strength of the U.S. economy, and stocks broadly recovered. This rapid move down and back up highlights the emotional discipline we are seeking to provide you with, and how our investment process is designed to help ensure that your portfolio is managed consistent with your financial goals.

STRATegiC AdviSeRS, inC.

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Strategic aDViSerS, inc., Quarterly MarKet PerSPectiVe, Q1 2016

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Bonds Have Provided Diversification Benefits

The recent shifts in the market also highlight the ben-efits of diversification. For most client accounts, this is reflected by the mix of stocks and bonds in your port-folio. during the stock market sell-off earlier in the year, high-quality bonds, such as U.S. Treasuries, gained more than 2%.3 These positive returns occurred in spite of the fact that the Federal Reserve raised the federal funds rate by 0.25% in december. Over the last several years, experts and pundits alike have raised the warning flag regarding Federal Reserve policy, including the effect that rising interest rates would have on bonds in your portfolio. The recent market environment serves as an important reminder that bonds play an important role in your portfolio when stocks are more challenged. History suggests that most bonds are less volatile instruments than stocks, and this does not change during periods of rising interest rates.

We believe that a disciplined process and diversified investment approach will be vital in the year ahead, as developing economies, such as China, are likely to remain challenged. That’s because China is seeking to transition

from a low-wage export-driven economy to one powered by consumers and high-tech manufacturing. As we have continued to experience, this transition will be bumpy, and we expect that markets will continue to react both positively and negatively to these very near-term focused shifts.

Economic Cycle Showing Signs of a Transition

in contrast, we continue to believe that many developed economies continue to grow. Here in the U.S., growth remains supported by a healthy labor market, growing wages, and a steady housing recovery. However, we recognize that we’ve had six straight years4 of economic expansion. given this longer than normal period, we are seeing signs of a shift in the stage of the U.S. economic cycle that is consistent with positive markets but also lower earnings growth and rising inflation. Historically, higher inflation has spurred action by the Federal Reserve. if this were to happen, it might create a chal-lenging environment for stocks. While we do not believe this to be of imminent concern, we are watching closely.

$89.73

$84.07

$80

$85

$90

$95

$100

$105

1/7/16 1/14/16 1/21/16 1/28/16 2/4/16 2/11/16

Large-Cap Stocks Small-Cap Stocks

U.S. Large- and Small-Cap Stock Decline and Rebound

Gro

wth

of $

100

3/31/16 3/24/16 3/17/16 3/10/16 3/3/16 2/25/16 2/18/16

$101.35

$98.48

Past performance is no guarantee of future results.

U.S. Large-Cap and Small-Cap returns 1/1/2016–3/31/2016.

Source: Fidelity Investments. Market data includes the following indexes, the S&P 500® Index and Russell 2000® Index.

All indexes are unmanaged, and performance of the indexes includes reinvestment of dividends and interest income, unless otherwise noted. Indexes are not illustrative of any particular investment and it is not possible to invest directly in an index.

STRATegiC AdviSeRS, inC., QUARTeRly MARKeT PeRSPeCTive, Q1 2016

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About the Author

Bruce HerringPresident, Strategic Advisers, Inc. Bruce Herring is president of Strategic Advisers, Inc. (SAI), a registered investment adviser and a Fidelity Investments company. Mr. Herring has been with Fidelity since 1987 and, before assuming his current role in 2015, held assignments as group CIO of the Global Asset Allocation and Equity divisions, director of research for Fidelity Tokyo, director of U.S. equity research, portfolio manager for U.S. equity funds, and research analyst.

in the coming months, we expect to see headlines reflecting the news of the day that may seem significant. it might be Britain’s referendum vote in June or the upcoming presidential election. it is the role of market commentators to get us excited by the news of the day, and to provide us with the reasons markets fell. This news, and the emotion it creates, can sometimes cause investors to react. This is why, in the management of your

portfolio, we relentlessly seek to understand each event and the implications it may or may not have on our views and, most importantly, on your portfolio.

Thank you for the trust you’ve placed in us. We will con-tinue to follow a disciplined process and diversified invest-ment approach to help you reach your financial goals.

Four phases of an economy’s market cycle

Early Mid Late Recession

• Activity rebounds (gdP, employment, incomes)

• Credit begins to grow• Profits grow rapidly• Policy still stimulative• Inventories low; sales

improve

• Growth peaking• Credit growth strong• Profit growth peaks• Policy neutral• Inventories, sales

grow; equilibrium reached

• Growth moderating• Credit tightens• Earnings under

pressure• Policy contractionary• Inventories grow;

sales growth falls

• Falling activity• Credit dries up• Profits decline• Policy eases• Inventories, sales fall

Note: This is a hypothetical illustration of a typical business cycle. There is not always a chronological progression in this order, and there have been cycles when the economy has skipped a phase or retraced an earlier one.

Source: Fidelity Investments (AART), as of March 2016.

RECOVERY EXPANSION

CONTRACTION

U.S.

Inflationary PressuresRed = High

+Economic Growth

–

Relative Performance of Economically

Sensitive AssetsGreen = Strong

1Large Cap = S&P 500® Index; Small Cap = Russell 2000® Index; as of 12/31/2015–2/11/2016.

2MSCI All Country World ex-U.S. Index, as of 12/31/2015–2/11/2016.

3Barclays U.S. Aggregate Bond Index, as of 12/31/2015–2/11/2016.

4Bureau of Economic Analysis, as of 12/31/2015.

Views expressed are as of March 31, 2016, and are subject to change at any time based on market and other conditions. Data is unaudited. Information may not be representative of current or future holdings.

Neither asset allocation nor diversification ensures a profit or protects against a loss.

Past performance does not guarantee future results.

This presentation does not constitute an offer or solicitation to any person in any jurisdiction in which such offer or solicitation would be unlawful. Nothing contained herein constitutes investment, legal, tax, or other advice, nor is it to be relied on in making an investment or other decision. No assumptions should be made regarding the manner in which a client’s account should or would be handled, as appropriate investment strategies will depend on each client’s investment objectives. None of the information contained herein takes into account the particular investment objectives, restrictions, tax or financial situation, or other needs of any specific client. Certain strategies discussed herein give rise to substantial risks and are not suitable for all investors. The information contained in this material is only as current as the date indicated, and may be superseded by subsequent market events or for other reasons. The information provided by third parties has been obtained from sources believed to be reliable, but Strategic Advisers, Inc., makes no representation as to its accuracy or completeness. Statements concerning financial market trends are based on current market conditions, which will fluctuate.

Stock markets, especially foreign markets, are volatile and can decline significantly in response to adverse issuer, political, regulatory, market, or economic developments. This material is provided for informational purposes only and should not be used or construed as a recommendation for any security.

In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk, liquidity risk, call risk, and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer.

Russell 2000® Index is a market capitalization–weighted index designed to measure the performance of the small-cap segment of the U.S. equity market. It includes approximately 2,000 of the smallest securities in the Russell 3000 Index.

Standard & Poor’s 500 Index (S&P 500® Index) is a market capitalization–weighted index of 500 common stocks chosen for market size, liquidity, and industry group representation to represent U.S. equity performance.

Barclays U.S. Aggregate Bond Index is a market value–weighted index of investment-grade fixed-rate debt issues, including government, corporate, asset-backed, and mortgage-backed securities, with maturities of one year or more.

MSCI EAFE (Europe, Australasia, Far East) Index (net MA tax) is a market capitalization–weighted index that is designed to measure the investable equity market performance for global investors in developed markets, excluding the U.S. & Canada.

The index performance includes the reinvestment of dividends and interest income. Securities indexes are not subject to fees and expenses typically associated with managed accounts or investment funds.

This material may not be reproduced or redistributed without the express written permission of Strategic Advisers, Inc.

Fidelity’s Portfolio Advisory Services are services of Strategic Advisers, Inc., a registered investment adviser and a Fidelity Investments company. These services provide discretionary money management for a fee.

Brokerage services are provided by Fidelity Brokerage Services LLC. Custody and other services are provided by National Financial Services LLC. Both are Fidelity Investments companies and members of NYSE and SIPC.

Fidelity Brokerage Services LLC, Member NYSE and SIPC, 900 Salem Street, Smithfield, RI 02917

© 2016 FMR LLC. All rights reserved.

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Questions? contact your Fidelity representative at 800.544.3455, or visit Fidelity.com.

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