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QUARTERLY NEWSLETTER

October 2016

We hope this letter finds everyone doing well and enjoying what we’re calling “The Great Sound Bite Election.” All politics aside, it seems all we hear are snippets of information (or sound bites) and not well thought out transparent plans on how to address issues facing our country. Fear, spin, and buzz words without any real substance seem to be the defining factors in politics these days. Ironically enough, these tactics aren’t new to us as, unfortunately, they’ve become a staple of the investment industry at large for some time. Shallow rhetoric and silliness aside, we continue to look beyond the fog in pursuit of what is truly going on in our dynamic and interconnected world economy.

Global stocks moved broadly higher in the 3rd quarter as late June volatility from the so called “Brexit” failed to derail the rally that began in the first half of February. Interest rates throughout the developed world touched or approached all-time lows to start the past quarter before bouncing around in a fairly tight range as central banks around the world continue to adjust and explore unprecedented monetary policies. Our opinion continues to be that a primary tailwind for the U.S. equity market has been low and falling bond yields as this dynamic increases the attractiveness of stock dividends and supports historically lofty valuations. Investors in need of income have pushed money normally meant for bonds into stocks and other assets at a record pace. This so called “hunt for yield” has driven up the value of normally defensive areas of the stock market just as the recent introduction of various strategies labeled “low-volatility” have pushed large amounts of money into sectors such as Consumer Staples, Utilities and Real Estate. Although these investments do have a place in many properly allocated portfolios, we feel that many investors are unfortunately ignoring some risks in their hunt for yield and are making decisions based largely on historical performance. Despite the rise in U.S. stock benchmarks this year along with gains in U.S. government bonds, the collective mood among the American investment community remains notably negative. In light of such a backdrop here are a few points to keep in mind as we move into year-end 2016:

Disclosures: The information provided in this paper 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. Securities offered through Capital Investment Group, Inc. Advisory services through Capital Investment Advisory Services, LLC 100 E. Six Forks Rd, Ste 200, Raleigh, NC 28609 919/831-2370 Member FINRA/SIPC

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Being a presidential election year and a particularly contentious one at that, the media and various (often unregulated) internet sources are quick to drive views with various forecasts for both the financial markets and general economy assuming either a Trump or Clinton victory in early November. We strongly reiterate our belief that a prudent long term investment strategy should never attempt to make bets based on hypothetical scenarios…political or otherwise. Amidst all the noise our process towards building and maintaining portfolios remains grounded in strategic diversification designed to balance quantifiable risk. Focused on your unique long range financial plan, our daily efforts are on asset allocation and risk management not forecasting as the latter offers little value to your economic bottom line. (Nor would it benefit our psychological health!)

The great irony of this current market cycle is the continuous talk of “bubbles” amidst what has been a substantial amount of risk avoidance. Although markets have and will always fluctuate to varying degrees over time, it remains mostly illogical to assume massive financial market bubbles are forming just as most investors of all types are mostly avoiding the stock market due to uncertainty, risk aversion, or fear of another bubble. We would like to point out that many sources that continue to call for imminent financial ruin, many of which are playing off the memory of the global financial crisis, are the same folks whom have missed the gains U.S. equities have provided since the Great Recession. As people declare the Federal Reserve has manipulated the stock market, it is important to note that the aggregate U.S. stock market has more than doubled since 2010. As some have called manipulation or an inevitable bubble, a balanced long term investor has realized tremendous opportunity.

Taking a look outside our borders, the resounding fears over a Chinese economic meltdown that swept the world stage for many months beginning in the summer of 2015 have recently subsided just as the threat of a European banking crisis has resurfaced to dominate headlines and the minds of the investor community. Our analysis indicates that although the inevitable resolution to Europe’s structural economic woes seems a prospect of the distant future, general conditions in China have shown signs of marginal improvement as of late. As central banks are expected to stay accommodative with investor sentiment largely negative, we feel that even a modest near term boost higher in Chinese economic output could cause various areas of the global stock market to move higher. We continue to stress that we live in a vastly interconnected global world in which China at times has a far greater impact on global assets than the United States.

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We would like to conclude this letter by once again touching on the concept that properly orchestrated and maintained diversification is the only so called “free lunch” in the world of long term investing. Although the benefits of this concept do not always seem obvious in the near term, they represent a shining light on the horizon for investors whom are constantly being bombarded with gloomy prognostications, get rich quick schemes and various strategies that are often nothing more than marketing. Driven by our in house analytical process and the pursuit of steady improvement, we will continue to utilize the benefit of true risk based diversification as the primary weapon in our collective fight for success on your financial journey of life. We greatly appreciate the opportunity to work with you and look forward to a continued partnership based not only on transparency but most importantly trust.

There is no such uncertainty as a sure thing.-Robert Burns

Thank You,

J. ANDY INGRAM

Disclosures: The information provided in this paper 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. Securities offered through Capital Investment Group, Inc. Advisory services through Capital Investment Advisory Services, LLC 100 E. Six Forks Rd, Ste 200, Raleigh, NC 28609 919/831-2370 Member FINRA/SIPC