AEPG® Wealth Strategies Consistently Good Advice in a Constantly Changing World® 1

March 2013 Overall global economic growth remains slow and central banks around world continue to implement loose monetary policy by keeping interest rates low and increasing the money supply in an effort to spur investment and stimulate economic growth. This economic backdrop, along with high levels of political and policy uncertainty, should continue to favor higher quality, larger cap, lower volatility, higher income yielding and inflation hedging asset classes. Client portfolios are positioned accordingly. In February, US stocks continued to move higher (Feb: +1.28% | YTD through Feb: +6.82%) while international stocks took a breather and ended the month lower (Feb: -0.84% | YTD through Feb: +3.23%). US stocks started the month strong, but declined the last week in February after the Federal Reserve (the Fed) released minutes from its end-of-January Federal Open Market Committee (FOMC) meeting, that indicated the possibility of an earlier-than-expected end to the Fed’s stimulus programs. This goes to show how the Fed’s stimulus programs have been a tailwind for stock prices, as any hint of the Fed taking away the proverbial “punch bowl” tends to worry investors particularly when the economy is not 100% healthy. The best case scenario would be for the Fed to slowly wind down its stimulus program when the US economy is in much better shape. International stocks declined in February mainly weighed down by European stocks as investors worried about the outcome of Italian elections at the end of February, which resulted in a hung parliament and no prospect of a strong government in the foreseeable future. The result was effectively seen as a public rejection of austerity policies. This is particularly worrisome for investors because it potentially comprises the European Central Bank's (ECB) pledge to save the currency union if necessary, which is contingent upon stressed euro-zone countries (like Italy) overhauling their economies via much needed austerity. In the meantime, Italy will form a temporary government and go to a vote again as early as summer. US bond prices moved up in February nearly making up for their January decline (Feb: +0.54% | YTD through Feb: -0.16%). Hence, bond yields, which move in the opposite direction of bond prices, edged lower; the yield on 10-year US Treasury notes dropped from 2.02% in the beginning of February to 1.89%. This was due to the selling pressure in global equity markets toward the end of the month as investors moved to the safety of bonds. Economic Month in Review:

• The latest Purchasing Managers Index (PMI) results, which are indicators of manufacturing economic health, suggested the pick-up in activity seen in January softened almost everywhere except the US in February, as the PMIs dropped back in most countries around the world.

• The latest Consumer Price Index (CPI) and Producer Price Index (PPI) results, which are indicators of inflation, suggested that were no significant signs of rising price pressures anywhere around the world in January.

• The latest housing market data in the US, suggested that the housing recovery continued to take shape in January, as building permits (an indication of future construction), single-family housing starts, and home sales exceeded economist expectations.

AEPG® Wealth Strategies Consistently Good Advice in a Constantly Changing World® 2

• US Jobless Claims (i.e., the number of people who file for unemployment benefits in a given week), is seen as an indicator of the health of the US job market fell in two of the last three weeks in February. The longer-term trend of this indicator suggests steady job growth but progress has been slow.

• The U.S. “sequester “ deadline of Feb. 28 passed that put in motion a 10 percent cut in federal government spending on most “discretionary” budget items. This essentially means that in 2013, the federal budget is to be cut by $85 billion. The impacts of these cuts will gradually feed through the economy over the next several months; however the magnitude of the impact is still uncertain.

AEPG Wealth Strategies Portfolio

• Our view is that global economic growth will likely continue to be sluggish throughout most of 2013, with the potential for economic growth to increase gradually in the latter part of the year and into 2014. The economic backdrop, along with high levels of political and policy uncertainty, should continue to favor higher quality, larger cap, lower volatility, higher income yielding and inflation hedging asset classes.

• We continued to increase allocations to diversified investment manager strategies, in an effort to further diversify client portfolios and to emphasize the asset classes mentioned above. We recently added more exposure to international stocks to the portfolio by investing with an experienced and successful international mutual fund manager that focuses on buying strong franchises at relatively good valuations. This manager has the ability to “go anywhere” in terms of geographic location (outside of the US) and market-cap (company size) depending on where the best values are. Currently the manager sees the best values in large-cap companies particularly in northern European countries. The fund is one of the least volatile in the international fund categories mainly due to the manager’s quality and valuation criteria, along with the fact that foreign currency exposure risk is hedged.

• AEPG’s investment philosophy is that clients can achieve long-term average market returns with less risk by maintaining balanced, diversified, low cost, and tax-efficient portfolios combined with disciplined rebalancing. When it comes to investing, it’s hard really predict what the future will hold, especially in the short-term, which is why investors are better served by tuning out the noise and maintaining a balanced and diversified portfolio to help protect during short-term market corrections and stay invested for the long term.