q1 2016 outlook april 26, 2016 · 2016. 4. 27. · q1 2016 outlook april 26, 2016 dr. charles...

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Q1 2016 Outlook

April 26, 2016

Dr. Charles Lieberman

Kevin Kern

David Lieberman

Dr. JoAnne Feeney

Stephen Zurilla, CFA


This presentation will contain opinion and performance reporting through March 31, 2016. ACM’s performance reports are created and audited independently under the standards of GIPS reporting. Although the information included in this presentation has been obtained from sources ACM believes to be reliable, we can not guarantee its accuracy. Past performance does not guarantee future results. Important performance and portfolio measurement disclosure information can be found on the final slides of this presentation. Top Holdings, Market Cap, Sector Allocation and Portfolio Statistics are shown as supplemental information only and complement each composite report. Composite allocation percentages can change at any time or in the case of the ACM Private Balanced Strategy can be driven by the client/advisor. Growth of $100,000 assumes reinvestment of dividends and interest with no contributions or withdrawals. Our Speakers are Dr. Charles Lieberman Chief Investment Officer, David Lieberman PM, Dr. JoAnne Feeney PM, and Stephen Zurilla, CFA PM. Managing Partner Kevin Kern will moderate. ACM is a registered investment advisory firm. Our ADV Part 2A and 2B are available upon request. For the purposes of this presentation ACM Private Account composite returns are presented net of all fees. ACM will not be presenting portfolio measurements for our Modeled Separate Account Composites. This information is available upon request. A copy of this presentation is also available upon request. Noted slides have been used with permission from Fidelity Research. Important disclosure pages follow this presentation and should be reviewed.

We Will Be Starting Shortly

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www.advisorscenter.com 3

ACM Investment Philosophy & Private Account Strategies

Kevin Kern Managing Partner

Investors Showing Heightened Sensitivity to News

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Dr. JoAnne Feeney Portfolio Manager

Source: FRED

Risk Perceptions Unusually Jumpy…Settled for Now, But for How Long?

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https://research.stlouisfed.org/fred2/graph/?g=4aZQ


Outlook and Positioning for 2016

Dr. JoAnne Feeney Portfolio Manager Macro

• Recession fears receding • Inflation rising, but still below target • Wages rising, albeit slowly • Economic recovery moderate, but resilient • Employment better than 70% of history • Low oil and gas prices help consumers • Housing growth continues • Fed moves cautiously in raising rates • EU growth tepid • China slows – some fear a hard landing

Markets • Don’t be surprised if volatility resumes. • Fed remains divided and interest rate forecasts are likely to

continue to fluctuate.

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Adjusted Portfolios Showing Improved Trends

• Increased number of positions • IWG: Protecting cash flow, guarding

appreciation potential • Balanced: Adding diversification • Core: Increasingly conservative • Fixed: More investment grade

Macro & Markets Support Key Investment Themes: • Housing Growth (builders, suppliers) • Cheap Oil (Chemicals, transpo) • Rising rates (Banks, money centers) • Demographics (health care, leisure)


US Macro and Asset Performance?

Focus on 3 questions

Q: What can we expect from asset performance based on our view of the US economy for the rest of 2016? Q: Could we see a reduction in global growth outside the U.S., and how much would this matter? Q: Where are we making adjustments?

Dr. Charles Lieberman Portfolio Manager

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Economic Checkup: Initial Unemployment Claims Still Falling

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https://research.stlouisfed.org/fred2/graph/?g=4hkz

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Job Openings, Quits, and Hires – The Labor Market Remains Strong


Unemployment Rate – Better Than 70% of History Since 1960

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https://research.stlouisfed.org/fred2/graph/?g=4hlk

Prime-Age Workers Slowly Being Drawn Back into Workforce…

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https://research.stlouisfed.org/fred2/graph/?g=46gi

…Which Helps Household Balance Sheets Remain Healthy

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• Better than average by mid-2016


Household Debt, as a % of US GDP, has fallen from 98% in 2009 to just under 80% today.

https://research.stlouisfed.org/fred2/graph/?g=46hQ

…While New Home Inventories Remain Low

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U.S. Economic Data Point to Moderate Growth, But Getting Later in Cycle

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Modest Investing Environment: • Unemployment close to historical lows • Wages beginning to rise • Inflation pressures increasing • Facing lower long-run growth projections vs history Strategy Implications: • Reducing beta • Increasing fixed income exposure and liquidity for

diversification and flexibility • Appropriate sector rotation

Global Growth?

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David Lieberman Portfolio Manager Focus on 3 questions

Q: What can we expect from asset performance based on our view of the US economy for the rest of 2016? A: Economic trends are mostly positive. We do not expect a recession in 2016.

Q: Could we see a reduction in global growth outside the U.S., and how much would this matter? Q: Where are we making adjustments?

Euro Area Slow to Recover…So What Else is New?

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David Lieberman Portfolio Manager

Source: FRED

Doing Better, But “Brexit” May Be A Concern Later This Year

for U.S.

https://research.stlouisfed.org/fred2/graph/?g=4hlB


China’s Rising Middle Class Creates Pockets of Opportunities


China Progress: • Q1 Growth of 6.7%, as

expected

• Home sales grew 71% Y/Y in

March on easy credit

• Property sale value on office,

buildings & retail grew over

54% YoY

• Real estate development

grew 6.2% in 1Q

• Retail sales were up 10.5%

Y/Y in March

China Concerns: • China is a developing

economy, whose fast growth will inevitably slow.

• Potential asset bubbles: stock market, real estate, commodities…

• Commodities likely still have another leg down

• China continues to use debt (public and private) to support growth.

5.0%

7.9%

6.9%

4.2%

3.2%

4.2%

3.4% 2.5%

4.3%

5.2% 4.9%

6.0%

4.3%

3.7% 3.7%

4.6%

0.3%

-3.9%

-1.2% -0.8%

0.1%

-0.2%

0.2%

-0.2%

9.6% 8.8%

10.7%

9.5%

7.7% 7.7% 7.2%

6.9%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

2008 2009 2010 2011 2012 2013 2014 2015

China GDP Growth and Sources

Investment (ctr) Consumption (ctr) Net Exports (ctr) GDP Growth rate

Sources: http://www.bloomberg.com/news/articles/2016-04-15/china-s-march-home-sales-surge-71-lifting-property-investment; :FactSet, J.P. Morgan Asset Management


China Debt Threat? Although Debt Rising, It’s Mostly Internal

Source: Investment Strategy Group, Bank for International Settlements., http://www.bloomberg.com/news/articles/2015-08-10/here-are-the-s-p-500-stocks-with-the-highest-exposure-to-china

US banks are not meaningfully exposed to China • The developed countries with the

largest exposure is still very small (as of Q2 2015, as % of bank assets):

• US: 0.8% • Japan: 0.5% • UK: 3.0% • Germany: 0.4% • Spain: 0.2%

But debt-fueled growth cannot last forever.

David Lieberman Portfolio Manager Chinese firms’ Debt/EBITDA:

More than doubled since 2010

Sources: S&P Capital IQ; and IMF staff estimates. Note: Ratios of companies with negative EBITDA are set to 10. The China sample contains 3,241 firms (2015LTM). EBITDA = earnings before interest, taxes, depreciation, and amortization; LTM = last 12 months.


China Spillovers? Trade Channel Still Small

In 2015 Exports of Goods and Services = 12.4% of US GDP

Source: http://www.census.gov/foreign-trade/statistics/highlights/toppartners.html http://research.stlouisfed.org/fred2/series/B020RE1A156NBEA


Top 10 Importers of US Goods and Services % of Total Exports Contribution to US GDP

Canada 15.20% 1.89%

Mexico 12.00% 1.49%

China 7.30% 0.90%

UK 5.40% 0.66%

Japan 4.80% 0.60%

Germany 3.50% 0.44%

South Korea 3.00% 0.37%

Brazil 2.70% 0.33%

France 2.20% 0.28%

India 1.70% 0.22%

Total Exports 57.80% 7.18%

Exports as a share of US GDP have fallen slightly in the last few years and are becoming more diffusely spread across countries.

But US & China Market Volatility Moving Together…

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Source: FRED

https://research.stlouisfed.org/fred2/graph/?g=4b5r

Jumpy Markets, But A Global* Tailwind? Cheap Oil Makes for Cheap Gas

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• Lower Oil Prices Reduce Costs for Consumers and Producers

• U.S. Net Imports of Petroleum products:

2015 = $82.5B 2014 = $189.7B 2013 = $232.3B

= Savings of $500/person in the US annually in 2015 vs 2013.

Nine of the largest 10 economies in the world are net importers of oil: U.S., China, Japan, Germany, UK, France, India, Italy, and Brazil

*For the countries most

relevant for US stocks.

Portfolio Positioning?

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Shark or dolphin??

Focus on 3 questions

Q: What can we expect from asset performance based on our view of the US economy for the rest of 2016? A: Economic trends are mostly positive. We do not expect a recession in 2016.

Q: Could we see a reduction in global growth outside the U.S., and how much would this matter? A: Real risks from debt concerns in China; cheap oil helps global outlook for largest countries; look for noise over the short run.

Q: How to position in this environment?

…Volatility is Down for Now…But What Lurks Beneath?

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Shark or dolphin??

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U.S. and Global Conditions Mildly Positive

Past performance is no guarantee of future results. Price and five-year peak earnings are adjusted for inflation. Source: Standard & Poor’s, Bureau of Labor Statistics, Haver Analytics, Fidelity Investments (AART), as of 3/31/16.

But Market Valuation Around Historical Average: Are We at Fair Value? Dr. JoAnne Feeney Portfolio Manager

Source: Advisors Capita l Management and Bloomberg L.P.

P/E Running Above Long-Term Average Since Late 2013

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Price Earnings Ratio (P/E) Average P/E S&P 500 Index

Credit Spreads Remain Elevated, But On the Way Back Down

Stephen Zurilla, CFA Co-Portfolio Manager

Source: FRED (BofA Merrill Lynch US High Yield Option-Adjusted Spread), Advisors Capital Management, LLC. as of 4/20/16

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Credit Spreads Remain Elevated, But On the Way Back Down


Source: FRED (BofA Merrill Lynch US High Yield Option-Adjusted Spread), Advisors Capital Management, LLC. as of 4/20/16

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Global Developed Market Yields Go Negative: U.S. Still Most Attractive

Source: Haver Analytics, Fidelity Investments (AART), as of 3/31/16


U.S. 1.8%

Germany 0.2%

Japan 0.0% Switzerland -0.5%

Italy 1.2%

U.K. 1.4%

France 0.5%

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

3-m

o

5-Y

rs

10

-Yrs

15

-Yrs

20

-Yrs

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-Yrs

30

-Yrs

United States Germany Japan

Sovereign Bond Yield Curves

Fixed Income: Recent Returns by Category

Past performance is no guarantee of future results. It is not possible to invest directly in an index. All indices are unmanaged. Index returns represented by: ABS (Asset-Backed Securities) – Barclays ABS Index; Agency – Barclays U.S. Agency Index; Aggregate – Barclays U.S. Aggregate Bond Index; CMBS (Commercial Mortgage-Backed Securities) – Barclays investment-grade CMBS Index; Credit – Barclays U.S. Credit Bond Index; EM Debt (Emerging-Market Debt) – JPMorgan EMBI Global Index; High Yield – BofA ML U.S. High Yield Index; Leveraged Loan – S&P/LSTA Leveraged Loan Index; Long Government & Credit (Investment-Grade) – Barclays Long Government Credit Index; MBS (Mortgage-Backed Securities) – Barclays U.S. MBS Index; Municipal – Barclays Municipal Bond Index; TIPS (Treasury Inflation-Protected Securities) – Barclays U.S. TIPS Index; Treasuries – Barclays U.S. Treasury Index. Source: FactSet, Fidelity Investments (AART), as of 12/31/15.

Q1 2016 Total Return: Some recovery as credit market conditions improved Stephen Zurilla, CFA

Co-Portfolio Manager

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7.3%

5.2%

4.5% 3.9%

3.6% 3.2% 3.2%

2.0% 2.0% 1.7% 1.6%

1.4%

3.0%

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& C

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1-Year 0.4% 4.4% 1.5% 0.9% 2.6% -4.0% 2.4% 1.9% 2.4% 4.0% -1.2% 1.7% 2.0%

Greatest duration risk here

Country risk here

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Select Sector, Capitalization, and Style Performance

Past performance is no guarantee of future results. It is not possible to invest directly in an index. All indices are unmanaged. Please see appendix for important index information. Equity market returns represented by: Growth – Russell 3000 Growth Index; Large Caps – S&P 500 Index; Mid Caps – Russell Midcap Index; REITs (Real Estate Investment Trusts) – FTSE NAREIT Equity Index; Small Caps – Russell 2000 Index; Value – Russell 3000 Value Index. Source: FactSet, Fidelity Investments (AART), as of 3/31/16.

Q1 2016 Total Return


1-Year 4.7% -4.0% -2.1% 1.8% 1.3% -9.8%

5.8%

2.2%

1.6% 1.3%

0.3%

-1.5%

REITs Mid Caps Value Large Caps Growth Small Caps

Despite Jan-Feb Sell-Off, Most Equity Categories End Q1 in Positive Territory

Trying to Time the Market Hurts…

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Investor Conundrum: Finding Total Return in a Higher Risk Environment

• Fixed: provides good ballast, but limited return (without taking more substantial credit

or duration risk)

• Equity: P/E close to long-term historical average; more important to find value.

• Exit? Being out of the market remains key source of underperformance over long periods:

Dalbar Inc. Indexes used are as follows: REITS: NAREIT Equity REIT Index, EAFE: MSCI EAFE, Oil: WTI Index, Bonds: Barclays U.S. Aggregate Index, Homes: median sale price of existing single-family homes, Gold: USD/troy oz, Inflation: CPI. 60/40: A balanced portfolio with 60% invested in S&P 500 Index and 40% invested in high quality U.S. fixed income, represented by the Barclays U.S. Aggregate Index. The portfolio is rebalanced annually. Average asset allocation investor return is based on an analysis by Dalbar Inc., which utilizes the net of aggregate mutual fund sales, redemptions and exchanges each month as a measure of investor behavior. Returns are annualized (and total return where applicable) and represent the 20-year period ending 12/31/14 to match Dalbar’s most recent analysis. – U.S. Data are as of March 31, 2016.

Investing Strategy in the Current Environment…Finding Returns in Fixed

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• Mix Fixed with Equities

• Equities provide the appreciation; bonds bring in some stability

Source: http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/histretSP.html . April 26, 2016. Past performance does not guarantee future results. Stock returns are S&P 500 annual returns. T. Bonds are annual returns in 10-year US Treasury bond.


ACM Private Account Composite Characteristics Q1 2016

ACM Private Composite 12 Month Forward P/E vs. S&P 500® Index

17x15.8x

12x13.3x

12.8x13.6x

0

2

4

6

8

10

12

14

16

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Current S&P500® Index

Average S&P500® 26 yrs.

ACM CoreDividend

ACM Growth ACM Incomew/Growth

ACM Balanced

Our investment philosophy is value oriented. We are actively seeking companies that we believe are undervalued relative to the market and have good growth possibilities. As a value manager, our portfolios typically will trade at a discount to the market.

P/E calculations as of April 18, 2016 provided by Bloomberg. Lower portfolio valuations do not eliminate future volatility. Value managers

generally invest in stocks that have relatively low valuations (i.e., relatively "cheap") and are overweight these stocks relative to portfolio

comprised of stocks that have relatively high valuations (i.e., relatively "rich"). Price-Earnings Ratio- P/E Ratio: A valuation ratio of a company's

current share price compared to its per-share earnings. Calculated as: Market Value per Share divided by Earnings per Share (EPS)


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This Strategy seeks to maximize total return with a focus on capital appreciation. The strategy

invests primarily in common stocks that we believe offer the potential for long-term growth

opportunities. This is a true stock picker’s portfolio search through sectors, countries and all

capitalization levels for value.

Buying Long-Term Growth at a Discount

COMPOSITE SECTOR ALLOCATION COMPOSITE MARKET CAP

TOP HOLDINGS

PORTFOLIO STATISTICS

Growth of $100,000 assumes reinvestment of dividends and interest with no contributions or withdrawals. Top Holdings, Market Cap, and Sector Allocation are shown as supplemental information and can change at any time. * Inception March 2001 ** Benchmark S&P 500 Index

THROUGH MARCH 31, 2016

Private Growth Strategy Update:

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Shark or dolphin??

Took advantage of sell-off to find more discounted growth investments: • Sold HTZ (before it fell another 12% in Q1) early Jan; held cash; added some tech. • Replaced OI (before it fell another 10% in Q1) with VAL (up 29% in Q1). • Stayed with decliners DAR, TREX, XPO (up 23%, 25%, and 14% in Q1, respectively).

The “Old_PVTGROW” represents the actual holdings of the ACM Private Growth Account Composite as of 9/30/2015 and run as a buy-and-hold hypothetical portfolio through 3/31/2016. AC8_PVGRO represents the actual ACM Private Growth Composite actively managed through the same period. The performance difference mountain chart shows the outperformance or underperformance of the actively managed actual composite versus the buy-and hold-hypothetical. Gross of fees. Past performance is not a guarantee of future success. Illustrations of less than one year may not fully reflect outcome.

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This all-cap, long only portfolio has a target allocation of 85% equities and 15% fixed income,

however asset allocation varies depending on valuation and market conditions. Core Dividend has a

thematic investment approach that stems from blending our top down and bottom up methodology.

More Than Just Dividends


TOP HOLDINGS

Growth of $100,000 assumes reinvestment of dividends and interest with no contributions or withdrawals. Top Holdings, Market Cap, and Sector Allocation are shown as supplemental information and can change at any time. * Inception December 1999 ** Benchmark 85/15 S&P 500 Index/Barclay’s Aggregate Bond Index




Private Core Dividend Strategy Update


Getting incrementally more cautious as we get later into the economic recovery. • Added HAIN (up 13%) and NCLH (up 9%) • Increasing fixed income exposure and applying higher weighting towards healthcare and staples • Stayed with decliner HUN (up 19% in Q1 after doubling off February low)

The “Old_COREDIV” represents the actual holdings of the ACM Private Core Dividend Composite as of 9/30/2015 and run as a buy-and-hold hypothetical portfolio through 3/31/2016. The AC8_PVTGR represents the actual ACM Private Core Dividend Composite actively managed through the same period. The performance difference mountain chart shows the outperformance or underperformance of the actively managed actual composite versus the buy-and-hold hypothetical. Gross of fees. Past performance is not a guarantee of future success. Illustrations of less than one year may not fully reflect outcome.

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Customized for Comfort!


DAVID LIEBERMAN

PORTFOLIO MANAGER

SINCE DECEMBER, 2012

TOP HOLDINGS


ACM’s Balanced strategy is an all-cap managed account that enables investors to

obtain a customized investment portfolio tailored to their preferred mix of stocks

and fixed income.

Growth of $100,000 assumes reinvestment of dividends and interest with no contributions or withdrawals. Top Holdings, Market Cap, and Sector Allocation are shown as supplemental information and can change at any time. * Inception September 2006 ** Benchmark 70/30 S&P 500 Index/Barclay’s Aggregate Bond Index


Private Balanced Strategy Update

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Shark or dolphin??

Diversification Enhancement, expected gross yield for Standard Private Balanced ~2-2.5%, for High Yield Private Balanced ~4-4.5% • Increased equity positions from ~35 to ~50 • Shifted Fixed Income mix towards Investment Grade • Portfolio Adjustment Example: Sold NMM (down 75% since sale), bought XPO (up 14% Q1)

The “Old_PVTBAL” represents the actual holdings of the ACM Private Balanced Composite as of 9/30/2015 and run as a buy-and-hold hypothetical portfolio through 3/31/2016. The AC8_PVTBA represents the actual ACM Private Balanced Account Composite actively managed through the same period. The performance difference mountain chart shows the outperformance or underperformance of the actively managed actual composite versus the buy-and-hold hypothetical. Gross of fees. Past performance is not a guarantee of future success. Illustrations of less than one year may not fully reflect outcome.

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ACM’s Income with Growth strategy places primary emphasis on current income, but also seeks

to grow asset values and income to keep up with inflation. This strategy tactically allocates

across asset classes including: stocks, bonds, preferred stocks, REITs, MLPs, telecom/utility

stocks and cash.

A Diversified Multi Asset Income Strategy


DAVID LIEBERMAN

PORTFOLIO MANAGER


TOP HOLDINGS


Growth of $100,000 assumes reinvestment of dividends and interest with no contributions or withdrawals. Top Holdings, Market Cap, and Sector Allocation are shown as supplemental information and can change at any time. * Inception March 2001 ** Benchmark 80/20 S&P 500 Index / Barclay’s Aggregate Bond Index


Private Income With Growth Strategy Update

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Cash Generation with Appreciation and More Diversification; expected current gross yield at 6.5% • Shifted out of shipping, such as CPLP (fell over 50% after exit) and replaced with IBM, JNJ • Retained energy exposure through less volatile bonds (sold WMB, WPZ—which

subsequently fell over 25% and bought WPZ bonds—yield + appreciation) • Stayed with decliners ARCC, AYR, LVS, and SEAS (all up solidly in 2016)

The “Old_INCGR represents the actual holdings of the ACM Private Income with Growth Composite as of 9/30/2015 and run as a buy-and-hold hypothetical portfolio through 3/31/2016. AC8_PVTIN represents the actual ACM Private Income with Growth Composite actively managed through the same period. The performance difference mountain chart shows the outperformance or underperformance of the actively managed actual composite versus the buy-and-hold hypothetical. Gross of fees. Past performance is not a guarantee of future success. Illustrations of less than one year may not fully reflect outcome.

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ALLOCATION OF HOLDINGS CREDIT QUALITY

DAVID LIEBERMAN

PORTFOLIO MANAGER


TOP HOLDINGS



ACM’s Fixed Income strategy’s emphasis is capital preservation and uses bonds and other

stable value securities to achieve that objective. The portfolio may be taxable or tax exempt

depending on the tax status of the account.

Sometimes Defense is the Best Offense

Growth of $100,000 assumes reinvestment of dividends and interest with no contributions or withdrawals. Top Holdings, Market Cap, and Sector Allocation are shown as supplemental information and can change at any time. * Inception December 2006 ** Benchmark Barclay’s Aggregate Bond Index

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Fixed Income Strategy Update


Remain positioned for eventual rate increases with a predominantly short duration portfolio • Added to Short and Intermediate term Investment Grade energy names during a period

of market dislocation • Keeping investments in Investment Grade floating-rate bonds which benefit from higher

short-term interest rates

The “Old_PVTFIXED represents the actual holdings of the ACM Private Fixed Income Composite as of 9/30/2015 and run as a buy-and-hold hypothetical portfolio through 4/20/2016. AC8_PVTFI represents the actual ACM Private Fixed Income Composite actively managed through the same period. The performance difference mountain chart shows the outperformance or underperformance of the actively managed actual composite versus the buy-and-hold hypothetical. Gross of fees. Past performance is not a guarantee of future success. Illustrations of less than one year may not fully reflect outcome.


We will now take your questions. Please type your questions now.

Should you have any additional questions please call us at 201-447-3400

If you would like to receive email invitations to future web casts or our receive our weekly market commentary please email us at [email protected]

Complete Model and Private Composite

performance history is available upon request.

Advisors Capital Management, LLC (ACM) claims compliance with the Global Investment Performance Standards (GIPS®). This report does not contain all required firm GIPS® information. Interested parties can obtain a complete presentation that complies with GIPS® standards and/or a list and description of all firm’s composites by calling 201-447-3400. This report must be presented in its entirety including all attached disclosure pages. Advisors Capital Management, LLC is an independent investment advisor located at 10 Wilsey Square Suite 200 Ridgewood NJ 07450

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Questions and Answers


Advisors Capital Management, LLC (ACM) claims compliance with the Global Investment Performance Standards (GIPS®). All composites contain fully discretionary accounts and include accounts no longer with the firm. ACM’s Mutual Fund/ETF, Model and Private Composites contain fully discretionary accounts. Below is a list of all ACM portfolio composites and their comparable primary Index/Benchmark:

S&P 500 Index Blended S&P500 / Barclays Agg. Bond Barclays Aggregate Bond MSCI World Index USD Mutual Fund/ETF Growth Mutual Fund/ETF Growth w/ Income ₁ Private Fixed Income Mutual Fund/ETF Global Balanced Model Growth Mutual Fund/ETF Income w/ Growth ₃ Private Growth Model and Private Core Dividend ₂ Model and Private Income with Growth ₃ Model and Private Balanced ₁

The U.S. Dollar is the currency used. Net returns are reduced by all fees and transaction costs incurred. Accounts pay a fee based on a percentage of assets under management. This fee includes portfolio monitoring, consulting services, and in some cases, custodial services. In some situations, custodians may impose additional trading fees. The annual composite dispersion presented is an asset-weighted standard deviation calculated for the accounts in the composite the entire year. Performance results of the ACM Private composites presented prior to July 1, 2006 consists of both Private and Model accounts. Since July 1, 2006 the Model and Private composites have been reviewed separately. ACM’s Private Income with Growth, Core Dividend, and Growth composites were created July 1, 2006. The ACM Private Balanced composite was created September 1, 2006. The Private Fixed Income Composite was created December 10, 2007. The Mutual Fund/ETF Growth, Core Dividend and Income with Growth Composites was created December 10, 2007. The Mutual Fund/ETF Global Balanced portfolios due to strategy inception date are not currently being reviewed as a composite.

For comparison purposes, the Growth with Income Model and Private composites are measured against a 85/15 blend of the S&P 500 and Barclays Aggregate Bond indices. This blend is for general industry-wide comparative purposes only and may reflect up to 15% higher or lower asset allocations than the composite, as composite allocations and the portfolio allocation ranges within the composite will vary over time. In presentations shown prior to 03/31/2011, the S&P 500 indices were presented as the benchmarks for this composite. As well the income with Growth Model and Private composites are measured against a 80/20 blend of the S&P 500 and Barclays Aggregate Bond indices. This blend is for general industry-wide comparative purposes only and may reflect up to 15% higher or lower asset allocations than the composite, as composite allocations and the portfolio allocation ranges within the composite will vary over time. In presentations shown prior to 03/31/2011, the Russell 3000 indices were presented as the benchmarks for this composite.

Compliance with GIPS® has been verified firm-wide by Ashland Partners & Company LLP through December 31, 2013. A portion of the Private composite performance presented prior to January 1, 2005 occurred while the portfolio manager (PM) was affiliated with another firm and was the only individual responsible for selecting the securities to buy and sell. Additional information concerning the transitions of the PM is available upon request. Performance numbers for this report are cumulative results through March 31, 2016. Past performance is not indicative of future results. The comparable index used may not be appropriate for all portfolios. Index/Benchmark Definitions: The Russell 3000 Index represents the broad U.S. equity universe with approximately 98% of the U.S. market. The Russell 3000 is constructed to provide a comprehensive, unbiased, and stable barometer of the broad market is completely reconstituted annually to ensure new and growing equities are reflected. The S&P 500 Index Is an unmanaged capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The Barclays Capital Aggregate Bond Index is an index comprised of approximately 6,000 publicly traded bonds including US Government, mortgage-backed, corporate, and Yankee bonds with an approximate average maturity of 10 years. The 70/30 blend of the S&P 500 and Barclays Capital Aggregate Bond Index is a blend is for general industry-wide comparative purposes only and may reflect up to 20% higher or lower asset allocations than the composite. Dividends are reinvested in the above benchmarks. The MSCI World Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed markets. As of June 2007 the MSCI World Index consisted of the following 23 developed market country indices: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Hong Kong, Ireland, Italy, Japan, Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, the United Kingdom, and the United States. The value of the MSCI World Index is denominated and calculated in U.S. Dollars. Advisors Capital Management, LLC (ACM) is a registered investment adviser. A complete list and description of composites, a presentation that adheres to GIPS® standards, calculation method of returns, program fees and breakpoints and the firm’s ADV Part 2A are available upon request. ACM is located at 10 Wilsey Square Suite 200, Ridgewood, NJ 07450. Telephone: 201-447-3400 Fax: 201-857-4099 Web: www.advisorscenter.com Email: [email protected].

70% S&P 500 Index and 30% Barclays Capital Aggregate Bond Index ₁ 85% S&P 500 Index and 15% Barclays Capital Aggregate Bond Index ₂ 80% S&P 500 Index and 20% Barclays Capital Aggregate Bond Index ₃

Performance Disclosure

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Disclosure

Views expressed are as of the date indicated, based on the information available at that time, and may change based on market and other conditions. Unless otherwise noted, the opinions provided are those of the authors and not necessarily those of Advisors Capital Management, Fidelity or its affiliates. Fidelity does not assume any duty to update any of the information. Investment decisions should be based on an individual’s own goals, time horizon, and tolerance for risk. These materials are provided for informational purposes only and should not be used or construed as a recommendation of any security, sector, or investment strategy. Advisors Capital Management and Fidelity does not provide legal or tax advice and the information provided herein is general in nature and should not be considered legal or tax advice. Consult with an attorney or a tax professional regarding your specific legal or tax situation. Past performance and dividend rates are historical and do not guarantee future results. Investing involves risk, including risk of loss. Diversification does not ensure a profit or guarantee against a loss. All indices are unmanaged, and performance of the indices includes reinvestment of dividends and interest income and, unless otherwise noted, is not illustrative of any particular investment. An investment cannot be made in any index. Although bonds generally present less short-term risk and volatility than stocks, bonds do contain interest rate risk (as interest rates rise, bond prices usually fall, and vice versa) and the risk of default, or the risk that an issuer will be unable to make income or principal payments. Additionally, bonds and short-term investments entail greater inflation risk—or the risk that the return of an investment will not keep up with increases in the prices of goods and services—than stocks. Increases in real interest rates can cause the price of inflation-protected debt securities to decrease. Stock markets, especially non-U.S. markets, are volatile and can decline significantly in response to adverse issuer, political, regulatory, market, or economic developments. Foreign securities are subject to interest rate, currency exchange rate, economic, and political risks, all of which are magnified in emerging markets. The securities of smaller, less well-known companies can be more volatile than those of larger companies. Growth stocks can perform differently from the market as a whole and from other types of stocks, and can be more volatile than other types of stocks. Value stocks can perform differently from other types of stocks and can continue to be undervalued by the market for long periods of time. 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. Any fixed income security sold or redeemed prior to maturity may be subject to loss. Floating rate loans generally are subject to restrictions on resale and sometimes trade infrequently in the secondary market; as a result, they may be more difficult to value, buy, or sell. A floating rate loan may not be fully collateralized and therefore may decline significantly in value. The municipal market can be affected by adverse tax, legislative, or political changes, and by the financial condition of the issuers of municipal securities. Interest income generated by municipal bonds is generally expected to be exempt from federal income taxes and, if the bonds are held by an investor resident in the state of issuance, from state and local income taxes. Such interest income may be subject to federal and/or state alternative minimum taxes. Investing in municipal bonds for the purpose of generating tax-exempt income may not be appropriate for investors in all tax brackets. Generally, tax-exempt municipal securities are not appropriate holdings for tax-advantaged accounts such as IRAs and 401(k)s. The commodities industry can be significantly affected by commodity prices, world events, import controls, worldwide competition, government regulations, and economic conditions. The gold industry can be significantly affected by international monetary and political developments, such as currency devaluations or revaluations, central bank movements, economic and social conditions within a country, trade imbalances, or trade or currency restrictions between countries. Changes in real estate values or economic downturns can have a significant negative effect on issuers in the real estate industry. Leverage can magnify the impact that adverse issuer, political, regulatory, market, or economic developments have on a company. In the event of bankruptcy, a company’s creditors take precedence over the company’s stockholders.

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Additional Definitions

Price-Earnings Ratio- P/E Ratio: A valuation ratio of a company's current share price compared to its per-share earnings. Calculated as: Market Value per Share divided by Earnings per Share (EPS) EBITDA/EV Multiple- A financial ratio that measures a company's return on investment. The bond credit rating represents the credit worthiness of corporate or government bonds. A bond is considered investment grade or IG if its credit rating is BBB- or higher by Standard & Poor's or Baa3 or higher by Moody's. Generally they are bonds that are judged by the rating agency as likely enough to meet payment obligations that banks are allowed to invest in them. Bonds that are not rated as investment-grade bonds are known as high yield bonds or more derisively as junk bonds. Bond Duration- A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. Duration is expressed as a number of years. Rising interest rates mean falling bond prices, while declining interest rates mean rising bond prices. Floating-Rate Bond/Note- A debt instrument with a variable interest rate. Also known as a “floater” or “FRN," a floating rate note’s interest rate is tied to a benchmark such as the U.S. Treasury bill rate, LIBOR, the fed funds or the prime rate. Floaters are mainly issued by financial institutions and governments, and they typically have a two- to five-year term to maturity. Fixed Rate Bond- A type of debt instrument bond with a fixed coupon (interest) rate, as opposed to a floating rate note. A fixed rate bond is a long term debt paper that carries a predetermined interest rate. The interest rate is known as coupon rate and interest is payable at specified dates before bond maturity. Due to the fixed coupon, the market value of a fixed-rate bond is susceptible to fluctuations in interest rates, and therefore has a significant amount of interest rate risk. Convertible Bond- A bond that can be converted into a predetermined amount of the company's equity at certain times during its life, usually at the discretion of the bondholder. Preferred Stock- A class of ownership in a corporation that has a higher claim on the assets and earnings than common stock. Preferred stock generally has a dividend that must be paid out before dividends to common stockholders and the shares usually do not have voting rights. Large Cap- Refers to companies with a market capitalization value of more than $10 billion. Which is calculated by multiplying the number of a company's shares outstanding by its stock price. Mid Cap- A company with a market capitalization between $2 and $10 billion, which is calculated by multiplying the number of a company's shares outstanding by its stock price. 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 Stock- A stock that tends to trade at a lower price relative to its fundamentals (i.e. dividends, earnings, sales, etc.) and thus considered undervalued by a value investor. Common characteristics of such stocks include a high dividend yield, low price-to-book ratio and/or low price-to-earnings ratio. Growth Stock- Shares in a company whose earnings are expected to grow at an above-average rate relative to the market.

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q1 2016 outlook april 26, 2016 · 2016. 4. 27. · q1 2016 outlook april 26, 2016 dr. charles...

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