weekly market review weekly review...ewm weekly market review 2 june 14, 2013 market dashboard 0.7...

Weekly Market Review

Talking Points

• Among equities, small-caps outperformed large-caps, and value stocks outperformed growth-oriented issues. Domestic stocks underperformed international equities. Developed markets outperformed emerging market stocks.

• Treasury prices advanced this week. The yield on the 10-year T-note declined.

• Commodity prices were mostly mixed on the week. Crude oil was sharply higher, precious metals posted slight gains, and grains were lower.

• The dollar was sharply lower again this week against a basket of currencies.

• Among economic data released this week, wholesale prices in the U.S. rose more than expected due to a jump in food and fuel, however, the core inflation number, which excludes food and energy, rose more modestly. Retail sales for May rose more than expected; jobless claims fell in the latest week; and consumer confidence held steady.

Weekly Highlights

• Domestic stock prices continued to consolidate this week.Despite a 1.5% rise in the S&P 500 on the Thursday – the index’s second-largest advance of the year – stock prices ended the week mixed. Future Fed policies are at the top of investors’ minds. The Fed holds its two-day policy meeting next week, and investors are anticipating any information that may indicate a scaling back of the bond-purchase program.

• Global markets were mostly lower on the week. World equity markets also gave up ground this week, as anticipation of future central bank policies seems to be driving market activity. European stocks declined for a fourth straight week due to fears that the Fed and other central banks may scale back on monetary stimulus.

• Treasury prices advance for the week. The yield on the benchmark 10-year U.S. Treasury declined this week, as investors believed that the possibility of an early scaling back of the Fed‘s bond-buying program may have been overdone.

• Commodity indices were mixed on the week. Crude oil rose to a nine-month high due to Middle East tensions, gold rose modestly, and grains were sharply lower on slowing demand and increasing supply.

Chart of the Week

June 18, 2013Weekly ReviewJune 14, 2013

EWM Weekly Market Review

2

June 14, 2013

MARKET DASHBOARD

0.7

0.8

0.9

1

1.1

1.2

1.3

May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13

Source: Bloomberg

Wealth Index|Growth of $1: Trailing 24 Months

S&P 500 Dow Industrials Small Cap EAFE Emerging Mkts.

L

S

Source: B loomberg

-0.85% -0.98% -1.11%

-0.83% -0.79% -0.74%

17.77%15.64%13.65%

One Week

Value Growth

-0.66% -0.55% -0.44%

YTD

Value Growth

15.63% 13.65% 11.63%

15.93% 15.54% 15.08%

1250

1300

1350

1400

1450

1500

1550

1600

1650

1700

Source: Bloomberg

S&P 500 Index: Trailing 180 Days

% Wgt in

S&P 500

Week %

Chg. YTD % Chg.

Consumer Discretionary 12.0 -0.61% 18.7%

Consumer Staples 10.5 -0.02% 16.1%

Energy 10.6 -0.71% 11.1%

Financials 16.6 -0.85% 20.3%

Health Care 12.7 0.11% 21.2%

Industrials 10.1 -0.54% 14.4%

Information Technology 18.0 -0.76% 8.8%

Materials 3.4 0.29% 6.4%

Telecom Services 2.9 1.57% 9.9%

Utilities 3.2 -0.26% 7.6%

Source: Bloomberg

Sector Performance: S&P/GICS Sectors

10

12

14

16

18

20

22

24

Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13

Source: Bloomberg

VIX Index: Trailing 180 Days

Last Price Change % Chg. YTD % Last Price Change % Chg. YTD %

S&P 500 1,627.60 -7.02 -0.43% 14.7% Russell Global EM 2,909.65 -108.93 -3.61% -8.5%

Dow Industrials 15,070.18 -72.04 -0.47% 15.8% 10-Year US Treas. 2.13 -3 bps NM 4 bps

Nasdaq 3,423.56 -23.85 -0.69% 14.1% DJ UBS Comm. Idx. 130.37 -0.83 -0.63% -6.2%

Russell 2000 981.38 2.07 -0.55% 15.6% Gold $1,390.09 $5.43 0.39% -17.1%

Euro Stoxx Index 291.13 -3.83 -1.30% 4.3% Crude Oil $97.85 $1.93 2.01% 4.5%

Shanghai Composite 2,162.04 -110.38 -4.86% -4.7% Dollar Index 80.63 -0.75 -0.91% 1.4%

Russell Global 1,498.55 -6.97 -0.46% 7.5% VIX Index 17.02 1.27 8.39% -8.9%Source: Bloomberg


3

134135136137138139140141142143144 Dec-10 Feb-11 Apr-11 Jun-11 Aug-11 Oct-11Index S&P/Case-Shiller Home Price Index-Trailing 12 Mos.Source: Bloomberg

THE ECONOMY AND MARKETS

-0.8

-0.6

-0.4

-0.2

0

0.2

0.4

0.6

0.8

1

1.2

Jun-12 Aug-12 Oct-12 Dec-12 Feb-13 Apr-13Mo

nth

ly %

Ch

g.

Producer Price Index-Trailing 12 Mos.

Headline PPI Core PPISource: Bloomberg

0

0.5

1

1.5

2

2.5

Jun-12 Aug-12 Oct-12 Dec-12 Feb-13 Apr-13

% C

han

ge Y

ear/

Year

Producer Price Index-Trailing 12 Mos.

Source: Bloomberg

A Macro View

After nearly 30 years of decreasing and then flattening interest rates, bond yields are showing signs of reversing direction. InMay, the yield on the benchmark 10-year U.S. Treasury jumped nearly half a percent to 2.13% at month-end. This rate increase negatively affected bond prices, with the Barclays Capital U.S. Aggregate Index, the broadest measure of the U.S. bond market, declining 1.8% for the month. The precipitous rise in yields was brought about in part by investor expectations that the Federal Open Market Committee (FOMC) may taper its bond-buying programs sooner than previously thought as the economy continues to improve. Indeed, in congressional testimony in May, Fed Chairman Ben Bernanke indicated that it is possible that the FOMC could move to taper purchases. It should be noted that the programs would initially still remain in place, and that the Fed would remain a net buyer of bonds once tapering begins, but the magnitude of the purchases would be scaled back.

The jump in yields also reflects a growing conviction among many investors that a significant pick-up in U.S. economic growth is coming. U.S. economic data released in May was mostly positive, especially employment and housing. The government’s jobs report not only showed that May payroll data was better than expected, but also upgraded numbers from previous months, indicating that the job market is in better shape than previously thought. On the housing front, home price appreciation not only continued to accelerate, but exceeded 10% year over year. Meanwhile, there is little sign of inflation. As a result, despite rising interest rates, the S&P 500 rose more than 2% in May, as the gains of cyclical sectors such as Financials and Industrials more than offset losses in defensive sectors and the interest-rate sensitive Utilities sector, which declined 9% during the month. This divergence in sector performance is an indication that the spike in yields in May was caused by stronger economic growth expectations rather than inflation fears.

In reaction to these developments, many portfolio managers are repositioning portfolios to reduce their U.S. interest rate exposure. This can be achieved by reducing portfolio duration, and by tilting holdings toward less interest rate sensitive securities. Bank Loans, international and emerging debt are examples of fixed-income segments that may help reduce the risk of rising rates in the U.S.

The real question isn’t will rates rise--they will--it’s the path they take to get there. If rates rise very slowly and incrementally, the impact to bond prices will be moderate. If rates spike, the impact will be more severe. The impact will also be more severe for bonds that have a higher duration (sensitivity to interest rates). Generally government bonds and longer maturity bonds have the highest durations and will be most impacted with higher interest rates. Since interest rates have been declining since the Reagan era, many investors have only experienced a declining rate environment. They are accustomed to bond values moving in only one direction: up. Fixed income is not always stable or boring and the coming years will create both challenges and opportunities in the bond markets. Bond strategies that are able to adjust to changing economic dynamics should still be able to continue to add value to client portfolios.

June 14, 2013


4

134135136137138139140141142143144 Dec-10 Feb-11 Apr-11 Jun-11 Aug-11 Oct-11Index S&P/Case-Shiller Home Price Index-Trailing 12 Mos.Source: Bloomberg

THIS WEEK IN THE ECONOMY AND MARKETS

290

300

310

320

330

340

350

360

370

380

390

400

3/22 4/5 4/19 5/3 5/17 5/31

Tho

usa

nd

s

Initial Jobless Claims-Trailing 12 Wks.

Source: Bloomberg

-1.5

-1

-0.5

0

0.5

1

1.5


% C

han

ge

Retail Sales - Trailing 12 Mos.

Source: Bloomberg

-0.2

0

0.2

0.4

0.6

0.8

1

1.2

May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13

% C

han

ge

Business Inventories - Trailing 12 Mos.

Source: Bloomberg

-1

-0.5

0

0.5

1

1.5


% C

han

ge

Industrial Prod. (Monthly Chng)-Trailing 12 Mos.

Source: Bloomberg

-15

-10

-5

0

5

10

3/22 4/5 4/19 5/3 5/17 5/31

%

Mortgage Index (Weekly % Chg)-Trailing 12 Wks.

Source: Bloomberg

-250

-200

-150

-100

-50

0

50

100

150


$ B

illio

ns

U.S. Fed. Budget Deficit/Surplus - Trailing 12 Mos.

Source: Bloomberg

June 14, 2013


EUROZONE CRISIS

5

Last Change % Chg. YTD % Last Change % Chg. YTD %

Germany 10-Yr. Govt. 1.52 2 bps NM NM France 10-Yr. Govt. 2.11 2 bps NM NM

Greece 10-Yr. Govt. 9.87 -23 bps NM NM Ireland 10-Yr. Govt. 3.90 4 bps NM NM

Italy 10-Yr. Govt. 4.26 -6 bps NM NM Portugal 10-Yr. Govt. 6.25 -12 bps NM NM

Spain 10-Yr. Govt. 4.53 0 bps NM NM Netherlands 10-Yr. Govt. 1.89 0 bps NM NM

Belgium 10-Yr. Govt. 2.33 0 bps NM NM U.K. 10-Yr. Govt. 2.07 -1 bps NM NM

Source: Bloomberg

SELECTED EUROPEAN SOVEREIGN YIELD PERFORMANCE

1.0

1.1

1.2

1.3

1.4

1.5

1.6

1.7

3/18 4/1 4/15 4/29 5/13 5/27 6/10

%

Germany 10-Year Government Bond Yield

Source: Bloomberg

3.0

3.5

4.0

4.5

5.0

5.5

3/18 4/1 4/15 4/29 5/13 5/27 6/10

%

Spain 10-Year Government Bond Yield

Source: Bloomberg

3.0

3.2

3.4

3.6

3.8

4.0

4.2

4.4

4.6

4.8

5.0

3/18 4/1 4/15 4/29 5/13 5/27 6/10

%

Italy 10-Year Government Bond Yield

Source: Bloomberg

7

8

9

10

11

12

13

3/18 4/1 4/15 4/29 5/13 5/27 6/10

%

Greece 10-Year Government Bond Yield

Source: Bloomberg

June 14, 2013


EQUITIES

6

2,900

3,000

3,100

3,200

3,300

3,400

3,500

3,600

3/15 3/29 4/12 4/26 5/10 5/24 6/7

Ind

exNasdaq Composite-Trailing 90 Days

Source: Bloomberg

2,050

2,100

2,150

2,200

2,250

2,300

2,350

3/15 3/29 4/12 4/26 5/10 5/24 6/7

Ind

ex

Shanghai Composite Index-Trailing 90 Days

Source: Bloomberg

265

270

275

280

285

290

295

300

305

310

315

3/15 3/29 4/12 4/26 5/10 5/24 6/7

Ind

ex

Euro Stoxx Index-Trailing 90 Days

Source: Bloomberg

13,800

14,000

14,200

14,400

14,600

14,800

15,000

15,200

15,400

15,600

3/15 3/29 4/12 4/26 5/10 5/24 6/7

Ind

ex

Dow Jones Industrial Average -Trailing 90 Days

Source: Bloomberg


S&P 500 1,627.27 -7.02 -0.43% 14.74% Swiss Market Index 7,635.96 -140.86 -1.81% 12.04%

Dow Industrials 15,070.18 -72.04 -0.47% 15.81% CAC 40 Index (France) 3,805.16 -55.17 -1.42% 4.84%

Nasdaq Composite 3,423.56 -23.85 -0.69% 14.10% DAX Index (Germany) 8,127.96 -106.48 -1.29% 7.04%

Russell Global 1,498.57 -6.97 -0.46% 7.5% Irish Overall Index 3,915.54 -90.12 -2.26% 14.57%

Russell Global EM 2,909.65 -108.93 -3.61% -8.5% Nikkei 225 12,686.52 -191.01 -1.48% 22.04%

S&P/TSX (Canada) 12,191.28 -96.17 -0.78% -1.26% Hang Seng Index 20,969.14 -869.29 -3.98% -7.45%

Mexico IPC 39,269.30 -751.21 -1.87% -9.67% Shanghai Composite 2,162.04 -110.38 -4.86% -4.72%

Brazil Bovespa 49,444.70 -1157.31 -2.24% -17.21% Kospi Index (S. Korea) 1,889.24 -34.61 -1.80% -5.40%

Euro Stoxx 600 291.13 -3.83 -1.30% 4.25% Taiwan Taiex Index 7,937.74 -157.46 -1.95% 3.09%

FTSE 100 6,308.26 -97.68 -1.52% 7.06% Tel Aviv 25 Index 1,222.13 -3.13 -0.26% 3.08%

IBEX 35 (Spain) 8,070.90 -159.30 -1.93% -0.74% MICEX Index (Russia) 1,300.80 -41.03 -3.05% -11.65%Source: Bloomberg

WORLD MARKET PERFORMANCE

June 14, 2013


EQUITIES – EMERGING AND FRONTIER MARKETS

7


Mexico IPC 39,269.30 -751.21 -1.9% -9.7% Hang Seng Index 20,969.14 -869.29 -4.0% -7.4%

Brazil (Bovespa Index) 49,474.98 -1157.31 -2.2% -17.2% India (Sensex 30) 19,177.93 -251.30 -1.3% -1.3%

MICEX Index (Russia) 1,300.80 -41.03 -3.1% -11.7% Malaysia (KLCI Index) 1,762.19 -13.40 -0.8% 4.3%

Czech Republic (Prague) 927.42 -34.11 -3.6% -11.1% Singapore (Straits Times Index) 3,161.43 -23.29 -0.7% -0.2%

Turkey (Istanbul) 80,011.13 966.34 1.2% 1.4% Thailand (SET Index) 1,465.27 -50.97 -3.4% 5.3%

Egypt (Hermes Index) 471.27 -45.37 -8.8% -14.5% Indonesia (Jakarta) 4,760.75 -104.58 -2.1% 10.3%

Kenya (Nairobi 20 Index) 4,806.52 -124.65 -2.5% 17.1% Pakistan (Karachi KSE 100) 22,541.64 182.68 0.8% 33.3%

Saudi Arabia (TASI Index) 7,623.89 10.53 0.1% 12.1% Vietnam (Ho Chi Minh) 509.03 -18.94 -3.6% 23.0%

Lebanon (Beirut BLOM Index) 1,150.28 -31.71 -2.7% -1.6% Sri Lanka (Colombo) 6,219.39 -88.04 -1.4% 10.2%

Palestine 454.78 -0.71 -0.2% -4.8% Cambodia (Laos) 1,338.82 0.00 0.0% 10.2%Source: Bloomberg

EMERGING AND FRONTIER MARKET PERFORMANCE

48,000

49,000

50,000

51,000

52,000

53,000

54,000

55,000

56,000

57,000

58,000

3/15 3/29 4/12 4/26 5/10 5/24 6/7

Ind

ex

Brazil (Bovespa Index)-Trailing 90 Days

Source: Bloomberg

17,000

17,500

18,000

18,500

19,000

19,500

20,000

20,500

3/15 3/29 4/12 4/26 5/10 5/24 6/7

Ind

ex

India (Sensex Index)-Trailing 90 Days

Source: Bloomberg

400

420

440

460

480

500

520

540

560

580

3/17 3/31 4/14 4/28 5/12 5/26 6/9

Ind

ex

Egypt (Hermes Index)-Trailing 90 Days

Source: Bloomberg

2,900

3,000

3,100

3,200

3,300

3,400

3,500

3/15 3/29 4/12 4/26 5/10 5/24 6/7

Ind

ex

Singapore (Straits Times Index)-Trailing 90 Days

Source: Bloomberg

June 14, 2013


INTEREST RATES

YIELD CURVES

8


2-Yr. U.S. Treasury 0.28% 1 bps NM NM Prime Rate 3.25% 0.00 NM NM

5-Yr. U.S. Treasury 1.02% -6 bps NM NM Fed Funds Rate 0.25% 0.00 NM NM

10-Yr. U.S. Treasury 2.13% -3 bps NM NM Discount Rate 0.75% 0.00 NM NM

30-Yr. U.S. Treasury 3.30% -1 bps NM NM LIBOR (3 Mo.) 0.27% 0 bps NM NM

German 10-Yr. Govt. 1.52% 2 bps NM NM Bond Buyer 40 Muni 4.89% 33 bps NM NM

France 10-Yr. 2.11% 2 bps NM NM Bond Buyer 40 G.O. 4.16% NA NM NM

Italy 10-Yr. 4.26% -6 bps NM NM Bond Buyer 40 Rev. 4.62% NA NM NM

Fed 5-Yr Fwd BE Inf. 2.46% -11 bps NM NM

Source: Bloomberg

SELECTED INTEREST RATES

1M 1Y 3Y 5Y 8Y 10Y 15Y 20Y 30Y0.00

1.00

2.00

3.00

4.00

5.00

6.00

US Treasury Actives Curve 20130607

US Treasury Actives Curve 20130614

USD US Industrial (B) BFV Curv 20130614

USD Composite (BBB) BFV Curve 20130614

1.40

1.50

1.60

1.70

1.80

1.90

2.00

2.10

2.20

2.30

12/17 1/17 2/17 3/17 4/17 5/17

Ind

ex

10-Year Treasury Yield - Trailing 180 Days

Source: Bloomberg

1.50

1.55

1.60

1.65

1.70

1.75

1.80

1.85

1.90

12/17 1/17 2/17 3/17 4/17 5/17

Ind

ex

BBB/Baa- 10-Yr Treas. Spread Rising Line = Risk Aversion

Source: Bloomberg

Source: Bloomberg

June 14, 2013


CURRENCIES

9

76

77

78

79

80

81

82

83

84

85

12/17 1/17 2/17 3/17 4/17 5/17

U.S. Dollar Index - Trailing Six Months

Source: Bloomberg

1.22

1.24

1.26

1.28

1.30

1.32

1.34

1.36

1.38

12/17 1/17 2/17 3/17 4/17 5/17

Euro - U.S. Dollars per Euro

Source: Bloomberg

75.00

80.00

85.00

90.00

95.00

100.00

105.00

12/17 1/17 2/17 3/17 4/17 5/17

Japanese yen - Yen per U.S. Dollar

Source: Bloomberg


Dollar Index 80.64 -1.024 -1.25% 1.10% Chinese Yuan 6.13 -0.002 0.04% 1.63%

Euro 1.33 0.013 0.98% 1.17% Swiss Franc 0.92 -0.015 1.60% -0.64%

Japanese Yen 94.33 -3.190 3.38% -8.07% New Zealand Dollar 0.81 0.017 2.13% -2.75%

British Pound 1.57 0.015 0.96% -3.37% Brazilian Real 2.15 0.015 -0.68% -4.43%

Canadian Dollar 1.02 -0.003 0.26% -2.46% Mexican Peso 12.70 -0.069 0.55% 1.24%

SELECTED CURRENCY PERFORMANCE

Source: Bloomberg

6.04

6.06

6.08

6.10

6.12

6.14

6.16

6.18

6.20

6.22

6.24

6.26

12/17 1/17 2/17 3/17 4/17 5/17

Chinese yuan - yuan per U.S. Dollar

Source: Bloomberg

June 14, 2013


COMMODITIES

10

75

80

85

90

95

100

105

12/17 1/17 2/17 3/17 4/17 5/17

$ p

er b

arre

l

Crude Oil - Light Crude ($ per barrel)

Source: Bloomberg

1,200

1,300

1,400

1,500

1,600

1,700

1,800

12/17 1/17 2/17 3/17 4/17 5/17

$ p

er o

un

ce

Gold - Spot gold price ($ per ounce)

Source: Bloomberg

6,000

6,500

7,000

7,500

8,000

8,500

12/17 1/17 2/17 3/17 4/17 5/17

Ind

ex

Copper

Source: Bloomberg

500

520

540

560

580

600

620

640

12/17 1/17 2/17 3/17 4/17 5/17

$ p

er b

ush

el

Corn - Active Contract

Source: Bloomberg


DJ UBS Comm. Idx. 130.37 -0.83 -0.63% -6.18% Platinum Spot $1,446.55 -$53.65 -3.57% -5.95%

Rogers Int. Comm. Idx. 3543.51 -22.04 -0.62% -4.03% Corn 533.00 -27.25 -4.88% -11.42%

Crude Oil $97.80 $1.93 2.01% 4.55% Wheat 680.75 -17.25 -2.48% -14.46%

Natural Gas $3.74 -$0.07 -1.72% 5.61% Soybeans 1,298.25 -33.50 -2.52% -0.46%

Gasoline ($/Gal.) $3.63 -$0.01 -0.22% 10.12% Sugar 17.09 0.03 0.18% -16.25%

Heating Oil 296.15 8.72 3.01% -0.71% Orange Juice 147.00 -6.35 -4.19% 19.58%

Gold Spot $1,390.91 $5.43 0.39% -17.13% Aluminum 1,857.00 -83.00 -4.28% -10.42%

Silver Spot $22.07 $0.37 1.71% -27.37% Copper 7,050.00 -180.00 -2.49% -11.11%

Source: Bloomberg

SELECTED COMMODITY MARKET PERFORMANCE

June 14, 2013


ALTERNATIVE INVESTMENTS

11

1,160

1,165

1,170

1,175

1,180

1,185

1,190

1,195

1,200

1,205

1,210

1,215

3/18 4/1 4/15 4/29 5/13 5/27 6/10

Ind

ex

HFRX Global Hedge Fund Index - Trailing 90 Days

Source: Bloomberg

930

932

934

936

938

940

942

944

946

948

950

3/18 4/1 4/15 4/29 5/13 5/27 6/10

Ind

ex

HFRX Equity Market Neutral - Trailing 90 Days

Source: Bloomberg

1,245

1,250

1,255

1,260

1,265

1,270

1,275

1,280

1,285

1,290

1,295

3/18 4/1 4/15 4/29 5/13 5/27 6/10

Ind

ex

IQ Fixed Income Beta Arb Index - Trailing 90 Days

Source: Bloomberg

1,060

1,070

1,080

1,090

1,100

1,110

1,120

1,130

1,140

3/18 4/1 4/15 4/29 5/13 5/27 6/10

Ind

ex

HFRX Equity Hedge Index - Trailing 90 Days

Source: Bloomberg


HFRX Global Hedge Fund Index 1194.00 -6.57 -0.55% 3.40% HFRX Distressed Index 981.69 -1.46 -0.15% 3.06%

HFRX Equity Market Neutral 944.09 -4.14 -0.44% 0.90% HFRX Merger Arbitrage Index 1537.29 -0.22 -0.01% 1.95%

HFRX Equity Hedge Index 1096.69 -11.83 -1.07% 4.59% HFRX Convertible Arbitrage Index 765.52 7.86 1.04% 8.66%

HFRX Event-Driven Index 1488.89 -2.56 -0.17% 7.49% HFRX Macro CTA Index 1141.82 -6.54 -0.57% -1.09%

HFRX Absolute Return Index 972.78 -1.76 -0.18% 1.74% IQ Fixed Income Beta Arb Index 1268.65 0.00 0.00% 2.44%

Source: Bloomberg

SELECTED ALTERNATIVE INVESTMENT INDEX PERFORMANCE

June 14, 2013


0.325

0.330

0.335

0.340

0.345

0.350

12/17 1/17 2/17 3/17 4/17 5/17

Ind

ex

High Yield/Inv. Grade Bonds - Trailing 180 Days

Source: Bloomberg

2.35

2.40

2.45

2.50

2.55

2.60

2.65

2.70

2.75

2.80

12/17 1/17 2/17 3/17 4/17 5/17

Ind

ex

S&P 500/MSCI EAFE - Trailing 180 Days

Source: Bloomberg

1.10

1.15

1.20

1.25

1.30

1.35

1.40

1.45

1.50

1.55

12/17 1/17 2/17 3/17 4/17 5/17In

dex

MSCI EAFE/MSCI EM - Trailing 180 Days

Source: Bloomberg

2.50

2.70

2.90

3.10

3.30

3.50

3.70

3.90

4.10

4.30

12/17 1/17 2/17 3/17 4/17 5/17

Ind

ex

S&P 500/MSCI EM - Trailing 180 Days

Source: Bloomberg

0.36

0.37

0.37

0.38

0.38

0.39

0.39

0.40

0.40

12/17 1/17 2/17 3/17 4/17 5/17

Ind

ex

Large Cap/Small Cap - Trailing 180 Days

Source: Bloomberg

0.54

0.54

0.55

0.55

0.56

0.56

0.57

12/17 1/17 2/17 3/17 4/17 5/17

Ind

ex

Growth/Value - Trailing 180 Days

Source: Bloomberg

0.180

0.185

0.190

0.195

0.200

0.205

0.210

12/17 1/17 2/17 3/17 4/17 5/17

Ind

ex

Info Tech/S&P 500 - Trailing 180 Days

Source: Bloomberg

1.76

1.77

1.78

1.79

1.80

1.81

1.82

1.83

1.84

1.85

1.86

1.87

12/17 1/17 2/17 3/17 4/17 5/17

Ind

ex

Inv. Grade Bonds/Int. Govt. Bonds - Trailing 180 Days

Source: Bloomberg

0.61

0.61

0.62

0.62

0.63

0.63

0.64

0.64

0.65

12/17 1/17 2/17 3/17 4/17 5/17

Ind

ex

High Yield Bonds/Int. Govt. Bonds - Trailing 180 Days

Source: Bloomberg

12

PORTFOLIO CONSTRUCTION

June 14, 2013


13

The Relative Strength Matrix provides an indication of how the various asset classes have performed relative to one another over the past 30 days. A number greater than 1.0 indicates that the asset class in the far left column has outperformed the corresponding asset class in the top row over the past 30 days. A number below 1.0 means the asset class on the left has underperformed the asset class at the top. The green shading indicates outperformance, and the red shading indicates underperformance.

Source: Bloomberg

4/11 4/18 4/25 5/2 5/9 5/16 5/23 5/30 6/6 6/13

Large Cap

(R200)2.02% -3.15% 2.63% 0.87% 1.65% 1.39% 0.07% 0.31% -1.84% 0.81%

Small Cap

(R2000)2.31% -4.81% 4.30% -0.05% 2.81% 1.97% -0.11% 1.03% -1.51% 1.04%

MSCI EAFE 3.91% -3.27% 3.65% 0.51% 1.72% 0.31% -2.17% -0.64% -3.11% 0.42%

MSCI Em.

Mkts.1.20% -3.10% 3.01% 0.98% 2.24% -1.34% -1.95% -0.96% -3.05% -4.21%

BarCap Agg.

(AGG)-0.04% 0.35% 0.03% 0.13% -0.63% -0.11% -0.63% -0.51% -0.34% -0.18%

High Yield

(JNK)0.81% -0.27% 1.07% 0.48% 0.24% -0.74% -0.34% -0.68% -2.00% 0.15%

DJ UBS Index 1.03% -2.53% 0.77% -0.77% 1.36% -1.86% 1.27% -0.94% 0.33% -1.27%

Hedge Funds

(HFRX Global)0.59% -0.52% 0.74% 0.29% 0.77% 0.38% -0.37% 0.08% -1.00% -0.28%

60/40* 1.51% -1.96% 1.98% 0.45% 0.94% 0.52% -0.65% -0.16% -1.54% 0.14%

48/32/20

(w/Alts.)**1.33% -1.67% 1.73% 0.42% 0.90% 0.49% -0.60% -0.11% -1.43% 0.06%

Source: Bloomberg; *60/40 portfolio = 30% Large Cap/10% Small Cap/15% EAFE/5% Emerging Markets/35% BarCap Agg./5% High Yield.

**48/32/20 portfolio = 24% Large Cap/8% Small Cap/12% EAFE/4% Emerging Markets/28% BarCap Agg./4% High Yield/20% HFRX Global Index.

WEEKLY ASSET CLASS PERFORMANCE (Prior 10 weeks ending Thursday)

Alternatives

Asset Allocation

Domestic

Equity

Int'l.

Equity

Fixed Income

Commodities

Equity

Large Cap

Core

Large Cap

Growth

Large Cap

Value

Mid Cap

Core

Mid Cap

Growth

Mid Cap

Value

Small Cap

Core

Small Cap

Growth

Small Cap

Value

Int'l.

Developed

Emerging

Markets REITs Comm. Int. Bond High Yield

Large Cap Core 1.00 1.04 0.97 1.03 1.02 1.04 0.98 0.96 1.01 1.24 1.93 1.28 1.32 1.47 1.35

Large Cap Growth 0.96 1.00 0.94 0.99 0.98 1.00 0.95 0.92 0.97 1.20 1.87 1.23 1.27 1.42 1.30

Large Cap Value 1.03 1.07 1.00 1.06 1.05 1.07 1.01 0.99 1.04 1.28 1.99 1.32 1.36 1.52 1.39

Mid Cap Core 0.97 1.01 0.94 1.00 0.99 1.01 0.96 0.93 0.98 1.21 1.88 1.24 1.28 1.43 1.31

Mid Cap Growth 0.98 1.02 0.95 1.01 1.00 1.02 0.96 0.94 0.99 1.22 1.90 1.25 1.29 1.45 1.32

Mid Cap Value 0.97 1.00 0.94 0.99 0.98 1.00 0.95 0.92 0.97 1.20 1.87 1.23 1.27 1.42 1.30

Small Cap Core 1.02 1.06 0.99 1.05 1.04 1.06 1.00 0.98 1.03 1.26 1.97 1.30 1.34 1.50 1.37

Small Cap Growth 1.04 1.08 1.01 1.07 1.06 1.08 1.03 1.00 1.05 1.30 2.02 1.33 1.37 1.54 1.41

Small Cap Value 0.99 1.03 0.96 1.02 1.01 1.03 0.98 0.95 1.00 1.23 1.92 1.27 1.31 1.46 1.34

Int'l. Developed 0.81 0.84 0.78 0.83 0.82 0.84 0.79 0.77 0.81 1.00 1.56 1.03 1.06 1.19 1.09

Emerging Markets 0.52 0.54 0.50 0.53 0.53 0.54 0.51 0.50 0.52 0.64 1.00 0.66 0.68 0.76 0.70

REITs 0.78 0.81 0.76 0.81 0.80 0.81 0.77 0.75 0.79 0.97 1.52 1.00 1.03 1.15 1.06

Commodities 0.76 0.79 0.74 0.78 0.77 0.79 0.75 0.73 0.77 0.94 1.47 0.97 1.00 1.12 1.02

Int. Bond 0.68 0.70 0.66 0.70 0.69 0.70 0.67 0.65 0.68 0.84 1.31 0.87 0.89 1.00 0.92

High Yield 0.74 0.77 0.72 0.76 0.76 0.77 0.73 0.71 0.75 0.92 1.43 0.95 0.98 1.09 1.00

RELATIVE STRENGTH MATRIX (BASED ON 30-DAY RSI)

June 14, 2013


14FOR FINANCIAL ADVISOR USE ONLY. NOT FOR DISTRIBUTION TO THE PUBLIC.

INDEX OVERVIEW The S&P 500 Index is an unmanaged index comprised of 500 widely held securities considered to be representative of the stock market in general. The S&P/Case-Shiller Home Price Indices measure the residential housing market, tracking changes in the value of the residential real estate market in 20 metropolitan regions across the United States. The MSCI EAFE Index represents 21 developed markets outside of North America. The MSCI EAFE Growth Index is an unmanaged index considered representative of growth stocks of Europe, Australasia and the Far East. The MSCI EAFE Value Index is an unmanaged index considered representative of value stocks of Europe, Australasia and the Far East. The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance in the global emerging markets. The MSCI Europe Index is an unmanaged index considered representative of stocks of developed European countries. The Barclays US Credit Index is an unmanaged index considered representative of publicly issued, SEC-registered US corporate and specified foreign debentures and secured notes. The Barclays US Aggregate Bond Index is a market capitalization-weighted index of investment-grade, fixed-rate debt issues, including government, corporate, asset-backed, and mortgage-backed securities, with maturities of at least one year. The Barclays US Corporate High Yield Index covers the USD-denominated, non-investment grade, fixed-rate, taxable corporate bond market. Securities are classified as high-yield if the middle rating of Moody’s, Fitch and S&P is Ba1/BB+/BB+ or below. The index may include emerging market debt. The Barclays Capital Municipal Bond Index is an unmanaged index comprised of investment-grade, fixed-rate municipal securities representative of the tax-exempt bond market in general. The Barclays US Treasury Total Return Index is an unmanaged index of public obligations of the US Treasury with a remaining maturity of one year or more. The Citigroup World Government Bond Index is a market capitalization weighted bond index consisting of the government bond markets of Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Ireland, Italy, Japan, Malaysia, Mexico, the Netherlands, Norway, Poland, Portugal, Singapore, Spain, Sweden, Switzerland, the United Kingdom and the United States. The DJ-UBS Commodity Index Total ReturnSM measures the collateralized returns from a basket of 19 commodity futures contracts representing the energy, precious metals, industrial metals, grains, softs and livestock sectors. The Russell 1000 Index is a market capitalization-weighted benchmark index made up of the 1000 largest U.S. companies in the Russell 3000 Index. The Russell 1000 Growth Index is an unmanaged index considered representative of large-cap growth stocks. The Russell 1000 Value Index is an unmanaged index considered representative of large-cap value stocks. The Russell 2000 Index is an unmanaged index considered representative of small-cap stocks. The Russell 2000 Growth Index is an unmanaged index considered representative of small-cap growth stocks. The Russell 2000 Growth Index is an unmanaged index considered representative of small-cap value stocks. The Russell 3000 Index is an unmanaged index considered representative of the US stock market. The Russell Midcap Index is a subset of the Russell 1000 Index. It includes approximately 800 of the smallest securities based on a combination of their market cap and current index membership. The Russell Midcap Growth Index is an unmanaged index considered representative of mid-cap growth stocks. The Russell Midcap Value Index is an unmanaged index considered representative of mid-cap value stocks. The HFRX Indices are a series of benchmarks of hedge fund industry performance which are engineered to achieve representative performance of a larger universe of hedge fund strategies. Hedge Fund Research, Inc. employs the HFRX Methodology (UCITS compliant), a proprietary and highly quantitative process by which hedge funds are selected as constituents for the HFRX Indices. The Consumer Price Index (CPI) measures the change in the cost of a fixed basket of products and services. The Gross Domestic Product (GDP) rate is a measurement of the output of goods and services produced by labor and property located in the United States. The information, analysis, and opinions expressed herein are for general and educational purposes only. Nothing contained in this weekly review is intended to constitute legal, tax, accounting, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. All investments carry a certain risk, and there is no assurance that an investment will provide positive performance over any period of time. An investor may experience loss of principal. Investment decisions should always be made based on the investor’s specific financial needs and objectives, goals, time horizon, and risk tolerance. The asset classes and/or investment strategies described may not be suitable for all investors and investors should consult with an investment advisor to determine the appropriate investment strategy. Past performance is not indicative of future results. Information obtained from third party sources are believed to be reliable but not guaranteed. Endowment Wealth Management makes no representation regarding the accuracy or completeness of information provided herein. All opinions and views constitute our judgments as of the date of writing and are subject to change at any time without notice. Investments in smaller companies carry greater risk than is customarily associated with larger companies for various reasons such as volatility of earnings and prospects, higher failure rates, and limited markets, product lines or financial resources. Investing overseas involves special risks, including the volatility of currency exchange rates and, in some cases, limited geographic focus, political and economic instability, and relatively illiquid markets. Income (bond) securities are subject to interest rate risk, which is the risk that debt securities in a portfolio will decline in value because of increases in market interest rates. Exchange Traded Funds (ETFs) are subject to risks similar to those of stocks, such as market risk. Investing in ETFs may bear indirect fees and expenses charged by ETFs in addition to its direct fees and expenses, as well as indirectly bearing the principal risks of those ETFs. ETFs may trade at a discount to their net asset value and are subject to the market fluctuations of their underlying investments. Investing in commodities can be volatile and can suffer from periods of prolonged decline in value and may not be suitable for all investors. Index Performance is presented for illustrative purposes only and does not represent the performance of any specific investment product or portfolio. An investment cannot be made directly into an index.

June 14, 2013


15

Alternative Investments may have complex terms and features that are not easily understood and are not suitable for all investors. You should conduct your own due diligence to ensure you understand the features of the product before investing. Alternative investment strategies may employ a variety of hedging techniques and non-traditional instruments such as inverse and leveraged products. Certain hedging techniques include matched combinations that neutralize or offset individual risks such as merger arbitrage, long/short equity, convertible bond arbitrage and fixed-income arbitrage. Leveraged products are those that employ financial derivatives and debt to try to achieve a multiple (for example two or three times) of the return or inverse return of a stated index or benchmark over the course of a single day. Inverse products utilize short selling, derivatives trading, and other leveraged investment techniques, such as futures trading to achieve their objectives, mainly to track the inverse of their benchmarks. As with all investments, there is no assurance that any investment strategies will achieve their objectives or protect against losses. Neither Endowment Wealth Management nor its representatives render tax, accounting or legal advice. Any tax statements contained herein are not intended or written to be used, and cannot be used, for the purpose of avoiding U.S. federal, state, or local tax penalties. Taxpayers should always seek advice based on their own particular circumstances from an independent tax advisor. Copyright Endowment Wealth Management, Inc. All rights reserved

ABOUT Endowment Wealth Management, Inc. We are a Multi-Client Family Office whose sole mission is to provide wealth sustainability for individuals, families, retirement plans and institutions through the utilization of the Endowment Investment Philosophy. We manage our client’s financial wealth to enhance the human capital of their future generations. We work closely with our clients to develop an integrated long-term wealth plan that maximizes the benefit gained by integrating all of our individuals or families wealth producing assets. We are different from many other firms, in the way we build our portfolios on behalf of our clients.

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June 14, 2013

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