Market Review & Commentary Q3 2013

November 6, 2013

Matthew H. McPhail, CFA, Chief Investment Officer

Sentinel Benefits & Financial Group 55 Walkers Brook Drive, Suite 100

Reading, MA 01867

WEB-037-11062013

Date of first use: 11.6.2013

Disclosure The views and opinions expressed in this webinar are those of Sentinel Pension Advisors through the period ending September 30, 2013 and are subject to change based on market and other conditions. All information has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. The information provided in this webinar is for informational purposes only and is not intended, nor should it be interpreted, as an offer, solicitation or recommendation to purchase or sell any security mentioned.

This webinar contains certain statements that may be deemed as forward-looking statements. These statements are based on certain assumptions and analyses made by Sentinel Pension Advisors in light of its perception of historical trends, current conditions, expected future developments and other factors it believes appropriate under the circumstances. Past performance is not a guarantee of future results.

Investment advisory services provided by Sentinel Pension Advisors, Inc. (SPA), an SEC-registered investment adviser. Securities offered through Sentinel Securities, Inc. (SSI) Member FINRA & SIPC. SPA and SSI are affiliated companies. Sentinel Benefits & Financial Group is the brand name for the Sentinel family of companies, which includes SPA and SSI.

SSI, SPA, Fidelity Asset Management and J.P. Morgan Asset Management are not affiliated companies.

Mr. McPhail is an Investment Adviser Representative of SPA.

Q3 Summary • Markets were strong across all asset classes in Q3 with the lone exception being the U.S. REIT

sector. Global stocks continued to surge higher led by foreign company shares. Markets held their gains for the quarter in the face of the looming government shutdown.

• In Q3, Dow +2.12%, S&P 500 +5.25%, NASDAQ +10.82%, Russell 2000 +10.21%.

• The U.S. mutual fund categories continue to hold the top nine spots in the YTD ranks of

performance with small and mid-cap stocks leading the way. • Bond prices rebounded slightly from their summer swoon, but the average Intermediate-Term

Bond fund has fallen by 1.71% per Morningstar. • Foreign funds rebounded strongly in Q3 with average gains ranging from 9.5% - 12% depending on

the category. Emerging Market funds continue to lag, but the average fund rebound by 4.98%. • Economic data continues to show modest growth with gradual improvement across a number of

key areas. The employment picture continues to be mixed, but jobs are being created. • The Federal Reserve will have a new leader in January. Assuming she’s confirmed by Congress,

Janet Yellen will take over for Ben Bernanke. Concerns remain over when the Fed will slow the pace of monetary stimulus and how future policy will change under the new leadership.

Past Performance is not indicative of future results

Foreign Stocks Lead; Bonds Bounce Back in Q3

Past Performance is not indicative of future results

Sector Results for Q3

Stock Prices Have Dramatically Outperformed Earnings Growth

Stock Prices Follow Earnings?

Source: Mauldin Economics

Foreign Markets Rebound in Q3

Past Performance is not indicative of future results

Fixed Income Stabilizes in Q3

Past Performance is not indicative of future results

Interest Rate Trend in 2013

Past Performance is not indicative of future results

Source: Yahoo

Sentinel Pension Advisors’ Interest Rate Expectations – 3 Scenarios

1. Base Case – The bottom in rates has been seen. Rates stay in a low range with an gradual upward bias.

2. Less Likely – Rates move to the up side in accelerated fashion in to much higher levels.

3. Least Likely – Rates fall to new lows.

Moving Forward – How to Manage Fixed Income Assets in a Rising Rate Environment

1. Investors must be willing to change. What has worked well in the past might not in the future.

2. Embrace flexible strategies. Look for true diversification across all fixed-income asset classes.*

3. Diversify away from strategies primarily exposed to interest rate movements.

4. Lower your return expectations. *Diversification may not protect against market risk.

Final Thoughts

• Global equities continue to surge higher in the face of challenges. The “Teflon Market” is an accurate description. Unlike 2011, markets ignored the potential threats over the issue of government shutdown and the debt ceiling.

• Equity prices have rose fare in excess of what you might expect based on actual earnings

growth. So what is the missing variable to explain this? The Fed and monetary stimulus. This is why the market is so obsessed with when the Fed will pull back.

• While bond prices rebounded in Q3, we continue to have longer-term concerns related to

bond funds. Our expectation is for gradually rising rates, but remaining in a historically low range. This will continue to pressure core bond funds. Investors should lower their expectations for bond fund returns going forward.

• Bond strategies remain useful as diversification tools in a portfolio. We favor shifting

exposure to bond managers with greater flexibility to adjust their portfolios to changing market conditions.

• Looking out to 2014, another potential fight within government over the debt ceiling is

shaping up for Q1. Equity valuations are elevated. Fixed-income is expected to remain a challenging asset class and mid-term elections will happen one year from now. As always, it should be interesting.

Thank you for attending.

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