weekly market review weekly review october 14, 2016 · 2016. 10. 14. · weekly market review chart...

Weekly Market Review

Chart of the Week

October 14, 2016Weekly Review

October 14, 2016

Tel. (920) 785-6010 www.EndowmentWM.com Fax (920) 227-0521

1

0

50

100

150

200

250

300

350

Oct-15 Dec-15 Feb-16 Apr-16 Jun-16 Aug-16

Tho

usa

nd

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Non-Farm Payrolls-Trailing 12 Mos.

Source: Bloomberg

Weekly Highlights

• Minutes from the FOMC’s (Federal Open Market Committee) September meeting were released on Wednesday with the hawks building momentum, contending that tightening conditions in the labor market justify a rate hike. Although the Fed (Federal Reserve) is not expected to raise rates at its November meeting, which falls just a week before the election, the probability of a hike in December seems to be increasing.

• Retail sales were in-line with consensus, with auto sales leading the way. Auto sales and restaurants, two discretionary categories, continue to be strong and support the strength of the US consumer. Ultimately, this points to the stability of the labor market, which continues to build its case for the Fed to raise interest rates.

• Import and export prices edged higher, led by petroleum, showing improvement from prior weakness. Signs of inflation appear to be developing, but will there be enough evidence before the end of the year to convince the doves at the Fed that a rate hike is warranted?

Talking Points

• Equity markets were downacross the globe, with the US and Japan down roughly 1% and Europe and EM losing more than 2%.

• The US 10-Year Treasury note inched lower after climbing to a three-month high of 1.79% on Wednesday.

• The US Dollar ended higheragainst a basket of major trade partners’ currencies, most notably the pound, as sterling continues to feel the effects of the Brexit referendum.

• On the whole, commodities were range-bound. Brent crude backed off of a one-year price of $53 reached on Monday, while agricultural goods traded higher.

• In other economic news: The Small Business Optimism Index moved lower. Aggressive plans to draw down inventories point to a negative outlook.

Endowment Wealth ManagementWeekly Market Review-October 14-2016

October 14, 2016

2

0.7

0.8

0.9

1

1.1

1.2

1.3

Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 May-16 Jul-16 Sep-16

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

-1.09% -0.85% -0.63%

-1.02% -1.33% -1.69%

2.79%6.74%10.75%

One Week

Value Growth

-1.30% -1.95% -2.60%

YTD

Value Growth

4.84% 3.78% 2.81%

9.01% 5.85% 2.70%

1900

1950

2000

2050

2100

2150

2200

2250

4/18 5/2 5/16 5/30 6/13 6/27 7/11 7/25 8/8 8/22 9/5 9/19 10/3

Source: Bloomberg

S&P 500 Index: Trailing 180 Days

% Wgt in

S&P 500

Week %

Chg. YTD % Chg.

Consumer Discretionary 12.5 -1.14% 0.9%

Consumer Staples 9.9 0.04% 3.6%

Energy 7.3 -1.16% 14.7%

Financials 13.0 -1.02% 0.2%

Health Care 14.4 -3.27% -3.5%

Industrials 9.7 -0.62% 6.7%

Information Technology 21.4 -0.59% 10.3%

Materials 2.8 -1.19% 6.2%

Telecom Services 2.6 0.66% 10.1%

Utilities 3.3 1.33% 10.2%

Source: Bloomberg

Sector Performance:

S&P/Global Industry Classification Sectors (GICS)

10

12

14

16

18

20

22

24

26

28

Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16Source: Bloomberg

VIX Index: Trailing 180 Days

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

S&P 500 2,132.98 -20.76 -0.96% 4.4% Russell Global EM 2,817.72 -76.24 -2.63% 11.0%

Dow Industrials 18,138.38 -102.11 -0.56% 4.1% 10-Year US Treas. 1.79 6 bps NM NM

Nasdaq 5,214.16 -78.24 -1.48% 4.1% DJ UBS Comm. Idx. 86.34 0.70 0.82% 9.9%

Russell 2000 1,212.41 -24.15 -1.95% 6.7% Gold $1,251.03 -$6.05 -0.48% 17.9%

Euro Stoxx Index 339.95 0.31 0.09% -7.1% Crude Oil $50.32 $0.51 1.02% 16.1%

Shanghai Composite 3,063.81 59.11 1.97% -13.4% Dollar Index 98.09 1.42 1.47% -0.6%

Russell Global 1,708.71 -25.53 -1.47% 3.0% VIX Index 16.12 2.64 19.58% -11.5%Source: Bloomberg; Index % change is based on price.

Market Dashboard


October 14, 2016

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

A Macro View: Money Market Reform – Impact and Expectations

Money markets have long been viewed as a safe and boring afterthought in the context of a diversified portfolio, but things may become a little more interesting on Friday. October 14th marks the deadline for compliance with the SEC’s long-awaited reforms in the regulation of money market portfolios. These reforms are aimed at fostering financial market stability and preventing a “break the buck” scenario in the event of a financial crisis like 2008. Much stricter requirements will be enforced for all non-government money market portfolios, most notably prime and municipal money markets. These measures include a floating net asset value (NAV) and the fund manager’s ability to impose liquidity fees or the outright suspensions of redemptions.

The reforms already have resulted in a $1 trillion exodus from prime funds, and many asset management firms have converted their prime money market portfolios into government-only funds in an effort to meet client demand and avoid the floating NAV. These measures also have had visible impacts on financial markets. Three-month London Interbank Borrowing Rate (LIBOR) has been trending upward for months, reaching a post-crisis high of 87 basis points, as banks have been forced to increase their short-term offer rates to attract lenders. This, of course, has consequences for floating-rate securities, such as bank loans, which use LIBOR as a reference rate. US municipalities also face a jump in short-term borrowing costs due to a similar rise in the Securities Industry and Financial Market Association (SIFMA) rate, the baseline for short-term municipal debt instruments, such as variable-rate demand notes.

Potential longer-term impacts of these reforms remain to be seen. The increase in government-only mandates will continue to drive up demand for T-Bills and other short-dated government issued securities. Of course, the supply of these securities is dependent on fiscal policy and the budget deficit, and could eventually be affected by Congress’ willingness (or lack thereof), to raise the debt ceiling. These reforms also may limit the Fed’s ability to control short-term interest rates, as stronger demand for government securities places a cap on short-term Treasury yields and exerts pressure on the Fed’s reverse repo facility. At the same time, demand for short-dated corporate paper has declined, which likely will continue to have an impact on companies’ borrowing costs to meet their short-term financing needs. Jerome Schneider, head of short-term portfolio management at PIMCO, emphasized the spike in LIBOR is “not just the market’s reaction to a piece of data, but a structural reform that changes the way investors allocate their cash”, meaning higher LIBOR rates are likely here to stay.

The one variable that could reverse the current trend toward government money markets is higher interest rates—if the yield on prime money markets reaches a point where it begins to draw investors away from government-only portfolios. Although the SEC’s good intentions aim to protect investors and reduce the potential for contagion in the event of a financial market crisis, it is unclear whether these money market reforms will ultimately be beneficial, or become an impediment to efficient capital markets.


October 14, 2016

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

235

240

245

250

255

260

265

270

7/22 8/5 8/19 9/2 9/16 9/30

Th

ou

san

ds

Initial Jobless Claims-Trailing 12 Wks.

Source: Bloomberg

Economic Data

-0.3

-0.2

-0.1

0

0.1

0.2

0.3

0.4

0.5


Mo

nth

ly %

Ch

g.Consumer Price Index-Trailing 12 Mos.

Headline CPI Core CPISource: Bloomberg

86.0

88.0

90.0

92.0

94.0

96.0

98.0

100.0

102.0

104.0

106.0


Ind

ex

Consumer Board Confidence Index - Trailing 12 Mos.

Source: Bloomberg

0

50

100

150

200

250

300

350


Tho

usa

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Non-Farm Payrolls-Trailing 12 Mos.

Source: Bloomberg

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

6.0

Dec-13 Jun-14 Dec-14 Jun-15 Dec-15 Jun-16

%

Real GDP Growth Rate - Annualized - 12 Qtrs.

Source: Bloomberg

4.6

4.6

4.7

4.7

4.8

4.8

4.9

4.9

5.0

5.0

5.1


%

Unemployment Rate-Trailing 12 Mos.

Source: Bloomberg


October 14, 2016

5

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

Germany 10-Yr. Govt. 0.06 -4 bps NM NM France 10-Yr. Govt. 0.33 -2 bps NM NM

Greece 10-Yr. Govt. 8.30 -3 bps NM NM Ireland 10-Yr. Govt. 0.49 -1 bps NM NM

Italy 10-Yr. Govt. 1.38 0 bps NM NM Portugal 10-Yr. Govt. 3.29 22 bps NM NM

Spain 10-Yr. Govt. 1.12 -4 bps NM NM Netherlands 10-Yr. Govt. 0.16 -2 bps NM NM

Belgium 10-Yr. Govt. 0.28 -3 bps NM NM U.K. 10-Yr. Govt. 1.10 -12 bps NM NM

SELECTED EUROPEAN SOVEREIGN YIELD PERFORMANCE

Source: Bloomberg

Basis points (bps)

-0.20

-0.15

-0.10

-0.05

0.00

0.05

0.10

7/20 8/3 8/17 8/31 9/14 9/28 10/12

%

Germany 10-Year Government Bond Yield

Source: Bloomberg

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

7/20 8/3 8/17 8/31 9/14 9/28 10/12

%

Spain 10-Year Government Bond Yield

Source: Bloomberg

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

7/20 8/3 8/17 8/31 9/14 9/28 10/12

%

Italy 10-Year Government Bond Yield

Source: Bloomberg

4.0

4.5

5.0

5.5

6.0

6.5

7.0

7.5

8.0

8.5

9.0

7/20 8/3 8/17 8/31 9/14 9/28 10/12

%

Greece 10-Year Government Bond Yield

Source: Bloomberg

Eurozone


October 14, 2016

6

4,850

4,900

4,950

5,000

5,050

5,100

5,150

5,200

5,250

5,300

5,350

5,400

7/18 8/1 8/15 8/29 9/12 9/26 10/10

Ind

exNasdaq Composite-Trailing 90 Days

Source: Bloomberg

2,000

2,200

2,400

2,600

2,800

3,000

3,200

7/18 8/1 8/15 8/29 9/12 9/26 10/10

Ind

ex

Shanghai Composite Index-Trailing 90 Days

Source: Bloomberg

300

310

320

330

340

350

360

7/18 8/1 8/15 8/29 9/12 9/26 10/10

Ind

ex

Euro Stoxx Index-Trailing 90 Days

Source: Bloomberg

17,700

17,800

17,900

18,000

18,100

18,200

18,300

18,400

18,500

18,600

18,700

7/18 8/1 8/15 8/29 9/12 9/26 10/10

Ind

ex

Dow Jones Industrial Average -Trailing 90 Days

Source: Bloomberg


S&P 500 2,132.98 -20.76 -0.96% 4.36% Swiss Market Index 8,089.91 -34.68 -0.43% -8.26%

Dow Industrials 18,138.38 -102.11 -0.56% 4.09% CAC 40 Index (France) 4,470.92 21.01 0.47% -3.58%

Nasdaq Composite 5,214.16 -78.24 -1.48% 4.13% DAX Index (Germany) 10,580.38 89.52 0.85% -1.51%

Russell Global 1,708.71 -25.53 -1.47% 3.0% Irish Overall Index 5,907.81 68.65 1.18% -13.01%

Russell Global EM 2,817.72 -76.24 -2.63% 11.0% Nikkei 225 16,856.37 -42.73 -0.25% -11.44%

S&P/TSX (Canada) 14,584.99 18.73 0.13% 12.11% Hang Seng Index 23,233.31 -719.19 -3.00% 6.02%

Mexico IPC 47,701.45 104.85 0.22% 10.99% Shanghai Composite 3,063.81 59.11 1.97% -13.43%

Brazil Bovespa 61,767.22 658.23 1.08% 42.49% Kospi Index (S. Korea) 2,022.66 -31.14 -1.52% 3.13%

Euro Stoxx 600 339.95 0.31 0.09% -7.07% Taiwan Taiex Index 9,165.17 -100.64 -1.09% 9.92%

FTSE 100 7,013.55 -30.84 -0.44% 12.35% Tel Aviv 25 Index 1,416.23 -24.19 -1.68% -7.36%

IBEX 35 (Spain) 8,767.90 143.60 1.67% -8.13% MICEX Index (Russia) 1,966.39 -13.63 -0.69% 11.64%

WORLD MARKET PERFORMANCE

Source: Bloomberg; Index % change is based on price.

Equities


October 14, 2016

7


Mexico IPC 47,701.45 104.85 0.2% 11.0% Hang Seng Index 23,233.31 -719.19 -3.0% 6.0%

Brazil (Bovespa Index) 61,767.22 658.23 1.1% 42.5% India (Sensex 30) 27,673.60 -387.54 -1.4% 6.0%

MICEX Index (Russia) 1,966.39 -13.63 -0.7% 11.6% Malaysia (KLCI Index) 1,658.97 -6.41 -0.4% -2.0%

Czech Republic (Prague) 899.16 13.44 1.5% -6.0% Singapore (Straits Times Index) 2,815.24 -60.00 -2.1% -2.3%

Turkey (Istanbul) 77,554.21 -421.78 -0.5% 8.1% Thailand (SET Index) 1,477.61 -26.73 -1.8% 14.7%

Egypt (Hermes Index) 752.68 10.65 1.4% 19.4% Indonesia (Jakarta) 5,399.89 22.74 0.4% 17.6%

Kenya (Nairobi 20 Index) 3,267.92 6.58 0.2% -19.1% Pakistan (Karachi KSE 100) 41,464.31 263.83 0.6% 26.4%

Saudi Arabia (TASI Index) 5,693.96 62.70 1.1% -17.6% Vietnam (Ho Chi Minh) 687.00 3.05 0.4% 18.6%

Lebanon (Beirut BLOM Index) 1,164.03 0.40 0.0% -0.5% Sri Lanka (Colombo) 6,482.54 -99.80 -1.5% -6.0%

Palestine 517.81 -0.26 -0.1% -2.8% Cambodia (Laos) 998.73 1.33 0.1% -14.9%

EMERGING AND FRONTIER MARKET PERFORMANCE


30,000

35,000

40,000

45,000

50,000

55,000

60,000

65,000

7/18 8/1 8/15 8/29 9/12 9/26 10/10

Ind

ex

Brazil (Bovespa Index)-Trailing 90 Days

Source: Bloomberg

26,500

27,000

27,500

28,000

28,500

29,000

29,500

7/18 8/1 8/15 8/29 9/12 9/26 10/10

Ind

ex

India (Sensex Index)-Trailing 90 Days

Source: Bloomberg

400

450

500

550

600

650

700

750

800

7/17 7/31 8/14 8/28 9/11 9/25 10/9

Ind

ex

Egypt (Hermes Index)-Trailing 90 Days

Source: Bloomberg

2,700

2,750

2,800

2,850

2,900

2,950

3,000

7/18 8/1 8/15 8/29 9/12 9/26 10/10

Ind

ex

Singapore (Straits Times Index)-Trailing 90 Days

Source: Bloomberg

Equities – Emerging and Frontier Markets


October 14, 2016

YIELD CURVES

8


2-Yr. U.S. Treasury 0.84% 0 bps NM NM Prime Rate 3.50% 0.00 NM NM

5-Yr. U.S. Treasury 1.28% 1 bps NM NM Fed Funds Rate 0.50% 0.00 NM NM

10-Yr. U.S. Treasury 1.79% 6 bps NM NM Discount Rate 1.00% 0.00 NM NM

30-Yr. U.S. Treasury 2.56% 9 bps NM NM LIBOR (3 Mo.) 0.88% 0 bps NM NM

German 10-Yr. Govt. 0.06% -4 bps NM NM Bond Buyer 40 Muni 3.20% 9 bps NM NM

France 10-Yr. 0.33% -2 bps NM NM Bond Buyer 40 G.O. 3.28% NA NM NM

Italy 10-Yr. 1.38% 0 bps NM NM Bond Buyer 40 Rev. 3.53% NA NM NM

Fed 5-Yr Fwd BE Inf. 1.55% 1 bps NM NM

SELECTED INTEREST RATES

Source: Bloomberg

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 20161007

US Treasury Actives Curve 20161014

USD Composite (A) BFV Curve 20161015

USD Composite (BBB) BFV Curve 20161015

0.00

0.50

1.00

1.50

2.00

2.50

4/18 5/18 6/18 7/18 8/18 9/18

Yie

ld %

10-Year Treasury Yield - Trailing 180 Days

Source: Bloomberg

1.00

1.20

1.40

1.60

1.80

2.00

2.20

4/18 5/18 6/18 7/18 8/18 9/18

Ind

ex

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

Source: Bloomberg

Source: Bloomberg

Interest Rates


October 14, 2016

9

89

90

91

92

93

94

95

96

97

98

99

4/18 5/18 6/18 7/18 8/18 9/18

U.S. Dollar Index - Trailing Six Months

Source: Bloomberg

0.80

0.85

0.90

0.95

1.00

1.05

1.10

1.15

1.20

4/18 5/18 6/18 7/18 8/18 9/18

Euro - U.S. Dollars per Euro

Source: Bloomberg

92.00

94.00

96.00

98.00

100.00

102.00

104.00

106.00

108.00

110.00

112.00

114.00

4/18 5/18 6/18 7/18 8/18 9/18

Japanese yen - Yen per U.S. Dollar

Source: Bloomberg


Dollar Index 98.09 1.422 1.47% -0.59% Chinese Yuan 6.73 0.057 -0.84% -3.49%

Euro 1.10 -0.023 -2.04% 1.01% Swiss Franc 0.99 0.013 -1.29% 1.19%

Japanese Yen 104.18 1.200 -1.15% 15.40% New Zealand Dollar 0.71 -0.007 -0.96% 3.75%

British Pound 1.22 -0.024 -1.95% -17.27% Brazilian Real 3.21 -0.015 0.47% 23.54%

Canadian Dollar 1.31 -0.016 1.19% 5.33% Mexican Peso 19.01 -0.293 1.54% -9.47%

SELECTED CURRENCY PERFORMANCE

Source: Bloomberg

6.30

6.35

6.40

6.45

6.50

6.55

6.60

6.65

6.70

6.75

4/18 5/18 6/18 7/18 8/18 9/18

Chinese yuan - yuan per U.S. Dollar

Source: Bloomberg

Currencies


October 14, 2016

10

0

10

20

30

40

50

60

4/18 5/18 6/18 7/18 8/18 9/18

$ p

er b

arre

l

Crude Oil - Light Crude ($ per barrel)

Source: Bloomberg

1,100

1,150

1,200

1,250

1,300

1,350

1,400

4/18 5/18 6/18 7/18 8/18 9/18

$ p

er o

un

ce

Gold - Spot gold price ($ per ounce)

Source: Bloomberg

0

50

100

150

200

250

300

350

400

450

500

4/18 5/18 6/18 7/18 8/18 9/18

$ p

er b

ush

el

Corn - Active Contract

Source: Bloomberg


Bloomberg Comm. Idx. 86.34 0.70 0.82% 9.91% Platinum Spot $935.75 -$32.25 -3.33% 4.96%

Crude Oil $50.32 $0.51 1.02% 16.11% Corn 354.25 14.50 4.27% -7.51%

Natural Gas $3.28 $0.09 2.94% 25.65% Wheat 421.00 26.25 6.65% -17.04%

Gasoline ($/Gal.) $2.25 -$0.01 -0.35% 12.78% Soybeans 962.50 5.75 0.60% 9.03%

Heating Oil 156.81 -1.11 -0.70% 17.79% Sugar 22.91 -0.51 -2.18% 51.72%

Gold Spot $1,251.03 -$6.05 -0.48% 17.90% Orange Juice 188.45 -9.65 -4.87% 30.06%

Silver Spot $17.42 -$0.13 -0.71% 25.80% Aluminum 1,692.00 17.00 1.01% 12.28%

Source: Bloomberg; % change is based on price. Copper 4,712.00 -66.00 -1.38% 0.15%

SELECTED COMMODITY MARKET PERFORMANCE

Commodities

4,200

4,300

4,400

4,500

4,600

4,700

4,800

4,900

5,000

5,100

4/18 5/18 6/18 7/18 8/18 9/18

Ind

ex

Copper

Source: Bloomberg


October 14, 2016

11

1,165

1,170

1,175

1,180

1,185

1,190

1,195

7/18 8/1 8/15 8/29 9/12 9/26 10/10

Ind

ex

HFRX Global Hedge Fund Index - Trailing 90 Days

Source: Bloomberg

984

986

988

990

992

994

996

998

1,000

1,002

1,004

1,006

7/18 8/1 8/15 8/29 9/12 9/26 10/10

Ind

ex

HFRX Equity Market Neutral - Trailing 90 Days

Source: Bloomberg

1,435

1,440

1,445

1,450

1,455

1,460

1,465

7/18 8/1 8/15 8/29 9/12 9/26 10/10

Ind

ex

IQ Fixed Income Beta Arb Index - Trailing 90 Days

Source: Bloomberg

1,105

1,110

1,115

1,120

1,125

1,130

1,135

1,140

1,145

1,150

1,155

7/18 8/1 8/15 8/29 9/12 9/26 10/10

Ind

ex

HFRX Equity Hedge Index - Trailing 90 Days

Source: Bloomberg


HFRX Global Hedge Fund Index 1185.65 -4.36 -0.37% 0.99% HFRX Distressed Index 1020.61 -0.79 -0.08% 13.87%

HFRX Equity Market Neutral 996.88 -3.80 -0.38% -4.16% HFRX Merger Arbitrage Index 1787.05 0.37 0.02% 2.84%

HFRX Equity Hedge Index 1142.96 -5.14 -0.45% -0.98% HFRX Convertible Arbitrage Index 738.39 -1.81 -0.24% 5.16%

HFRX Event-Driven Index 1502.73 -6.49 -0.43% 6.70% HFRX Macro CTA Index 1146.80 -7.84 -0.68% -1.95%

HFRX Absolute Return Index 1027.75 -1.79 -0.17% 0.24% IQ Fixed Income Beta Arb Index 1444.81 -6.68 -0.46% 4.15%

SELECTED ALTERNATIVE INVESTMENT INDEX PERFORMANCE


Alternative Investments


October 14, 2016

3.30

3.40

3.50

3.60

3.70

3.80

3.90

4/18 5/18 6/18 7/18 8/18 9/18

Ind

ex

S&P 500/MSCI EAFE - Trailing 180 Days

Source: Bloomberg

1.40

1.45

1.50

1.55

1.60

1.65

1.70

1.75

1.80

1.85

4/18 5/18 6/18 7/18 8/18 9/18

Ind

ex

MSCI EAFE/MSCI EM - Trailing 180 Days

Source: Bloomberg

0.38

0.38

0.39

0.39

0.40

0.40

0.41

0.41

0.42

0.42

0.43

0.43

4/18 5/18 6/18 7/18 8/18 9/18

Ind

exLarge Cap/Small Cap - Trailing 180 Days

Source: Bloomberg

0.78

0.78

0.79

0.79

0.80

0.80

0.81

0.81

0.82

0.82

0.83

4/18 5/18 6/18 7/18 8/18 9/18

Ind

ex

Growth/Value - Trailing 180 Days

Source: Bloomberg

12

3.00

3.50

4.00

4.50

5.00

5.50

6.00

6.50

7.00

4/18 5/18 6/18 7/18 8/18 9/18

Ind

ex

S&P 500/MSCI EM - Trailing 180 Days

Source: Bloomberg

Portfolio Construction


October 14, 2016

0.270

0.275

0.280

0.285

0.290

0.295

0.300

0.305

4/18 5/18 6/18 7/18 8/18 9/18

Ind

exHigh Yield/Inv. Grade Bonds - Trailing 180 Days

Source: Bloomberg

0.190

0.195

0.200

0.205

0.210

0.215

0.220

0.225

4/18 5/18 6/18 7/18 8/18 9/18

Ind

ex

Info Tech/S&P 500 - Trailing 180 Days

Source: Bloomberg

1.77

1.78

1.79

1.80

1.81

1.82

1.83

1.84

1.85

1.86

1.87

4/18 5/18 6/18 7/18 8/18 9/18

Ind

ex

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

Source: Bloomberg

0.49

0.50

0.51

0.52

0.53

0.54

0.55

0.56

0.57

4/18 5/18 6/18 7/18 8/18 9/18

Ind

ex

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

Source: Bloomberg

13

Portfolio Construction (continued)


October 14, 2016

14

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

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 1.00 0.99 1.03 1.07 1.00 0.99 1.01 0.97 1.07 0.97 1.08 0.88 1.06 0.90

Large Cap Growth 1.00 1.00 0.99 1.03 1.06 1.00 0.99 1.00 0.97 1.07 0.97 1.08 0.88 1.06 0.90

Large Cap Value 1.01 1.01 1.00 1.04 1.07 1.01 0.99 1.01 0.97 1.08 0.98 1.09 0.88 1.07 0.90

Mid Cap Core 0.97 0.97 0.96 1.00 1.03 0.97 0.96 0.97 0.94 1.04 0.94 1.05 0.85 1.03 0.87

Mid Cap Growth 0.94 0.94 0.93 0.97 1.00 0.94 0.93 0.94 0.91 1.01 0.91 1.02 0.83 1.00 0.84

Mid Cap Value 1.00 1.00 0.99 1.03 1.06 1.00 0.98 1.00 0.96 1.07 0.97 1.08 0.88 1.06 0.89

Small Cap Core 1.01 1.01 1.01 1.05 1.08 1.02 1.00 1.02 0.98 1.09 0.98 1.10 0.89 1.08 0.91

Small Cap Growth 0.99 1.00 0.99 1.03 1.06 1.00 0.98 1.00 0.96 1.07 0.97 1.08 0.88 1.06 0.89

Small Cap Value 1.03 1.04 1.03 1.07 1.10 1.04 1.02 1.04 1.00 1.11 1.01 1.12 0.91 1.10 0.93

Int'l. Developed 0.93 0.93 0.93 0.96 0.99 0.94 0.92 0.94 0.90 1.00 0.91 1.01 0.82 0.99 0.84

Emerging Markets 1.03 1.03 1.02 1.06 1.10 1.03 1.02 1.03 0.99 1.10 1.00 1.11 0.91 1.10 0.92

REITs 0.92 0.92 0.92 0.95 0.98 0.93 0.91 0.93 0.89 0.99 0.90 1.00 0.81 0.98 0.83

Commodities 1.14 1.14 1.13 1.17 1.21 1.14 1.12 1.14 1.10 1.22 1.10 1.23 1.00 1.21 1.02

Int. Bond 0.94 0.94 0.93 0.97 1.00 0.94 0.93 0.94 0.91 1.01 0.91 1.02 0.83 1.00 0.84

High Yield 1.11 1.12 1.11 1.15 1.19 1.12 1.10 1.12 1.08 1.19 1.08 1.21 0.98 1.19 1.00

RELATIVE STRENGTH MATRIX (BASED ON 30-DAY RSI)

7/28 8/4 8/11 8/18 8/25 9/1 9/8 9/15 9/22 9/29 10/6 10/13

Large Cap

(R200)0.07% -0.12% 1.01% -0.04% -0.70% 0.04% 0.46% -1.32% 1.24% -1.27% 0.56% -1.14%

Small Cap

(R2000)1.12% -0.29% 1.27% 0.63% 0.26% -0.02% 1.50% -2.49% 2.97% -2.03% 0.69% -2.45%

MSCI EAFE 0.06% 0.32% 2.69% -0.02% -0.34% -0.45% 2.27% -3.27% 3.10% -1.24% -0.69% -2.39%

MSCI Em.

Mkts.0.50% 0.06% 3.60% 0.97% -2.00% -0.78% 4.06% -4.13% 3.59% -0.82% 0.40% -2.88%

BarCap Agg.

(AGG)0.19% -0.15% -0.17% 0.33% -0.19% -0.05% -0.21% -0.45% 0.48% 0.25% -0.87% 0.00%

High Yield

(JNK)-0.66% -0.06% 1.22% 0.63% -0.30% -0.25% 0.25% -0.99% 1.16% -0.08% 0.11% -0.19%

Bloomberg

Commodity

Index

-1.83% 0.61% 0.08% 3.29% -1.95% -3.47% 3.71% -2.43% 2.92% -0.33% 0.34% 0.90%

Hedge Funds

(HFRX Global)-0.01% 0.05% 0.45% 0.10% -0.24% -0.06% 0.54% -0.59% 0.38% 0.00% 0.27% -0.42%

60/40* 0.20% -0.07% 1.02% 0.24% -0.41% -0.13% 0.77% -1.55% 1.54% -0.73% -0.15% -1.10%

48/32/20

(w/Alts.)**0.16% -0.05% 0.90% 0.21% -0.38% -0.11% 0.72% -1.36% 1.31% -0.58% -0.06% -0.96%

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 12 weeks ending Thursday)

Alternatives

Asset Allocation

Domestic

Equity

Int'l.

Equity

Fixed Income

Commodities

Equity


October 14, 2016

INDEX OVERVIEWThe S&P 500 Index is an unmanaged index comprised of 500 widely held securities considered to be representative of the stock market in general. TheS&P/Case-Shiller Home Price Indices measure the residential housing market, tracking changes in the value of the residential real estate market in 20metropolitan regions across the United States. The Nasdaq Composite is a stock market index of the common stocks and similar securities listed on theNASDAQ stock market. The MSCI EAFE Index represents 21 developed markets outside of North America. The MSCI EAFE Growth Index is an unmanagedindex considered representative of growth stocks of Europe, Australasia and the Far East. The MSCI EAFE Value Index is an unmanaged index consideredrepresentative of value stocks of Europe, Australasia and the Far East. The MSCI Emerging Markets Index is a free float-adjusted market capitalizationindex that is designed to measure equity market performance in the global emerging markets. The MSCI Europe Index is an unmanaged indexconsidered representative of stocks of developed European countries. The MSCI Pacific Index is a free float-adjusted market capitalization weightedindex that is designed to measure the equity market performance of the developed markets in the Pacific region. The Barclays US Credit Index is anunmanaged index considered representative of publicly issued, SEC-registered US corporate and specified foreign debentures and secured notes. TheBarclays 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 theUSD-denominated, non-investment grade, fixed-rate, taxable corporate bond market. Securities are classified as high-yield if the middle rating ofMoody’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 anunmanaged index comprised of investment-grade, fixed-rate municipal securities representative of the tax-exempt bond market in general. The BarclaysUS Treasury Total Return Index is an unmanaged index of public obligations of the US Treasury with a remaining maturity of one year or more. TheCitigroup 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 returnsfrom a basket of 19 commodity futures contracts representing the energy, precious metals, industrial metals, grains, softs and livestock sectors. TheRussell 1000 Index is a market capitalization-weighted benchmark index made up of the 1000 largest U.S. companies in the Russell 3000 Index. TheRussell 1000 Growth Index is an unmanaged index considered representative of large-cap growth stocks. The Russell 1000 Value Index is an unmanagedindex 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 anunmanaged index considered representative of small-cap value stocks. The Russell 3000 Index is an unmanaged index considered representative of theUS stock market. The Russell Midcap Index is a subset of the Russell 1000 Index. It includes approximately 800 of the smallest securities based on acombination of their market cap and current index membership. The Russell Midcap Growth Index is an unmanaged index considered representative ofmid-cap growth stocks. The Russell Midcap Value Index is an unmanaged index considered representative of mid-cap value stocks. The HFRX Indices area series of benchmarks of hedge fund industry performance which are engineered to achieve representative performance of a larger universe of hedgefund strategies. Hedge Fund Research, Inc. employs the HFRX Methodology (UCITS compliant), a proprietary and highly quantitative process by whichhedge funds are selected as constituents for the HFRX Indices. The ISM Non-Manufacturing Index is an index based on surveys of more than 400 non-manufacturing firms' purchasing and supply executives, within 60 sectors across the nation, by the Institute of Supply Management (ISM). The ISM Non-Manufacturing Index tracks economic data, like the ISM Non-Manufacturing Business Activity Index. A composite diffusion index is created based on thedata from these surveys that monitors economic conditions of the nation. The ISM Manufacturing Index is an index based on surveys of more than 300manufacturing firms by the Institute of Supply Management. The ISM Manufacturing Index monitors employment, production inventories, new ordersand supplier deliveries. A composite diffusion index is created that monitors conditions in national manufacturing based on the data from these surveys.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 ameasurement of the output of goods and services produced by labor and property located in the United States. Basis Point(s) is a unit that is equal to1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly used for calculating changes in interest rates,equity indexes and the yield of a fixed-income security. The CBOE Volatility Index (VIX) is an up-to-the-minute market estimate of expected volatility thatis calculated by using real-time S&P 500 Index option bid/ask quotes. The Index uses nearby and second nearby options with at least 8 days left toexpiration and then weights them to yield a constant, 30-day measure of the expected volatility of the S&P 500 Index. The MSCI World ex-U.S. Index -captures large and mid-cap representation across 22 of 23 Developed Markets DM countries*--excluding the United States. With 1,002 constituents, theindex covers approximately 85% of the free float-adjusted market capitalization in each country. (* DM countries include: Australia, Austria, Belgium,Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, Netherlands, New Zealand, Norway, Portugal, Singapore, Spain,Sweden, Switzerland and the UK.) The MSCI Japan Index - is designed to measure the performance of the large and mid-cap segments of the Japanesemarket. With 320 constituents, the index covers approximately 85% of the free float-adjusted market capitalization in Japan. The Barclays GlobalAggregate ex-U.S. Index - is a market capitalization-weighted index, meaning the securities in the index are weighted according to the market size of eachbond type. Most U.S. traded investment grade bonds are represented. Municipal bonds, and Treasury Inflation-Protected Securities are excluded, due totax treatment issues. The index includes Treasury securities, Government agency bonds, Mortgage-backed bonds, Corporate bonds, and a small amountof foreign bonds traded in U.S. The University of Michigan Consumer Sentiment Index (MCSI) is a survey of consumer confidence conducted by theUniversity of Michigan. The Michigan Consumer Sentiment Index (MCSI) uses telephone surveys to gather information on consumer expectationsregarding the overall economy. A separately managed account (SMA) is an individual managed investment account offered typically by a brokerage firmthrough one of their brokers or financial consultants and managed by independent investment management firms (often called money managers forshort) and have varying fee structures. An open-end index fund continuously issues and redeems shares based on investor demand. As an index fund, itsinvestment objective is to duplicate the performance of the index it uses as a benchmark. Investment Grade or Investment Grade Bond – The broadcredit designation given to corporate and municipal bonds which have a high probability of being paid and minor, if any, speculative features. Bondsrated Baa and higher by Moody’s Investor Services or BBB and higher by Standard & Poor's are deemed by those agencies to be "investment grade”. Non-Investment Grade - By definition, junk bonds are non-investment grade. A bond rated lower than Baa/BBB, also called a "high-yield" bond. Junk bondsare speculative compared with investment grade bonds. Risk-On Risk-Off - An investment setting in which price behavior responds to, and is driven by,changes in investor risk tolerance. Risk-on risk-off refers to changes in investment activity in response to global economic patterns. During periods whenrisk is perceived as low, risk-on risk-off theory states that investors tend to engage in higher-risk investments. When risk is perceived as high, investorshave the tendency to gravitate toward lower-risk investments.

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October 14, 2016

The information, analysis, and opinions expressed herein are for general and educational purposes only. Nothing contained inthis weekly review is intended to constitute legal, tax, accounting, securities, or investment advice, nor an opinion regardingthe appropriateness of any investment, nor a solicitation of any type. All investments carry a certain risk, and there is noassurance that an investment will provide positive performance over any period of time. An investor may experience loss ofprincipal. 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 investorsand investors should consult with an investment advisor to determine the appropriate investment strategy. Past performanceis not indicative of future results.

Information obtained from third party sources are believed to be reliable but not guaranteed. Endowment WealthManagement makes no representation regarding the accuracy or completeness of information provided herein. All opinionsand 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 reasonssuch 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, limitedgeographic focus, political and economic instability, and relatively illiquid markets. Income (bond) securities are subject tointerest rate risk, which is the risk that debt securities in a portfolio will decline in value because of increases in marketinterest rates. Exchange Traded Funds (ETFs) are subject to risks similar to those of stocks, such as market risk. Investing inETFs may bear indirect fees and expenses charged by ETFs in addition to its direct fees and expenses, as well as indirectlybearing the principal risks of those ETFs. ETFs may trade at a discount to their net asset value and are subject to the marketfluctuations of their underlying investments. Investing in commodities can be volatile and can suffer from periods ofprolonged decline in value and may not be suitable for all investors. Index Performance is presented for illustrative purposesonly and does not represent the performance of any specific investment product or portfolio. An investment cannot be madedirectly into an index.

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. For more information on Endowment Wealth Management, Inc., please call (920) 785-6010 and/or visit www.EndowmentWM.com.

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