Weekly Market Review Weekly Review January 23, 2015 · January 23, 2015. Domestic vs. International...

Weekly Market Review

Talking Points

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

• Treasury prices were little changed this week. The yield on the 10-year T-note was essentially unchanged.

• Commodity prices declined on the week. Energy retreated; precious metals were higher; and grains were mixed.

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

• Among economic data released this week, homebuilder confidence was little changed in January; housing starts in December jumped the most in seven years; existing-home sales rose less than forecast; the index of leading economic indicators rose for the fourth straight month in January; and initial jobless claims rose more than forecast in the latest week.

Weekly Highlights

• Domestic stock prices surged this week. Broad equity indices were sharply higher, largely as a result of the European Central Bank’s (ECB) decision to undertake a U.S. Federal Reserve-style asset purchase program. The ECB stated it will purchase up to $1.3 trillion of public and private securities to help stimulate tepid eurozone economic growth.

• Global markets staged a strong rally on the week. World markets turned in even better performance than domestic U.S. markets. The ECB’s actions were cheered by European investors, with eurozone equities posting their best weekly performance in more than three years. U.K. stocks closed at their highest level in four months. Asian stocks also reached a two-month high.

• Treasury prices were little changed for the week. The yield on the benchmark 10-year U.S. Treasury was modestly higher.

• Commodity indices continued to decline this week. Crude oil retreated again, precious metals were slightly higher and grains were mixed.

Chart of the Week

January 23, 2015

Domestic vs. International Equity PerformanceS&P 500 Index Relative to MSCI EAFE (Trailing Six Months)

…however, International has rebounded sharply the past two weeks.

Weekly ReviewJanuary 23, 2015

Tel. (920) 785-6010 www.EndowmentWM.com Fax (920) 227-0521 1

Endowment Wealth ManagementWeekly Market Review-Jan-23-2014

2

January 23, 2015

MARKET DASHBOARD

0.70.80.9

11.11.21.31.41.51.6

Dec-12 Feb-13 Apr-13 Jun-13 Aug-13 Oct-13 Dec-13 Feb-14 Apr-14 Jun-14 Aug-14 Oct-14 Dec-14

Source: Bloomberg

Wealth Index|Growth of $1: Trailing 24 Months

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

L

S

Source: Bloomberg

YTDValue Growth

-1.50% -0.41% 0.67%

0.17% 0.16% 0.14%

-0.67%-1.31%-1.96%

One WeekValue Growth

0.68% 1.04% 1.40%

1.14% 1.61% 2.08%

1.21% 1.74% 2.24%

1700

1750

1800

1850

1900

1950

2000

2050

2100

2150

7/28 8/11 8/25 9/8 9/22 10/6 10/20 11/3 11/17 12/1 12/15 12/29 1/12

Source: Bloomberg

S&P 500 Index: Trailing 180 Days

% Wgt in S&P 500

Week % Chg. YTD % Chg.

Consumer Discretionary 11.9 1.71% -1.8%Consumer Staples 10.1 0.66% 2.3%Energy 8.2 1.59% -3.1%Financials 16.1 1.22% -3.8%Health Care 14.8 0.83% 3.7%Industrials 10.3 2.35% -1.2%Information Technology 19.8 3.11% 0.2%Materials 3.2 0.77% -0.8%Telecom Services 2.3 -1.13% 0.1%Utilities 3.4 1.11% 4.2%

Source: Bloomberg

Sector Performance: S&P/Global Industry Classification Sectors (GICS)

10

12

14

16

18

20

22

24

26

28

Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14Source: Bloomberg

VIX Index: Trailing 180 Days

Last Price Change % Chg. YTD % Last Price Change % Chg. YTD %S&P 500 2,051.82 32.40 1.60% -0.3% Russell Global EM 3,058.83 77.91 2.61% 2.6%Dow Industrials 17,672.60 161.03 0.92% -0.8% 10-Year US Treas. 1.82 0 bps NM NMNasdaq 4,757.88 123.49 2.66% 0.5% DJ UBS Comm. Idx. 101.13 -2.18 -2.11% -3.1%Russell 2000 1,188.93 12.27 1.04% -1.3% Gold $1,294.73 $14.51 1.13% 9.3%Euro Stoxx Index 370.37 17.97 5.10% 8.1% Crude Oil $45.36 -$3.77 -7.67% -15.5%Shanghai Composite 3,351.76 -24.73 -0.73% 3.6% Dollar Index 94.97 2.44 2.64% 5.2%Russell Global 1,731.01 34.27 2.02% 0.2% VIX Index 16.66 -4.33 -20.67% -13.4%Source: Bloomberg; Index % change is based on price.

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3

January 23, 2015

THE ECONOMY AND MARKETS

A Macro View – The ECB Takes Action

While an inordinate portion of the week’s attention shifted to the deflation of footballs in the NFL, the real story of the weekin finance-land was the emphatic move of the European Central Bank (ECB) to halt deflation in the economies of the Eurozone. Long expected yet still larger than anticipated, the move announced by the bank’s head Mario Draghi will be the European version of the same quantitative easing undertaken by the U.S. Federal Reserve bank until last year. Whether it willsucceed in jolting moribund European economies, it is certainly a sign that those economies are in need of jolting.

And regardless of the macro-economic effects, these policies will mean that the financial world should remain fairly flush with money. That does not mean that stocks will go up, but it does provide the conditions for equities to continue their steady rise, and may lead to some long-expected outperformance of European and non-U.S. shares. These moves also suggest that even if the U.S. Fed does modestly raise short-term interest rates come the summer, global rates and sovereign yields look to stay very low for the foreseeable future.

The operative word here is “foreseeable.” We know that the world remains awash in liquidity. We know that low yields are a global phenomenon. We know that most national economies are seeing modest or mediocre growth, such that 7.4% growth in China (lower than at any point since 1990) and about 3% growth in the United States appear impressive. We know as well that conditions favor continued equity gains and continued low yields.

As for what is not foreseeable, that list is and will remain long. The unexpected effects of the upcoming Greek election; the ever-present threat of destabilizing terror acts; the arduous U.S.-Iranian negotiations over nuclear power; North Korea; plummeting oil prices leading to defaults and instability; too much sovereign debt and not enough sovereign growth. Complacency. All there, but hard to shape a portfolio that specifically attends to these risks.

Meanwhile, equity markets erased most of their losses for the year on the heels of this liquidity, and earnings reports for the fourth quarter of 2014 showed much that was expected, including weakness in many banks. But there were no major earnings surprises (yet), and that too has been a positive.



4

January 23, 2015

THIS WEEK IN THE ECONOMY AND MARKETS

250

260

270

280

290

300

310

320

10/31 11/14 11/28 12/12 12/26 1/9

Thou

sand

s

Initial Jobless Claims-Trailing 12 Wks.

Source: Bloomberg

850

900

950

1000

1050

1100

1150

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

Thou

sand

s

Building Permits - Trailing 12 Mos.

Source: Bloomberg

4.2

4.4

4.6

4.8

5

5.2

5.4


Mill

ions

(SAA

R)

Existing Home Sales (Annualized) - Trailing 12 Mos.

Source: Bloomberg

-0.2

0.0

0.2

0.4

0.6

0.8

1.0

1.2


Inde

x

Conference Board Leading Indicators - Trailing 12 Mos.

Source: Bloomberg

15

20

25

30

35

40

45

50

55

60

65


Inde

x

NAHB Housing Index (Monthly % Chg)-Trailing 12 Mos.

Source: Bloomberg

0

200

400

600

800

1000

1200


Thou

sand

s

Housing Starts (Annualized) - Trailing 12 Mos.

Source: Bloomberg


Endowment Wealth ManagementWeekly Market Review-Jan-23-2014 January 23, 2015

EUROZONE

5

Last Change % Chg. YTD % Last Change % Chg. YTD %Germany 10-Yr. Govt. 0.36 9 bps NM NM France 10-Yr. Govt. 0.54 9 bps NM NMGreece 10-Yr. Govt. 8.29 47 bps NM NM Ireland 10-Yr. Govt. 1.06 17 bps NM NMItaly 10-Yr. Govt. 1.52 12 bps NM NM Portugal 10-Yr. Govt. 2.44 31 bps NM NMSpain 10-Yr. Govt. 1.37 12 bps NM NM Netherlands 10-Yr. Govt. 0.39 6 bps NM NMBelgium 10-Yr. Govt. 0.63 9 bps NM NM U.K. 10-Yr. Govt. 1.48 5 bps NM NM

SELECTED EUROPEAN SOVEREIGN YIELD PERFORMANCE

Source: BloombergBasis points (bps)

0.30

0.40

0.50

0.60

0.70

0.80

0.90

1.00

10/27 11/10 11/24 12/8 12/22 1/5 1/19

%

Germany 10-Year Government Bond Yield

Source: Bloomberg

1.0

1.2

1.4

1.6

1.8

2.0

2.2

2.4

10/27 11/10 11/24 12/8 12/22 1/5 1/19

%

Spain 10-Year Government Bond Yield

Source: Bloomberg

1.5

1.7

1.9

2.1

2.3

2.5

2.7

10/27 11/10 11/24 12/8 12/22 1/5 1/19

%

Italy 10-Year Government Bond Yield

Source: Bloomberg

4.0

5.0

6.0

7.0

8.0

9.0

10.0

11.0

10/27 11/10 11/24 12/8 12/22 1/5 1/19

%

Greece 10-Year Government Bond Yield

Source: Bloomberg



EQUITIES

6

4,300

4,400

4,500

4,600

4,700

4,800

4,900

10/24 11/7 11/21 12/5 12/19 1/2 1/16

Inde

xNasdaq Composite-Trailing 90 Days

Source: Bloomberg

2,000

2,200

2,400

2,600

2,800

3,000

3,200

3,400

3,600

10/24 11/7 11/21 12/5 12/19 1/2 1/16

Inde

x

Shanghai Composite Index-Trailing 90 Days

Source: Bloomberg

300

310

320

330

340

350

360

370

10/24 11/7 11/21 12/5 12/19 1/2 1/16

Inde

x

Euro Stoxx Index-Trailing 90 Days

Source: Bloomberg

16,00016,20016,40016,60016,80017,00017,20017,40017,60017,80018,00018,200

10/24 11/7 11/21 12/5 12/19 1/2 1/16

Inde

x

Dow Jones Industrial Average -Trailing 90 Days

Source: Bloomberg

Last Change % Chg. YTD % Last Change % Chg. YTD %S&P 500 2,051.82 32.40 1.60% -0.34% Swiss Market Index 8,161.16 261.57 3.31% -9.15%Dow Industrials 17,672.60 161.03 0.92% -0.84% CAC 40 Index (France) 4,640.69 261.07 5.96% 8.61%Nasdaq Composite 4,757.88 123.49 2.66% 0.46% DAX Index (Germany) 10,649.58 481.81 4.74% 8.61%Russell Global 1,731.01 34.27 2.02% 0.2% Irish Overall Index 5,577.82 293.72 5.56% 6.76%Russell Global EM 3,058.83 77.91 2.61% 2.6% Nikkei 225 17,511.75 647.59 3.84% 0.35%S&P/TSX (Canada) 14,779.35 469.94 3.28% 1.00% Hang Seng Index 24,850.45 746.93 3.10% 5.28%Mexico IPC 42,649.72 1247.71 3.01% -1.15% Shanghai Composite 3,351.76 -24.73 -0.73% 3.62%Brazil Bovespa 48,775.30 -241.22 -0.49% -2.46% Kospi Index (S. Korea) 1,936.09 47.96 2.54% 1.07%Euro Stoxx 600 370.37 17.97 5.10% 8.12% Taiwan Taiex Index 9,470.94 332.65 3.64% 1.76%FTSE 100 6,832.83 282.56 4.31% 4.06% Tel Aviv 25 Index 1,455.66 -7.67 -0.52% -0.64%

IBEX 35 (Spain) 10,581.50 542.60 5.40% 2.94% MICEX Index (Russia) 1,671.80 80.37 5.05% 19.70%

WORLD MARKET PERFORMANCE

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



EQUITIES – EMERGING AND FRONTIER MARKETS

7

Last Change % Chg. YTD % Last Change % Chg. YTD %Mexico IPC 42,649.72 1247.71 3.0% -1.1% Hang Seng Index 24,850.45 746.93 3.1% 5.3%Brazil (Bovespa Index) 48,775.30 -241.22 -0.5% -2.5% India (Sensex 30) 29,278.84 1156.95 4.1% 6.5%MICEX Index (Russia) 1,671.80 80.37 5.1% 19.7% Malaysia (KLCI Index) 1,803.08 59.51 3.4% 2.4%Czech Republic (Prague) 961.94 12.89 1.4% 1.6% Singapore (Straits Times Index) 3,411.50 110.82 3.4% 1.4%Turkey (Istanbul) 90,736.05 3319.65 3.8% 5.9% Thailand (SET Index) 1,598.33 80.59 5.3% 6.7%Egypt (Hermes Index) 907.66 29.79 3.4% 8.9% Indonesia (Jakarta) 5,323.89 175.51 3.4% 1.9%Kenya (Nairobi 20 Index) 5,217.88 14.16 0.3% 2.1% Pakistan (Karachi KSE 100) 34,026.59 240.15 0.7% 5.9%Saudi Arabia (TASI Index) 8,421.72 -37.00 -0.4% 1.1% Vietnam (Ho Chi Minh) 582.38 7.57 1.3% 6.7%Lebanon (Beirut BLOM Index) 1,168.61 -1.57 -0.1% -0.1% Sri Lanka (Colombo) 7,276.63 -237.23 -3.2% -0.3%Palestine 505.14 10.87 2.2% 0.5% Cambodia (Laos) 1,413.58 1.11 0.1% 0.0%

EMERGING AND FRONTIER MARKET PERFORMANCE


42,000

44,000

46,000

48,000

50,000

52,000

54,000

56,000

58,000

10/24 11/7 11/21 12/5 12/19 1/2 1/16

Inde

x

Brazil (Bovespa Index)-Trailing 90 Days

Source: Bloomberg

25,500

26,000

26,500

27,000

27,500

28,000

28,500

29,000

29,500

10/27 11/10 11/24 12/8 12/22 1/5 1/19

Inde

x

India (Sensex Index)-Trailing 90 Days

Source: Bloomberg

400

500

600

700

800

900

1,000

10/26 11/9 11/23 12/7 12/21 1/4 1/18

Inde

x

Egypt (Hermes Index)-Trailing 90 Days

Source: Bloomberg

3,100

3,150

3,200

3,250

3,300

3,350

3,400

10/24 11/7 11/21 12/5 12/19 1/2 1/16

Inde

x

Singapore (Straits Times Index)-Trailing 90 Days

Source: Bloomberg



INTEREST RATES

YIELD CURVES

8

Last Change % Chg. YTD % Last Change % Chg. YTD %2-Yr. U.S. Treasury 0.49% 0 bps NM NM Prime Rate 3.25% 0.00 NM NM5-Yr. U.S. Treasury 1.32% 4 bps NM NM Fed Funds Rate 0.25% 0.00 NM NM10-Yr. U.S. Treasury 1.82% 0 bps NM NM Discount Rate 0.75% 0.00 NM NM30-Yr. U.S. Treasury 2.39% -4 bps NM NM LIBOR (3 Mo.) 0.26% 0 bps NM NMGerman 10-Yr. Govt. 0.36% 9 bps NM NM Bond Buyer 40 Muni 3.44% 8 bps NM NMFrance 10-Yr. 0.54% 9 bps NM NM Bond Buyer 40 G.O. 3.36% NA NM NMItaly 10-Yr. 1.52% 12 bps NM NM Bond Buyer 40 Rev. 4.08% NA NM NMFed 5-Yr Fwd BE Inf. 1.78% 0 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 20150116US Treasury Actives Curve 20150123USD US Industrial (BB) BFV Cur 20150123USD Composite (BBB) BFV Curve 20150123

2.00

2.10

2.20

2.30

2.40

2.50

2.60

2.70

7/28 8/28 9/28 10/28 11/28 12/28

Yiel

d %

10-Year Treasury Yield - Trailing 180 Days

Source: Bloomberg

1.00

1.10

1.20

1.30

1.40

1.50

1.60

1.70

1.80

1.90

7/28 8/28 9/28 10/28 11/28 12/28

Inde

x

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

Source: Bloomberg

Source: Bloomberg



CURRENCIES

9

70

75

80

85

90

95

100

7/28 8/28 9/28 10/28 11/28 12/28

U.S. Dollar Index - Trailing Six Months

Source: Bloomberg

1.00

1.05

1.10

1.15

1.20

1.25

1.30

1.35

1.40

7/28 8/28 9/28 10/28 11/28 12/28

Euro - U.S. Dollars per Euro

Source: Bloomberg

80.00

85.00

90.00

95.00

100.00

105.00

110.00

115.00

120.00

125.00

7/28 8/28 9/28 10/28 11/28 12/28

Japanese yen - Yen per U.S. Dollar

Source: Bloomberg

Last Change % Chg. YTD % Last Change % Chg. YTD %Dollar Index 94.96 2.439 2.64% 5.20% Chinese Yuan 6.23 0.021 -0.34% -0.37%Euro 1.12 -0.035 -3.06% -7.32% Swiss Franc 0.88 0.022 -2.53% 12.86%Japanese Yen 117.80 0.280 -0.24% 1.69% New Zealand Dollar 0.74 -0.035 -4.43% -4.51%British Pound 1.50 -0.016 -1.04% -3.75% Brazilian Real 2.58 -0.042 1.63% 3.00%Canadian Dollar 1.24 0.045 -3.58% -6.50% Mexican Peso 14.66 0.104 -0.71% 0.61%

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

7/28 8/28 9/28 10/28 11/28 12/28

Chinese yuan - yuan per U.S. Dollar

Source: Bloomberg



COMMODITIES

10

40

50

60

70

80

90

100

7/28 8/28 9/28 10/28 11/28 12/28

$ pe

r bar

rel

Crude Oil - Light Crude ($ per barrel)

Source: Bloomberg

1,100

1,150

1,200

1,250

1,300

1,350

7/28 8/28 9/28 10/28 11/28 12/28

$ pe

r oun

ce

Gold - Spot gold price ($ per ounce)

Source: Bloomberg

5,000

5,500

6,000

6,500

7,000

7,500

7/28 8/27 9/26 10/26 11/25 12/25

Inde

x

Copper

Source: Bloomberg

320

330

340

350

360

370

380

390

400

410

420

7/28 8/28 9/28 10/28 11/28 12/28

$ pe

r bus

hel

Corn - Active Contract

Source: Bloomberg

Last Change % Chg. YTD % Last Change % Chg. YTD %DJ UBS Comm. Idx. 101.13 -2.18 -2.11% -3.06% Platinum Spot $1,268.50 $2.25 0.18% 5.08%Rogers Int. Comm. Idx. 2593.57 3.49 0.13% -7.13% Corn 386.75 6.75 1.78% -2.58%Crude Oil $45.36 -$3.77 -7.67% -15.53% Wheat 530.00 -2.75 -0.52% -10.13%Natural Gas $2.97 -$0.16 -5.02% 2.80% Soybeans 972.75 -18.25 -1.84% -4.96%Gasoline ($/Gal.) $2.04 -$0.04 -1.83% -9.02% Sugar 15.17 0.00 0.00% 4.48%Heating Oil 164.50 -2.06 -1.24% -10.29% Orange Juice 147.25 0.00 0.00% 5.33%Gold Spot $1,294.59 $14.51 1.13% 9.34% Aluminum 1,866.00 21.00 1.14% 0.73%Silver Spot $18.32 $0.53 2.98% 16.60% Copper 5,665.00 -50.00 -0.87% -10.08%Source: Bloomberg; % change is based on price.

SELECTED COMMODITY MARKET PERFORMANCE



ALTERNATIVE INVESTMENTS

11

1,170

1,180

1,190

1,200

1,210

1,220

1,230

1,240

10/27 11/10 11/24 12/8 12/22 1/5 1/19

Inde

x

HFRX Global Hedge Fund Index - Trailing 90 Days

Source: Bloomberg

976

978

980

982

984

986

988

990

992

10/27 11/10 11/24 12/8 12/22 1/5 1/19

Inde

x

HFRX Equity Market Neutral - Trailing 90 Days

Source: Bloomberg

1,360

1,365

1,370

1,375

1,380

1,385

1,390

1,395

1,400

1,405

10/27 11/10 11/24 12/8 12/22 1/5 1/19

Inde

x

IQ Fixed Income Beta Arb Index - Trailing 90 Days

Source: Bloomberg

1,140

1,150

1,160

1,170

1,180

1,190

1,200

10/27 11/10 11/24 12/8 12/22 1/5 1/19

Inde

x

HFRX Equity Hedge Index - Trailing 90 Days

Source: Bloomberg

Last Change % Chg. YTD % Last Change % Chg. YTD %HFRX Global Hedge Fund Index 1210.86 -0.32 -0.03% -0.58% HFRX Distressed Index 997.77 -0.47 -0.05% -1.12%HFRX Equity Market Neutral 988.26 -7.20 -0.73% -0.55% HFRX Merger Arbitrage Index 1604.48 -1.78 -0.11% 0.21%HFRX Equity Hedge Index 1172.53 0.95 0.08% -0.57% HFRX Convertible Arbitrage Index 699.15 1.18 0.17% -0.73%HFRX Event-Driven Index 1494.36 -5.68 -0.38% -1.40% HFRX Macro CTA Index 1201.40 0.24 0.02% 0.70%HFRX Absolute Return Index 998.44 -1.38 -0.14% 0.11% IQ Fixed Income Beta Arb Index 1400.63 0.58 0.04% 1.01%

SELECTED ALTERNATIVE INVESTMENT INDEX PERFORMANCE




2.60

2.70

2.80

2.90

3.00

3.10

3.20

3.30

3.40

3.50

7/28 8/28 9/28 10/28 11/28 12/28

Inde

x

S&P 500/MSCI EAFE - Trailing 180 Days

Source: Bloomberg

1.35

1.40

1.45

1.50

1.55

1.60

1.65

7/28 8/28 9/28 10/28 11/28 12/28

Inde

x

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

7/28 8/28 9/28 10/28 11/28 12/28

Inde

xLarge Cap/Small Cap - Trailing 180 Days

Source: Bloomberg

0.73

0.74

0.74

0.75

0.75

0.76

0.76

0.77

0.77

0.78

7/28 8/28 9/28 10/28 11/28 12/28

Inde

x

Growth/Value - Trailing 180 Days

Source: Bloomberg

January 23, 2015

12

PORTFOLIO CONSTRUCTION

3.00

3.50

4.00

4.50

5.00

5.50

7/28 8/28 9/28 10/28 11/28 12/28

Inde

x

S&P 500/MSCI EM - Trailing 180 Days

Source: Bloomberg



0.290

0.300

0.310

0.320

0.330

0.340

0.350

7/28 8/28 9/28 10/28 11/28 12/28

Inde

xHigh Yield/Inv. Grade Bonds - Trailing 180 Days

Source: Bloomberg

0.196

0.197

0.198

0.199

0.200

0.201

0.202

0.203

0.204

0.205

0.206

7/28 8/28 9/28 10/28 11/28 12/28

Inde

x

Info Tech/S&P 500 - Trailing 180 Days

Source: Bloomberg

1.80

1.81

1.82

1.83

1.84

1.85

1.86

1.87

1.88

1.89

7/28 8/28 9/28 10/28 11/28 12/28

Inde

x

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

Source: Bloomberg

0.54

0.56

0.58

0.60

0.62

0.64

0.66

7/28 8/28 9/28 10/28 11/28 12/28

Inde

x

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

Source: Bloomberg

January 23, 2015

13

PORTFOLIO CONSTRUCTION (cont’d.)



14

January 23, 2015

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

11/6 11/13 11/20 11/27 12/4 12/11 12/18 12/25 1/1 1/8 1/15 1/22

Large Cap (R200) 1.74% 0.49% 0.61% 0.99% -0.04% -1.84% 1.21% 0.94% -1.11% 0.13% -3.39% 3.56%

Small Cap (R2000) 1.39% 0.30% -0.40% 1.70% -1.48% -0.52% 2.16% 1.23% -0.17% -0.71% -3.46% 3.09%

MSCI EAFE 0.31% 0.47% 0.14% 1.51% -0.67% -2.34% -1.12% 1.25% -0.81% -2.31% 0.64% 2.01%

MSCI Em. Mkts. -1.61% 0.14% -0.26% 2.27% -2.54% -4.14% -1.15% 1.66% 0.60% 0.27% 0.12% 2.45%

BarCap Agg. (AGG) -0.49% 0.20% 0.01% 0.46% -0.16% 0.11% -0.10% -0.37% 0.39% 0.58% 1.06% -0.45%

High Yield (JNK) -0.50% -0.42% -0.85% 0.83% -2.03% -2.78% 0.95% 1.64% -1.18% 0.23% -0.47% 0.80%

DJ UBS Index -0.81% -0.90% 1.70% -0.36% -4.50% -1.35% -1.95% -2.17% -1.73% -0.66% -1.85% -0.13%

Hedge Funds (HFRX Global) 0.20% 0.00% -0.14% 0.63% -0.59% -1.17% 0.07% 0.60% 0.32% 0.01% -0.63% 0.04%

60/40* 0.43% 0.30% 0.11% 1.01% -0.55% -1.26% 0.36% 0.63% -0.36% -0.15% -0.92% 1.69%

48/32/20 (w/Alts.)** 0.38% 0.24% 0.06% 0.93% -0.56% -1.25% 0.31% 0.62% -0.23% -0.12% -0.86% 1.36%

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

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 0.98 1.02 0.98 0.98 0.97 1.02 1.00 1.03 1.08 1.01 0.75 1.64 0.91 1.15Large Cap Growth 1.02 1.00 1.05 1.00 1.00 0.99 1.04 1.03 1.05 1.11 1.03 0.77 1.67 0.94 1.18Large Cap Value 0.98 0.96 1.00 0.95 0.96 0.95 0.99 0.98 1.01 1.06 0.98 0.73 1.60 0.89 1.13Mid Cap Core 1.03 1.00 1.05 1.00 1.01 1.00 1.04 1.03 1.06 1.11 1.03 0.77 1.68 0.94 1.18Mid Cap Growth 1.02 1.00 1.04 0.99 1.00 0.99 1.04 1.02 1.05 1.10 1.03 0.77 1.67 0.93 1.17Mid Cap Value 1.03 1.01 1.05 1.00 1.01 1.00 1.05 1.03 1.06 1.12 1.04 0.77 1.69 0.94 1.19Small Cap Core 0.98 0.96 1.01 0.96 0.97 0.96 1.00 0.99 1.01 1.07 0.99 0.74 1.61 0.90 1.13Small Cap Growth 1.00 0.97 1.02 0.97 0.98 0.97 1.01 1.00 1.03 1.08 1.00 0.75 1.63 0.91 1.15Small Cap Value 0.97 0.95 0.99 0.95 0.95 0.94 0.99 0.97 1.00 1.05 0.98 0.73 1.59 0.89 1.12Int'l . Developed 0.92 0.90 0.95 0.90 0.91 0.90 0.94 0.93 0.95 1.00 0.93 0.69 1.51 0.84 1.06Emerging Markets 0.99 0.97 1.02 0.97 0.97 0.96 1.01 1.00 1.02 1.07 1.00 0.74 1.62 0.91 1.14REITs 1.33 1.30 1.36 1.30 1.31 1.29 1.35 1.34 1.37 1.44 1.34 1.00 2.18 1.22 1.53Commodities 0.61 0.60 0.63 0.60 0.60 0.59 0.62 0.61 0.63 0.66 0.62 0.46 1.00 0.56 0.70Int. Bond 1.09 1.07 1.12 1.07 1.07 1.06 1.11 1.10 1.13 1.18 1.10 0.82 1.79 1.00 1.26High Yield 0.87 0.85 0.89 0.85 0.85 0.84 0.88 0.87 0.89 0.94 0.88 0.65 1.42 0.79 1.00

RELATIVE STRENGTH MATRIX (BASED ON 30-DAY RSI)



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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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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. Envestnet|PMC™ makes norepresentation regarding the accuracy or completeness of information provided herein. All opinions and views constitute ourjudgments 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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