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trust & investmentperspectivesWINTER 2017

P E N N S Y L V A N I A T R U S T

A Shared Passion

The common theme that runs through this issue of Perspectives is a vital message of empower-

ment: whether empowering our portfo-lios with the guidance of Tara Hedlund’s market insights for the coming year in her article “2017 Market Outlook: It’s Positive,” empowering ourselves by shedding some of a lifetime’s worth of accumulated possessions as explored in Carol Wyeth’s article “Downsizing – Don’t Take It Personally,” or empower-ing nonprofit organizations in their no-ble endeavors. At Pennsylvania Trust, we under-stand that managing a foundation, endowment, or other nonprofit is about much more than investments and grants. It’s about energizing and em-powering an organization to bring about genuinely meaningful change – change

that revitalizes our communities and transforms individual lives. From feeding the hungry and protecting rescued animals, to sup-porting the environment and providing scholarships to young students, we have a wide range of nonprofit clients who do incredible work every day. And for more than 30 years, we have proudly supported their important missions. Over that period, we’ve learned that true nonprofit partnership requires more than building and managing portfolios; it requires a shared passion and com-mitment. From helping to define an optimal Investment Policy Statement to providing operating and strategic advice, fundraising guidance, as well as philanthropic consulting and planning advice for constituents, donors and organizational leaders, our team has

built an unparalleled depth of nonprofit expertise. Nonprofits face difficult questions every day as they strive to fulfill their mission while maintaining operations and garnering new support, often with a fairly small staff. These issues can be very challenging, and the advisors at Pennsylvania Trust can help assess and determine the optimal direction for the organization. We also advise a great many small-er family foundations and charitably- inclined individuals, helping them to maximize the impact of their philan-thropic efforts.

Rolling Up Our Sleeves What makes Pennsylvania Trust dif-ferent, however, is that we don’t just work with nonprofits, Continued on page 4

Pennsylvania Trust Continues to Be Recognized for Its Trust ServicesFor the fourth year in a row, Pennsylvania Trust has been recognized for its Trust Administration Services in The Legal Intelligencer‘s “Best Of” poll, where readers cast their votes for the best providers of products and services to the legal com-munity. The Legal Intelligencer is the oldest daily law journal and a trusted source of legal news, information, and analysis.

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2017 Market Outlook: It’s Positive by Tara R. Hedlund, CFA, CPA

After several years of sluggish growth, 2016 ended in a better position than many expected.

U.S. home prices recently topped their prior peak from a decade ago and GDP advanced an annualized 1.9% in the fourth quarter. Moreover, Americans have more confidence in the economy than at any time since January 2004, according to the University of Michigan Index of Consumer Sentiment. Following last November’s elec-tion results, we expect to see reduced tax rates and increased government spending on infrastructure and defense. Coupled with an easing of regulatory burdens in the energy, financial, and healthcare industries, these changes are likely to lead to enhanced economic growth this year. On the other hand, a stronger economy is also likely to push inflation to mostly higher levels than seen since the Great Recession. We expect that inflation will primar-ily be driven by wage growth, and per-haps by some commodity price increas-es as well. We also anticipate that the Federal Reserve will raise interest rates in 2017. Along with these changes in U.S. monetary policy, moderate increases in

the price of oil and other commodities will strengthen the U.S. Dollar, particu-larly against the Japanese Yen. The over-all strength of the U.S. economy is likely to support higher stock prices, although recent robust gains may foreshadow a temporary pullback sometime in the next few months. We believe that stock prices in the U.S. will also be supported by corporate earnings. The earnings recession in the U.S. came to an end in the third quar-ter of 2016 and earnings are expected to accelerate from current levels. While we have a long-term bias toward large cap, we recommend clients have added exposure to small and mid-cap stocks this year since we expect they will ben-efit disproportionately from tax cuts and deregulation. We also favor exposure to Japan on a currency-hedged basis, and to a lesser extent, to Europe, where over- all valuations are somewhat cheaper and monetary policy remains very accommodative. Additionally, for the long term, we recommend some expo-sure to emerging markets, particularly in Asia. But there is a potential downside too. Valuations are no longer cheap, optimism is nearing elevated levels, and

profit margins may be challenged by the wage growth we foresee. If the an-ticipated fiscal stimulus does not mate-rialize, or if deregulation does not occur as expected, the stock market will likely give back its recent gains. Although Pennsylvania Trust’s over-all investment outlook for 2017 is pos-itive, the firm is more cautious on the bond market, where yields are still near historically low levels. The combination of a stronger economy, fiscal stimulus, monetary policy tightening, and rising inflation all are supportive of rising bond yields and thus falling bond prices. We continue to believe that bonds are an important part of a diversified invest-ment portfolio as they serve as a hedge against the downside risk inherent in the equity markets While 2017 offers the opportunity for growth, it’s important to remember that appropriate asset allocation and a diversified portfolio are the most im-portant tools investors have to achieve their long-term goals. We encourage you to contact your Pennsylvania Trust advisor with any questions you may have regarding your investments.

trust & investmentperspectives

Ms. Hedlund is Senior Vice President, Senior Equity Analyst, Portfolio Manage-ment, at Pennsylvania Trust.

Dow Jones Breaks 20,000On January 25, 2017, the Dow Jones closed above 20,000 for the first time. On the day Pennsylvania Trust was founded – June 9, 1986 – the Dow closed at 1840.15. “The Dow took almost 103 years to reach 10,000 in March, 1999. Reaching 20,000 required nearly 18 years more.” Wall Street Journal, January 26, 2017.

It seems as though one minute we’re juggling our jobs, updating the kitch-en, and re-decorating the house for

the second time, and the next minute we find ourselves nearing retirement, wandering around a four-bedroom house surrounded by a lifetime’s worth of accumulated “stuff.” Where did the years go, and how did we acquire so many things?

Sooner or later, we all begin to con-template the prospect of downsizing – whether that entails making a physical move to a smaller, more manageable property, or simply shedding the lion’s share of our possessions. What in theory seems a practical and simple undertak-ing, however, can quickly become an emotional roller coaster if you allow it. Over the years, I have worked with countless clients in helping them plan their legacies, downsize, and ulti-mately settle their estates. And I have seen it all – from parents stealthily slipping Hummel figurines onto their children’s mantels to all-out family fights over the fact that none of the kids will take possession of Dad’s complete col-lection of National Geographic maga-zines from 1950 to 1990. The problem is, we tend to see our belongings as an extension of ourselves. So when our family balks at embracing them, it feels like a personal rejection. So what is the best strategy to begin downsizing? While there’s no surefire right or wrong way to go about it, the following guidelines should help make the process easier:

1. Set a clear goal. Just as youdo with your investments, you need to establish a clear objective and then design a plan that will allow you to achieve it. If you plan on moving to a smaller house or condominium, how many square feet of space and how many rooms would your ideal new home have? Use this as a guide for what furniture and possessions should stay and what can go. Perhaps you merely want to simplify your life to save your family the headache of having to sort through all your possessions. If that’s the case, set small goals (e.g., two boxes a week) and start sorting.

2. Try to be dispassionate.As the title of this article urges, don’t take it personally if family members seem disinterested in many of your heirlooms. Just because you have a strong emotional attachment to your collection of Princess Diana memo-rabilia or your grandmother’s “brown furniture,” doesn’t mean your chil-dren or grandchildren are going to eagerly queue up to take possession of them. Let each child choose a couple of things that they would like as keepsakes or legacies, and then consider a house sale, auction, eBay, or a charitable or-ganization for the remainder (keeping in mind the harsh reality that your re-vered property may not fetch the dollar amount you desire if you try to sell it).

3. Think essential, not useful.Don’t make the all too common mis-take of assessing whether to keep or discard items based on a possible future

use rather than a clear demonstrable need. The remote possibility that you might someday take up woodworking in retirement does not justify keeping all those tools hanging on the basement workbench. When in doubt, always err on the side of shedding a possession.

4. Take your time. Downsizing isnot something you want to be rushed through in response to a major health concern, so it’s important to start early and allow yourself time to go through the process without any additional stress and pressure beyond your own nostalgia. In order to avoid procrastinat-ing, however, consider setting a simple goal like downsizing one room a month over the coming year. At Pennsylvania Trust, we have close ties to external resources such as antique dealers, home management organizers, and auction houses as well as specialized expertise that can help simplify and streamline your downsizing efforts (call us if you would like a refer-ral). Most importantly, never lose sight of the fact that you are far more than the sum of your possessions. Don’t let the things you own end up owning you. There is a great sense of freedom and empowerment that comes with simpli-fying your life, and downsizing can be a tremendous start to that process.

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Downsizing – Don’t Take It Personally by Carolyn L. Wyeth

WINTER 2017

Ms. Wyeth is Senior Vice President, Trust and Account Administration, at Pennsylvania Trust.

we also actively work in them. Our leadership team and most of our professionals volunteer as leaders and board members for a great many charitable organizations throughout the greater-Philadelphia area. We donate our time, talent, and our dollars in support of many good causes. In addition, our team includes a consultant who is an expert on philanthropic matters. Active community outreach is an essential part of our corporate culture, and

we are honored to have recently been recognized with the Main Line Cham-ber of Commerce’s 2016 “Gives Back Award” for all our continued efforts to en-hance the community through support of nonprofits and other community-focused endeavors. To learn more about our commit-ment to nonprofit involvement and the many organizations we support, pleasevisit www.penntrust.com/about-pennsylvania-trust/commitment-community/.

Or to discuss how we might help address your organization’s particular needs or challenges, please call Nan Lansinger at 610.975.4300.

Continued from page 1

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The information herein has been obtained from sources we believe to be reliable but is not guaranteed and does not purport to be a complete statement of all material facts. This report is for informational purposes only.

Five Radnor Corporate CenterSuite 450100 Matsonford RoadRadnor, Pennsylvania 19087610.975.4300800.975.4316610.975.4324 Fpenntrust.com

Pennsylvania Trust is a wealth management organization that seeks to provide for the enrichment of client lives, achievement of life goals, and care for families through investment management, wealth advisory and fiduciary services, and tax, estate, and finan-cial planning services, delivered by a team of experienced and expert professionals. The firm is responsible for the manage-ment and administration of over three billion dollars of client assets and is independent and employee owned.

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Market IndIcators

1/31/17 9/30/16 1/31/16

STOCK INDICES

Dow JonesIndustrial Average 19,864 18,308 16,466

Standard & Poor’s 500 2,278 2,168 1,940

U.S. TREASURY YIELDS

2 Year 1.2% 0.8% 0.8%

5 Year 1.9% 1.2% 1.3%

10 Year 2.5% 1.6% 1.9%

30 Year 3.1% 2.3% 2.7%

ANNUALIZED RETURNS OF SELECT ASSET CLASSES1 YEAR/10 YEAR 1/31/2017

U.S. Inflation

U.S. 30 Day T-Bill

U.S. LTGovernment Bonds

S&P 500

Russell Mid-CapStock

U.S. Small CapStock

MSCI EAFE

Source: Morningstar 1 Year 10 Year

1.91.8

0.2

-2.5

20.0

24.7

32.9

12.6

0.6

6.6

7.0

7.8

7.4

1.4

Richardson T. MerrimanChairman and Chief Executive Officer

Richardson T. Merriman Chairman and CEO

George C. McFarland, Jr., Esq. President and Chief Investment Officer

Lee J. Anderson, CFA Senior Vice President Chief Information Officer

Leslie Gillin Bohner, Esq. Senior Vice President Chief Fiduciary Officer

Juliana S. Karnavas Senior Vice President Director of Portfolio Management

Nan M. Lansinger Senior Vice President Director of Marketing and Client Development

Barbara S. Wood, CPA Senior Vice President Chief Financial Officer

Gilpin W. Bartels Senior Vice President Multi-Cap Value Portfolio Manager

Susan L. Bartels Senior Vice President Director of Human Resources

Nils L. Berglund Senior Vice President Portfolio Management

Douglas H. DeLong, CFA Senior Vice President Portfolio Management

Frederic N. Dittmann, CFA Senior Vice President Portfolio Management

Bayard R. Fiechter Senior Vice President Portfolio Management

Aaron H. Fox, Esq. Senior Vice President Trust and Account Administration

William H. Haines, IV Senior Vice President Client Development

Jonathan M. Heckscher Senior Vice President Director of Fixed Income and Institutional Strategy

Tara R. Hedlund, CFA, CPA Senior Vice President Senior Equity Analyst Portfolio Management

Peter J. Johnson, Esq. Senior Vice President Trust and Account Administration

Charles T. Lee, III Senior Vice President Portfolio Management

Patrick J. McGinnis, Jr. Senior Vice President Portfolio Management

Monica P. Ruggio Senior Vice President Operations

Charles L. Sheppard, II Senior Vice President Director of Investment Research

Newbold Strong Senior Vice President Portfolio Management

Randy G. Thomas, CPA, CFP® Senior Vice President Director of Tax Services

Cole P. Vastine Senior Vice President Trust and Account Administration

Willard N. Woolbert Senior Vice President Portfolio Management

Carolyn L. Wyeth Senior Vice President Trust and Account Administration

Kenneth R. Brightcliffe Vice President Equity and Fixed Income Trading

Frank T. Files, CFP® Vice President Portfolio Management

J. August Gerhardt, CFA Vice President Portfolio Management

Lauren A. Jordan, CPA Vice President Finance

Francis X. Mehaffey Vice President Tax Administration

Nicole Bennett Price, CFP® Vice President Trust and Account Administration

Lucas J. Saunders Vice President Marketing and Client Development

Debra S. Tongue Vice President Trust and Account Administration

Marc D. Zlatkin Vice President Information Technology

Diane A. Ferrie Senior Tax Officer Tax Administration

Caroline W. Fortin Senior Operations Officer Operations

Monica C. Ahern Trust Officer Trust and Account Administration

Patricia A. Campbell Client Service Officer Portfolio Management

Mary Ellen Gilroy Client Service Officer Portfolio Management

Susan B. Schafer Tax Officer Tax Administration

CONSULTANTS

Bruce M. Brown Senior Philanthropy Consultant

Kevin R. Fisher Senior Technology Consultant

JoAnne T. Fredericks, CFA Senior Investment Consultant

Francis R. Grebe, Esq. Senior Trust Consultant

Donald E. Lewin, Ph.D. Senior Investment Consultant

I. Wistar Morris, III, CFA Senior Investment Consultant

Radclyffe F. Thompson, CFP® Senior Client Development Consultant

30 Years of Community Involvement

Pennsylvania Trust Receives 2016 Main Line Gives Back Award

Recently, Pennsylvania Trust received the 2016 “Main Line Gives Back” Award from the Main Line Chamber of Commerce (MLCC). Senior Vice President Bill Haines was on hand to accept the award at the Summit on Business Leadership and Corporate Volunteerism hosted by the MLCC. In accepting the award, Mr. Haines said, “Penn-sylvania Trust has a long commitment to serving others. It’s what we do. We are engaged in the community by supporting organizations with donations and more im-portantly, by our colleagues sharing their time and talents with others.” Nominees for the “Gives Back” Awards are mea-sured on their efforts to enhance the community through charitable donations, volunteer efforts by employees, and/or in-kind donations. Bill Haines also received the annual Meritorious Service Award in 2016 from the Philadelphia Estate Plan-ning Council in honor of his many years of dedicated ser-vice to the professional organization. The many ways Pennsylvania Trust professionals interact with our community underscores the sincere interest in outreach that is an important aspect of our corporate culture. The extent to which our colleagues are engaged in volunteering reflects our commitment and the values and integrity we bring to relationships with our community and our clients.

This past fall, several of our employees volunteered at the Ronald McDonald House and also participated in City Team Ministries’ annual “Turkey Drop” at Thanksgiving. In its 30th year, Pennsylvania Trust donated funds to 75 area nonprofits, including a holiday gift to help needy families in Norristown — demonstrating its over-whelming commitment to serving nonprofit organizations in the greater Philadelphia area.