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Third Quarter 2013 Market Overview. Presented by Ruth Matt 22 Free Street, Suite 201 Portland , ME 04101 (207)899-0531. Economic Summary: Third Quarter 2013. Milestones Equity markets hit all-time high (again) U.S. government begins partial shutdown

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Presentation Transcript
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Third Quarter 2013

Market Overview

Presented by Ruth Matt22 Free Street, Suite 201

Portland, ME 04101

(207)899-0531

economic summary third quarter 2013
Economic Summary: Third Quarter 2013
  • Milestones
    • Equity markets hit all-time high (again)
    • U.S. government begins partial shutdown
    • BlackBerry agrees to be taken private in $4.7B deal
    • Merkel scores decisive victory in German election
    • Fed continues bond-buying program
    • Verizon’s $49B bond deal sets record in Vodafone acquisition
    • SEC approves advertising for hedge funds and private offerings
    • Europe agrees on further aid tranche for Greece
    • Housing recovery appears strong despite rise in rates
    • Detroit declares bankruptcy
    • Syria overshadows economic issues at G-20 meeting

Certain sections of this commentary contain forward-looking statements based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Past performance is not indicative of future results.

economic themes
Economic Themes
  • Equity/fixed income
  • Housing
  • Credit and banking
  • Employment
  • Consumer behavior
  • Business and manufacturing activity

Certain sections of this commentary contain forward-looking statements that are based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Past performance is not indicative of future results.

q3 2013 s p 500 index and dow jones industrial average
Q3 2013: S&P 500 Index and Dow Jones Industrial Average

Indices are unmanaged and cannot be invested in directly. Past performance is no guarantee of future results.

q3 2013 equity returns by style
Q3 2013: Equity Returns by Style

Source: Commonwealth Asset Management/Morningstar Direct

Indices are unmanaged and cannot be invested in directly. Past performance is no guarantee of future results.

q3 2013 fixed income returns by style
Q3 2013: Fixed Income Returns by Style

Source: Commonwealth Asset Management/Morningstar Direct

Indices are unmanaged and cannot be invested in directly. Past performance is no guarantee of future results.

treasury yields
Treasury Yields

Yield up = Price down

net flows into bank l oan f unds
Net Flows into Bank Loan Funds

Source: Morningstar Direct/Haver/Commonwealth Investment Research

fixed income1
Fixed Income

Past performance is no guarantee of future results.

fixed income continued
Fixed Income continued

Announcement

Past performance is no guarantee of future results.

change in nonfarm payrolls
Change in Nonfarm Payrolls

Strong!

Source: Commonwealth Asset Management/Bloomberg

conclusions
Conclusions
  • Job growth was strong in Q3; unemployment fell to 7.3 percent.
  • Inflation is not a large concern, for now.
  • ISM indices hit post-recession highs in some cases.
  • Treasury rates moved aggressively higher across the curve, prompting bond outflows.
  • Dividend sectors, especially utilities, saw pricing pressure as rates moved higher.
  • The housing recovery is still progressing, but pricing may slow in the near term.
  • GDP growth is expected to continue but could see a headwind as the government shutdown ripples through the economy.
looking forward
Looking Forward . . .
  • Key themes to monitor
    • Nomination of Yellen as new Fed Chairman
    • Impact of government shutdown on broader economy
    • Earnings season for Q3 (beat or miss estimates?)
    • Will the rise in mortgage rates curb the housing recovery?
    • Europe and economic outcome
    • Ongoing debt ceiling debate
    • Emerging markets manufacturing in Q3
    • Fed “tapering” and direction of Treasury rates
disclosure
Disclosure

Investing involves risks, including loss of principal amount invested due to market fluctuations. All indices are unmanaged, and investors cannot invest directly in an index. Past performance is not indicative of future results. The S&P 500 Index is a broad-based measurement of changes in stock market conditions based on the average performance of 500 widely held common stocks. The Dow Jones Industrial Average is a price-weighted average of 30 actively traded blue-chip stocks. The Bank of America Merrill Lynch US Corporate Index tracks the performance of U.S. dollar-denominated investment-grade corporate debt publicly issued in the U.S. domestic market. The Merrill Lynch Municipal Master Index tracks the performance of U.S. dollar-denominated investment-grade tax-exempt debt publicly issued by U.S. states and territories, and their political subdivisions, in the U.S. domestic market. The Bank of America/Merrill Lynch High Yield Master II Index tracks the performance of U.S. dollar-denominated below-investment-grade corporate debt publicly issued in the U.S. domestic market. International investing involves special risks such as currency fluctuation and political instability. The commodities industries can be significantly affected by commodity prices, world events, import controls, worldwide competition, government regulations, and economic conditions.

Treasury bills are guaranteed by the U.S. government as to the timely payment of principal and interest, and, if held to maturity, they offer a fixed rate of return and fixed principal value. U.S. Treasury bills do not eliminate market risk. Municipal bonds are federally tax-free but may be subject to state and local taxes, and interest income may be subject to federal alternative minimum tax (AMT). The purchase of bonds is subject to availability and market conditions. There is an inverse relationship between the price of bonds and the yield: when price goes up, yield goes down, and vice versa. Market risk is a consideration if sold or redeemed prior to maturity. Some bonds have call features that may affect income.

Investments in floating-rate securities are subject to significant credit, interest rate, valuation, liquidity, and inflation risk. Floating-rate securities tend to attract investors during periods when interest rates are rising but may be less attractive when interest rates are falling. Floating-rate securities have a variable interest rate that will go up and down, or ‘float,’ to reflect changes in current market rates.