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Quarterly Investment Briefing November 9, 2011. John S. Seidl, CFA . Stephen J. Nilles, CFP. Capital Market Returns Current and Annualized thru 9/30/2011. October Returns. U.S. Equities 11.5% Developed International Equities 10.7% Emerging Market Equities 12.6%

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quarterly investment briefing november 9 2011
QuarterlyInvestment BriefingNovember 9, 2011

John S. Seidl, CFA

Stephen J. Nilles, CFP

october returns
October Returns
  • U.S. Equities 11.5%
  • Developed International Equities 10.7%
  • Emerging Market Equities 12.6%
  • Fixed Income 0.1%
the euro debt crisis continues the dominant issue and the greatest threat
The Euro debt crisis continuesThe dominant issue and the greatest threat
  • European governments are deferring decisions (and they aren’t alone!)
  • The market is getting impatient
  • Investors want decisive action; a plan to contain crisis

Until policymakers come to a permanent solution, expect:

  • Extreme market volatility
  • Trading on speculation and rumor
  • SENTIMENT will drive the market

Source: Russell

effectiveness of u s policy options stimulating the u s economy
Effectiveness of U.S. policy optionsStimulating the U.S. economy
  • To encourage Americans to borrow, invest, buy or refinance
  • Lower long-term interest rate
  • Lowermortgage rates

What is the Fed’s intent?

  • Fed buys $400B worth of long-term Treasuries
  • Fed sells $400B worth of short-termTreasuries

What is the 9-month Operation Twist?(October 2011 - June 2012)

  • Expected impact is weak – 10-year treasury yield might go down by 20bp for a brief time
  • More policy action is not out of the question (think Quantitative Easing 3)

Russell’s opinion on Fed actions:

Source: Russell

some recent positive economic news
Some Recent Positive Economic News
  • Recent economic data is quieting double-dip fears:
  • 11/4 US Unemployment falls to 9%, a six-month low
  • 11/4 Non-farm payrolls up 80,000; September revised to 158,000
  • 11/2 ISM Non-Manufacturing Survey: 52.9
  • 11/1 ISM Manufacturing Survey: 50.8
  • 10/26 Durable Goods Orders increased 2.4% m/m
  • 10/17 US Industrial Output increased 0.4% m/m
  • 10/14 Rise in US Retail Sales: 2% annualized
  • 10/10 Lending at commercial banks grows for 4 consecutive months

Source: Capital Economics

market observations outlook
Market observations & outlook

1

3

2

Restructuring of troubled debt is inevitable. Governments continue to “kick the can” and the markets respond accordingly

Policy brinksmanship hammering risk assets

Flight to safety – anything but safe

Perceived safe havens often not ideal for meeting long term financial goals

4

Fundamental economic improvements underway, but too weak to dispel gloom

We currently forecast a 70-75% chance of economic expansion with a 25% chance of recession

Diversified portfolios have served investors well since low of March 2009 - this still holds true

Fundamentals suggest attractive valuations, however sentiment could drive markets. Even with downward revisions, we continue to expect equities to appreciate from here

Source: Russell

intra year volatility in historical context
Intra-Year Volatility, In Historical Context

Taking the long view on stocks: Nearly every significant up year for the stock market has also had a significant intra-year decline. This suggests a positive 2011 annual return remains a possibility and that attempting to time market bottoms is futile.

Sources: Fidelity, BLS, FactSet, JP Morgan Asset Management

allocation to alternatives dampens volatility
Allocation to Alternatives Dampens Volatility
  • 3rd Quarter 2011 Returns
  • Absolute Strategies + 1.6%
  • PIMCO All Asset - 6.4%
  • Forward Tactical Growth - 3.1%
  • Altegris Managed Futures + 3.2%
  • Russell Global Real Estate - 19.0%
  • Russell 3000 Index - 15.3%
  • MSCI EAFE (Net) - 19.0%
  • MSCI Emerging Markets (Net) - 22.6%
slide17

ITC Portfolio Allocation

Equity Strategies

August 29, 2011