Market Update

• Stocks sliding as Treasuries continue to gain momentum. Global markets are reeling on Friday, as the 10-year German Bund approaches a zero yield amid heightened Brexit concerns. Domestic markets were led lower yesterday by financials, though high dividend stocks outperformed as the yield on the 10-year Treasury broke below the key 1.70% level. Overnight, Asian equities finished firmly in the red, though the Shanghai Compositewas closed, and in afternoon trading many European markets are down around 2%. The U.S. dollar is moving higher, pushing WTI crude oil back below $50/barrel, and COMEX gold is relatively unchanged.

Macro View

• Central Banks dominate the week ahead. The Fed, the Bank of Japan, and the Bank of England all meet next week, and although none are expected to change policy, what they say about the economic and inflation outlook may resonate over the next few months. On the U.S. data front, June reports on homebuilder sentiment and manufacturing activity in Philadelphia and New York, as well as May data on small business sentiment, CPI, retail sales, and industrial production will provide plenty for market participants to talk about, when they are not talking about the Fed. Overseas, China will release May data on retail sales, industrial production, and fixed investment over the weekend with May property price data coming late next week. Data in the U.K. on retail sales, industrial production, inflation, and unemployment will provide the backdrop for the run-up to the Brexit vote on June 23.
• U.K., German government debt yields in record territory. A flight to safety amid Brexit concerns pushed the yield on benchmark debt in Germany and the U.K. to all-time record lows and put German bund yields within striking distance of negative territory in Friday trading. This comes on the heels of subdued expectations for a near-term rate hike in the U.S. following last week’s disappointing jobs report, which have since pushed 10-year Treasury yields back near 2016 lows.

Monitoring the Week Ahead

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Important Disclosures

Past performance is no guarantee of future results.

The economic forecasts set forth in the presentation may not develop as predicted.

The opinions voiced in this material are for general information only and are not intended to provide or be construed as providing specific investment advice or recommendations for any individual security. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly.

Stock investing involves risk including loss of principal.

Investing in foreign and emerging markets securities involves special additional risks. These risks include, but are not limited to, currency risk, political risk, and risk associated with varying accounting standards. Investing in emerging markets may accentuate these risks.

Treasury inflation-protected securities (TIPS) help eliminate inflation risk to your portfolio, as the principal is adjusted semiannually for inflation based on the Consumer Price Index (CPI)—while providing a real rate of return guaranteed by the U.S. government. However, a few things you need to be aware of is that the CPI might not accurately match the general inflation rate; so the principal balance on TIPS may not keep pace with the actual rate of inflation. The real interest yields on TIPS may rise, especially if there is a sharp spike in interest rates. If so, the rate of return on TIPS could lag behind other types of inflation-protected securities, like floating rate notes and T-bills. TIPs do not pay the inflation-adjusted balance until maturity, and the accrued principal on TIPS could decline, if there is deflation.

Bank loans are loans issued by below investment-grade companies for short-term funding purposes with higher yield than short-term debt and involve risk.

Because of its narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies.

Commodity-linked investments may be more volatile and less liquid than the underlying instruments or measures, and their value may be affected by the performance of the overall commodities baskets as well as weather, disease, and regulatory developments.

Government bonds and Treasury bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate.

Investing in foreign and emerging markets debt securities involves special additional risks. These risks include, but are not limited to, currency risk, geopolitical and regulatory risk, and risk associated with varying settlement standards.

High-yield/junk bonds are not investment-grade securities, involve substantial risks, and generally should be part of the diversified portfolio of sophisticated investors.

Municipal bonds are subject to availability, price, and to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rate rise. Interest income may be subject to the alternative minimum tax. Federally tax-free but other state and local taxes may apply.

Investing in real estate/REITs involves special risks such as potential illiquidity and may not be suitable for all investors. There is no assurance that the investment objectives of this program will be attained.

Currency risk is a form of risk that arises from the change in price of one currency against another. Whenever investors or companies have assets or business operations across national borders, they face currency risk if their positions are not hedged.

Technical Analysis is a methodology for evaluating securities based on statistics generated by market activity, such as past prices, volume and momentum, and is not intended to be used as the sole mechanism for trading decisions. Technical analysts do not attempt to measure a security’s intrinsic value, but instead use charts and other tools to identify patterns and trends. Technical analysis carries inherent risk, chief amongst which is that past performance is not indicative of future results. Technical Analysis should be used in conjunction with Fundamental Analysis within the decision making process and shall include but not be limited to the following considerations: investment thesis, suitability, expected time horizon, and operational factors, such as trading costs are examples.

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