1. Welcome to the Mid-year Economic Outlook
Your Host:
(please insert appropriate broker/dealer disclosure)
Welcome!

2. Tonight’s Agenda Economic Review Strategies to Consider
Suggestions & Ideas
Questions & Answers
Tonight’s agenda is:
Economic Review
Strategies to Review
Suggestions and Ideas
Questions & Answers

3. Five Key Areas of Financial Planning
Protection
Retirement Plan
Investments
Tax Planning
Estate Planning
As you may know, there are five key areas of financial planning:
Protection;
Retirement Plan;
Investments;
Tax Planning; and
Estate Planning.

4. 2016 has been a confusing year for investors
After a very bad January and being down over 10% in both January and February, equity markets as of June 1st are sitting at a slight positive for the year.

5. What is contributing to this ?

6. Equity investors dislike uncertainty!

7. Several major issues that are creating uncertainty & volatility in 2016 include:
U.S. Interest Rates
Corporate Earnings
Brexit
Oil Prices
Foreign Interest Rates
China
The Upcoming Presidential Election
There are several major issues that have furthered uncertainty in 2016:
They include:
U.S. Interest Rates
Corporate Earnings
Oil Prices
Foreign Interest Rates
China, and
The Upcoming Presidential Election

8. The Federal Open Market Committee, which determines interest rates, is headed by Federal Reserve Chairwoman Janet Yellen. On May 27th, at an appearance at Harvard University, she said an interest-rate rise may be coming in a matter of “months.”
The Federal Open Market Committee, which determines interest rates, is headed by Federal Reserve Chairwoman Janet Yellen. On May 27th, at an appearance at Harvard University, she said an interest-rate rise may be coming in a matter of “months.”
rise-is-probably-coming-in-months

9. In late 2015, Fed Chairperson Janet Yellen raised rate for the first time in over 7 years to %
Let’s look back for a moment and recall that in December of 2015, Janet Yellen and the Fed had increased rates for the first time in seven years to %. Almost every financial analyst and publication has a prediction for small but additional interest rate movements in This has not yet happened and it is still anyone’s guess when the Fed will actually raise interest rates and by how much.
As for rates that savers are paid on bank deposits, they are not getting off the floor just yet. Barron’s writes that, “Investors should not look for money market yields to rise enough to be discernable without a magnifying glass.”

10. What is the Federal Funds Rate
The Federal Funds Rate is the interest rate at which a depository institution lends funds maintained at the Federal Reserve to another depository institution overnight. The Federal Funds Rate is generally only applicable to the most creditworthy institutions when they borrow and lend overnight funds to each other.
What is the Federal Funds Rate?
According to Investopedia, The Federal Funds Rate is the interest rate at which a depository institution lends funds maintained at the Federal Reserve to another depository institution overnight. The federal funds rate is generally only applicable to the most creditworthy institutions when they borrow and lend overnight funds to each other.
In simpler terms, The Federal Funds Rate is the target interest rate banks charge each other to borrow Federal Reserve funds overnight. They need these funds to maintain their Federal reserve requirement. That is the amount the nation's central bank, the Federal Reserve, requires they keep on hand each night. That prevents them from lending out every single dollar they get and it makes sure they have enough cash on hand to start each business day.

11. Where are interest rates headed and when?
So the big question is: where are interest rates headed and when?
Today’s near zero yields for markets and savings accounts are suggesting the we are entering a period of “Lower Interest Rates for Longer.”

12. How do interest rates affect bonds ?
How do interest rates affect bond prices?
For bonds that are secure and current, like Treasury bonds, generally speaking, as interest rates drop the prices of existing bonds go up and as interest rates rise, the prices of existing bonds fall.
Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and bonds are subject to availability and change in price.

13. How do interest rates affect bonds ?
Many experts believe rates will begin increasing sooner rather than later. Here is a hypothetical illustration of the potential math behind interest rate changes.
Let’ s review this illustrative example of a 10 year bond and how interest rate changes would potentially affect it.
If you had a 10 year Treasury bond at 1.625% and interest rates for new 10 year treasury bonds were at 1.25%, then that yield drop would move that bond price up by 3.5%.
If you had a 10 year Treasury bond at 1.625% and interest rates for new 10 year treasury bonds were at 2.50%, then that yield increase would move that bond price down by 8%.
Once again, for bonds that are secure and current, like Treasury bonds, generally speaking, as interest rates drop the prices of existing bonds go up and as interest rates rise, the prices of existing bonds fall.
Source: bonds-interest-rates-and-your-portfolio/
Source: Principal.com

14. How have interest rates affected equities ?
How have past interest rate changes affected equities?
Late 2015 was our first interest rate movement since 2008.
We need to watch the Fed very carefully and past performance can never guarantee any future performance, but as this chart shows, 12 months after either rate hikes or rate cuts the S&P 500 grew from 1946 thru 2008.
their-impact-on-the-stock-market

15. What is happening with corporate earnings?

16. Corporate Earnings
The first quarter of 2016 marked the sixth period in a row of quarterly declines — the longest period of consecutive drops outside of a recession, according to Goldman Sachs.
Although the tone of quarterly earnings this season was distinctly negative, that doesn’t mean we’re heading into recession.
Analysts are optimistic that earnings will recover to their previous levels throughout 2016 as pressures from energy prices and exchange rates subside.
Corporate earnings need to be monitored.
The first quarter of 2016 marked the sixth period in a row of quarterly declines — the longest period of consecutive drops outside of a recession, according to Goldman Sachs.
Although the tone of quarterly earnings this season has been distinctly negative, that doesn’t mean we’re spinning into recession. In fact, analysts are optimistic that earnings will recover to their previous levels throughout 2016 as pressures from energy prices and exchange rates abate.
Analysts are optimistic that earnings will recover to their previous levels throughout 2016 as pressures from energy prices and exchange rates abate.
Corporate earnings need to be monitored.
analysts-say-recession-not-horizon

17. Why are Corporate Earnings important
Why are corporate earnings so crucial?
Because many stocks are evaluated based on their price earnings ratio or PE Ratio. The price-earnings ratio (P/E Ratio) is the ratio for valuing a company that measures its current market value or share price relative to its per-share earnings.
The P/E ratio (price-to-earnings ratio) is a measure of the price paid for a share relative to the annual net income or profit earned by the firm per share. It is a financial ratio used for valuation: a higher P/E ratio means that investors are paying more for each unit of net income, so the stock is more expensive compared to one with lower P/E ratio.

18. Brexit Britons voted to leave the European Union on June 23rd
Brexit caused extreme volatility in the U.S. markets
The Stoxx Europe 600 fell 7%
British Pound fell 9% to its lowest level in 3 decades
In a move that surprised the markets, Britons voted on a referendum to leave the European Union on June 23rd. Known as “Brexit”, this event dominated the headlines. While the long-term repercussions are still far from certain, equity markets around the world reacted to the event.
This caused extreme volatility in the U.S. equity markets with a 3% drop the day after the vote.
The Stoxx Europe 600, which measures large, mid-, and small capitalization companies across 18 countries in the European region, fell 7% following the news.
The British Pound fell 9% to its lowest level in 3 decades.
Sources: Barron’s 6/27/2016, Fidelity.com 6/26/2016

19. Brexit
American companies are generally insulated from global events due to 70% of revenues generated domestically
Federal Reserve stress test held positive results for American banks
American markets recovered in 3 days
British Prime Minister David Cameron announced that he will resign
Final impact of this event is still uncertain
Because American companies generate 70% of their revenues domestically, they continue to be insulated from global events.
During this same time period, the Federal Reserve held a stress test of 33 of the largest banks. In a worst-case scenario, the banks tested had nearly twice as much capital as required.
Three days following this vote, U.S. markets almost completely recovered its losses.
As a result of this vote, British Prime Minister David Cameron announced that he will resign from his position by October.
Ultimately, the final impact of the Brexit is still uncertain.
Sources: Barron’s 6/27/2016, Fidelity.com 6/26/2016

20. Historic Oil Prices Oil prices in 2016 returned to 2004 levels
Energy related companies make up over 15% of S&P 500
Many company earnings are impacted by oil prices
Now, let’s look at oil prices. Oil prices have been very volatile. A few years ago they were over $100 per barrel.
More recently;
Oil prices in 2016 returned to 2004 levels
Energy related companies make up over 15% of S&P 500
Many company earnings are impacted by oil prices, like transportation companies or consumer product companies.
_market.jhtml
Sources: market-update-jadwa/

21. Oil Prices Oil prices have continued to be volatile in 2016
Oil Prices should be monitored by investors
Energy companies had a strong performance in the April – June Quarter of 2016
While they have increased in 2016…
U.S. oil prices have continued to be volatile, and
Oil Prices should be monitored by investors
Energy companies had a strong performance in the April – June quarter of 2016 .

22. Negative Interest Rates
Many Central Banks worldwide are currently offering NEGATIVE rates to investors
While U.S. interest rates remain near record lows, internationally, negative interest rates are currently being offered by some central banks given the significant risks they see to the outlook for growth and inflation. This bold policy action is unprecedented, and its effects over time will vary among countries. As this chart shows, the European Central Bank and the Bank of Japan are among those countries where interest rates are actually negative!
rates//blog-imfdirect.imf.org/

23. China China was once forecasted to grow at robust rates
In June of 2016 China’s central bank warned of slower growth forecasts
Also, growth in China is weighing on investors minds. China is one of the world’s largest economies and:
China was once forecasted to grow at robust rates, and
In June of 2016, China’s central bank warned of slower growth forecasts.
China’s growth is another matter that investors should watch.
Sources:
charts.html

24. 2016 is a Presidential Election Year
Also, this year is a presidential election year. Having said that, so far the presidential election has not had a significant effect on equities... However, we still need to be watchful!

25. Are Equities Relatively Inexpensive or Overvalued ?
U.S. Interest Rates
Corporate Earnings
Oil
Foreign Interest Rates
China
So, are equities relatively inexpensive or overvalued?
We need to watch and see, but as we discussed, by monitoring U.S. interest rates, corporate earnings, oil prices, foreign interest rates and China we can hopefully potentially provide some direction. 25
SLIDE 25

26. Uncertainty can create problems or opportunities!
As we all know, uncertainty can sometimes create problems or opportunities!

27. Investors Need to Prepare for any Environment!
We are in a rapidly changing environment.

28. Emotions can often play a large role in how people manage their money.
Unfortunately, many times emotions can play a large role in how people manage their money, and that’s not helpful.
The fundamentals of great companies usually do not change on a daily basis, but the emotions of investors can.

29. The Stock Market vs. Your Portfolio
An index, whether S&P 500 or the Dow Jones, isn’t a measure of your portfolio.
It’s what your portfolio is doing, not what “the market” is doing, that is important.
Your portfolio doesn’t always move in lock step with any single market or index.
Indexes cannot be invested in directly, are unmanaged and do not incur management fees, costs and expenses.
Let’s look at The Stock Market vs. Your Portfolio
Remember:
An index, whether S&P 500 or the Dow Jones, isn’t a measure of your portfolio;
It’s what your portfolio is doing, not what “the market” is doing, that is important; and
Your portfolio doesn’t always move in lock step with any single market or index.

30. What Has History Taught Us ?
It’s near impossible to consistently predict market declines or increases.
It’s equally as hard to predict how long a market decline or increase will last.
It’s almost impossible to consistently predict the absolute best time to get in or out of the market!
So what can a market decline teach us?
Here are 3 things:
It’s near impossible to consistently predict market declines;
It’s equally as hard to predict how long a market decline will last; and
It’s almost impossible to consistently predict the absolute best time to get in or out of the market!

31. Our GOAL is to Monitor the Situation
How important is it to monitor the situation?

32. What will the future bring?
So – What will the future bring?
No one can say for certain, so let’s focus on what you can do.

33. What Can You Do? Re-evaluate your investment goals and objectives
Confirm your investment timelines
Short Term
Longer Term
Re-evaluate your risk tolerance
Conservative… Moderate….Aggressive
Make sure your investments match your risk
tolerance level
You can:
Re-evaluate your investment goals.
Re-evaluate your investment timelines. Are you looking for short term or long term?
Re-evaluate your risk tolerance. Is your risk tolerance conservative, moderate or aggressive?
As always, we will help you with all of these!

34. What Can You Do? Analyze your true cash flow requirements.
Review your emergency fund needs – keep enough liquid for 6-12 months of living expenses plus planned expenditures.
We can also:
Analyze your true cash flow requirements.
We will review your emergency funds needs-keep enough liquid for months of living expenses plus planned expenditures.
Again, we will help you with all of these!

35. What Can We Do Now? Meet With You!
Confirm your risk tolerance is where
it should be for your situation.
Rebalance – Where appropriate
Capital Gains & Loss Tax Harvesting
Review Your Retirement Plans
now?
First of all we are always available to meet with you!
We can confirm your risk tolerance is where it should be for your situation.
We can rebalance your portfolios – where appropriate
We can look into year-end Capital Gains & Tax Loss harvesting
We can review your retirement plans. For either those of you in a withdrawal mode or those of you in an accumulating mode. We will see if there are any appropriate necessary changes or opportunities.
Most importantly, we are always here to meet with you!

36. What Else Can Be Done?
Analyze your sources of income and true cash flow requirements
Review your overall tax planning strategies
Review your emergency fund needs
We can:
Analyze your sources of income and true cash flow requirements
Review your overall tax planning strategies
And we can review your emergency funds needs
As always, we will help you with all of these!

37. Investors need to prepare for any environment!
We are in a rapidly changing environment and investors need to prepare!

38. We review changes for our clients regularly!
One of our main focuses as a financial advisory practice is to review these changes for our clients on an ongoing basis.

39. What can you expect from us?
Constant communication
More frequent discussions
We are constantly reviewing economic, tax, estate and investment issues for our clients
So – what can you expect from us?
You can expect constant communication, more frequent discussions, and you can expect that we are constantly reviewing economic, tax, estate and investment issues for our clients.

40. Our Role as Your Advisor
We will maintain a non-emotional objective
We will avoid knee-jerk reactions
We will assist you in making decisions that are always in your best interest! - and
WE WILL BE HERE FOR YOU!
As you know, our role as your advisor is to:
Maintain a non-emotional objective;
Avoid knee-jerk reactions;
Assist you in making decisions that are always in your best interest; and
We will be here for you! 40
Slide 40

41. Available Soon Add a friend to our mailing list. They will thank you!
Our latest newsletters and reports
We have certain information that will be available soon. We are also planning on offering additional newsletters and reports that we offer to clients. If you are not on our mailing list, please sign up so that we can make sure you get your copy. Also, we encourage clients to add (2-5) more friends to our mailing list so that they can benefit from this information.

42. Sign your friends up for our newsletter service.
Help Us Help Others !
Sign your friends up for our newsletter service.
We would like to help others in the year 2016!
In fact, we would be honored if you could share some names of friends to add to our mailing lists so that they can benefit from this information.

43. We appreciate the opportunity to assist With YOUR financial needs!
Thank You!
We appreciate the opportunity to assist With YOUR financial needs!
Thank you for coming to this Economic Summit. We appreciate the opportunity to assist you with your financial needs.
We would like to take this time to invite any of the guests here today to a complimentary session to help them with their financial needs and goals. Please see one of our assistants at the exit in order to schedule your complimentary session.
As you know, we are also making ourselves available to help some of your friends and colleagues. One theme that you have probably heard from our office already is our company’s “Growth Initiative.” It is our goal to offer our services to several other clients just like you. It is primarily through an introduction from our best clients that we have best been able to meet high quality people who can use and benefit from our services. We would be honored if you shared with us the names of one or two other friends, relatives or colleagues so we can put them on our mailing list or if appropriate, invite them in for a complimentary consultation.

44. Index Descriptions
All indices referenced are unmanaged and cannot be invested into directly. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. Past performance is no guarantee of future results. The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries and widely held by individuals and institutional investors. The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index.

45. Any Questions?
Any questions?

46. Insert Approved broker/dealer disclaimer
The views expressed are not necessarily the opinion of < insert Broker/Dealer name> Information is based on sources believed to be reliable, however, their accuracy or completeness cannot be guaranteed.
Investing involves risk including loss of principal. No investment strategy can guarantee a profit or protect against loss. Past performance is not guarantee of future results.
This information is not intended to be a substitute for specific individualized tax, legal or investment planning advice.
You should discuss your situation with a qualified financial professional
Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
Contents Provided by APFA, Inc. © 2016