1. Making Sense of Markets Q4 2016 Headlines
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2. Featured Speaker
Matthew Carvalho, CFA, CFP® Director Investment Research, Loring Ward
Today’s speaker

3. Predictions are tough, especially about the future
Yogi Berra’s famous quote about predictions is as true for the financial markets as anywhere else.
Two Barron’s covers from 2016 illustrate how hard it is to know how news and events will impact financial markets
Source: Barron’s

4. Predictions and S&P 500 Performance
Dec 6, 2015
FLAT IS THE
NEW UP
Jan 7
DOW, S&P OFF
TO THE WORST
STARTS EVER
Jan 4
THE S&P 500 FALLS MORE THAN 20% AS IT FINALLY SUCCUMBS TO THE INCIPIENT GLOBAL RECESSION
Dec 15
THE TRUMP
RALLY WILL
CONTINUE IN 2017
Jun 24
BREXIT MAY
TRIGGER GLOBAL
RECESSION
Nov 7
MAJOR WALL STREET ANALYSTS AGREE THAT THE S&P 500 WILL LIKELY SELL OFF IF DONALD TRUMP WINS
Jan 11
SELL
EVERYTHING
Source: ‘Flat is the new up’ for 2016 stock market Goldman Sachs guru says, USA Today. The market will drop 20% in 2016: Pento, CNBC. Dow, S&P off to worst starts ever for any Year, The Wall Street Journal. RBS Warns: Sell Everything, The Wall Street Journal. Brexit may trigger global recession, Houston Chronical. Market Predictions: S&P 500 to sell off if Donald Trump tops Clinton, CNBC. The Trump rally will continue in 2017, Business Insider. Indexes are unmanaged baskets of securities that are not available for direct investment by investors. Index performance does not reflect the expenses associated with the management of an actual portfolio. Past performance is not a guarantee of future results.
Read headlines:
Dec 6, 2015 “Flat is the new up,” Goldman Sachs
2016
Jan 4: The S&P 500 falls more than 20 percent as it finally succumbs to the incipient global recession, CNBC
Jan 7: Dow, S&P off to the worst starts ever, WSJ
Jan 11: RBS Warns: Sell Everything, WSJ
Jun 24: Brexit may trigger global recession, Houston Chronical
Nov 7: Major Wall Street analysts agree that the S&P 500 will likely sell off if Donald Trump wins, CNBC
Dec 15: The Trump rally will continue in 2017, Business Insider

5. “Stock market rally long in the tooth”
2016
THE BULL MARKET IN STOCKS IS QUITE LONG IN THE TOOTH
CNBC
2015
BULL MARKET
GETTING LONG
IN THE TOOTH
ThinkAdvisor
2014
THIS BULL MARKET
IS LONG IN THE
TOOTH MORE THAN
5 ½ YEARS OLD
Bloomberg
2013
AS A RALLY SOME
WORRY IS LONG
IN THE TOOTH
Forbes
“Stock market rally long in the tooth”
2012
TODAY’S CYCLICAL BULL IS LONG
IN THE TOOTH
Kitco
2011
RALLY…LONG
IN THE TOOTH
AND SHOWING IT’S AGE
Stock Market Observations
2010
ARE STOCK, GOLD RALLIES LONG IN TOOTH?
Barron’s
2009
CHART OF THE DAY: STOCK MARKET RALLY LONG IN THE TOOTH
Analyst Advisor
‘Stock market rally long in the tooth’ is a saying that you may be have heard recently, but commentators have actually been saying that about the current bull market since it’s inception in 2009.
Source: Chart of the Day Stock Market Rally Long in the tooth, Advisor Analyst, 11/2/09. Are Stock, Gold Rallies Long in Tooth? Barron’s, 10/6/10. July Stock Market Observations, Stock Market Observations, 7/30/11. Stock Bull Topping, Kitco Commentary, 10/19/12. Should You Let Your Winners Run or Take Profits Off The Table, Forbes, 10/29/13. The Easy-Money Stock Market is Over, Bloomberg, 10/16/2014. Bull Market Getting ‘Long in the Tooth’: Morningstar, Think Advisor, 12/28/15. Cashin: The rally is getting long in the tooth, CNBC, 12/13/16.

6. Financial “Advice” in 2016
Those predictions lead to poor performance as shown by the average return on the positions being recommended by several media outlets in 2016, all below the return on the S&P 500 for the year.
Source: “It’s Time to Ignore Advice About Which Stocks to Buy in 2017”, Jan 4, 2017, TheUpshot/The New York Times. Performance of advice from different sources and the S&P 500 during calendar year Indexes are unmanaged baskets of securities that are not available for direct investment by investors. Index performance does not reflect the expenses associated with the management of an actual portfolio. Past performance is not a guarantee of future results.

7. Dow 20,000
Milestone
First Date Crossed
Trading Days To Reach
10,000
Mar 29, 1999
246
9,000
Apr 6, 1998
182
8,000
Jul 16, 1997
105
7,000
Feb 13, 1997 85
6,000
Oct 14, 1996
226
5,000
Nov 21, 1995
189
4,000
Feb 23, 1995
975
3,000
Apr 17, 1991
1,080
2,000
Jan 8, 1987
3,573
1,000
Nov 14, 1972
21,652
Milestone
First Date Crossed
Trading Days To Reach
20,000 ?
19,000
Nov 22, 2016
483
18,000
Dec 23, 2014
120
17,000
Jul 3, 2014
153
16,000
Nov 21, 2013
139
15,000
May 7, 2013
1,460
14,000
Jul 19, 2007 59
13,000
Apr 25, 2007
127
12,000
Oct 19, 2006
1,879
11,000
May 3, 1999 24
On average since topping 1,000, the Dow has hit a new 1,000 milestone roughly every 2.5 years. But as the index grows, each 1,000 is a smaller percentage change.
Down was at 15,503 on Feb 11
Source: Dow Closes Above for First Time, The Wall Street Journal. Indexes are unmanaged baskets of securities that are not available for direct investment by investors. Index performance does not reflect the expenses associated with the management of an actual portfolio. Past performance is not a guarantee of future results.

8. Do All-Time Highs Mean Overvalued Markets?
Index Level Change (Annualized) After:
Following:
1 Month
6 Months
1 Year
2 Years
Record Highs:
7.10%
7.23%
7.39%
7.18%
All Other Days:
6.82%
8.29%
7.64%
5.88%
With markets at all time highs, it’s natural to wonder if it’s time to get out of the stock market. But research shows us that historically the return following new All-Time highs has not been much different than during all other periods.
Source: Do All-Time Highs Mean Overvalued Markets?, Advisor Insights, 10/18/16. Dow Jones Industrial Average price return. Indexes are unmanaged baskets of securities that are not available for direct investment by investors. Index performance does not reflect the expenses associated with the management of an actual portfolio. Past performance is not a guarantee of future results.

9. Top 10 List of Predictions
TV pundits will frequently and loudly debate short‑term market direction
A new book will say the rules no longer work and everything has changed
Another new book will say nothing has really changed and the old rules still apply
Another new book will say nothing has really changed and the old rules still apply
Parts of your portfolio will do better than other parts. We don’t know which
Some companies will prosper. Others will falter. These change year to year
TV pundits will frequently and loudly debate short‑term market direction
Some economies will strengthen. Others will weaken. These change year to year
Some companies will prosper. Others will falter. These change year to year
There will be unexpected news. Some of this will move prices
Acres of newsprint will be devoted to the likely path of interest rates
Markets will go up some of the time and down some of the time
Acres more will speculate on China’s growth outlook
A new book will say the rules no longer work and everything has changed
Markets will go up some of the time and down some of the time
Acres of newsprint will be devoted to the likely path of interest rates
Acres more will speculate on China’s growth outlook
Some economies will strengthen. Others will weaken. These change year to year
Parts of your portfolio will do better than other parts. We don’t know which
There will be unexpected news. Some of this will move prices
These were predictions laid out by Jim Parker at Dimensional Fund Advisors going into 2016, but we think they are valid pretty much every year.
Source: 2016: 10 Predictions to Count On, Jan 2016, Jim Parker Dimensional Fund Advisors

10. Additional Commentary
Additional commentary can be found on the Making Sense of Markets portion of Loring Ward’s YouTube channel.
Available at:

11. Standardized Performance Data and Disclosures
Average Annual Total Returns (%)
3 Mo
1 Yr
5 Yr
10 Yr
Since Inception
S&P 500 TR USD
3.82
11.96
14.66
6.95
9.38
9/11/1989
DJ Industrial Average TR USD
8.66
16.50
12.92
7.52
9.95
9/30/1987
Data as of 12/31/16
U.S. Large Cap (S&P 500 Index): The S&P 500® Index is comprised of a broad and diverse group of stocks. Generally, these are the US stocks with the largest market capitalizations and, as a group, they represent approximately 75% of the total market capitalization of all publicly traded US stocks. Indexes are unmanaged and reflect reinvested dividends and/or distributions, but does not reflect sales charges, commissions, expenses or taxes.
Source: Morningstar Direct “Dow” refers to Dow Jones Industrial Average, a price weighted index of 30 US companies. Indexes are unmanaged baskets of securities that are not available for direct investment by investors. Index performance does not reflect the expenses associated with the management of an actual portfolio. Past performance is not a guarantee of future results. All investments involve risk, including loss of principal.