1. Industry Responses to Fed Policy Changes CFA Society Houston Wednesday, April 8, 2015 Julie R. Dahlquist, Ph.D., CMT 210-860-7048 jdahlquist@sbcglobal.net

2. We are living in unusual times….

3. Since 1950, the 3-month rate has been below 1% only 99 times. 22 times previously 77 times in the past 6 1/2 years Since 1950, the 3-month rate has been below 0.75% only 79 times. 2 times previously 77 times in the past 6 1/2 years Time FrameAverage 10 years1.39% 20 years2.59% 30 years3.64% 40 years4.91% 50 years 5.03%

4. FOMC Statement September 17, 2014 The Committee will determine the timing and pace of policy normalization-- meaning steps to raise the federal funds rate and other short-term interest rates to more normal levels…

5. FOMC Statement October 29, 2014 December 17, 2014 January 28, 2015 March 18, 2015 The Committee currently anticipates that, even after employment and inflation are near mandate- consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run.

6. WHEN?

7. Three Steps and a…

8. Stumble

9. Gould’s rule  The market will suffer a substantial downturn after the Federal Reserve raises rates three consecutive times  George Schade (1991)  Early warning signal  Markets tend to advance for six more months  Expect bottom 18 months after signal

10. Recessions have been preceded by increases in discount rate

12. Gould’s rule

13. Gould’s rule--1994

14. Gould’s rule--2000

15. Gould’s rule--2004

16. Cyclical Investing and Trading Jim Cramer’s Mad Money 0% 1% 2% 3% GDP growth 1 st rate 1 st rate hike 2 nd rate hike 3 rd rate hike 4 th rate hike 1 st Fed easing buy financials buy metals and minerals buy medicine and supermarket sell financials

17. Do some sectors provide protection from the stumble? Daily returns since July, 1926 Kenneth R. French Dartmouth College http://mba.tuck.dartmouth.edu/pages/faculty/ken.french/data_library.html

18. Mean returns around Gould’s three-step signal Stumbling before the step  Negative returns precede third rate hike  Predominantly positive results following hike

19. Mean returns around Gould’s three-step signal Annualized—Assuming 250 trading days

20. Median returns around Gould’s three-step signal

21. Annualized—Assuming 250 trading days

22. Financial Sector

23. Financial Sector Annualized—assuming 250 trading days

24. Financial Sector

25. Food: meat, dairy, bakery products, beverages, candy 10-day pre5-day pre5-day post10-day post30-day post60-day post90-day post120-day post July 7, 1928-0.1653-0.5706-0.03330.11700.14170.20070.13910.1185 May 1, 1937-0.5132-0.06280.1610-0.4316-0.0415-0.0116-0.0211-0.1494 Jan. 21, 19460.1382-0.20630.18380.2058-0.09860.08250.06460.0227 Aug. 13, 1948-0.1063-0.24790.24920.1031-0.1389-0.0424-0.0506-0.0118 Sept. 9, 19550.11070.1316-0.1141-0.0322-0.14130.0015-0.01660.0090 March 3, 19590.19970.21970.2656-0.00090.04670.07620.06250.0630 Dec. 6, 1265-0.0403-0.02820.05960.06840.0933-0.0260-0.0223-0.0526 Apr. 19, 19680.54340.37140.48330.50240.29110.10320.10880.0992 May 1, 1973-0.4476-0.48440.4303-0.05260.08500.03770.01850.0431 Jan. 9, 1978-0.1523-0.5426-0.1341-0.0445-0.00280.03550.15310.1047 Dec. 5, 1980-0.1916-0.1638-0.31040.11140.26950.19220.20520.1654 Jan. 24, 1989-0.0745-0.21010.36130.30090.28000.30180.21110.2245 Nov., 15, 19940.16370.2910-0.3984-0.2807-0.02280.05060.10200.1129 Feb. 2, 2000-0.7220-0.62750.1072-0.2518-0.1059-0.05750.10100.1106 Sept. 21, 2004-0.4341-0.4369-0.09090.15450.11490.15600.10620.0821

26. Mines: metal mining, gold, silver, iron, and copper ores 10-day pre5-day pre5-day post10-day post30-day post60-day post90-day post120-day post July 7, 1928-0.0780-0.7240-0.0176-0.0641-0.03260.16210.13100.1146 May 1, 1937-0.7852-0.39910.2811-0.53230.00600.08090.0379-0.1508 Jan. 21, 19460.1888-0.17610.43530.48500.00590.07690.05870.0261 Aug. 13, 1948-0.2593-0.57840.08020.2035-0.07650.02070.00190.0051 Sept. 9, 19550.22910.0213-0.1756-0.0804-0.26450.0178-0.03260.0651 March 3, 1959-0.01920.20540.50510.18790.0463-0.0581-0.0108-0.0001 Dec. 6, 12650.09200.13660.44170.25920.39240.29650.23140.1103 Apr. 19, 19680.50570.49930.69520.35060.30650.04490.01400.0098 May 1, 1973-0.2401-0.56360.53100.2556-0.06430.13860.11520.1861 Jan. 9, 19780.1226-0.1429-0.0401-0.0052-0.1226-0.01600.09240.0221 Dec. 5, 19800.35070.5294-1.1286-0.3229-0.3857-0.3142-0.0287-0.0438 Jan. 24, 19890.31460.7071-0.1165-0.0675-0.1096-0.1572-0.0311-0.0136 Nov., 15, 1994-0.4068-0.4670-0.9494-0.5900-0.1331-0.1428-0.00470.0012 Feb. 2, 20001.16521.29471.55030.26810.0733-0.2453-0.2166-0.1888 Sept. 21, 2004-0.1197-0.27650.72200.58490.03700.15440.08170.1444

27. Oil: oil and gas extraction, petroleum refining 10-day pre5-day pre5-day post10-day post30-day post60-day post90-day post120-day post July 7, 1928-0.1539-0.7195-0.1554-0.03200.13140.18540.16290.1595 May 1, 1937-0.49040.5791-0.0530-0.5121-0.04610.06020.0194-0.1702 Jan. 21, 1946-0.1797-0.3807-0.37030.0325-0.15730.12270.16310.1057 Aug. 13, 1948-0.0092-0.46270.2291-0.0846-0.2753-0.0277-0.0555-0.0475 Sept. 9, 19550.21280.24780.30030.2670-0.10130.10940.07660.1321 March 3, 19590.33610.92410.1048-0.11730.0901-0.0227-0.0561-0.0234 Dec. 6, 1265-0.1394-0.15010.20950.02020.1174-0.0581-0.0065-0.0250 Apr. 19, 19680.1594-0.04200.48350.44750.17390.20010.16720.1570 May 1, 1973-0.2178-0.77330.6024-0.25130.00460.0100-0.02840.0804 Jan. 9, 1978-0.2618-0.9895-0.2251-0.10420.01360.03720.14450.0502 Dec. 5, 1980-0.3359-1.2560-0.01840.4723-0.1244-0.1636-0.2014-0.1953 Jan. 24, 1989-0.0456-0.05650.58010.36830.12920.15350.10490.1119 Nov., 15, 1994-0.2893-0.3786-0.3092-0.1451-0.0684-0.00920.07040.1041 Feb. 2, 2000-0.3421-0.2192-1.09210.02150.19090.13230.17930.0408 Sept. 21, 20040.34670.32390.27180.3182-0.01200.08830.08340.1990

28. Clothing: yarn and thread mills, apparel, footwear, floor covering 10-day pre5-day pre5-day post10-day post30-day post60-day post90-day post120-day post July 7, 1928-0.2237-0.4456-0.1809-0.0958-0.04370.04150.05830.0519 May 1, 1937-0.5782-0.1895-0.0220-0.4684-0.1270-0.0600-0.0273-0.1829 Jan. 21, 19460.2308-0.12060.65520.4437-0.13500.11550.15910.0933 Aug. 13, 1948-0.1931-0.39750.16790.1218-0.1487-0.0718-0.1125-0.0599 Sept. 9, 19550.18460.3055-0.02600.0029-0.1475-0.0194-0.0336-0.0220 March 3, 19590.1467-0.01820.0620-0.03640.07050.07720.10090.0761 Dec. 6, 12650.27060.16950.16350.17240.21670.11660.0897-0.0068 Apr. 19, 19680.63130.50760.78880.60410.36810.16110.17900.1709 May 1, 1973-0.6072-0.60750.5121-0.1953-0.3048-0.0930-0.1270-0.0324 Jan. 9, 1978-0.2410-0.6774-0.06440.07810.04660.13050.21620.1257 Dec. 5, 1980-0.3737-0.2998-0.8178-0.24490.18170.18740.22950.1744 Jan. 24, 19890.0626-0.34020.56190.33660.16400.15620.11710.1661 Nov., 15, 1994-0.1007-0.2069-0.4327-0.2760-0.0871-0.0425-0.0399-0.0228 Feb. 2, 2000-0.8107-0.6792-2.0803-1.5626-0.05550.1283-0.01730.0202 Sept. 21, 2004-0.0381-0.0265-0.04600.11980.18540.19940.11440.1248

29. Durables: household furniture and appliances, musical instruments, toys, jewelry 10-day pre5-day pre5-day post10-day post30-day post60-day post90-day post120-day post July 7, 19280.0556-0.8425-0.0667-0.2099-0.02160.25290.27790.2052 May 1, 1937-0.7934-0.3854-0.1382-0.82100.03180.07120.0246-0.2579 Jan. 21, 19460.2084-0.09300.51280.6354-0.07840.14620.11940.0611 Aug. 13, 1948-0.1090-0.43200.30150.1331-0.0779-0.0190-0.0491-0.0471 Sept. 9, 19550.2314-0.23710.0178-0.0054-0.2042-0.0417-0.0803-0.0096 March 3, 19590.41950.38980.47160.22310.23960.23450.19550.1391 Dec. 6, 12650.0507-0.06460.31640.10030.24670.08170.17740.0947 Apr. 19, 19680.58420.24530.61010.51420.2704-0.04130.03310.0457 May 1, 1973-0.6106-0.85490.5591-0.25790.00120.1016-0.01810.0166 Jan. 9, 1978-0.2720-0.6885-0.3027-0.3100-0.1663-0.01640.18440.1144 Dec. 5, 1980-0.2830-0.1611-0.3122-0.06910.04750.14990.18040.1181 Jan. 24, 19890.1117-0.01330.15260.19460.06220.11650.10350.1305 Nov., 15, 1994-0.1016-0.0350-0.8635-0.4229-0.13050.03030.06530.0824 Feb. 2, 2000-0.3511-0.3952-0.4920-0.4008-0.0866-0.0354-0.0291-0.0507 Sept. 21, 20040.0396-0.0018-0.13120.23400.04680.16600.06770.0617

30. Chemicals: plastic material, synthetic resin, agricultural chemicals 10-day pre5-day pre5-day post10-day post30-day post60-day post90-day post120-day post July 7, 1928-0.1783-0.68270.08440.19860.14950.20680.24310.2355 May 1, 1937-0.33930.23610.2011-0.22130.04770.06230.0459-0.1086 Jan. 21, 19460.1046-0.18660.31360.5592-0.01700.16050.13010.0941 Aug. 13, 1948-0.0762-0.27340.42910.2184-0.06650.03330.00970.0416 Sept. 9, 19550.43630.36080.22560.0424-0.21750.0100-0.03380.0221 March 3, 19590.63420.48950.38550.07800.12970.19630.12980.1022 Dec. 6, 1265-0.1024-0.0502-0.01560.04170.0737-0.0678-0.0588-0.0865 Apr. 19, 19680.76390.39630.10980.09440.00930.00120.05970.0894 May 1, 1973-0.4391-0.52960.7245-0.0674-0.02170.05400.04120.1395 Jan. 9, 1978-0.3817-1.0169-0.2044-0.1290-0.1363-0.01140.14090.0534 Dec. 5, 1980-0.3559-0.2634-0.5339-0.02800.11610.13570.10700.0603 Jan. 24, 1989-0.1275-0.13140.25490.20080.12040.15630.07690.1404 Nov., 15, 1994-0.2283-0.1828-0.9585-0.3094-0.00870.02520.08650.1199 Feb. 2, 2000-0.5500-0.0739-0.8695-0.6304-0.0593-0.0511-0.0266-0.0635 Sept. 21, 2004-0.10650.11730.41210.46260.12840.24280.14030.1979

31. Consumer Goods: tobacco products, drugs, soaps, perfumes 10-day pre5-day pre5-day post10-day post30-day post60-day post90-day post120-day post July 7, 19280.05690.0156-0.09080.16600.07040.15670.14320.1378 May 1, 1937-0.21830.05200.0997-0.1762-0.0228-0.01780.0156-0.0826 Jan. 21, 19460.1373-0.15880.37310.0125-0.21000.09460.15940.0686 Aug. 13, 1948-0.0170-0.16710.20760.1016-0.1213-0.0318-0.01890.0097 Sept. 9, 19550.13570.14150.14580.1446-0.08100.08030.03680.0636 March 3, 19590.49220.31540.06770.17700.25080.12970.15160.1107 Dec. 6, 12650.20580.20960.21780.19680.1566-0.00110.0349-0.0249 Apr. 19, 19680.54860.37510.50070.39810.16740.04000.03770.0446 May 1, 1973-0.3858-0.73400.5393-0.07820.10070.1193-0.0711-0.0079 Jan. 9, 1978-0.2578-0.7564-0.07830.1320-0.01730.03710.19140.1305 Dec. 5, 1980-0.1820-0.1639-0.34700.11020.24140.17280.18680.1526 Jan. 24, 1989-0.0714-0.21730.27900.29990.24590.27800.16420.2234 Nov., 15, 19940.20190.4006-0.5600-0.0910-0.00590.08830.12870.1148 Feb. 2, 2000-0.23780.6832-0.3405-0.4640-0.2307-0.00740.04120.0581 Sept. 21, 2004-0.1659-0.3905-0.1153-0.1399-0.21010.0229-0.01070.0280

32. Construction: forestry, building contractors, paints, paving and roofing materials, hand tools 10-day pre5-day pre5-day post10-day post30-day post60-day post90-day post120-day post July 7, 1928-0.0993-0.6848-0.09060.10440.07530.15280.16000.1776 May 1, 1937-0.57970.05140.5020-0.29310.01440.01780.0283-0.2255 Jan. 21, 19460.2049-0.09940.53520.57750.06410.20650.15690.0928 Aug. 13, 1948-0.0497-0.32970.33530.2271-0.10440.0120-0.01980.0084 Sept. 9, 19550.39430.28900.30140.3452-0.14300.0362-0.03820.0401 March 3, 19590.28730.13760.17780.09910.05380.10140.08660.0625 Dec. 6, 12650.0067-0.08610.18740.14450.20490.05940.0490-0.0316 Apr. 19, 19680.79170.22250.56510.49630.32460.13250.20000.1566 May 1, 1973-0.4342-0.47390.4824-0.1897-0.15920.07930.04760.1140 Jan. 9, 1978-0.2227-0.7914-0.2445-0.02950.00910.10060.22580.1439 Dec. 5, 1980-0.2457-0.3977-0.5095-0.01410.04990.08110.11040.0839 Jan. 24, 1989-0.0268-0.01290.34300.30100.10060.15310.11520.1578 Nov., 15, 1994-0.0882-0.1035-0.8884-0.2531-0.06870.05000.01920.0335 Feb. 2, 2000-0.36170.5518-0.4650-0.32330.06180.0010-0.1548-0.0561 Sept. 21, 20040.0268-0.00920.14570.10150.16340.22210.15010.1202

33. Steel: iron and steel foundries 10-day pre5-day pre5-day post10-day post30-day post60-day post90-day post120-day post July 7, 1928-0.1544-0.53080.06610.20640.21410.29690.28110.2544 May 1, 1937-0.7422-0.05120.2437-0.69020.06740.14130.1145-0.2165 Jan. 21, 19460.1222-0.43480.49820.7634-0.04050.08600.08350.0476 Aug. 13, 1948-0.1384-0.66430.59390.2839-0.07320.0639-0.0108-0.0159 Sept. 9, 19550.56970.72610.12450.1150-0.3276-0.0173-0.06980.0189 March 3, 19590.31670.07590.45520.09130.02170.06050.10690.0840 Dec. 6, 1265-0.1090-0.09610.17970.59780.40580.13220.13530.0169 Apr. 19, 19680.57850.58300.17960.30900.30380.02080.06560.0881 May 1, 1973-0.3161-0.29850.4033-0.2605-0.1355-0.04130.00920.1337 Jan. 9, 1978-0.0736-0.52510.04420.0933-0.14410.04110.15940.0587 Dec. 5, 1980-0.31160.0053-0.7220-0.2270-0.02420.14420.24550.1704 Jan. 24, 1989-0.1870-0.00070.33540.0721-0.01160.0691-0.00900.0920 Nov., 15, 1994-0.3265-0.3667-0.9213-0.3588-0.0114-0.0512-0.0411-0.0166 Feb. 2, 2000-0.1621-0.4437-0.31030.62990.18230.13810.13350.1557 Sept. 21, 2004-0.1146-0.00670.83760.80510.07600.18780.10950.1469

34. Fabricated Products: metal cans, shipping containers, sheet metal work 10-day pre5-day pre5-day post10-day post30-day post60-day post90-day post120-day post July 7, 1928-0.3611-0.95750.08170.53030.53980.38580.25940.1485 May 1, 1937-0.56810.03490.3251-0.1956-0.03550.06350.1017-0.1214 Jan. 21, 19460.0102-0.65720.17810.3740-0.13360.00550.03640.0491 Aug. 13, 19480.1727-0.21670.2076-0.1397-0.1952-0.0745-0.05740.0070 Sept. 9, 19550.23820.1935-0.2497-0.0603-0.06310.08370.04650.0598 March 3, 19590.28060.14740.05190.0133-0.2327-0.04210.0042-0.0152 Dec. 6, 12650.18670.05590.24500.12380.17630.06800.05440.0016 Apr. 19, 19680.56920.02200.31120.40350.17270.06720.06480.1112 May 1, 1973-0.3045-0.36100.78590.0796-0.02010.07490.01770.0855 Jan. 9, 1978-0.0172-0.3246-0.0565-0.0058-0.03230.09490.17660.1283 Dec. 5, 1980-0.0326-0.1669-0.4713-0.0123-0.0441-0.00090.08730.0515 Jan. 24, 1989-0.0647-0.06150.08660.24180.12210.15770.12680.1674 Nov., 15, 19940.05950.1629-0.7095-0.3009-0.05030.04940.08490.0953 Feb. 2, 2000-0.9923-0.5221-1.1371-0.5513-0.03030.05370.0263-0.0042 Sept. 21, 2004-0.0166-0.1217-0.00840.39570.32190.30170.15040.1514

35. Machinery: engines, cranes, office computers, lab instruments 10-day pre5-day pre5-day post10-day post30-day post60-day post90-day post120-day post July 7, 1928-0.2987-0.71740.14560.27130.18650.22070.18360.1959 May 1, 1937-0.33040.52610.1348-0.48130.12650.10360.0788-0.1613 Jan. 21, 19460.1569-0.15070.31870.4806-0.09890.05660.03870.0118 Aug. 13, 1948-0.1346-0.58610.55810.3080-0.08980.0021-0.0222-0.0031 Sept. 9, 19550.15340.12710.15190.1509-0.20340.04400.00870.0725 March 3, 19590.34610.04770.13580.08990.17780.19760.14970.0820 Dec. 6, 1265-0.0731-0.26120.36560.07400.02520.03560.11970.0437 Apr. 19, 19680.33480.14990.60200.54100.38670.02980.05530.0268 May 1, 1973-0.5220-0.57870.5310-0.1950-0.02470.0523-0.00040.0472 Jan. 9, 1978-0.1631-0.7084-0.0402-0.0629-0.0880-0.03330.15600.0959 Dec. 5, 1980-0.3097-0.2763-0.3247-0.0477-0.0874-0.06560.01750.0337 Jan. 24, 1989-0.1902-0.2332-0.0468-0.0918-0.09990.08400.02710.0695 Nov., 15, 19940.02290.0603-0.8157-0.35300.02320.07900.13490.1718 Feb. 2, 2000-0.23970.15830.53840.47960.48760.26440.14370.1748 Sept. 21, 20040.4490-0.0071-0.45190.31920.16170.20790.07390.0933

36. Cars: motor vehicles, motor homes, bicycles, auto dealers 10-day pre5-day pre5-day post10-day post30-day post60-day post90-day post120-day post July 7, 1928-0.3149-0.91730.24310.11900.12450.30810.24160.1685 May 1, 1937-0.25670.57300.4304-0.4446-0.1121-0.12540.0177-0.1668 Jan. 21, 1946-0.1411-0.59590.23330.5777-0.12500.0196-0.0221-0.0383 Aug. 13, 19480.0083-0.62010.69900.2342-0.16630.0083-0.0552-0.0240 Sept. 9, 19550.15990.06100.77780.68860.04990.1355-0.00460.0229 March 3, 19590.21010.13880.13570.11920.19370.22230.23610.1574 Dec. 6, 1265-0.2140-0.0987-0.2267-0.14010.1196-0.0526-0.0988-0.1258 Apr. 19, 19680.2886-0.14090.40660.34700.0787-0.01210.06180.1019 May 1, 1973-0.4142-0.37850.2111-0.4315-0.2605-0.0717-0.0801-0.0483 Jan. 9, 1978-0.4863-0.9124-0.1802-0.09490.00380.12730.18150.0948 Dec. 5, 1980-0.3281-0.2981-0.06460.17660.05860.15100.19290.1892 Jan. 24, 1989-0.4017-0.28990.2111-0.0004-0.14710.0169-0.01920.0513 Nov., 15, 19940.04750.2136-1.3355-0.4615-0.0032-0.0580-0.03790.0015 Feb. 2, 2000-0.27940.5123-0.6356-0.5954-0.00390.1848-0.0420-0.0697 Sept. 21, 2004-0.2914-0.1987-0.16760.2058-0.02930.10570.01220.0161

37. Transportation: truck bodies, aircraft and parts, ship building, school buses 10-day pre5-day pre5-day post10-day post30-day post60-day post90-day post120-day post July 7, 1928-0.1770-0.5479-0.14170.00800.03450.07750.05360.0719 May 1, 1937-0.37650.51970.4880-0.4334-0.1085-0.1218-0.1306-0.3454 Jan. 21, 19460.1463-0.09770.29950.3688-0.15080.0042-0.0169-0.0108 Aug. 13, 1948-0.1775-0.51990.58790.3798-0.0582-0.0007-0.0588-0.0437 Sept. 9, 19550.25240.37740.24110.1030-0.14240.09400.01420.0578 March 3, 19590.26370.18520.37950.25520.16770.07260.0455-0.0358 Dec. 6, 12650.55550.26550.34950.21320.16490.09110.16600.0337 Apr. 19, 19680.81000.35110.53070.47200.28090.04940.08010.0823 May 1, 1973-0.8077-0.81590.3742-0.3819-0.3030-0.1064-0.09620.0200 Jan. 9, 1978-0.1808-0.67200.18920.18990.05310.15410.29190.2157 Dec. 5, 1980-0.1516-0.2416-0.46120.08630.09750.04820.14530.1168 Jan. 24, 1989-0.0181-0.11400.28050.20950.05000.14540.08140.1363 Nov., 15, 1994-0.1747-0.1025-0.7538-0.2725-0.02440.08130.12700.1279 Feb. 2, 2000-0.8585-0.6162-0.8815-0.6119-0.00630.15790.07810.0774 Sept. 21, 20040.10040.1520-0.01620.20040.11150.18580.07130.1123

38. Utilities: electric, gas, sanitary services, water supply 10-day pre5-day pre5-day post10-day post30-day post60-day post90-day post120-day post July 7, 1928-0.3096-0.7820-0.08230.11480.08750.18200.11080.1875 May 1, 1937-0.48970.15070.0970-0.7215-0.2762-0.0357-0.0196-0.1743 Jan. 21, 19460.45350.28540.54470.3131-0.09890.08770.07010.0475 Aug. 13, 1948-0.1079-0.36240.19370.0893-0.04860.0118-0.04570.0022 Sept. 9, 19550.11100.14000.00200.0199-0.1643-0.0078-0.02920.0124 March 3, 19590.25290.29580.14190.11280.0311-0.0331-0.02220.0030 Dec. 6, 1265-0.1442-0.15810.0359-0.0561-0.0118-0.1440-0.0713-0.0665 Apr. 19, 19680.23990.19590.03180.03490.04070.14810.08970.0888 May 1, 1973-0.1613-0.20830.36700.06490.0171-0.0622-0.0360-0.0185 Jan. 9, 1978-0.0797-0.3505-0.0682-0.0523-0.04070.01310.00720.0224 Dec. 5, 1980-0.1278-0.5001-0.18800.51090.12120.01170.01380.0194 Jan. 24, 1989-0.0618-0.09470.08580.05760.04870.16530.15080.1510 Nov., 15, 1994-0.0859-0.2585-0.12050.25450.09580.15220.08410.0979 Feb. 2, 20000.2199-0.0650-0.5377-0.3564-0.11880.06870.09340.0715 Sept. 21, 2004-0.02000.14730.06500.19210.12090.17720.13860.1501

39. Retail: department and grocery stores, eating and drinking establishments, florists 10-day pre5-day pre5-day post10-day post30-day post60-day post90-day post120-day post July 7, 1928-0.0168-0.52380.26300.25050.26450.28640.28040.2657 May 1, 1937-0.49070.30880.0760-0.5045-0.13580.00250.0266-0.1755 Jan. 21, 19460.2718-0.10050.49520.48120.00590.21080.23060.0697 Aug. 13, 19480.0091-0.27630.44330.3102-0.01160.05170.01980.0262 Sept. 9, 19550.30370.23570.54190.6124-0.04950.0809-0.00860.0167 March 3, 19590.18150.12580.0239-0.0874-0.00600.02220.05690.0384 Dec. 6, 1265-0.2228-0.22250.0357-0.0002-0.0416-0.1152-0.0519-0.0619 Apr. 19, 19680.53970.28910.57660.36690.23810.03740.10030.0993 May 1, 1973-0.4494-0.19390.3879-0.2667-0.08810.0393-0.02270.0180 Jan. 9, 1978-0.3440-0.8678-0.1826-0.0803-0.06730.00370.14620.0759 Dec. 5, 1980-0.3678-0.3243-0.2978-0.01450.21970.22220.30390.2517 Jan. 24, 1989-0.1743-0.30480.28180.27850.15420.25120.14270.1824 Nov., 15, 19940.0745-0.1155-0.6436-0.3193-0.2606-0.0399-0.0124 Feb. 2, 2000-0.7150-0.3522-0.2813-0.8058-0.0509-0.0131-0.1041-0.0304 Sept. 21, 2004-0.0506-0.17030.09880.22390.15510.15310.09800.1003

40. Other: paper, periodicals, barbershops, advertising, cable TV operators 10-day pre5-day pre5-day post10-day post30-day post60-day post90-day post120-day post July 7, 1928-0.1738-0.5644-0.05370.04590.06010.12370.13330.1466 May 1, 1937-0.4536-0.10920.0308-0.3478-0.01370.01210.0207-0.0951 Jan. 21, 19460.0035-0.29230.49720.3748-0.02890.09710.08480.0405 Aug. 13, 1948-0.1452-0.38910.25770.1577-0.0623-0.0008-0.0121-0.0107 Sept. 9, 19550.19380.16390.26180.2297-0.11360.02220.00730.0479 March 3, 19590.43820.38290.07790.08870.17670.07150.06010.0278 Dec. 6, 1265-0.0014-0.00220.03380.00150.0660-0.01470.0221-0.0214 Apr. 19, 19680.41050.15150.42530.30250.18500.06950.08350.0960 May 1, 1973-0.4681-0.40790.6036-0.0154-0.08940.0143-0.01720.0245 Jan. 9, 1978-0.1688-0.6470-0.0686-0.04970.00980.08550.16690.1115 Dec. 5, 1980-0.1297-0.3833-0.32240.24360.10520.08540.15110.1467 Jan. 24, 1989-0.1033-0.11680.33710.26860.17180.27330.18860.1986 Nov., 15, 1994-0.02550.0592-0.6126-0.2743-0.01840.07570.09110.0806 Feb. 2, 2000-0.3752-0.25210.2076-0.02520.1677-0.1283-0.1176-0.0839 Sept. 21, 20040.1161-0.0730-0.07500.31010.10100.18090.07250.0580

41. Gould’s signal  Market may anticipate rate increase  Historically, Fed has raised rates during a market decline  Traditional interpretation of Gould’s rule appears to work better during a strong market rally  Some sectors may offer protection when a Fed rate hike occurs

42. QUESTIONS?