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LPL Financial Member FINRA/SIPC

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2 LPL Financial Member FINRA/SIPC


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We live in a glass is half-empty world where basic human psychology, often encouraged by the media and marketers, leads us to lose sight of the good things that are happening and instead to dwell on the ever-present possibility of lurking dangers. It’s even embedded in the words we use. There are twice as many words that describe negative feelings as positive feelings in the English language. That tells us that we need to teach ourselves to focus on what’s important, and that’s true in the markets too.

Slide 5: Given all this negativity, when looking at bull markets, it’s important to ask how and why they typically end with a sense of objectivity and perspective, rather than simply rebuilding the psychological “wall of worry” by revisiting tired old ideas. One common tired idea is that bull markets die of old age, which quickly triggers fears that the current bull market has simply grown too old. We are currently in the fifth-longest expansion since WWII, longer than more than half of the 10 prior expansions. But expansions have varied quite a lot in length and the most recent ones, which likely provide the best comparison for the current expansion, have been very durable, all lasting longer than the current expansion. Given the variability and durability of expansions over the last 30+ years, it’s easy to see that it hasn’t simply been age that has killed bull markets.

Slide 6: Another tired idea is that bull markets end when the Federal Reserve (Fed) starts to raise rates, but since 1970 expansions have lasted an average of 47 months after the Fed has started to raise rates, and some almost double that. The Fed often starts to raise rates when the economy has become healthy enough to stand on its own two feet, so is the first rate hike about the glass being half full or half empty?

Slide 7: Day-to-day market movements reflect the struggle between optimism and pessimism, the bulls and the bears, risk and opportunity, which creates the short-term market volatility we experience. But stand back and look at the bigger picture and you see large peaks surrounded by valleys. Those peaks mark the top of bull markets and they hold the key to understanding why bull markets end.

604020 800# of Months

Duration of Recovery

02/1961

11/1970

07/1980

10/1949

03/1991

06/2009

04/1958

03/1975

11/2001

120100

11/1982

05/195410/1945

Source: Haver, LPL Research 07/17/15

Last 3 Expansions

Current


# of Months60504020 30 80100 70

Time from First Rate Hike Until Next Recession

9/11/1958

8/8/1983

6/30/2004

8/22/1980

4/15/1955

4/23/1971

3/24/1994

7/18/1975

7/1/1963

Source: Haver, LPL Research 07/17/15 6 LPL Financial Member FINRA/SIPC

1/2 Empty

1/2 FullSource: Standard & Poor’s, FactSet, LPL Research 07/17/15 Indexes are unmanaged and cannot be invested into directly. Past performance is not indicative of future results.

2100

900

300

1200

1500

600

1800

S&P 500 Index

201520101990 2000 20051995



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Slide 9: These peaks and valleys reflect the shape of the economic cycle, from recovery, to maturity, to aging, to recession. Each stage runs its course and transitions to the next, until finally the economic cycle rolls over and takes the market with it. It’s not Fed rate hikes or simply age that has led to the end of bull markets over the past 30+ years. It’s whatever those forces are that have taken a mature economic cycle and transformed it into an aging cycle, and an aging cycle to a recession.

Slide 10: Simplified, the cycle is like a vessel that holds all the attitudes, activity, and opportunities that feed economic growth, until finally cracks start to appear, attitudes shift, opportunities disappear, activity slows, and the economy contracts, emptying the vessel until a new cycle begins.

Slide 11: When a new cycle begins, businesses and consumers start to do the things that reflect a healthy economy again, tentatively at first and then slowly with greater assurance. We believe there are three categories of things business and consumers start to do again when a new cycle begins that are crucial: they become more confident and are willing to take more risks; they borrow to take advantage of opportunities; and they spend as their economic situation improves.

Slide 12: Confidence, borrowing, and spending start to create growth, refilling the vessel as overall economic activity rises.

Slide 13: Confidence, borrowing, and spending are all essential for healthy economic growth. They are not intrinsically dangerous; they are intrinsically beneficial. We need to hire and build, invest and spend. But when confidence becomes overconfidence, borrowing becomes overborrowing, and spending becomes overspending, pressure starts to build in the economy and cracks begin to appear.

Recovery

Mature Aging

Recession

Source: Standard & Poor’s, FactSet, LPL Research 07/17/15 Indexes are unmanaged and cannot be invested into directly. Past performance is not indicative of future results. 9 LPL Financial Member FINRA/SIPC

It Ain’t Over Until It’s Over“ ”-Yogi Berra


It Ain’t Over Until Over Is Everywhere“ ”-LPL Research



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LPL Research, to borrow a line from the great Yogi Bera, believes “It Ain’t Over Until Over Is Everywhere.” Confidence can drive borrowing, which is used to increase spending, which in turn can create greater economic confidence, forming a self-reinforcing virtuous cycle. But when these three activities start spurring each other to unstable heights where “over” is everywhere, the cycle can turn vicious. What drives the end of bull markets is not age, it is excesses.

Slide 17: In order to capture when these excesses, these cracks in the vessel, are starting to appear, LPL Research has built its Over Index, which aggregates data that reflect economic confidence, borrowing activity, and spending activity, creating a sub-index for each, and then combines them to help measure the likelihood that the economy is showing signs of overactivity and that we may be approaching a cyclical peak.

Slide 18: For each sub-index of the Over Index we have chosen four diverse components that reflect the economic activity of that sub-index from a different angle. For example, for borrowing we look at two measures of consumer borrowing, credit card debt levels, and total debt service payments relative to income. We also include two measures of commercial borrowing activity: the level of business liabilities and the rate of commercial loan growth. All the measures are standardized and transformed in some way to help measure cyclicality. For example, credit card debt and total debt service payments are looked at relative to income.

Slide 19: The raw data for each component in the borrowing sub-index share some features but each looks at borrowing activity from a different angle. Individually, they don’t necessarily reveal a clear pattern.

CONFIDENCE

Borrowing

SPENDING

OVERINDEX

The


CONFIDENCE

Borrowing

SPENDING

CREDIT CARD DEBT

CONSUMER DEBt PAYMENTSBUSINESS DEBTCOMMERCIAL LOAN GROWTH

Revolving Consumer Credit/Disposable Income

Household debt service relative to disposable personal income

Business total liabilities/net income before taxes

Year-over-year change in commercial and industrial loans at all commercial banks

OVERINDEX

The


0

-30

Year-Over-Year Change in Commercial and Industrial Loans at All Commercial Banks

30%

10

-10

-40

Business Total Liabilities/Net Income Before Taxes (trailing 4 quarters)

140%

BUSINESS DEBT

80

20

CONFIDENCE

Borrowing

SPENDING

COMMERCIAL LOAN GROWTH

OVERINDEX

The

Source: Federal Reserve, Haver Analytics, LPL Research 07/17/15

Household Debt Service Relative to Disposable Personal Income

CREDIT CARD DEBTRevolving Consumer Credit/ Disposable Income

11.5

9.5

13.5%

1983 20151983 2015

2

10%

6

CONSUMER DEBt PAYMENTS

1983 20151983 2015



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Slide 21: But when combined into a single sub-index and set against economic recessions, the overall pattern emerges. The borrowing sub-index does climb before each recession, reaching an average ranking of over 80% prior to the dot-com recession. But it’s the Great Recession where excesses in borrowing really stand out. Also important to notice, when the index was low, there was little threat of a recession, and it is low right now.

Slide 22: Overspending tells a different story. The overspending sub-index consists of business capital expenditures on the commercial side; durable goods purchases, which are often big ticket items, on the consumer side; home values, the major purchase of most consumers; and spikes in commodity prices, which can have a lot of drivers but among them a jump in demand. This sub-component has its highest spike before the early 1990s recession, but is in the upper half of the chart before all three recessions.

Slide 23: The confidence sub-index includes consumer confidence compared to future expectations, the equity risk premium, proxied by the spread of the “earnings yield” of the S&P 500 (earnings divided by price) over Treasuries as an indication of the relative priciness of stocks; wage growth, since hiring despite strong wage growth is a strong sign of economic confidence; and a measure of financial leverage put out by the Fed, since leveraging is a measure of risk taking. Not surprisingly, the dot-com bubble scores highest on confidence, although the confidence sub-index rose prior to all three recessions.

Slide 24: Every economic cycle is different, which can be seen when the three sub-indexes are put on top of each other. In the last three recessions, each was characterized by a different sub-index standing out. None of them tells the whole story by itself—it’s the combined effect of the three that is most telling.

Slide 25: Where do we stand today? Valuations are a particular concern with investors, some seeing overconfidence. But by our preferred way of measuring the traditional price-to-earnings ratio, we are currently in a confident zone, and that’s not necessarily a bad thing.

Re

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Re

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ion

Average of Credit Card Debt, Consumer Debt Payments, Business Debt, and Commercial Loan Growth ComponentsBorrowing

0

100%

1983 2015201120072003199919911987 1995


CONFIDENCE

Borrowing

SPENDING

OVERINDEX

The

40

20

60

80


Home Values

Business Spending – Capex

Big Ticket Purchases

Commodity Prices

Indexed Real Home Prices

Nonfinancial Business Total CapEx/Income After Taxes

Durable Goods Purchases/Personal Consumption Expenditures

S&P GSCI Commodities Index over Prior 5-Year Low


CONFIDENCE

Borrowing

SPENDING

OVERINDEX

The

0

100%

1983 2015201120072003199919911987 1995

40

20

60

80

Borrowing

Re

ce

ss

ion

Re

ce

ss

ion

Re

ce

ss

ion


0

100%

1983 2015201120072003199919911987 1995

40

20

60

80

Borrowing

Re

ce

ss

ion

Re

ce

ss

ion

Re

ce

ss

ion

Spending

Consumer Confidence

Valuations

Wage Growth

Business INVESTMENT

Conf. Board Consumer Confidence Minus Consumer Expectations

Equity Risk Premium

Employment Cost Index

Chicago Fed National Financial Conditions – Leverage


CONFIDENCE

Borrowing

SPENDING

OVERINDEX

The


0

100%

1983 2015201120072003199919911987 1995

40

20

60

80

SpendingConfidence Borrowing

ConfidenceBorrowing Spending

Source: Federal Reserve, Haver Analytics, Conference Board, Standard & Poor’s, LPL Research 07/17/15

CONFIDENCE

Borrowing

SPENDING

OVERINDEX

The

Re

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ss

ion

Re

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ss

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Re

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ion


S&P 500 Trailing Price-to-Earnings Ratio

20001980 1990 201019701950 1960

30

5

0

15

35x

20

25

Over Confident

Confident10

17.8

Source: Federal Reserve, Haver Analytics, Conference Board, Standard & Poor’s, LPL Research 07/17/15 Past performance is not indicative of future results

CONFIDENCE

Borrowing

SPENDING

OVERINDEX

The



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Slide 27: However, the Over Index focuses on stock valuations relative to bonds. Recall it’s a measure of the difference between the earnings yield for stock compared to the yield on 10-year Treasuries, and it actually reflects relatively low confidence in stocks compared to bonds.

Slide 28: Putting the three subcomponents together, the Over Index is currently near 30% right now, meaning 70% of the index values have been higher over the last 30+ years. Confidence is not bleeding into overconfidence, while spending and borrowing remain low. But we are watching all the sub-indexes carefully. We also continue to use our “Five Forecasters,” again a diverse set of indicators that have provided some warning when we are moving into the later stages of the economic cycle. None of the Five Forecasters is flashing a warning signal. Purchasing managers’ sentiment, which has been weighed down by falling capital expenditures from the oil industry, is not a red flag but is on watch, as are valuations.

Slide 29: If we set aside tired “dinosaur” ideas about what causes bull markets to end, we can focus on data-driven indicators of threats to the bull market. Stocks are tied to the economic cycle and economic cycles die of excesses. We have our data points we are watching, the Over Index and the Five Forecasters. And finally, we have our takeaway. The pace of this expansion has been moderate, but the Fed preparing to raise rates tells us the economy may be ready to stand on its own two feet. The moderate pace of expansion so far may actually help extend the current expansion’s length. But there are some yellow flags out there, so while we remain bullish, we’re cautiously bullish and continue to monitor market conditions closely.

S&P 500 Earnings Yield* Minus 10-Year Treasury Yield

Bonds Cheap

Stocks Cheap *1-Year Average of Trailing 4-Quarter Earnings Divided by Index Level

Equity Risk Premium

Source: Federal Reserve, Haver Analytics, Conference Board, Standard & Poor’s, LPL Research 07/17/15 Past performance is not indicative of future results

CONFIDENCE

Borrowing

SPENDING

OVERINDEX

The

20112003 2007 201519991983 19876

3

-6%

0

-3

19951991


1983 2015

Treasury Yield Curve

Leading Economic Indicators

Market Breadth

Purchasing Managers’ Sentiment

Market Valuation

No YesOn WatchForecaster

Late Cycle Warning?

Source: LPL Research 07/17/15

CONFIDENCE

Borrowing

SPENDING

OVERINDEX

The

Forecasters5The

0

100%

40

20

60

80


The OVER Index

CONFIDENCE

Borrowing

SPENDING

Forecasters5The

It Ain’t Over Until Over is Everywhere

Are Flashing Limited Concerns

Economic Expansions End Because of Too

Many Excesses

Investment Implications:

&

Stay Cautiously Bullish

Avoid Dinosaur

Ideas


Not All Cracks Are Canyons



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Even as we move through a bull market, market cracks appear. When the glass is viewed as half empty, every crack threatens a market collapse. But every market crack is not the same, and they are certainly not all canyons.

Slide 32: If we look at every pullback of at least 5% back to 1983, we see that most turn out to be just pullbacks (5-10% decline from peak), while only a few grow into corrections (10-20% decline from peak), and only three of those have turned into bear markets (>20% decline from peak). Bear markets start as smaller cracks, but few of the smaller cracks end up as bear markets. Also, if we look at the shape of these different cracks, we see a lot of variety.

Slide 33: There are a lot of different kind of cracks. A simple way to classify them is by how deep they are and how long they last. In the 2010 flash crash, the S&P 500 dropped over 5% in just five minutes. In 1994, the S&P 500 never fell more than 10% but also never managed to recapture its early February high for the year over the remainder of the year.

Slide 34: So when market cracks appear, it’s important to look at the context. Take Greece, for example. Greece recaptured investors’ attention in 2015 as a new government tried to renegotiate terms with its lenders. Greece was a catalyst for a small crack, just a market pullback. Could it develop into more? Greece represents only 0.3% of global gross domestic product (GDP), but the real concern with Greece was not its size; it was the possible ripple effect.

Slide 35: But potential ripple effects from Greece were not the same issue in 2015 as they had been earlier in the European debt crisis. Bank exposure to Greek debt is only a fraction of what it had been in 2009.

Slide 36: Derivative exposure had also shrunk considerably. Credit default swaps, a financial derivative that provide protection against Greek default, had also fallen to a fraction of their former level.

Slide 37: And even at its peak, Greek credit default swap exposure was just a fraction of default swap exposure against subprime defaults prior to the financial crisis. In short, Greece was no Lehman.

Pullback Cracks

Correction Cracks

Bear Market Cracks-60

-50

-40

-30

-20

-10

1983 20151985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013

S&P 500 Negative Daily Return Days

Source: Haver Analytics, LPL Research 07/17/15

Not all Cracks Are The Same

0%


NarrowDe

epWide

Shal

low Greece 1994 Malaise

Flash Crash Great Recession


Not all Cracks Are The Same


Greece is less than 2% of Eurozone and 0.3% of Global Economy

World $72,806.6

EuROZONE $13,399.4 Greece

$237.8

GreeceSize of GDP, $ Billion

Source: Haver Analytics, LPL Research 07/17/1534 LPL Financial Member FINRA/SIPC

SpainItaly Netherlands

Bank Exposure to Greek Debt ($, Billions)

FranceGermany

70

30

0

50

90

10

60

40

20

80

2009

2014

$144 Billion

$19 Billion

2009 2014


Greece


2015 Exposure to Greece

$2 Billion


Greece


Credit Default Swaps

$80 Billion




$2 Billion

Greece


$80 Billion

2008 Exposure to Subprime

Credit Default Swaps

$4.5 Trillion


CracksWe Are Watching?

What Are Some of the



8

Nevertheless, it remains important to monitor any threats to the bull market. The key crack we’re watching is global growth.

Slide 40: Purchasing Managers’ Indexes (PMI) can often give some sense of where an economy is heading. The level of the PMIs of the largest economies, weighted by GDP, has been falling, but anything above 50 for PMIs still represents growth. It’s a factor worth monitoring, but it’s still half full.

Slide 41: This is a graphic from our 2015 Midyear Outlook, showing changes in real GDP growth relative to other major economies (on the y-axis) and a measure of how loose or tight monetary policy is (on the x-axis). Countries generally move counterclockwise. Better growth leads to tighter (less supportive) monetary policy; weaker growth leads to looser (more supportive) monetary policy. The key ideas to focus on here are that Japan and Europe, despite loose policy, had not seen the economic benefits as of the end of 2014. China, meanwhile, still has a lot of capacity to loosen policy to support growth.

Slide 42: As we monitor global growth, we are looking for a gradual, low-impact exit from loose monetary policy by the U.S., the translation of still loose policy to growth in Europe and Japan, and further stimulus to help stabilize China’s growth rate.

54

51

50

49

52

48

53

Composite Global PMIs

Purchasing Managers Remain Positive

2015201420132012


DeceleratingAccelerating

Global Growth


Weaker GrowthLooser Policy

Stronger GrowthTighter Policy Monetary Policy

Po

st-

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R

ela

tive

G

row

th

-10

10

0

5

-5

10-10 5-5

1

2

4

3

Weaker GrowthLooser Policy

Stronger GrowthTighter Policy Monetary Policy

Po

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R

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G

row

th

-10

10

0

5

-5

10-10 5-5 USA ‘12

USA

Size of circle represents relative size of GDP

2008

USA ‘08

2012 2014

Monetary Policies Drive Global GrowthTop Global Economies*

Global GrowthWeaker Growth

Looser PolicyStronger Growth

Tighter Policy Monetary Policy

Po

st-

Re

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R

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G

row

th

-10

10

0

5

-5

10-10 5-5 USA ‘12

USA

Size of circle represents relative size of GDP

2008 2012 2014

Monetary Policies Drive Global GrowthTop Global Economies*

Global Growth

Euro-Zone

Japan

Eurozone ‘12

Japan ‘12

ChinaChina

‘12

Source: LPL Research, International Monetary Fund, Haver Analytics 05/29/15 *While 20 economies were used to establish astatistical baseline, only 4 of the largesteconomies are shown.


Keys To NOT CRACKING

EUROPE & JAPAN:SUSTAIN LOOSE POLICY

U.S.:CAUTIOUS MOVE TO

TIGHTEN

Global Growth

China: More Aggressively

Loosen Policy


What about the

Cracksin Our Portfolios?



9

In addition to monitoring potential macroeconomic cracks, we have also been monitoring some cracks affecting many portfolios for the last several years, such as the benefits of diversification and the performance of active managers.

Slide 45: In order to measure the effect of diversification, we compared the performance of the S&P 500, the most widely used domestic large cap index, with a portfolio made up of some popular equity diversifiers: small caps, represented by the Russell 2000; developed international stocks, represented by the MSCI EAFE Index; and emerging market stocks, represented by the MSCI EAFE Emerging Markets Free Index. We called the average of these three indexes the equity diversifier, and you can see that in three of the last four years it has trailed the S&P 500 by more than 10%.

Slide 46: But if you look at the difference between the performance of the S&P 500 and the equity diversifier back to 2000, it’s clear that underperformance by the diversifier had not been the norm.

Slide 47: Judging from flows into the largest exchange-traded funds (ETF) representing the S&P 500 and the equity diversifiers, investors have been taking the shorter-term situation to be the norm and have become “diversification defectors,” losing some of its potential benefits.

Slide 48: Active management has also been subject to a narrow view. This slide shows the percent of active managers who have outperformed the S&P 500 from 2000 to 2014. The downward slope seems to tell a clear story—manager performance has been steadily declining—but we believe it is deceptive.

Our Diversifiers Have Not Worked Well over the Past Few Years

Equity Diversifier

-0.5%

Large Cap

13.7%

Large Cap

32.4%Equity

Diversifier

19.9%

Equity Diversifier

17.6%

Large Cap

16.0%

Equity Diversifier

-11.4%

Large Cap

2.1%

LPL Research, FactSet, MSCI, Russell, Standard & Poor’s

Index proxies: Large–S&P 500; Emerging markets–MSCI EAFE Emerging Markets Free; International–MSCI EAFE; Small–Russell 2000

2014201320122011


-14.2%-12.5%

1.6%

-13.5%

201420132012201120102009200820072006200520042003200220012000

-6.3%

19.8%

11.1%10.1%12.8%10.8%

18.9%

8.1%4.9%

-6.8%

3.0%

Diversification Benefit over time

LPL Research, FactSet, MSCI, Russell, Standard & Poor’s

“Benefit” = Large cap - equity diversifier return

There is no guarantee that a diversified portfolio will enhance overall returns or outperform a nondiversified portfolio. Diversification does not ensure against market risk.


190000

110000

50000

150000

230000

What are we Investing In?

2010 20142012 20132011 2015

DIVERSIFICATION DEFECTORS

210000

170000

130000

90000

70000

Dollars in Large Cap, $, Million Dollars in Small Cap, International, and Emerging Markets, $, Million

Note: Assets in largest ETFs representing asset classes shown



60

20

0

40

80%

2010200820052000 2003 20142001 2002 2004 2006 2007 2009 2012 2013

Active Managers struggling lately% of Active Managers Outperforming the S&P 500

2011

Source: LPL Research, Morningstar, Standard and Poor’s

Note: % of active managers in the large blend Morningstar Category outperforming the S&P 500



10

Slide 50: If you take those same years and divide them into higher return and lower return environments, you can see that the return environment, not just movement forward through time, has dictated the success of active management. If we expect the last part of this cycle to produce moderate returns, with a 10% return the dividing line between the two return environments on this chart, we may be heading towards a period where active management, on a historical basis, has performed better.

Slide 51: In short, we believe that dismissing diversification and active management to be based on an overly narrow reading of the evidence, and the prospects of a moderate return environment and a broader historical perspective lead us to believe a better strategy would be to trust active management and stay diversified.

Slide 52: This slide presents our best diversification ideas, which can be found in our 2015 Midyear Outlook and biweekly Portfolio Compass.

20

-20

-40

10%

27.5%

45%

62.5%

80%

1.75 3.5 5.25 7

55%

61% 61%

73%

26%

66%61%

0

S&P 500 Index Calendar Year Returns Ranked Lowest to Highest40%

2007

2004

20062014

2005

2008

2000

2013

2002

2001

2011

2010 2012

20092003Modest Return Higher Return

10%

22.5%

35%

47.5%

60%

3.75 7.5 11.25 15

45%

17%

26%

35%

41%

51%

34%

41%

50

20

10

30

60

70

40

90%

80

% of Active Managers Outperforming

LPL Research, FactSet, Morningstar, Standard & Poor’s

Note: % of active managers in the large blend Morningstar Category outperforming the S&P 500 Index Indexes are unmanaged and cannot be investing into directly. Past performance is not indicative of future results.

Higher Return Environment Challenging For Active Managers


Trust Active Management

Staydiversified

PORTFOLIOCRACKS

KEYS TO AVOIDING


Our BestDiversification Ideas

cyclical growth

managed futures

International

Master Limited Partnerships

(MLPs)Global macro

high-yield bonds

Municipal Bonds

investment-grade credit

Emerging Markets


Thank You For Your Partnership



11

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 your clients. Any economic forecasts set forth in the presentation may not develop as predicted and there can be no guarantee that strategies promoted will be successful. All indexes are unmanaged and cannot be invested into directly.

Economic forecasts set forth may not develop as predicted, and there can be no guarantee that strategies promoted will be successful.

There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not ensure against market risk.

Bonds are subject to market and interest rate risk if sold prior to maturity. Bond and bond mutual fund values and yields will decline as interest rates rise and bonds are subject to availability and change in price. 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.

International and emerging markets investing involves special risks, such as currency fluctuation and political instability, and may not be suitable for all investors.

The PE 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 PE ratio means that investors are paying more for each unit of net income, so the stock is more expensive compared to one with lower PE ratio.

The MSCI EAFE Index is recognized as the pre-eminent benchmark in the United States to measure international equity performance. It comprises the MSCI country indices that represent developed markets outside of North America: Europe, Australasia, and the Far East.

The Russell 2000 Index measures the performance of the small cap segment of the U.S. equity universe. The Russell 2000 Index is a subset of the Russell 3000 Index representing approximately 10% of the total market capitalization of that index.

The S&P 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.

Not FDIC or NCUA/NCUSIF Insured | No Bank or Credit Union Guarantee | May Lose Value | Not Guaranteed by Any Government Agency | Not a Bank/Credit Union Deposit

Tracking #1-412542 | Exp. 08/16

This research material has been prepared by LPL Financial. To the extent you are receiving investment advice from a separately registered independent investment advisor, please note that LPL Financial is not an affiliate of and makes no representation with respect to such entity.


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