D9 Newsletter

Mid-Year Reflection eduAcaNteewasnldettsehrartoe lstifaey’schonanpepcetneidn,gs. Clients and Friends, Courtnie’s Commentary NEW Locations Happy summer! I hope Courtnie’s Recipe this newsletter finds you Social Media & Website well! It is hard to believe Conor’s Commentary 2017 is halfway “over”. At Family Updates the mid-year point, I look Family Updates (Cont.) at this time of the year asan opportunity to reflect. It is a time to reflecton successes, missed goals, and provides usan opportunity to learn. It truly sets up therest of the year. Use this time of the year toevaluate your progress on saving more,reducing debt, and use it is a time to put yourhealth goals back in focus. At Good Life wefirmly believe that health and finances areintimately linked together. Often times stressstems from one’s financial imbalances leadingto negative physical health. It is veryimportant to be conscious of your financialhealth as an individual and as a family. Usethis time to have open dialogue with yourfamily about your current financial health andabout your goals you are setting forth for boththe short and long term. We encourage youto include your children in on thisconversation. Educating your children, nomatter what age, about treating money andfinances with respect is vitally important. Usethis as a time to evaluate increasing savings,perhaps investing excess funds you may havesaved year to date, or use it as time to get anindependent opinion on your uniquesituation. As you navigate through theseconversations, do not hesitate to reach out toyour team here at Good Life for guidance.We hope you enjoy the rest of your summer!Courtnie NeinPresidentGood Life Financial Advisors

follow us! ONLINE ACCOUNTSGreenville, South Carolina Search “Good Life Financial Advisors” on bothElkin, North Carolina Facebook and LinkedIn and follow/add ourColumbia, South Carolina page to your friends list! Be sure to share our updates with your family and friends! You can access your online by visiting our website at www.GoodLifeFA.com and navigating to CLIENT CENTER > ACCOUNT VIEW LOGIN. If you are interested in an online account, please call Denise Brochu at (610) 898-6927 x2080. She along with the rest of our team are in the office from 9AM-5PM Monday-Friday and would be happy to help! Mocha-Nut Snack Bites With just a hint of espresso, these tasty morsels will keep you full of energy for hiking, camping, or any exciting activity you might be doing! INGREDIENTS: 1 cup old fashioned oats ¼ cup flax seed 1 teaspoon espresso powder 2 tablespoons unsweetened cocoa powder Pinch salt ½ teaspoon vanilla extract 2 tablespoons creamy peanut butter 2 tablespoons almond butter ¼ cup maple syrup DIRECTIONS: In a large bowl, combine all ingredients. Whisk or stir with a spatula until everything comes together. Cover and place the mixture in the fridge for 30 minutes to chill. Once chilled, scoop out tablespoon sized portions and roll into a ball. Place on a pan lined with parchment paper. Refrigerate to set. Store in an airtight container.

The Important Things Clients and Friends, I hope everyone’s summer is off to a great start! We wanted to take the opportunity to give you an update on what is happening at the Good Life. We are in the process of looking for a new office. Our current office, and the landlords, have beengreat to us but the corporation that serves the national footprint of advisorshas expanded such that we are not comfortable anymore in the current location.This has given me the opportunity to look at the culture and messaging we demonstratedaily at Good Life. For a young firm, we are frankly at the precipice of effecting real change in this greatcommunity that we serve. With a successful offering nationwide, we have been able to grow operating revenuesuch that we can really hone in on some of the MACRO issues that we face in Berks County and start thinkingabout how this company can help lead change here.Berks County has 3 big issues… One of the least healthy, one of the poorest, and one of the highest crime rates inthe country. I would tie those issues back to a few key things… Lack of leadership, lack of money, and lack ofknowledge. Look for us to build a community wellness center for our next great office where we address the bigissues and how our organization can be a beacon of light.Keep in mind, our firm is one of the few that keeps all of its revenues in Berks County. Anyone else in financialservices takes most of the revenue you pay and they send it to New York, St. Louis, or somewhere else. The abilityto have a positive impact on our local community is restricted due to public shareholders. Good Life prides itselfon keeping our offices here, where our advisors and the corporation service Berks County, enabling us to reinvestback into other businesses in Berks every day. This makes us unique. Further, we go to 30 towns around thecountry where we support 200 advisors and affiliates, and we bring a piece of those revenues back to Berks.We will drive change here, and we will unite. Look for more on this in the future but in the meantime, the best isyet to come! All the best, Conor Delaney CEO Good Life Financial Advisors

Family UpdateAs always, the Delaney clan is going and growing! Our beautifulbaby girl Elena has the happiest disposition I have ever seen in ababy! Blake is on her way to Kindergarten and Rhys is being thecrazy almost 3 year old that you would expect. For those that donot know, I have embarked on a journey to run the Abbott WorldChampionship... 6 marathons around the world, starting withBoston. Liz came to Boston and is hooked! Not 5 months afterthe baby is born and Liz has gotten into the best shape of herlife... many thanks to our great trainer Ray Piazza (and to his wifeBarbara for letting us borrow him so often!). Next up, NYCMarathon in November! Family Update I thought I would share an update on the Nein family. Graham turned five on July 6th. He graduated from Pre-K at Goddard School and will begin kindergarten in the fall at Schuylkill Valley Elementary School. He is very excited but also nervous for the new change. I might be just as nervous since he won’t be just “across the parking lot” any longer! Justinn and I are excited to continue watching him grow and develop. He has quite the imagination and loves living his life as “cowboy Graham.” As for our Colt, he turned one in February and is also attending Goddard School. He is running all over and learning a lot of new words each day! He is a joy to watch and we love watching him follow big brother Graham’s every move. Justinn and I just moved into a new home at the end of June so needless to say our life is a bit crazy right now between both of our businesses, being parents to our boys, getting settled into the new house, and attempting to spend time together. We hope that each of you continue to cherish the moments with your family and always appreciate the support from everyone as we navigate the balance of business and parenthood.

Family Update This past year we have been empty nesters and adjusting to the quiet. Kirsten graduated from Conrad Weiser last year and followed her sister, Karlene, out to the University of Akron, OH. The nest wasn’t totally empty as we have Maggie, our English Mastiff. Karlene graduated in May from Akron and took a trip with her roommate. They traveled 9,183 miles around the country and blogged about their experience. They were gone for 26 days. Karlene now is taking summer courses for her Master’s Degree in Accounting which she hopes to have by next May. Kirsten has decided to major in Human Resources and will be returning to Akron for her sophomore year. She has come home for the summer to build up her bank account. Each stage of life comes with its own excitement. I enjoy watching the children of both Conor’s family and Courtnie’s family grow up seeing the joys and struggles of having young children from the sideline. It is nice that mine now sleep in on weekends.See document enclosed for LPL Financial’s Mid-Year Outlook! Securities offered through LPL Financial Member FINRA/SIPC. Investment advice offered through GoodLife Advisors, LLC a registered investment advisor. Good Life Financial Advisors and Good Life Advisors, LLC are separate entities from LPL Financial.

Member FINRA/SIPC

The New Growth Engine Here are where these market drivers stand and the themes we’ll be watching as we look ahead to the rest of 2017: An important shift has taken place in this economic cycle. Monetary policy The Federal Reserve (Fed) was finally able to start following through on its projected rate hike path, raising rates twice POWERING DOWN in just over a three-month period. By doing so, the Fed Slow path to normalization. showed increasing trust that the economy has largely met The Fed has been slowly powering down support its dual mandate of 2% inflation and full employment, that since it started tapering its bond purchases the economy is progressively able to stand on its own two in January 2014. Although the slow path to feet, and that fiscal policy may now provide the backstop to normalization accelerated in the first half of 2017, the economy that monetary policy has provided throughout we expect the Federal Open Market Committee’s the expansion. The gauges say growth engines and market (FOMC) gradual approach to rate hikes to continue drivers may have changed: power down monetary policy, and look for two or three rate hikes in 2017. power up business fundamentals, and potentially take fiscal2 policy and economic growth off standby. Business fundamentals Thus far in 2017, the consistency of this new fiscal-led POWERING UP dynamic has been uneven, leading to shifting market Now taking control. leadership amidst low volatility and a narrow trading range Global monetary policy has helped push equity for major market indexes. To be sure, in the post-election prices higher since 2014, despite no real earnings rally, the financial markets began to price in many of the growth. That dynamic has begun to change pro-growth policies offered by the Trump administration. and we expect solid earnings gains in 2017. The Yet, despite an initial flurry of activity, political momentum central bank-driven market has become a more slowed, and investor sentiment dampened even as fundamental-driven market, which may favor active consumer and business confidence remained high. It is management going forward. important for investors to appreciate that despite these developments, U.S. equity indexes managed to progress Economic growth through the first half of 2017 either at, or very near, all-time highs. Moreover, signs of financial stress, based on interest ON STANDBY rates, credit spreads, and market volatility, remained largely Confidence not enough, yet. absent. Most importantly, even with fiscal policy on standby, Business and consumer confidence have increased, the return to business fundamentals, such as renewed but have not yet provided a significant boost to the corporate earnings growth, can now act as a market catalyst. economy. Trends in business spending have been The Fed will still have its role to play, but monetary policy is encouraging. Policy uncertainty is likely partly to powering down as the driver of financial market strength. blame for this disconnect and therefore greater policy clarity may help unleash “animal spirits” and Despite the significant role of monetary policy as a market spur growth. driver throughout this expansion, general investing principles have held true. The ability to form a good plan Fiscal policy and stick to it, with judicious adaptation to the market environment, is the time-tested foundation of continued ON STANDBY progress toward financial goals. If we are shifting to new Pro-growth potential, but when? market dynamics, including a greater role for corporate Implementation of pro-growth policies such as tax profits and fiscal policy, understanding the evolving reform, infrastructure spending, and deregulation opportunities will be important for diversified investors. Use remain likely, but the timetable may very well LPL Research’s Midyear Outlook: A Shift In Market Control as be pushed back due to political distractions in your guide to the shift in growth engines fueling this market. Washington, D.C. In terms of potential earnings impact, fiscal policy — corporate tax reform in particular — is a 2018 story.

Forecasts @ A GlanceEconomy Stocks International BondsGDP Growth Near 2.5% 6 – 9% Returns Emerging over Developed Limited Return PotentialWe continue to look for the As investors increasingly trust Though fundamentals are We expect the 10-yearU.S. economy to expand up that the economy can stand firming, growth in Europe Treasury yield to end 2017 into 2.5% in 2017, although on its own without the need and Japan has only gradually the 2.25 – 2.75% range, withpotential delays in passing of monetary policy support, improved from low levels. the potential for moves towardmajor fiscal policies introduce business fundamentals should Monetary policy has fueled 3.0% should anticipated policysome risk to the downside. take over as the primary economic and financial market support lead to a meaningfulData on consumption, market engine and corporate gains with central bank support rise in economic activity.employment, housing, profits will take on increasing continuing, yet economic Divergent global centralmanufacturing, and services importance. We have slightly reforms are still needed. We bank activities, moderateall point toward improvement raised our 2017 S&P 500 Index remain cautious on developed inflation pressures, andin the months and quarters total return forecast to 6 – 9%, international markets, but attractive valuations for U.S.ahead following sluggish first commensurate with expected more constructive on emerging Treasuries relative to globalquarter GDP growth. earnings gains. markets (EM). alternatives may support bonds at higher yields. 3How to Given the environment we expect over the second half of 2017, our preferred investments include:Invest U.S. Small U.S. small caps have benefited from accommodative monetary policy andStocks Cap Stocks may benefit from fiscal policy changes, though valuations are stretched. Emerging Near-term catalysts (global growth, monetary policy) and longer- Markets (EM) term trends (six billion consumers) offer opportunities. Cyclical Technology is positioned to benefit from continued solid earnings Sectors growth as business investment potentially picks up and drives higher productivity. Industrials may benefit from potential spending on defense and infrastructure projects and stronger global demand. Financials should benefit from deregulation that may free up capital for lending and dividends, while tighter monetary policy may help profitability. Master Limited The Trump administration’s stance on energy deregulation is supportive; Partnerships yields remain very attractive but introduce interest rate risk. Investment-Grade We continue to find relative value in investment-grade corporate bonds given Corporates continued strength in credit markets and the yield premium over Treasuries.Bonds Mortgage-Backed Among high-quality bonds, MBS continue to offer an attractive Securities (MBS) trade-off between yield and interest rate risk. Bank Loans Attractive yields and coupon payments that adjust with short-term rates make bank loans less likely to suffer price declines as rates rise. Because of its narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies.

CENTRAL BANKS The Fed Powers Down For the U.S. and global economies alike, the ability this stage of the business cycle. But even if payroll to stand on their own without central bank support growth were to decline to a 100,000 to 125,000 will be key for financial markets over the balance of monthly pace, we suspect the Fed would still stay 2017 and beyond. on track to hike rates at least twice this year. Wage The Fed is powering down its support as it growth at 2.5% remains below the 4.0% pace that continues on the path to normalization. Considering has historically caused central bankers to raise rates the age of the business cycle and largely steady, aggressively, but has improved enough to keep the though below-trend growth, the Fed no longer Fed on its stated track.4 needs to employ emergency-level policy measures. While such a rate hike path would be consistent We expect two or possibly three rate hikes in with the FOMC’s statements, monetary officials 2017 as the central bank gradually removes its will need to balance their employment and inflation support [Figure 1]. Better U.S. growth amid low mandates with the potential U.S. dollar impact. unemployment will likely be accompanied by core Following a significant rally from late 2014 to early inflation pushing somewhat above the Fed target 2015, the dollar has been largely range bound of 2%, supporting normalization. But there are still [Figure 2]. Imbalances may occur if the dollar gets enough forces pushing down on inflation, including too strong relative to other currencies, particularly excess manufacturing capacity, a low labor force in EM — representing over half of global economic participation rate, and a more stable dollar, that an output — where weak currencies relative to the extended run meaningfully above the Fed’s 2% dollar can lead to capital flight, higher debt service target remains unlikely. payments, and food inflation. Policymakers are Job creation, which has averaged about 185,000 mindful of this, as published statements expressed jobs per month so far in 2017, is likely to slow at a possible shift in tactics toward a market-based 1 Fed Expects Gradual Rate Hikes; 2 The U.S. Dollar Has Been Largely Market Expects Even Slower Range Bound Since 2015 Number of 0.25% Rate Hikes U.S. Dollar Index Market Implied 110 Fed Dot Plot Implied 105 4.0 100 95 3.5 90 85 3.0 80 75 2.5 ‘13 ‘14 ‘15 ‘16 ‘17 2.0 Source: LPL Research, FactSet 05/19/17 1.5 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 1.0 business operations across national borders, they face currency risk if their positions are not hedged. 0.5 0.0 2018 2019 Remainder of 2017 Source: LPL Research, Federal Reserve, Bloomberg 05/19/17 Market implied rate hike expectations are calculated based on the pricing of various fed funds futures contracts. Fed Dot Plots are predictions of the fed funds rate by Federal Open Market Committee (FOMC) participants plotted in a chart.

form of tightening, referred to as balance sheet (ECB) appears to be in a holding pattern — not likelyrunoff, whereby the central bank can reduce the size to loosen further (which would benefit bonds), butof its balance sheet by tapering the reinvestment of also not likely to tighten until inflation starts to pickmaturing bonds, potentially beginning in early 2018. up. The Bank of Japan (BOJ) is in a similar situation, providing more optimistic economic assessments,Looking overseas, central bank policy, particularly in but still warning that stimulus will need to beEurope and Japan, continues to result in low yields maintained at current levels. The end result is lowfor developed overseas economies. With better rates overseas may keep U.S. interest rates fromgrowth emerging in many European countries, but moving significantly higher.inflation still subdued, the European Central BankActive Management Spark Reduced reliance on monetary policy has also led to 5 falling correlations between stocks [Figure 3], whichGlobal monetary policy has been an important force has helped drive improved performance for activehelping to push equity prices higher since 2014. As strategies. It is much easier to find a winner whencentral bank balance sheets expanded, stock prices the market produces a good number of them. Abenefited as bonds became less attractive in a low- market where everything moves together providesyield world. Consequently, equity prices climbed a challenging environment for stock pickers todespite flat earnings, resulting in a market driven by differentiate themselves versus the indexes.a climbing price-to-earnings ratio (investors willing topay more for potential future earnings). Broader market leadership is another encouraging development for active managers. When the S&PAs the Fed has begun to tighten its policy, the 500 leads all investment alternatives, diversifyingcentral bank-driven market has become more of asset classes can detract from performance. Morea fundamentally-driven market. In a fundamental areas, such as international and EM equities, haveenvironment, which includes fiscal policy, businesses been outpacing U.S. large caps this year andhave a more differentiated response to the macro providing more opportunities to enhance returns.environment and investors take cues from businessfundamentals (earnings, sales, cash flow, etc.). The Active management involves risk as it attempts to outperform a benchmarkreturn of a more “classic” business cycle where index by predicting market activity, and assumes considerable risk shouldfundamentals drive stock performance should favor managers incorrectly anticipate changing conditions.active strategies going forward. 3 Lower Correlations and More Dispersion May Mean Opportunity Median 63-Day Correlation of S&P 500 Stocks to the S&P 500 Index 1.0 0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 ‘02 ‘04 ‘06 ‘08 ‘10 ‘12 ‘14 ‘16 Source: LPL Research, Ned Davis Research 05/19/17Correlation ranges between -1 and +1. Perfect positive correlation (a correlation co-efficient of +1) implies that as one security moves, either up or down, the othersecurity will move in lockstep, in the same direction. Alternatively, perfect negative correlation means that if one security moves in either direction the security thatis perfectly negatively correlated will move in the opposite direction. If the correlation is 0, the movements of the securities are said to have no correlation; they arecompletely random.

U.S. ECONOMYRegularly Scheduled Maintenance DueWe continue to look for the U.S. economy to all point toward potential improvement in theexpand near 2.5% in 2017, although potential delays months and quarters ahead following sluggish firstin passing major fiscal policies introduce some quarter GDP growth.risk to the downside. This below-trend pace is stillsomewhat stronger than the trajectory that the While confidence among consumers andeconomy has experienced throughout the expansion businesses remains very high (so called “soft[Figure 4], as employment, income, production, data”), measures of actual economic activity (“hardand sales have failed to reach levels achieved in data”), such as GDP, have not been as strong in theprior economic cycles. first part of 2017. The soft data needs to translate6 into stronger economic activity to reach our GDPDespite the weak first quarter, we still see U.S. growth forecast for 2017. One likely reason forGDP growth approaching our 2017 forecast with this disconnect is continued policy uncertainty,potential for further acceleration in 2018. First although we have seen a recent pickup in businessquarter GDP growth, at 1.2%, was disappointing, investment. While enacting effective pro-growthbut a pattern of first quarter weakness has been policy would almost certainly benefit the economy,evident these past several years as a combination greater policy clarity may be enough to unleashof weather-related events and perhaps an “animal spirits” and help spur growth.ineffective, seasonal-adjustment process hasled to higher revisions and improved growth in The recent improvement in job growth withensuing quarters. Recent data on consumption, moderate wage gains allows for consumptionemployment, housing, manufacturing, and services growth without the need for an accommodative4 Expect a Slight Pickup in U.S. Economic Growth in 2017 Real Gross Domestic Product: Quantity Index (% Change from Prior Quarter, Seasonally Adjusted Annual Rate)5.0%2.50.0-2.5-5.0 -7.5 Actual Estimated-10.0 Recession (Quarterly) (Annual) Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 ‘17 E ‘06 ‘07 ‘08 ‘09 ‘10 ‘11 ‘12 ‘13 ‘14 ‘15 ‘16 ‘17 Source: LPL Research, U.S. Bureau of Economic Analysis 05/19/17 Shaded areas indicate recession. Gross domestic product (GDP) is the monetary value of all the finished goods and services produced within a country’s borders in a specific time period, though GDP is usually calculated on an annual basis. It includes all of private and public consumption, government outlays, investments, and exports less imports that occur within a defined territory.

5 Growth Needs a Productivity Injection Growth in U.S. Real Output per Hour (5-Year Average) 4%3210 7 ‘90 ‘92 ‘94 ‘96 ‘98 ‘00 ‘02 ‘04 ‘06 ‘08 ‘10 ‘12 ‘14 ‘16 Source: LPL Research, Bureau of Labor Statistics 05/19/17central bank. Meanwhile, anticipated fiscal [Figure 5]. There are many possible reasons forlegislation may provide further incentives for this, including diminishing returns from technologybusinesses to take economic risks, such as development and lost skills during the deepinvesting in property, plant, and equipment, contraction in employment during the financialto position for future growth. This would be crisis. Business investment is a key elementa change from recent years, where many of improving productivity, and we have seen itbusinesses used low rates to return cash to pick up in the first quarter. Businesses that driveinvestors by issuing debt and buying back shares productivity will have an important role to play if weor paying dividends, choosing the financial risk are to see improved economic growth.from more debt on their balance sheets over theeconomic risk of investing in their businesses. An Fiscal policy could also enable governmentimprovement in capital investment trends would spending to help drive GDP, while the Fed’s gradualalso likely boost productivity, which is essential approach may limit upward pressure on the U.S.for raising living standards. dollar, eliminating the potential for currency gains to interfere with export growth (a stronger U.S. dollarProductivity growth remains the key to any makes domestic goods more expensive for foreignsustainable increase in the rate of economic growth buyers). Global GDP growth has also been trendingover the long term. There are two primary drivers positive so far in 2017 and further improvementsof economic growth: a larger workforce and an could also benefit the U.S. economy by boostingincrease in what a member of the workforce can exports. Considering these trends for consumption,produce, through better training or better resources. investment, government spending, and trade, weThe latter is what we call productivity and it has are sticking with our forecast for near 2.5% GDPslowed considerably throughout the expansion growth in 2017.

U.S. STOCKS Business Fundamentals Back At The Controls As investors increasingly trust that the economy by potential improvement in economic growth, can stand on its own without the need of resilient profit margins, a stable U.S. dollar, and monetary policy support, business fundamentals rebounding energy profits. We believe S&P 500 should take over as the primary market driver. earnings growth near 10% is attainable, putting As a result, corporate profits will be increasingly earnings for the index in the range of $130 per important for stocks over the balance of 2017 share, even without any material impact from and into 2018. Our confidence that earnings fiscal policy changes this year. growth will come through over the balance of the year has led us to slightly raise our 2017 Corporate America is off to a good start toward8 S&P 500 Index total return forecast to 6 – 9%, hitting our earnings target. First quarter earnings up from mid-single-digits previously, driven by: season was a very good one, with S&P 500 1) a pickup in U.S. economic growth; 2) mid- to profits rising by a much better than expected high-single-digit earnings gains; 3) a stable price- 15% year over year (Thomson data) [Figure 6] to-earnings ratio (PE) of 19 – 20; and 4) prospects while company guidance for the remainder for a fiscal policy boost to earnings in 2018. of the year was also positive. The bar for growth was fairly low, as the comparison was Over the past three years, operating earnings relatively easy considering the struggles of for the S&P 500 have been basically flat, at early 2016, particularly in the energy sector. But around $118 per share. Consequently, market even excluding the strong contribution from returns over this period have been largely due rebounding energy sector profits, S&P 500 to the combination of price-to-earnings ratio earnings were still up over 10% year over year in (PE) expansion and dividends. This dynamic the first quarter. Even if the earnings trajectory has already begun to change. In 2017, we slows some over the course of the year as expect solid gains in corporate profits, driven comparisons with 2016 get tougher, business 6 Earnings Shifting to Higher Gear S&P 500 Year-over-Year Earnings Growth 20 % 15 10 5 0 -5 Actual Consensus Results Estimates -10 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2017E 2018E ‘16 ‘16 ‘16 ‘16 ‘17 ‘14 ‘14 ‘14 ‘14 ‘15 ‘15 ‘15 ‘15 Source: LPL Financial, Thomson Reuters 05/19/17 All indexes 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. All performance referenced is historical and is no guarantee of future results. Estimates may not develop as predicted.

7 Higher Valuations Have A Fair Amount of Support Lower Inflation and Lower Interest Rates Have Historically Correlated to Higher Price-to-Earnings Ratios Trailing PE vs. 10-Year Treasury Yield Trailing PE vs. CPI Change (Year over Year)18% 16% 1416 1210-Year Treasury Yield Annual CPI Change141012 8 610 Current8 46 24 02 Current -2 -400 5 10 15 20 25 30 35 0 5 10 15 20 25 30 35 S&P 500 Trailing PE Ratio S&P 500 Trailing PE Ratio Source: LPL Research, FactSet, Thomson Reuters, Haver Analytics 05/19/17 Data are monthly going back to 1962. 9 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. Consumer price inflation is the retail price increase as measured by a Consumer Price Index (CPI).fundamentals may still point toward further that can get enough votes to pass the House andgrowth in output and profits. Senate. Far from a slam dunk but still, we believe, more likely than not.We look for stocks to see gains commensuratewith profit growth, consistent with historical While accelerating earnings growth maymid-to-late economic cycle performance. At provide further support for stocks, challenges19 – 20 times trailing S&P 500 earnings, stocks implementing President Trump’s agenda andare expensive relative to their long-term history. additional Fed rate hikes could lead to periodicHowever, when viewed against interest rates bouts of stock market volatility and may preventand inflation still near historic lows [Figure 7], stocks from adding meaningfully to year-to-datevaluations look fair to us. Moreover, the potential gains. Fiscal policy is therefore a wildcard, butpolicy upside to earnings in 2018 on top of an meaningful progress toward implementationalready upward trajectory for corporate profits of corporate tax reform could provide upsidecould provide further support for equities. for corporate profits in 2018, adding potentialRemember, history is littered with examples fundamental justification for forward PE ratios.showing that valuations have been poorpredictors of one-year stock market performance. Investors should feel good about where the stock market is as the halfway point of 2017Additional clarity on corporate tax reform in approaches. The economic expansion isthe coming months will provide further insight poised to continue and, powered by businessinto 2018 profit growth and potentially justify fundamentals, this eight-year-old bull market willelevated stock market valuations. In fact, probably continue as well. Fiscal policy may notalthough we have little more than a high-level help much this year, and there may be bouts offramework to go on as June begins, the potential volatility as monetary conditions tighten further,exists for corporate tax reform to boost S&P but we think stocks are in a good position to500 earnings by 5% or more in 2018, with the stand on their own as monetary policy support isobvious condition that the Trump administration removed and deliver modest additional gains inand Congress can come together on a package the second half of 2017.

GLOBAL ECONOMY & MARKETS Don’t Push Until Ready International markets are also contending with may provide more stability, while potential risks challenges related to the balance between related to “Brexit,” upcoming elections in Italy monetary and fiscal policies. Fundamentals and Germany, and structural challenges such as are firming in Europe and Japan, and economic immigration and labor market reform may weigh growth has been gradually improving from low on developed markets. levels, as these economies attempt to recover from the financial crisis. Monetary policy has Politics and policy aside, fundamentals are firming been a primary driver of economic and financial in Europe and the ECB has given no clear signal market gains with central bank support continuing, regarding when the inevitable reduction of support10 yet economic reforms are still needed to address will take place. Valuations and dividend yields structural challenges. Therefore, we remain in Europe appear attractive while firming global cautious on developed international markets. demand, improving earnings, and the elimination That said, the relative performance between of the worst-case scenarios from the French and international and domestic markets have a long Dutch elections have also provided market support. cycle; we may be poised for a reversal [Figure 8]. The backdrop looks to be more favorable for global Historically, developed markets have offered equity investors in Japan, where political leadership relative stability compared to the risks endemic was strengthened last year. The combination to the emerging space, such as varying economic of government spending, monetary policy, and growth, currency volatility, and uncertain politics. structural reforms appears to be supportive Yet more recently, in part because of limitations of economic and profit growth, while policy on the impact of monetary policy in Europe, EM tailwinds remain in place as the BOJ maintains 8 International Performance Runs in Cycles MSCI EAFE Index Relative to S&P 500 MSCI Emerging Markets Index Relative to S&P 500 ‘13 ‘15 ‘17 180 ‘03 ‘05 ‘07 ‘09 ‘11 160 140 120 100 80 60 40 20 0 -20 ‘93 ‘95 ‘97 ‘99 ‘01 Source: LPL Research, FactSet 05/19/17 Investing in foreign and emerging markets securities involves special additional risks. These risks include, but are not limited to, currency risk, geopolitical risk, and risk associated with varying accounting standards. Investing in emerging markets may accentuate these risks.

9 Earnings Boost: Not Just a U.S. Story25 % Earnings Growth Developed International Emerging Markets 1120 United States 2012 2013 2014 20151510 2011 5 0 -5-10-15-20-25 2016 2017E 2018E Source: LPL Research, FactSet 05/19/17 Earnings forecasts are based on Thomson Reuters and FactSet consensus.its accommodative stance. Expectations for described as a global bull market.Stronger earnings in Europe and earnings globally Indeed, U.S. indexes remain at, orJapan have powered earnings have increased. near, all-time highs and strengthgrowth for the MSCI EAFE More evidence is also evident in developed andIndex solidly higher in 2017 after they will be met is emerging markets. Global stockearnings declines in five out of required for us to market indexes are at or nearthe last six years [Figure 9]. record highs while both the MSCI EAFE and MSCI EM indexes haveAs has typically been the case, increase investment. outpaced the S&P 500 year to date.emerging market economiesare dependent on Chinese Despite prospects of betterdemand, yet given massive global growth, with regard toinvestment across EM, fueled in large part by investments outside the U.S., there are a numberdollar-denominated debt, they remain sensitive of risks that will need to be monitored closely.to changes in U.S. monetary policy. Steady global These include a policy mistake by a central bank ordemand has boosted output for the largely export- government, the possibility of a trade war, electionsdriven economies and driven renewed earnings in Europe, potential mistakes as the U.K. negotiatesgrowth, while falling commodity prices can have leaving the European Union (EU), debt-drivenmixed results for producers and exporters. vulnerabilities in China’s financial system, and geopolitical uncertainty in places such as NorthFortunately, these fundamentals have been largely Korea and Syria.supportive of global equities, driving what can be

BONDSCareful Not To OverloadHistorically, the bond market has been a pretty good to favor fixed-income positioning with neutral toindicator of increased potential for economic and below-benchmark interest rate sensitivity. Despitegeopolitical risk and thus far, we see little stress our expectation for stability in credit markets,evident in the fixed income markets. Of course, outperformance of the high-yield sector relativeyear-to-date, short-term U.S. Treasury prices have to high-quality fixed income has led to tightweakened as the front-end of the yield curve spreads versus long-term averages, limiting returnadjusted to the Fed’s gradual approach to tightening. potential and warranting caution for investors.For longer-dated Treasuries, following a sharp With little additional room for capital appreciation,move lower immediately after the election, periodic yield is poised to be the dominant driver of return.12 increases in demand due to geopolitical threats,European elections, mild inflation, and attractive Our view on interest rates remains unchangedvaluations relative to other sovereigns, have kept from the first half of 2017. We continue to believeprices relatively stable. Moreover, the spread that the combination of government policy, centralbetween high yield and investment-grade corporate bank policy, and steady economic growth hasbond yields relative to Treasuries, and the cost to the potential to push the 10-year Treasury yieldinsure against potential corporate defaults have higher, and that our year-end target of betweenfailed to signal potential looming threats [Figure 10]. 2.25% and 2.75% remains reasonable. Our bias is toward the upper end of the range, and we couldNonetheless, higher rates of economic growth see the 10-year Treasury yield rise as high asand inflation, along with our base case for one to 3%, should Congress make meaningful progresstwo additional Fed rate hikes in 2017 (making two toward enacting fiscal stimulus. Scenario analysisto three for the year) may put bond prices under based on this potential interest rate range and thepressure moving forward. As such, we continue duration of the index indicates low- to mid-single-10 Credit Gauges Are Signaling Confidence in Credit Markets, but Expensive Valuations Investment-Grade Corporate Spread High-Yield Spread9%876543210 2015 2016 2017 2014 Source: LPL Research, Bloomberg 05/19/17 Option adjusted spread for Bloomberg Barclays U.S. Corporate Bond Index. Option adjusted spread for Bloomberg Barclays U.S. Corporate High Yield Bond Index. Yield of each index over comparable maturity Treasuries. High-yield/junk bonds are not investment-grade securities, involve substantial risks, and generally should be part of the diversified portfolio of sophisticated investors.

11 Treasuries Still Showing Power Relative to German Bund and JGB 10-Year Treasury Yield Advantage to Bund 10-Year Treasury Yield Advantage to Japanese Government Bond (JGB) 133.5 % ‘11 ‘12 ‘13 ‘14 ‘15 ‘16 ‘173.02.52.01.51.00.50.0-0.5-1.0 ‘07 ‘08 ‘09 ‘10Source: LPL Research, Bloomberg 05/19/17Investing 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.digit returns for the Bloomberg We continue to Treasuries. Finally, the disconnectBarclays Aggregate Bond believe that the between “soft data” (confidence)Index. At that level, however, combination of and “hard data” (employmentinternational demand may government policy, and manufacturing) could persist,once again return as valuations central bank leaving rates lower longer than wewould become very attractive policy, and steady would otherwise expect.relative to other sovereigns, economic growthmost notably to Japanese has the potential Despite our expectation forGovernment Bonds (JGB) and to push the 10- muted bond market performanceGerman Bunds [Figure 11]. year Treasury in 2017 based on our yield yield higher, and outlook, we continue to believeRisks to our rate call include that our year-end fixed income plays a vital roledelays in pro-growth target of between in a well-diversified portfolio,policies, geopolitical risk, and 2.25% and 2.75% providing income and liquiditypotentially mixed messages remains reasonable. during times of equity marketfrom economic data. As stress. High-quality bonds servedemonstrated earlier in the as an important diversifier, alsoyear, delays in pro-growth helping to manage portfolio risk.policy could drag down longer- Although the absolute return mayterm yields and support be minimal, high-quality fixedU.S. Treasuries. Geopolitical income’s value as a risk mitigationtensions could flare up at tool should be emphasized inany time (e.g., North Korea, the fixed income portion of one’sSyria) and drive demand for diversified investment portfolio.

Striving To Efficiency The gauges say the growth engine for the U.S. economy and markets is changing. Monetary policy is powering down, business fundamentals are powering up, and fiscal policy and economic growth are on the verge of being taken off standby. The Fed has shown increasing trust that the economy has recovered and that market forces can14 keep it steady. Consequently, we look for fiscal policy to supplement corporate profits as the market’s next drivers. In general, consumers and businesses feel pretty good about economic conditions. Consumer and business confidence is high, likely providing the next boost to consumption and investment. But attempts at a full transfer away from monetary policy have stalled some, evident in headlines in the media about how the Trump administration’s agenda may be in danger. Stock market leadership has turned away from those areas of the market best positioned to benefit from the proposed fiscal policies. The latest stall could push the key fiscal policy pillars into 2018, or possibly derail them. The odds still favor corporate tax reform being achieved, while prospects for the rest of the agenda may become tenuous. It is important for investors to appreciate the implications of a new stock market driver. Much like a portfolio can benefit from diversification, the economy and markets can benefit from different drivers working at different times. As monetary policy powers down, business fundamentals power up, and we wait for fiscal policy to help get the U.S. economy off of standby mode, we hope LPL Research’s Midyear Outlook: A Shift In Market Control will enable you to identify opportunities that may arise, navigate the challenges that will inevitably come, and help you stick to your long-term investing plan.

IMPORTANT DISCLOSURES 15The opinions voiced in this material are for general information only and are not intended to provide or be construed as providingspecific investment advice or recommendations for any individual security. To determine which investments may be appropriate foryou, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results.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 besuccessful.Investing in stock includes numerous specific risks including: the fluctuation of dividend, loss of principal, and potential liquidityof the investment in a falling market.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 willdecline as interest rates rise and bonds are subject to availability and change in price.Government bonds and Treasury bills are guaranteed by the U.S. government as to the timely payment of principal andinterest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is notguaranteed and will fluctuate.Mortgage-backed securities are subject to credit, default, prepayment risk that acts much like call risk when you get yourprincipal back sooner than the stated maturity, extension risk, the opposite of prepayment risk, market and interest rate risk.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.Investing in MLPs involves additional risks as compared with the risks of investing in common stock, including risks related tocash flow, dilution, and voting rights. MLPs may trade less frequently than larger companies due to their smaller capitalizations,which may result in erratic price movement or difficulty in buying or selling. MLPs are subject to significant regulation and maybe adversely affected by changes in the regulatory environment, including the risk that an MLP could lose its tax status as apartnership. Additional management fees and other expenses are associated with investing in MLP funds.INDEX DEFINITIONSThe U.S. Dollar Index (DXY) indicates the general international value of the U.S. dollar. The DXY Index does this by averagingthe exchange rates between the U.S. dollar and six major world currencies.The S&P 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domesticeconomy through changes in the aggregate market value of 500 stocks representing all major industries.The Bloomberg Barclays U.S. Aggregate Bond Index is a broad-based flagship benchmark that measures the investment-grade,U.S. dollar-denominated, fixed-rate taxable bond market. The index includes Treasuries, government-related and corporatesecurities, MBS (agency fixed-rate and hybrid ARM pass-throughs), ABS, and CMBS (agency and non-agency).The Bloomberg Barclays U.S. Corporate Bond Index measures the investment grade, fixed-rate, taxable corporate bond market.It includes U.S. dollar-denominated securities publicly issued by U.S. and non-U.S. industrial, utility and financial issuers.The Bloomberg Barclays U.S. Corporate High Yield Bond Index measures the U.S. dollar-denominated, high yield, fixed-ratecorporate bond market. Securities are classified as high yield if the middle rating of Moody’s, Fitch and S&P is Ba1/BB+/BB+ orbelow. Bonds from issuers with an emerging markets country of risk, based on Barclays EM country definition, are excluded.The MSCI Emerging Markets Index is a free float-adjusted, market capitalization index that is designed to measure equitymarket performance of emerging markets.The MSCI EAFE Index is a free float-adjusted, market-capitalization index that is designed to measure the equity marketperformance of developed markets, excluding the United States and Canada.

RES 5106 0617 Tracking #1-615392 (Exp. 06/18) This research material has been prepared by LPL Financial LLC. To the extent you are receiving investment advice from a separately registered independent investment advisor, please note that LPL Financial LLC is not an affiliate of and makes no representation with respect to such entity. Not FDIC/NCUA Insured | Not Bank/Credit Union Guaranteed | May Lose Value Not Guaranteed by Any Government Agency | Not a Bank/Credit Union DepositMember FINRA/SIPC