April 17, 2017 , 2016 What 10-Year Yield Ranges Really ...

[Pages:5]Weekly Market Commentary

April 17, 2017

, 2016 What 10-Year Yield Ranges Really Reveal

If you are a regular reader of my Money and Markets columns, you know that I'm a big believer in three things: One, Occam's Razor, which is a principle that was introduced to me by the investment great John Bogle. First stated by a 14th century philosopher, the principle says: "The simpler the solution, the more likely it is to be correct."

Two, the yield on the benchmark 10-year U.S. Treasury is the perfect predictor that will signal the direction of the stock market. It's really the only indicator that you need to follow to tip you off about whether the market is going up, down or sideways.

That's because this top-of-the-food-chain interest rate is the key for pricing assets across the board. It sets the prices that investors are willing to pay for everything, ranging from bonds to stocks to commodities to real estate ... it will even tell you the direction of the global economy.

I know it's hard to believe, but it's really the only number you need to know to protect and grow your portfolio in the current environment. Click here to read more

By one measure, investors have almost never been this nervous about stocks

Stock market investors have rarely ever been this skittish.

As measured by Credit Suisse's in-house fear barometer, investors haven't been as concerned as they are right now since just before Brexit, when the firm's gauge hit an all-time high.

This reading follows data out last month which showed investor concerns about a market crash reaching levels not seen since 2009.

And while the VIX, an index which measures future expected volatility in the stock market, has been on the rise in recent days, the mood among many investors remains one of agreeing that things are quiet, too quiet. Click here to read more

The Next Big US Crisis Will Start Here

Investors hold on to your hats, the US may be headed for another crisis with eerie echoes of the last one. Just like in the run up to the Financial Crisis, there has been a big explosion of spending in real estate. In particular, developers have built over one million apartments in the US. Now, the big banks that funded all that development with loans are getting worried the market has become overstretched. The Fed is now doing more rigorous stress tests to see how banks would respond to a 35% drop in commercial real estate prices. The big worry is over "trendy" metropolitan apartment buildings, which have seen sharp price rises. Regulations put in place after the Crisis have incentivized builders to go into commercial real estate rather than residential, as have demographic trends like Millennials' preference to live downtown rather than in the suburbs. Click here to read more

Horter Investment Management

Current Model Allocations

11726 Seven Gables Road Symmes Township Cincinnati, Ohio 45249

Office: (513) 984-9933 Fax: (513) 984-5219 support@him-

Low Risk HIM Model #7 100% short and intermediate-term treasury bonds HIM Model #2 25% municipal bonds/75% municipal bond mutual fund HIM Model #1 15% high yield/85% high-yield mutual fund HIM Model #6 10% short duration/75% high yield/10% strat inc/5% debenture HIM Model #3 15% global bond/14% convertibles /43% dividend equities/

14% utilities/14% cash HIM Model #20 5% cash/ 95% high yield HIM Model #19 50% MBS/50% real estate mutual fund HIM Model #23 100% floating rate

Moderate Risk HIM Model #12 HIM Model #9 HIM Model #8 HIM Model #22 HIM Model #14 HIM Model #10 HIM Model #15 HIM Model #11 HIM Model #21

100% mid-cap 20% long S&P /80% alternative equity mutual fund 100% QQQ 100% S&P 500 100% cash 100% invested 100% invested 75% invested (15 stocks)/25% cash 15% long real est/75% real estate

mutual fund/10% cash

Weekly Market Commentary April 17, 2017

, 2016 Taking a comprehensive look at the overall current stock market, you can see the chart below representing eight major indices and their returns through the week ending April 14, 2017. In a truly diversified portfolio, the portfolio's total return is determined by the performance of all of the individual positions in combination ? not individually.

So, understanding the combined overall performance of the indices below, simply average the 8 indices (excluding the BofA Merrill Lynch US High Yield Master II Index) to get a better overall picture of the market. The combined average of all 8 indices is 4.96% year to date.

Market Perspectives (through 04/14/2017)

60/40 Allocation: 2.75 % YTD

(60% S&P 500/40% Barclays US Aggregate Bond Index)

S&P 500: 4.03% YTD Barclays Agg: 0.82% YTD

QUOTE OF THE WEEK "Good leadership consists of showing average people how to do the work of superior people."

? John D. Rockefeller

Horter Investment Management

Current Model Allocations

11726 Seven Gables Road Symmes Township Cincinnati, Ohio 45249

Office: (513) 984-9933 Fax: (513) 984-5219 support@him-

Low Risk HIM Model #7 100% short and intermediate-term treasury bonds HIM Model #2 25% municipal bonds/75% municipal bond mutual fund HIM Model #1 15% high yield/85% high-yield mutual fund HIM Model #6 10% short duration/75% high yield/10% strat inc/5% debenture HIM Model #3 15% global bond/14% convertibles /43% dividend equities/

14% utilities/14% cash HIM Model #20 5% cash/ 95% high yield HIM Model #19 50% MBS/50% real estate mutual fund HIM Model #23 100% floating rate

Moderate Risk HIM Model #12 HIM Model #9 HIM Model #8 HIM Model #22 HIM Model #14 HIM Model #10 HIM Model #15 HIM Model #11 HIM Model #21

100% mid-cap 20% long S&P /80% alternative equity mutual fund 100% QQQ 100% S&P 500 100% cash 100% invested 100% invested 75% invested (15 stocks)/25% cash 15% long real est/75% real estate

mutual fund/10% cash

Weekly Market Commentary April 17, 2017

, 2016 The Dow Jones Industrial Average slipped 203 points, ending the week down -1% at 20,453. The S&P 500 Index fell -1.1% to finish the week down 27 points at 2,329. The Nasdaq Composite was down -1.2% to end the week at 5,805. The S&P MidCap 400 Index fell -1.5% to close the week at 1,681. The Russell 2000 finished down -1.4%, ending the week at 1,345.

The ETF "EFA", the proxy for developed international equity markets, was down -0.4%. Emerging markets, as represented by the ETF "EEM", fell -0.6%.

Domestic high yield corporate bonds were relatively unchanged during the week, as measured by the Markit iBoxx USD Liquid High Yield Index.

US equity markets lost ground during the holiday-shortened week, while developed and emerging international markets posted modest losses.

The US dollar fell 0.5% against a basket of foreign currencies after President Trump expressed a preference for a weaker dollar and continued low interest rates. The yield on the benchmark 10-Year US Treasury note slid to 2.24%, its lowest level since November 2016. Oil prices continued to rise, at over $53 a barrel for US West Texas Intermediate and around $55.84 for international Brent Crude as of Thursday.

Domestic high yield bond prices fell modestly while yields inched higher. Spreads over Treasuries remained under 4%, at 3.96%. Investor demand for high yield bonds has remained strong despite the post-election rally in US stocks, which led to rotation out of bond markets and into equities. High yield issuance for the first quarter of 2017 totaled $79.6 billion, roughly double the Q1 total in 2016.

Meanwhile, defaults have been cut in half from the prior year, with just 21 issuers defaulting in Q1, including 10 firms in the oil and gas industries. Rating agency Moody's issued a revised 2017 default rate for high yield debt, lowering its expectation from 4% to 3% by year end.

This follows a December revision from 5.6% to 4%. Interestingly, Moody's also cites Retail, not Energy, as the most vulnerable sector going forward.

In US economic news, the Labor Department's Job Openings and Labor Turnover Survey (JOLTS) showed a 2.1% increase in job openings during February, bringing the total to its highest level since July at 5.74 million. The JOLTS report is the Federal Reserve's preferred economic indicator for monitoring the employment situation.

Weekly jobless claims also suggested strength in the jobs market, at just 234,000 in the week ended April 8th. Inflation data from the Producer Price Index was weaker than anticipated, down -0.1% in March compared to consensus estimates for no change. Fed Chair Janet Yellen offered some insight into the Fed's current focus in a speech at the University of Michigan, stating that the Fed is comfortable with the current state of the US economy and may allow it to "coast" for the time being, possibly implying a more gradual pace to interest rate policy in the near term.

In international economic news, Eurozone industrial production unexpectedly slipped in February, down -0.3% from the prior month, but still up 1.2% year-over-year. In Asian markets, Chinese exports increased 16.4% year-overyear in March while imports were up 20.3% during the same period, resulting in a March trade surplus of $23.93 billion, nearly double analysts' forecasts of $12 billion.

In US corporate news, earnings season commenced with a trio of large banks. JPMorgan (JPM), Citigroup (C), and Wells Fargo (WFC) all beat analysts' earnings expectations, although Wells Fargo missed on revenue, sending shares lower.

Bank of America (BAC), Goldman Sachs (GS), General Electric (GE), Verizon (VZ), and Johnson & Johnson (JNJ) are some of the larger names slated to report earnings the week of April 17th.

Horter Investment Management

Current Model Allocations

11726 Seven Gables Road Symmes Township Cincinnati, Ohio 45249

Office: (513) 984-9933 Fax: (513) 984-5219 support@him-

Low Risk HIM Model #7 100% short and intermediate-term treasury bonds HIM Model #2 25% municipal bonds/75% municipal bond mutual fund HIM Model #1 15% high yield/85% high-yield mutual fund HIM Model #6 10% short duration/75% high yield/10% strat inc/5% debenture HIM Model #3 15% global bond/14% convertibles /43% dividend equities/

14% utilities/14% cash HIM Model #20 5% cash/ 95% high yield HIM Model #19 50% MBS/50% real estate mutual fund HIM Model #23 100% floating rate

Moderate Risk HIM Model #12 HIM Model #9 HIM Model #8 HIM Model #22 HIM Model #14 HIM Model #10 HIM Model #15 HIM Model #11 HIM Model #21

100% mid-cap 20% long S&P /80% alternative equity mutual fund 100% QQQ 100% S&P 500 100% cash 100% invested 100% invested 75% invested (15 stocks)/25% cash 15% long real est/75% real estate

mutual fund/10% cash

Weekly Market Commentary

April 17, 2017

, 2016

Summary

In utilizing an approach that seeks to limit volatility, it is important to keep perspective of the activity in multiple asset classes. At Horter Investment Management we seek to achieve lower risk with higher returns. More specifically, we seek to achieve superior risk-adjusted returns over a full market cycle to a traditional 60% equities / 40% bonds asset allocation. We do this by implementing global mandates of several tactical managers within different risk buckets.

For those investors who are unwilling to stomach anything more than minimal downside risk, our goal is to provide a satisfying return over a full market cycle compared to the Barclays Aggregate Bond Index.

At Horter Investment Management we realize how confusing the financial markets can be. It is important to keep our clients up-to-date on what it all means, especially with how it relates to our private wealth managers and their models.

We are now in year nine of the most recent bull market, one of the longest bull markets in U.S. history. At this late stage of the market cycle, it is extremely common for hedged managers to underperform, as they are seeking to limit risk. While none of us know when a market correction will come, even though the movement and volatility sure are starting to act like a correction, our managers have been hired based on our belief that they can accomplish a satisfying return over a full market cycle, -- while limiting risk in comparison to a traditional asset allocation approach.

At Horter we continue to monitor all of the markets and how our managers are actively managing their portfolios. We remind you there are opportunities to consider with all of our managers. Hopefully this recent market commentary is helpful and thanks for your continued trust and loyalty.

Chart of the Week:

The Chart of the Week shows the Volatility Index ($VIX) which hit a 5-month high in a sign that investors are turning more defensive, rising above 15 for the first time since the election.

Horter Investment Management

Current Model Allocations

11726 Seven Gables Road Symmes Township Cincinnati, Ohio 45249

Office: (513) 984-9933 Fax: (513) 984-5219 support@him-

Low Risk HIM Model #7 100% short and intermediate-term treasury bonds HIM Model #2 25% municipal bonds/75% municipal bond mutual fund HIM Model #1 15% high yield/85% high-yield mutual fund HIM Model #6 10% short duration/75% high yield/10% strat inc/5% debenture HIM Model #3 15% global bond/14% convertibles /43% dividend equities/

14% utilities/14% cash HIM Model #20 5% cash/ 95% high yield HIM Model #19 50% MBS/50% real estate mutual fund HIM Model #23 100% floating rate

Moderate Risk HIM Model #12 HIM Model #9 HIM Model #8 HIM Model #22 HIM Model #14 HIM Model #10 HIM Model #15 HIM Model #11 HIM Model #21

100% mid-cap 20% long S&P /80% alternative equity mutual fund 100% QQQ 100% S&P 500 100% cash 100% invested 100% invested 75% invested (15 stocks)/25% cash 15% long real est/75% real estate

mutual fund/10% cash

Weekly Market Commentary April 17, 2017

, 2016

Horter Investment Management

Current Model Allocations

11726 Seven Gables Road Symmes Township Cincinnati, Ohio 45249

Office: (513) 984-9933 Fax: (513) 984-5219 support@him-

Low Risk HIM Model #7 100% short and intermediate-term treasury bonds HIM Model #2 25% municipal bonds/75% municipal bond mutual fund HIM Model #1 15% high yield/85% high-yield mutual fund HIM Model #6 10% short duration/75% high yield/10% strat inc/5% debenture HIM Model #3 15% global bond/14% convertibles /43% dividend equities/

14% utilities/14% cash HIM Model #20 5% cash/ 95% high yield HIM Model #19 50% MBS/50% real estate mutual fund HIM Model #23 100% floating rate

Moderate Risk HIM Model #12 HIM Model #9 HIM Model #8 HIM Model #22 HIM Model #14 HIM Model #10 HIM Model #15 HIM Model #11 HIM Model #21

100% mid-cap 20% long S&P /80% alternative equity mutual fund 100% QQQ 100% S&P 500 100% cash 100% invested 100% invested 75% invested (15 stocks)/25% cash 15% long real est/75% real estate

mutual fund/10% cash

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