Below please find a link to our monthly market perspective piece for December. This month we explore a variety of factors potentially driving markets and evaluate the risks and rewards lying beneath the surface.

1. Market Perspective – April 2017
Experience Insight Impact
Overview: With markets continuing an upward march beyond the first quarter, many investors
wonder what has caused the surge. They also question what risks market participants face. This
month we focus on how a confluence of factors such as earnings growth, policy change
(potential), economic data, and central banks may be influencing markets in the short-term.
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2. Earnings Growth
Experience Insight Impact
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• After several years of shrinking
earnings, S&P 500 companies have
finally clawed their way back towards
positive growth.
• This growth is expected to continue
throughout the year, although we
have already seen negative revisions.
• A significant portion of year over
year growth stems from a rebound in
energy and commodity prices.
• The U.S. dollar has also been a
headwind in recent years, a factor
that has begun reversing modestly.

3. Policy Change
Experience Insight Impact
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In the past, we have discussed the “big three” areas of policy change which could serve as positive market
catalysts.
• Tax Reform: A lowering of the corporate rate, a repatriation “holiday” (or rate reduction), and personal tax
reform could stimulate the economy (and accordingly the markets) by hundreds of billions of dollars (or more)
over time. Given the fractured Republican congress, as demonstrated in the failure to repeal Obamacare,
achieving tax reform in a “revenue neutral” manner reduces the likelihood of a significant reform.
• Deregulation: Most companies and analysts believe the cost of the high level of regulation in various industries
is burdensome, and we believe this can be greatly improved. The impact is highly uncertain, although
directionally a positive.
• Infrastructure: An infrastructure stimulus-type plan has a reasonable chance of occurring and the impact
should be positive. However, in the past, projects can take several years (at a minimum) to implement and the
impact is felt over even longer periods of time.
SUMMARY: At this time, it appears the market is “baking in” at least some of these agenda items and may be
ahead of the reality.

4. Economic Data: GDP
Experience Insight Impact
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• GDP is a coincident indicator.
The measure of economic
output resonates with the
current status of the economy.
• Real GDP growth rate has
bounced off the recent lows,
but remains sluggish relative to
historical averages.
• Q4 2016 GDP growth equaled
2.1% (seasonally adjusted
annual rate) and the consensus
estimate for Q1 2017 is
substantially lower (currently
1.3%), implying continued
subpar growth.
• Full year 2017 estimate is closer
to 2%, which remains below
average.
Average

5. Central Bank Activity
Experience Insight Impact
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• Central Banks around the globe
have begun the process of
tapering off extreme
accommodative policy, and in
some cases are reversing such
policy (for example, the U.S.
Federal Reserve raising interest
rates). Nonetheless, global central
bank assets continue to expand
albeit at a slower rate.
• Much of the growth coincides
with accommodative monetary
policy and a concern exists for
what will happen to liquidity once
policy tightens modestly. The
BOJ’s assets are approaching 100%
of GDP.
• The impacts of monetary policy
changes typically occur with
significant lag, often up to a year
or more.
Central Bank Assets / GDP
Switzerland
Japan
Europe
U.S.

6. Examples of Other Notable Risks
Experience Insight Impact
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Geopolitical Risks Anti-Growth Policies
Expensive Valuation Congressional Dysfunction
North Korea, populist movements, European
disintegration, hostility with Russia, etc. Not all of Trump’s proposed policies are market friendly.
Trump’s
market-friendly
agendas (e.g.
tax reform)
may not fully
materialize.
Shiller CAPE

7. Conclusion: Part of being an investor is accepting market risk and volatility as a trade-off to higher
returns. The past six months have witnessed very little volatility, while risks appear to be
mounting (even leaving valuations out of this discussion). Weighing the positives and negatives of
the investing environment is critical to long-term success. At the same time, a flexible approach
towards portfolio management with a long-term focus remains our preferred strategy in a world
with rapid change and ongoing risks.
Experience Insight Impact
Market Perspective – April 2017
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8. Experience Insight Impact
Disclaimer
Opinions expressed in this commentary may change as conditions warrant and is for informational
purposes only. Information contained herein is not intended to be personal investment advice for
any specific person for any particular purpose. We utilize information sources that we believe to
be reliable but cannot guarantee the accuracy of those sources. Past performance is no guarantee
of future performance; investing involves risk and may result in loss of capital. Consider seeking
advice from a professional before implementing any investing strategy.
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