Here is the first edition of Perspectives & Planning, a quarterly newsletter written by Washington Trust Wealth Management experts, featuring an outlook on the current state of the economy and the financial markets, as well as insights on financial planning.

1. F a l l 2 0 1 5
M a r k e t & E c o n o m y
P e r s p e c t i v e s & P l a n n i n g
While not exactly robust, the
U.S. economy is performing im-
pressively in a slow growth
world. After a soft start due to the
harsh winter, GDP rebounded
sharply to 3.9% in the second
quarter. Growth appears to have settled in the
vicinity of 2.5% for the balance of the year. We ex-
pect that this moderate pace can be maintained
into 2016, accompanied by continued low inflation
and benign monetary policy, characterized by spo-
radic 0.25% rate hikes, and minor increases in
long-term Treasury yields, even as the labor mar-
ket continues to improve.
The above scenario should provide a healthy
backdrop for equities. Yet, U.S. stocks are correct-
ing in tandem with global markets. Financial tur-
moil in China and a modest devaluation of the
yuan in August has triggered volatility worldwide.
Global GDP for 2015 is estimated at a mere 3.0%,
as emerging markets have faltered. Chinese
growth is slipping. While it
is likely to stabilize in a 5%
to 6% range, this is a far
cry from the double digit
rate of a few years back.
As a result, commodity-
oriented economies, in-
cluding Brazil and Russia,
are mired in deep reces-
sions. Even Canada is
struggling.
In this context, 2.5%
growth in the world’s
largest economy is an achievement. How-
ever, weakness overseas has created head-
winds for the U.S. economy. A stronger dollar
is further eroding exports. Manufacturing
growth has ebbed. The freefall in commodity
prices has also hit hard with the sharp con-
traction in energy exploration reducing capital
spending. It is little wonder that investors are
P l a n n i n g
H i g h l i g h t s
Market
• The global economy’s affect on the U.S.
• What to expect from the S&P 500
Planning
• Managing your portfolio’s taxable income
• Steps to reduce capital gains tax liability
W e s t e r l y , P r o v i d e n c e & N a r r a g a n s e t t , R I ~ W e l l e s l e y , M A ~ N e w H a v e n , C T
8 0 0 - 5 8 2 - 1 0 7 6 ~ w w w . w a s h t r u s t w e a l t h . c o m
SMART ADVICE
SUCCESSFUL OUTCOMES
Recently, a professional football player returned the “par-
ticipation trophies” that his sons had received because he
felt that these trophies had not been earned. This fueled
debates around the country on the merits of “participation
trophies” and likely caused a gazillion dollars being spent
on studies determining the long-term impact that these pieces of plastic
have on the psyches of our children. Of course, thirty seconds after receiving
the trophies, and a few forced smiles to appease the obligatory photo
shoots, the kids went back to being kids and forgot all about the awards.
Perhaps adults are jealous that they never receive trophies for just partici-
pating. Imagine if one day your boss handed you a trophy and said, “Great
job showing up this year!” Maybe we would be more likely to show up next
year. On the other hand, the anti-participation establishment may have a
point; very rarely in the “real world” do we achieve what we want by simply
participating.
This is also true when it comes to managing taxable income within one’s
portfolio. For example, if the markets end 2015 in the red, many investors
may expect lower capital gains taxes, and perhaps even capital losses on
their tax return. However, it is unlikely that simply participating in the market
losses will achieve that goal.
The tax impact from capital gains generally lag the year in which they took
place as taxes are only impacted when the gains are realized. Many in-
vestors, either directly, or inside their mutual funds, have liquidated stocks
in 2015 that have enjoyed years of positive market gains. This is why we
expect realized capital gains to be significant in 2015, despite the S&P 500
being down 5.29% as of September 30th. However, the following steps may
help reduce 2015 capital gains tax liability:
Harvest losses to offset gains
While domestic equities have had a strong run, other asset classes may
Source: BEA, Bloomberg
c o n t ’ d o n P a g e 2
c o n t ’ d o n P a g e 2

2. I f y o u ’ d l i k e t o d i s c u s s a n y o f t h e i n f o r m a t i o n c o n t a i n e d i n t h i s n e w s l e t t e r , p l e a s e c a l l
y o u r r e l a t i o n s h i p t e a m o r 8 0 0 - 5 8 2 - 1 0 7 6 . Y o u c a n a l s o r e a d p a s t e d i t i o n s o f o u r
p u b l i c a t i o n s b y v i s i t i n g o u r w e b s i t e : w w w . w a s h t r u s t w e a l t h . c o m
P l a n n i n g c o n t ’ d f r o m P a g e 1
increasingly skeptical. We expect full year 2015 S&P 500 earnings growth
will be challenged, given plummeting energy earnings and the multinational
character of many companies in the benchmark.
The impact on U.S. GDP should be modest. The U.S. export sector’s share
of the economy is relatively small. Exports to China are roughly 0.5% of
GDP and they are dominated by aircraft and agricultural products which are
largely insulated from China’s current travails. The consumer sector, not ex-
ports or energy, is key for U.S. growth. The benefits of low inflation and dollar
strength for the consumer are obvious as real disposable income rises de-
spite mediocre wage gains. While energy sector weakness hindered growth
in the first half, our expectation is that retailers will enjoy a strong holiday
season as consumer savings from low energy prices find their way back
into the economy. After years of underbuilding, the housing recovery should
also remain on track as job gains help millennials move off their parents’
sofas and out on their own.
Given that stock market corrections have occurred on average every 18
months and that the last one transpired in 2011, it can be argued that it was
only a matter of time. Volatility is always unsettling but valuation is now much
improved. Looking ahead to projected S&P 500 2016 earnings of $128, the
market is trading at a P/E ratio under 15x, a level that appears quite reason-
able. Therefore, our view is that the selloff in U.S. equities will prove transitory.
P e r s p e c t i v e s & P l a n n i n g P a g e 2
be trading at a loss, such as foreign equities and bond funds. Depending
on the accounting method used, you may be able to hand-pick recently pur-
chased share lots that are at a loss. While the 30-day rule prohibits an in-
vestor from immediately repurchasing the same asset, it may be possible
to buy similar investments so that you are not left out of the market.
Beware of year-end mutual fund distributions
Generally in November, mutual funds will release their estimated year-end
distributions. It may make sense to sell funds with large estimated distributions
prior to the fund’s record date. You can then use the proceeds to buy funds
that have already gone ex-dividend. This strategy works particularly well if the
asset is trading at a loss, but can backfire if the asset is trading at a gain.
The views expressed here are those of Washington Trust Wealth Management and are subject to change based on market and other conditions. Investment recommendations and
opinions expressed in these reports may change without prior notice. All material has been obtained from sources believed to be reliable but its accuracy is not guaranteed.
Investing entails risk, including the possible loss of principal. Stock markets and investments in individual stocks are volatile and can decline significantly in response to issuer,
market, economic, political, regulatory, geopolitical, and other conditions. Investments in foreign markets through issuers or currencies can involve greater risk and volatility
than U.S. investments because of adverse market, economic, political, regulatory, geopolitical, or other conditions. Emerging markets can have less market structure, depth, and
regulatory oversight and greater political, social, and economic instability than developed markets. Fixed Income investments, including floating rate bonds, involve risks such
as interest rate risk, credit risk and market risk, including the possible loss of principal. Interest rate risk is the risk that interest rates will rise, causing bond prices to fall. Past
performance does not guarantee future results. The information we provide does not constitute investment advice and it should not be relied on as such. It should not be considered
a solicitation to buy or an offer to sell any security. It does not take into account any investor's particular investment objectives, strategies, tax status or investment horizon.
Please consult with a financial counselor, attorney or tax professional regarding your specific investment, legal or tax situation.
M a r k e t & E c o n o m y c o n t ’ d f r o m P a g e 1
Source: Factset
Source: Factset
Consider sheltering ordinary income
Over certain thresholds, which vary depending on filing status, the fed-
eral capital gains rate increases to 20%, from 15%. Furthermore, a
3.8% Medicare tax could also be tacked on. Therefore, if you know you
are going to have sizable capital gains, consider sheltering or deferring
ordinary income. It may also make sense to accelerate deductions in
years with higher income.
If appropriate, we will implement many of these strategies within your
managed portfolios. If you wish to discuss at greater length, please do
not hesitate to contact us.