INSIGHT Quarterly Market Review

A Long-Playing Record July 2019

Photo credit: Bryan Malis, Managing Director Second Quarter 2019 Dubai, United Arab Emirates Key Topics

1. The U.S. economy 2. The trade war’s 3. Markets are 4. An uncertain 5. Yields fall into is slowing but still shadow on the counting on the inflation outlook rare territory, a boon healthy overall, in global economy is Fed to come to the is prompting us for keeping with the spreading. rescue (again) even if to add other real but with mixed advanced age of this it is not an economic assets in addition implications. expansion. emergency. to commodities as inflation hedges.

altairadvisers.com Second Quarter 2019

“I’m built for comfort, I ain’t built for speed.” – Willie Dixon, to ease financial conditions, and strong incentives exist “Built for Comfort” for Presidents Trump and Xi to contain and ultimately settle their trade fight. A notable milestone was passed in July when the U.S. economic expansion hit its record 121st month, This expansion is now more than twice as long as the surpassing the technology-fueled run from 1991 to average (58 months) since World War II. Expansions carry 2001. Yet fanfare was minimal, even as markets reached no expiration date, however. A Federal Reserve Bank of midyear with one of the best first-half performances for San Francisco study of recessions concluded that there stocks in decades. is no particular time or age at which an expansion ends. Many developed economies have achieved 15 years of If this expansion were a person, we might be tempted to uninterrupted growth; Australia’s current expansion is in say “You sure don’t look 10!” or “You have a lot of energy year 28. … for your age.” A long skein of modest GDP growth coupled with muted We would be exaggerating. The truth is the growth inflation may in fact indicate a more sustainable pace rate has been one of the weakest on record. Average than a speedier rise would. At the very least, they hardly GDP growth during the 10 years has been just 2.3%, suggest an economy that is overheating and ready to well below the 3.6% of the last three U.S. expansions. combust. In the parlance of Dixon, the Chicago blues Now this string of positive growth is facing pressure from master, this U.S. expansion was built for comfort – or mixed global economic data, the 16-month-old U.S.- durability – not for speed. China trade war and geopolitical tensions rising in the Middle East and elsewhere. “Economic expansions don’t die of old age.” – Saying heard late in economic expansions So why do we believe this cycle can continue? The originator of that aphorism, late MIT economist Rudi Dornbusch, added that expansions are “murdered by In short, as we discuss below: The U.S. economy the Fed.” Indeed, Fed mistakes are always possible and remains solid if plodding, a near-term recession appears hard to anticipate. But we believe that Jerome Powell, unlikely, the Fed is leading a new push by central banks Playing With Fire(works)

Noah Kroese Illustration

See disclosures at end of document. 2 Second Quarter 2019

Record-Length Economic Expansion U.S. Economy Expected to Hit 40 Quarters of Expansion

Sources: St. Louis Federal Reserve, Morningstar, Altair Advisers having ended the Fed’s nine-rate-hike cycle and so far 1. The U.S. economy is slowing but still healthy smoothly engineered its dovish turnaround, is taking the overall, in keeping with the advanced age of this steps needed to avoid a legacy as this expansion’s killer. expansion.

Given the uncertainties mentioned above, we do Jerome Powell is said to often ride his bike from his not believe conditions merit taking on more risk. We home outside Washington to the Fed some eight miles recommend that clients stay at their target allocation away. Based on the many times he has uttered the term levels in all three of our investment buckets: higher, “crosscurrents” in describing the U.S. economy this year, medium and lower risk. one might think he travels by canoe or kayak instead. We do, however, reaffirm our tactical overweights within Powell said in June that crosscurrents had reemerged, higher risk to small-cap and emerging-market stocks, two asset classes that had double-digit gains in the adding more uncertainty to a challenging economy. first half but underperformed against their U.S. and More recently, he said that “crosscurrents, such as international peers, respectively. trade tensions and concerns about global growth, have been weighing on economic activity and the outlook.” The performance gap between large caps and small As a result, he declared, the central bank will “act as caps is unusually wide and we expect the smaller- appropriate” to sustain the current economic expansion. company stocks to close it. Only three times in the past 40 years has the Russell 2000 benchmark for small caps We believe investors can take confidence in Powell’s been more than 10% short of its all-time record while the assurance that the Fed will work to offset some of the S&P 500 for large caps traded at new highs, according damage that could occur if the trade war heats up or the to Strategas Research. In all three instances, small caps global economy worsens. But how anxious should we caught up over subsequent months and made a new high of their own. be about these crosscurrents?

Emerging-market stocks, meanwhile, have held up well An analysis of the economy’s key indicators shows some given the backdrop of a trade war and remain attractively developing causes for concern, especially with only valued. fading benefits left from the corporate tax cuts that sped up growth a year ago. Yet there are no major stresses Please read on as our quarterly discussion takes a look or excesses in the economy that point to a near-term at key issues in more depth: recession.

See disclosures at end of document. 3 Second Quarter 2019 Leading Economic Index Still Positive (Barely) June 2016 – June 2019

Sources: The Conference Board, Altair Advisers

The biggest trouble area is manufacturing, a sector and the coincident indicators of real U.S. economic that has shrunk from its more dominant years but growth performing in an acceptable fashion.” still represents 11% to 12% of the economy. A sharp decline in the first half of this year sent the Purchasing The Leading Economic Index, comprised of 10 economic Managers’ Index to multi-year lows, barely above the components, declined in June but the six-month growth level that indicate a contracting economy. Hiring, output rate remained positive. Consumer confidence is still and manufacturing sentiment all have fallen off. elevated despite recent softening. Household spending is estimated by the Atlanta Federal Reserve to have Flagging business confidence is another emerging soft expanded at a 3.9% pace in the second quarter. The job spot that has significant implications for the economy market has bounced back from a spring slump, adding and markets if it persists and affects spending. So far, 224,000 jobs in June. Unemployment remains just above business spending is declining but has yet to go negative. a five-decade low at 3.7%. We are watching companies’ outlooks closely during the second-quarter earnings reporting season that is now We expect global growth to pick up in the second half under way for any signs of pulling back further. based on both China’s decision to stimulate its slowing economy more aggressively and central banks pledging The anemic global backdrop is more of an issue for the more easing. Geopolitical risks remain high with Middle U.S. economy than any deterioration in domestic data, East tensions involving Iran simmering, Italy’s financial however. The budding weaknesses in manufacturing and woes festering and Brexit looming under new British business spending both relate to the slowdown in trade Prime Minister Boris Johnson. But barring an unexpected and the global economy and could be shored up with a shock, the global slowdown may have bottomed and a trade-war deal. We remain confident that will happen, pickup could be in store for the remainder of the year. but it remains unclear how much damage could be done to the economy first. Our belief is that equity markets will continue to be supported by a solid U.S. economy in the second half The economy’s strengths, in the meantime, are more of 2019. An eventual trade agreement, however, is plentiful than the glass-half-empty view of many market necessary to sustain the current market cycle. pundits. As economist Don Rissmiller of Strategas Research wrote recently: “Rarely have we seen so much 2. The trade war’s shadow on the global economy pessimism with the U.S. stock market making new highs is spreading.

See disclosures at end of document. 4 Second Quarter 2019

The U.S.-China trade war that began in March 2018 Counterintuitively, we think hope can be drawn from the already has lasted longer than expected, yet now the fact the U.S. and China are beginning to feel pain from distinct possibility exists that it could linger into 2020. their trade fight; it should increase the motivation to avoid Can the global economy bend further without breaking new tariffs and reach a deal. An additional, threatened if it does? $300 billion in Chinese import tariffs would jolt the global economy if the trade truce reached by the two sides at We believe the economy will maintain sufficient strength, the G-20 summit in late June collapses. with central banks’ assistance. But the slowly detrimental impact of the trade war on trade volumes, business We believe economic and political incentives are high for confidence and other areas has heightened uncertainty both sides and that a deal will be made prior to next and risk. year’s election. President Trump is motivated to stimulate the economy to aid his reelection, and there is no easier Direct consequences on the economy thus far have been way for him to do that than ending the trade war. History muted. Global growth, while slowing, is still positive. The has shown that presidents almost always succeed in main engine of the world economy, the United States, their bids for a second term when there is no recession. remains sturdy. Yet the recent decline in a number of President Xi, too, would no doubt like to avoid provoking areas is not sustainable if a global recession is to be a global recession with his economy decelerating. avoided. Whenever it comes, an agreement is likely to provide an As with the U.S. economy, weakened manufacturing is additional lift to markets, although more volatility is likely a red flag. The global manufacturing sector has fallen before that occurs. below the 50 level (a collective 49.6 in June) that denotes a decrease or deterioration. 3. Markets are counting on the Fed to come to the rescue (again) even if it is not an economic World trade flows have seen the biggest decline since emergency. the financial crisis, prompting global banks to project the worst year for global trade volume since 2009. The Fed’s The Federal Reserve’s baseline outlook, Powell said this semiannual Monetary Policy Report published in July month (July), is for economic growth to remain solid even said the latest tariffs – imposed in May on $200 billion of in the face of his oft-mentioned crosscurrents. The labor Chinese goods – “appear to have lowered imports and market remains healthy and consumer spending has exports in the U.S. and elsewhere.” Actual and planned been steady. But the Fed knows that if it waits until there capital expenditures by businesses, too, have slowed in is an emergency, it will be too late to undo the damage. 2019 as the trade war offsets the positive impact of tax cuts and deregulation. Trade War Shadows Dueling Economies

Sources: National Bureau of Statistics of China, National Federation of Independent Businesses

See disclosures at end of document. 5 Second Quarter 2019

Lower rates seem virtually assured starting at the end of pivots are mixed. Among the four most recent instances July. As we publish this commentary, the CME Group’s of the Fed shifting from raising rates to lowering them, widely used FedWatch tool projects a 100% probability stocks rallied twice (1995, 1998) and slumped twice of a rate cut at the Fed’s July 30-31 meeting, with further (2001, 2007). reductions by year-end. We believe, though, that the conditions surrounding the Fed officials have cited the need to revive inflation as 1995 and 1998 cuts bear the strongest similarities to part of their dual mandate to promote stable prices and today’s. maximum employment. They are concerned about it lagging persistently below their 2% target rate as well as In 1995, global and U.S. growth was slowing and the about uncertainties caused by the trade war and slowing Fed justified its three rate reductions by pointing to global growth. The reality is that they also keep one eye weakening inflation. Also like the current situation, the on the markets. president (Bill Clinton) was up for reelection the following year – historically a period when stocks have stayed This is a Fed-driven rally, as investors showed when they strong, perhaps with the assistance of a presidential embraced the central bank’s reversal earlier this year of nudge or two. plans for two more rate hikes in 2019. Confidence was fraying as the trade war continued and recession fears In 1998, the Fed eased policy at a time when the stock surfaced. The Fed’s pivot from hawkish to dovish is the market was in decline following the collapse of the primary reason for U.S. stocks’ best first half in decades. hedge fund Long-Term Capital Management. Stocks turned around after the rate cuts. As is the case today, For better or worse, then, this rally requires more Fed the Leading Economic Index was virtually unchanged stimulus to keep going. We believe the expectation of over the six months preceding the 1995 and 1998 cuts multiple rate reductions in the second half, an assumption – perhaps the clearest evidence of similarity. that Fed officials have done nothing to rebut, should support stocks for at least the rest of the year. Certainly The 2001 and 2007 reductions both came with the U.S. the market historically has reacted positively to the initial economy on the verge of recessions, which we do not reduction in a rate-cut cycle – even more so when it is think is the case now. Thus we do not view these periods not followed by a recession. as comparable to today.

Rate cuts are no guarantee the economy or markets will This time, too, monetary stimulus is promised not just by strengthen, of course. The consequences of similar past the Fed but also by the European Central Bank. Under Market Appreciates Breathing Room Average S&P 500 Return up to Initial Fed Funds Rate Cut and Performance Following, Given Recession or Continued Expansion

Sources: St. Louis Federal Reserve, Morningstar, Altair Advisers

See disclosures at end of document. 6 Second Quarter 2019

Financial Conditions Have Eased National Financial Conditions Index January 2017 – June 2019

Sources: St. Louis Federal Reserve, Altair Advisers outgoing President Mario Draghi, the ECB is expected 4. An uncertain inflation outlook is prompting us to to cut interest rates, which already are negative, and add other real assets in addition to commodities as reportedly also is considering relaunching its bond- inflation hedges. buying program. A puzzling absence of meaningful inflation in the We are monitoring earnings reports closely for any signs quantitative-easing era has confounded both investment of multiple companies scaling back their outlooks, along and economic experts. Moreover, inflation expectations with any further deterioration in growth estimates. For have fallen over the last year based on the breakeven now, we continue to believe that a dovish Fed and easier inflation rate, which has spent 2019 below the Fed’s financial conditions will provide an important underpinning target of 2%. for markets through the remainder of 2019. Inflation Stays Below Fed’s Target Personal Consumption Expenditures Ex. Food and Energy January 2017 – June 2019

Sources: St. Louis Federal Reserve, Altair Advisers See disclosures at end of document. 7 Second Quarter 2019

We do not believe inflation is dead. There is reason to 5. Yields fall into rare territory, a boon for bond believe it could spike unexpectedly, such as if a tight U.S. investors but with mixed implications. labor market creates upward wage pressure or through a fiscal stimulus package, so we want to maintain a certain This year’s steep decline in yields has level of inflation hedging in portfolios. generally spelled good news for bond investors, since prices rise as yields fall. The slide to multiyear lows However, we have reduced our expectation for the sends a more cautionary message about the future of potentially high inflation that is a hallmark of the later the economy, however. While we think a recession in the innings of business cycles. We believe there are other next year remains unlikely, a continued drop would be assets that also can offset the impact of more moderate, cause for further concern. non-traditional bouts of price increases. The 10-year U.S. Treasury yield, above 3.2% at its As a result, we will be positioning our portfolios to include peak last November, fell to a 2 1/2-year low of 1.9% in more than just commodities, which tend to be robust early July – reflecting pessimism about the longer-term hedges of very high and unexpected inflation but carry a prospects for the economy amid tariffs, slowing global lot of volatility along the way. We plan to opportunistically growth and with lower inflation expectations. add other real-return and real-asset securities such as floating-rate debt, infrastructure equities, natural Internationally, the drop has been even more dramatic. resource equities and Treasury Inflation-Protected Nearly a quarter of the bonds in the Bloomberg Barclays Securities (TIPS) to protect the portfolio from more mild Global Aggregate Index, worth about $13 trillion, have inflationary periods as well. negative yields. The dovish shift of global central banks – not just the Fed but also the ECB and the Bank of Inflation can take different forms and thus requires a England – has accelerated the decline, since further variety of assets that are inflation-sensitive due to their monetary easing will translate into even lower interest underlying fundamentals and not simply responsive rates worldwide. to inflation surprises. By broadening the exposure of our portfolios’ inflation-fighting assets, we will be able A return to yield levels above 3% for the U.S. 10-year any to diversify the higher-risk category through lower time soon will come only after a reacceleration of growth. correlated assets that will reduce the overall volatility of Yet a return to the 1.4% low reached in 2016 seems the portfolio and potentially enhance returns through similarly unlikely given the economy’s overall stability. various inflationary environments. Falling Rates Across Curve Lift Bonds Treasury Yield Curve September 2018 - June 2019

Sources: St. Louis Federal Reserve, Altair Advisers

See disclosures at end of document. 8 Second Quarter 2019

One focal point: We have been closely tracking the The greatest risk to markets is the threat of escalation in spread between the 3-month and 10-year rates on the the U.S.-China trade war, which would pose danger to yield curve since they inverted in May – meaning the already weakening global trade. We believe the strong longer-dated yields have been paying out less than their political and economic incentives for both sides to avoid shorter-dated peers. That is the equivalent of the bond a breakdown will result in a deal in advance of next year’s market expressing concerns about the economy and U.S. presidential election. historically a reliable indicator of a coming recession. The multiple rate cuts that Fed officials appear to be The yield curve steepened considerably in July, however, leaning toward are justified in the face of subdued going back into positive territory shortly before this inflation, slowing global growth and the recent partial commentary’s publication. That trend should continue as inversion of the yield curve. Equity markets should benefit the Fed lowers short-term rates further. Coupled with the unless trade-war negotiations collapse for an extended fact that the equally important 10-year/2-year spread did period. not invert and has remained steady this year, we believe a recession is not just around the corner. We expect the U.S. dollar to decline against other currencies, a boon for international stocks, as the Fed cuts rates, growth moderates and the trade deficit Our Outlook widens. President Trump has advocated action to lower the dollar. We remain optimistic about equity markets for at least the second half of 2019. Central banks have pledged easier We still believe small-cap and emerging-market financial conditions and the U.S. economy continues to stocks hold strong potential despite the relative be a linchpin of the global economy. underperformance of both categories in the first half. Valuations and prospects for both remain attractive and While the risk of a recession is growing as GDP growth emerging-market stocks should benefit from a trade-war slows, we believe the chances of one occurring in the resolution while small caps should outperform if the U.S. next 12 months remain small. The job market and other economy reaccelerates following a trade agreement. key indicators are positive and there are no signs of significant distress or excess in the economy.

Quotes of the Quarter

“Global commerce is being hit “TARIFF is a “We will act as by new trade restrictions on a beautiful word appropriate to sustain historically high level.” indeed!” the expansion.” Roberto Azevedo, Donald Trump, Jerome Powell, World Trade U.S. president Federal Reserve Organization director- chairman general

“We are now embarking on a new Long March, and we must start all over again!”

Xi Jinping, Chinese president

See disclosures at end of document. 9 Second Quarter 2019

Market Data reflecting a 0.1% decline in the dollar since the beginning U.S. Stocks of 2019. France’s market stood out with a 19.3% return Slowing economy? Trade war? No worries – investors for the first half, while Japan lagged with a 6.0% gain. shrugged off both in the first half of 2019. Emerging markets were more volatile amid the progress Markets continued to reflect optimism on both counts and setbacks of trade talks, but still positive. The iShares in the second quarter, confident the Federal Reserve will MSCI Emerging Markets ETF eked out a 0.7% gain from soon ease lending conditions and President Trump will April through June and was up 10.7% over the first half. ultimately close a trade deal with China. The result was The biggest winner was the Russian market, up more the U.S. market’s best first half since 1997. than 28% on rebounding oil prices and perceptions that new U.S. sanctions were unlikely. Other first-half returns The iShares S&P 500 ETF followed up its best quarter of of note: Brazil 14.7%, China 12.9%, India 6.5%. the bull market from January through March with a solid 4.2% return in the second quarter, leaving it up 18.5% Real Estate for the year. The entire gain and then some came in June, U.S. real estate investment trusts benefited as the Federal the month when Fed Chair Jerome Powell promised that Reserve halted its interest rate-hiking cycle after more “We will act as appropriate to sustain the expansion.” than three years and set the stage for coming reductions. REITs reached midyear as the top-returning asset class Financial stocks led the way in the quarter, up 8%, (+19.3%) despite underperforming the broader market in although tech firms delivered some of the largest gains. the second quarter with a 1.7% return. Technology was the top-performing sector for the first half, up 27%. Five companies, mostly tech giants, Internationally, REITs were essentially flat, inching back accounted for fully a third of the S&P 500’s second- 0.1%, but posted a strong 13.3% return through six quarter gain as they extended their 2019 momentum: months. As with domestic REITs, concern about slowing Apple (+40% year-to-date), Amazon (+27%), Facebook economic growth weighed on investors’ enthusiasm. (+44%), Microsoft (+32%) and Walt Disney (+27%). Commodities Small caps lagged their larger counterparts, likely on Commodity prices rose in the first half by 4.8% even fears about cooling domestic growth. The iShares under the cloud of the U.S.-China trade war, but Russell 2000 Index ETF edged up 1.9% in the quarter evidence of waning global trade growth sent the asset for a 16.8% first-half return. class to a 1.9% second-quarter loss as proxied by the iPath Bloomberg Commodity Total Return ETN. Growth outpaced value as the investing style of choice in the extended risk-on environment. The iShares Russell Crude oil futures increased by close to 25% in the first 1000 Growth ETF was up 20.9% at midyear after a 4.2% half amid growing geopolitical tensions, particularly in quarterly rise; its value counterpart had a first-half gain the Middle East involving Iran. The gain came exclusively of 15.8% following a second-quarter advance of 3.6%. from January through March; crude fell 3% in the second quarter amid worries that the lingering trade war is International Stocks causing the global economy and oil demand to slow. Non-U.S. stocks also delivered double-digit gains virtually across the globe in the first half, albeit less Grains was the top-performing commodities sector, with impressive than those of their American peers. Buoyed corn up nearly 18% and wheat up 15% on a mixture of by expectations of coming Fed rate cuts, international trade turmoil and weather issues. Precious metals also stock investors also drew confidence from China were among the biggest gainers as the Fed adopted a pumping monetary and fiscal stimulus into its economy more dovish outlook on interest rates, the dollar weakened to partially offset trade-war pressures. and geopolitical concerns mounted. Gold, the heaviest- weighted individual commodity in the Bloomberg index, The iShares MSCI All-Country World ex-US ETF, a climbed 9% in the quarter and reached a six-year high benchmark for all non-U.S. stocks, rose 2.8% and was above $1,440 an ounce in late June. Palladium surged up 13.4% at midyear. Developed economies fared best, 14%. collectively; the iShares MSCI EAFE ETF added 3.5% for a 14.2% return over the year’s first six months. In local Hedged/Opportunistic currencies, the first-half return was a tick lower at 14.1%, The HFRX Global Index, a benchmark representative of the hedge fund universe, underperformed stocks and

See disclosures at end of document. 10 Second Quarter 2019 delivered returns comparable to those of bonds: 1.6% Taxable bonds had particularly sturdy returns from for the quarter, 4.2% for the year to date. That still left investors bidding up these bonds in a flight to purchase it with the best first-half return since 2009 as funds safe assets. The Vanguard Total Index ETF benefited from betting on stocks, trend-following and was up 6.1% for 2019 after a 3.1% second-quarter gain. activist strategies. Tax-exempt municipal bonds, affected by different The HFRX Equity Hedge Index, an investable benchmark factors, were more modestly positive. Altair’s investable of long and short equity funds, followed a strong first benchmark for the market, a blend of the quarter with a 0.0% return from April through June for a Market Vectors’ short and intermediate ETFs, was up 6.0% rise in the first half. 1.6% in the quarter and 4.1% for the first half. Issuance of munis has slowed and the market remains supported Fixed Income by low supply and high demand. Bonds delivered a strong quarter as the 10-year Treasury’s yield fell below 2% for the first time since 2016 amid increased concern about an economic slowdown and heightened expectations that central banks will step in to cut rates. Bond prices rise as yields fall. Second Quarter 2019 Market Returns

Sources: Financial Times Interactive Data (IDC), Charles Schwab

See disclosures at end of document. 11 Second Quarter 2019

Investable Benchmark Returns through June 30, 2019 Annualized Year-to- Quarter (%) Date (%) 1 Year (%) 3 Year (%) 5 Year (%) 10 Year (%)

Large Cap Equity iShares S&P 500 ETF 4.2 18.5 10.8 14.1 10.7 14.6 iShares Russell 1000 Growth ETF 4.2 20.9 11.0 17.7 13.1 16.0 iShares Russell 1000 Value ETF 3.6 15.8 8.1 10.0 7.3 12.9

Small Cap Equity iShares Russell 2000 ETF 1.9 16.8 -3.5 12.2 7.1 13.4 iShares Russell 2000 Growth ETF 2.3 20.0 -0.9 14.5 8.7 14.5 iShares Russell 2000 Value ETF 1.0 13.1 -6.5 9.6 5.2 12.2

International Equity iShares MSCI ACWI ex US ETF 2.8 13.4 1.6 9.0 2.4 6.3 iShares MSCI EAFE ETF 3.5 14.2 1.3 8.8 2.6 6.8 1 MSCI EAFE Index - in local 3.1 14.1 2.7 10.3 6.4 8.8 Vanguard FTSE Europe ETF 4.2 15.6 1.1 9.0 1.5 7.2 Vanguard FTSE Pacific ETF 1.1 10.1 -2.8 8.8 3.9 6.8 iShares MSCI Emerging Mkts ETF 0.7 10.7 1.3 9.9 2.1 4.9

Fixed Income Market Vectors Sh/Inter Muni ETF 1.6 4.1 5.6 1.7 2.2 2.9 1 Barclays 5 Yr Muni Index 1.7 3.8 5.2 2.0 2.3 3.2 SPDR Nuveen Barclays Muni Bond 2.3 5.2 6.9 2.0 3.5 4.4 Vanguard Total Bond Market ETF 3.1 6.1 7.7 2.1 2.8 3.7 Gl FixedInc Investable Benchmark 3.7 5.6 6.4 1.5 1.0 2.5 iShares BarclaysInt Govt/Credit 2.4 4.8 6.6 1.7 2.2 2.9

Alternative SPDR Barclays High Yield Bond 2.4 10.7 8.3 6.5 3.1 7.7 Vanguard REIT 1.7 19.3 12.2 4.0 7.7 15.5 Vanguard Gl Ex-US Real Estate -0.1 13.3 5.5 7.6 4.5 8.6 HFRX Global Index 1.6 4.2 -2.0 2.1 -0.1 1.4 HFRX Equity Hedge Index 0.0 6.0 -4.2 3.2 0.7 1.4 iPath Bloomberg Commodity ETN -1.9 4.8 -8.7 -3.5 -10.8 -5.0 1 CEF Blended Benchmark 3.9 18.6 7.1 7.4 4.7 9.1

Other Common Benchmarks SPDR Dow Jones Industrial Avg 3.1 15.3 11.9 16.7 12.2 14.8 Fidelity Nasdaq Comp. ETF 4.3 21.7 8.0 19.5 13.9 17.0 iShares MSCI ACWI ETF 3.4 16.4 6.0 11.8 6.7 10.2 SPDR Barclays 1-3 Month T-Bill 0.6 1.1 2.1 1.2 0.7 0.3 1 Inflation - CPI 0.8 2.0 1.6 2.0 1.5 1.7

1There is no investable equivalent for this index Source: Financial Times Interactive Data (IDC) and Charles Schwab.

This table was prepared using investment performance and other information obtained from third-party sources, which we believe to be reliable; however, we have not audited the data from these sources and are not responsible for its accuracy. Past performance is no guarantee of future results. © 2019 Altair Advisers LLC. All Rights Reserved.

See disclosures at end of document. 12 Altair’s Senior Client Team Managing Directors

Rebekah L. Kohmescher, CFP®, CPA Jason M. Laurie, CFA, CFP® Steven B. Weinstein, CFA, CFP® Chief Executive Officer Managing Director and Chief Investment Chairman Officer

Richard K. Black, JD, CFP® Bryan R. Malis, CFA, CFP® Michael J. Murray, CFA, CFP®, CAIA Donald J. Sorota, CFP®, CPA Managing Director Managing Director Managing Director Managing Director

Directors Research Marketing

Timothy G. French, CFP®, CPA Rachael Halstuk Mangoubi, CFP®, CPWA® David J. Lin, CFA Anna E. Nichols Director Director Director of Investment Research Director of Communications Business Development

Lisa Micka, CFP®, CPWA®, AEP® Associate Director William C. Shannon, CIMA® Director of National Business Development

Altair Advisers Altair Advisers is an independent wealth advisory firm providing investment management, financial planning and client education services. We counsel a select group of individuals, families, foundations and endowments. As a fiduciary, we serve as an advocate for our clients, providing objective advice and comprehensive guidance across all aspects of our clients’ financial lives.

Disclosures The material shown is for informational purposes only. Past performance is not indicative of future performance, and all investments are subject to the risk of loss. Forward-looking statements are subject to numerous assumptions, risks, and uncertainties, and actual results may differ materially from those anticipated in forward-looking statements. As a practical matter, no entity is able to accurately and consistently predict future market activities. Information presented herein may incorporate Altair Advisers’ opinions as of the date of this publication, is subject to change without notice and should not be considered as a solicitation to buy or sell any security. While efforts are made to ensure information contained herein is accurate, Altair Advisers cannot guarantee the accuracy of all such information presented. Material contained in this publication should not be construed as accounting, legal, or tax advice.

© Altair Advisers LLC. All Rights Reserved.

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