THE THOMAS JEFFERSON INSTITUTE FOR

PUBLIC POLICY

THIRD ANNUAL ECONOMIC CONFERENCE

INVESTMENT OUTLOOK ISSUES INVESTORS SHOULD CONSIDER NOW

STEPHAN CASSADAY, CFP, CFS

PRESIDENT & CHIEF EXECUTIVE OFFICER

CASSADAY & COMPANY, INC

WWW.CASSADAY.COM SECURITIES OFFERED THROUGH ROYAL ALLIANCE ASSOCIATES, MEMBER FINRA/SIPC. INVESTMENT ADVISORY AND INSURANCE SERVICES OFFERED THROUGH CASSADAY AND

COMPANY, A REGISTERED INVESTMENT ADVISER NOT AFFILIATED WITH ROYAL ALLIANCE ASSOCIATES

AGENDA:

THE POTENTIAL IMPACT OF TAX REFORM

POLITICAL ENVIRONMENT

ARE THE MARKETS OVERVALUED?

HISTORY LESSONS

THE REAL BUBBLE

CONCLUSIONS

LONG TERM TRENDS

WHAT ARE THE

CHANCES??

KILLARNEY IRELAND

IMPACT OF TAX BILL

IMPOSSIBLE TO PLAN OR KNOW UNTIL AN ACTUAL BILL GETS PASSED

ANY QUESTIONS?

OUR ADVICE

TAX PLANNING IS IMPORTANT BUT VISIBILITY IS NECESSARY

DON’T LET THE TAX TAIL WAG THE INVESTMENT DOG

Our Politics Have Never Been Filled with Such Vitriol

THERE IS SOME GOOD NEWS….

ARE THE MARKETS OVERVALUED?

HISTORY LESSON

WHAT HAS THE

GREATEST IMPACT ON

INVESTMENT

RESULTS?

Source: Bloomberg,

12/31/15. Average asset

allocation investor return

is based on an analysis

by DALBAR, Inc., which

utilizes the net of

aggregate mutual fund

sales, redemptions and

exchanges each month

as a measure of investor

behavior.

A CLOSER LOOK AT DECLINES

WHAT CONDITIONS LED TO PREVIOUS BEAR MARKETS?

Growth Assets Historically Outperform in

Rising Rate Environments

Asset Class Performance During Various Treasury Rate Environments (1995–2016)

Sources: Barclays Live, Credit Suisse, Alerian and Bloomberg, 12/31/16. The average 10-Year Treasury rate over the past 20 years is 4%.

“Low” is defined as below 4%. Commodities are represented by the Dow-Jones UBS Commodity Index. TIPS is represented by U.S. Generic

Treasury Inflation Protected Bond Securities. Gold is represented by the U.S. dollar spot price of one troy ounce. Core Bonds are represented

by the Bloomberg Barclays U.S. Aggregate Bond Index. Senior Loans are represented by the Credit Suisse Leveraged Loan Index.

International Equities are represented by the MSCI EAFE Index. Master Limited Partnerships are represented by the Alerian MLP Index.

Emerging Market Equities are represented by the MSCI Emerging Market Index. Large-Cap Equities are represented by the Russell 1000

Index. Small-Cap Stocks are represented by the Russell 2000 Index. Index definitions can be found on page 90. Past performance does not

guarantee future results.

Plenty of corporate cash out there…

Source: FactSet, Russell Investment Group, Standard & Poor’s, J.P. Morgan Asset Management.

CURRENT PE VS. HISTORICAL

Source: FactSet, Russell Investment Group, Standard & Poor’s, J.P. Morgan Asset Management.

ARE PE RATIOS PREDICTIVE?

Source: FactSet, Thomson Reuters, Standard & Poor’s, J.P. Morgan Asset Management. Returns are 60-month annualized total returns, measured monthly, beginning September 30, 1992. R² represents the percent of total variation in total returns that can be explained by forward P/E ratios.

WHAT DRIVES PRICES?

Source: Bloomberg, as of 12/31/16. Company logos are for illustrative purposes only and are not intended as investment advice. The mention of specific companies does not constitute a recommendation on behalf of any fund or OppenheimerFunds, Inc. Correlation expresses the strength of relationship between distribution of returns of two sets of data. The correlation coefficient is always between +1 (perfect positive correlation) and –1 (perfect negative correlation). A perfect correlation occurs when the two series being compared behave in exactly the same manner. Past performance does not guarantee future results.

Source: Compustat, FactSet, Standard & Poor’s, J.P. Morgan Asset Management; S&P 500 individual company 10k filings, S&P Index Alert. EPS levels are based on operating earnings per share. Earnings estimates are Standard & Poor’s consensus analyst expectations. Past performance is not indicative of future returns

Does GDP MATTER?

1985-2005 S&P annualized return 8.20%

1985-2005 real GDP annualized growth 3.20%

2006-2016 S&P annualized return 5.40%

2006-2016 real GDP annualized growth 1.50%

1985-2005 S&P annualized return 8.20%

1985-2005 real GDP annualized growth 3.20%

2006-2016 S&P annualized return 5.40%

2006-2016 real GDP annualized growth 1.50%

THE REAL BUBBLE?

THE CURRENT BULL MARKET IS OLD BY HISTORICAL STANDARDS BUT INVESTORS ARE NOT OVERLY ENTHUSIASTIC. SINCE 2009 $800B HAS COME OUT OF EQUITY FUNDS AND $1.5T HAS GONE TO BOND FUNDS FEAR OF SLOW GROWTH HAS CAUSED TREPIDATION BUT 2017 GLOBAL GROWTH IS PROJECTED TO BE FRACTIONALLY BELOW THE LONG TERM AVERAGE. VALUATIONS ARE HISTORICALLY ABOVE AVERAGE BUT CAN STAY ELEVATED AND EVEN GO HIGHER. POLITICAL EVENTS LIKE TAX REFORM (OR NOT), ELECTIONS, FISCAL CLIFF, BREXIT, GREXIT ETC. USUALLY ARE A SOURCE OF VARIABILITY BUT USUALLY DO NOT END CYCLES. AT SOME POINT AN EVENT WILL END THE MARKET’S RUN BUT THESE ARE ALWAYS A SURPRISE AND NEVER PREDICTED IN ADVANCE.

THE WEIGHT OF THE EVIDENCE SUPPORTS A BULL CASE FOR EQUITIES. .

Conclusion…

Long term trends… 1. Disruption 2. Disruption 3. Disruption

Think about it…

1. Air Bnb 2. IBM Watson – legal advice, medical

diagnosis 3. Autonomous cars – massive disruptions 4. Health diagnosis 5. 3D printing 6. Education - Khan Academy

THE THOMAS JEFFERSON INSTITUTE FOR

PUBLIC POLICY

THIRD ANNUAL ECONOMIC CONFERENCE

INVESTMENT OUTLOOK ISSUES INVESTORS SHOULD CONSIDER NOW

STEPHAN CASSADAY, CFP, CFS

PRESIDENT & CHIEF EXECUTIVE OFFICER

CASSADAY & COMPANY, INC

WWW.CASSADAY.COM SECURITIES OFFERED THROUGH ROYAL ALLIANCE ASSOCIATES, MEMBER FINRA/SIPC. INVESTMENT ADVISORY AND INSURANCE SERVICES OFFERED THROUGH CASSADAY AND

COMPANY, A REGISTERED INVESTMENT ADVISER NOT AFFILIATED WITH ROYAL ALLIANCE ASSOCIATES