** TRADE DATE SCHEDULED FOR Today – November 9^th, 2016 **

• Private Client (PC Blended/PC Traditional/PC L100k/BME/CBP/PC Income Strat)
• ETF (including ETF Tactical models)
• American Funds
• DFA
• Fidelity
• Socially Responsible (SRI)
• Vanguard

Investment Rationale: 

As 2016 begins to wind down, LSA will be recommending changes to all of the portfolios over the next two weeks to address some under-performing funds that have been placed on a watch-list and to continue with our movement of reducing risk or correlations in the portfolios.  As market volatility seems to have re-emerged, we believe that this will be a continued trend moving forward especially around the 2016 election.  The IPC will be recommending funds in the models with the attempt to reduce risk and to provide solid downside protection.  Although the IPC continues to believe that a recession is not eminent in 2016 or even in 2017, we do believe that the probability of a recession in the next couple of years has increased greatly over the last eight months.  The November 2016 model changes are not targeting big shifts in asset class exposures as we believe the portfolios have handled well in 2016, but we will continue to explore the use of alternatives to reduce correlations, emerging market equities to go after attractive valuations, and commodities as ways to combat inflation.

The high level thesis is that in 2018 the US economy will be faced with a couple of difficult headwinds that have greatly increased the probability of a recession taking place.  These headwinds are not limited to, but include, the idea that the Fed rate hikes that started in December of 2015 will be thirty plus months in play at that time.  Historically, recessions will occur thirty to forty months after the Fed begins to raise rates. The markets will also be facing the first major reset of bonds purchased by the Fed in the numerous QE programs.  We have already begun to see a slowdown in corporate earnings, and when you couple that with slow economic growth in the developed world it creates a case for difficult markets ahead.  The IPC will be looking to slowly reduce risk from the portfolios over the course of the next two years.  We believe such model changes could be particularly helpful during conditions of weakness for equities and/or other equity-correlated risk assets.

*As a reminder, the Revision Explanation Presentation/Video is posted in the “News & Announcements,” section.