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1st Quarter March 2014

Spring Is Here?

Markets continue to climb. January was flat and stock indices were negative for a period before recovering and surging through the end of the quarter. A look around the world, however, gives us reasons for caution. China probably faces a retrenchment after manufacturing growth with significant debt. There may be some backlash if the promises made to their citizens are not realized around growth. The ripple effect of slower growth in Asia will likely continue in emerging markets, but we believe this will create opportunity. The Federal Reserve's easy-money policy that has been in place for the last six years is likely over, which we have discussed in previous letters. We do not know if that will be disruptive to stock and bond markets eventually, as we saw last summer, but we should expect that it very well could. Russia and the Middle East will lose their stronghold on oil as the U.S. and Canada become less dependent on foreign supply. This is significant, as an energy renaissance in the U.S. is underway.

I had a conversation this weekend with an executive whose company makes the steel pipe that transports oil and natural gas that is being extracted out of the huge shale deposits across our country, facilitated by better, more efficient technology. His view is that we are in the third inning or the early stages of this process. What does this all mean? We believe you have to balance opportunity with risk – there is no silver bullet. We believe in staying diversified even if you have to put up with low returns on lower risk assets, like bonds and cash, for the time being. They are there to help balance some of the volatility that is inherent in global markets. We have gone several years without a significant pullback and we believe it is not prudent to expect that to continue.

Financial Market Update* Year-to-date change as of March 31, 2014
S&P 500 Index 1.81%
Dow Jones Industrial Average -0.15%
NASDAQ Composite 0.83%
MSCI EAFE US$ (International) 0.66%
Barclay US Aggregate Bond 1.84%
*Indexes are for illustrative purposes only. One cannot invest directly in any index. Assumes dividends are reinvested.
Source: Morningstar

High Frequency Trading

A word about high frequency trading, which has been in the news lately. High frequency trading describes how faster computer networks may give some traders at high-speed electronic trading firms a price advantage when fulfilling investment orders. The issue in the news mostly impacts those who are in the actual business of trading stocks. The debate concerns a particular segment of traders who leverage speed to gain an advantage over other traders. History has shown that when advantages are identified by market participants, a combination of market forces, investor sentiment, and regulation will intervene to level the playing field. Regulators have ongoing investigations into this practice to ensure investors are being treated fairly. While the publicity sells books, we do not think you currently need to be alarmed. Large institutions will adjust quickly to any perceived advantage.

April 15th

Tax season is in full swing. If we can assist you in any way to facilitate your tax returns or discuss ways to reduce the impact of tax increases, please call on us.

I am encouraged that I can actually see my sidewalk now as the snow is melting, and Big Ten teams had a great showing in the NCAA basketball tournament. There is much to be optimistic about! Happy Spring.

Best Regards,


Please note that international investing involves special risks, including currency fluctuations, differing financial accounting standards, and possible political and economic volatility. Investing in emerging markets can be riskier than investing in well-established foreign markets. Past performance may not be indicative of future results. Expressions of opinions are as of this date and are subject to change without notice. Any opinions are those of Sherri Stephens and not necessarily those of RJFS or Raymond James. Stephens Wealth Management Group is independent of RJFS. The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Diversification does not ensure a profit or guarantee against a loss. Investing involves risk and investors may incur a profit or a loss. Raymond James and its advisors do not offer tax advice. You should discuss any tax matters with the appropriate professional.

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