Quarterly Investment Update – 1st Quarter 2013


Stock Market Commentary -

Renewed monetary support by the Federal Reserve and dissipation of fear over tax hikes drove U.S. equity markets to record levels in the first quarter. The S&P 500 rose 10.6%, closing the quarter at a high of 1,569; the S&P 400 Midcap index surged 13.5%; and the Russell 2000 climbed 12.4%. Foreign equities experienced downside volatility on the Cyprus bailout news, which reignited concerns over the Eurozone's economic troubles. The MSCI EAFE Index managed to return 5.3% by quarter-end, but the MSCI Emerging Markets Index fell 1.6%. Value stocks outperformed growth stocks, while all sectors of the U.S. market rose in the first quarter. Defensives led, with Healthcare returning 16% and Consumer Staples rising 14.6%. Technology and Materials lagged, up 4.6% and 4.8%, respectively. The Real Estate sector added another 7%, as measured by the DJ Wilshire REIT Index.

Bond Market Commentary -

Interest rates rose modestly in the first quarter, leading to negative returns in the overall taxable bond market. The yield on the 10-year Treasury increased by 9 basis points to 1.85%, and the 30-year Treasury yield jumped to 3.11%. High-yield bonds had another strong quarter, gaining 2.9%. The 12-month default rate for high-yield bonds has been trending down from already low levels. Following a broad selloff in December 2012, the municipal bond market gained approximately 0.6% in the first quarter of 2013.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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