First Quarter 2017

It is hard to believe, but on February 2, I will have been with Stifel for two years. The time has flown by with the move from Morgan Stanley and all of us getting acquainted with and comfortable at our new home – Stifel. Our team is thrilled at the welcome we received from our Stifel family, and we are certain it was the right move at the right time. Change is usually difficult to accept, but it is a part of business and of life.

That is why it is with great sadness, and some excitement, that I am saying good bye to all of our wonderful clients. I have decided to take a position with my husband’s company, which is growing rapidly. I’m eager to see what this new path will bring my way. This was not an easy decision to make, nor was it easy to tell the team I had made it. Many of you I have known for the past 16 years that I have worked with Bill. Some of you I have only come to know recently, through Alex and Rob joining the team. But regardless of how long it has been, it has been my great pleasure to get to know you and to be of service to you. It is not every person who can say that they love their job and look forward to going to work everyday, but I can. And it is our clients who make that happen. I will miss Bill’s sharp wit, Rob’s attention to detail, Alex’s larger than life personality, and Deb’s ever-cheerful attitude. And equally important, I will miss connecting with all of you through conversations, e-mails, seminars, and our Annual (Ladies Only) Holiday Party. You will always have a special place in my heart.

I would also like to introduce you to the newest member of our team, Laurie Rouse. She will be a terrific addition to the team, and I know they are all excited to have her join them. Laurie comes to us with over 20 years of experience in the finance industry working for Wells Fargo and World Savings/Wachovia Bank. Most of Laurie’s more recent background is from the loss mitigation side of the mortgage business, but she is very excited to take on the challenge of assisting the team as they continue to provide exceptional service to you, our valued clients.

If you ever wish to reach me you can contact me at kim@bridlewoodinsurance.com. I will miss all of you, and I wish the best for you and your families.

Best, Kimberly WetzelRegistered Operations Coordinator

OUR TEAM

R. William Chaffin, CFP® Senior Vice President/Investments

Resident Manager

Robert Willgoss, CFP® First Vice President/Investments

Alexander Monroe Financial Advisor

Kimberly Wetzel Registered Operations Coordinator

Deborah Muenchow Registered Client Service Associate

Laurie Rouse Client Service Associate

GOOD BYE AND WELCOME

It’s pronounced (Ste-fuhl)

Left-to-Right: Rob Willgoss, Kim Wetzel, Bill Chaffin, Debbie Muenchow, Alex Monroe

2016 MARKET OVERVIEW & 2017 MARKET OUTLOOK Although 2016 produced positive returns across most asset classes, the path to achieving those gains was anything but smooth. After the worst start to a year in history, U.S. equity markets finished 2016 near record highs. Bond yields, which fell to historical lows mid-year, rebounded sharply at year end, on expectations of faster economic growth. The decline in oil prices, which had been a drag on energy-related stocks, also reversed course, providing a boost to the outlook for corporate profits. From Brexit to the November elections, there were plenty of surprises that impacted performance in 2016. Perhaps the biggest surprise was that the market’s reaction was counter to investor expectations.

• Stocks Outperformed Bonds – All three major U.S. stock indices produced solid gains, with the DOW, S&P 500, and NASDAQ rising 16.5%, 11.96% and 8.87%, respectively, versus the Barclays Aggregate Bond Index return of 2.65%.1

• A Shift in Leadership – Gains for U.S. stocks were broad-based, and all sectors except for Health Care produced positive returns. However, 2015’s worst-performing sectors, Energy, Financials, and Industrials, were the best performing stocks in 2016, while Consumer names and Health Care, last year’s best performers, lagged. Following two years of under-performance, small-cap and mid-cap bested large-cap stocks. After a decade of underperformance, value outperformed growth by more the 900 basis points.

• Trump Trade – Anticipation of lower taxes, increased infrastructure spending, and less regulation resulted in some extreme prices moves post the November election. Financial, Industrial, and Energy-related stocks, all seen as beneficiaries of a Trump presidency, rallied sharply, while fears of tariffs and potential trade wars weighed on large-cap multinational corporations and developed market international stocks.

• U.S. Dollar – The U.S. dollar rose to a 15-year high against the pound, euro, and other foreign currencies. The stronger dollar had a negative impact on large-cap multinational stocks.

• Rising Interest Rates – Expectations of stronger economic growth and further monetary tightening by the Federal Reserve helped lift interest rates off historical lows. The prospect of higher interest rates weighed on bond proxy performance in the second half of the year, with defensive sectors such as Consumer Staples, Utilities, and Telecommunication underperforming.

One of the most often asked questions for 2017 is likely to be about how rising interest rates will affect dividend yield stocks. History would suggest that if the pace of Fed interest rate hikes is gradual, as expected, and if economic growth is at moderate levels, the environment for dividend-paying stocks will remain favorable

If we take away any lessons from 2016, it is that markets rarely perform as expected. As we look ahead to 2017, amid the uncertainty of both monetary and fiscal policy, expectations for economic growth and equity markets are on an upward, albeit moderate, trajectory. This increased optimism is tempered by the fact that the S&P 500 has been up for eight consecutive years (including dividends), producing the second longest bull market in history and raising equity valuations above their historic average.2

1 The Dow Jones Industrial Average is an index that shows how 30 large, publicly owned companies based in the United States have traded during a standard trading session in the stock market. The Standard & Poor’s 500 Index is a capitalization-weighted index that is generally considered representative of the U.S. large capitalization market. The NASDAQ Composite Index is a capitalization-weighted index that is comprised of all stocks listed on the National Association of Securities Dealers Automated Quotation System stock market, which includes both domestic and foreign companies. The Barclays Capital U.S. Aggregate Index is comprised of the Barclays Capital U.S. Government/Credit Index and the Barclay Capital Mortgage-Backed Securities Index. All issues in the index are rated investment grade or higher, have a least one year to maturity, and have an outstanding par value of at least $100 million. Index returns include the reinvestment of dividends but do not include adjustments for brokerage, custodian, and advisory fees. Indices are unmanaged and are not available for direct investment. Past performance is no guarantee of future results.

2 Strategies is a research and investment advisory unit of Choice Financial Partners, Inc., a subsidiary and affiliated SEC Registered Investment Adviser of Stifel Financial Corp.

1. Although officially founded in 1817, the NYSE traces its roots back to the “Buttonwood Agreement” in 1792. The story goes that 24 stockbrokers met outside of 68 Wall Street, New York and signed an agreement under a buttonwood (sycamore) tree, essentially starting the now famous NYSE.1

2. Wall Street was laid out behind a 12-foot-high wood stockade across lower Manhattan in 1685. The stockade was built to protect the Dutch settlers from British and Native American attacks.2

3. The American Stock Exchange was originally called, “The Curb.” This is because traders first started out on the streets of New York City, standing by the curb.2

4. In the United States, changes in stock prices were expressed as fractions until the year 2000. The U.S. lagged behind other major stock markets like the London Stock Exchange and the Paris Bourse, which had switched over to the decimal format several years earlier. In the late 1990s, U.S. congressional leaders enacted a law that mandated the switch over to decimals, as an effort to make understanding stock values easier for the average investor.1

5. Despite the New York Stock Exchange’s notoriety, it was not the first stock exchange in the United States. That distinction belongs to the Philadelphia Stock Exchange, which was founded in 1790.3

6. Massachusetts Investors Trust was the first official mutual fund, created on March 21, 1924. The Wellington Fund, created in 1928, was the first mutual fund to include stocks and bonds.3

7. The word “millionaire” first popped up in literature in the 1826 novel “Vivian Grey” by Benjamin Disraeli.3

8. Before money was made of bills and coins, these items were used as currency: conch shells, ivory, clay, live animals, and grain. As long as it was divisible and scarce, it could be money.4

9. Where does the term “check” or “cheque” come from? It’s derived from the game of chess. Putting the king in check means his choices are limited, just like a modern day cheque that limits opportunities for forgery and alteration.4

1 www.zacks.com2 http://seekingalpha.com3 www.financialcoachinginstitute.com4 www.happyworker.com

DID YOU KNOW?

Stifel, Nicolaus & Company, Incorporated | Member SIPC & NYSE | www.stifel.com

16870 West Bernardo Drive, Suite 150 Rancho Bernardo, California 92127 (858) 879-4000 | (855) 778-4335 toll-free

First Quarter 2017 Newsletter

R. William Chaffin, CFP®, CWS Senior Vice President/Investments

Kimberly Wetzel Registered Operations Coordinator

Robert Willgoss, CFP®

First Vice President/Investments

Deborah Muenchow Registered Client Service Associate

Laurie Rouse Client Service Associate

Alexander Monroe Financial Advisor

16870 West Bernardo Drive, Suite 150 Rancho Bernardo, California 92127