INVESTMENT PRODUCTS: NOT FDIC INSURED • NO BANK GUARANTEE • MAY LOSE VALUE
LEARNING FROM THE LESSONS OF TIME
2000–2002 Bear market 1987 Bear market1973–1974 Bear market
74.66
267.23
-48.20-33.51
23.33122.09
456.10
Peak to trough (market high to market low) 1-year after end 5-years after end 10-years after end
25.99
-100
0
100
200
300
400
500
-49.15
105.1224.40
120.82
-54.89
70.58
205.84
N/A
2007–2009 Bear market
For every bear, there’s a bull … and for every bull, there’s a bearThe chart below shows how dramatically the stock market (as represented by the S&P 500) bounced back from its lowest point during four bear markets over the last few decades. Of course, investors during these periods couldn’t possibly have known their investment would grow so dramatically … but they could have remained fully invested, con�dent in the knowledge that markets recover over time.
A few “history lessons” to consider
Staying focused despite the day-to-day distractions of the market is never easy, especially during periods of economic uncertainty. However, investors who seek the guidance of a trusted Financial Professional and remain committed to their investment plans, even when it’s tempting to head to the sidelines, are better positioned to realize their short- and long-term goals.
THE ISSUES THAT WORRY INVESTORS TODAY AREN’T NEW
1 Source: Standard & Poor’s, a division of the McGraw-Hill Companies, Inc., GPW (Legg Mason internal system) and Morningstar Direct.Past performance is no guarantee of future results.
This chart is for illustrative purposes only and is not indicative of performance of any specific investment. All investments involve risks, including loss of principal. Please note that an investor cannot invest directly in an index. Unmanaged index returns do not reflect any fees, expenses or sales charges. This chart illustrates the historical performance of the Standard & Poor’s 500 Index (S&P 500) before and after the bear market bottoms of October 3, 1974, December 4, 1987, October 9, 2002 and March 9, 2009. Cumulative total returns include reinvestment of dividends and capital gains. The S&P 500 Indexis an unmanaged index of 500 stocks that is generally a representation of the performance of larger companies in the U.S.
Cumulative total returns of the S&P 5001 (%)
Don’t let emotions drive your decisions Emotions can lead to irrational decision making and impulsive decisions that compromise the realization of stated goals. Before you react impulsively, make a list of your concerns, revisit your goals and review your strategy. If your goals and/or priorities have changed, or if you believe your strategy is no longer appropriate given the economic environment, contact your Financial Professional. When there is fear and uncertainty in the air, when there is scary news that makes you question what you should do, that’s when it’s most important to talk to your Financial Professional. He or she can provide the perspective you need to understand the situation at hand and how it relates to your individual goals and strategy.
Understand your tolerance for riskRisk is part of investing. You can limit it, you can defend against it, but you can’t eliminate it. The important thing is to have a well-informed understanding of how much risk you can tolerate by working closely with your Financial Professional. By having a well-informed understanding of your tolerance for risk, your Financial Professional can construct a long-term investment strategy suited to your needs.
Be diversified2
Despite the best e�orts of investment professionals, it’s virtually impossible to guess in advance which asset class will have the best return in any given year. Spreading your investment dollars between di�erent asset classes is an important tool to manage investment risk, especially during periods of market volatility.
Stay investedInvestors who stay the course have historically been rewarded for their patience. When you look at market performance over decades rather than just a year or two, you �nd that while it may contract, it also expands — with the gains often concentrated in a handful of trading days.
Work closely with a trusted Financial ProfessionalA trusted Financial Professional works with you to identify your goals, needs and aspirations to align your short- and long-term goals with your own risk tolerance. A Financial Professional also o�ers much-needed perspective by helping to identify the consequences of impulsive and irrational decisions. Most importantly, your Financial Professional, backed by the resources of his/her own �rm, helps you achieve your goals by providing valuable insight and guidance on economic issues, the markets, speci�c investments and strategies.
-2.43
-0.31
2.15
5.88
-13.33
-6.16
-4.38
Fully invested
Missed the top 10 days
Missed the top 20 days
Missed the top 30 days
Missed the top 40 days
Missed the top 50 days
Missed the top 100 days
Price-only performance
Market returns (%)S&P 500 Index from January 2, 1997–December 30, 20163
2 Diversification does not assure a profit or protection against market loss.3 Source: Morningstar Direct. All investments involve risks, including loss of principal. The chart provided is for illustrative purposes only and represents an unmanaged index in which investors cannot directly invest. Past performance is no guarantee of future results.
Any information, statement or opinion set forth herein is general in nature, is not directed to or based on the financial situation or needs of any particular investor, and does not constitute, and should not be construed as, investment advice, forecast of future events, a guarantee of future results, or a recommendation with respect to any particular security or investment strategy or type of retirement account. Investors seeking financial advice regarding the appropriateness of investing in any securities or investment strategies should consult their financial professional.
Legg Mason, Inc., its affiliates and its employees are not in the business of providing tax or legal advice to taxpayers. These materials and any tax-related statements are not intended or written to be used, and cannot be used or relied upon, by any such taxpayer for the purpose of avoiding tax penalties or complying with any applicable tax laws or regulations. Tax-related statements, if any, may have been written in connection with the “promotion or marketing” of the transactions(s) or matter(s) addressed by these materials, to the extent allowed by applicable law. Any such taxpayer should seek advice based on the taxpayer’s particular circumstances from an independent tax advisor.
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A P R I L 2 5 , 2 0 16A P R I L 2 5 , 2 0 16A P R I L 2 5 , 2 0 16
t i m e . c o mt i m e . c o mt i m e . c o m
That’s what every American man, That’s what every American man, That’s what every American man, woman and child would need to pay woman and child would need to pay woman and child would need to pay to erase theto erase theto erase the $13.9 trillion$13.9 trillion$13.9 trillion U.S. debt U.S. debt U.S. debt $13.9 trillion U.S. debt $13.9 trillion$13.9 trillion$13.9 trillion U.S. debt $13.9 trillion U.S. debt $13.9 trillion U.S. debt $13.9 trillion$13.9 trillion$13.9 trillion U.S. debt $13.9 trillion
Make America Solvent AgainMake America Solvent AgainMake America Solvent AgainMake America Solvent AgainMake America Solvent AgainBy James GrantBy James GrantBy James GrantBy James GrantBy James Grant
$$$42,998.1242,998.1242,998.12$42,998.12$$$42,998.12$42,998.12$42,998.12$$$42,998.12$You oweYou oweYou owe
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THE DATES MAY CHANGE, BUT THEHEADLINES STAY THE SAME
Source: FactSet and Morningstar Direct.Past performance is no guarantee of future results. This chart is for illustrative purposesonly and is not indicative of performance of any specific investment. An investor cannot investdirectly in an index. Unmanaged index returns do not reflect any fees, expenses or sales charges. The Dow Jones Industrial Average (DJIA) is a widely followed measurement of the stock market.The average is comprised of 30 stocks that represent leading companies in major industries.These stocks, widely held by both individual and institutional investors, are considered to be allblue-chip companies.Time magazine and Time Inc. are not affiliated with, and do not endorse products or services of,Legg Mason, Inc.The magazine covers in this brochure are all from Time Magazine. Date of Issue and Publication Year are listed under each cover. © 2017 Time Inc., used under license.
4 “Unemployment On the Rise,” by James Kelly, Time, February 8, 1982.5 “Banking Takes A Beating,” by William Blaylock, Adam Zagorin, Stephen Koepp,
Time, December 3, 1984.6 “Who’s in Charge?,” Time cover image, November 9, 1987.7 “All Shook Up,” by John Greenwald, Time, October 15, 1990.8 ”Jobs in the Age of Insecurity,” by George J. Church, Time, November 22, 1993.9 “Everyone, Back in the Labor Pool,” by Daniel Kadlec, Time, July 29, 2002.10 “The New President’s Economy Problem,” by Justin Fox, Time, May 26, 2008.11 “It’s Only Going to Get Worse in Washington,” by Michael Scherer; Alex Altman,
Time, October 14, 2013.12 “Make America Solvent Again,” by James Grant, Time, April, 25, 2016.
It’s human nature to be concerned about the future, and doom-and-gloom headlines command attention in both good and bad times. Yet a look back at history shows that neither bull or bear markets last forever — and that short-term worries may not be a good indicator to where the market is going.
What matters is keeping a clear head — and recognizing that markets will go both up and down, and at times may even move in opposite directions. When in doubt, talk to your Financial Professional. Revisiting your long-term goals and the logic behind your investment decisions can provide much-needed perspective and help avoid impulsive moves that may work against you in the future.
Nov. 9, 1987Feb. 23, 1976 Sep. 30, 1977 Oct. 22, 1979 Feb. 8, 1982 Dec. 3, 1984 Nov. 10, 1986 Oct. 15, 1990 Sep. 28, 1992 Nov. 22, 1993 Mar. 20, 1995 Sep. 14, 1998 Mar. 26, 2001 Feb. 4, 2002 Jul. 29, 2002 May 26, 2008 Oct. 13, 2008 Nov. 9, 2009 Mar. 29, 2010 Aug. 15, 2011Nov. 2, 1987 Nov. 19, 2012
Housing/Credit market turmoil
Iran hostage crisis
President Reagan shot
Tech bubble bursts
9/11 terrorist attacks
Exxon Valdez oil disaster
Iraq invades Kuwait
Market meltdown
S&P downgrades U.S. debt
“It is doubly trouble-some that the ranks of the jobless are growing at a time when many of the cushions softening the pain of unemployment have been deflated.”4
“Bankers now face their most strenuous survival test since the Great Depression.”5
“The crash on Wall Street spotlights America’s Leadership Crisis.”6
“Banks and insurance firms are tottering beneath huge portfolios of bad real estate mortgages.”7
“Americans are more worried about their financial future than at any other time since the turbulent 70s.”9
Nov. 17, 2014 Apr. 25, 2016Feb. 2, 2015
LTCM collapse; Russian debt default
Governmentshutdown
Asian currency crisis emerges
“But Americans have a new menu of economic woes — among them a real estate crash, a credit crisis, a broken health-care system and nagging job insecurity.”10
“The nation has been carved up into echo chambers; increasingly, we hear only the sound of our own passions and fears reverberating.”11
“We owe more than we can easily repay. We spend too much and borrow too much.”12
“All sorts of people who never thought they would be on the jobless lines ... are looking for jobs and not finding them.”8
Oct. 14, 2013