24 Apr 2025 Q1 Student of the Markets

Stocks

1. Stocks started the year on a strong note rising through February 19 prior to selling off first mildly on dampening enthusiasm around AI and subsequently more aggressively on heighted fears of macroeconomic weakness stemming from tariffs and overall policy uncertainty.

 

The U.S. market gained nearly 5% to start the year through February 19. During that period signs of a change in market leadership started to emerge with value outperforming growth, the Magnificent Seven lagging the overall market and foreign stocks outperforming U.S. stocks.

 

Since peaking at an all-time high on February 19, the U.S. market has declined more than 13% as of April 15 with foreign developed and emerging markets stocks, value stocks and non-tech/non-Mag 7 stocks holding up comparatively better than the aggregate U.S. market.

 

For the year thus far through April 15^th, the overall U.S. market is down slightly less than 9% while foreign stocks are modestly positive and U.S. value stocks are down only 3%. Meanwhile, U.S. tech stocks are down 10% and the Magnificent Seven is down more than 18%.

Past performance is not a guarantee of future results. Indices are not available for direct investment. Index performance does not reflect the expenses associated with the management of an actual portfolio. Investing involves risks such as fluctuating value and potential loss of principal value. There is no guarantee strategies will be successful.

Source: Ycharts.

2. Following President Trump’s “Liberation Day” tariff announcements, the S&P 500 experienced one of its worst four-day declines since 1950.

 

At the close on Tuesday April 8, the S&P 500 was down more than 12% over the previous four trading days, marking its 12^th largest four-day decline since 1950.

 

Perhaps, somewhat counterintuitively, following past historically large four-day declines, the market has reliably moved substantially higher over the subsequent 1, 3 and 5 years.

Past performance is not a guarantee of future results. Indices are not available for direct investment. Index performance does not reflect the expenses associated with the management of an actual portfolio. Investing involves risks such as fluctuating value and potential loss of principal value. There is no guarantee strategies will be successful.

Source: @CharlieBilello.

 

3. Market volatility has picked up to levels comparable to 2008 and 2020.

 

Stock market volatility kicked into overdrive in the few weeks following President Trump’s “Liberation Day” tariff announcements.

 

 

4. Investor sentiment has rapidly deteriorated relative to its sky-high levels coming into the year.

 

According to the Conference Board Consumer Confidence Index report in March, “only 37.4% expected stock prices to rise over the year ahead—down nearly 10 percentage points from February and 20 percentage points from the high reached in November 2024. On the flip side, 44.5% expected stock prices to decline (up 11 ppts from February and over 22 ppts more than November 2024).” It’s likely that April’s report due toward the end of the month with show that investor optimism declined even further in April.

Fund managers too have become decidedly more bearish according to Bank of America’s Global Fund Manager Survey in April as shown below.

 

5. U.S. stock market valuations have declined amid the selloff but remain expensive relative to history.

 

On a forward price-to-earnings basis, the market has gone from historically expensive to still modestly above average valuations over the last 30 years.

Price-to-earnings is price divided by consensus analyst estimates of earnings per share for the next 12 months as provided by IBES since March 1994 and by FactSet since January 2022. Average P/E and standard deviations are calculated using 30 years of history. Shiller’s P/E uses trailing 10-years of inflation-adjusted earnings as reported by companies. Dividend yield is calculated as the next 12-months consensus dividend divided by most recent price. Price-to-book ratio is the price divided by book value per share. Price-to-cash flow is price divided by NTM cash flow. EY minus Baa yield is the forward earnings yield (consensus analyst estimates of EPS over the next 12 months divided by price) minus the Bloomberg US corporate Baa yield since December 2008 and interpolated using the Moody’s Baa seasoned corporate bond yield for values beforehand. Std. dev. over-/under-valued is calculated using the average and standard deviation over 30 years for each measure. *Averages and standard deviations for dividend yield and P/CF are since November 1995 due to data availability.

Source: Graph from J.P. Morgan Asset Management: Guide to the Markets – U.S. Data are as of April 10, 2025. Underlying data from Source: FactSet, FRB, Refinitiv Datastream, Robert Shiller, Standard & Poor’s, Thomson Reuters, J.P. Morgan Asset Management.

 

On a longer-term basis, U.S. stocks remain expensive even relative to past market peaks when measured by the cyclically adjusted price-earnings (CAPE) ratio, developed by Professor Robert Shiller. The CAPE ratio is a valuation measure that uses real earnings per share (EPS) over a 10-year period to smooth out fluctuations in corporate profits that occur over the business cycle.

Past performance is not a guarantee of future results. Indices are not available for direct investment. Index performance does not reflect the expenses associated with the management of an actual portfolio. The Shiller P/E, also known as the cyclically adjusted price-to-earnings ratio or CAPE, is a valuation measure usually applied to the US S&P 500 equity market. It is defined as price divided by the average of ten years of earnings (moving average), adjusted for inflation. Peak values represent the month-end value for the month preceding the market peak. Trough values represent that month-end value for the month during which the market bottomed. Current is as of April 15, 2025.

Source: Robert Shiller’s data library for Shiller P/E Ratio and National Bureau of Economic Research for recession dating.

 

 

 

6. The Magnificent 7 stocks remain expensively valued relative to the rest of the market with an aggregate expected long-term growth profile that’s similar to that of the overall market.

 

While the Magnificent 7 stocks have delivered superior earnings growth vs. the overall market in the last few years, expectations looking forward call for earnings growth that’s much more market-like with the notable exceptions being NVIDIA and Netflix. Importantly, however, many of the Magnificent 7 stocks still command premium valuations relative to the rest of the market.

 

*Trailing 3-year where 5-year is not available.

Estimated Long-Term Growth based on median analyst earnings growth estimates over the next 3 years. Growth rates as of 3/31/25. All other data as of 4/15/25. Aggregate metrics in italics shown as weighted averages. You cannot invest directly in an index.

Source: Table from WisdomTree, data via FactSet, S&P.

 

 

7. Despite its outperformance year to date, foreign stocks remain historically cheap relative to U.S. stocks.

 

The valuation gap between U.S. and foreign stocks has narrowed only modestly even as non-U.S. stocks have outperformed U.S. stocks by double digits thus far in 2025.

Data begins 12/29/2000 to coincide with inception of the MSCI ACWI ex-US Index. U.S. measured by S&P 500 Index. Ex-US measured by MSCI ACWI ex-US Index. You cannot invest directly in an index. Past performance is not indicative of future returns.

Source: Chart from WisdomTree, data via MSCI, S&P.

 

 

 

8. The S&P 500 has typically declined by around 25% around economic recessions.

 

Amid heighted policy uncertainty investors have grown increasingly concerned that the U.S. economy will enter a recession during the next 12 months. Simply based on historical experience, if a recession were to occur, it’s reasonable to expect some amount of further downside for the U.S. stock market. However, it’s important to recognize that past market declines around recessions have displayed a wide variation around the average decline of 24%.

Past performance is not a guarantee of future results. Indices are not available for direct investment. Index performance does not reflect the expenses associated with the management of an actual portfolio. Investing involves risks such as fluctuating value and potential loss of principal value. There is no guarantee strategies will be successful.

Source: Chart from Goldman Sachs Global Investment Research.

 

 

 

 

9. As it relates to a potential U.S. recession, it’s critical to remember that the stock market is forward looking in that it has historically declined in advance of a recession actually occurring and thus tends to look through declines in the overall economy and corporate earnings when they actually occur.

 

The fact that markets are forward looking is ultimately why “waiting for the dust to settle” or “waiting until things are less uncertain” is not a profitable investment strategy. Markets decline in the anticipation of deteriorating economic conditions and then usually start rising again when the anticipated poor conditions actually materialize, and signs of a turnaround begin to emerge.

 

As a live example of this, we see here that stocks bottomed well before earnings and GDP during the 2020 bear market / recession.

Past performance is not a guarantee of future results. Indices are not available for direct investment. Index performance does not reflect the expenses associated with the management of an actual portfolio. Investing involves risks such as fluctuating value and potential loss of principal value. There is no guarantee strategies will be successful.

Source: Chart from Ritholtz Wealth Management data via Bloomberg.

 

 

 

 

10. Separate from, but highly related to stock market declines around recessions, it’s important to remember that equity bear markets come in a variety of shapes and sizes.

 

Not all bear markets are the same. Research from Goldman Sachs identifies three different types of bear markets that have bearing on the triggers, timing and speed of the recovery:

 

• Structural bear markets: triggered by structural imbalances and financial bubbles
• Cyclical bear markets: typically triggered by rising interest rates, impending recessions and falls in profits
• Event-driven bear markets: triggered by a one-off “shock” that either does not lead to a domestic recession or temporarily knocks a cycle off course

 

We applied Goldman’s framework to the last 11 bear markets for the S&P 500 Index (defined by the market closing more than 20% below an all-time high level) since the 1950s.

Investing involves risks such as fluctuating value and potential loss of principal value. There is no guarantee strategies will be successful. You cannot invest directly in an index.

Note: Drawdown calculations based on daily index closing levels and do not include intra-day index levels or dividends.

Source: Kathmere calculations based on index data from Ycharts and Yahoo Finance.

 

We can see that cyclical and event-driven bear markets have been the most common types of bear markets over the last 75 years. On average, during these types of bear markets, stocks have declined by about 30%, although they’ve differed modestly in their speed and duration. In general terms, we’ve seen event-driven bear markets materialize and recover faster and decline less once the 20% decline threshold was crossed as compared to cyclical bear markets which have historically been more drawn-out affairs, ultimately declining a bit more from the official start of the bear market and taking a bit longer to recover.

 

On the other hand, the three structural bear markets (1973, 2000 and 2007) stand out in terms of both their severity (total declines averaging about 50%, including a further 38% on average from the start of the bear market) and duration (taking nearly 6 years to fully recover to a new all-time high from the start of the bear market).

 

One additional note that’s important to keep in mind—identifying the type of bear market is obviously easy to do in retrospect but is much more complicated in real time. Most structural bear markets start out looking cyclical, and many event-driven bear markets begin due to a specific event but can morph into something more cyclical.

 

 

 

11. The start of a bear market has historically proved to be a good entry point for long-term investors.

 

The official start of a bear market tends to gain a lot of attention in the financial media and the press which can naturally result in a heighted sense of fear and unease among investors. However, history has demonstrated that the stock market has tended to perform quite strongly in the months and years following the official start to a bear market. The table below builds upon the analysis presented above and shows the returns of the S&P 500 Index over a variety of time periods following the date on which the market first officially closed in bear market territory (down 20% or more from its all-time high).

 

What we can see clearly is that on average, the market has delivered strong performance following the start of a bear market, particularly if it’s a cyclical or event-driven one.

Investing involves risks such as fluctuating value and potential loss of principal value. There is no guarantee strategies will be successful. You cannot invest directly in an index.

Note: Drawdown calculations based on daily index closing levels and do not include intra-day index levels or dividends.

Source: Kathmere calculations based on index data from Ycharts and Yahoo Finance.

 

 

12. Market timing recessions / bear markets is a risky proposition.

 

During episodes like today’s heightened economic uncertainty and market volatility, it’s tempting for investors to think they can sell and get out of the market today, sidestep future market declines and get back at lower prices when things appear to be on more solid footing.

 

One often overlooked problem with this line of thinking is that successful market timing requires not just one, but two correct decisions—when to sell and when to buy back in.

 

Leaving aside the question of when to sell, the decision of when to get back in is complicated by the fact that “no one rings a bell at the market bottom.” Rather it only becomes clear in retrospect.

 

The risk for investors engaging in market timing is that by the time the proverbial dust has settled, and the coast is once again clear, the market has historically moved materially higher.

 

We see in the chart below that on average the stock market has on average gained nearly 15% in the first month following the bottom of the last 11 S&P 500 bear markets since the 1950s.

 

Accordingly, being only a few months late on the re-entry decision can cost an investor dearly.

Past performance is not a guarantee of future results. Indices are not available for direct investment. Index performance does not reflect the expenses associated with the management of an actual portfolio. Investing involves risks such as fluctuating value and potential loss of principal value. There is no guarantee strategies will be successful.

Note: Drawdown calculations based on daily index closing levels and do not include intra-day index levels or dividends.

Source: Kathmere calculations based on index data from Ycharts and Yahoo Finance.

 

 

 

12. Downside risk and volatility are a normal part of stock market investing.

 

Here we examine the market’s declines within each calendar year since the start of 1928.

We can see that drawdowns are a very typical and ordinary part of stock market investing. Historically, we’ve observed that in the median year the market has experienced a 13% drawdown at some point during the year. Many years experienced intra-year drawdowns of 20% or more. This of course has occurred during a period where the market delivered an impressive annualized gain of more than 10% per year over the full period.

 

Put simply, volatility can be thought of as the price of admission we as long-term investors pay for the potential to earn the market’s compelling long-term returns.

 

Bonds & Credit

1. High-quality reserve assets has delivered much needed ballast during the equity market’s selloff.

 

High quality bonds have delivered on their role of providing ballast and stability in a portfolio thus far in 2025.

Past performance is not a guarantee of future results. Indices are not available for direct investment. Index performance does not reflect the expenses associated with the management of an actual portfolio. Investing involves risks such as fluctuating value and potential loss of principal value. There is no guarantee strategies will be successful.

Source: Ycharts.

 

 

 

2. Treasury rates are broadly in-line with or lower than where they started the year despite some volatility in recent weeks amid the tariff uncertainty.

 

Treasury rates have been quite volatile since the start of April following President Trump’s “Liberation Day” tariff announcements driven by a confluence of factors including an ever-evolving outlook for economic growth and inflation combined with technical factors related to trading by hedge funds and other leveraged investors.

 

On the whole, however, two- and 10-year Treasury rates are modestly lower today than where they were to begin the year, which has served to contributed positive to bonds’ performance for the year.

 

 

 

3. Credit spreads on high yield bonds have moved higher thus far in 2025.

 

Investors have been demanding increased compensation for bearing the risk of default on high yield bonds as the economic outlook has deteriorated in recent weeks.

 

Credit spreads measure the additional yield offered on riskier bonds (e.g., investment-grade and/or high yield corporate bonds) relative to a “risk-free” U.S. Treasury bond with the same maturity.

 

Despite their recent widening, credit spreads remain below their average levels over the last nearly 30 years.

 

 

 

4. Risk-aware growth public and private credit strategies have held up reasonably well during the equity market selloff.

 

Public / traded credit assets such as high yield bonds, broadly syndicated bank loans and lower-rated structured corporate credit (BBB-rated CLOs) have declined by 2-3% since the stock market’s all-time high on February 19 and are modestly down thus far in 2025.

 

Private credit has thus far proven more resilient than its public peers due largely to the private nature of the asset class and the lack of true mark-to-market volatility. For the year, private credit as an asset class is up 2-3%.

Past performance is not a guarantee of future results. Indices are not available for direct investment. Index performance does not reflect the expenses associated with the management of an actual portfolio. Investing involves risks such as fluctuating value and potential loss of principal value. There is no guarantee strategies will be successful.

Source: Ycharts.

 

 

 

Economy

1. Economists came into the year forecasting another year of solid economic growth.

 

After two straight years of realized economic growth coming in well above expectations, economists in aggregate ratcheted up their expectations for economic growth in 2025 coming into the year. According to the Federal Reserve Bank of Philadelphia’s Survey of Professional Forecasters 4Q 2024 survey, economists were expecting U.S. GDP growth to exceed 2% in 2025.

 

Why is this important? Simply put, the hurdle for upside economic surprises—which helped fuel the stock market rally over the last two years—was much higher coming into this year than in recent years. Growth was expected this year, and if it were to materialize, it wouldn’t come as a pleasant surprise—it would have been expected. Bullishness was consensus coming into the year.

Notes: Year-ahead forecasts are as of November the preceding year (e.g., 2025 growth forecast is from November 2024).

Source: Federal Reserve Bank of Philadelphia Survey of Professional Forecasters and Bureau of Economic Analysis (BEA).

 

 

 

2. Then came a barrage of tariff announcements from the Trump administration which cumulatively have pushed U.S. tariff rates up to their highest levels since the early 1990s.

 

Economists at Goldman Sachs found that “simply multiplying 2024 trade shares by these tariff increases and accounting for the exemptions granted would imply a 25 [percentage point] increase in the US’ effective tariff rate to 27.5%. But this approach overstates the increase because it fails to account for larger declines in imports of goods facing higher tariffs and for substitution and rerouting of US imports away from China toward other countries facing lower tariffs….After accounting for greater declines in imports of goods facing higher tariffs and for substitution and rerouting toward lower-tariff countries, we estimate that the tariffs implemented to date [as of April 15] and the sectoral tariffs that we expect will raise the US’ effective tariff rate by about 16 [percentage points].”

Source: Chart from Goldman Sachs Investment Research.

 

According to data from the U.S. Bureau of Economic Analysis, in 2024, the U.S. imported approximately $3.3 trillion of goods as shown in the chart below.

Applying a 16-percentage point tariff rate increase (Goldman’s estimate of the effective increase) to that amount of goods yields an effective tax increase of U.S. consumers and producers of approximately $525 billion. As a point of comparison, in its fiscal year 2025 budget, the U.S. federal government expected to raise $524 billion from corporate income taxes. Thus, as announced, the recent tariff increases are from a tax perspective effectively equivalent to a doubling of the corporate income tax rate.

 

 

 

3. Economic policy uncertainty has soared to levels only matched during the height of the Covid pandemic.

 

Given both the magnitude of potential changes to tariff rates and the fluidity of the overall situation, a key index of economic policy uncertainty has jumped to historically high levels dating back to the indexes’ inception in the 1980s.

 

 

 

4. Consumer confidence has materially declined.

 

The Conference Board’s Consumer Confidence Index declined materially in March, prior the “Liberation Day” tariff announcements.

 

According to the March report: “Views of current business conditions weakened to close to neutral. Consumers’ expectations were especially gloomy, with pessimism about future business conditions deepening and confidence about future employment prospects falling to a 12-year low. Meanwhile, consumers’ optimism about future income—which had held up quite strongly in the past few months—largely vanished, suggesting worries about the economy and labor market have started to spread into consumers’ assessments of their personal situations.”

 

5. Small business optimism has sharply declined.

 

The NFIB’s Small Business Optimism Index sharply declined in March, just three months after reaching a near record high in December.

Source: Chart from NFIB Small Business Economic Trends (March 2025).

 

 

 

6. Economists have become more pessimistic in their outlook for the U.S. economy.

 

Economists surveyed by the Wall Street Journal in April raised their probability of a recession in the next 12 months to 45% from slightly above 20% when last surveyed in January.

 

As always with these things, we should take these forecasts with a healthy grain of salt. Recall that in 2022 and 2023 in three separate surveys economics recession expectations topped 60%, yet no recession actually materialized. Nevertheless, it’s notable how quickly and sharply expectations have shifted in just a few months.

 

7. Key economic indicators still revel that the U.S. economy has been growing at a modest, healthy rate.

 

Key lagging economic indicators covering the labor market, industrial output, personal income and personal spending show that as of the latest trailing data available, the economy was still growing at a healthy rate through the end of the first quarter.

 

This list represents set of data that are highlighted by the National Bureau of Economic Research (NBER) as the indicators for consideration of business cycle turning points. More information is provided at https://www.nber.org/research/business-cycle-dating

Data as of latest available: Total Nonfarm Employees (3/31/2025), Employment Level (3/31/2025), Industrial Production (2/28/2025). Real Manufacturing and Trade Industries Sales (1/31/2025), Real Personal Income Excluding Government Transfer Payments (2/28/2025), Real Personal Consumption Expenditures (2/28/2025)

Source: Federal Reserve Bank of St. Louis FRED.

 

 

 

8. The labor market remains in solid shape too.

 

One of the best, as close as possible real-time economic indicators we have to keep a current pulse on the economy is initial jobless claims which are reported weekly (vs. traditional job growth and unemployment reports which are reported monthly) Given the propensity for there to be a fair amount of “noise” on a week-to-week basis, it’s helpful to examine them on a moving four-week average.

 

Thus far in 2025, we’ve fortunately seen layoffs remain fairly stable and in line with recent years where the economy has generally been characterized as “fully employed” like today (e.g., 2018, 2019, 2023 and 2024). To the extent that the economy was significantly deteriorating, we’d expect to see initial jobless claims to begin moving materially higher. Historically we’ve seen initial claims noticeably pick up before a recession and climb 20% or more.

 

If we see claims surge in the coming weeks, we’ll start to grow more concerned about the prospects of a pending recession.

2025 data is as of week ended April 12.

Source: Ycharts.

 

 

Important Disclosures

 

Kathmere Capital Management (Kathmere) is an investment adviser registered under the Investment Advisers Act of 1940. Registration as an investment adviser does not imply any level of skill or training. The firm only transacts business in states where it is properly registered or is excluded from registration requirements. Content in this presentation should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the author on the date of publication and are subject to change. Information presented does not involve the rendering of personalized investment and should not be viewed as an offer to buy or sell any securities discussed. Tax information provided is general in nature and should not be construed as legal or tax advice. Always consult an attorney or tax professional regarding your specific legal or tax situation. Tax and ERISA rules are subject to change at any time. All investment strategies have the potential for profit or loss. Different types of investments involve higher and lower levels of risk. There is no guarantee that a specific investment or strategy will be suitable or profitable for an investor’s portfolio. Historical performance returns for investment indexes and/or categories, usually do not deduct transaction and/or custodial charges or an advisory fee, which would decrease historical performance results. There are no guarantees that a portfolio will match or outperform a specific benchmark. Market performance results and index returns do not represent the performance of Kathmere or any of its advisory clients.

 

The information presented in the material is general in nature and is not designed to address your investment objectives, financial situation or particular needs. Prior to making any investment decision, you should assess, or seek advice from a professional regarding whether any particular transaction is relevant or appropriate to your individual circumstances. Although taken from reliable sources, Kathmere cannot guarantee the accuracy of the information received from third parties.

 

The opinions expressed herein are those of Kathmere and may not actually come to pass. This information is current as of the date of this material and is subject to change at any time, based on market and other conditions. Index performance used throughout is intended to illustrate historical market trends and performance. Indexes are managed and do not incur investment management fees. An investor is unable to invest in an index. Past performance is no guarantee of future results.

 

The mention of specific securities and sectors illustrates the application of our investment approach only and is not to be considered a recommendation by Kathmere Capital Management. The specific securities identified and described above do not represent all of the securities purchased and sold for the portfolio, and it should not be assumed that investment in these types of securities were or will be profitable. There is no assurance that securities discussed in this article have been purchased or remain in the portfolio or that securities sold have not been repurchased.  It should not be assumed that any change in investments, discussed in this article have been applied to your account.  Please contact your investment adviser to discuss your account in detail.

 

The information herein was obtained from various sources. Kathmere does not guarantee the accuracy or completeness of information provided by third parties. The information in this report is given as of the date indicated and believed to be reliable. Kathmere assumes no obligation to update this information, or to advise on further developments relating to it.

 

All investment strategies have the potential for profit or loss. Different types of investments involve higher and lower levels of risk. There is no guarantee that a specific investment or strategy will be suitable or profitable for an investor’s portfolio.

 

Historical performance returns for investment indexes and/or categories, usually do not deduct transaction and/or custodial charges or an advisory fee, which would decrease historical performance results. There are no guarantees that a portfolio will match or outperform a specific benchmark. Index returns do not represent the performance of Kathmere Capital Management or any of its advisory clients.

 

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing.

 

Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.

 

There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not ensure against market risk. Asset allocation and diversification do not assure or guarantee better performance and cannot eliminate the risk of investment losses.

 

Tactical allocation may involve more frequent buying and selling of assets and will tend to generate higher transaction cost. Investors should consider the tax consequences of moving positions more frequently.

 

Stock Investment Risk

 

Stock investing involves risk including loss of principal.

 

Investing in stock includes numerous specific risks including: the fluctuation of dividend, loss of principal and potential illiquidity of the investment in a falling market.

 

Investing in foreign and emerging markets securities involves special additional risks. These risks include, but are not limited to, currency risk, geopolitical risk, and risk associated with varying accounting standards. Investing in emerging markets may accentuate these risks.

 

Currency risk is a form of risk that arises from the change in price of one currency against another. Whenever investors or companies have assets or business operations across national borders, they face currency risk if their positions are not hedged.

 

Bond Investment Risk

 

Bonds are subject to market and interest rate risk if sold prior to maturity. Bond and bond mutual fund values and yields will decline as interest rates rise and bonds are subject to availability and change in price.

 

Government bonds and Treasury bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate.

 

High-yield/junk bonds are not investment-grade securities, involve substantial risks, and generally should be part of the diversified portfolio of sophisticated investors.

 

Municipal bonds are subject to availability, price, and to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rate rise. Interest income may be subject to the alternative minimum tax. Federally tax-free but other state and local taxes may apply.

 

Investing in foreign and emerging markets debt securities involves special additional risks. These risks include, but are not limited to, currency risk, geopolitical and regulatory risk, and risk associated with varying settlement standards.

 

Alternative Investments Risk

 

Alternative strategies may not be suitable for all investors and should be considered as an investment for the risk capital portion of the investor’s portfolio. The strategies employed in the management of alternative investments may accelerate the velocity of potential losses.

 

Investing in real estate/REITs involves special risks such as potential illiquidity and may not be suitable for all investors. There is no assurance that the investment objectives of this program will be attained.

 

Commodity-linked investments may be more volatile and less liquid than the underlying instruments or measures, and their value may be affected by the performance of the overall commodities baskets as well as weather, geopolitical events, and regulatory developments.

 

The fast price swings of commodities may result in significant volatility in an investor’s holdings.

 

There is a risk of substantial loss associated with trading commodities, futures, options, derivatives and other financial instruments. Before trading, investors should carefully consider their financial position and risk tolerance to determine if the proposed trading style is appropriate. Investors should realize that when trading futures, commodities, options, derivatives and other financial instruments one could lose the full balance of their account. It is also possible to lose more than the initial deposit when trading derivatives or using leverage. All funds committed to such a trading strategy should be purely risk capital.