Weekly Market Commentary

Snowed Under

Financial market participants will be pulled in several directions this week as January turns into February. Political developments in North Africa and the Middle East are likely to be top of mind this week and serve as a reminder that geopolitics are never too far removed from the headlines. Policy — a key theme in markets last week (January 24 – 28) — lingers as a potential market-mover this week, as does Federal Reserve Chairman Ben Bernanke who will hold a press conference, a very unusual event for a Chairman of the Federal Reserve. Additionally, central banks in Australia, Iceland, India, the Czech Republic, Indonesia, as well as the European Central Bank (ECB) meet to set policy this week. Other than India, none of these central banks are expected to raise rates, although rising inflation in much of the developing world has put renewed focus on the actions of emerging market central banks in response to higher food and fuel prices.

Back home in the United States, fiscal policy will continue to be at or near the top of the headlines, as the battle over the debt limit ceiling looms. In addition to the geopolitics and policy, a full slate of crucial economic data for December and January in the United States is due out this week. Data on consumer spending, inflation, manufacturing, construction and the labor market are all due out this week. The key report of the week is the employment report for January, on Friday, February 4. In China, a key report on manufacturing activity in January is set to be released late Monday night. Markets remained concerned about the pace of economic growth and, more importantly, inflation in China, and we continue to expect more policy tightening in China in the coming weeks and months.

Will The Rise in Energy Prices Short Circuit the Recovery?

As this publication was being prepared, December data on consumer spending, personal income, and the Fed’s preferred measure of inflation, the personal consumption expenditure (PCE) deflator, excluding food and energy, along with reports on manufacturing activity in Chicago, Milwaukee and Dallas in January were being released. Later in the week, the employment picture in early 2011 will come into focus, as first the Challenger layoff data for January, then the ADP employment report and finally the nonfarm payroll jobs report for January will be released. Unusually severe winter weather across large swaths of the United States in much of January is likely to have an impact on the employment data and indeed all the economic data for January.

The income, spending and price data for December largely reinforced the Fed’s case for continuing its program of quantitative easing. Income growth (at just 3.8% year-over-year) suggests that employment is growing too slowly, while the 0.7% year-over-year gain in the core PCE deflator in December remains well below the low end of the Fed’s unofficial comfort zone for this metric, +1.5 to 2.0%. The Fed’s decision to embark on a second round of quantitative easing was based on the idea that the Fed was not fulfilling either part of its dual mandate of low and stable inflation and full employment. The latest data on spending and inflation continues to show that while the economy is growing, and a recovery is underway, it remains tenuous. Our view remains that despite political pressure, the Fed will continue to pursue quantitative easing until it is slated to end in June 2011, but that the hurdle is high for the Fed to initiate yet another round of quantitative easing later this year.

One concern many market participants (and consumers) have had in recent weeks and months as oil and gasoline prices have moved higher is what impact these rising energy prices will have on the economy as a whole, and on consumer spending in particular. The data embedded in the monthly personal income and spending report released as this report was being prepared will likely shed some light on this. In December 2010, consumers spent $646 billion (on an annualized basis) on gasoline, electricity, home heating oil, natural gas, etc. That figure represented just over 6.0% of total consumer spending. Since hitting a low of 4.8% of spending in late 2008/ early 2009, energy spending by consumers as a percent of total spending has moved steadily higher, although it remains well below the peak hit in mid-2008 of 7.0%. In dollar terms, U.S. consumers were spending $710 billion (annualized) in mid-2008 (versus the aforementioned $646 billion today) as oil prices hovered near $150 per barrel, gasoline prices were above $4 per gallon and natural gas was close to $14 per BTU.

Today, oil prices are just below $90 per barrel, gasoline prices are about $3 per gallon and natural gas is running between $4 and $5 per BTU. A “shock” in the form of a cut in oil production and resulting sharp rise in consumer energy prices was one of the preconditions for the double-dip recession in 1980 – 82, and played a big part in the economic slowdown in late 2007 and early 2008 ahead of the worst of the financial crisis in late 2008/early 2009 that was precipitated by the collapse of Lehman Brothers in September 2008. On balance, while we are watching the rise of consumer energy prices closely, our view is they have not risen far enough or fast enough to suggest that the economy is headed for a double dip. In 2008 (and 1981, when the second leg of the double-dip recession ensued), the labor market was deteriorating, real incomes were stagnating, inflation, interest rates and, most importantly, consumer debt levels were high and rising. Today, the labor market is improving, real incomes are accelerating, and inflation, consumer interest rates and, most importantly, consumer debt levels, are falling.

January Jobs Report Likely To Be Impacted By Weather, Revisions

In the second half of the week, markets’ attention will turn to the labor market. Reports on layoffs (as measured by the outplacement firm Challenger, Gray and Christmas) and private sector employment (as measured by ADP, the nation’s largest payroll processing firm) for January will set the stage for the monthly employment report from the U.S. Department of Labor on Friday, February 4.

Unfortunately, the most closely watched data is likely to be beset with distortions this time around, making it even more difficult to interpret. The weather is the key wildcard for the report and could have a significant impact on the headline job count. Much colder and wetter wintery weather in most of the country in January will most likely hold down the job count in weather-sensitive industries like retail, construction and leisure.

In the month of January, the weekly data on initial filings for unemployment insurance was heavily influenced by the weather. The employment indices in the various regional manufacturing indices during January (Chicago, Philadelphia, Empire State, Dallas, Richmond, etc.) were mixed at best, and many of these surveys cited poor weather as an influence on economic activity in the month. Markets will try to look past the weather impact and hope that February brings more “normal” winter weather, which would allow markets to simply average January and February’s employment readings to get a better gauge of the underlying health of the labor market.

The January jobs report will also incorporate some methodological changes to the report, as well as the annual benchmark revision to the jobs data done each year to synch up tax records and payroll counts over the past several years. Both the establishment survey (which tallies the number of employees at businesses) and the household survey (which queries some 300,000 households about the employment status of the members of the household) are subject to revision. The revisions to the payroll survey are likely to show that 366,000 fewer jobs were created between March 2010 and December 2010 than was previously thought. Revisions and methodological changes may also impact the household survey, which is used to derive the nation’s unemployment rate.

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IMPORTANT DISCLOSURES 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. All performance reference is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly. Investing in international and emerging markets may entail additional risks such as currency fluctuation and political instability. Investing in small-cap stocks includes specific risks such as greater volatility and potentially less liquidity. Stock investing involves risk including loss of principal Past performance is not a guarantee of future results. Investing in alternative investment may not be suitable for all investors and involve special risks such as risk associated with leveraging the investment, potential adverse market forces, regulatory changes, potential liquidity. There is no assurance that the investment objective will be attained.

This research material has been prepared by LPL Financial. The LPL Financial family of affiliated companies includes LPL Financial and UVEST Financial Services Group, Inc., each of which is a member of FINRA/SIPC. To the extent you are receiving investment advice from a separately registered independent investment advisor, please note that LPL Financial is not an affiliate of and makes no representation with respect to such entity.

Not FDIC or NCUA/NCUSIF Insured | No Bank or Credit Union Guarantee | May Lose Value | Not Guaranteed by any Government Agency | Not a Bank/Credit Union Deposit.

Weekly Market Commentary

Policy Week

Monetary and fiscal policy may dominate headlines this week, even as market participants absorb more than 128 fourth quarter earnings reports from S&P 500 companies and a busy slate of economic data. In addition, several major central banks meet to set policy including the Bank of Japan, the Reserve Bank of New Zealand and Norway's central bank, Norges Bank. Both Norway and New Zealand have already raised rates in this cycle, and no rate increases are expected this week. There is no economic data due in China this week, as the country approaches its Lunar New Year holidays, which begins on February 2. The next key economic release in China is the Chinese Purchasing Managers Index for January 2011, due out on Monday, January 31.

This week’s economic data in the United States is an eclectic mix of reports on housing, consumer confidence, labor costs, and manufacturing activity as 2010 ended and 2011 began. Although “old news” at this point, the financial media is likely to focus on Friday’s release of gross domestic product (GDP) data for the fourth quarter of 2010. The consensus is looking for a 3.5% quarter-over-quarter gain in real GDP in the fourth quarter of 2010 relative to the third quarter, a marked acceleration from the 2.6% rate of growth in the third quarter. Estimates range from a low of 2.9% growth to a high of 5.9% growth in the fourth quarter.

We estimate GDP growth accelerated to 4.0% in the fourth quarter, after averaging about 2.5% over the first three quarters of 2010. One highlight of the GDP report is likely to be that consumer spending in the fourth quarter of 2010 is on track to outpace business spending for the first time since early 2009. In addition, a growth rate of real GDP faster than 2.6% in the fourth quarter will push the level of real GDP back above its pre-recession peak, hit in late 2007, after adjusting for inflation. The level of nominal (i.e., non-inflation adjusted) GDP moved past its prior peak in mid-2010. As highlighted in our 2011 Our view for economic growth in 2011 is that real GDP growth will be near the long-term average at 2.5–3%.

State of the Union Address May Reignite the Budget Battle

President Obama’s State of the Union address on Tuesday, January 25 will help to usher in the budget season in Washington and could reignite talk of a battle of the debt ceiling and a potential government shutdown sometime in late winter or early spring 2011. While the State of the Union speech is the unofficial start of the budget season and the timeline for the budget process over the next several months is set, the only deadline investors are going to worry about is the debt ceiling limit deadline, which may occur anytime between mid March and mid May 2011.

President Obama will release his proposed budget for fiscal year (FY) 2012 in mid-February and shortly thereafter, the house Republicans will release their own vision for the nation’s finances for fiscal year 2012, which begins on October 1, 2011. This week, just after the President’s State of the Union address, the non-partisan Congressional Budget Office (CBO) will release its 2011 budget and economic outlook on Wednesday, January 26, and in March 2011, the CBO will release its analysis of the President’s budget.

One thing is for sure, neither the President’s budget nor the House Republicans’ version will be passed into law anytime soon. While there was a flurry of healthy conversations in Washington in late 2010 as several bi-partisan commissions released deficit reduction plans, talk of balanced budgets faded soon thereafter, as the President and House Republicans agreed to a deal that:

·         Extended the Bush tax cuts for two years

·         Extended unemployment insurance benefits for a year

·         Cut payroll taxes by 2 percentage points

·         Provided tax incentives for businesses to make purchases of capital equipment in 2011

According to the non-partisan CBO, that deal also raised deficit estimates for FY 2011 (which ends on September 30, 2011) by close to $400 billion and did little or nothing to address the nation’s long-term deficit problem, which is too much spending on mandatory programs like Social Security, Medicaid and especially Medicare, and not enough revenue. And while we applaud recent efforts by some members of Congress to focus attention on “waste, fraud and abuse” and political “pork” in the Federal budget, the fact is that “waste, fraud and abuse” along with pork barrel projects (earmarks) together account for only a small portion of the $3.5 trillion budget. Recent non-partisan studies pegged waste, fraud and abuse in the Federal budget at anywhere between $75 billion and $100 billion per year. Earmarks are close to $20 billion per year.

While waste, fraud, and abuse, along with earmarks total an enormous sum ($100 to $125 billion) on an absolute basis, relative to the total federal outlays of close to $3.5 trillion dollars, they are literally just a rounding error. Again, we applaud the effort to root out waste from the Federal budget process, but in order to make any real progress on bringing the budget back into balance, many difficult choices lie ahead.

We expect the debt-ceiling limit to be an almost daily topic of conversation in the markets and in the financial media between now and the spring of 2011. Normally, the raising of the limit on the debt ceiling is a non-event for markets, but because deficits are in the news (here and abroad) and because the newly elected House GOP ran on deficit reduction, there is a risk that the debt ceiling debate could lead to a government shutdown. On the positive side, a government shutdown could pave the way for a more substantive discussion of the debt and deficit, and prompt some significant action. On the downside, the debate may unnerve some foreign investors, who hold half of our federal debt.

However, we do not expect the debate on the raising of the debt limit to lead to actions that significantly reduce entitlement spending and the deficit anytime soon, although the odds are not zero. The best guess is that the 2012 election cycle will provide the platform for a more substantive discussion of entitlement reform and what its consequences for taxes and spending, so that some progress can begin to be made in 2013.

Dissent Drives the Debate

While the outcome of the Federal Open Market Committee (FOMC) meeting is not in doubt—the FOMC will leave interest rates unchanged and continue its program of quantitative easing—the details of the meeting could attract attention. Even though Fed Chairman Ben Bernanke has more than enough votes on the 12-member FOMC to continue QE2, there is likely to be discussion that is more heated and dissent at this FOMC meeting. Despite the increased rhetoric around in the Fed, our view remains that the hurdle for the Fed to end QE2 early is high, and the hurdle to start QE3 in June 2011 is even higher.

During his one-year tenure as a voting member on the FOMC in 2010, Thomas Hoeing, the president of the Kansas City Fed, voted against the second round of quantitative easing, QE2, and keeping rates near zero at each of the eight FOMC meetings. While Hoeing will rotate off of the FOMC as a voting member this week, two new members of the FOMC, Philadelphia Fed president Charles Plosser and Dallas Fed President Richard Fisher—who are noted inflation hawks and critics ofQE2—are potential “dissenters” that will move on to the committee as voting members. Thus, we would not be surprised to see at least one, and possibly two dissents in the statement accompanying the FOMC decision on Wednesday, January 26.

The FOMC also prepares economic forecasts four times a year, and will be preparing a forecast at this week’s meeting. The FOMC is likely to upgrade its view of the economy and express some optimism about employment, but continue to note that while raw materials costs have risen, businesses have in large part been unable to pass these increases on to consumers. The bottom line is that the FOMC is likely to note that while the economy has improved since the last FOMC meeting in December, it is not growing quickly enough to push the unemployment rate down meaningfully or the core inflation rate up meaningfully. The forecast made at this week’s FOMC meeting will be released along with the minutes of that meeting on February 16. The release of the minutes of this week’s FOMC meeting will precede Fed Chairman Bernanke’s high-profile monetary policy testimony to Congress in mid to late February. Bernanke is likely to face withering questioning from House members on both sides of the aisle who oppose QE2 and Fed intervention in the economy.

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IMPORTANT DISCLOSURES 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. All performance reference is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly.

Investing in international and emerging markets may entail additional risks such as currency fluctuation and political instability. Investing in small-cap stocks includes specific risks such as greater volatility and potentially less liquidity.

Stock investing involves risk including loss of principal. Past performance is not a guarantee of future results.

This research material has been prepared by LPL Financial.

The LPL Financial family of affiliated companies includes LPL Financial and UVEST Financial Services Group, Inc., each of which is a member of FINRA/SIPC.

To the extent you are receiving investment advice from a separately registered independent investment advisor, please note that LPL Financial is not an affiliate of and makes no representation with respect to such entity.

Not FDIC or NCUA/NCUSIF Insured | No Bank or Credit Union Guarantee | May Lose Value | Not Guaranteed by any Government Agency | Not a Bank/Credit Union Deposit

Weekly Market Commentary

Competing For Attention

Housing, the Federal Reserve’s (Fed) monetary policy, and the manufacturing sector in early 2011 are likely to compete for market participants’ attention this week. This data comes amid a flurry of corporate earnings reports for the fourth quarter of 2010 and guidance for 2011. Overseas this week, another round of Chinese economic data for December, more hand wringing about the European fiscal situation, and interest rate decisions from no fewer than seven central banks are on tap. In addition, markets will continue to digest and debate last week’s full slate of economic data in the United States, which helped to boost expectations for real gross domestic product (GDP) growth in the recently completed fourth quarter of 2010. GDP growth is likely to accelerate to 4.0% in the fourth quarter, after averaging about 2.5% over the first three quarters of 2010.

Manufacturing, Housing and the Fed On the Docket This Week in the United States

The Empire State (released as this report was being prepared) and Philly Fed (Thursday, January 20) manufacturing surveys for January offer the first look at the manufacturing sector in 2011. As market participants digest these reports, the key question will be: Can the manufacturing sector continue to accelerate into 2011, or are we due for a deceleration soon? Business capital spending, and exports (both driven in large part by manufacturing) have grown faster than consumer spending in every quarter since the second quarter of 2010. That string may have been broken in the fourth quarter of 2010, although we continue to expect manufacturing, along with business spending and exports, to continue to add to GDP in 2011.

Housing, which has added to real GDP growth in just one quarter (the third quarter of 2010) in the past four years, is big news this week. Reports on homebuilder sentiment in January (released as this report was being prepared), housing starts (Wednesday, January 19) and existing home sales (Thursday, January 20) for December are due out. As noted above, housing construction — although a small part of GDP — has been a drag on GDP growth in 16 of the past 17 quarters. The good news is that unassisted by any government programs, the housing market seems to have found a floor. But the question is: Can the housing market reaccelerate on its own, and can it do so with only modest job and income growth and still stringent bank lending standards? Our best guess is that housing will continue to muddle along, not significantly adding to (or subtracting from) GDP growth in 2011.

In the last public appearance by a Fed official ahead of next week’s Federal Open Market Committee (FOMC) meeting, the president of the Philadelphia Fed, Charles Plosser, is scheduled to deliver a speech this week in Chile. While Fed officials do not often break any new ground when speaking overseas (let alone a first time voter on the FOMC speaking the week before the FOMC meeting), Plosser’s speech will be closely monitored. Plosser is a well-known inflation “hawk”, and will likely cast a vote against continuing the Fed’s program of quantitative easing. There will likely be other dissenters at the January 26 FOMC meeting as well, but our view is that despite the political pressures, the hurdle for the Fed to end QE2 early is high, and the hurdle to start QE3 in June 2011 is even higher.

Elsewhere, bad weather will dominate the weekly data on claims and retail sales this week. With more wintry weather along the East Coast this week, market participants are beginning to ask: How long will it be before we can get a clean reading on the economy in early 2011? The Martin Luther King holiday, along with persistently harsh winter weather — that continued into mid January — are likely to disrupt the economic data for the next several weeks, especially the weekly readings on retail sales and initial filings for unemployment insurance. As a result, market participants may have to wait until early February to get a better gauge on the underlying health of the economy in early 2011.

Several Surprise Rate Increases Last Week as Emerging Markets Combat Domestic Inflation Worries

There were many signs in last week’s batch of economic data for late 2010 and early 2011, that the United States economy gathered steam as 2010 ended and 2011 began, although more wintry than usual winter weather made some of the data even more difficult to interpret than usual. Last week’s economic data in China for December continues to point to more policy tightening in China in the coming weeks and months. Several central banks around the globe did actually raise rates last week, including South Korea, Chile, Serbia and Thailand. All four have been raising rates for some time now to combat domestic inflation, although the rate hikes in Chile and South Korea were unexpected. The data released in the United States last week included reports on retail sales, inflation, jobless claims and the Beige Book. In addition, the data released in China last week continues to argue for more tightening there.

A Strong Finish to 2010, and a Solid Start to 2011

A quick recap of last week’s key data in the United States and China is below:

The United States government’s tally of December retail sales suggested that overall December retail sales were soft, but that holiday and overall consumer spending in the fourth quarter of 2010 were quite strong. As noted above, consumer spending in the fourth quarter of 2010 is on track to outpace business spending for the first time since early 2009.

Perhaps impacted by bad weather right before and right after Christmas, retail sales in December fell short of expectations. However, the strength in sales in November indicates that holiday shopping may have started earlier this year than last. Over the final two months of the year "holiday" sales posted a 7% gain over the final two months of 2009, the best performance since 1999. Overall, retail sales have now climbed all the way back to their pre-recession, mid-2007 peak. In addition, the growth rate of all major categories of retail sales accelerated between Q3 2010 and Q4 2010, suggesting much stronger consumer spending in the fourth quarter of 2010 than the third quarter growth rate of 3.2%. Finally, the level of core retail sales in December 2010 was higher than the fourth quarter 2010 average, imparting some upward momentum to spending as 2011 begins.

December consumer and producer prices were driven higher by energy and tobacco prices, but core inflation remains subdued. Both producer price and consumer price indices for December were pushed higher by surging gasoline prices, but behind the headlines on higher raw materials, energy, and grocery prices, inflation remains tame.

The overall consumer price index (CPI) rose 0.5% between November and December, pushed higher by gasoline (+8.5%) and tobacco (+0.8%) prices. The 0.5% month-over-month increase in the overall CPI was the strongest since June 2009, and may raise concerns about a spike higher in inflation. However, a quick look behind the headlines suggests a much more benign price environment, as consumer prices excluding food and energy (core CPI) rose just 0.1% month-over-month in December and were up just 0.8% from December 2009. At 0.8% year-over-year, core inflation remains well below the lower end of the Fed's unofficial comfort zone for core inflation of 1.5% to 2.0%. The benign December core CPI data provides the Fed with more support to continue QE2.

How can prices at the grocery store be rising so quickly (prices for meats, poultry, fish and eggs in December 2010 were 6% higher than December 2009, while prices for milk and dairy products were 4% higher) and overall inflation be so tame? Core inflation accounts for 78% of overall CPI, and includes, among other items, measures of housing prices and rents (42% of CPI), computers, cell phones, apparel and household furnishings including televisions, appliances and furniture.

Taken together computers, cell phones, apparel and household furnishings account for nearly 15% of the CPI, while items like groceries (8% of the CPI) and gasoline (4% of CPI) account for an ever-smaller (around 12%) portion of our spending. In general, prices of computers, cell phones, apparel, appliances, and furniture are falling, and that decline in prices helps to offset the big increases in food and gasoline prices over the past year. But since our purchase of groceries and our trips to the gas station to “fill ‘er up” are more frequent than our trips to the appliance store or the furniture store or the clothing store, it sure does seem like inflation is rising faster than it actually is.

Initial claims for unemployment insurance spiked higher last week, but weather and holidays are the likely culprit, not a deteriorating labor market. More people filed for unemployment insurance in the week ending January 8, 2011 (445,000), an increase of 35,000 from the prior week. The consensus called for just 410,000 individuals to file. As we have noted in recent weeks, the weekly jobless claims data between mid-December and mid-January are always difficult to interpret. Severe winter weather makes the data even more suspect. While we cannot dismiss the latest reading entirely (there is a chance that the labor market deteriorated in late December and early January), we would like to see a few "clean" readings on claims before reaching that conclusion. Unfortunately, the latest round of foul weather in some parts of the country along with the Dr. Martin Luther King Jr. Day federal holiday will continue to distort the data in the coming weeks.

The Fed's Beige Book, a qualitative assessment of economic activity in each of the 12 regional Federal Reserve districts (Boston, New York, Philadelphia, Atlanta, Dallas, etc.), found that the economy continued to expand between the December 14 FOMC meeting and early January 2011. Business and banking contacts reported better hiring, very good holiday sales, and some improvement in commercial real estate. Bank loan demand and lending activity was mixed, while residential real estate remained weak. On the price front, while there was more evidence of higher input prices impacting some businesses, there was little evidence that these were being passed on to the end user. Wages, which account for 70% of business costs, continue to be quite subdued, suggesting that widespread consumer inflation is unlikely any time soon. The Beige Book was prepared ahead of the next FOMC meeting, which is set for January 26.

Chinese authorities released money supply and bank loan data for December last week. December money supply growth (one of the most reliable and least politically influenced economic data points in China) unexpectedly accelerated in December and while new loan growth decelerated between November and December, loans exceeded expectations. The economic data in China has been slowing (albeit from a very rapid pace of growth) since early- to mid-2010, and more deceleration is likely into 2011. Real GDP growth in China is expected to be near 9.5% year-over-year in the fourth quarter of 2010, and is expected to grow at that pace in 2011 as well. Real GDP growth began the year at 12.0%. We continue to expect more tightening of policy in China in

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IMPORTANT DISCLOSURES 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. All performance reference is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly.

Investing in international and emerging markets may entail additional risks such as currency fluctuation and political instability. Investing in small-cap stocks includes specific risks such as greater volatility and potentially less liquidity.

Stock investing involves risk including loss of principal Past performance is not a guarantee of future results.

The Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.

The Philadelphia Fed Survey is a business outlook survey used to construct an index that tracks manufacturing conditions in the Philadelphia Federal Reserve district. The Philadelphia Fed survey is an indicator of trends in the manufacturing sector, and is correlated with the Institute for Supply Management (ISM) manufacturing index, as well as the industrial production index.

Empire State Manufacturing Survey is a monthly survey of manufacturers in New York State conducted by the Federal Reserve Bank of New York.

Quantitative Easing (QE) is a government monetary policy occasionally used to increase the money supply by buying government securities or other securities from the market. Quantitative easing increases the money sup­ply by flooding financial institutions with capital in an effort to promote increased lending and liquidity.

This research material has been prepared by LPL Financial.

The LPL Financial family of affiliated companies includes LPL Financial and UVEST Financial Services Group, Inc., each of which is a member of FINRA/SIPC.

To the extent you are receiving investment advice from a separately registered independent investment advisor, please note that LPL Financial is not an affiliate of and makes no representation with respect to such entity.

Not FDIC or NCUA/NCUSIF Insured | No Bank or Credit Union Guarantee | May Lose Value | Not Guaranteed by any Government Agency | Not a Bank/Credit Union Deposit

Weekly Market Commentary

A Busy Start to 2011

Financial market participants return to their desks this week reflecting on a mixed end, data-wise, to 2010 and are bracing for a full slate of key U.S. economic reports. The Federal Reserve (Fed) will also be in the headlines this week, as will China’s battle against inflation.

The economic reports likely to command most of the attention this week are The Institute of Supply Management’s (ISM) report on manufacturing for December (released on Monday, January 3) and the U.S. Department of Labor’s employment report for December, due out on Friday, January 7. Markets will also be mulling over the 2010 holiday shopping season this week (chain store sales are due out Thursday, January 6), after initial reports suggest that the 2010 holiday shopping season was the best in many years.

December ISM, Jobs Report Bookend the Week

The various regional surveys of manufacturing activity in December (released over the last two weeks of 2010) hinted at the strong reading on the December ISM report. Indeed, the ISM rose to 57.0 in December 2010, a slight acceleration from the 56.6 reading in November 2010. The December ISM reading matched consensus expectations. The ISM averaged 57.3 in 2010, consistent with real gross domestic product (GDP) growth of 5.1%. However, we should point out that the ISM has only been above 57.0 in 49 of the 492 months since 1970 (i.e. 10% of the time), and rarely stays close to the 60.0 level for too long. Thus, a dip back toward 50 in the coming months would not be unusual and would not necessarily signal a double-dip recession.

In the Weekly Economic Commentary dated December 6, 2010, we noted that “the November jobs report, released on Friday morning, December 3, 2010 was both weak and disappointing, but the market did not necessarily believe the report.” We also noted that “the weak November jobs report puts even more weight on the December jobs report to shine. That report is due out on Friday, January 7.”

Well, the day of reckoning is nearly here, and expectations for the December 2010 jobs report are relatively lofty, with the consensus looking for a 155,000 gain in nonfarm payroll jobs following the disappointing 39,000 gain in November. If the consensus is correct, the economy will have created 1.3 million private sector jobs in 2010, just over 110,000 per month. As noted in our 2011 Outlook, our view is that the job market will stage a comeback with nearly twice the pace of job creation experienced in 2010. What would that pace of job growth mean for the unemployment rate?

On average over the last 40 years, roughly 150,000 people enter the labor force each month, so in order for the unemployment rate (which is calculated by dividing the number of unemployed by the labor force) to fall, employment has to increase by at least 150,000 per month. In the short run, however, the business cycle can have a big impact on how many people join (or leave) the labor force. Generally, in good times, more people come into the labor force, attracted by better job prospects. Thus in the long, robust economic recovery in the 1990s, an average of 160,000 people per month entered the labor force. Even in the shorter and less powerful economic expansion in the mid-2000s, an average of 145,000 people entered the labor force each month.

However, during and just after recessions, labor force growth typically slows to a crawl. For example, during the “jobless recoveries” in 2002 and 2003, just 55,000 people per month entered the labor force. Similarly, during the Great Recession and its immediate aftermath, an average of 33,000 people per month dropped out of the labor force, discouraged by poor prospects for finding work. As the economy improved over the course of 2010, an average of 86,000 people per month joined the labor force, as the unemployment rate rose slightly from 9.7% in January 2010 to 9.8% in November. The consensus is looking for a 9.7% unemployment rate in December 2010.

The Fed Returns to the Hot Seat This Week, While China’s Attempts to Cool Its Economy Met With a Collective Yawn

The release of the minutes of the December 14 Federal Open Market Committee (FOMC) on Tuesday, January 4 and testimony from Fed Chairman Ben Bernanke before the Senate Budget Committee on Friday, January 7 are likely to reignite the debate over the Fed’s role in the economic recovery. It is probably too early for the Fed (or markets) to assess the effectiveness of quantitative easing (QE2). By the end of the first quarter of 2011, both the Fed and the markets should have a better read on whether QE2 was successful and if another round of quantitative easing will commence in June 2011, when QE2 ends. The Fed’s Beige Book (a qualitative assessment of economic conditions in each of the 12 regional Federal Reserve districts) is due out on January 12 and the next FOMC meeting is January 26. We reiterate our assessment that the while the hurdle for ending QE2 remains high, the hurdle for the Fed to begin QE3 in June 2011 is even higher. The market is not expecting the Fed to raise rates until early 2012.

Overseas this week, market participants continue to fret over China’s interest rate policy, in the wake of the 25 basis point rate hike by Chinese monetary authorities on Christmas Day and the lower-than-expected reading on the Chinese ISM for December, which was reported on December 31, 2010. The rate hike was the second in ten weeks, and has been accompanied by no fewer than six increases in reserve ratio requirements for Chinese banks over the past 12 months. Thus far, market reaction to the latest round of interest rate hikes in China has been muted, especially relative to early 2010, when China’s early attempts at tightening policy were met with a severe downdraft in both global commodity and equity prices. The economic data in China has been slowing (albeit from a very rapid pace of growth) since early- to mid-2010, and more deceleration is likely into 2011. We continue to expect more tightening of policy in China in the coming weeks and months as policymakers attempt to cool inflation. The next round of economic reports (for December) in China are due out the week of January 10 – 14.

Economic Data Mixed Over Final Two Weeks of 2010, but Holiday Shopping Looks Strong

The economic reports released over the final two weeks of 2010 included:

·         New, existing and pending home sales for November

·         New orders for, and new shipments of, business capital equipment

·         Regional reports on manufacturing activity in Chicago, Dallas, Richmond and Milwaukee

·         Personal income, personal spending and the Fed’s preferred measure of inflation the personal consumption deflator excluding food and energy

·         Consumer confidence and consumer sentiment for December

·         Weekly reports on retail sales, mortgage applications and initial claims for unemployment insurance

Taken together, the data released over the final two weeks of 2010 were mixed, at best, a sharp contrast to the strong run of data released in the first half of December. The data on home sales and home prices was mixed, with sales increasing between October and November, but by less than expected. Pending home sales — a good leading indicator of future existing home sales — bucked the trend in housing, beating expectations and accelerating between October and November. Unsupported by government programs, the housing market is still bouncing along the bottom, above the lows hit in early 2009, but still barely able to stand on its own. The good news here is that the labor market is improving, housing affordability — the ability of the household with a median income to afford the payments on the median-priced house — is at an all-time high, and housing construction itself only accounts for around 2% of GDP. The bad news on housing is that loans are still difficult to get, foreclosures remain high, inventories of unsold existing homes are elevated, and prices are still falling in many parts of the country.

Most of the manufacturing data released over the final two weeks of 2010 came in above expectations and accelerated between November and December, raising expectations for the December ISM report. The weaker US dollar, strong corporate balance sheets, and a robust export market are still supporting business capital spending and exports. Sure, Europe (1.4% GDP expected in 2011) and the United Kingdom (1.9%) are beset with fiscal issues, but 50% of U.S. exports head to emerging market economies, where real GDP growth in 2011 is expected to be well north of six percent.

Although the final tally is not in yet, most of the data in hand suggests that the 2010 holiday shopping season was the best since at least 2006. On December 28, the International Council of Shopping Centers (ICSC) raised its forecast for holiday spending for the second time in less than a month, noting that retail sales in the Christmas week rose 4.8% from the same week in 2009, the strongest Christmas week gain in sales since the 5.5% year-over-year gain in 2003. The solid performance of the U.S. equity market (more than 20.0% as measured by the S&P 500) from early September through mid-December was a good indicator of how sales were likely to track. Historically, equity market performance between September and December is one of the most accurate predictors of holiday shopping.

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IMPORTANT DISCLOSURES 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. All performance reference is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly.

Investing in international and emerging markets may entail additional risks such as currency fluctuation and political instability. Investing in small-cap stocks includes specific risks such as greater volatility and potentially less liquidity.

Stock investing involves risk including loss of principal Past performance is not a guarantee of future results.

Purchasing Managers Index (PMI) is an indicator of the economic health of the manufacturing sector. The PMI index is based on five major indicators: new orders, inventory levels, production, supplier deliveries and the employment environment.

The ISM index is based on surveys of more than 300 manufacturing firms by the Institute of Supply Manage­ment. The ISM Manufacturing Index monitors employment, production inventories, new orders, and supplier deliveries. A composite diffusion index is created that monitors conditions in national manufacturing based on the data from these surveys.

Quantitative Easing is a government monetary policy occasionally used to increase the money supply by buying government securities or other securities from the market. Quantitative easing increases the money supply by flooding financial institutions with capital in an effort to promote increased lending and liquidity.

This research material has been prepared by LPL Financial.

The LPL Financial family of affiliated companies includes LPL Financial and UVEST Financial Services Group, Inc., each of which is a member of FINRA/SIPC.

To the extent you are receiving investment advice from a separately registered independent investment advisor, please note that LPL Financial is not an affiliate of and makes no representation with respect to such entity.

Not FDIC or NCUA/NCUSIF Insured | No Bank or Credit Union Guarantee | May Lose Value | Not Guaranteed by any Government Agency | Not a Bank/Credit Union Deposit

Weekly Market Commentary

Rising Economic Expectations As 2010 Ends

Light trading on financial exchanges around the globe through year-end 2010 will serve as the backdrop for a number of key economic reports across the full spectrum of economic activity in the United States and abroad. Taken together, the reports will help solidify the markets’ expectation for real gross domestic product (GDP) for the fourth quarter of 2010 in the United States, and set the stage for the early part of 2011.

The reports due out over the next two weeks include:

·         New, existing and pending home sales for November.

·         New orders for, and new shipments of, business capital equipment.

·         Regional reports on manufacturing activity in Chicago, Dallas, Richmond.

·         Personal income, personal spending, and the Fed’s preferred measure of inflation - the personal consumption deflator excluding food and energy.

·         Consumer confidence and consumer sentiment for December.

·         Weekly reports on retail sales, mortgage applications and initial claims for unemployment insurance.

Reports Over the Next Two Weeks Will Highlight the Best and Worst of the Economy

Virtually every area of the economy is represented over the next few weeks, and the reports are likely to highlight the best and worst of the economy as 2010 turns into 2011.

Although housing remains the weakest part of the recovery, the housing data due out over the next two weeks is expected to show that housing improved somewhat between October and November. Unsupported by government programs, the housing market is still bouncing along the bottom, above the lows hit in early 2009, but still barely able to stand on its own. The good news here is that the labor market is improving, housing affordability is at an all-time high, and housing construction itself only accounts for around 2% of GDP. The bad news on housing is that loans are still difficult to get, foreclosures remain high, inventories of unsold existing homes are elevated, and prices are still falling in many parts of the country.

The manufacturing data due out between now and year-end is likely to be upbeat, underscoring the idea that the weaker US dollar, strong corporate balance sheets, and a robust export market are still supporting business capital spending and exports. Sure, Europe (1.4% GDP expected in 2011) and the United Kingdom (1.9%) are beset with fiscal issues, but 50% of U.S. exports head to emerging market economies, where real GDP growth in 2011 is expected to be well north of 6%. Strong readings on the regional manufacturing indices (Dallas, Richmond, Milwaukee and Chicago) will raise the bar for the Institute of Supply Management’s (ISM) report on national manufacturing for December, which is due out on Monday, January 3.

Reports on personal income, personal spending, and, most importantly, core inflation in November will help to frame the debate on the efficacy of the Federal Reserve’s (Fed) latest foray into quantitative easing. Core inflation, as measured by the core personal consumer expenditures, the Fed’s preferred measure of inflation, is expected to remain at 0.9% (year-over-year) in November, the same year-over-year reading as in October. But at 0.9% year-over-year, core inflation remains well below the lower end of the Fed’s informal target for core PCE inflation of 1.5 to 2.0%.

Fed Chairman Ben Bernanke, and the Fed itself, will likely face withering criticism from Congress in the new year, as Texas Congressman Ron Paul, a vocal critic of the Fed, will head up the committee in the House of Representatives that is responsible for oversight of the Fed. In our view, it is probably too early for the Fed (or markets) to assess the effectiveness of quantitative easing (QE2). However, by the end of the first quarter of 2011, both the Fed and the markets should have a better read on if QE2 was successful and if another round of QE will commence in June 2011, when QE2 ends. We reiterate our assessment that the while the hurdle for ending QE2 remains high, the hurdle for the Fed to begin QE3 in June 2011 is even higher.

European economic data released will be limited over the year-end holiday season, as will meetings of global central banks. The only major central bank meeting over the final two weeks of 2010 is the Bank of Japan. The next key event for U.S. monetary policy is the release of the December 14 Federal Open Market Committee (FOMC) meeting minutes on January 4, 2011. The next FOMC meeting is January 26.

The Chinese economic calendar is also quiet over the holidays, as the next batch of economic data for December is not due out until mid-January. However, a key report on the Chinese economy, the December Purchasing Managers’ Index (PMI), is set to be released on December 30, 2010, at the height of the holiday vacation season. The report may set the tone for further rate increases by Chinese monetary authorities early in 2011, and therefore will be closely watched by market participants across the globe, even if they are on vacation.

Strong Consumer Spending in November and Early December Leads to Upward Revision of 2010 Holiday Shopping Forecasts

Against the backdrop of very high expectations, 85% of last week’s batch of U.S. economic data beat expectations, 80% accelerated from the prior period, and more than 75% of the data saw upward revisions to prior period’s data. In all, it was a very strong week for economic data that had forecasters talking about 4.0% growth in real GDP in the fourth quarter. Our view is that some of the strength early in the fourth quarter (October and November) may have been borrowed from December, but that a real GDP growth rate of between 3.0 and 3.5% is likely.

As noted above, the data released last week was nearly uniformly strong on both the front end (consumer spending) and back end (business spending). The monthly retail sales data for November (and the weekly data through mid-December) suggests that the 2010 holiday shopping season is on track to exceed expectations. Indeed, the three most well-known, independent organizations that track retail sales through the holidays — ShopperTrak, the International Council of Shopping Centers and the National Retail Federation — raised their 2010 holiday shopping forecasts last week. Those estimates are now roughly in-line with where we think holiday sales may end up, although the risk remains that estimates for 2010 holiday shopping are still too pessimistic given the improving labor market, pent-up demand, and the solid performance of the U.S. equity market (+20.0% as measured by the S&P 500) from early September through mid-December. Equity market performance between September and December is one of the most accurate predictors of holiday shopping.

On the back end of the economy, the December reports on the Philadelphia Fed manufacturing index and the Empire State manufacturing index (both released last week) strongly suggest that the ISM for December will accelerate from its strong 56.6 reading in November. A reading above 50 on the ISM suggests that the manufacturing sector is expanding, and at 56.6, the ISM is consistent with a GDP growth rate of close to 5.0%. In addition, businesses continue to show confidence in the sustainability of the recovery, adding to their inventories for the tenth consecutive month in October. In all, businesses have added to inventories in 12 of 13 months since October of 2009. The restocking of depleted shelves in response to better economic growth at home, and booming economic growth in the emerging markets (where 50% of U.S. exports end up), has been a big plus for manufacturing and the overall economy since the recession ended in June 2009.

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IMPORTANT DISCLOSURES 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. All performance reference is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly.

Investing in international and emerging markets may entail additional risks such as currency fluctuation and political instability. Investing in small-cap stocks includes specific risks such as greater volatility and potentially less liquidity.

Stock investing involves risk including loss of principal Past performance is not a guarantee of future results.

Philadelphia Federal Index is a regional federal-reserve-bank index measuring changes in business growth. The index is constructed from a survey of participants who voluntarily answer questions regarding the direction of change in their overall business activities. The survey is a measure of regional manufacturing growth. When the index is above 0 it indicates factory-sector growth, and when below 0 indicates contraction.

The ISM index is based on surveys of more than 300 manufacturing firms by the Institute of Supply Manage­ment. The ISM Manufacturing Index monitors employment, production inventories, new orders, and supplier deliveries. A composite diffusion index is created that monitors conditions in national manufacturing based on the data from these surveys.

Quantitative Easing is a government monetary policy occasionally used to increase the money supply by buying government securities or other securities from the market. Quantitative easing increases the money supply by flooding financial institutions with capital in an effort to promote increased lending and liquidity.

Purchasing Managers Index (PMI) is an indicator of the economic health of the manufacturing sector. The PMI index is based on five major indicators: new orders, inventory levels, production, supplier deliveries, and the employment environment.

This research material has been prepared by LPL Financial.

The LPL Financial family of affiliated companies includes LPL Financial and UVEST Financial Services Group, Inc., each of which is a member of FINRA/SIPC.

To the extent you are receiving investment advice from a separately registered independent investment advisor, please note that LPL Financial is not an affiliate of and makes no representation with respect to such entity.

Not FDIC or NCUA/NCUSIF Insured | No Bank or Credit Union Guarantee | May Lose Value | Not Guaranteed by any Government Agency | Not a Bank/Credit Union Deposit

Weekly Market Commentary

From Data to Debates

Last week, the markets were driven primarily by economic data as stocks and bond yields rose and the dollar fell. This week, in the absence of any high-profile economic data, markets are likely to be driven by news headlines on policy debates, which are not likely to be as favorable for investors.

The economic data from last week that was especially good for the markets included the Federal Reserve’s (Fed) Beige Book, and China’s PMI — both released on Wednesday, December 1 — and the U.S. retail sales reports on Thursday, December 2.

·         China PMI – The Purchasing Managers Index (PMI), released by the Beijing-based China Federation of Logistics and Purchasing and the National Bureau of Statistics, kicked off the better part of the week’s market rally on Wednesday morning. China’s manufacturing grew at a faster pace for a fourth straight month in November, exceeding economists’ estimates and indicating the economy can withstand higher interest rates.

·         Beige Book – Released Wednesday afternoon, the Fed’s Beige Book, a qualitative assessment of economic, financial and business conditions across the United States, suggested the economy was rebounding from the summer soft spot. Ten of the twelve regions reported improving economic conditions. The Fed’s overall assessment that the U.S. economy “continued to improve” was strikingly different than it was back in September when they noted “widespread signs of deceleration”.

·         Retail Sales – November same-store sales from retailers surprised to the upside when reported Thursday morning. Over 80% of retailers beat estimates by an average of more than 2 percentage points, for an average year-over-year increase of nearly 6% among the 25 national retailing chains that reported November sales results. This marked a strong improvement from October’s tepid growth of less than 2% with nearly 50% of retailers missing targets.

·         While these economic data points were the highlights of the week, the data has been so much better-than-expected, on balance, in recent weeks that investors dismissed the disappointing November employment report-released on Friday, December 3, as an outlier.

·         With a lack of any meaningful economic data this week here or abroad, market participants’ attention will turn to the policy headlines that are likely to be driven by:

·         The debate over extending the Bush tax cuts due to expire at year-end.

·         The ongoing fiscal and financing troubles in the eurozone, including Ireland’s vote on its 2011 budget (setting the stage for Greece’s vote on its 2011 budget the following week).

·         The effectiveness of the Fed’s second round of quantitative easing (QE2) before the next Fed meeting on December 14.

·         China may implement another rate hike ahead of its release of inflation data the following week.

None of this week’s headlines will likely result in as favorable an outcome for the markets (unless a quick deal is cut on taxes) as the data delivered last week. It is worth exploring each of these potential drivers.

Tax Cut Extensions

The debate over the tax cut extensions is likely to be contentious this week, following very partisan votes in the House this past week and the lack of public progress that has been made in the negotiation among Geithner, Lew, and the Republican and Democratic members of Congress. We look to the middle of the month as a more likely time for compromise and a vote in the Senate. On Saturday, Congress passed a continuing resolution that funds the federal government through Saturday, December 18. The end of that week leading up to the December 18 deadline is the most likely for a breakthrough agreement, with votes in both the House and Senate to immediately follow.

Fiscal and Financial Problems in the Eurozone

In the European Union (EU), the risk of a near-term liquidity crisis is being managed effectively, but the longer-term solvency problems remain almost untouched. News reports in recent days have focused on potential additional actions the EU may take to provide more demand for member nation debt (Spain and Portugal as the need for liquidity spreads from Greece and Ireland). The Greek government has so far received 29 billion euros as part of a rescue package intended to give them funding until 2013, enough time for the Greeks to fix their budget. The EU and The International Monetary Fund (IMF) approved the rescue package back in May in exchange for the Greek government agreeing to cut spending and raise taxes.

With the liquidity for their debt assured by the EU, how have the Greeks done over the past seven months addressing the solvency of their finances?  Poorly. Higher taxes were introduced to boost tax receipts by 13.7% this year. That goal was trimmed to 8.7% in October and to 6% in November. So far, income has risen just 3.7% in 2010. The yield difference, or spread, between 10-year Greek bonds and German bunds was 8.86 percentage points yesterday, compared with a record 9.73 in May, reflecting the lack of material improvement in the solvency of Greece.

The fiscal crash diet in Greece, Ireland and other troubled EU nations is highly unpopular. Local protests are taking place daily. On December 15, there is an EU-wide labor strike planned. Efforts at fiscal austerity are fading. It is likely to be longer and more expensive to get the EU over-spenders back in line with EU mandates. In addition, it may require a tougher stance from senior EU members Germany and France to ensure adequate action is taken. This raises the risk that these headlines surface this week and weigh on the markets.

Fed’s Quantitative Easing 2

The Fed implemented QE2 to keep borrowing rates low to encourage economic growth, in part, through low mortgage and other consumer borrowing rates. Since implementing the first round of QE2, rates have moved steadily higher. The national average 30-year mortgage fixed rate (tracked by Bankrate.com) rose from 4.24%, when QE2 was announced on November 3, to 4.71% this past Friday, reaching the highest level of the second half of 2010. In addition, the dollar, widely expected to decline and act as a boost to U.S. export growth, has instead moved higher.

The Fed has faced political pressure on all sides since the last meeting on November 3 to do more, to do less, and to do nothing at all. Legislation was even introduced to change the Fed’s mandate. Debate surrounding the effectiveness of the Fed’s actions and how limited future actions to aid economic growth may be could dominate the headlines this week ahead of its next meeting on December 14.

China Rate Hikes

Last week’s China PMI report showed surging input prices, reinforcing the case for the central bank to raise borrowing costs again. In October, the Chinese central bank pushed the one-year lending rate to 5.56%, its first increase since 2007. The Chinese government’s efforts to rein in the money supply also included two reserve-ratio increases for banks last month. At the same time, officials allowed the yuan to appreciate about 1.8% against the dollar in September, and since then gains have totaled another 0.3%.

These efforts are intended to contain inflation which has been rising nearly 5% year-over-year. Concern that monetary tightening in response to higher inflation will act as a drag on growth spurred a 10% sell-off in China’s Shanghai Stock Exchange Composite Index since the last inflation report that was released on November 11. As we approach the release of the next inflation data point, China may announce another rate hike, possibly sending markets lower.

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IMPORTANT DISCLOSURES

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. All performance reference is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly.

International and emerging market investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors.

Stock investing may involve risk including loss of principal.

Purchasing Managers Index (PMI) is an indicator of the economic health of the manufacturing sector. The PMI index is based on five major indicators: new orders, inventory levels, production, supplier deliveries, and the employment environment.

The Shanghai Stock Exchange Composite Index is a capitalization-weighted index. The index tracks the daily price performance of all A-shares and B-shares listed on the Shanghai Stock Exchange. The index was developed on December 19, 1990 with a base value of 100. Index trade volume on Q is scaled down by a factor of 1000.

The International Monetary Fund (IMF) is an organization of 187 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world.

Quantitative Easing is a government monetary policy occasionally used to increase the money supply by buying government securities or other securities from the market. Quantitative easing increases the money supply by flooding financial institutions with capital in an effort to promote increased lending and liquidity.

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

This research material has been prepared by LPL Financial.

The LPL Financial family of affiliated companies includes LPL Financial and UVEST Financial Services Group, Inc., each of which is a member of FINRA/SIPC.

To the extent you are receiving investment advice from a separately registered independent investment advisor, please note that LPL Financial is not an affiliate of and makes no representation with respect to such entity.

Not FDIC or NCUA/NCUSIF Insured | No Bank or Credit Union Guarantee | May Lose Value | Not Guaranteed by any Government Agency | Not a Bank/Credit Union Deposit