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Monthly Market Update - April 2016

May 11, 2016

Following strong returns in March the stock market continued to press forward in April. The S&P 500 Index returned a modest 0.4% but U.S. large value stocks gained 1.3%. International large caps gained 2.9% and international value stocks were up 3.9%. Bond returns were relatively flat, as were REIT and managed futures returns. Commodities bounced back with an 8.5% gain and are now the strongest performing asset class year‐to‐date.

Economy

  • The initial estimate of first quarter real GDP came in at 0.5%. The deceleration in growth from the fourth quarter reflects decreases in personal consumption expenditures and nonresidential fixed investment.
  • The year‐over‐year inflation rate fell to 0.9%. Declines in the food index detracted from the rate.
  • The U.S. economy posted job gains of 160,000 in April, which was below analyst forecasts of 202,000. The unemployment rate remained unchanged at 5.0%.

Stocks

  • The S&P 500 Index returned 0.4% for the month and U.S. large value stocks advanced 1.3%. U.S. small stocks outperformed large stocks with a 1.6% gain.
  • International large stocks closed the month up 2.9%. International small stocks rose 2.2%.
  • After an impressive double‐digit return in March, emerging markets cooled off, returning just 0.5% this month. The index is up 6.3% year‐to‐date.

Bonds

  • The 10‐year U.S. Treasury yield ended the month relatively unchanged at 1.8%.
  • Intermediate‐term bonds and TIPS both gained 0.3%. International bonds ended the month down 0.2%.

Alternatives

  • Managed futures gained 0.6% and REITs fell 0.3%.
  • Commodities surged 8.5%, led by strong gains in the energy sector.

The New Fiduciary Standard
The final ruling from the Department of Labor (DOL) on the long awaited regulations requiring advisors to act as "fiduciaries" was announced in April. The ruling basically elevates the responsibilities of financial professionals to put clients' interests first and to increase disclosures to better ensure investors are getting appropriate, unbiased, and trusted advice.

The document itself is quite long and complex ‐ 1,200 pages as a matter of fact! While it will take time to fully digest, we feel that these changes indicate that the rest of the industry may have to begin holding themselves to the high standard of client care that Savant always has. We willingly chose to found and operate our business for the past 30 years under the model of a Registered Investment Advisor and a fiduciary. Our goal as a Registered Investment Adviser is to ensure we comply with a fiduciary standard of care toward our clients at all times; our role as a fiduciary is mandated by the Investment Adviser's Act of 1940.

We view the recent fiduciary ruling as a step in the right direction for investors and we fully expect the debate on this topic to continue. At Savant, we will continue to sort through the DOL ruling to better understand its impact on both investors and the financial industry as a whole moving forward. Rest assured, we do not take our calling as a trusted advisor to our clients lightly. We will move forward, as we have for the past 30 years, earning the trust and confidence of our clients, acting in their best interests, and helping build ideal futures.

Sources: Bureau of Economic Analysis (BEA), Federal Reserve, Institute for Supply Management, JP Morgan, Morningstar Direct, Standard and Poor's, Wells Fargo, Yahoo! Finance, BofA Merrill Lynch, wsj.com

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