Mark R. Holloway, C.F.A. Chief Investment Officer March 14, 2019 2019 Spring Economic Seminar The Outlook For The Economy and Capital Markets “Magical Things” Mark R. Holloway, C.F.A. Chief Investment Officer March 14, 2019

The Economy The outlook for the domestic economy remains healthy. No recession in 2019. Leading economic indicators are positive. Interest rates will stay low. Corporate profits are growing. Housing appears to be recovering. Consumer and business confidence is high. Consumer spending is vibrant. Employment is very strong.

The Bond Market Interest rates will remain relatively stable in 2019. Inflation is low. The Federal Reserve has changed policy. Fed Funds futures are positive. Foreign rates remain low compared to U.S. bonds. Political expediency will keep rates low.

The Stock Market Stocks remain the financial asset class of choice. We are still in a secular bull market for stocks. Valuations are reasonable. Corporate profits are growing. Interest rates remain low. Historical returns favor stocks.

What Could Go Wrong The Federal Reserve and Interest Rates Global Economic Slow Down Politics Algorithmic Trading Debt

Volatility and Why You Should Ignore It No one can time the market Confidence in the U.S. Economy and Capital Markets Human Nature History

What to do in a volatile market and Uncertain Times? Review Asset Allocation Diversify, Diversify, Diversify Reduce Bond default and Interest Rate Risk Quality Floor to Reduce Default Risk Reduce Average Maturities High Quality Stocks Dividend payers and growers Consistent and sustainable growth rates Clean Balance Sheets

“Magical Things”

“Magic” The stability of the economic and political system in the United States Historical returns from the stock market Quality Stocks-A Free Lunch Time and the Market The Power of Compounding

The Real Magic: The Power of Compounding XYZ Corporation ( A real Company) Sustainable Earnings Growth of 9-10% Stated Dividend Payout Ratio of 40% Current Dividend Yield of 3.0% Compound Five Year Dividend Growth of 18% Yield on Cost 5 Years-4.9% 10 Years-7.8% 20 years-20.2%