Kevin M. Wilson, ChFC, PhD President/CEO/CIO 1405 Medical Arts Building 324 W. Superior Street Duluth, MN Office: Toll Free: Fax: Monthly Market Review “Sell in May (or Maybe April) and Walk Away?” (An Exercise in Historical Analysis) April 18, Ted A. Pavlovich, WMS VP Wealth Management

INTRODUCTION TED A. PAVLOVICH 2

Will History Repeat, Or Just Rhyme This Year? 3

SPRING MARKET WEATHER (STORM CLOUDS MAY HAVE A SILVER LINING) TED A. PAVLOVICH 4

5 There Are Seasonal Patterns in Many Markets, e.g., Gold & Silver Average This Week

6 Long-Term Average for Stocks Shows Weakness From May-October Annually

7 More Recently the Seasonality Has Been More Pronounced

8 “Sell in May (or April) & Go Away?”

9 In Two Previous Years, High Yield Bonds Diverged From Trend in Advance of The Stock Market Sell-Off, And It’s Happening Again This Year

WATCHES, WARNINGS, OR EMERGENCIES? KEVIN M. WILSON 10

11 To Put This Year’s Seasonal Trends in Context, We Should Note That The World Economy Appears To Be In Recession

Yet There Is A Persistent Divergence Between The Economy and The Markets 12

13 The Divergence Is Caused By Central Bank Money Printing, Which Boosts Risky Assets

14 However In The U.S., The Economy is Weakening Faster Than The Markets Expected

15 Main Street and Wall Street Do Not Agree

16 Wall Street Is Cheering Recent Stock Buybacks, But They May Be Peaking

17 Valuations Are High, Suggesting That Future Returns Will Be Low On Average

18 There Are Long-Term Cycles In Earnings and Forward P/E Ratios That Are Peaking Now

19 Market Speculation May Be Peaking

20 Seasonal Down-Trends In Certain Sectors May Be Exacerbated By Other Market Factors

21 Combining Record Highs With Seasonal Sell-Offs Could Lead To Unexpected Market Drops

DOES THE FED PROVIDE SHELTER? 22 KEVIN M. WILSON

23 Each Spring The Economy Has Slowed Down And The Fed Has Printed More Money

24 In Spite of At Least $14 Trillion Of New Liquidity, Global GDP Continues To Decline

25 Each U.S. Market Dip Has Been Offset By The Surge Associated With Each New Wave Of Money Printing

26 This Is Serial Bubble Blowing By Central Banks, As We’ve Seen Before

27 At The Same Time, Bond Prices Have Benefited From QE

28 In Fact, Bonds Have Nearly Matched The Stock Market Since 1973

SUMMARY/Q & A 29 KEVIN M. WILSON 1)Seasonal trends in the markets are valid for investment purposes 2)“Sell in May & Go Away” only makes sense if you can predict the 2009 and 2012 outliers in advance, or ignore them 3)However, you can re-allocate in the springtime to take advantage of the seasonal bond rally when stocks sell off 4) A warning, but not yet an emergency

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