YOUR FINANCIAL FUTUREYour Guide to Life Planning

April 2016

Luther J. Hagen CFP, MarkReichowInfinity Wealth AlliancePresident & Wealth Advisor14811 Energy WayApple Valley, MN 55124952-431-2224Fax: 952-431-4575Luther.Hagen@LPL.comwww.iwalliance.com

In This Issue

Upcoming events in the Twin Cities - April 11, 2016Upcoming events in the Twin Cities - April 11, 2016

Quotes for the week of April 11, 2016Quotes for the week of April 11, 2016

Weekly Market Commentary | Week of April 11, 2016After disappointing investors last year, emerging market earnings forecasts may finally beconsistent with what can be delivered.

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Upcoming events in the Twin Cities - April 11, 2016

 

Upcoming events in the Twin CitiesUpcoming Sport Events

April4/13/16 - MN Timberwolves4/13/16 - MN Twins4/14/16 - MN Twins4/15/16 - MN Twins4/15/16 - U of M - Baseball & Men's Tennis4/16/16 - MN Twins4/16/16 - U of M - Baseball4/17/16 - MN Twins4/17/16 - U of M - Baseball & Men's Tennis4/18/16 - MN Twins4/19/16 - MN Twins4/19/16 - U of M - Baseball4/20/16 - U of M - Baseball4/22/16 - U of M - Women's Tennis4/24/16 - U of M - Women's Tennis4/25/16 - MN Twins4/26/16 - MN Twins4/27/16 - MN Twins4/27/16 - U of M - Women's Track4/28/16 - U of M - Men's Tennis4/29/16 - MN Twins4/29/16 - U of M - Men's Tennis4/30/16 - MN Twins4/30/16 - U of M - Men's Tennis

May5/1/16 - MN Twins5/1/16 - U of M - Men's Tennis5/3/16 - U of M - Baseball5/4/16 - U of M - Baseball & Women's Track5/6/16 - U of M - Baseball5/7/16 - U of M - Baseball & Women's Track5/8/16 - U of M - Baseball5/9/16 - MN Twins5/10/16 - MN Twins5/11/16 - MN Twins5/14/16 - Minnesota Lynx5/19/16 - MN Twins5/19/16 - St. Paul Saints5/19/16 - U of M - Baseball5/20/16 - MN Twins5/20/16 - St. Paul Saints5/20/16 - U of M - Baseball5/21/16 - MN Twins5/21/16 - St. Paul Saints5/21/16 - U of M - Baseball5/22/16 - MN Twins5/22/16 - St. Paul Saints

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 5/23/16 - MN Twins5/24/16 - MN Twins5/25/16 - MN Twins5/26/16 - St. Paul Saints5/27/16 - St. Paul Saints5/27/16 - Minnesota Lynx5/28/16 - St. Paul Saints5/29/16 - St. Paul Saints

 Upcoming Performance and Art EventsApril

4/1-24/16 - Catch Me If You Can - Ames Center

4/1-2/16 - Jeff Dayton Salutes Glen Campbell - Chanhassen Dinner Theatres4/1/-10/16 - On Golden Pond - Lakeville Area Arts Center 4/6-16/16 - As You Like It - University of Northwestern - St. Paul

4/12-17/16 - Bullets Over Broadway - Ordway Music Theater

4/14/16-4/8/16 - Fidler on the Roof - Bloomington Center for the Arts

4/14/16 - Symphony in 60: Stravinsky's Petrushka - Orchestra Hall

4/15-16/16 - Stravinsky's Petrushka - Orchestra Hall

4/16/16 - Beautiful Vision - The Songs of Van Morrison featuring Mick Sterling - Chanhassen DinnerTheatres

4/16/16 - The Hunts - Lakeville Area Arts Center

4/17/16 - Ladyslipper Ensemble - Lakeville Area Arts Center

4/20/16 - Bryn Terfel (Baritone) & Natalia Katyukova (Piano) - Ordway Music Theater

4/21/16 - Mumford & Sons - Xcel Energy Center

4/22-24/16 - Rilling Conducts A German Requiem - Orchestra Hall

4/22-23/16 - Songs By The Wrecking Crew - The Studio Musicians Behind The Biggest Hits of the '60s &'70s featuring The Fabulous Armadillos - Chanhassen Dinner Theatres

4/22-24/16 - VocalEssence presents Listeners' Choice Live - Ordway Concert Hall

4/23/16 - Brantley Gilbert - Target Center

4/23/16 - Burnsville Rotary's Concert for Caring - Ames Center

4/23/16 - Miss Hazel and the Rosa Parks League - Lakeville Area Arts Center

4/23/16 - Taikoproject - Ordway Music Theater

4/24/16 - Reunion Concert Feat. Young Artists - Dakota Valley Symphony - Ames Center

4/27-28/16 - Young People's: Music, Noise & Silence with Magic Circle Mime Company - Orchestra Hall

4/28/16 - The Wild Midwest: Season Finale - Target Atrium of Orchestra Hall

4/29/16-5/22/16 - Leap of Faith - New Century Theatre

4/29-30/16 - The Beatles' Abbey Road: An Album Tribute featuring Jeff Engholm and the CollectiveUnconcious - Chanhassen Dinner Theatres

4/29/16 - Dennis Warner and the D's - Lakeville Area Arts Center

4/29-30/16 - Pink Martini with the Minnesota Orchestra - Orchestra Hall

May5/1/16 - Family Concert: Music, Noise & Silence with Magic Circle Mime Company - Orchestra Hall

5/1/16 - Lyra Baroque - Lakeville Area Arts Center

5/1/16 - Minnesota Youth Symphonies Spring Concert - Orchestra Hall

5/1/16 - The Rose Ensemble - Ordway Concert Hall

5/1/16 - The Who (Rescheduled) - Target Center

5/5/16 - Ellie Goulding with Special Guest Years & Years - Xcel Energy Center

5/5-7/16 - Rachmaninoff's First Piano Concerto - Orchestra Hall

5/6-8/16 - Cinderella 1944: A Love Story - Ames Center

5/6-8/16 - Rainy Days & Mondays: The Music of the Carpenters featuring Aimee Lee & the Superstars -Chanhassen Dinner Theatres

5/7/16 - Stravinsky: The Soldier's Tale - Target Atrium of Orchestra Hall

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 5/8/16 - Alton Brown Live: Eat Your Science - Orpheum Theatre

5/10-29/16 - The Book of Mormon - Orpheum Theatre

5/12-13/16 - Strauss' Merry Pranks - Orchestra Hall

5/13/16 - The Producers - Lakeville Area Arts Center

5/14/16 - A Broadway Romance with the Minnesota Orchestra - Orchestra Hall

5/14/16 - Songs of the Grand Ole Opry & Sun Records featuring Mick Sterling and The Memphis and theMeantimes - Chanhassen Dinner Theatres

5/15/16 - Chamber Music: Dvoák and Debussy - Target Atrium of Orchestra Hall

5/15/16 - Medalist Concert Band: Hands Across the Sea Bloomington Center for the Arts

5/19/16-6/12/16 - Blither Spirit - Bloomington Center for the Arts

5/20/16 - Inside the Classics: The Evolution of Opera - Orchestra Hall

5/20-21/16 - Bloomington Chorale: Bizet to Bernstein - Bloomington Center for the Arts

5/20-21/16 - Pilobolus - Ordway Music Theater

5/20-21/16 - Rumours and Dreams - The Music of Fleetwood Mac featuring Pamela McNeill, Mary Jane Alm& Jeff Engholm - Chanhassen Dinner Theatres

5/21-22/16 - Cirque de la Symphonie with the Minnesota Orchestra - Orchestra Hall

5/22/15 - The Saint Paul Conservatory of Music Faculty in Concert - Ordway Concert Hall

5/26/16 - Symphony in 60: Erin Keefe Plays Brahms - Orchestra Hall

5/27-28/16 - Erin Keefe Plays Brahms - Orchestra Hall

 To Order Tickets:Ames Center (Burnsville Performing Arts Center) - www.ames-center.comArtistry - Bloomington Center for the Arts -www.btaacmn.orgGopher Sports - www.gophersports.comLakeville Area Arts Center - www.ci.lakevill.mn.usMinnesota Orchestra -www.minnesotaorchestra.orgMinnesota Lynx - www.lynx.wnba.comMinnesota State Fair Grandstand - http://www.mnstatefair.org/entertainment/grandstand.htmlMinnesota Swarm - www.mnswarm.comMinnesota Wild - www.wild.nhl.comMinnesota MN Vikings - www.MN Vikings.comOrdway - www.ordway.orgOrpheum Theatre, State Theatre, Pantages Theatre & New Century Theatre - www.hennepintheatretrust.orgRosemount Area Arts Council - www.rosemountarts.comSt. Paul Saints - www.saintsbaseball.comTarget Center - www.targetcenterTimberwolves - www.nba.comTwins Baseball - www.twinsbaseball.comUniversity of Northwestern - St. Paul - https://www.unwsp.edu/web/music-theatre-dept/theatre-seasonXcel Center - www.xcelenergycenter.com                       

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Quotes for the week of April 11, 2016

 Quotes for the week of April 11, 2016Discipline if the highest form of love. If you really love someone, you have to give them the level of discipline they need. - Tom IzzoThe will to succeed is important, but what's more important is the will to prepare. - BobbyKnightThere is a point in every contest when sitting on the sidelines is not an option. - DeanSmithA lot of people notice when you succeed, but they don't see what it takes to get there. -Dawn StaleyJust focus on the things that matter. Celebrate the positive. - Origin Unknown 

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Weekly Market Commentary | Week of April 11, 2016

 

EMERGING MARKET EARNINGS: IS THE TIDE TURNING?

KEY TAKEAWAYS

The importance of earnings for EM companies is often overshadowed by macro considerations.As with most other regions, EM earnings disappointed markets recently.Analysts have recently been revising earnings upward, and not merely in commodity-oriented sectors.

After disappointing investors last year, emerging market earnings forecasts may finally be consistent with whatcan be delivered. Emerging markets (EM) have underperformed U.S. markets since the summer of 2011. Thereasons are numerous, including concerns about the Chinese economy (the largest and most important amongEM), the strength of the U.S. dollar, and the decline in commodity prices, just to name a few. However, there issome reason to believe this trend might be reversing. Macroeconomic and political considerations tend todominate the conversation around the asset class. We will address certain economic considerations, especiallythe impact of currency movements on the asset class, in an upcoming Weekly Economic Commentary. Here wefocus on what we believe is the improving earnings picture for the asset class. Though the recent improvementappears to be partially due to stability in commodity prices, the revision in earnings estimates extends farbeyond commodities and into consumer and technology companies.

DISAPPOINTMENT AND DOWNGRADES

The nature of EM tends to excite investors. Global investors are eager to capitalize on the prospect of hundredsof millions of people in China or India buying their first smartphone or their first car. The reality can be moresobering. Historically, when EM do well, they have the potential to outperform the U.S. for years, by hundredsof basis points each year. But when they disappoint, the performance gap between emerging and developedmarkets can be equally large.

Earnings still matter for EM. As the U.S. economic recovery and bull market began to age, investors becameincreasingly optimistic on earnings growth outside of the U.S., and therefore on those equity markets. Yet,actual earnings were much lower than expectations, resulting in a massive negative earnings surprise for thefourth quarter of 2015. Furthermore, analysts reduced expectations for future earnings growth. The estimatedearnings growth for EM in 2016 is currently 9.4%, down from 34% that was projected at the end of the thirdquarter of 2015 [Figure 1]. EM investors may be less sensitive to quarterly estimates, as most companies tendto release data throughout the quarter, as opposed to U.S. companies where most announcements are madewithin a three- to four-week period.

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However, as we approached the start of this quarter's earnings season, the investment community has becomemore optimistic regarding EM earnings. One important difference--though at times difficult tomeasure--between emerging and developed markets is the degree of political and economic uncertainty. Bydefinition, there are more questions about EM companies than their developed market peers. Differingaccounting standards, the impact of changing government policy, currency volatility, and many other factorsmake examining earnings more difficult. As a rule, EM equities trade at a valuation discount to developedmarkets. The key to investing in EM is to ask if the current valuations warrant accepting the additional risk. 

WHERE DOES THE GROWTH COME FROM?

Emerging markets have a very different composition than developed markets. Historically, they have beenheavily dependent upon commodity export-oriented companies. These sectors are still important for the assetclass, more so than for developed markets [Figure 2]. Commodities are not just important to EM as a source ofcorporate profits, but also as a fuel for their economies as a whole. Countries like Brazil and Russia usecommodity exports to support their economies and help fund government operations. Analysts began to revisetheir earnings forecasts upward right around the time that the oil market began to stabilize and rebound[Figure 3].

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However, the increased optimism for earnings extends far beyond commodities. Across the entire asset class,earnings expectations have been trending up for 7 of the 10 equity sectors, including important areas like

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 technology and consumer-related sectors. Despite increased stability in oil prices, earnings estimates have notbeen increased for energy companies. Financials, one of the key sectors within EM, has seen stability inearnings estimates, but has not seen an increase.

As always, the important part of evaluating data--whether it is earnings, economic data, or anything else--isthe all-encompassing question "What's priced in?" The bottom half of Figure 3 shows that forwardprice-to-earnings (PE) ratios for EM have not expanded much since the financial crisis, whereas valuations forthe S&P 500 have increased significantly. Yes, earnings for U.S. companies have been better, but this is alreadyfactored into the PE ratio. To us, the current low valuations suggest not only pessimism on corporate earnings,but also on macroeconomic and political factors. Should we see more improvement, the EM asset class wouldindeed look very attractive.

CONCLUSION

By itself, increased investor confidence in EM companies is not sufficient to warrant a significant allocation toEM, though aggressive and more tactically oriented investors may decide that is enough to initiate a smallposition, when suitable. Stability and eventual improvement in corporate earnings are a necessary part of anysustained rally in EM performance. Increased economic stability and clarity on policy, especially in keycountries like China, will also serve as confirmation of an "all clear" for the asset class. However, by the timesuch clarity is received, valuations will likely be higher than they are today. The famous global investor SirJohn Templeton suggested that one should buy EM when "there is blood in the streets." Times have changedand these markets no longer experience the kind of turbulence they did in Templeton's day. Perhaps thisshould be changed to buy when there is still "red on the screen."

 

IMPORTANT DISCLOSURES

The opinions voiced in this material are for general information only and are not intended to provide specificadvice or recommendations for any individual. To determine which investment(s) may be appropriate foryou, consult your financial advisor prior to investing. All performance referenced is historical and is noguarantee of future results.

The economic forecasts set forth in the presentation may not develop as predicted and there can be noguarantee that strategies promoted will be successful.

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

Because of its narrow focus, specialty sector investing, such as healthcare, financials, or energy, will besubject to greater volatility than investing more broadly across many sectors and companies.

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 accountingstandards. Investing in emerging markets may accentuate these risks.

All investing involves risk including loss of principal.

Forward price-to-earnings is a measure of the price-to-earnings ratio (PE) using forecasted earnings for thePE calculation. While the earnings used are just an estimate and are not as reliable as current earnings data,there is still benefit in estimated PE analysis. The forecasted earnings used in the formula can either be forthe next 12 months or for the next full-year fiscal period.

INDEX DESCRIPTIONS

The Standard & Poor’s 500 Index is a capitalization-weighted index of 500 stocks designed to measureperformance of the broad domestic economy through changes in the aggregate market value of 500 stocksrepresenting all major industries.

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The MSCI EAFE Index is recognized as the pre-eminent benchmark in the United States to measureinternational equity performance. It comprises the MSCI country indexes that represent developed marketsoutside of North America: Europe, Australasia, and the Far East.

The MSCI Emerging Markets Index captures large and mid cap representation across 23 emerging markets(EM) countries. With 822 constituents, the index covers approximately 85% of the free float-adjusted marketcapitalization in each country.

This research material has been prepared by LPL Financial LLC.

Tracking #1-486491 (Exp. 04/17)

The opinions voiced in this material are for general information only and are not intended to provide specificadvice or recommendations for any individual. To determine which investment(s) may be appropriate foryou, consult your financial advisor prior to investing. All performance referenced is historical and is noguarantee of future results. All indices are unmanaged and cannot be invested into directly.

LPL Financial, Member FINRA/SIPC

 

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