Author: Franklin J. Parker

by Franklin J. Parker, CFA

The Summary

• This week’s important data is personal consumption expenditures—the Federal Reserve’s preferred inflation gauge. This figure should also give some insight into how households are coping with higher prices. We also see some data on manufacturing and durable goods orders this week.
  
  
• The European Central Bank announced their intent to move rates above 0% by September, which would be the first time since 2014 that rates would be above 0%. ECB president Lagarde also indicated that inflation running above 2% might prompt the ECB to push rates even higher. This follows the US central bank’s indication that aggressive rate hikes should be expected this year, with a reigning in of the cash printed over the last couple of years.
  
  
• Markets have reminded investors what volatility looks like—it was easy to forget over the past decade! Of course, with the Fed pulling back its support, and with consumers and companies struggling with higher prices, there is ample worry of a recession on the horizon (or here now). All of these changing factors indicate to me that we are in a transitionary environment—this is the “hangover” from an easy-money environment. It may take a bit to work out, but, at the moment at least, the fundamentals of the economy are still generally strong. Demand is plentiful, and it is usually a lack of demand that drives economies into a recession.
  
  

The Details

With the first quarter of 2022 posting a contraction, I could not help but wonder how often we get one-off contractions without a second quarter of contraction (two quarters of GDP contraction is the technical definition of a recession). So, I went back through the record and counted.

Since 1950, there have been 16 quarters of one-off contractions (that is, without a subsequent second quarter of contraction). As it turns out, this is not particularly uncommon—about every 1 year in every 5 we should expect a one-off bad quarter. However, there is some nuance to this.

Of those 16 one-off quarterly contractions, about 10 of them are part of a string of volatile quarters (they tend to cluster). So, for example, the year 1956 looked like this:

• Q1: -0.38%
• Q2: +0.83%
• Q3: -0.09%
• Q4: +1.65%

In other words, though not technically a recession it was a volatile year for economic growth, with each quarter bouncing between contraction and expansion. 1957 looked similar, except a recession finally hit in the last quarter of 1957 pushing into the first quarter of 1958. That two year period from 1956 to 1958 was a difficult economic environment.

As the plot below demonstrates, market returns were sub-par during that period, yet most of the losses in the S&P 500 came from the recession in the last two quarters of 1957. Recall, 1956 had two negative quarters of GDP growth, yet still delivered positive total returns. It was not until late 1957—almost 18 months after the first quarter of contraction—that the S&P 500 began to dip in earnest.

The lesson here is that volatile economic growth can create volatility in equity markets, but it is recessions that deliver the bulk of the downside. If, then, this is the start of a volatile string of quarters (like the late-1950s, or even the mid 1970s), markets can still deliver positive returns. And, as usual, investors should be on the lookout for recessions as those are what cause the most damage to portfolios.

Chart of the Week

This week’s chart comes to us courtesy of the Conference Board, and it breaks down the components of GDP growth, quarter-by-quarter. What becomes clear in this chart is that, despite the recent negative posting for GDP, consumer demand remains strong (orange). Most of the drag on GDP was from trade and reduced government spending. Despite all of the headwinds, US consumers remain strong—fueling demand in the economy.

This document is a general communication being provided for informational purposes only. It is educational in nature and not designed to be taken as advice or a recommendation for any specific investment product, strategy, plan feature or other purpose in any jurisdiction, nor is it a commitment from Directional Advisors to participate in any of the transactions mentioned herein. Any examples used are generic, hypothetical and for illustration purposes only. This material does not contain sufficient information to support an investment decision and it should not be relied upon by you in evaluating the merits of investing in any securities or products. In addition, users should make an independent assessment of the legal, regulatory, tax, credit, and accounting implications and determine, together with their own financial professionals, if any investment mentioned herein is believed to be appropriate to their personal goals. Investors should ensure that they obtain all available relevant information before making any investment. Any forecasts, figures, opinions or investment techniques and strategies set out are for information purposes only, based on certain assumptions and current market conditions and are subject to change without prior notice. All information presented herein is considered to be accurate at the time of production, but no warranty of accuracy is given and no liability in respect of any error or omission is accepted. It should be noted that investment involves risks, the value of investments and the income from them may fluctuate in accordance with market conditions and taxation agreements and investors may not get back the full amount invested. Both past performance and yields are not reliable indicators of current and future results.

by Franklin J. Parker, CFA

The Summary

• Inflation numbers continued higher last week, spooking markets. The S&P 500 dropped below the 4000 level, which had been a key technical support for some time. Interestingly, though prices have dropped, we have seen earnings growth continue with the S&P 500 on track to net a little over 11% growth in earnings (though most of that coming from the energy sector—factoring out the energy sector the growth figure stands around 5%).
  
  
• This week we see data on retail sales, and several data points on US manufacturing. Today, the NY Fed Manufacturing Index posted at a shocking -11.60, which is about where is was in March of 2020 (and economists expected a +17—so this was a big surprise). One data point a trend does not make, but it certainly exacerbates concerns about a looming economic slowdown, concerns which were already heightened after last week’s weak consumer sentiment figures.
  
  
• 20% drops in the S&P 500 are pretty rare outside of recessions. Outside of a recession, it has happened only five other times since 1950 (Fall of 2018 was the last time), and in every case stocks were fully recovered within six months. Of course, that assumes there is no recession. While I see a low probability of a recession this year, I admit that the chances are rising. Ultimately, the types of risk that you can afford to take on will be dictated by your goals.
  
  

The Details

As the Fed has begun to pull monetary support from the economy, public markets have been the most visual aspect of the shift in risk sentiment. However, the shift has hit private markets much more strongly.

And that makes sense when you think it out. With the valuation of many publicly-traded technology companies now cut in half, why would I risk my funds in a higher-risk startup company with a sky-high valuation when I could simply buy a similar company on the open market for less? Not to mention, many significant VC and Angel investors have seen their public-market portfolios take significant losses, leaving less money available for investment elsewhere.

One place we have yet to see this change in risk sentiment is in residential real estate. Rather than follow interest rates and pull back, real estate in many areas has continued to climb. Residential real estate is an interesting market, subject to many forces that have little to do with our intuition. For one, real estate serves a purpose beyond investment for most people (shelter). For another, it is very politically unpopular for real estate values to go down, so politicians have incentives to maintain real estate values.

At any rate, it appears the private markets are beginning to turn, and we may be soon entering a good buying opportunity for investors with cash and the ability to take on this type of risk. Though, as history has shown, it is often new funds that reap the benefits of a turn in the market like this.

Chart of the Week

This week we look at the sensitivity of home prices to changes in interest rates. Despite our intuition on the subject, home prices are not swayed much at all by changes in interest rates (first chart). Even looking at the absolute levels of rates (the second chart) shows that home prices tended to rise even when rates were historically high.

In other words, home prices are largely governed by factors other than interest rates, so, despite what we might initially think on the subject, rising rates alone do not predict lower home prices.

This document is a general communication being provided for informational purposes only. It is educational in nature and not designed to be taken as advice or a recommendation for any specific investment product, strategy, plan feature or other purpose in any jurisdiction, nor is it a commitment from Directional Advisors to participate in any of the transactions mentioned herein. Any examples used are generic, hypothetical and for illustration purposes only. This material does not contain sufficient information to support an investment decision and it should not be relied upon by you in evaluating the merits of investing in any securities or products. In addition, users should make an independent assessment of the legal, regulatory, tax, credit, and accounting implications and determine, together with their own financial professionals, if any investment mentioned herein is believed to be appropriate to their personal goals. Investors should ensure that they obtain all available relevant information before making any investment. Any forecasts, figures, opinions or investment techniques and strategies set out are for information purposes only, based on certain assumptions and current market conditions and are subject to change without prior notice. All information presented herein is considered to be accurate at the time of production, but no warranty of accuracy is given and no liability in respect of any error or omission is accepted. It should be noted that investment involves risks, the value of investments and the income from them may fluctuate in accordance with market conditions and taxation agreements and investors may not get back the full amount invested. Both past performance and yields are not reliable indicators of current and future results.

by Franklin J. Parker, CFA

The Summary

• The Federal Reserve was the big news last week, posting a 0.50% hike in the federal funds rate. More importantly, they announced a plan to begin shrinking their ~$9 trillion balance sheet by allowing $47.5 billion per month of bonds mature. In short, this “destroys” about $47.5 billion worth of dollars every month. In September, the plan is to increase that to $95 billion/month. Markets reacted positively to Powell’s dismissal of a 0.75% rate hike, but this does mark the beginning of a tightening cycle and history shows us that we get 18 to 24 months of tightening before the next recession hits.
  
  
• This week we get inflation data (fingers crossed!) and consumer sentiment. Both figures could be market-moving, and consumer sentiment will be key. To date, consumers have continued to spend—any sign of that faltering would likely be a prelude to a recession.
  
  
• Earnings continue to be pretty good. It appears the S&P 500 will post 10% earnings growth. Of course, that is not distributed evenly. Energy is seeing enormous growth, while consumer discretionary is seeing a 30% contraction in earnings. Technology has seen 13% growth, but has suffered at the shift in Fed policy. Many of the valuations that were supported by low interest rates and ongoing money-printing have come back to earth (though are still high by historical standards).
  
  

The Details

My investment philosophy centers around two things: first, an understanding of individual goals—what is it that you need doing? Second, I spend a lot of time and energy trying to understand where we are in the business cycle, and allocating investments accordingly. Of course, that adds some risk to a portfolio (the risk that we get it wrong), but it is a philosophy that has served us well so far.

As I look at the fundamentals of this economy, there are several indicators that are showing we are likely in the final phase of this very short business cycle. If I had to put a timeline on it, I’d say we have 12 to 16 months before a recession (at least, that is based on today’s data).

This is, of course, a difficult economic environment. There appears to be ample demand in the economy—people and companies want to buy things—but there is an ongoing shortage of supply. This supply bottleneck has been exacerbated by supply-chain problems (backed-up ports, shipping costs and shortages, even warehouse space for containers), and also a dramatic shortage in labor.

Last week, job openings hit an all-time high of 11.5 million. Unable to get goods and labor, many businesses are simply constrained on their output. This applies often to service business, especially, which are some two-thirds of the US economy. The “raw material” of a service business is, ultimately, labor.

The economic indicators, then, are somewhat mixed. On the one hand, demand is strong, so a focus on those indicators would seem to indicate a roaring economy. On the other hand, supplies and labor are short, so a focus on actual transactions done would seem to indicate a faltering economy. In a sense, this is good news—if supply and labor problems are resolved, the increased supply would likely be met with instant demand and the economy would lurch forward.

Inflation, of course, could begin destroying that demand, in which case a recession wouldn’t be far behind.

In any event, close attention to ongoing developments in the data is absolutely key for investors wishing to adjust allocations with the business cycle. And, as I have repeated numerous times, flexibility is key.

Chart of the Week

Last week, the job openings level posted a record 11.5 million job openings, and the quit rate also hit a record. Adjusting for the size of the total population shows just how dramatic the current situation is, although it is the culmination of a post-2020 trend, with enough job openings to employ 3.5% of the US population.

This is another indication of the constraints facing the current economy. Without labor—especially in higher-skilled fields—many US businesses simply cannot meet demand and that limits economic activity.

This document is a general communication being provided for informational purposes only. It is educational in nature and not designed to be taken as advice or a recommendation for any specific investment product, strategy, plan feature or other purpose in any jurisdiction, nor is it a commitment from Directional Advisors to participate in any of the transactions mentioned herein. Any examples used are generic, hypothetical and for illustration purposes only. This material does not contain sufficient information to support an investment decision and it should not be relied upon by you in evaluating the merits of investing in any securities or products. In addition, users should make an independent assessment of the legal, regulatory, tax, credit, and accounting implications and determine, together with their own financial professionals, if any investment mentioned herein is believed to be appropriate to their personal goals. Investors should ensure that they obtain all available relevant information before making any investment. Any forecasts, figures, opinions or investment techniques and strategies set out are for information purposes only, based on certain assumptions and current market conditions and are subject to change without prior notice. All information presented herein is considered to be accurate at the time of production, but no warranty of accuracy is given and no liability in respect of any error or omission is accepted. It should be noted that investment involves risks, the value of investments and the income from them may fluctuate in accordance with market conditions and taxation agreements and investors may not get back the full amount invested. Both past performance and yields are not reliable indicators of current and future results.

by Franklin J. Parker, CFA

The Summary

• A big week this week, both in data and policymaking. The Federal Reserve meets Tuesday/Wednesday, meaning that on Wednesday we likely get an interest rate hike as well as a press conference from chairman Powell. Currently, the expectation is a rate hike of half a percent, but investors are watching very closely for how the Fed will manage its balance sheet on an ongoing basis. At present, they are allowing $95 billion/month to mature. Changes to that figure or strategy will be important developments. Of course, how Powell speaks to the ongoing inflation problem will be important, as well.
  
  
• Today we got the purchasing manufacturer’s index (PMI), which posted at 55.4—significantly lower that the 57.5 that was expected. While this is still signaling expansion (anything above 50 is expansion), it has slowed considerably over the past months. Tomorrow we get data on factory orders and job openings, and Friday we get the unemployment rate for April. With worry over an economic slowdown growing, all of this data could be market-moving.
  
  
• Speaking of economic slowdown, shocking news last week on GDP growth which posted a 1.4% contraction for the first quarter of 2022. The economy, it turned out, shrank last quarter. The definition of a recession is two quarters of contraction, so that is half of the equation. Naturally, this has spooked investors. As I have mentioned before, I do not see a recession as likely for this year, but it does appear that one is forming in 2023. This means that I see this pullback as a buying opportunity. The data is changing quickly, however, and flexibility is key in this environment.
  
  

The Details

I have had several conversations over the past few weeks about whether the US dollar can maintain its global prominence. The concern is understandable—most of us have never lived in a world without US dollar hegemony—and with the recent weaponization of the dollar, and its questionable ongoing management, there are good reasons to be concerned.

The main thrust of my counterpoint can be seen in the chart below. Generally speaking, the more a country exports, the more foreign reserves it will tend to hold. This makes sense: when China sends goods to the US, Chinese companies receive dollars and US companies receive goods. Export-driven economies, then, will tend to have large amounts of foreign reserves on hand—because they are constantly receiving foreign currencies. Import-driven economies tend to have the opposite—they tend to have little in the way of foreign currencies because they are importing goods, not cash.

And this is the primary reason why the US dollar is the global reserve currency: for decades, the US has been the largest importer in the world (though this has recently shifted to China). This means that US dollars are flung all over the world, making it quite easy for Japan to buy goods from Korea with US dollars, because they both have them already. The Indian Rupee, by contrast, is localized mostly to India because India is an export-driven economy and it is relatively difficult for other countries to get ahold of.

Before another currency can be the global reserve currency, it has to be accessible by people around the globe. A global reserve currency, then, will most likely be backed by an import-driven economy.

I am, therefore, a bit more bullish on the US dollar than most seem to be. Other than the Euro, which is another import-driven currency, the dollar is the easiest currency for most people to get their hands on. Until and unless another country imports more than the US (and uses their own currency to purchase those imports), it is unlikely that the dollar’s dominance will wane.

Chart of the Week

Last week we also got earnings from the FAANG crowd. Amazon’s considerable loss was a surprise—analysts expected a profit of $8.35 per share and Amazon posted a loss of $7.56 per share. Netflix was another shocker: for the first time in over a decade, Netflix lost subscribers. The bright spots were Tesla, which saw its margins expand due to higher prices—deliveries where about equal to last quarter—and Apple, which saw profits much higher than expected. Apple, however, issued concerning guidance on inflation and supply chain problems.

It is also worth noting that these companies have been the innovators in the US economy for some time now, and in a world with rising interest rates, innovation is becoming more expensive. In fact, over the past year, technology stocks have tended to deliver lower returns as interest rates rose, and higher returns as rates dropped, as this week’s chart shows. That is a trend likely to continue, and this creates a headwind for the sector as a whole and for new companies looking to launch a disruptive product or service.

There is some hope that more expensive innovation will put the focus on quality instead of quantity. Investors should be cautious going forward: the days of “easy” returns are behind us. Upside will be hard-won going forward, and a focus on quality is more likely to be rewarded.

This document is a general communication being provided for informational purposes only. It is educational in nature and not designed to be taken as advice or a recommendation for any specific investment product, strategy, plan feature or other purpose in any jurisdiction, nor is it a commitment from Directional Advisors to participate in any of the transactions mentioned herein. Any examples used are generic, hypothetical and for illustration purposes only. This material does not contain sufficient information to support an investment decision and it should not be relied upon by you in evaluating the merits of investing in any securities or products. In addition, users should make an independent assessment of the legal, regulatory, tax, credit, and accounting implications and determine, together with their own financial professionals, if any investment mentioned herein is believed to be appropriate to their personal goals. Investors should ensure that they obtain all available relevant information before making any investment. Any forecasts, figures, opinions or investment techniques and strategies set out are for information purposes only, based on certain assumptions and current market conditions and are subject to change without prior notice. All information presented herein is considered to be accurate at the time of production, but no warranty of accuracy is given and no liability in respect of any error or omission is accepted. It should be noted that investment involves risks, the value of investments and the income from them may fluctuate in accordance with market conditions and taxation agreements and investors may not get back the full amount invested. Both past performance and yields are not reliable indicators of current and future results.

by Franklin J. Parker, CFA

The Summary

• This week we see some important fundamental economic data. Today, Durable Goods orders post—a gauge of sentiment for business investment. On Wednesday, we get GDP growth figures for the first quarter. Economists are expecting 1.1% GDP growth, down considerably from last quarter’s 6.9%. Obviously this figure will be important as investors try to understand what affects inflation and slowing consumer spending will have on the economy. Also posting this week is personal consumption expenditures—another gauge of inflation—and manufacturing data. This is a busy week for basic economic data!
  
  
• Last week’s comments from Federal Reserve officials appear to indicate a preference for a 0.50% rate hike at the next meeting. This was more hawkish than markets expected, and that sent risk prices reeling. I have talked about how the Fed has few tools to fight inflation this time around and that the main weapon in their arsenal is moving rates upward quickly. With that thesis, this “pivot” is not particularly surprising to me, though it does appear that markets may be over-reacting (again). At any rate, this is well within the investment outlook I set for the year, and it is still my view that markets will return to growth in the back half of the year (barring a recession, of course).
  
  
• It seems increasingly improbable that the Fed can engineer a “soft landing” for the economy. Much more likely is a “hard landing” that ends in high unemployment, a recession, and—very likely—lingering inflation. History shows us that we get 18 to 24 months of rate hikes before the next recession hits. Based on that alone, we should expect to see a recession in late 2023, an expectation other other indicators seem to confirm. In my view, a recession is likely in 2023, but unlikely this year.
  

The Details / Chart of the Week

Valuation is a word thrown around a lot, but what does it mean?

Very simply, valuation is the number of dollars an investor is willing to pay for $1 in company earnings. Of course, there are many different methods of measuring this. A method popularized by Nobel laureate Robert Shiller is the cyclically-adjusted price-to-earnings ratio, or CAPE ratio for short. While not as straightforward a measure (like the simple price-to-earnings ratio), it does a better job of showing the longer-term trends in valuation.

This week’s chart shows the historical valuation of the S&P 500. After reaching valuations that were more expensive than 98% of its history, the S&P 500 has begun to retreat a little (though it is still above its 95th percentile). Some of that is from recent price falls, but some is also from earnings growth. While I would expect this reduction in valuation to continue due to the Fed’s change in policy, we did see a similar retreat in 2018-2020, only to move to still newer highs.

In the end, it is important to note valuations (and the risks thereto), but they are also not a useful short-term trading tool. That is, valuations give us very little information about how markets will behave over the coming months or next few years, as our second plot demonstrates. One-year returns for markets are fairly random. However, longer-term returns tend to inversely correlate to valuations (high valuations tend to yield lower returns and vice versa).

As always, we are forced to assess and balance risks that you can afford to take. And, as we have talked about ad nauseum, flexibility is key in this environment.

This document is a general communication being provided for informational purposes only. It is educational in nature and not designed to be taken as advice or a recommendation for any specific investment product, strategy, plan feature or other purpose in any jurisdiction, nor is it a commitment from Directional Advisors to participate in any of the transactions mentioned herein. Any examples used are generic, hypothetical and for illustration purposes only. This material does not contain sufficient information to support an investment decision and it should not be relied upon by you in evaluating the merits of investing in any securities or products. In addition, users should make an independent assessment of the legal, regulatory, tax, credit, and accounting implications and determine, together with their own financial professionals, if any investment mentioned herein is believed to be appropriate to their personal goals. Investors should ensure that they obtain all available relevant information before making any investment. Any forecasts, figures, opinions or investment techniques and strategies set out are for information purposes only, based on certain assumptions and current market conditions and are subject to change without prior notice. All information presented herein is considered to be accurate at the time of production, but no warranty of accuracy is given and no liability in respect of any error or omission is accepted. It should be noted that investment involves risks, the value of investments and the income from them may fluctuate in accordance with market conditions and taxation agreements and investors may not get back the full amount invested. Both past performance and yields are not reliable indicators of current and future results.

by Franklin J. Parker, CFA | for ongoing updates through the week, you can follow me on Twitter.

The Summary

• As expected, the Fed raised interest rates by 0.25% last week. Also in-line with expectations were producer prices (the Fed’s preferred inflation gauge), posting a staggering 10% year-over-year. Of course, inflation figures have yet to include the recent run-ups in energy and food prices, so next month’s figures are likely to be still worse. In the end, inflation appears to still be accelerating rather than abating.
  
  
• Markets began an upward run last week. Some of that may be from the Fed’s decision—there was some debate over whether rates would rise by 0.25% or 0.50%, so something in the middle was priced in. A big question that remains is how the Fed will handle its current balance sheet, investors eagerly will watch guidance on this front. Letting the bonds mature would be most accommodative, whereas selling them off would be more restrictive. This week we get data on new home sales, durable goods orders, and consumer sentiment. These should give some insight into the feeling of consumers and the strength of spending in the face of mounting inflationary pressures—especially durable goods orders.
  
  
• All-in-all, markets have pushed off of their recent lows. My downside target was 15% to 20% from the S&P 500’s high, and that was hit, albeit briefly, on February 24. Recent market action suggests that the lows may have been logged. That said, I am still cautious. Inflation hasn’t been tamed, and it represents a serious threat to earnings. Not to mention, these pullbacks typically last a bit longer than a couple of months. More than anything, this market is unpredictable. In the end, your goals will determine how you position your portfolio.
  

The Details

I hate driving.

Well, to be more specific, I hate driving in traffic. A Sunday drive on a back country road it actually quite pleasant (especially given the right car).

For years now, I have been eagerly awaiting the long-promised self-driving car. The idea that I can just get in and the car takes me where I want to go is immensely appealing. The investment knock-on affects of this convenience, however, are something I have pondered on awhile now. Let’s hit three highlights.

First—and this would not happen right away—self-driving cars have to potential to “speak” to each other and control the flow of traffic exponentially more efficiently than human drivers. Like most major cities, Dallas (where I live) has but a few major highways flowing into the city. If, through computerized efficiency, we could increase the speed on those highways by 1.5x or even 2x (what is known as the “throughput”), what might that do to the price of real estate in the suburbs? After all, people tend to pay up for proximity of time, rather than distance per se, so more outlying areas could command higher prices. This development alone has the potential to reshape real estate pricing around cities nationwide.*

Second, the expectation is that self-driving cars will create a much safer driving experience. With fewer accidents, we will almost certainly see a drop in insurance premiums—especially as driving-related casualties drop precipitously. Car insurance premiums represent a significant amount of revenue (and float) to many insurance companies, which are, of course, simply investment companies at heart. And this brings up the third thing.

If insurance companies have noticeably less revenue and investment float, we are likely to see an increase in prices for those securities which are preferred by insurance companies (i.e. high-quality corporate and sovereign debt, blue-chip stocks, and even some derivatives). Capital markets are quite deep, of course, so whether this is noticeable is an open question. But, were I an insurance company analyst, or an analyst in the financial department of an insurance company, this would be on my radar.

All of that said, I am immensely excited about this potential future (the safety potential alone is incredible—no more drunk drivers!).

To those engineers working on the problem: I am respectfully begging you to hurry up!

*I would also expect parking lots to go away, but that explanation would make this post run a bit long. Suffice it to say that I think there is considerable opportunity in the shifting dynamics of real estate.

Chart of the Week

Since 2020, economic policy uncertainty has been very high. Much of that, of course, has been due to the extraordinary measures taken during the Covid pandemic. However, much of the Covid concern is behind us, and as 2022 gets under way in earnest, we find ourselves with the third-highest level of policy uncertainty in at least 40 years.

Stable economic policy is important, of course, because businesses must plan many years into the future. When businesses feel that they cannot reliably forecast economic conditions, their willingness to take on risk wanes and their investment wanes along with it.

This document is a general communication being provided for informational purposes only. It is educational in nature and not designed to be taken as advice or a recommendation for any specific investment product, strategy, plan feature or other purpose in any jurisdiction, nor is it a commitment from Directional Advisors to participate in any of the transactions mentioned herein. Any examples used are generic, hypothetical and for illustration purposes only. This material does not contain sufficient information to support an investment decision and it should not be relied upon by you in evaluating the merits of investing in any securities or products. In addition, users should make an independent assessment of the legal, regulatory, tax, credit, and accounting implications and determine, together with their own financial professionals, if any investment mentioned herein is believed to be appropriate to their personal goals. Investors should ensure that they obtain all available relevant information before making any investment. Any forecasts, figures, opinions or investment techniques and strategies set out are for information purposes only, based on certain assumptions and current market conditions and are subject to change without prior notice. All information presented herein is considered to be accurate at the time of production, but no warranty of accuracy is given and no liability in respect of any error or omission is accepted. It should be noted that investment involves risks, the value of investments and the income from them may fluctuate in accordance with market conditions and taxation agreements and investors may not get back the full amount invested. Both past performance and yields are not reliable indicators of current and future results.