Wealth Protect Status Update: February 2017

This is the monthly WealthProtect System* status update and includes the probability (Low, Mid, High) of a change in status within the next two months. Below is a commentary on actions taken this month as well as changes in overall asset allocation.

System Commentary Starting with this edition, I will split my commentary on our system triggers from my market commentary. Once again, there are no trades in our WealthProtect System this month; we have been fully invested in equities since October 2016. Real Estate Investment Trusts and Commodities are the closest to exiting.

Market Commentary While markets have risen over the past 30 days, market leadership has changed. For example, US growth stocks, foreign developed stocks, and foreign emerging market stocks, which were all weak since the election, have outperformed the broad market since the turn of the year. Similarly, bonds have strengthened some. US value stocks and natural resource stocks conversely have been a bit weaker.

According to 720 Global research, S&P 500 earnings have grown only 2.34% annualized over the past five years and -0.48% over the past three. Yet the S&P 500 has increased over 14% annualized over the past five years ending 12/31/16. There seems to be a disconnect, and we can see it in valuations. The S&P 500, using multiple measures, is trading at levels either never seen before or at the highest levels outside of the 1999-2000 internet bubble. From current valuations, a 40%-60% drop is not out of the question. If there is good news, it is that a number of asset classes, such as foreign stocks, do not appear to be as overvalued and may even be undervalued.

This is a dangerous time to be complacent and assume the US market will continue to go straight up. It is a time to check one's strategy, to make sure your portfolio is appropriately balanced, and that you have a rules-based risk management system like our WealthProtect in place.

*The Armstrong Wealth Management Group WealthProtect System is an investment risk control system designed (but not guaranteed) to limit significant losses in major bear markets (excess of 30% loss from market peak to market trough). It is NOT designed to prevent normal market losses (under 20%). No strategy can assure a profit or protect from a loss. Occasional false signals can reduce returns.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

Stock investing involves risk including loss of principal. The prices of small and mid-cap stocks are generally more volatile than large cap stocks. All indices are unmanaged and may not be invested into directly.

International and emerging market investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors.

Investing is Real Estate Investment Trusts (REITs) involves special risks such as potential illiquidity and may not be suitable for all investors. There is no assurance that the investment objectives of this program will be attained.

The fast price swings in commodities will result in significant volatility in an investor's holdings.

All performance referenced is historical and is no guarantee of future results.

There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio.

Diversification does not protect against market risk.

The forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.

Because of their narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies.

The Standard & Poor's 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

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