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April 1, 2015

Dear Client: For the first quarter of 2015, the major indices had the following returns: Index First Qtr 2015 Dow Jones Industrial Average -0.26% S&P 500 +0.44% NASDAQ Composite +3.48% The start of 2015 seemed to be a near repeat version of 2014 where harsh winter weather during the first quarter and anticipated Federal Reserve action shaped the tone of the equity markets. This year, record snowfalls in the east and the coldest February temperatures on record for most Americans since 1979 likely had a negative, but temporary, effect on the economy. Combined with the port strike on the west coast, it is likely the first quarter GDP growth rate will later be reported at a rather tepid level. On the Federal Reserve front, last year at this time the Fed was posturing for an anticipated tapering and eventual halt of quantitative easing, one of its key economic support tools. Many market forecasters at that time anticipated such Fed action would mark the top for the equity markets. This year, the Fed is preparing to raise short-term interest rates for the first time in eleven years, and again, many are pessimistic about the long-term effect on stocks. The good news is we have seen this before and recall how similar circumstances in early 2014 eventually gave way to a 13.68% total return on the S&P 500 in 2014. Like last year, we expect GDP growth rates to bounce back later in the year after a weak first quarter. Likewise, last year’s dreaded Fed action eventually played out to be a non-event due in part to the growing strength in...