812-853-0878  |  800-355-9624

July 1, 2016

Dear Client: Returns for the major stock indices for the first half of 2016 and current bond market yields are as follows:   Index YTD 2016 Dow Jones Industrial Average +2.90% S&P 500 +2.69% NASDAQ Composite -3.29%   Fixed Income Yields 1 year 5 year 10 year 30 year Municipals .50% 0.91% 1.35% 2.16% US Treasuries .44% 1.00% 1.47% 2.29%   Year-to-date, the driving market forces for stocks and bonds have included some recurring as well as new themes.  The most notable new theme is the coined term “Brexit,” which is shorthand for Britain’s recent vote to exit the European Union; turn on your TV and the talking heads will have you believe the “sky is falling” once again.  We believe, despite some short-term volatility, investors should ignore the scare stories.  Britain, the world’s fifth largest economy, will likely begin negotiating free trade deals, just as non-EU countries Norway and Switzerland.  Ultimately, Brexit encourages more freedom, accountability and efficiencies and is a long-term win for world markets and investors.  We hesitate to give Brexit much attention as we believe it is a non-event for long-term investors, but feel compelled to address it based on the current news cycle and recent market volatility. We offer to point to our past letters addressing the “sky is falling” geopolitical news events related to what could be described as economic hypochondria; more specifically, recent events we have experienced in the current recovery: fiscal cliff, flash crash, debt ceiling, China slowdown, Greece defaults, quantitative easing, and sequestration, to name a few.  We believe the overreaction to so many of these events originates from the...