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January 1, 2017

Dear Client: Returns for the major stock indices for 2016 and the current bond market yields are as follows: Index 2016 Dow Jones Industrial Average +16.50% S&P 500 +11.96% NASDAQ Composite +7.80%   Fixed Income Yields 1 year 5 year 10 year 30 year Municipals 1.00% 1.80% 2.35% 3.08% US Treasuries 0.81% 1.93% 2.44% 3.07% As we close out 2016, long-term equity investors have,once again, been rewarded with double-digit returns.  As we reflect on the year, 2016 endured more market-moving drama and bouts of fear related to geopolitical events.  The beginning of 2016 gave us a 10% pullback in the market related to uncertainty with the Chinese economy; in late June, we experienced a brief 5% sell-off from Brexit; in November, the U.S. election gave us another specific date of perceived reckoning or opportunity which had investors from both sides of the political aisle unsure of how to invest.  These three market-moving situations gave shortsighted investors cause to worry, but provided long-term investors great opportunities to invest and be rewarded. At LYNCH & Associates, we regularly discuss what it means to be a long-term investor. We believe it starts with the correct mindset: you have to believe that when you are buying ownership in a company in the form of stock that you are buying the rights to the dividends and appreciation of the company.  Because you will collect dividends from your company (typically four times a year) and have the opportunity to realize capital appreciation, there is a market value on these rights and opportunities.  The investor’s dilemma becomes, “What is an appropriate price you should pay (stock...