February 2018 Market UpdateVolatility Returns

THE ADVISORS OF BROWN WEALTH MANAGEMENT ARE LPL REGISTERED REPRESENTATIVES WITH AND SECURITIES OFFERED THROUGH LPL FINANCIAL, MEMBER FINRA/SIPC. INVESTMENT ADVICE OFFERED THROUGH STRATOS WEALTH PARTNERS,

LTD., A REGISTERED INVESTMENT ADVISOR. BROWN WEALTH MANAGEMENT AND STRATOS WEALTH PARTNERS ARE SEPARATE ENTITIES FROM LPL FINANCIAL.

THE ECONOMIC FORECASTS SET FORTH IN THE PRESENTATION MAY NOT DEVELOP AS PREDICTED AND THERE CAN BE NO GUARANTEE THAT STRATEGIES PROMOTED WILL BE SUCCESSFUL. ALL PERFORMANCE REFERENCED IS HISTORICAL AND IS

NO GUARANTEE OF FUTURE RESULTS. ALL INDICES ARE UNMANAGED AND MAY NOT BE INVESTED INTO DIRECTLY.

Please see important disclosures, chart explanations, summary and commentary at the end of this report.

Please see important disclosures, chart explanations, summary and commentary at the end of this report.

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Record Streak without

Correction Ends • Set record without a 3% correction

• Went 400+ days without a 5% pull back• Mean # of 5% corrections/year = 3.4x, Lasting 36 days• Mean # of 10% corrections/year = 1.1x, Lasting 102 days

2018 YTD S&P 500

-~ 10%

1/1/18

1/22/18

2/09/18©Factset

Please see important disclosures, chart explanations, summary and commentary at the end of this report.

Please see important disclosures, chart explanations, summary and commentary at the end of this report.

© Copyright 2017 Ned Davis Research, Inc. Further distribution prohibited without prior permission. All Rights Reserved. See NDR Disclaimer at www.ndr.com/copyright.html. For vendor disclaimers refer to www.ndr.com/vendorinfo/

Wage Inflation Spooks Market

Please see important disclosures, chart explanations, summary and commentary at the end of this report.

Please see important disclosures, chart explanations, summary and commentary at the end of this report.

© Copyright 2017 Ned Davis Research, Inc. Further distribution prohibited without prior permission. All Rights Reserved. See NDR Disclaimer at www.ndr.com/copyright.html. For vendor disclaimers refer to www.ndr.com/vendorinfo/

Earnings Trending Higher

Please see important disclosures, chart explanations, summary and commentary at the end of this report.

Please see important disclosures, chart explanations, summary and commentary at the end of this report.

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Global Economy Performing Well

Please see important disclosures, chart explanations, summary and commentary at the end of this report.

Please see important disclosures, chart explanations, summary and commentary at the end of this report.

© Copyright 2017 Ned Davis Research, Inc. Further distribution prohibited without prior permission. All Rights Reserved. See NDR Disclaimer at www.ndr.com/copyright.html. For vendor disclaimers refer to www.ndr.com/vendorinfo/

Sentiment at Extreme

Pessimism Now

Please see important disclosures, chart explanations, summary and commentary at the end of this report.

Please see important disclosures, chart explanations, summary and commentary at the end of this report.

© Copyright 2017 Ned Davis Research, Inc. Further distribution prohibited without prior permission. All Rights Reserved. See NDR Disclaimer at www.ndr.com/copyright.html. For vendor disclaimers refer to www.ndr.com/vendorinfo/

Market breadth still Intact

Please see important disclosures, chart explanations, summary and commentary at the end of this report.

Please see important disclosures, chart explanations, summary and commentary at the end of this report.

© Copyright 2017 Ned Davis Research, Inc. Further distribution prohibited without prior permission. All Rights Reserved. See NDR Disclaimer at www.ndr.com/copyright.html. For vendor disclaimers refer to www.ndr.com/vendorinfo/

Watching Indicators for Signs of More Pronounced

Trouble

Please see important disclosures, chart explanations, summary and commentary at the end of this report.

Bottom Line

• Corrections are a normal part of equity investing• We are back to “The Normal”. Volatility and

market fluctuations will continue• Positive backdrop of earnings and strong global

economy should help contain correction• Extreme pessimism replaced extreme optimism

and has historically been a good entry point in the short term.

• Watching indictors for signs of a more troubling pull back or a shift in strategy.

• Hold the course or perhaps take advantage with cash on the sidelines.

Please see important disclosures, chart explanations, summary and commentary at the end of this report.

Executive Summary

• Slide 3 - Corrections are a normal part of investing. The S&P 500 is fresh off of a number of records, including longest time without a 3%

correction and it went 400 days without a 5% correction. On average, 5% corrections happen 3-4 times per year and 10% corrections happen

once per year.

• Slide 4 - This chart shows the year-over-year change of hourly earnings. Labor costs are the largest share of corporate input costs. Fast rising

labor costs could suggest mounting inflationary pressures, as producers try to pass through higher wage costs to consumers. The recent spike in

wages could suggest that the Fed has to raise rates quicker than expected.

• Slide 5 - The chart below shows analysts’ consensus projections for S&P 500 earnings per share for calendar years 2012 through 2018. The

average equity analyst tends to start each year with excessively rosy expectations for corporate earnings which are progressively tempered over

time. These downward revisions can clearly be seen in the chart. The anomaly in the upper right corner of the chart is this year – 2018. As one

can see, earnings estimates are trending up, not down. This typically bodes well for equities.

• Slide 6 – This chart shows a number of global economic indicators. If they are highlighted green, that means the indicator is improving. As one

can see, most of the global economy is performing well.

• Slide 7 - This chart shows the relative performance of stocks versus bonds globally based on the reading of the DSI Global Sentiment

Composite. The top-clip plots the ratio of stock total returns to bond total returns, with a rising line indicating stocks outperforming bonds and a

falling line indicating bonds outperforming. The recent correct has caused sentiment to fall from extreme optimism to extreme pessimism.

Generally, stocks outperform bonds in extreme pessimism levels.

• Slide 8 – Despite the correction, market breadth is still intact and at healthy levels. It would be a concern if this indicator dropped below 45.5

(bottom dashed line), which would mean trend is working against equities.

• Slide 9 - The top clip plots the global stock price index, which is a blend of the MSCI World Index price returns prior to 1988 and the MSCI ACWI

price returns thereafter. The bottom clip plots the percentage of Bear Watch indicators that have reached key bearish levels historically. As

shown in the table at the bottom of the chart, there have been eight cases since October of 1985 where the percentage of indicators have risen

above 40% for the first time in at least six consecutive months. The median drawdown over the next 12 months for all cases has been very high.

We will continue to watch this for more signs of trouble or a shift in strategy.