STONEHEARTH CAPITAL MANAGEMENT

RISK MANAGEMENTfor

LIFE’S TRANSITIONS

SCM Market UpdateNovember 1, 2014

• Where We Have Been

• Where We Are

• What This Tells us About the Future

NOISE! NOISE! NOISE!BUY BUY SELL

SELL

BEAR MARKET

CRASH

EBOLA

CHINA

CRASH

2008

BUY THE DIP

ST

RO

NG

ER

USD

Recent Pull Back

Historical Volatility

Asset Class Trailing 1 Year Return*

* Return as of 10/24/2014• Source Morningstar

THEN AND NOWCHARACTERISTIC MARCH 2000 OCTOBER 2007 SPETEMBER 2014

INDEX LEVEL 1,527 1,565 1,972

P/E RATIO FWD 25.6x 15.2x 15.2x

SHILLER P/E 43.22 27.32 25.49

DIVIDEND YIELD 1.1% 1.8% 1.9%

PRICE TO BOOK 5.06x 2.91x 2.73x

FED POLICY RATE 6.0% 4.0% 0.25%

10-YR TREASURY 6.2% 4.7% 2.5%

HOUSELHOLD DEBT SERVICE RATIO 12.09x 13.18x 9.91x

Source: Federal Reserve Bank of St. Louis/FRED

Sherman Sheet

Source: Sherman Sheet

SCM Risk Model

Nobody Knows Nothing!!!!!S&P500 Actual Year End

20131,848

Company NameS&P 500 Target Year End

2013Missed it by this

much

WELLS FARGO 1,390 32.95%UBS 1,425 29.68%

MORGAN STANLEY 1,434 28.87%DEUTSCHE BANK 1,500 23.20%

BARCLAYS 1,525 21.18%CREDIT SUISSE 1,550 19.23%

HSBC 1,560 18.46%JEFFERIES 1,565 18.08%

GOLDMAN SACHS 1,575 17.33%BMO CAPITAL 1,575 17.33%JP MORGAN 1,580 16.96%

OPPENHEIMER 1,585 16.59%BOFA MERRILL LYNCH 1,600 15.50%

CITIGROUP 1,615 14.43%

AVERAGE 1,534 20.45%MEDIAN 1,563 18.27%

Your Portfolio

13.00%

37.00%

15.00%

5.00%

10.00%

5.00%

15.00%

SCM MODERATE PORT-FOLIO

FIXED INCOME US EQUITYINTERNTATIONAL DEVELOPED EMERGING MARKETFRONTIER MARKET MANAGED FUTURESCOMMODITY TREND FOLLOWING

40.00%

45.00%

10.00%

5.00%

SCM MODERATE BENCHMARK

FIXED INCOME US EQUITYINTERNTATIONAL DEVELOPED EMERGING MARKET

SCM MODERATE ACTIVE WEIGHT vrs BENCHMARK

Why Managed Futures?

60/40 Portfolio 60%Sp500/40% Barclays Aggregate.

THANK YOU

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