2016 the Big Picture TM

26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15

Ensuing 10-yr ann. return: -0.7%

40 Ensuing 10-yr ann. return: -4.1% 40
30 S&P 500 Price-to-Earnings Ratio 30
Median: 17 Median: 17
10 10
Ensuing 10-yr ann. return: 12.1% Ensuing 10-yr ann. return: 18.5%
20% 20%

10%
Inflation Prime Rate 10%

0% 0%

-10% -10%

Dot Com collapse U.S. Stocks down 50%, U.S. Stocks

$12 Bull & Bear Markets in U.S. Stocks A Bull Market starts at the lowest point reached after the market has fallen by 20% or more, and ends when it reaches its next high. $12 Balanced Portfolio down 24% $4,696,671 9.8%
A Bear Market is a period over which the market falls by 20% or more from its previous high to its next low.
168 m A Recovery Period starts at the lowest point reached Iraq invaded
783% after the market has fallen by 20% or more, Growth Portfolio
17% and ends when it attains its previous high. $2,681,381 9.2%
44 m
$6 77 m $6
178%
32% 144% 61 m 9/11 Balanced Portfolio
30 m
15%
76%
109%
16%
$1,211,342 8.2%
$1,000,000 25%
181 months 155 m 153 m
TIME: Buy Stocks? No Way!
International Stocks
929% total return 845% 833%
17% annualized return 19% 19% $959,599 7.9%
$1 $1
33 months 6m 6m 19 m 21 m 3m 25 m 16 m
-84% total return -22% -22% -29% -43% -30% -44% -50% Dow 18,000

$0 $0
1920s 1930s 1940s 1950s 1960s 1970s 1980s 1990s 2000s 2010s U.S. downgraded to AA+ Income Portfolio
$303,516 6.6%
Business Week:
Alan Greenspan: Unqualifiedly bullish The Death of Equities
Downturns Euro zone crisis U.S. Stocks without
reinvested dividends $164,854
Proportion of 1-year rolling period returns below 0% and -10%, 1926 - 2015
U.S. Stocks down 43%,
$100,000 Below 0% Average Balanced Portfolio down 23%
Gulf War
Recessions to-date: 15 Bonds
U.S. Stocks 25.8% -14.3% $101,618 5.3%
Intl Stocks 32.1% -13.1%
Black Monday TIPS introduced
Balanced P. 20.9% -7.6%
First credit card launched
Below -10% Life expectancy in U.S.
U.S. Stocks 13.7% -22.7% Cold War ends M: 76 yrs, F: 81 yrs
Dow 500
Intl Stocks 15.0% -22.8%
T-Bills
Balanced P. 5.2% -18.5%
Korean War
S&L Crisis $27,834 3.8%
Inflation: 14.8%
Subprime crisis
Inflation: 19.7%
Inflation
Life expectancy in U.S.
M: 60 yrs, F: 64 yrs
$13,288 2.9%
Prime Rate: 20.5%
$10,000
Great Depression World War II

Compound Annual Returns

U.S. Stocks down 85%,
Risk
1-yr 3-yr 5-yr 10-yr 25-yr 50-yr All-time
Growth of Balanced Portfolio down 59%
U.S. Stocks 1.5% 15.1% 12.5% 7.4% 10.0% 9.8% 9.8% 20.0%

$1,000 Intl Stocks

Bonds
0.3%
1.1%
5.7%
0.8%
4.2%
4.2%
3.6%
5.0%
5.8%
6.7%
9.4%
7.3%
7.9%
5.3%
21.8%
8.1%
T-Bills 0.1% 0.1% 0.1% 1.3% 3.0% 5.5% 3.8% 3.5%
Oil crisis First index fund launched Inflation 0.7% 1.2% 1.6% 1.9% 2.3% 4.1% 2.9% 4.1%
Growth P. 0.8% 10.3% 9.4% 7.1% 9.3% 9.7% 9.2% 14.4%
Vietnam War Balanced P. 1.2% 8.9% 8.7% 6.8% 8.7% 8.9% 8.2% 11.4%
Income P. 1.0% 4.5% 5.8% 5.5% 7.2% 7.9% 6.6% 6.9%

Avg. dividend 5.5% 5.7% 4.9% 3.2% 4.0% 4.2% 2.4% 1.8%
yield by decade One-year returns (2015)

2.0% 4.0% 6.3% 2.7% 11.4% 0.4% 6.0% 2.8% 6.4% 6.1% 15.4% 12.8% 13.6% 8.0% 3.2% 6.6% 1.2% 1.1%
Compound -1.4% 9.1% 19.4% 7.8% 5.8% 17.6% 18.4% -0.7% 1.5%
annual returns 2.5% 0.6% -4.8% 0.4% 20.8% 2.2% 5.1% 4.3% 10.1% 6.8% 22.8% 10.0% 7.3% 5.3% 1.6% 3.0% 0.3% 0.1%
by decade 2.1% 6.4% 15.3% 6.7% 7.3% 17.5% 14.3% 2.7% 0.8%
3.0% -2.0% 4.1% 5.4% 5.8% 2.2% 4.5% 2.5% 6.5% 7.4% 13.7% 5.1% 10.2% 2.9% 4.8% 2.5% 1.0% 0.7%

Price per barrel of oil $3 $12 $37 $27 $23 $17 $27 $50 $71 $37
Price per oz. of gold $35 $36 $161 $615 $317 $384 $384 $279 $445 $1,225 $1,068
House Price Index 100 107 147 234 293 308 326 407 535 897 1,109 1,462 1,559 2,115 3,665 2,566 3,443

1925 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 2016
Recessions are marked in grey. Intl Stocks exclude U.S. Stocks. The Growth Portfolio is composed as follows: 55%U.S. Large Cap Stocks, 25%Bonds, 15%International Stocks, 5%U.S. Small Cap Stocks. The Balanced Portfolio is composed as follows: 55%U.S. Large Cap Stocks, 35%Bonds, 10%T-Bills. The Income Portfolio is composed as follows: 55%Bonds, 25%U.S. Large Cap Stocks, 20%T-Bills.
This chart shows the inferred growth of one thousand dollars invested on January 1, 1926. This chart is for illustrative purposes only; it does not constitute investment advice and must not be relied on as such. Assumes reinvestment of all income and no transaction costs or taxes. The portfolios shown are neither real, nor recommended. They were rebalanced each January. Risk is measured by the standard deviation (volatility) of annual returns. All returns
are compound annual returns unless otherwise indicated. An investment cannot be made directly in an index. Government bonds and Treasury bills are guaranteed by the full faith and credit of the United States government as to the timely payment of principal and interest, while stocks are not guaranteed and have been more volatile than the other asset classes shown. International stocks involve special risks such as fluctuations in currency, foreign
taxation, economic and political risks, liquidity risks, and differences in accounting and financial standards. Sources: U.S. Stocks: S&P 500 Total Return index, U.S. Small Cap Stocks: NYSE/NYSEMkt,NASDAQ Small Cap Index, Treasury Bills: CRSP 90-Day T-Bill ReturnsCenter for Research in Security Prices (CRSP). International Stocks: ex-U.S.A. Total Return Index, Bonds: USA 10-year Government Bond Total Return Index, exchange ratesGlobal
Financial Data, Inc. Inflation: Consumer Price IndexU.S. Bureau of Labor Statistics. Prime Interest RateThe Federal Reserve. House Price IndexShiller, R. RecessionsNational Bureau of Economic Research. S&P 500 Price-to-Earnings Ratio; S&P 500 Dividend YieldShiller, R. Gold pricesKitco. Oil pricesInflationdata.com. The reproduction of part or all of this publication without prior written consent from Investments Illustrated Inc. is
prohibited. The Big Picture, and the Investments Illustrated name and logo, are registered trademarks. Past performance is not an indicator of future performance. Diversification neither assures a profit nor eliminates the risk of experiencing investment losses. 2016 Investments Illustrated, Inc. All Rights Reserved.