From: "NI, Anton C" To: "Pil, Anton C" Subject: GIO Market Alert - March 2015 Date: Fri, 13 Mar 2015 14:08:25 +0000 Attachments: GIO_Market_Alert_-_March_2015.pdf Inline-Images: image001.png 0313-0217 GIO banner for word & ennailjpg GIO Market Alert March 2015 increasingly the market appears to be coming around to our view that not only is the Fed likely to hike in 2015 but the timing of that hike is likely to be in the next 3-6 months (i.e. June or September). While we view this as a positive sign and affirmation that the US economy is solidly expanding, equity markets can be choppy in the months around the beginning of a tightening cycle as markets digest the news. Looking back 30 years, the S&P 500 has typically been range bound in the months before the first Fed hike with peak-to-trough drawdowns ranging from 5.10%. Furthermore, our views on continued US dollar strength and oil weakness as it re- tests recent lows could drive additional concerns on corporate earnings. With this in mind, we think it is prudent to take profits on some of our US equity exposure which has done well over the last 3 years to take down risk in the US. We will look for the right opportunity to reinvest this dry powder when market volatility increases. WHERE TO TAKE PROFITS Large Cap Outperformers There are many companies that have outperformed in the last 6-9 months and as a result now have a smaller valuation cushion. We would take profits on those outperformers, particularly those up over 10% in 2015 in the large cap technology and pharma sectors that lack catalysts in the next 3-6 months. We expect to buy them back on a —1.0% pullback. Payments Innovation Since the announcement of Apple Pay in September 2014, the stocks we highlighted as beneficiaries of mobile payments innovation are up 14% due to strong results and underlying trends. While we still like many of the companies longer term, the credit card networks and NFC chip makers may become more volati