Today’s market dynamics may challenge the performance of traditional investments going forward. The current economic landscape of low income and low growth is defined by structural forces that have been years in the making.

Low yields

Low economic growth tends to keep inflation in check, which puts downward pressure on interest rates. Interest rates peaked in the high inflation days of the 1980s, and today’s lower rates mean investors have fewer options to meet their income needs.

US 10 year treasury yield Source: Macrobond. U.S. 10-YEAR TREASURY YIELD 0% 2% 4% 6% 8% 10% 12% 14% 16% January 1960 September 2017

Economic indicators

We expect interest rates to remain low for some time, and to monitor markets going forward, we are watching:

Slowing growth

GDP growth has declined over the last 50 years, caused primarily by slowing labor force growth and slowing productivity. With few signs to suggest that this trend will reverse course in the near term, we believe investors may need to prepare their portfolios for a lower-for-longer growth environment.

Real gdp growth values Sources: Bureau of Economic Analysis, FS Investments. -6% -4% -2% 0% 2% 4% 6% GROWTH OF GDP Real GDP growth 1985 1991 1997 2003 2009 2015

Economic indicators

To anticipate shifts in long-run growth trends, we are monitoring the following:

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