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Commonwealth Financial Network® does not provide legal or tax advice. You should consult a legal or tax professional regarding your individual situation.

Securities offered through Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser.

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Second Quarter 2013Market Overview

Economic Summary: Second Quarter 2013

• Milestones– Equity markets hit-all time high (again)– Bernanke’s “tapering” comments send tremors through all markets– Germany drops austerity and embraces stimulus– Japan turns to U.S. shale gas to cut soaring fuel costs– Obama fires IRS chief over targeting conservative and some liberal groups– Apple sells $17 billion in record bond deal– Brazilian social unrest emerges– Gold falls to three-year low– Housing recovery appears strong despite rise in rates– China growth continues to decline

Certain sections of this commentary contain forward-looking statements based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Past performance is not indicative of future results.

Economic Themes

• Equity/fixed income• Housing• Credit and banking• Employment• Consumer behavior• Business and manufacturing activity

Certain sections of this commentary contain forward-looking statements that are based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Past performance is not indicative of future results.

S&P 500 Index and Dow Jones Industrial Average: Q2 2013

Indices are unmanaged and cannot be invested in directly. Past performance is no guarantee of future results.

Stock Price Averages: Dow Jones 30 Industrials, NYSE

Standard & Poor's 500 Stock Price Index

OCTSEPAUGJULJUN11

MAYAPRMARFEBJANDECNOVSources: Dow Jones, Wall Street Journal /Haver Analytics

13000

12500

12000

11500

11000

10500

1425

1350

1275

1200

1125

1050

Standard & Poor's 500 Stock Price Index

Stock Price Averages: Dow Jones 30 Industrials, NYSE

JUN13

MAYAPRMARFEBJANDECNOVOCTSEPAUGJULSources: Wall Street Journal, Dow Jones /Haver Analytics

1700

1600

1500

1400

1300

15500

15000

14500

14000

13500

13000

12500

r = 0.99

Q2 2013: Equity Returns by Style

Indices are unmanaged and cannot be invested in directly. Past performance is no guarantee of future results.

Value Blend Growth

Large 3.2 2.65 2.06

Mid 1.65 2.21 2.87

Small 2.47 3.08 3.74

Large Growth

Large Blend

Large Value

Mid Growth

Mid Blend

Mid Value

Small Growth

Small Blend

Small Value

14.56 14.38 14.60

17.10 16.33 15.83

20.19 19.34 18.67

3-year volatility in returns

Source: Commonwealth Asset Management/Morningstar Direct

Q2 2013: Fixed Income Returns by Style

Indices are unmanaged and cannot be invested in directly. Past performance is no guarantee of future results.

2009 2010 2011 2012 Q2

High-Yield57.51

High-Yield15.19

U.S. Treasury

9.81

Emerging Markets18.62

High-Yield–1.35

Emerging Markets28.78

Emerging Markets12.24

Corporates8.15

High-Yield15.59

Mortgage–1.92

Corporates18.68

Corporates9.00

Emerging Markets

8.02

Foreign Sovereign

13.97

US Treasury

–1.92

Foreign Sovereign

11.64

U.S. Core6.54

U.S. Core7.84

Corporates9.82

US Core–2.32

U.S. Core5.93

U.S. Treasury

5.87

Mortgage6.14

U.S. Core4.21

Corporates–3.31

Mortgage5.76

Mortgage5.67

Foreign Sovereign

4.78

Mortgage2.59

Foreign Sovereign

–4.09

U.S. Treasury

–3.57

Foreign Sovereign

4.05

High-Yield4.38

U.S. Treasury

1.99

Emerging Markets–6.03

Source: Commonwealth Asset Management/Morningstar Direct

1.95

2.73

3.744.36

6.536.87

7.613-year volatility in returns

Treasury Yields

10-Year Treasury Note Yield at Constant Maturity

Avg, % p.a.

JUN13

MAYAPRMARFEBJANDECNOVOCTSEPAUGJULSource: Federal Reserve Board /Haver Analytics

2.6

2.4

2.2

2.0

1.8

1.6

1.4

2.6

2.4

2.2

2.0

1.8

1.6

1.4

Yield up = Price down

Net Flows into Bank-Loan Funds

Fixed Income

Past performance is no guarantee of future results.

High Yield Spread

BOA ML HY Master - 10-year US Treasury

131211Source: Haver Analytics

9

8

7

6

5

4

3

9

8

7

6

5

4

3

Fixed Income continued

Past performance is no guarantee of future results.

Corporate Spread

(ML Corporate Master) - (10-year US Treasury)

13121110090807060504Source: Haver Analytics

6

5

4

3

2

1

0

6

5

4

3

2

1

0

Fixed Income continued

Past performance is no guarantee of future results.

Announcement

Corporate Spread by Quality

(AAA Corporate) - (BB Corporate)

1312111009Source: Haver Analytics

12

10

8

6

4

2

0

12

10

8

6

4

2

0

Housing: Prices and Supply

CoreLogic National House Price Index% Change - Year to Year NSA, Jan-00=100

1-family homes sold/1-family homes for sale

141312111009080706050403020100Source: Haver Analytics

20

10

0

-10

-20

3.5

3.0

2.5

2.0

1.5

1.0

0.5

r = 0.87

Credit and Banking

TED Spread

(3-mo LIBOR minus 3-mo t-bill)

1312111009Source: Haver Analytics

5

4

3

2

1

0

5

4

3

2

1

0

Credit and Banking continued

Velocity of Money: Ratio of Nominal GDP to Money Supply M2% Change - Year to Year Ratio

CPI-U: All Items, 1982-84=100Y/Y %Change

10050095Sources: MA/FRB/H, BLS /Haver

8

4

0

-4

-8

-12

-16

6

4

2

0

-2

-4

r = 0.46

Credit and Banking continued

US Bankcard Credit Cards: 90+ Day Delinquency Rate%

Homes Foreclosed: USANSA, per 10,000 Homes

13121110090807060504Sources: Standard & Poor's, Zillow.com /Haver Analytics

3.2

2.8

2.4

2.0

1.6

1.2

0.8

12

10

8

6

4

2

0

Employment

Source: Commonwealth Asset Management/Bloomberg

Expanding

Employment continued

Unempl+Margin Attach+Part Time Econ Reasons/CLF + Margin Attach

SA,%

1312111009080706050403Source: Bureau of Labor Statistics /Haver Analytics

17.5

15.0

12.5

10.0

7.5

17.5

15.0

12.5

10.0

7.5

Employment continued

Average Weekly Hours: Total Private Industries

SA, Hrs

13121110090807Source: Bureau of Labor Statistics /Haver Analytics

34.8

34.6

34.4

34.2

34.0

33.8

34.8

34.6

34.4

34.2

34.0

33.8

Business and Manufacturing Activity

ISM Mfg: PMI Composite IndexSA, 50+ = Econ Expand

Real Gross Domestic ProductSAAR, %Chg

10050095Sources: ISM, BEA /Haver

67.5

60.0

52.5

45.0

37.5

30.0

8

4

0

-4

-8

-12

Business and Manufacturing Activity continued

ISM Nonmanufacturing: NMI Composite IndexSA, 50+=Increasing

Gross Domestic Product% Change - Annual Rate SAAR, Bil.$

1312111009080706050403Sources: ISM, BEA /Haver

65

60

55

50

45

40

35

10

5

0

-5

-10

Business and Manufacturing Activity continued

Capacity Utilization: Industry

SA, Percent of Capacity

12111009080706050403Source: Federal Reserve Board /Haver Analytics

84

80

76

72

68

64

84

80

76

72

68

64

Gross Domestic Product% Change - Year to Year SAAR, Bil.$

Commonwealth Labor Index% Change - Year to Year

1005009590Source: Haver Analytics

10.0

7.5

5.0

2.5

0.0

-2.5

-5.0

12

8

4

0

-4

-8

Business and Manufacturing Activity continued

Conclusions

• Job growth was reasonable in Q2; unemployment remained at 7.6 percent, but payroll growth was strong.

• Inflation is not a large concern, for now.• ISM indices showed strong movements over the quarter.• Treasury rates moved aggressively higher across the curve.• Dividend sectors, especially utilities, remain relatively

expensive, despite a sell-off with the rise in rates. • The housing recovery seems to be fully under way.• GDP growth could surprise to the upside.

Looking Forward . . .

• Key themes to monitor– Employment improvement necessary for sustained recovery– Earnings season for Q2—beat or miss estimates?– Can housing continue its upward trend?– Will Europe emerge from recession?– Ongoing debt ceiling debates– Emerging markets manufacturing in Q2– Fed “tapering” and direction of Treasury rates

Disclosure

Investing involves risks, including loss of principal amount invested due to market fluctuations. All indices are unmanaged, and investors cannot invest directly in an index. Past performance is not indicative of future results. The S&P 500 Index is a broad-based measurement of changes in stock market conditions based on the average performance of 500 widely held common stocks. The Dow Jones Industrial Average is a price-weighted average of 30 actively traded blue-chip stocks. The Bank of America Merrill Lynch U.S. Corporate Index tracks the performance of U.S. dollar-denominated investment-grade corporate debt publicly issued in the U.S. domestic market. The Merrill Lynch Municipal Master Index tracks the performance of U.S. dollar-denominated investment-grade tax-exempt debt publicly issued by U.S. states and territories, and their political subdivisions, in the U.S. domestic market. The Bank of America/Merrill Lynch High-Yield Master II Index tracks the performance of U.S. dollar-denominated below-investment-grade corporate debt publicly issued in the U.S. domestic market. International investing involves special risks such as currency fluctuation and political instability. The commodities industries can be significantly affected by commodity prices, world events, import controls, worldwide competition, government regulations, and economic conditions.