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

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

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

Presented by Matthew A. Parsons525 N 9th St, Cottage Grove, Oregon

(541) 942-7300

Second Quarter 2012Market Overview

Economic Summary: Second Quarter 2012

• Milestones– The Federal Reserve (the Fed) extends Operation Twist– Spanish borrowing losses reach unsustainable levels– U.S. Supreme Court lets most of health care overhaul go forward– J.P. Morgan experiences sizeable trading losses, estimated at $4.4 billion– China unexpectedly cuts interest rates to revive expansion– Romney assured GOP presidential nomination after Texas primary win– Facebook IPO lands flat– Rumors of centralized budget authority surface in Europe– Bernanke sends message to Obama, Congress about “fiscal cliff”– Socialists win election in France– Obama proposes extension of tax cuts for incomes less than $250,000

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. All data as of 6/30/12 unless otherwise noted.

S&P 500 Index and Dow Jones Industrial Average: Second Quarter 2012

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

JUN12

MAYAPRMARFEBJANDECNOVOCTSEPAUGJULSources: Dow Jones, Wall Street Journal /Haver Analytics

13500

13000

12500

12000

11500

11000

10500

1425

1350

1275

1200

1125

1050

Economic Themes

• Housing• Credit and banking• Fixed income• Employment• Business and manufacturing activity• Inflation• Consumer behavior

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.

Housing: Prices and Supply

CoreLogic National House Price Index% Change - Year to Year NSA, Jan.2000=100

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

11100908070605040302Source: Haver Analytics

22.5

15.0

7.5

0.0

-7.5

-15.0

-22.5

3.5

3.0

2.5

2.0

1.5

1.0

0.5

Housing: Affordability

Housing Starts YoY

100500959085Sources: Census Bureau /Haver Analytics

3

2

1

0

-1

-2

120

80

40

0

-40

-80

Housing: Price-to-Rent Ratio

Price-to-rent ratio

SA

100500959085Source: Haver Analytics

112500

105000

97500

90000

82500

75000

67500

112500

105000

97500

90000

82500

75000

67500

Credit and Banking

US Bankcard Credit Cards: 1-Month Delinquency Rate%

Homes Foreclosed (%)

11100908070605040302Source: Haver Analytics

6.75

6.00

5.25

4.50

3.75

3.00

2.25

12

10

8

6

4

2

0

Credit and Banking continued

Consumer Credit Outstanding

Change - Period to Period EOP, SA, Bil.$

11100908070605040302Source: Federal Reserve Board /Haver Analytics

22.5

15.0

7.5

0.0

-7.5

-15.0

-22.5

22.5

15.0

7.5

0.0

-7.5

-15.0

-22.5

Fixed Income

Past performance is no guarantee of future results.

High Yield Spread

BOA ML HY Master - 10-year US Treasury

12111009080706050403Source: Haver Analytics

24

20

16

12

8

4

0

24

20

16

12

8

4

0

Fixed Income continued

Past performance is no guarantee of future results.

Corporate Spread

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

12111009080706050403Source: Haver Analytics

6

5

4

3

2

1

6

5

4

3

2

1

Fixed Income continued

Past performance is no guarantee of future results.

Muni Master Spread

1211100908070605040302Source: Haver Analytics

3.00

2.25

1.50

0.75

0.00

-0.75

-1.50

3.00

2.25

1.50

0.75

0.00

-0.75

-1.50

Employment

Source: Commonwealth Asset Management/Bloomberg

Employment continued

Large Firm Payrolls3-month Change SA, Thous

Small Firm Payrolls3-month Change SA, Thous

12111009Sources: ADP/Macroeconomic Advisers /Haver Analytics

500

250

0

-250

-500

-750

-1000

500

250

0

-250

-500

-750

-1000

Employment continued

Goods-producing Industries3-month Change SA, Thous

Service-producing Industries3-month Change SA, Thous

1211100908Sources: Bureau of Labor Statistics /Haver Analytics

800

400

0

-400

-800

-1200

-1600

800

400

0

-400

-800

-1200

-1600

ISM Mfg: PMI Composite Index (SA, 50+ = Econ Expand)

121110090807060504030201009998Sources: Institute for Supply Management /Haver Analytics

67.5

60.0

52.5

45.0

37.5

30.0

67.5

60.0

52.5

45.0

37.5

30.0

Business and Manufacturing Activity

Contraction

Slowing

ISM Nonmanufacturing: NMI Composite Index (SA, 50+=Increasing)

121110090807060504030201009998Sources: Institute for Supply Management /Haver Analytics

65

60

55

50

45

40

35

65

60

55

50

45

40

35

Business and Manufacturing Activity continued

Contraction

Slowing

Business and Manufacturing Activity continued

Composite Index of 10 Leading Indicators

% Change - Year to Year 2004=100

1005009590858075706560Source: The Conference Board /Haver Analytics

15.0

7.5

0.0

-7.5

-15.0

-22.5

15.0

7.5

0.0

-7.5

-15.0

-22.5

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

Labor Index(Proprietary)% Change - Year to Year

100500959085Source: Haver Analytics

16

12

8

4

0

-4

-8

16

12

8

4

0

-4

-8

Business and Manufacturing Activity continued

Inflation

CPI-U: All Items% Change - Year to Year SA, 1982-84=100

CPI-U: All Items Less Food and Energy% Change - Year to Year SA, 1982-84=100

1110090807060504030201009998Sources: Bureau of Labor Statistics /Haver Analytics

6

4

2

0

-2

6

4

2

0

-2

Consumer Behavior

Domestic Auto Sales as % of Total

121110090807060504030201Source: Haver Analytics

88

84

80

76

72

68

88

84

80

76

72

68

Conclusions

• Payrolls:– Private payrolls slowed a bit– Service-producing and small firms led increase

• U.S. economy slowed a bit, though performing relatively well• Consumer most likely approaching end of deleveraging phase• Housing appears to have found a footing; prices increasing• Service-producing sectors outpacing goods-producing• Inflation much less of a concern at the moment• Housing and vehicle sales may create unexpected tailwind

Looking Forward . . .

• Key themes to monitor– Employment improvement necessary for sustained recovery– Earnings season for Q2 (beat or miss estimates?)– European debt crisis– Manufacturing: Will it continue to decline? – Direction of ISM indices over coming months– Direction of inflation: Will a further decline warrant QE3?– Can payroll growth remain positive despite global slowdown?

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 US 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.