4Q 2015 Market Commentary

4th Quarter 2015
Market Commentary
The worlds fixed income markets spent most of 2015 anticipating the Feds
first interest rate hike in 9 years. The fact that it did not occur until
December reflects the inconclusive, even conflicting signs regarding the US
economy. Despite increased volatility across most asset classes, municipal
bonds generated positive performance again in 2015.
Backdrop to the Year
The Federal Reserve rationalized initiating its normalization process with

an optimistic prognosis on the US economy. Job creation was strong in 2015.
Month after month, the numbers were positive, and the unemployment rate
declined steadily from 5.6% in January to 5.0% in December. But meaningful
wage growth failed to materialize, and evidence of price pressures is muted.
Commodity prices especially oil - plummeted in 2015, and most measures
of inflation remain below the Feds 2% target. An anticipated stimulus from
sharply lower energy prices failed to materialize in any large measure.
Consumers banked the savings, or paid down some of their borrowings.
Overseas, concerns about Greece and the continued viability of the
Eurozone, which occupied headlines for most of the 1st half of 2015, gave
way to fear of spillover effects from Chinas economic slowing. Nevertheless,
the US economy grew. For the first 3 quarters of 2015, the growth rate
averaged 2.1%. While somewhat low by historical standards, this was
markedly better performance than that of the rest of the developed world.
However, as a new year opens it is clear that the markets retain some
lingering concerns about the US economys resiliency and continued
recovery.
The Bond Markets
Municipal bond yields ended the year close to where they started it. Longer
maturity bond yields closed lower by several basis points, while shorter yields
were higher in sympathy with the Feds policy change, resulting in a flatter
curve. But for the most part, municipal bond investors were able to collect
the coupon and ride down a fairly steep yield curve.
This contrasts with the yields on US Treasury securities, which increased
modestly along most of the yield curve. However, the increase was muted
enough to still allow for positive returns in this sector.
Positive economic growth and good job creation numbers helped bolster the
credit quality of municipal bonds, as income and sales tax receipt growth
contributed to the replenishment of their general fund balances, which had
been drawn down sharply in the recession. There were significantly more
credit upgrades of municipal bonds than downgrades in 2015.
Exhibit 1: Market Returns
4Q15
1.50%
-0.04%
-0.01%
0.66%
1.27%
1.60%
2.12%
0.79%
1.06%
1.29%
1.99%
2.36%
1.78%
7.04%
BC Muni Index
1 Year
3 Year
5 Year
7 Year
10 Year
20 Year
1-10 Year
AAA
AA
A
BBB
Muni High Yield
S&P 500
2015
3.30%
0.61%
1.18%
2.43%
3.26%
3.76%
3.93%
2.45%
2.73%
3.16%
3.71%
4.25%
1.81%
1.38%
Sources: Barclays (BC), Bloomberg 12/31/15

Past performance is not a guarantee of
future results. Inherent in any investment
is the potential for loss.
Exhibit 2: Flattening AAA

Municipal Yield Curve
2.5
2.0
12/31/15
1.5
1.0
9/30/15
0.5
0.0
1
11
13
15
13
15
Maturity (Years)
Source: Thomson
Exhibit 3: Increasing US
Treasury Yields
3.0
2.5
12/31/15
2.0
1.5
1.0
9/30/15
0.5
0.0
1
11
Maturity (Years)
Source: Bloomberg
Not all bond related news was good news. Puerto Ricos excessive debt
burden finally caught up with it and the Commonwealth was forced to
default on some of its appropriation debt in August. It is still struggling with
ways to avoid default on its general obligation bonds. Samson has not and
does not purchase Puerto Rico debt for our clients, with the exception of
pre-refunded bonds.
Looking Forward into the New Year
As we enter 2016, the economic data does not argue strongly for either a
meaningful uptick in growth or a significant slowing. It is likely this lack of
clarity contributed to the increased volatility in the stock and bond markets
in the second half of 2015, which has continued into the new year.
Greece, Iran, Puerto Ricos default, and Europes refugee influx all
commanded considerable attention in 2015, but it was Chinas slowing
growth and the lack of momentum in US growth that impacted the stock
and currency markets the most. Stock prices rocked around significantly, and
the flight to quality helped underpin bond prices.
While the concerns about China will continue this year other factors will also
compete for attention. In the US, 2016 is a presidential election year. In the
Middle East, a newly rehabilitated Iran and an anxious Saudi Arabia may
extend their proxy disputes, further upsetting the region. The refugee
situation will continue to make demands on Europe and the rest of the world
in one form or another. Greece may again become a headline as it struggles
to address the still-open requirements of the 3 bailouts. Further, elections in
the southern Eurozone (Portugal, Spain, and Greece) have reduced the
influence of centrist parties in favor of left of center parties that are less
receptive to Brussels demands for austerity. In the northern Eurozone, the
appeal of right wing parties has increased, as has the possibility of a UK vote
on a Brexit occurring as early as 2016. All of these and probably more will
weigh on the markets.
Exhibit 4: Municipal Issuance ($B)

400
350
300
Combined
250
Refunding
200
150
100
New Money
50
0
2013
2014
2015
Source: Bond Buyer
Exhibit 5: Municipal Fund Flows

(4 Week Moving Avg $MM)
1,500
1,000
500
0
-500
-1,000
Dec-14
Jan-15
Feb-15
Mar-15
Apr-15
May-15
Jun-15
Jul-15
Aug-15
Sep-15
Oct-15
Nov-15
Dec-15
Municipal bond issuance was higher in 2015 than in the previous 2 years, but
is still only at pre-crisis levels, at best. Demand for municipals was strong a
evidenced by net positive inflow into municipal bond mutual funds. All of
which allowed us to position portfolios with modestly longer than
benchmark duration targets, which helped improve total return.
Source: LIPPER
In an environment where economic growth is steady, but lackluster, where

the salubrious effects of continued monetary accommodation seem to be
waning, where corporate revenues are flat-lining, and where political and
geo-political uncertainty will all likely contribute to increased market
volatility, municipal bonds continue to offer safe haven advantages along
with improving credit quality.
Samson Capital Advisors 4th Quarter 2015 Market Commentary
Past performance is not a guarantee of future results. Inherent in any investment is the potential for loss.
This presentation is for informational purposes and should not be considered a solicitation to buy, or an offer to sell, a
security.
Certain information contained in this document may constitute forward-looking statements, which can be identified by the
use of forward-looking terminology such as may, will, should, expect, anticipate, project, estimate, intend
continue, or believe or the negatives thereof or other variations thereon or comparable terminology. Due to various
risks and uncertainties, actual events or results or the actual performance of any strategy or market sector may differ
materially from those reflected or contemplated in such forward- looking statements.
Statements regarding current conditions, trends or expectations in connection with the financial markets or the global
economy are based on subjective viewpoints and may be incorrect.
This document contains information that has been provided by a number of third party sources not affiliated with Fiera
Capital Inc. that, which Fiera Capital Inc. believes to be reliable, but for which Fiera Capital Inc. makes no representation
regarding its accuracy or completeness.
Charts, tables and graphs contained in this document are not intended to be used to assist the reader in determining which
securities to buy or sell or when to buy or sell securities.
Allocations presented herein are as of the date noted and subject to change.
Index Definitions:
The Barclays Municipal Bond Index is a rules-based and market value weighted index engineered for the long-term taxexempt bond market. To be included in the index, bonds must be rated investment-grade (Baa3/BBB- or higher) by at
least two of the following ratings agencies: Moodys, S&P, Fitch. If only two of the three agencies rate the security, the
lower rating is used to determine index eligibility. If only one of the three agencies rates a security, the rating must be
investment-grade. They must have an outstanding par value of at least $7 million and be issued as part of transaction
of at least $75 million. The bonds must be fixed rate, have a double date after December 31, 1990, and must be at
least one year from maturity date. Remarketed issues, taxable municipal bonds, bonds with floating rates, and
derivatives, are excluded from the benchmark.
-
Subindices include: 1 Year (1-2 year maturities), 3 Year (2-4 year maturities), 5 Year (4-6 year maturities), 7 Year
(6-8 year maturities), 10 Year (8-12 year maturities), 15 Year (12-17 year maturities), 20 Year (17-22 year
maturities), 1-10 Year (1-12 year maturities).
The Barclays US Municipal High Yield Index measures the non-investment grade and non-rated US dollar-denominated,
fixed-rate, tax exempt bond market within the 50 United States and four other qualifying regions (Washington DC,
Puerto Rico, Guam and the Virgin Islands). The index allows state and local general obligation, revenue, insured, and
pre-refunded bonds, however, historically the index has been comprised of mostly revenue bonds. The US Municipal
High Yield Index is a stand-alone index with no crossover into other Barclays taxable indices, such as the US High Yield
Index. Index history is available through October 1, 1995.
The S&P 500, or the Standard & Poor's 500, is an American stock market index based on the market capitalizations of
500 large companies having common stock listed on the NYSE or NASDAQ.
Samson Capital Advisors 4th Quarter 2015 Market Commentary

4Q 2015 Market Commentary

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4th Quarter 2015

The Federal Reserve rationalized initiating its normalization process with

Exhibit 1: Market Returns

Sources: Barclays (BC), Bloomberg 12/31/15

Exhibit 2: Flattening AAA

Exhibit 4: Municipal Issuance ($B)

Source: Bond Buyer

Exhibit 5: Municipal Fund Flows

In an environment where economic growth is steady, but lackluster, where

Samson Capital Advisors 4th Quarter 2015 Market Commentary

Samson Capital Advisors 4th Quarter 2015 Market Commentary

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