June 30, 2019

The third quarter outlook calls for the middle of the yield curve to outperform the short end. In line with our expectations, we will slightly increase the duration of the fixed income portfolio. The outlook also calls for the fixed income component to underperform the equity component of the portfolio. Within the equity side, we look for the international stocks to underperform the domestic stocks. Domestically, we expected the small-cap stocks to underperform the mid-cap and large-cap stocks, and the mid- caps to outperform the large-cap stocks. In turn, we expect a slight style bias in favor of growth stocks. The expected outlook leads us to decrease the fixed income exposure of the portfolio. Collectively, we expect the international stocks to underperform the U.S. Thus, a decreased exposure to international equities favoring domestic stocks is warranted this quarter. Net the effect of the increased equity exposure combined with the reduced international exposure resulted in a slight decrease in the international exposure. Within the international group the process yielded a slight increase in the allocation to the developed Asia/Pacific, Emerging and Frontier market regions. Domestically, we increase exposure to the. mid and large-cap stocks and reduces the exposure to the small cap stocks.

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