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The first half of 2019 delivered positive results for U.S. equities and for Tealwood portfolios as we maintained our Quality at a Reasonable Price discipline. While we believe this odds-defying economic expansion will eventually turn out to be finite, the data points we analyze to assess the probability of ongoing expansion continue to be constructive.

In this late stage of the economic expansion, we consider the role of risk management to be as significant as a focus on the upside. This balanced approach helps to keep us out of the bubble under construction. The ongoing rigor of managing for cyclical risk and applying our Quality at a Reasonable Price discipline engages critical thinking and guards against complacency and inertia. One-dimensional thinking that only contemplates reward is a risk unto itself.

As part of risk management, we have already made late cycle adjustments to sector allocations, shifting assets from more economically sensitive to less economically sensitive sectors. When the data signals, we are ready to make the shift to a more defensive posture.

We are confident our high-quality companies will continue to contribute to enhanced risk management, strategic
clarity, and compounding value. Here are primary elements that contribute to today’s necessary balanced approach:

On the fixed income side, the expectation that the Fed will cut interest rates has sparked a bond market rally and
driven rates down. We utilize Fixed Income as a defensive asset class and do not intend to extend maturities in search of higher yields. Our bond portfolios have delivered positive results year-to-date and we affirm our strategy of using this asset class to manage for risk in asset allocation.

Here is where we come out
Stay fully invested in quality companies at reasonable prices. If you are made anxious by marketplace acrophobia (fear of heights) or a sense of growing ambiguity, let’s have an asset allocation conversation to address risk management and equity exposure. This is the essence of late cycle strategy.