First Quarter 2015

DEAR CLIENTS & FRIENDS;

Despite a turbulent start to the year, both the U.S. and International stock markets ended the first quarter in
positive territory. The U.S. stock market rose 2% in the quarter, representing the eleventh consecutive quarterly
gain, while International equites rebounded from a weak second half of 2014, rising 4%.
The U.S. fixed income market also posted positive results in the quarter with the Barclays aggregate bond index
rising 1%. Bonds continue to benefit from falling U.S. treasury rates as the 10-year declined from 2.17% at the
beginning of the quarter to 1.93% at the end.
Commodities were a drag on portfolio performance with the Dow Jones-UBS Commodity index falling 7% in the
first quarter. This was driven primarily by an 11% plunge in crude oil (now down 56% from its peak last June)
coupled with 5% declines in both corn and soybeans. Gold prices remained relatively unchanged in the quarter
while Silver was up 6%.
The first quarter was a busy one for us at Wisco. We hosted a number of year-end client meetings over the
last few months to discuss 2014 performance and to review objectives for 2015. Please feel free to contact us
anytime if you would like to discuss your investment strategy, targeted risk level, or performance report, or if
you would like us to work on a personalized financial plan for you. Also, dont forget that the last day to make
your 2014 IRA contribution is right around the corner (tax day).
As a reminder, we are always appreciative of opportunities to talk to your organizations and companies about
investment-related topics. This last quarter, we were fortunate to have had the opportunity to present to PLATO
at UW-Madison Continuing Studies about the investment industry and our approach at Wisco. Also as spring
approaches, we are excited to again be sponsoring the Logans Heart & Smiles Golf Outing and the 2015 Festa
Italia.
At Wisco, we believe our approach of designing well-diversified, low-cost investment portfolios is the best way
to produce favorable results over time. We would like to thank you for providing us with the opportunity to work
with you as your investment adviser. We appreciate
your business!
Sincerely,

The Wisco Team

Investment Advisors:

Stephen Share sshare@wiscoinvest.com Greg Schroeder gschroeder@wiscoinvest.com

First Quarter 2015

Wisco Investment Management

Wisco model portfolios are constructed using five different asset classes; Domestic Equity, International Equity,
Domestic Fixed Income, Alternative Investments and Money Market. Our current model portfolio asset class
allocations are as follows:

WISCO MODEL PORTFOLIOS

Conservative

Domestic Equity
International Equity
Domestic Fixed Income
Alternative Investments
Money Market
Total

Balanced

Balanced Growth

Growth

Aggressive

33%
47%
53%
60%
65%
5%
5%
13%
22%
23%
42%
31%
17%
0%
0%
10%
10%
12%
14%
10%
10%
7%
5%
4%
2%
100% 100% 100% 100% 100%

Target Volatility* 6% 8% 10% 12% 14%

*Target Volatility is our estimate for the annual standard deviation of portfolio returns.
Source: Wisco Investment Management LLC

First Quarter 2015 Market Review

DOMESTIC EQUITY
35%

33%

30%
25%
20%

17%

16%

15%

Quarterly Returns

13%

10%
5%

5%

5%
0%

2%
1Q15

4Q14

3Q14

2Q14

1Q14

2014

2013

2012

2011

2010

0%

2%

1%

Source: Dow Jones U.S. Broad Stock Market Index and Wisco.

The domestic equity market had another positive

quarter returning 2% in 1Q15. In the quarter,
mid cap (6%) and small cap (5%) posted stronger
performance than large caps (up 1.5%). The S&P
500, closed the quarter at 2068 off the all-time high
of 2117 reached March 2. S&P 500 3Q14 earnings
grew 6% y/y, as stronger consumer performance
more than offset headwinds from a stronger dollar
and falling Energy company earnings. Going forward,
we expect mid-single

digit earnings growth in 2015. We feel economic

activity could pick up as consumers start to see
more discretionary dollars because of lower gas
prices and an improving job market. Two factors
that could slow earnings growth are a strong
dollar and tighter monetary policy. The Federal
Reserve could start increasing rates as early
as June, which could be a catalyst to further
strengthening of the dollar against other major
currencies as most other economies have easier
monetary policies than the U.S.
We continue to have a positive outlook for the
domestic market and have exposure to the U.S.
equity market in all our model portfolios. On a
valuation basis, the S&P 500 is trading at a P/E of
16.8x 2015 consensus operating earnings which is
higher than average. That said, we think this higher
valuation is justified based on our expectation for
accelerating GDP growth in 2015. We expect a
positive return for the domestic stock market in
2015 albeit the returns may not be as strong as
they have been the past three years.

INTERNATIONAL EQUITY
20%
15%
10%

17%
11%

DOMESTIC FIXED INCOME

10%

14%

Quarterly Returns

5%

5%

1%

0%

-3%

-5%

-5%

-10%

8%
7%

6%

6%

Quarterly Returns

4%

3%

2% 2%

2%

-3%

-2%

1Q15

4Q14

3Q14

2Q14

1Q14

2014

2013

2012

While one quarter is not a trend, we are encouraged

that Draghis monetary easing resulted in a modest
acceleration in Europes GDP. Therefore, we
continue to hold international equities in all our
model portfolios and prefer developed markets
over emerging markets.

2011

International equity markets recovered in 1Q15

posting a 4% return. In Europe, the STOXX 50
increased 5% this quarter as a quantitative easing
program appears to have helped equities. Most
major European markets performed well with
Denmark (up 13%), Hungary (up 11%) and Germany
(up 8%) among the strongest performers. These
gains were partially offset by another big decline
in Greeces Athex Composite (down 16%) as
the country continues to struggle with the EUs
austerity demands. In Asia, most major markets
posted a strong return with Japans Nikkei 225
increasing 11% in the quarter. The FTSE Emerging
Market Index was also up 2% in 1Q15. The Shanghai
composite was up 16% in 1Q15 and Russias
RTSI index (up 11%) recovered some lost ground.
However, this strength was partially offset by
another poor quarter in Brazils IBOVESPA
which declined 15%.

1%

-2%
2010

1Q15

4Q14

3Q14

2Q14

1Q14

2014

2013

2012

2011

2010

Source: MSCI ACWI ex USA and Wisco

-4%

2%
0%

0%

-14%

-15%
-20%

4%

8%

Source: Barclays Capital U.S. Aggregate Bond Index and Wisco.

The Barclays Capital U.S. Aggregate Bond Index

returned 1% in the 1Q15, as the 10-year treasury
yield started the quarter at 2.17% and ended 1Q15
at 1.93%. The Federal Reserve seems unlikely to
increase rates before June. Plus, despite historically
low yields, monetary easing in Europe along with
a dramatic fall in commodity prices resulted in a
strong dollar, pushing rates even lower. Barclays U.S.
Treasury Inflation Protected Securities Index (TIPS)
was also up 1% in 1Q15, while annual inflation is flat
because of low oil prices, inflation expectations per
the Cleveland Fed increased to 1.7% annually in
March. Investment grade corporate bonds and high
yield corporate bonds both returned 2% in 1Q15 as
investors desperate for yield took more risk.
Wisco continues to expect low yet positive Fixed
Income returns. While interest rates are at
historically low levels, we feel this trend could
continue for a number of reasons. First, the global
economy is relatively soft. In addition, low oil prices
could keep a lid on inflation. Finally, a strong dollar
may attract foreign investors to the domestic
bond market. Therefore, we continue to have fixed
income positions in our more conservative models.

ALTERNATIVE INVESTMENTS
The Dow Jones-UBS Commodity Index declined 7%
in the quarter. In agriculture, both Corn prices and
Soybean prices declined 5%1, as high stockpiles and
a strong dollar drove prices lower. Gold prices were
flat2 in the quarter, while silver increased 6%3 for
the quarter. Real Estate Investment Trusts (REIT)
had another strong quarter up 5%4. Crude oil was
again the main story in Alternative Investments. WTI
prices fell another 11%5 and now are down 56%5
from their peak price in June. While the number of
oil rigs in use is declining and major oil companies
are cutting capital expenditures, these changes
have not yet had a significant impact on production.
Furthermore, domestic oil supplies continue to be at
very high levels, which could keep the price low until
these supplies are worked down. Longer term, we
think global oil production will self-correct and prices
will move higher.

Wisco believes Alternative Investments are an

important part of a well-diversified portfolio.
In addition, we feel the dramatic decline in oil
prices may present investors with a longer term
opportunity. With this in mind, we hold an Energy
Master Limited Partnership (down 4%6 in the
quarter) in all our models and may opportunistically
make additional oil related investments in the
second half of 2015.

MONEY MARKET
Wisco keeps a modest money market allocation in
all of our model portfolios. The current yield of the
Schwab Money Market is 0.01%. Low Federal Funds
rates have held down short-term yields. While an
increase in the Fed Funds rate may increase this
yield later in the year, we think short-term interest
rates will remain low for an extended period of time.

1 Return calculation based on the near future contract as quoted in the Wall Street Journal.
2 Return calculation uses ETFS Physical Swiss Gold Shares (SGOL) as a proxy for gold.
3 Return calculation uses iShares Silver Trust ETF (SLV) as a proxy for silver.
4 Return calculation uses Schwab U.S. REIT ETF (SCHH) as a proxy for Real Estate Investment Trusts.
5 Return calculation uses Cushing, OK WTI spot price FOB as a proxy for oil.
6 Return calculation uses Alerian MLP (AMLP) as a proxy for Energy Master Limited Partnerships.

Wisco Investment Management LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend
to make an offer or solicitation for the sale or purchase of any specific securities product, service, or investment strategy. Investments involve
risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser, tax professional, or attorney before
implementing any strategy or recommendation discussed herein.

402 Gammon Place, Suite 380 Madison, WI 53719 Office 608.442.5507 Fax 608.237.2206