MONTHLY MARKET RECAP 1

MONTHLY MARKET RECAPA Timely Review for Wealth and Asset Management Clients

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June 7, 2016

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JUNE 7, 2016

Index (total return) May 2016 Year to Date 2016

Last 12 Months (Annualized)

S&P 500 1.8%MSCI EAFE -0.8%MSCI Emerging Markets -3.7%

3.6%-0.8%2.3%

1.7%-9.2%-17.3%

Barclays Aggregate 0.0% 3.5% 3.0%Bloomberg Commodity -0.2% 8.6% -15.5%Source: Bloomberg, LP 05/31/2016

A late month rally pushed the three major asset classes, equities, bonds and commodities, to finish the month of May with near flat returns, though the S&P 500 did post its third consecutive positive monthly gain. The modest rally began as market participants became comfortable with the idea that a higher Federal Fund Rate would not derail the moderate economic expansion in the US, nor would it cause turmoil in non-US markets, like Emerging Markets equities and bonds. Prior to that rally, comments by several Federal Reserve governors suggested a rate hike was likely this year, catching markets somewhat by surprise. Through the middle of May, the market placed odds of a June Fed rate hike at about 5%, but ramped them up to nearly 40% after comments by three prominent regional Fed governors suggested as many as two rate hikes were warranted in 2016. In addition, the corporate earnings reporting period in the US largely came to an end during the month, and the results were generally in line with expectations. Finally, there were no major turbulent events outside the US that would push markets in one direction or the other.

Economic data released in May for the US continued to paint a picture of modest growth. Several important indicators showed improvement, however. A strong Retail Sales report showed consumer spending rose by 1.3% for the month of April, the largest gain in 13 months. The all-important spring home selling season appeared to be off to a robust start, with Building Permits, Existing Home Sales and New Home Sales, all up more than expected. Car sales also rebounded during the month, reversing the downward trend of the past two months, again confirming the strength of consumers. On a less positive note, the labor market added fewer jobs than anticipated in April, the lowest monthly increase since September of 2015. Manufacturing data showed the sector reversed some of the momentum seen in the first quarter, as several regional manufacturing indexes reverted back to show contraction in the sector. Finally, Capital Goods Orders that exclude military and aircraft spending fell when an increase was expected, suggesting the industrial sector remains mired in a funk.

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With earnings season largely over and generally in line with expectations, equities in the US were mostly negative for much of the month until a late month rally pushed them up resulting in solid positive gains. That early negative sentiment was driven by the increasing likelihood of a Fed rate hike based on the economic data and comments by Fed governors. Such a move was generally expected to be bad for equities. That turned around markedly late in the month, as equity investors came to the realization that markets were better prepared to withstand a higher Fed Funds rate and that the economy was unlikely to falter, as a result.

International developed and emerging markets equities posted small negative returns for the month, though they also participated in the late month surge that reversed steep losses through mid-month. For much the same reasons affecting their US counterparts, international equity investors also came to see rate hikes as being somewhat benign. In addition, economic data from the Eurozone and its member countries painted a fairly positive picture. Japan posted a solid 1.7% increase in first quarter GDP, reversing the negative print in the fourth quarter of 2015. In addition, Chinese economic activity was largely as expected, not raising further concerns about the stability of the economy there.

Bond markets in the US were largely unchanged for the month. Investment grade fixed income markets were up solidly mid-month, but turned around to finish near the flat line, given the economic data and Fed comments mentioned previously. High yield, on the other hand, posted respectable monthly gains, tracking the performance of stocks, given their equity-like characteristics. The market continued to heal, as evidenced by computer maker Dell, Inc. issuing $20 billion of bonds to finance its takeover of EMC Corp. during the month.

In addition, the yield curve flattened significantly during the month, with the spread between the yield on the 2-Year and 10-Year Treasuries falling to 95 basis points (“bps”) from about 106 bps to start the month. A flat yield curve usually signifies economic conditions may deteriorate, however, in this case, it is likely the result of the short end rising faster than the long end in anticipation of Fed rate hikes. Investment grade corporate spreads were largely flat on the month, while high yield spreads declined slightly, another sign of the recovery taking place in that market.

Talk of Fed rate hikes helped to push the value of the US dollar higher, which normally would be negative for commodities, however, several commodity markets posted strong positive returns for the month. The metals were down in sympathy to the higher dollar, enough to offset the gains seen in the other commodity segments. As a result, the broad commodity index finished the month slightly down. Led by the strong 4.0% monthly gain in West Texas Intermediate (“WTI”) crude oil, the energy segment posted solid monthly gains. At one point, WTI in the spot market touched $50 a barrel intraday, a level last seen in early November of 2015. The increase in crude was the result of both supply disruptions and elevated demand. Led by wildfires in Western Canada, rebels

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rebels in Nigeria shutting off export capabilities there and the persistent slowdown in US production, supply declined. Demand for crude globally continued to rise, narrowing the gap between supply and demand quicker than the market expected. In addition, most agricultural commodities posted solid monthly gains, paced by the spike in soybean meal due to flooding in Argentina, the world’s largest exporter of meal. On the downside, metals prices declined anywhere between 6% to 13% during the month. Prospective higher borrowing costs led to the declines, paring the rally seen this year, especially in gold.

Finally, with Memorial Day having kicked off the unofficial start to summer, we would like to wish all of our clients a happy and safe season while you enjoy your upcoming summer vacation. Please feel free to contact your Portfolio Manager or Trust Officer to discuss this piece or your portfolio. We thank you for selecting us to help you reach your financial goals.

No part of this document may be reproduced in any manner without written permission from Capital One Wealth and Asset Management. For full disclosures, see last page of document.

Unless otherwise noted, performance and return data sourced from Bloomberg, LP as of May 31, 2016

Disclosures

For informational purposes only. Neither the inf ormation nor any opinion expressed in this material constitutes an offer to buy or sell any security or instrument or participate in any particular trading strategy. Capital One, N.A., its affiliates and subsidiaries are not providing or offering to provide personalized investment advice through this communication, or recommending an action to you. Capital One, N.A., its affiliates and subsidiaries are not acting as an advisor to you and do not owe a fiduciary duty to you with respect to the information and material contained in this communication. This communication is not intended as tax or legal advice; consult with any and all internal or external advisors and experts that you deem appropriate before acting on this information or material.Wealth and Asset Management products and services are offered by Capital One, N.A. (“Bank”). All investment management clients are clients of the Bank, who has delegated the investment management services to Capital One Asset Management, LLC (COAM) via a master services agreement. Investment management services are provided to the Bank by COAM, a SEC registered investment advisor and wholly-owned subsidiary of Capital One, N.A. © 2016 Capital One. All rights reserved. COAM registered with the SEC in 2001 as a Registered Investment Adviser as a Separately Identifiable Division or Department (“SIDD”). In 2005, COAM changed its registration to a wholly owned subsidiary when it filed with the State of Louisiana as a Limited Liability Company. Please refer to COAM’s ADV Part 2, which is available upon request, for additional information on COAM.Recipients of this report will not be treated as a client by virtue of having received this report. No part of this report may be redistributed to others or replicated in any form without the prior consent of Capital One.All charts and graphs are shown for illustrative purposes only. Opinions, estimates, forecasts, and statements of financial market trends that are based on current market conditions constitute our judgment and are subject to change without notice. The information has been obtained from sources believed to be reliable but we do not warrant its completeness, timeliness, or accuracy, except with respect to any disclosures relative to Capital One. The information contained herein is as of the date referenced, and we do not undertake any obligation to update such information.Any opinions and recommendations expressed herein do not take into account an investor’s financial circumstances, investment objectives, or financial needs and are not intended for advice regarding or recommendations of particular investments and/or trading strategies, including investments that reference a particular derivative index or benchmark.Past performance is not indicative of future results. The securities described herein may be complex, may involve significant risk and volatility, may involve the complete loss of principal, and may only be appropriate for highly sophisticated investors who are capable of understanding and assuming the risks involved. The securities discussed may fluctuate in price or value and could be adversely affected by changes in interest rates, exchange rates, or other factors. Asset allocation and diversification do not assure or guarantee better performance, and cannot eliminate the risk of investment losses.Investors must make their own decisions regarding any securities or financial instruments mentioned or discussed herein, and must not rely upon this report in evaluating the merits of investing in any instruments or pursuing investment strategies described herein. In no event should Capital One be liable for any use by any party, or for any decision made or action taken by any party in reliance upon, or for any inaccuracies or errors in, or for any omissions from, the information contained herein.Fixed Income securities are subject to availability and market fluctuations. These securities may be worth less than the original cost upon redemption. Corporate bonds generally provide higher yields than U.S. treasuries while incurring higher risks. Certain high yield/high-risk bonds carry particular market risks and may experience greater volatility in market value than investment-grade corporate bonds. Government bonds and Treasury bills are guaranteed by the U.S. government and, if held to maturity, offer a fixed rate of return and fixed principal value.Interest from certain municipal bonds may be subject to state and/or local taxes and in some circumstances, the alternative minimum tax. Unlike U.S. Treasuries, municipal bonds are subject to credit risk. Quality varies widely depending on the specific issuer.Yields are subject to change with economic conditions. Yield is only one factor that should be considered when making an investment decision.

This is only an opinion and not a prediction or promise of events to come.

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