Dividend Focus Fund

(As of 9/30/21) — Equity market returns were somewhat mixed in the 3rd quarter, but the S&P 500 Index etched out a modestly positive return of 0.58%. The global recovery hit a speed bump during the period as the world dealt with rising COVID-19 Delta variant infections, an energy price spike, and supply chain issues that continued to constrain economic growth. After trading lower earlier in the quarter, interest rates increased later in the period in response to higher-than-expected inflation data and an admission from the Federal Reserve (the “Fed”) that they would need to begin removing monetary stimulus from the economy sometime soon.

The Russell 3000 Index declined -0.10% in the quarter. Growth stocks outperformed Value stocks as the Russell 3000 Growth Index returned 0.69% versus a drop of -0.93% for the Russell 3000 Value Index. Relative performance was correlated with market cap size as large caps outperformed small caps in the quarter. The large cap Russell 1000 Index returned 0.21% compared to the Russell Midcap Index return of -0.93%. Smaller market cap indices were even more negative, with the Russell 2000 Index returning -4.36% and the Russell Microcap Index returning -4.98%. Financials were the top performing sector for the quarter, while Industrials and Materials were lagging sectors.

(As of 9/30/21) — The stock market continued to advance in June and July reaching record highs, however in September the market traded off and gave up most of its early quarter gains. The rise in the first months of the quarter was attributed to the expectations that the economy continued to recover from the COVID-19 pandemic. New COVID-19 infections, hospitalizations, and deaths were declining in the U.S. as vaccines have been approved and injected into arms. Life was on the cusp of returning to normal; however, the Delta variant flared up and the momentum for returning to normality waned. The late summer surge in COVID-19 cases coincided with severe weather events (hurricanes, flooding, fires, etc.), supply chain logistics issues, key parts shortages, unemployment insurance plans ending, and inflation pressures led to reduced estimates for economic growth. Investors are also watching the politics in Washington as Congress works on the budget, infrastructure plans, and raising the debt ceiling, with all parties indicating an unwillingness to compromise. The Federal Reserve continued to indicate that it views the current elevated levels of inflation as transitory, and that they are not likely to raise interest rates in the near term. However, they did note that they are likely to curtail (or taper) their bond buying activity in near term, with a modest monthly decline in purchases.

Despite the uncertainty created by pandemic and fiscal policy, we remain focused on wide moat, large capitalization companies trading at reasonable valuations, in our view. As always, the Fund will continue to emphasize on competitively-advantaged companies that can be purchased at a fair value, in our opinion. As stock market volatility spikes, we will look for opportunities to find companies that fit our investment criteria, as we continue to follow our process of finding new investment ideas and to be ready when market declines provide better entry points.