Flexible Income Fund

(As of 6/30/21) — Equity markets moved higher for the fifth consecutive quarter, as the S&P 500 Index returned 8.55%, raising the year-to-date return to 15.25%. The COVID-19 vaccine rollout has helped fuel an economic comeback while corporate earnings are improving. The vaccine adoption around the world is encouraging, and over 50% of the U.S. population is now vaccinated. Capital markets continued to be supported by significant spending from Congress and aggressive monetary policy from the Federal Reserve (the Fed). The 2nd quarter was marked by outperformance of growth stocks, overcoming investor concerns of rising inflation and potential interest rate hikes in the prior quarter. Hawkish comments from the Fed replaced inflation worries with concerns about the magnitude and duration of the economic recovery. Long duration growth companies were beneficiaries as yields on the 10-Year and 30-Year Treasuries declined during the period after climbing for the previous four months.

The broad market Russell 3000 Index advanced 8.24% in the quarter. Growth stocks outperformed Value stocks, as the Russell 3000 Growth Index surged 11.38% compared to the Russell 3000 Value Index gain of 5.16%. Relative performance was correlated with market cap size in the quarter, as the large cap Russell 1000 Index returned 8.54%, the Russell Midcap Index advanced 7.50%, the small cap Russell 2000 Index returned 4.29%, and the Russell Microcap Index finished 4.14% higher.

All economic sectors produced positive returns during the period with the exception of Telecom Services. Real Estate, Information Technology, and Energy led the advance followed by Financials and Health Care. More defensive areas, such as Telecom Services, Utilities, and Consumer Staples, trailed on a relative basis.

(As of 6/30/21) — The stock market continued to advance during the quarter and ended the period at a record high. New COVID-19 infections, hospitalizations, and deaths have declined in the U.S. as vaccines have been approved and administered. This has allowed the relaxing of COVID-related closures and restrictions. Workers are gradually returning to the office, and consumers are emerging from their homes and venturing back out. The pent-up demand aided by additional fiscal stimulus checks, and continued central banks’ accommodative policies, provide a favorable tailwind for the economy. Although the Fed continues to indicate that it is holding off raising interest rates, investors are mindful for any signs of inflation. While some prices have gone up, the Fed believes these are transitory. As the year continues to unfold, investors will also be focused on the following topics: prospects for passage of an announced infrastructure agreement, vaccination rates, booster shots, how COVID-19 variants will spread or be contained, if COVID-19 lockdowns resume, and how long monetary policy will remain accommodative.

We remain focused on wide-moat, large-capitalization, dividend-paying companies trading at reasonable valuations, in our view. 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.