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Quarter 2 – 2021 Commentary

Disclaimer: Investing in financial markets carries risk, including loss of principal. You can lose some or all of the money that is invested. Past performance is no guarantee of future results. The material contained herein is for informational purposes only. This document does not constitute a recommendation of securities, securities portfolio, transactions or investment strategies. The projections were created based on hypothetical information, there is no guarantee that any of them will come true. Proxy Financial is a registered investment adviser. Proxy and its Financial Advisors are not licensed in all states to offer securities and insurance products. This site is not a solicitation of interest in any of these products or service in any state which the registered representative is not properly licenses.

What happened:

· The United States equity markets had another positive month in June. Technology was back in favor alongside energy which has been the best performing sector in 2021. The real estate and healthcare equity sectors also performed well in June.

· The S&P 500 was up + 2.2% in June and has returned + 14.4% through the first half of the year, closing out the second quarter at record high levels. The NASDAQ Composite Index was up + 5.5% in June, bringing its year-to-date performance to + 12.5% (as of 06/30). The domestic small cap sector, measured by the Russell 2000 Index, also had positive returns during the month of June returning + 1.8% and + 17% over the first half of 2021. International equity markets continue to lag behind the United States.

· The MSCI EAFE (Europe, Asia, Far East) was slightly negative in the month of June but still had a positive return over the second quarter + 5.1% and was + 8.8% year-to-date (June 30). Emerging markets were also positive for the quarter but trailed compared to the more developed markets. The MSCI Emerging Markets Index returned + 5% in the second quarter and + 7.5% over the first half of the year.

· The fixed income markets also gained slightly in the month of June, with interest rates falling, the Bloomberg Barclays Aggregate Index returned + 0.7% in the month of June and returned negative – 1.6% over the first half of the year. As default rates continued to drop, investors were willing to pay up for extra incremental yield buying lower credit quality bonds, as well as bonds with longer-dated maturities, so higher-yielding credit and more interest rate sensitive types of bonds have recently performed well.

What we did:

· We mostly stayed the course on our U.S. equities. We actively reduce our direct exposure to China. We took some gains, while in other positions we also realized some losses. We increased our cash position across our core equity and our growth portfolios (both hold over 4% cash now).

· In our equity dividend strategy, we added a few new names increasing our targeted average yield to over 3.5%. Actively adjusting our portfolios during this period, we strive to provide our clients with the ability to lose less on the downside and gain more from the upside by buying fundamentally good companies that become cheaper during these down-market periods.

· When it comes to fixed income & bonds, there is not much that we strongly view as attractive right now. We do not see the U.S. Federal Reserve increasing interest rates during uncertain times. U.S. Treasuries at these lower yields we still view as unattractive longer-term investments, being selective within the fixed income space will be key. Corporate bonds and higher-yielding bonds are likely to be in focus should yield pick back up and prices fall.

What we are watching:

· We are seeing domestic equity markets continue to lead upward, setting new record highs to go along with the accommodative monetary policy coming out of Washington D.C. International markets remain a laggard with COVID & the Delta variant concerns really starting to jeopardize the strength of the global recovery.

· The Chinese Communist Party turned 100 recently and they clearly seem to be getting ready to challenge the United States as the other world’s economic superpower. China is taking a strong stance toward regulating their technology companies, with more oversight, the companies will have to move away from western investment capital. The goal is to bring home the investment returns and technologies back into China.

· COVID and its variants are a major global concern dragging down what might be a speedier recovery. Large unvaccinated populations have seen a spike in cases recently as the summer months have gone on. How the governments around the globe decide to respond will be important, will the global recovery be stunted?

· We think volatility is going to increase, since markets were up around 14%, measured by the S&P 500, over the first half of the year, we feel strongly about the possibility that equity markets will experience somewhat of a healthy pullback and then hopefully rally toward the end of the year. Corporate earnings from the second quarter will give us an insight into how the stimulus money is working its way through the economy.

· Other questions to ask, what will come out of the eventual infrastructure bill, what are the changes to the corporate tax rate, are the recent economic inflation metrics here to stay or just transitory? Any changes to both our fiscal and monetary policies would certainly disrupt the markets.

· We are keeping a keen eye on the political environment around the globe for any disruption in global trade or geopolitical tensions that could interrupt or upset the global recovery.

· We expect sovereign governments to continue to challenge and regulate big tech companies, like Amazon, Facebook, and Google. The “crypto” industry will not be spared, eventually, global central banks will look to issue their own digital currencies. Ransomware attacks should concern both governments and companies alike, creating more of a need for a digitally secured world.

· Plenty of variables to consider for the second half of 2021, we will continue to find the best investment opportunities for our clients through our investment conversations and our personally constructed investment approach.

Disclaimer: Investing in financial markets carries risk, including loss of principal. You can lose some or all of the money that is invested. Past performance is no guarantee of future results. The material contained herein is for informational purposes only. This document does not constitute a recommendation of securities, securities portfolio, transactions or investment strategies. The projections were created based on hypothetical information, there is no guarantee that any of them will come true. Proxy Financial is a registered investment adviser. Proxy and its Financial Advisors are not licensed in all states to offer securities and insurance products. This site is not a solicitation of interest in any of these products or service in any state which the registered representative is not properly licenses.