Midwest Financial Brian Johnson, RFC 706 Montana Street Glidden, IA 51443 www.midwestfinancial.us [email protected] 712-659-2156

The SITREP for the week ending 08/13/2021 ***************************************************** SIT REP: n. a report on the current situation; a military abbreviation; from "situation report". In the markets: U.S. Markets: U.S. markets were mixed, but the headline indices continued to gain ground as the market mostly shrugged off concerns about a renewed spread of the coronavirus. Within the benchmark S&P 500 index, value stocks outperformed their growth counterparts. The Dow Jones Industrial Average finished the week up 307 points closing at 35,515, a gain of 0.9%. The technology-heavy NASDAQ Composite ticked down -0.1% to 14,823. By market cap, the large cap S&P 500 added 0.7%, the mid cap S&P 400 gained 0.5% and the small cap Russell 2000 retreated -1.1%.

International Markets: Canada’s TSX rose 0.2%, while the United Kingdom’s FTSE 100 gained 1.3%. On Europe’s mainland, France’s CAC 40 and Germany’s DAX added 1.2% and 1.4%, respectively. In Asia, China’s Shanghai Composite gained 1.7%, while Japan’s finished up 0.6%. As grouped by Morgan Stanley Capital International, developed markets added 1.4% but emerging markets pulled back -0.4%.

Commodities: Precious metals finished the week mixed with Gold rising 0.9% to $1778.20 per ounce, while Silver retreated -2.3% to $23.78. Crude oil finished essentially flat following last week’s decline. West Texas Intermediate crude closed at $68.44 per barrel, an increase of 0.2%. The industrial metal copper, viewed by some analysts as a barometer of world economic health due to its wide variety of uses, finished the week up 1.0%.

U.S. Economic News: New applications for first-time unemployment benefits fell last week to close to a pandemic low, signaling that fewer people are losing their jobs despite the resurgence in coronavirus cases. The Labor Department reported initial jobless claims dropped by 12,000 to 375,000, matching the consensus forecast. New claims had fallen to a pandemic low of 368,000 last month before a temporary increase that was likely tied to seasonal swings in summer employment. New claims were little changed in most states. Claims fell the most in New Mexico while California and Michigan posted the biggest increases. Meanwhile, continuing claims, which counts the number of people already receiving benefits slid by 114,000 to 2.87 million. Continuing claims are also now at a pandemic low.

It truly is a job-seeker’s market. The number of job openings in the United States rose to a record 10.1 million in June, the Labor Department reported - the fourth consecutive all-time high. Economists had expected job openings to rise 9.3 million. The data is proof the labor market is firming and businesses continue to seek workers. Also in the report, for the first time in six months, the rate of hiring outpaced the rate of job opening increases. The number of people hired rose by 697,000 to 6.7 million. Some economists are starting to anticipate the strong labor market data will allow the Federal Reserve to start tapering its bond purchases this fall. T.J. Connelly, head of research at Contingent Macro, wrote in a note, “This report might offer the first sign that headwinds like generous unemployment benefits and childcare issues for parents might finally be abating.”

Optimism among the nation’s small business owners retreated in July after hitting the highest level since the November election last month. The National Federation of Independent Business (NFIB) reported its index dropped 2.8 points to 99.7. The survey found business owners are losing confidence in the strength of the economy and expect a slowdown in job creation. Owners expecting better business conditions over the next six months fell eight points to a net negative 20%. Still a net 27% of the owners planned to create new jobs in the next three months, only down one point from a record-high reading in June. Turning to inflation, a net 46% of small business owners reported raising average retail prices. The NFIB said in its statement, “This is inflation, the question is for how long.” A net 38% of owners reported raising compensation for workers, down 1 point from June’s record high. A net 27% expect to raise compensation in the next three months, a 48-year record high reading.

The consumer price index climbed 0.5% in July, matching the consensus forecast. The reading was down from a 0.9% gain in June. Over the past 12 months, the rate of inflation remained at 5.4% for a second straight month—a 20-year high. However, the measure that eliminates the often volatile food and energy categories, so-called “core inflation”, rose a lesser 0.3%. That measure decelerated to an annual rate of 4.3% from 4.5%, which had been a 29-year high. The key driver in the moderation of core CPI was used car prices, which rose just 0.2% after surging 30% from March to June. Federal Reserve officials are remaining patient and view the surprising surge of inflation as “largely transitory.” Most economists seem to agree but uncertainty remains.

Prices at the wholesale level surged again, rising sharply in July for the sixth month in a row and offering no evidence that the increase in inflation is near its crest. The Bureau of Labor Statistics reported its Producer Price Index (PPI) jumped a whopping 1% last month. Economists had forecast only a 0.6% advance. In the report, most of the increase was concentrated in services such as airline tickets and hotel rooms amid the surge in travel this summer. Wholesale auto prices have also risen sharply due to strong demand and because carmakers have been unable to maintain production levels amid shortages of key components. The pace of wholesale inflation over the past 12 months moved up to 7.8% from 7.3%. That’s the highest level since the index was reconfigured in 2010, and likely one of the highest readings since the early 1980s.

International Economic News: Canadian Prime Minister Justin Trudeau is planning a snap election on September 20th to seek voter approval for the government’s costly plans to combat COVID-19. Trudeau only has a minority government and relies on other parties to push through legislation. In recent months he has complained about what he calls opposition obstruction. Trudeau came to power in 2015 with a majority of the 338 seats in the House of Commons, but in 2019 he was reduced to a minority after old photos emerged of him wearing blackface. The opposition Conservatives, Trudeau's main rivals, maintain that his spending is excessive and will leave future generations hobbled by debt.

Across the Atlantic, Britain’s economy surged in the second quarter as consumers eagerly spent money following the easing of coronavirus restrictions. The rapid quarter-on-quarter growth rate allowed the economy to recover much of the ground lost over the past two years. The growth rate was in line with market expectations, although a touch slower than the Bank of England’s forecast of 5% expansion. Samuel Tombs, UK economist at Pantheon Macroeconomics, said the data showed the UK was “still the straggler” among advanced economies across the whole pandemic despite growing fastest among G7 countries in the second quarter.

On Europe’s mainland, French economic activity ran 1-1.5% below normal levels in July, nearing pre- coronavirus epidemic levels. In its monthly economic report, the Bank of France confirmed a positive economic trend in the country, notably due to continued improvement in hotels, restaurants, transport, leisure and cultural activities. In July, the services sector, worst-hit by restrictions, was "increasing significantly" after a return to normal. The Bank of France expects the French economy to grow 5.8% for the whole year of 2021, 0.2% lower than the current government forecast.

Germany’s Economy Ministry argues that the recent rise in inflation will be temporary as it is largely driven by special effects that should wane at the start of next year. Germany’s annual consumer price inflation accelerated by more than expected, hitting a 13-year high in July. In its monthly report, the ministry wrote, “A sustained increase in the inflation rate is not to be expected from today’s perspective. Currently there are no signs of a wage-price spiral that could lead to permanently high inflation.” The main factor in the jump in the inflation rate was base effects from a temporary reduction in VAT (value-added tax) rates in the second half of 2020, the ministry maintained.

In Asia, China’s worst coronavirus outbreak in a year has authorities taking drastic measures to limit its spread. But while locking down cities, canceling flights and suspending trade may bring the virus back under control, those actions risk stalling a precarious recovery. While the numbers of cases remain small by comparison with recent surges in infections in the United States and Europe, China has aggressively revived its “zero-Covid” strategy. Those drastic moves have already prompted some economists to slash their growth projections for the world’s second largest economy. Goldman Sachs analysts forecast China’s GDP to grow by just 2.3% in the third quarter from the previous quarter — dramatically lower than the 5.8% increase they originally expected.

Ninety percent of major Japanese companies expect the country's economy to expand in 2022 on hopes that the fallout from the coronavirus pandemic will subside, a Kyodo News survey showed. The survey of 111 companies, including heavyweights like Toyota Motor Corp. and Sony Group Corp., also showed companies increasingly joining global efforts to curb greenhouse gases and striving to ensure economic security amid growing tensions between the U.S. and China. The survey found 75% of the firms expect moderate economic growth next year, followed by 15% that said the world's third-largest economy will expand in 2022. None of the companies anticipated a contraction.

Finally: Jimmy Dugan, the manager of the Rockford Peaches (played by Tom Hanks), famously told his crew of women ballplayers in “A League of Their Own” that “There’s no crying in baseball!” It seems, however, there’s a LOT of crying in investing – at least in some generational age brackets. A survey of more than 1,100 individual investors by Magnify Money revealed that investors generally, and Gen-Z investors in particular, have experienced regrets over impulsive investing decisions, have lost sleep over their investments, have invested while drunk, and defied Jimmy Dugan by crying about it. Boomers are much less prone to these behaviors than the other age cohorts, but even Boomers have some regrets. (Chart from Magnify Money)

(Sources: All index- and returns-data from Yahoo Finance; news from Reuters, Barron’s, Wall St. Journal, Bloomberg.com, ft.com, guggenheimpartners.com, zerohedge.com, ritholtz.com, markit.com, financialpost.com, Eurostat, Statistics Canada, Yahoo! Finance, stocksandnews.com, marketwatch.com, wantchinatimes.com, BBC, 361capital.com, pensionpartners.com, cnbc.com, FactSet.)

The SITREP | Glossary of Terms ______

Index, Exchange and Investment Definitions:

• Barclays Aggregate Index - An unmanaged index of fixed rate investment grade securities with at least one year to maturity combining the Barclays U.S. Treasury Bond Index, the Barclays U.S. Government- Related Bond Index, the Barclays U.S. Corporate Bond Index, and the Barclays U.S. Securitized Bond Index. • Barclays US Corporate Index is a broad-based benchmark that measures the investment grade US dollar- denominated, fixed-rate, taxable corporate bond market. It includes USD denominated securities issued by US and non-US industrial, utility, and financial issuers that meet specified maturity, liquidity, and quality requirements. • Barclays Aggregate Bond Index (formerly known as the Lehman Brothers Aggregate Bond Index), an unmanaged, market capitalization weighted index of government and corporate bonds, mortgage-backed securities, and other asset-backed securities, with interest reinvested. This index commonly serves as a proxy for the U.S. bond market. • The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998. • CBOE Volatility Index shows the market's expectation of 30-day volatility. It is constructed using the implied volatilities of a wide range of S&P 500 index options. This volatility is meant to be forward looking and is calculated from both calls and puts. The VIX is a widely used measure of market risk and is often referred to as the "investor fear gauge." • The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones. • The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. • The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. • The NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. • The measures the performance of the small-cap segment of the U.S. equity universe: market-cap weighted index composed of 2,000 U.S. small-cap common stocks. • The CAC-40 Index is a narrow-based, modified capitalization-weighted index of 40 companies listed on the Paris Bourse. • The ISEQ Overall Index is a capitalization-weighted index of all official list equities in the Irish , excluding U.K.-registered companies. • The FTSE MIB (Milano Italia Borsa) is the benchmark for the Borsa Italiana, the Italian national stock exchange. • The IBEX 35 is the benchmark stock market index of the Bolsa de Madrid, Spain's principal stock exchange. • The DAX 30 is a Blue-Chip stock market index consisting of the 30 major German companies trading on the Frankfurt Stock Exchange. • The FTSE 100 Index is a share index of the 100 companies listed on the London Stock Exchange with the highest market capitalization. • The STOXX Europe 600 Index is derived from the STOXX Europe Total Market Index (TMI) and is a subset of the STOXX Global 1800 Index. • The RTS Index (abbreviated: RTSI, Russian: Индекс РТС) is a free-float capitalization-weighted index of 50 Russian stocks traded on the . • The SSE Composite Index is an index of all stocks (A shares and B shares) that are traded at the Shanghai Stock Exchange.

• The Shanghai Composite Index tracks the biggest and most important public companies in China. • The is a free float-adjusted market capitalization-weighted stock market index that is the main indicator of the overall market performance in Hong Kong. • The IDX Composite or Jakarta Composite Index is an index of all stocks that are traded on the (IDX). • The Korea Composite Stock Price Index or KOSPI is the major stock market index of South Korea, representing all common stocks traded on the Korea Exchange. • The Asia Dow measures the Asia equity markets by tracking 30 leading blue-chip companies in the region. • The S&P/ASX 200 Index is a market-capitalization weighted and float-adjusted stock market index of Australian stocks listed on the Australian Securities Exchange from Standard & Poor’s. • Nikkei 225 (Ticker: ^N225) is a stock market index for the Tokyo Stock Exchange (TSE). • The Nikkei Average is the most watched index of Asian stocks. • The BSE SENSEX (Bombay Stock Exchange Sensitive Index), also-called the BSE 30 (BOMBAY STOCK EXCHANGE) or simply the SENSEX, is a free-float market capitalization-weighted stock market index of 30 well-established and financially sound companies listed on the Bombay Stock Exchange (BSE). • Karachi Stock Exchange 100 Index (KSE-100 Index) is a stock index acting as a benchmark to compare prices on the Karachi Stock Exchange (KSE) over a period. • The Dow Jones Americas Index measures the Latin American equity markets by tracking 30 leading blue-chip companies in the region. • The Mexican IPC Index (Indices de Precios y Cotizaciones) is a major stock market index which tracks the performance of leading companies listed on the Mexican Stock Exchange. • The Bovespa Index is a gross total return index weighted by traded volume & is comprised of the most liquid stocks traded on the Sao Paulo Stock Exchange. • The S&P/TSX Composite Index is an index of the stock (equity) prices of the largest companies on the Toronto Stock Exchange (TSX) as measured by market capitalization. • The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide.

• The MSCI World Index is a free-float weighted equity index that includes developed world markets and does not include emerging markets.

• The MSCI EAFE Index is recognized as the pre-eminent benchmark in the United States to measure international equity performance. It comprises the MSCI country indices that represent developed markets outside of North America: Europe, Australasia and the Far East. • The MSCI Emerging Markets Index is a float-adjusted market capitalization index consisting of indices in more than 25 emerging economies. • The US Dollar Index measures the performance of the U.S. dollar against a basket of six currencies. • Corporate BBB 1-3-year Index - as represented by the BBB rated component of the BofA Merrill Lynch 1- 3 Year U.S. Corporate Index, comprised of U.S. dollar-denominated investment-grade corporate debt securities publicly issued in the U.S. domestic market with between one and three years remaining to final maturity. • High Yield Index - as represented by the Bank of America Merrill Lynch U.S. High Yield Master II Constrained Index, a market value-weighted index of all domestic and Yankee high-yield bonds, including deferred-interest bonds and payment–in-kind securities. • 10 -Year US Treasury Index - This index represents a theoretical rolling 10-year U.S. Treasury note, renewed semiannually to a new higher coupon based on the indicated rise in rates.

Index Disclosures: “An index is a composite of securities that provides a performance benchmark. Indexes are unmanaged, do not incur management fees/costs/expenses, and cannot be invested-in directly. Past performance is not a guarantee of future results.”

The views expressed represent the opinion of Brian Johnson, owner of Midwest Financial an SEC registered investment advisor. Information is for Illustrative purposes only and does not constitute investment, tax or legal advice. Stated information is derived from proprietary and nonproprietary sources that have not been independently verified for accuracy or completeness. While Midwest Financial believes the information to be accurate and reliable, we do not claim or have responsibility for its completeness, accuracy, or reliability. Statements of future expectations estimates, projections and other forward-looking statements are based on available information and Midwest Financial’s view as of the time of these statements. Accordingly, such statements are inherently speculative as they are based on assumptions that may involve known and unknown risks and uncertainties. Actual results, performance or events may differ materially from those expressed or limited in such statements. Investing in equity securities involves risks, including the potential loss of principal while equities may offer the potential for greater long-term growth than most debt securities, they generally have higher volatility. International investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles, or from economic or political instability in other nations. Past performance is not indicative of future results.

Midwest Financial does not accept any liability for the use of the information discussed. Consult with a qualified financial, legal, or tax professional prior to taking any action.

This presentation is for information purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security.

Midwest Financial is a Registered Investment Adviser. Advisory services are only offered to clients or prospective clients where Midwest Financial and its representatives are properly licensed or exempt for licensure. Past performance is not guarantee of future returns. Investing involves risk and possible loss of principal capital. No advice may be rendered by Midwest Financial unless a client service agreement is in place.

Brian Johnson, RFC Managing Member 712-659-2156 706 Montana St. Glidden, IA 51443

* refers to Market Conditions Midwest Financial monitors each day. For more information you can contact Midwest Financial.

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