2ND QUARTER 2021 – MARKET REVIEWJuly 8, 2021

Prepared by Kate Hennessy, CFP®

7/8/21 2

AssetGrade Market Review2nd Quarter 2021 – Shift in returns with continued recovery

Investment returns continued to be strong in REITs and stocks, particularly small-cap value, bonds took a hit:• REITs (Real Estate Investment Trusts) continued as the best performing asset class this year after being the worst performer in 2020.

Investors’ demand for yield and a hedge against inflation contributed to performance. • Small cap value stocks returned 26%, outperforming all other domestic equity categories year to date. Growth stocks had

dramatically outperformed value stocks over the last ten years • US Treasuries were negative as rates increased, while higher yielding sectors of fixed income performed well as investors

demanded more yield. US Treasury real yields are now negative, which means the 10 Year Treasury now yields less than the rate of inflation.

• A barbell approach within fixed income may make sense in the current environment, as investors demand yield and protection.• In 2020 the US Dollar weakened. As the US economy continues to strengthen in 2021, as does the US Dollar. A stronger US Dollar

can mute returns for US investors holding international equities.

Three main macro themes as we dive deeper: the labor market, inflation, and a return to normal.• The labor market lost 22.2 million jobs between February and April 2020. Since then, 66% or 14.7 million have been recovered. o Unemployment rate is still elevated at 5.8%, but demand for labor is still exceptionally high. Prolonged unemployment benefits,

childcare responsibilities and early retirements continue to restrain the labor supply.• A surge in consumer spending along with supply shortages has created a tailwind for inflation.o The Federal Reserve’s goal is to keep inflation as measured by the CPI (Consumer Price Index) at 2% year over year over time.

The Federal Reserve feels this current wave of inflation is transitory, meaning that it will be brief and return to close to 2%.• The number of confirmed COVID cases and fatalities continue to fall, as we reach the herd immunity zone of 60% to 90% of the

population.o Over 50% of the U.S. population and over 85% of people over the age of 65 have now received at least one dose of the

vaccine.

AssetGrade is a registered investment adviser. For information about AssetGrade's registration status and business operations, please consult the Firm's Form ADV disclosure documents, the most recent versions of which are available on the SEC's Investment Adviser Public Disclosure website at www.adviserinfo.sec.gov.

7/8/21 3

Appendix

Asset class returns

Source: Barclays, Bloomberg, FactSet, MSCI, NAREIT, Russell, Standard & Poor’s, J.P. Morgan Asset Management. Large cap: S&P 500, Small cap: Russell 2000, EM Equity: MSCI EME, DM Equity: MSCI EAFE, Comdty: Bloomberg Commodity Index, High Yield: Bloomberg Barclays Global HY Index, Fixed Income: Bloomberg Barclays US Aggregate, REITs: NAREIT Equity REIT Index, Cash: Bloomberg Barclays 1-3m Treasury. The “Asset Allocation” portfolio assumes the following weights: 25% in the S&P 500, 10% in the Russell 2000, 15% in the MSCI EAFE, 5% in the MSCI EME, 25% in the Bloomberg Barclays US Aggregate, 5% in the Bloomberg Barclays 1-3m Treasury, 5% in the Bloomberg Barclays Global High Yield Index, 5% in the Bloomberg Commodity Index and 5% in the NAREIT Equity REIT Index. Balanced portfolio assumes annual rebalancing. Annualized (Ann.) return and volatility (Vol.) represents period from 12/31/05 to 12/31/20. Please see disclosure page at end for index definitions. All data represents total return for stated period. The “Asset Allocation” portfolio is for illustrative purposes only. Past performance is not indicative of future returns. Guide to the Markets – U.S. Data are as of June 30, 2021.Asset Class Returns do not reflect returns in any AssetGrade Portfolio, but show the rate of return for the following asset classes

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2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 YTD Ann. Vol.

REITs EM Equity

Fixe d Inc ome

EM Equity REITs REITs REITs Sma ll

Ca p REITs REITs Sma ll Ca p

EM Equity Ca sh La rge

Ca pSma ll Ca p REITs La rge

Ca pEM

Equity3 5 .1% 3 9 .8 % 5 .2 % 7 9 .0 % 2 7 .9 % 8 .3 % 19 .7 % 3 8 .8 % 2 8 .0 % 2 .8 % 2 1.3 % 3 7 .8 % 1.8 % 3 1.5 % 2 0 .0 % 2 1.3 % 9 .9 % 2 3 .3 %

EM Equity Comdty. Ca sh High

Y ie ldSma ll Ca p

Fixe d Inc ome

High Y ie ld

La rge Ca p

La rge Ca p

La rge Ca p

High Y ie ld

DM Equity

Fixe d Inc ome REITs EM

Equity Comdty. Sma ll Ca p REITs

3 2 .6 % 16 .2 % 1.8 % 5 9 .4 % 2 6 .9 % 7 .8 % 19 .6 % 3 2 .4 % 13 .7 % 1.4 % 14 .3 % 2 5 .6 % 0 .0 % 2 8 .7 % 18 .7 % 2 1.1% 8 .9 % 2 3 .1%

DM Equity

DM Equity

Asse t Alloc .

DM Equity

EM Equity

High Y ie ld

EM Equity

DM Equity

Fixe d Inc ome

Fixe d Inc ome

La rge Ca p

La rge Ca p REITs Sma ll

Ca pLa rge Ca p

Sma ll Ca p

High Y ie ld

Sma ll Ca p

2 6 .9 % 11.6 % - 2 5 .4 % 3 2 .5 % 19 .2 % 3 .1% 18 .6 % 2 3 .3 % 6 .0 % 0 .5 % 12 .0 % 2 1.8 % - 4 .0 % 2 5 .5 % 18 .4 % 17 .5 % 7 .5 % 2 2 .6 %

Sma ll Ca p

Asse t Alloc .

High Y ie ld REITs Comdty. La rge

Ca pDM

EquityAsse t Alloc .

Asse t Alloc . Ca sh Comdty. Sma ll

Ca pHigh Y ie ld

DM Equity

Asse t Alloc .

La rge Ca p REITs DM

Equity18 .4 % 7 .1% - 2 6 .9 % 2 8 .0 % 16 .8 % 2 .1% 17 .9 % 14 .9 % 5 .2 % 0 .0 % 11.8 % 14 .6 % - 4 .1% 2 2 .7 % 10 .6 % 15 .3 % 7 .1% 19 .1%

La rge Ca p

Fixe d Inc ome

Sma ll Ca p

Sma ll Ca p

La rge Ca p Ca sh Sma ll

Ca pHigh Y ie ld

Sma ll Ca p

DM Equity

EM Equity

Asse t Alloc .

La rge Ca p

Asse t Alloc .

DM Equity

DM Equity

EM Equity Comdty.

15 .8 % 7 .0 % - 3 3 .8 % 2 7 .2 % 15 .1% 0 .1% 16 .3 % 7 .3 % 4 .9 % - 0 .4 % 11.6 % 14 .6 % - 4 .4 % 19 .5 % 8 .3 % 9 .2 % 6 .9 % 18 .8 %

Asse t Alloc .

La rge Ca p Comdty. La rge

Ca pHigh Y ie ld

Asse t Alloc .

La rge Ca p REITs Ca sh Asse t

Alloc . REITs High Y ie ld

Asse t Alloc .

EM Equity

Fixe d Inc ome

Asse t Alloc .

Asse t Alloc .

La rge Ca p

15 .3 % 5 .5 % - 3 5 .6 % 2 6 .5 % 14 .8 % - 0 .7 % 16 .0 % 2 .9 % 0 .0 % - 2 .0 % 8 .6 % 10 .4 % - 5 .8 % 18 .9 % 7 .5 % 9 .2 % 6 .7 % 16 .7 %

High Y ie ld Ca sh La rge

Ca pAsse t Alloc .

Asse t Alloc .

Sma ll Ca p

Asse t Alloc . Ca sh High

Y ie ldHigh Y ie ld

Asse t Alloc . REITs Sma ll

Ca pHigh Y ie ld

High Y ie ld

EM Equity

DM Equity

High Y ie ld

13 .7 % 4 .8 % - 3 7 .0 % 2 5 .0 % 13 .3 % - 4 .2 % 12 .2 % 0 .0 % 0 .0 % - 2 .7 % 8 .3 % 8 .7 % - 11.0 % 12 .6 % 7 .0 % 7 .6 % 5 .0 % 12 .2 %

Ca sh High Y ie ld REITs Comdty. DM

EquityDM

EquityFixe d

Inc omeFixe d

Inc omeEM

EquitySma ll Ca p

Fixe d Inc ome

Fixe d Inc ome Comdty. Fixe d

Inc ome Ca sh High Y ie ld

Fixe d Inc ome

Asse t Alloc .

4 .8 % 3 .2 % - 3 7 .7 % 18 .9 % 8 .2 % - 11.7 % 4 .2 % - 2 .0 % - 1.8 % - 4 .4 % 2 .6 % 3 .5 % - 11.2 % 8 .7 % 0 .5 % 2 .1% 4 .5 % 11.8 %

Fixe d Inc ome

Sma ll Ca p

DM Equity

Fixe d Inc ome

Fixe d Inc ome Comdty. Ca sh EM

EquityDM

EquityEM

EquityDM

Equity Comdty. DM Equity Comdty. Comdty. Ca sh Ca sh Fixe d

Inc ome4 .3 % - 1.6 % - 4 3 .1% 5 .9 % 6 .5 % - 13 .3 % 0 .1% - 2 .3 % - 4 .5 % - 14 .6 % 1.5 % 1.7 % - 13 .4 % 7 .7 % - 3 .1% 0 .0 % 1.2 % 3 .2 %

Comdty. REITs EM Equity Ca sh Ca sh EM

Equity Comdty. Comdty. Comdty. Comdty. Ca sh Ca sh EM Equity Ca sh REITs Fixe d

Inc ome Comdty. Ca sh

2 .1% - 15 .7 % - 5 3 .2 % 0 .1% 0 .1% - 18 .2 % - 1.1% - 9 .5 % - 17 .0 % - 2 4 .7 % 0 .3 % 0 .8 % - 14 .2 % 2 .2 % - 5 .1% - 1.6 % - 4 .0 % 0 .8 %

2006 - 2020

AssetGrade Market ReviewAsset Class Returns: Q2 2021

REITs (Real Estate Investment Trusts) were the top performers.

‹#›

4

Returns and valuations by style

Source: FactSet, Russell Investment Group, Standard & Poor’s, J.P. Morgan Asset Management.All calculations are cumulative total return, including dividends reinvested for the stated period. Since Market Peak represents period from 2/19/20 to 6/30/21. Since Market Low represents period from 3/23/20 to 6/30/21. Returns are cumulative returns, not annualized. For all time periods, total return is based on Russell style indices with the exception of the large blend category, which is based on the S&P 500 Index. Past performance is not indicative of future returns. The price-to-earnings is a bottom-up calculation based on the most recent index price, divided by consensus estimates for earnings in the next 12 months (NTM), and is provided by FactSet Market Aggregates and J.P. Morgan Asset Management.Guide to the Markets – U.S. Data are as of June 30, 2021.

13

Value Blend Growth Value Blend Growth

17.0 21.5 30.513.7 15.8 18.5

17.5 22.0 39.0

14.4 16.4 20.3

19.3 29.5 59.4

16.9 21.3 35.2

Since market peak (February 2020) Since market low (March 2020) Current P/E as % of 20-year avg. P/E

Value Blend Growth Value Blend Growth

Larg

e

18.9% 29.9% 43.2%

Larg

e

92.2% 96.1% 109.0%

Larg

e

Mid 23.2% 31.1% 40.0% Mid 117.9% 119.5% 117.7% Mid

Smal

l

35.4% 38.8% 39.6%

Smal

l

138.1% 134.0% 126.9%

Smal

l

9.0%

Smal

l

16.2%

YTD

Value

Current P/E vs. 20-year avg. P/E

Blend Growth

Mid 11.7% 13.2% 15.1% Mid

10-year annualized

15.3%

10.4% Mid

17.0% 13.0%

Larg

e

19.5%

Larg

e

11.6% 14.8% 17.9%

192.0%

Smal

l

10.8% 12.3% 13.5%

Smal

l

26.7%

GrowthBlend

Larg

e

Value

17.5%

165.3%

168.8%

123.8%

121.4%

114.3%

136.5%

134.3%

138.7%

AssetGrade Market ReviewDomestic Equities

Small value has gone from worst performer of the decade to the best performer since market low in March 2020

Still least over-valued as % of 20 year avg P/E

5

Fixed income market dynamics

Source: Barclays, Bloomberg, FactSet, SIFMA, Standard & Poor’s, U.S. Treasury, J.P. Morgan Asset Management. Sectors shown above are provided by Bloomberg unless otherwise noted and are represented by – U.S. Aggregate; MBS: U.S. Aggregate Securitized - MBS; ABS: J.P. Morgan ABS Index; Corporates: U.S. Corporates; Municipals: Muni Bond; High Yield: Corporate High Yield; TIPS: Treasury Inflation-Protected Securities (TIPS); U.S. Floating rate index; Convertibles: U.S. Convertibles Composite. Convertibles yield is as of March 2021 due to data availability. Yield and return information based on bellwethers for Treasury securities. Sector yields reflect yield-to-worst. Convertibles yield is based on U.S. portion of Bloomberg Barclays Global Convertibles. Correlations are based on 15-years of monthly returns for all sectors. Issuance is based on monthly data provided by SIFMA. Past performance is not indicative of future results. Guide to the Markets – U.S. Data are as of June 30, 2021.

40

AssetGrade Market ReviewUS Bonds

High yielding fixed income, like convertible bonds, performed well year to date

6

Interest rates and inflation

Source: BLS, FactSet, Federal Reserve, J.P. Morgan Asset Management.Real 10-year Treasury yields are calculated as the daily Treasury yield less year-over-year core CPI inflation for that month except for June and May 2021 where real yields are calculated by subtracting out May 2021 year-over-year core inflation.Guide to the Markets – U.S. Data are as of June 30, 2021.

39

AssetGrade Market ReviewUS Bonds

7

39

AssetGrade Market ReviewUS Bonds Higher quality fixed income (UST) may provide protection when the equity market falls, lower quality fixed

income (EMD) may provide for more income in current environment

8

Source: FactSet, Federal Reserve, MSCI, Standard & Poor’s, J.P. Morgan Asset Management. All return values are MSCI Gross Index (official) data. 15-year history based on U.S. dollar returns. 15-year return and beta figures are calculated for the time period 12/31/05 to 12/31/20. Beta is for monthly returns relative to the MSCI AC World Index. Annualized volatility is calculated as the standard deviation of quarterly returns multiplied by the square root of 4. Chart is for illustrative purposes only. Please see disclosure page for index definitions. Past performance is not a reliable indicator of current and future results. *Sector breakdown includes the following aggregates: Technology (Information Technology) and cyclicals (Consumer Discretionary, Financials, Industrials, Energy and Materials). The Internet and direct marketing subsector has been removed from the cyclicals calculation. In our judgement, companies in this space do not yet fit into the cyclical category, as they are still in a transitional growth phase and are not being directly impacted by the business cycle. EM North Asia includes China, Taiwan and South Korea. EM South Asia includes India, Indonesia, Malaysia, Pakistan, Philippines, Taiwan and Thailand.Guide to the Markets – U.S. Data are as of June 30, 2021.

50

Returns

Local USD Local USD Ann. Beta

Regions

U.S. (S&P 500) - 15.3 - 18.4 9.9 0.89

AC World ex-U.S. 11.8 9.4 6.5 11.1 5.4 1.08

EAFE 13.1 9.2 1.3 8.3 5.0 1.04

Europe ex-UK 16.1 12.2 2.1 11.6 5.9 1.18

Emerging markets 8.1 7.6 19.5 18.7 7.0 1.19

Selected Countries

United Kingdom 11.4 12.5 -13.2 -10.4 2.9 1.02

France 18.1 14.5 -3.9 4.7 5.5 1.22

Germany 13.2 9.7 3.0 12.3 6.5 1.31

Japan 9.1 1.5 9.2 14.9 3.7 0.73

China 1.9 1.9 28.3 29.7 11.9 1.12

India 14.5 12.5 18.6 15.9 8.0 1.28

Brazil 7.0 10.7 4.8 -18.9 4.8 1.51

Russia 18.7 20.0 3.4 -11.6 2.7 1.51

2021 YTD 2020 15-years

33%

53%44% 45%

54% 55%60%

70% 73%

27%

13%20%

29%

8%14% 13%

2% 0%

-10%

5%

20%

35%

50%

65%

80%

S&P500

ACWIex-U.S.

EM EMNorthAsia

Europe Japan EMSouthAsia

EMLATAM

EMEMEA

Weights in MSCI All Country World Index% global market capitalization, float adjusted

Europe ex-UK13%

Japan 6%Pacific 3%

Canada 3%United States

59%

Emerging markets

13%

Representation of cyclical and technology sectors% of index market capitalization

Cyclical sectors* Technology

AssetGrade Market ReviewInternational Equities Stronger US Dollar in 2021 can mute returns, relative to returns in local currency

9

Labor demand

Source: Conference Board, National Federation of Independent Business, U.S. Department of Labor, J.P. Morgan Asset Management. The diffusion index is calculated as the percentage of consumers reporting jobs plentiful minus those reporting jobs hard to get plus 50. Guide to the Markets – U.S. Data are as of June 30, 2021.

27

JOLTS Job Openings NFIB Small Business Jobs Report, jobs hard to fillTotal nonfarm job openings, thousands, seasonally adjusted % of firms with 1 or more jobs unable to fill, seasonally adjusted

Consumer Confidence Survey, labor market diffusion indexJobs plentiful minus jobs hard to get plus 50

May 2021: 48.0%

0%

10%

20%

30%

40%

50%

'75 '80 '85 '90 '95 '00 '05 '10 '15 '20

Apr. 2021: 9,286

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

'00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20

Jun. 2021: 93.5

-20

0

20

40

60

80

100

120

'75 '80 '85 '90 '95 '00 '05 '10 '15 '20

AssetGrade Market ReviewLabor Market

10

Inflation

27

30

Source: BLS, FactSet, J.P. Morgan Asset Management.CPI used is CPI-U and values shown are % change vs. one year ago. Core CPI is defined as CPI excluding food and energy prices. The Personal Consumption Expenditure (PCE) deflator employs an evolving chain-weighted basket of consumer expenditures instead of the fixed-weight basket used in CPI calculations. Guide to the Markets – U.S. Data are as of June 30, 2021.

CPI and core CPI% change vs. prior year, seasonally adjusted

50-yr. avg. Apr. 2021 May 2021Headline CPI 3.9% 4.2% 4.9%Core CPI 3.8% 3.0% 3.8%Food CPI 3.9% 2.4% 2.2%Energy CPI 4.4% 25.0% 27.8%Headline PCE deflator 3.4% 3.6% 3.9%Core PCE deflator 3.3% 3.1% 3.4%

-3%

0%

3%

6%

9%

12%

15%

'71 '73 '75 '77 '79 '81 '83 '85 '87 '89 '91 '93 '95 '97 '99 '01 '03 '05 '07 '09 '11 '13 '15 '17 '19 '21

Recession

AssetGrade Market ReviewTransitory Inflation?

11

Inflation

27

30

AssetGrade Market ReviewReturn to Normal

12

7/8/21 13

Disclosures

The Standard & Poor’s 500 Index is an unmanaged index of 500 U.S. companies, and is a common measure of performance of theoverall U.S. stock market.

The Russell 2000 Index is an unmanaged index of 2000 small-capitalization companies, and is a common measure of performance ofU.S. “small-cap” equities.

The opinions expressed herein are those of AssetGrade, LLC (AssetGrade) and are subject to change without notice. Nothing in thismaterial should be construed as an offer to purchase or sell any product or security. AssetGrade is an independent investment adviserregistered under the Investment Advisers Act of 1940, as amended. Registration does not imply a certain level of skill or training. Moreinformation about AssetGrade, including our investment strategies, fees and objectives, can be found in our Form ADV Part 2, which isavailable upon request.

Certified Financial PlannersTM (CFP®) are licensed by the CFP® Board to use the CFP® mark. CFP® certification requirements include: Bachelor’s degree from an accredited college or university, completion of the financial planning education requirements set by the CFP® Board (www.cfp.net), successful completion of the CFP® Certification Exam, comprised of two three-hour sessions, experience requirement: 6,000 hours of professional experience related to the financial planning process, or 4,000 hours of Apprenticeship experience that meets additional requirements, successfully pass the Candidate Fitness Standards and background check, agree annually to be bound by CFP® Board’s Standards of Professional Conduct, and complete 30 hours of continuing education every two years, including two hours on the Code of Ethics and Standards of Professional Conduct.

AG-21-19