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Third Quarter 2022 Newsletter

Salal Investment Services

Available through CUSO Financial Services, L.P.*

photo of Adrian Hedwig

Adrian A. Hedwig

Financial Advisor, CUSO Financial Services, L.P.*
Available by appointment at all Salal Credit Union branches.
Virtual and phone meetings also available.
P: 206.607.3481
F. 206.299.9530

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Pacific Northwest Coast Landscape

Quarterly Market Review: April-June 2022

For the first time since 2015, each of the benchmark indexes lost value for two consecutive quarters. They also posted losses for June, marking three consecutive down months for the tech-heavy Nasdaq, its longest losing streak since 2015. Investors watched for signs of an economic deceleration in the U.S., with inflation continuing to run at multi-decade highs, and monetary policymakers maintaining a firm stance that their priority remains bringing down prices even if it means slowing economic growth. Nevertheless, Wall Street has suffered one of its worst six-month stretches in decades. The S&P 500 is poised for its worst first half since 1962. Ten-year Treasury yields climbed from 2.37% at the beginning of the quarter to over 3.00%. The dollar is on pace for its best quarter since 2016. Consumer spending slowed for the first time this year, possibly indicating that the economy is indeed weakening. Consumer sentiment fell to its lowest level since 2021. Crude oil prices rose marginally in the quarter, spiking at $123.18 per barrel in early June, ultimately settling at around $105.00 by the end of the quarter. Gold prices declined each month of the quarter as investors weighed rising interest rates against fears of a recession. According to AAA, as of June 30, the average price for regular gasoline was $4.857 per gallon, $0.90 less than the previous week but $1.80 per gallon more than than a year ago. As prices for crude oil and gasoline increased, demand waned, helping to pull prices lower. In addition, OPEC+ agreed to increase output in July and August to compensate for the drop in production due to the sanctions placed on Russia.

Equities fell sharply in April as some disappointing earnings data from several mega-cap companies added to investor worries about rising inflation, the war in Ukraine, and the possibility of an economic pullback. The Nasdaq dropped the most since October 2008, falling nearly 24.0% from its peak as it entered bear territory. The S&P 500 notched its worst month since the beginning of the pandemic, dragged lower by heavy losses in communication services, consumer discretionary, and information technology. Bond prices also lagged as yields increased in anticipation of rising interest rates as part of the Federal Reserve’s plan to quell inflation. While consumers worried about cost containment and its impact on the economy, one factor helping to drive inflation higher was strong wage growth propelled by a tight labor market. Weekly jobless claims fell to their lowest level since 1970, while the unemployment rate dropped to a pre-pandemic 3.6%. Entering May, Americans remained focused on rising inflation, the ongoing war in Ukraine, lockdowns in China due to rising COVID numbers, and the impact of the Fed’s program of fiscal tightening.

May proved to be a month of market swings. Equities lost value for the first three weeks of the month. However, a late rally helped the benchmark indexes close the month relatively flat, with the exception being the tech-heavy Nasdaq, which followed April’s sharp declines by falling another 2.0%. Early in the month the Federal Reserve raised interest rates 50 basis points and announced plans to start reducing its balance sheet in June. The Fed’s hawkish pronouncements in its effort to curb rising inflation spurred worries of a recession, despite solid economic data from the prior month.

Stocks soured in June as a slowdown in consumer spending (personal consumption expenditures), which accounts for nearly 70% of economic activity, prompted concerns about a recession. The Federal Reserve increased the target range for the federal funds rate 75 basis points, more than expected, as forecasters estimated a 50-basis point rate increase. Despite a surge mid-month, each of the benchmark indexes ended June in the red. Crude oil prices fell in June, the first monthly decrease since November. The dollar advanced, while gold prices slid lower.

Stock Market Indexes

2021 Close
As of June 30
Monthly Change
Quarterly Change
YTD Change
S&P 500
Russell 2000
Global Dow
Fed. Funds
75 bps
125 bps
150 bps
10-year Treasuries
13 bps
65 bps
146 bps
US Dollar-DXY
Crude Oil-CL=F

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.

Latest Economic Reports

  • Employment: Employment rose by 390,000 in May. Notable job gains occurred in leisure and hospitality, in professional and business services, and in transportation and warehousing. Despite the increase, employment is down by 822,000, or 0.5%, from its pre-pandemic level in February 2020. The unemployment rate remained at 3.6% for the third month in a row. The number of unemployed persons was essentially the same at 6.0 million. By comparison, in February 2020 prior to the coronavirus (COVID-19) pandemic, the unemployment rate was 3.5%, and the number of unemployed persons was 5.7 million. Among the unemployed, the number of workers who permanently lost their jobs was unchanged at 1.4 million in May. The number of persons who were unable to work because their employer closed or lost business due to the pandemic fell to 1.8 million. The labor force participation rate increased 0.3 percentage point to 62.3% in May. The employment-population ratio increased by 0.3 percentage point to 60.2%. In May, average hourly earnings rose by $0.10 to $31.95. Over the last 12 months ended in May, average hourly earnings increased by 5.2%. The average work week was 34.6 hours in May, unchanged for the third consecutive month.
  • There were 231,000 initial claims for unemployment insurance for the week ended June 25, while the total number of insured unemployment claims was 1,328,000 as of June 18. During the second quarter of the year, claims for unemployment fell to their lowest levels since 1970. A year ago, there were 3,266,000 insured unemployment claims.
  • FOMC/interest rates: Following its meeting in June, the Federal Open Market Committee increased the federal funds target rate range by 75 basis points to 1.50%-1.75%. In support of its decision, the Committee noted that it is “highly attentive to inflation risks” and that it “is strongly committed to returning inflation to its 2.0% objective.”
  • GDP/budget:Gross domestic product decreased 1.6% in the first quarter of 2022. GDP advanced 6.9% in the fourth quarter of 2021. A record surge in the trade deficit was largely responsible for the decline in first-quarter GDP. Also, consumer spending, as measured by personal consumption expenditures, rose 1.8%, down from 2.5% in the fourth quarter of 2021. Consumers cut spending on goods such as clothes, home furnishings, and food. Fixed investment advanced 7.4%, driven higher by a 10.0% increase in nonresidential (business) fixed investment. Exports dropped 4.8%, while imports, a negative in the calculation of GDP, increased 18.9%. Also dragging GDP lower was a 6.8% decrease in federal government spending, while state and local government spending dipped 0.5%. The personal consumption expenditures (PCE) price index, a measure of inflation, increased 7.1%. Excluding food and energy prices, the PCE price index increased 5.2%.
  • The Treasury budget deficit came in at $66.2 billion in May, 50.0% smaller than the $132.0 billion shortfall in May 2021. Through the first eight months of fiscal year 2022, the deficit sits at $426.2 billion, 79.0% lower than the deficit over the same period in fiscal year 2021 as outlays dropped 19.0%, while receipts increased 29.0%. So far in this fiscal year, individual income tax receipts have risen 46.0% and corporate income tax receipts have increased 17.0%.
  • Inflation/consumer spending: According to the latest Personal Income and Outlays report for May, both personal income and disposable personal income rose 0.5%, the same increase as in the previous month. Consumer spending increased 0.2% following a 0.6% jump in April. Consumer prices climbed 0.6% in May after advancing 0.2% in April. Consumer prices have risen 6.3% since May 2021.
  • The Consumer Price Index climbed 1.0% in May after climbing 0.3% in the previous month. The May increase was broad-based, with advances in prices for shelter, gasoline, and food being the largest contributors. The gasoline index rose 4.1% in May, prices for food rose 1.0%, and the index for shelter increased 0.6%. The CPI increased 8.6% for the 12 months ended in May, the largest 12-month increase since the period ending December 1981.
  • Prices that producers receive for goods and services jumped 0.8% in May following a 0.4% increase in April. Producer prices have increased 10.8% since May 2021. Prices less foods, energy, and trade services increased 0.5% in May and 6.8% since May 2021. In May, nearly two-thirds of the rise in the PPI was due to a 1.4% advance in prices for final demand goods. Prices for final demand services increased 0.4%. A major factor in the May increase in the prices for goods was a 5.0% increase in energy prices, within which gasoline prices spiked 8.4%.Couple sitting on front stoop
  • Housing: Sales of existing homes retreated for the fourth consecutive month in May, falling 3.4% from the April estimate. Year over year, existing home sales were 8.6% under the May 2021 total. According to the latest survey from the National Association of Realtors®, home sales have essentially returned to the levels seen in 2019, prior to the pandemic, after two years of exceptional performance. The median existing-home price was $407,600 in May, up from $395,500 in April and 14.8% more than May 2021 ($355,000). Unsold inventory of existing homes represents a 2.6-month supply at the current sales pace. Sales of existing single-family homes also fell, down 3.6% in May. Sales of existing single-family homes have fallen 7.7% since May 2021. The median existing single-family home price was $414,200 in May, up from $401,700 in April and up 14.6% from May 2021 ($361,300).
  • Sales of new single-family homes rose 10.7% in May, the first advance in the last five months. The median sales price of new single-family houses sold in May was $449,000 ($454,700 in April). The May average sales price was $511,400 ($569,500 in April). The inventory of new single-family homes for sale in May represented a supply of 7.0 months at the current sales pace, down from April’s 7.6-month supply. Sales of new single-family homes in May were 5.9% below the May 2021 estimate.
  • Manufacturing: Industrial production increased 0.2% in May following a 1.4% increase in April. In May, manufacturing output declined 0.1% after three months when growth averaged nearly 1.0%. The indexes for utilities and mining rose 1.0% and 1.3%, respectively, in May. Total industrial production was 5.8% higher than it was a year earlier. Since May 2021, manufacturing has risen 4.8%, mining has jumped 9.0%, while utilities increased 8.4%.
  • May saw new orders for durable goods increase $1.9 billion, or 0.7%, marking the seventh monthly increase out of the last eight months. Excluding transportation, new orders rose 0.7% in May. Excluding defense, new orders increased 0.6%. Transportation equipment, up two consecutive months, led the increase, up $0.7 billion, or 0.8%.
  • Imports and exports: Import prices rose 0.6% in May after advancing 0.4% in April, according to the U.S. Bureau of Labor Statistics. Higher fuel prices offset lower nonfuel prices to account for the overall May increase. Fuel import prices rose 7.5% in May, with higher petroleum and natural gas prices both contributing to the increase. The price index for import fuel rose 73.5% over the past year, the largest 12-month advance since increasing 87.0% in November 2021. Prices for nonfuel imports declined 0.3% in May, the first monthly decrease since November 2020. Prices for U.S. exports advanced 2.8% in May following a 0.8% rise the previous month. Higher prices for both nonagricultural and agricultural exports contributed to the export price rise in May. Export prices have risen 18.9% since May 2021, the largest year-over-year rise since September 1984.
  • The international trade in goods deficit was $104.3 billion in May, down $2.4 billion, or 2.2%, from April. Exports of goods were $176.6 billion in May, $2.0 billion more than in April. Imports of goods were $280.9 billion, $0.4 billion less than April imports.
  • The latest information on international trade in goods and services, released June 7, is for April and shows that the goods and services trade deficit declined by $20.6 billion to $87.1 billion from the March deficit. April exports were $252.6 billion, $8.5 billion more than March exports. April imports were $339.7 billion, $12.1 billion less than March imports. Year over year, the goods and services deficit increased $107.9 billion, or 41.1%, from the same period in 2021. Exports increased $151.3 billion, or 18.8%. Imports increased $259.2 billion, or 24.3%.
  • International markets: The United States is not the only country seeing rising costs. Several European nations, plus Israel and South Korea, have seen surges in inflation since the start of the pandemic. Germany, France, Spain, and Italy have seen inflation spike recently. South Korea’s inflation reached a 13-year high in April, while Israel, which had maintained low inflation rates through 2021, saw inflation jump 25.0% from the first quarter of 2020 to the beginning of 2022. Inflation rates in the United Kingdom hit a 40-year high in May, up 9.1%. Several countries have taken various measures to try to curb inflationary pressures, from freezing the price of gas and electricity (“tariff shield”), to transfers to the most vulnerable (e.g., energy vouchers), temporary tax reductions or discounts on fuel prices, and price regulation. Of course, several countries have also tightened monetary policy by raising interest rates. Overall, for the markets in June, the STOXX Europe 600 Index declined 5.7%. The United Kingdom’s FTSE slid 2.7%. Japan’s Nikkei 225 Index fell 2.4%, while China’s Shanghai Composite Index rose 5.6%.
  • Consumer confidence: The Conference Board Consumer Confidence Index® decreased in June following a decline in May. The index stands at 98.7, down from 103.2 in May. The overall index is at its lowest level since February 2021. The Present Situation Index, based on consumers’ assessment of current business and labor market conditions, declined to 147.1 in June, down marginally from 147.4 in May. The Expectations Index, based on consumers’ short-term outlook for income, business, and labor market conditions, declined to 66.4 in June (73.7 in May), its lowest level since March 2013.

Eye on the Month Ahead

Inflation continued to run hot in June, prompting a plan of fiscal tightening from the Federal Reserve, which included a 75-basis point interest rate increase. The Fed meets again in July and is certain to increase interest rates by at least 50 basis points, with the growing likelihood of another 75-basis point jump, particularly since the Fed does not meet again until September. The first estimate of second-quarter gross domestic product is also out in July. The economy retracted 1.5% in the first quarter.

Data sources: Economic: Based on data from U.S. Bureau of Labor Statistics (unemployment, inflation); U.S. Department of Commerce (GDP, corporate profits, retail sales, housing); S&P/Case-Shiller 20-City Composite Index (home prices); Institute for Supply Management (manufacturing/services). Performance: Based on data reported in WSJ Market Data Center (indexes); U.S. Treasury (Treasury yields); U.S. Energy Information Administration/Bloomberg.com Market Data (oil spot price, WTI Cushing, OK); www.goldprice.org (spot gold/silver); Oanda/FX Street (currency exchange rates). News items are based on reports from multiple commonly available international news sources (i.e., wire services) and are independently verified when necessary with secondary sources such as government agencies, corporate press releases, or trade organizations. All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Forecasts are based on current conditions, subject to change, and may not come to pass. U.S. Treasury securities are guaranteed by the federal government as to the timely payment of principal and interest. The principal value of Treasury securities and other bonds fluctuates with market conditions. Bonds are subject to inflation, interest-rate, and credit risks. As interest rates rise, bond prices typically fall. A bond sold or redeemed prior to maturity may be subject to loss. Past performance is no guarantee of future results. All investing involves risk, including the potential loss of principal, and there can be no guarantee that any investing strategy will be successful.
The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 largest, publicly traded companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2,000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. The U.S. Dollar Index is a geometrically weighted index of the value of the U.S. dollar relative to six foreign currencies. Market indexes listed are unmanaged and are not available for direct investment.

Bear Essentials: Declines and Recoveries

  • At about 160 days and counting, the current decline is more than halfway through the median bear length going back to 1929.
  • The median gain during a recovery—at 77.5%—compares favorably to the median loss of 33.5%. Same goes for duration: the median recovery period is 633 days versus a median bear market length of 240 days.
  • As active investment managers and asset allocators we view these environments in terms of the opportunities they offer.

Crossing the 20% mark on the way down—the formal threshold for a bear market—always instills a fresh sense of concern. This must be serious, but how bad will it get?

No one can credibly answer when or where this selloff will conclude. We can reference history, however, to see how other bear markets have behaved.

Declines come in all shapes, sizes and lengths.

We’ve explored declines in the S&P 500 Index that show a vast difference between small bears (declines of between 20% and 30%) and big bears (declines greater than 30%).

Going back to 1966, small bears have taken about 5½ months to recover from their troughs. Big bears are a different story altogether, with recoveries taking about 37 months.

Exhibit 1 uses data from all bear markets going back to 1929. We observed the two principal characteristics of declines: size (percent loss) and length (number of days from peak to trough). We calculated averages and medians given the susceptibility of averages to the influence of the largest numbers.

Exhibit 1: Bear markets—from cubs to grizzlies

Percent LossNumber of Days
September 7, 1929 through March 23, 2020. Source: Yardeni Research, Inc., SEI. Performance of the S&P 500 prior to March 4, 1957 is backtested. Back-tested performance, which is hypothetical and not actual performance, is subject to inherent limitations because it reflects application of an Index methodology in hindsight. No theoretical approach can take into account all of the factors in the markets in general and the impact of decisions that might have been made during the actual operation of an index. Actual returns may differ from, and be lower than, back-tested returns. Past performance is no guarantee of future results.

At about 160 days and counting, the current bear market is more than halfway through the median bear length.

Both the shortest and longest bears have occurred in the 21st century: the longest started in early 2000 as the dotcom bubble burst, and the September 11th attack took place about midway through the 2½ year span. Everyone still remembers the shortest—the COVID crash, which lasted from February to March 2020.

In terms of size, a 20% decline is well into the lower half of both the median and average losses. The largest loss—at a staggering 83%—dates back to the early 1930s in the teeth of the Great Depression.

Recoveries look like they’re worth the wait.

For all the attention that stock market declines receive, remember that equities spend a large majority of the time climbing.

This bear market will end, at one point or another, just like every selloff that has come before. Judging by the statistics in exhibit 2, there’s a high likelihood that the low point of this downturn will be followed by a much larger and longer recovery.

Exhibit 2: Leaving the bear behind

Percent GainNumber of Days
June 12, 1928 through January 3, 2022. Source: Yardeni Research, Inc., SEI. Performance of the S&P 500 prior to March 4, 1957 is
backtested. Back-tested performance, which is hypothetical and not actual performance, is subject to inherent limitations because it reflects application of an Index methodology in hindsight. No theoretical approach can take into account all of the factors in the markets in general and the impact of decisions that might have been made during the actual operation of an index. Actual returns may differ from, and be lower than, back-tested returns. Past performance is no guarantee of future results.

Investors should take a great deal of encouragement from this statistical look at bear markets and recoveries. The simple fact is that recoveries have been much more potent than downturns through history. Furthermore, this selloff is already fairly mature.

The median gain during a recovery—at 77.5%—compares favorably to the median loss of 33.5%. A hypothetical investor undergoing a 33.5% decline followed by a 77.5% gain would be well ahead for the full period.

Same goes for duration: the median recovery period is 633 days versus a median bear market length of 240 days. Here, the largest and longest recoveries are for the same period: late 1987 through early 2000.

Person on laptop checking investment graphsInvestor hands are not tied, but they should sit on them.

Of course, we’d prefer a small bear over a big bear, but investors have no control over this outcome. So what can we control?

Investors have the last word on how much of a downturn they’re willing to tolerate. We recognize that the market environment has ranged from inhospitable to hostile in 2022. The simultaneous selloff in bonds has added an uncommon challenge into the mix.

As losses grow, it can be tempting to consider a temporary exit in favor of cash. But when would be the right time to re-invest? And while cash is always susceptible to inflationary erosion, price increases are currently running at a 40-year high.

We urge investors to consider the wisdom of shouldering the first 20% of a downturn only to exit. Bearing the pain of the decline is an investment in the eventual recovery. History suggests the recovery will eclipse the selloff. Exiting for cash is akin to relinquishing this investment.

Our view.

As active investment managers and asset allocators we view these types of environments in terms of the opportunities they offer. A globally diversified investment portfolio will not have endured the full brunt of the selloff in U.S. stocks, which have been hit harder than many other asset classes.

Opportunities are beginning to appear, as higher interest rates have pommeled bonds and expensive stocks. High-priced U.S. stocks have been leading this decline on the way down. The NASDAQ Composite Index, which contains many of the expensive growth and tech-oriented stocks that have been under the most recent pressure, peaked in November and has declined by more than 30% through May. These types of stocks are moving back toward valuation levels that are more in line with the rest of the market. Value-oriented equities still look attractive, and we expect to see bargains in equities if the market falls a bit further.

We remain nimble in fixed income, as always, adding credit or duration exposure as spreads widen and removing risk once spreads tighten. Higher volatility creates more opportunities to manage these exposures.

Less-efficient areas like emerging markets offer significant opportunities for active managers. Emerging-market equities have been in a bear market for several months, while emerging-market debt yields have been driving higher. The diverse opportunity set in emerging markets tends to reveal itself during downturns, providing the opportunity to identify attractive risk-and-return tradeoffs.

Important Information
This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice and is intended for educational purposes only. There are risks involved with investing, including possible loss of principal. Diversification may not protect against market risk. Information provided by SEI Investments Management Corporation, a wholly owned subsidiary of SEI Investments Company.


When Others are Fearful, Focus on Goals

Quarterly Index Return GraphNearly every investor nods sagely in agreement with Warren Buffett’s famous maxim of being “fearful when others are greedy and greedy only when others are fearful”. Living it, of course, is an entirely different proposition.

So far in 2022, the U.S. equity market is down approximately 20% as measured by the S&P 500. U.S. Big Tech, which is comprised of the financial powerhouses that have been at the epicenter of innovation and growth for the broad U.S. economy—indeed, the global economy—for the past several years, have fallen particularly hard. And bonds have offered no solace, in a reversal from prior trends. With inflation eating away at purchasing power and interest rates accelerating higher, the Bloomberg Barclays US Aggregate Bond Index, which represents the core U.S. bond market, is down just over 10% for the year-to-date stretch through the end of June.

It remains to be seen how investors en masse will respond to this climate, but evidence from past downturns isn’t encouraging. In fact, Morningstar, Inc.’s investor returns study called “Mind the Gap”—which approximates the return of the typical investor as measured by flows in and out of a particular asset class—consistently indicate that investors time their buys and sells poorly, and the timing in more volatile asset classes is especially weak.*

But if staying the course is the recommendation, how can investors do so—or even commit more capital—when uncertainty is so high and trailing returns acrosclasses are suffering a setback?

In our mind, it’s a matter of perspective. Every investor, even the professionals, invest for one primary reason: to meet individual financial goals. In fact, we are all goals-based investors. And as such, we should focus less on day-to-day, month-to-month, or even year-to-year gyrations and more on how each portfolio is progressing toward its goals.

Of course, when economic headlines are screaming about punishing conditions, and trailing returns have red ink, those financial goals can lose their primacy or even feel out of reach.

If retirement feels a bit further away or less secure today than it was six months ago, it’s worth remembering market history. Over the course of two World Wars, crushing 1970s stagflation, 9/11, a recent global pandemic, and countless other unpredictable and terrifying events, both equity and fixed-income markets have been able not only to recover from losses but have managed to grind their way higher. Today’s uncertainty is unlikely to be the first to disrupt that trend.

That’s not to say market losses aren’t an opportunity to reassess whether your particular portfolio is the right one for your stated financial goal. Market losses feel easy to weather during periods of calm, making excessive risk-taking tempting, even for goals with short time horizons. During periods of downturn, however, losses become more vivid. With that in mind, today’s environment is a good one for conversations with your financial advisor to ensure portfolio fit. You’ll likely find you are well suited to stay the course.

While we recommend a sit-tight policy for end investors, let’s be clear: we aren’t taking the summer off. As valuation-driven managers of the Morningstar Managed Portfolios, we analyze prices and market conditions daily, aiming to buy securities as they dip below our estimates of fair value while also spreading the portfolios across a range of securities that should respond with varying magnitude to different economic environments. These efforts aim to minimize severe loss relative to the mandate of each given portfolio while also positioning the portfolios to take advantage of lower prices and the improved forward-looking returns that we believe can result from better valuations.

Indeed, from our vantage point, better yields across fixed-income and lower-valuation multiples within equities make markets more attractive today than they were a year ago.

We’re not calling the market bottom—we have no expertise in that, and I can’t help but note that no one else does, either—but we are carefully and judiciously averaging into the opportunities that we believe are emerging today. Those include the broad U.S. equity market, which, as valuations fall amid the prevailing sell-off, is finally starting to look a bit more attractive today than it has for several years.

To bookend the discussion with another famous sentiment about frightening times: the only thing we have to fear is fear itself. And in this case, we can’t let those doubts push us into poorly timed changes or missed

As always, we value your trust in us and manage portfolios with you and your goals in mind.

Opinions expressed are those of Morningstar Investment Management LLC and are as of June 30, 2021; such opinions are subject to change without notice.
* The Mind the Gap report is available at https://www.morningstar.com/lp/mind-the-gap
©2022 Morningstar Investment Management LLC. All rights reserved. The Morningstar name and logo are registered marks of Morningstar, Inc. Morningstar Investment Services LLC is a registered investment adviser and subsidiary of Morningstar Investment Management LLC. Portfolio construction and ongoing monitoring and maintenance of the model portfolios is provided on Morningstar Investment Services’ behalf by Morningstar Investment Management LLC, a registered investment adviser and subsidiary of Morningstar, Inc.

*Non-deposit investment products and services are offered through CUSO Financial Services, L.P. (“CFS”), a registered broker-dealer (member FINRA / SIPC) and SEC Registered Investment Advisor. Products offered through CFS: are not NCUA/NCUSIF or otherwise federally insured, are not guarantees or obligations of the credit union, and may involve investment risk including possible loss of principal. Investment Representatives are registered through CFS. The credit union has contracted with CFS to make non-deposit investment products and services available to credit union members. Article 1 prepared for Salal Investment Services by Broadridge Investor Communication Solutions, Inc. Copyright 2022. Broadridge Investor Communication Solutions, Inc. does not provide investment, tax, or legal advice. The information presented here is not specific to any individual’s personal circumstances. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances. These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable—we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice. This communication is strictly intended for individuals residing in the state(s) of CA, IL, IA, MN, NV, OH, OR, VA, and WA. No offers may be made or accepted from any resident outside the specific states referenced.
The information, data, analyses and opinions presented herein do not constitute investment advice; are provided solely for informational purposes and therefore are not an offer to buy or sell a security. Diversification does not ensure a profit or p protect against a loss in a declining market. Past performance is no guarantee of future results. Except as otherwise required by law, we shall not be responsible for any trading decisions, damages or other losses resulting from, or related to, the information, data, analyses or opinions or their use. Please consult with your financial advisor before making any investment decisions.
Morningstar® Managed PortfoliosSM are offered by the entities within Morningstar’s Investment Management group, which includes subsidiaries of Morningstar, Inc. that are authorized in the appropriate jurisdiction to provide consulting or advisory services in North America, Europe, Asia, Australia, and Africa. In the United States, Morningstar Managed Portfolios are offered by Morningstar Investment Services LLC or Morningstar Investment Management LLC, both registered investment advisers, as part of various advisory
services offered on a discretionary or non-discretionary basis. Portfolio construction and on-going monitoring and maintenance of the portfolios within the program is provided on Morningstar Investment Services behalf by Morningstar Investment Management LLC.
Investment research is produced and issued by Morningstar, Inc. or subsidiaries of Morningstar, Inc. including, but not limited to, Morningstar Research Services LLC, registered with and governed by the U.S. Securities and Exchange Commission.
Individual index performance is provided as a reference only. Each index is unmanaged and is not available for direct investment. Since indexes and/or composition levels may change over time, actual return and risk characteristics may be higher or lower than those presented. Although index performance data is gathered from reliable sources, we cannot guarantee its accuracy, completeness or reliability. Index data sources are as follows.
S&P 500 Index—An index of 500 stocks chosen for market size, liquidity and industry grouping, among other factors. The S&P 500 is designed to be a leading indicator of U.S. equities and is meant to reflect the risk/return characteristics of the large cap universe. The S&P 500 is a market value weighted index.
MSCI EAFE Index (Europe, Australasia, Far East)—A free float-adjusted market capitalization index designed to measure the equity market performance of developed markets, excluding the U.S. & Canada.
Bloomberg Barclays U.S. Aggregate Index—A market value weighted performance benchmark for investment-grade fixed-rate debt issues, including government, corporate, asset-backed, and mortgagebacked securities, with maturities of at least one year.
MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets.