Kuby's Commentary

The information provided in this commentary is not an offer to sell or the solicitation of an offer to purchase any security, product, or brokerage service. The information is not intended to be used as the basis for investment decisions, nor should the information be construed as advice designed to meet the particular needs of any investor. This commentary is presented to illustrate examples of the securities that North Star Investment Management Corporation and/or its affiliates ("North Star") may have bought for client accounts and the diversity of markets in which North Star Investments may invest, and may not be representative of current or future investments. You should not assume that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this commentary will be profitable or will be equal to any corresponding performance levels that might be indicated. Past performance is no guarantee of future results. Investments in securities involve risks including the possible loss of the principal invested. North Star and others associated with it, including employees, may have positions in and effect transactions in securities of companies mentioned or indirectly referenced in this commentary. North Star may buy, sell or hold these securities in proprietary or client accounts. North Star will not be providing regular updates or advising you of any changes in the views expressed herein. Investors should consider their investment objectives, risk tolerance, and financial situation and needs before investing in any security. Tax considerations, commissions, fees and other costs should be carefully evaluated with one's investment and/or tax advisors. Information provided is obtained from sources deemed to be reliable, but North Star cannot guarantee the accuracy or completeness of the information. This material may not be reproduced, distributed or transmitted to any other person in whole or in part without the prior written consent of North Star. A copy of North Star Investment Management Corporation's Form ADV Brochure, Privacy Notice and Business Continuity Plan summary can be obtained by calling 312-580-0900.

The information provided in this commentary is not an offer to sell or the solicitation of an offer to purchase any security, product, or brokerage service. The information is not intended to be used as the basis for investment decisions, nor should the information be construed as advice designed to meet the particular needs of any investor. This commentary is presented to illustrate examples of the securities that North Star Investment Management Corporation and/or its affiliates ("North Star") may have bought for client accounts and the diversity of markets in which North Star Investments may invest, and may not be representative of current or future investments. You should not assume that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this commentary will be profitable or will be equal to any corresponding performance levels that might be indicated. Past performance is no guarantee of future results. Investments in securities involve risks including the possible loss of the principal invested. North Star and others associated with it, including employees, may have positions in and effect transactions in securities of companies mentioned or indirectly referenced in this commentary. North Star may buy, sell or hold these securities in proprietary or client accounts. North Star will not be providing regular updates or advising you of any changes in the views expressed herein. Investors should consider their investment objectives, risk tolerance, and financial situation and needs before investing in any security. Tax considerations, commissions, fees and other costs should be carefully evaluated with one's investment and/or tax advisors. Information provided is obtained from sources deemed to be reliable, but North Star cannot guarantee the accuracy or completeness of the information. This material may not be reproduced, distributed or transmitted to any other person in whole or in part without the prior written consent of North Star. A copy of North Star Investment Management Corporation's Form ADV Brochure, Privacy Notice and Business Continuity Plan summary can be obtained by calling 312-580-0900.

The information provided in this commentary is not an offer to sell or the solicitation of an offer to purchase any security, product, or brokerage service. The information is not intended to be used as the basis for investment decisions, nor should the information be construed as advice designed to meet the particular needs of any investor. This commentary is presented to illustrate examples of the securities that North Star Investment Management Corporation and/or its affiliates ("North Star") may have bought for client accounts and the diversity of markets in which North Star Investments may invest, and may not be representative of current or future investments. You should not assume that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this commentary will be profitable or will be equal to any corresponding performance levels that might be indicated. Past performance is no guarantee of future results. Investments in securities involve risks including the possible loss of the principal invested. North Star and others associated with it, including employees, may have positions in and effect transactions in securities of companies mentioned or indirectly referenced in this commentary. North Star may buy, sell or hold these securities in proprietary or client accounts. North Star will not be providing regular updates or advising you of any changes in the views expressed herein. Investors should consider their investment objectives, risk tolerance, and financial situation and needs before investing in any security. Tax considerations, commissions, fees and other costs should be carefully evaluated with one's investment and/or tax advisors. Information provided is obtained from sources deemed to be reliable, but North Star cannot guarantee the accuracy or completeness of the information. This material may not be reproduced, distributed or transmitted to any other person in whole or in part without the prior written consent of North Star. A copy of North Star Investment Management Corporation's Form ADV Brochure, Privacy Notice and Business Continuity Plan summary can be obtained by calling 312-580-0900.

The information provided in this commentary is not an offer to sell or the solicitation of an offer to purchase any security, product, or brokerage service. The information is not intended to be used as the basis for investment decisions, nor should the information be construed as advice designed to meet the particular needs of any investor. This commentary is presented to illustrate examples of the securities that North Star Investment Management Corporation and/or its affiliates ("North Star") may have bought for client accounts and the diversity of markets in which North Star Investments may invest, and may not be representative of current or future investments. You should not assume that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this commentary will be profitable or will be equal to any corresponding performance levels that might be indicated. Past performance is no guarantee of future results. Investments in securities involve risks including the possible loss of the principal invested. North Star and others associated with it, including employees, may have positions in and effect transactions in securities of companies mentioned or indirectly referenced in this commentary. North Star may buy, sell or hold these securities in proprietary or client accounts. North Star will not be providing regular updates or advising you of any changes in the views expressed herein. Investors should consider their investment objectives, risk tolerance, and financial situation and needs before investing in any security. Tax considerations, commissions, fees and other costs should be carefully evaluated with one's investment and/or tax advisors. Information provided is obtained from sources deemed to be reliable, but North Star cannot guarantee the accuracy or completeness of the information. This material may not be reproduced, distributed or transmitted to any other person in whole or in part without the prior written consent of North Star. A copy of North Star Investment Management Corporation's Form ADV Brochure, Privacy Notice and Business Continuity Plan summary can be obtained by calling 312-580-0900.

The information provided in this commentary is not an offer to sell or the solicitation of an offer to purchase any security, product, or brokerage service. The information is not intended to be used as the basis for investment decisions, nor should the information be construed as advice designed to meet the particular needs of any investor. This commentary is presented to illustrate examples of the securities that North Star Investment Management Corporation and/or its affiliates ("North Star") may have bought for client accounts and the diversity of markets in which North Star Investments may invest, and may not be representative of current or future investments. You should not assume that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this commentary will be profitable or will be equal to any corresponding performance levels that might be indicated. Past performance is no guarantee of future results. Investments in securities involve risks including the possible loss of the principal invested. North Star and others associated with it, including employees, may have positions in and effect transactions in securities of companies mentioned or indirectly referenced in this commentary. North Star may buy, sell or hold these securities in proprietary or client accounts. North Star will not be providing regular updates or advising you of any changes in the views expressed herein. Investors should consider their investment objectives, risk tolerance, and financial situation and needs before investing in any security. Tax considerations, commissions, fees and other costs should be carefully evaluated with one's investment and/or tax advisors. Information provided is obtained from sources deemed to be reliable, but North Star cannot guarantee the accuracy or completeness of the information. This material may not be reproduced, distributed or transmitted to any other person in whole or in part without the prior written consent of North Star. A copy of North Star Investment Management Corporation's Form ADV Brochure, Privacy Notice and Business Continuity Plan summary can be obtained by calling 312-580-0900.

So far 2021 has provided an incredibly smooth ride for investors, but the news flow last week suggested some turbulence on the horizon.

The Delta Covid-19 variant cases and deaths surged, both consumer and producer prices spiked, consumer confidence plunged, and political wrangling in the U.S. House of Representatives cast doubt on the passage of the infrastructure bill.

The S&P 500 gained 0.71% for the week to set another new record high on Friday, but small-cap stocks suffered a 1.1% decline.

The U.S. Senate on Tuesday passed a $1 trillion infrastructure bill and immediately kicked off debate on a $3.5 trillion spending blueprint for President Joe Biden's key priorities on climate change, universal preschool, and affordable housing.

Consumer prices rose by 5.4% in July as the reopening of the economy kept inflation elevated at levels that, according to the Labor Department's CPI report on Wednesday, matched the prior month's increase. The gains moderated on a monthly basis, but inflation remains much faster than it was before the pandemic.

The U.S. consumer showed signs of fatigue from confronting the combination of the resurgence of the virus and higher prices, as the University of Michigan's gauge of consumer sentiment plunged in August to a reading of 70.2 from a final July reading of 81.2.

Speaking of the consumer, earnings reports are due out from Walmart, Target, Lowe's, and Macy's. Additionally, on Tuesday retail sales for July are forecasted to show a 0.2% decline from the June tally.

Reflecting on the major market-moving storylines, the classic 1977 Meatloaf song, "Two Out of Three Ain't Bad" comes to mind: (1) corporate earnings were great; (2) the jobs report was very strong; and (3) BUT sadly Covid-19 cases are surging.

On the earnings front, 89% of the companies in the S&P 500 have reported actual results for Q2 2021 to date. Of these companies, 87% have reported actual EPS above estimates.

Turning to the employment report, Friday's headline figure was that employers created nine hundred and forty-three thousand new jobs in July, and the unemployment rate fell from 5.8 percent to 5.4 percent.

More than 44,000 Americans are currently hospitalized with COVID-19, according to the CDC, up 30% in a week and nearly four times the number in June. The seven-day average for deaths rose from about 270 deaths per day two weeks ago to nearly 500 a day as of Friday, according to Johns Hopkins University.

The stock market embraced "two out of three ain't bad" and closed out the week with the S&P 500 gaining 0.94% at a record high, while the Nasdaq rose 1.11%, and the Russell 2000 advanced 0.97%.

Earnings season will wrap up, with just twelve S&P 500 companies reporting results for the second quarter. On the economic calendar, The Bureau of Labor Statistics will report the Job Openings and Labor Turnover Survey (JOLTS) for June on Monday.

The BLS also reports CPI on Wednesday and PPI on Thursday, both releases will be carefully watched for any indications of the inflationary pressures being as "transitory" as the Fed has suggested. On Friday, The University of Michigan releases its Consumer Sentiment for August. We believe it is important to monitoring consumer sentiment as a forward-looking indicator of economic activity.

Stocks on the Move: CarParts.com Inc (PRTS), Century Casinos Inc (CNTY), Hamilton Beach Brands Holding Co (HBB)

February 17th, 2021 marked the top of the Chinese stock market, which has subsequently nosedived over 25%, including 8.72% last week. The S&P 500 has gained 12.49% during that time frame. The most recent downturn was triggered by China's decision to have its $100 billion private-tutoring industry operate as nonprofits and have no foreign ownership.

The major indexes remain near record levels, but last week there was a modest decline in the market, or perhaps it is more accurate to say there was a decline in Amazon, Apple, Facebook, and Microsoft, as the entire 0.4% decline in the S&P 500 can be attributed to those 4 companies.

Corporate earnings continued to dramatically exceed estimates, including the reports from those Mega-Caps. With almost 60% of companies having reported, a record 88% have beaten estimates by an incredible 17.2%.

The economic data during the week came in slightly softer than anticipated, with GDP +6.5%, which was nearly 2% below estimates.

It is the busiest week of earnings season, with 148 S&P 500 companies reporting results for the second quarter. Investors will be paying particular attention to the forward guidance and any color provided on the cost pressures and pricing power that companies are disclosing.

Stocks on the Move: Advanced Micro Devices Inc (AMD), ACCO Brands Corporation (ACCO), PetMed Express Inc (PETS), Consolidated Communications Holdings Inc (CNSL), Westwood Holdings Group Inc (WHG)

Never-Ending Rally Back on Track

Despite the scary headlines, the "Fear Index" continues to falter. The Bull Market seemed to show signs of battle fatigue, fighting the stiff headwinds of inflationary pressures and the emergence of the highly contagious Delta variant of the coronavirus. Monday proved to be the worst trading day in over 9 months for equities, with a 2% across the board decline and a 14.3% increase in the Fear Index (VIX). By Tuesday morning, without any positive news, the sell-off was over, and the never-ending rally was back on track. Indeed, by Friday's close the S&P 500, the Nasdaq Composite, and the DJIA, were all at record highs, and the Fear Index had resumed its downward slope.

We have asked our summer interns to send us articles from the previous week that they believe are most relevant. Summer Intern Sam Audy, from Indiana University's Kelley School of Business, focused on monetary policy experiment. He referenced an article from MarketWatch that highlighted modern monetary theory and its potential danger, providing the following quote: "the transition to MMT may create instability. An exchange-rate or inflation shock would affect existing investors and trade. Policymakers may be unable to control the process once set in motion. Where supply constraints are reached, excessive deficit-financed spending would result in inflation, higher rates and a currency correction."

We continue to monitor the dollar for signs of weakness, and believe gold remains a reasonable hedge against the possible future instability.

Investors Aren't Backing Down

Christian Bryan, one of our interns from the University of Chicago (Go Maroons!), noted "Through what I saw it looks like many people are saying that regardless of if the delta variant becomes more prevalent, America and Europe are unlikely to truly shut down again, meaning that the economic growth pace will not be affected."

It will be a big week for earnings releases, with 180 S&P 500 companies reporting second quarter results.

The economic calendar is also busy, with New Home Sales on Monday, Durable Goods and Consumer Confidence on Tuesday, GDP on Thursday, and Personal Income on Friday. Perhaps the most important event of the week will be the FOMC monetary policy decision on Wednesday, with expectations that the central bank will announce a timeline for reducing its bond purchases, current at $120 billion a month.

Stocks on the Move: HCSG, RGP, PRTS, RCKY

Whereas the major headline indexes set record highs again on Monday, the undertone of the market continues to soften, with declining issues increasingly outnumbering advancing issues. In fact, excluding the Fab FAANG Five (Facebook, Apple, Amazon, Netflix, & Google) plus Microsoft, the rest of the market has been primarily in retreat for the past month, with Small-Cap and Value faring the worst.

On Friday, Dr. Gottlieb expressed his concern that the U.S. is significantly undercounting the number of Covid delta infections, making it difficult to know whether the highly transmissible strain is causing higher-than-expected hospitalization and death rates. "Perhaps at the core of these recent movements is concern that the Delta variant of Covid-19 might disrupt the recovery later in the summer or in the fall. In any event, small caps have been very moody recently, exhibiting substantially more day-to-day volatility than their big-cap brethren." We would add that the future economic impact of this likely spread of the virus has created a stiff headwind for the "reopening" businesses.

Regarding the inflationary pressures, Tuesday's consumer price index came in very hot at 5.4%, making three months in a row of elevated prices.

The good news is that corporate earnings reports have been extremely strong. The bad news is that market forecasters are discounting these results as representing peak earnings. U.S. stock futures followed the global markets lower over the weekend, and the "Fear Index" (VIX) jumped 6% going into Monday's trading session.

Earnings season will be in full swing this week, with 79 S&P 500 companies scheduled to release results.

Stocks on the Move: CarParts.com (PRTS), Westwood Holdings Group Inc (WHG), Madison Square Garden Entertainment Corp (MSGE), Pitney Bowes Inc (PBI), 1-800-Flowers.com Inc (FLWS), Century Casinos Inc (CNTY)