The Battle versus Covid-19 Continues

Dear Kimball Creek Partners and Friends:

The battle versus COVID-19 continues. The spread in some of the recent hotspots like California and Florida is slowing, while states in the Northeast and Midwest are now experiencing increases in cases. According to the World Health Organization, 27 vaccines are in human trials, and the chances of an approved vaccine by late this year or early next year are quite high. By staying on the side of scientists, and through humankind’s resolve as the entire world is working together, it’s possible to believe we will beat this latest adversary.

In good news, the S&P 500 Index has moved into positive territory for the year (as of August 5) after being down more than 30% in March, making 2020 one of the largest reversal years ever. Going back to 1950, however, August and September historically have been the two worst months of the year for stocks. In addition, signs of recent weakening in the job market, based on stubbornly high jobless claims, combined with evidence of reduced consumer mobility from several high-frequency data points suggest the stage could be set for stocks to take a well-deserved break.

At the July 29 Federal Open Market Committee meeting, Federal Reserve (Fed) Chair Jerome Powell made it very clear that the Fed has additional tools to support the recovery, and that low interest rates may be here to stay well beyond this year and next. The economy has improved off the March lows, but it isn’t near the record-breaking levels we saw earlier this year. Powell also noted that further relief from Congress was “essential” to help support the economy.

Meanwhile, Congress is inching closer to a new COVID-19 relief bill, but parties remain at odds over several key elements. Although the two sides appear far apart, a deal likely may be struck at the eleventh hour—consistent with typical Washington theater. At this time, Congress is expected to agree to a stimulus package in the neighborhood of $1.5 trillion, bringing the total US fiscal stimulus to more than $4 trillion.

Signs that the economic recovery may be leveling off have not prevented corporate America from delivering earnings well above expectations. Leaders like Apple, Amazon, and Facebook reported extremely strong results in the second quarter, helping these influential stocks move significantly higher. FactSet consensus estimates of future earnings have ticked higher as well, suggesting corporate America may be confident in the eventual economic rebound.

Baseball Hall of Fame catcher Yogi Berra said, “If you torture numbers enough, they will tell you anything,” which fits well with what we’re seeing right now in 2020. Some data appears good, while some data appears troubling. This journey is not over yet, and there may be more twists and turns before society and the economy can fully recover from COVID-19. But like all journeys, this one has an end date, and we will get there.

Until then, please remain diligent and strong, and contact me with any questions.

Important Information

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as
predicted and are subject to change.

References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no
guarantee of future results.

All data is provided as of August 5, 2020.

Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. LPL Financial doesn’t provide research on individual equities.

All index data from FactSet.

This Research material was prepared by LPL Financial, LLC. All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.

At the Midpoint of 2020

July 17, 2020

Dear Kimball Creek Partners and Friends:

We are at the midpoint of 2020, and it would be an understatement to say it’s been a challenging year so far in the United States and around the world. We’ve faced health, social, and economic crises that continue to impact our communities and our economy. That is why we’re looking ahead for new ways to face these challenges together and to prepare now for better times. LPL Research’s Midyear Outlook 2020: The Trail to Recovery charts a path forward.

The stock market is forward-looking: It focuses on what’s happening today and what it sees on the path ahead. Much of the recent real-time economic data—such as transportation activity,
home sales, and jobless claims—is showing tangible evidence that economic activity—while still depressed—has begun to make a comeback. The path of the economic recovery remains uncertain, but based on the deep impact and multi-staged recovery, LPL Research expects a 3–5% contraction in gross domestic product in 2020.

Already stocks are pricing in a steady economic recovery beyond 2020 that may be supported if we receive breakthrough treatments to end the COVID-19 pandemic. LPL Research’s 2020 year-
end S&P 500 Index target range is 3,250–3,300, based on a price-to-earnings ratio (PE) of just below 20 and a normalized earnings per share (EPS) number of $165. However, the optimism
showing in the S&P 500 Index now may limit the size of the gains over the rest of the year.

Turning to the bond market, LPL Research expects interest rates to head higher over the rest of 2020 but remain near historically low levels, with a year-end forecast of 1–1.5% on the 10-year
US Treasury yield. If realized, this would be the lowest interest-rate level on record to end a year.

It’s still going to be a challenging environment with significant uncertainty that may lead to more volatility for the next few months, especially with the highly anticipated presidential election in
November. It’s important for investors to continue to focus on the fundamental drivers of investment returns and their long-term financial goals.

LPL Research’s Midyear Outlook 2020 provides updated views of the pillars for investing—the economy, bonds, and stocks. As the headlines change daily, continue to look to these pillars as
trail markers on your investment journey, and to the Midyear Outlook 2020 to help provide perspective on facing these challenges now and preparing to move forward together.

Please contact me if you have any questions.

__________________________________________________________________________________________________________________________________

All data is provided as of June 30, 2020.

All index data from FactSet.

This Research material was prepared by LPL Financial, LLC. All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy. Securities offered through LPL Financial, member FINRA/SIPC. Investment advice and financial planning offered through Financial Advocates Investment Management DBA Kimball Creek Partners, a Registered Investment Advisor. Financial Advocates Investment Management, Kimball Creek Partners and LPL Financial are separate entities.

Please remember to contact Financial Advocates Investment Management and Kimball Creek Partners in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you want to impose or modify any reasonable restrictions to our investment advisory services, or if you wish to direct that Financial Advocates Investment Management, and Kimball Creek Partners effect any specific transactions for your account. Please be advised that there can be no assurance that any email request will be reviewed and/or acted upon on the day it is received – please be guided accordingly. Trading instructions sent by email will NOT be honored. A copy of our current written disclosure statement discussing our advisory services and fees continues to remain available for your review upon request.

The information contained in this e-mail message is intended only for the personal and confidential use of the recipient(s) named above. If the reader of this message is not the intended recipient or an agent responsible for delivering it to the intended recipient, you are hereby notified that you have received this document in error and that any review, dissemination, distribution, or copying of this message is strictly prohibited. If you have received this communication in error, please notify us immediately by e-mail, and delete the original message.

#1-05030783

When Will the Economy Get Back to Normal?

Dear Kimball Creek Partners and Friends:

The July Fourth holiday will be very different this year. Although it’s a time to enjoy family and friends, and maybe even watch some fireworks, social distancing and a new wave of COVID-19
cases also may take a seat at the picnic table. We all continue to believe our doctors and medical community will help us conquer this disease; however, with more than 10 million confirmed cases of COVID-19 around the globe (Johns Hopkins), this terrible fight is far from over. Meanwhile, the US economy appears to be turning a major corner, and better times may be ahead later in 2020.

Recent economic data has created some fireworks itself, coming in significantly better than what economists had expected, and in some cases, beating previous records. For example, the May US Bureau of Labor Statistics employment report showed a record 2.5 million jobs created—10 million more than economists expected, according to Bloomberg. Additionally, retail sales soared
nearly 18% in May, according to the US Census Bureau, again much better than what was expected. Even though these rebounds are coming off historically low levels, it has been
encouraging to see how quickly the economy may be coming back.

The big question, though, is when will the economy get back to normal? Although parts of our economy are coming back quickly, other areas may take years to come back fully. Industries like
hotels, restaurants, and airlines are going to be under pressure for a long time. In fact, in the 10 US recessions since 1950, it took nearly 30 months on average for all of the jobs that were lost to
come back. More recently, it took four years for all the jobs to return after the tech bubble recession in the early 2000s, and more than six years for all of the lost jobs to return after the
financial crisis of 2008–09. Our economy has lost nearly 20 million jobs in the past three months, and even with re-hiring activity in May and June, it may take years to recover all of those job
losses. (Jobs data from US Census Bureau)

A major second wave of COVID-19 is the big wild card. Although most of us don’t expect to go into full lockdown mode again like we did in March and April, more restrictions may be put in
place, which could hinder the economic recovery. But it isn’t all bad news. On June 22, Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious Disease, said at a
congressional hearing that a vaccine may be available by early 2021. He noted that in the past it has taken years to develop a vaccine against viruses, but with the entire world working together
to beat COVID-19, this vaccine may be the fastest to market ever produced.

Voltaire said, “History never repeats itself. Man always does.” Given the stock market is driven by fear and greed, it has very human-like qualities, which means history may be a guide for what
may happen next. In March 2003, stocks hit a major low before a huge spike into early summer, when stocks consolidated—or sat on their gains—during the summer months, followed by an
eventual move higher later in the year. There was a very similar reaction in the summer of 2009 after the March 2009 bear market lows. So far in 2020 we’ve had the March lows and a huge
rally, so historically, a summertime pullback or consolidation would be normal—and maybe even healthy.

While we’ve faced several health, social, and economic crises this year, July Fourth is a good time to think about how lucky we are to live in this great country and to remember the resilience and
perseverance we’ve demonstrated over the past 244 years. History has shown us that better times will come.

Best wishes for a happy and safe Fourth of July, and contact me if you have any questions.

__________________________________________________________________________________________________________________________________

All data is provided as of June 30, 2020.

All index data from FactSet.

#1-05027182

Never confuse a single defeat with a final defeat.

Dear Kimball Creek Partners and Friends:

“Never confuse a single defeat with a final defeat.” — F. Scott Fitzgerald

The economic struggles in our country are among the worst we’ve ever seen. In April, a record 20 million people lost their jobs, and 36 million people have filed for unemployment since the COVID-19 pandemic struck in mid-March. Record drops in consumer confidence, manufacturing, and spending are all adding to the immediate economic fallout. Specific industries have been devastated, with names like J.C. Penney, J.Crew, and Neiman Marcus filing for bankruptcy.

Clothing sales are down 89%, furniture sales down 66%, and restaurant sales down 49% from this time last year, according to the United States Census Bureau. Yet, as F. Scott Fitzgerald wrote, these many single defeats won’t necessarily add up to the final defeat. Our country has survived many trying times before, and we are starting to see glimmers of hope on both the medical and economic fronts. Our resolve and fortitude will once again shine, as we head toward better times in the second half of 2020.

More testing for COVID-19 is needed to help identify infected people and to stop the virus from spreading. As testing has soared, the number of positive COVID-19 results as a percentage of total tests has trended lower, and that percentage consistently has been beneath 10%, according to data from the COVID Tracking Project. In addition, doctors have developed a “toolbox” of drugs to help provide patients a better chance at survival. Antiviral drugs like remdesivir in combination with other drugs are showing significantly better results now than just a few weeks ago. The World Health Organization has reported “potentially positive data” in several treatments. Although a vaccine could still be a year or more away, human drug trials are underway with encouraging initial results.

In the face of the devastating loss of human life and historically weak economic data, however, the S&P 500 Index has experienced one of its greatest short-term rallies ever, up more than 30% from the March 23 lows at its recent peak. Based on historical trends, a warranted correction in stocks over the coming months may be possible. Stock valuations are historically expensive, tensions are building between the United States and China, the stock market’s momentum is showing signs of waning, and we’re entering the historically weak summer months—all of these are reasons to be alert.

History bears this out. All major S&P 500 bear markets in the past 60 years had a significant bounce off the market lows, followed by a correction of about 10% on average before another surge higher. Based on this historical trend, a market correction of 8–12% after the recent big rally may be likely over the coming months.

While current economic data may sound bad, it’s important to remember it is backward-looking. Real-time economic data points such as public transportation, traveler data from the Transportation Security Administration, fuel sales, railroad traffic, and federal tax withholding are all showing improvement as the economy begins to re-open.

Finally, small businesses are the lifeblood of the US economy, and the Bureau of Labor Statistics shows they employ 47% of all private sector jobs. Recent data showed small businesses are as optimistic about the next six months as they’ve been in 18 months, suggesting the worst may be behind us, and a growing demand for their products and services could be brewing. The pain from this recession is impacting all of us, but better times are coming.

Stay safe, and don’t hesitate to contact me if you have any questions or concerns.

__________________________________________________________________________________________________________________________________

All index data from FactSet.

This Research material was prepared by LPL Financial, LLC. All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.

#1-05012842

Disruptive Embrace

There is so much talk about disruption these days and typically it has to do with innovation.

A new company or product hits the market and displaces existing market leaders — and even eliminates entire industries over time.

The 12 original components selected by Charles Dow to make up his original Dow Jones Industrial Average in 1896 were: American Cotton Oil; American Sugar; American Tobacco; Chicago Gas; Distilling & Cattle Feeding; General Electric[ Laclede Gas;National Lead; North American; Tennessee Coal & Iron; U.S. Leather Preferred; and U.S. Rubber.

Not one of these companies is on the Dow today and most of them no longer exist.

What they all have in common is they have experienced the effects disruption through innovation.

Disruption is the interruption of process, work flow or sequence. And innovation is a new idea, a modern thought or a better application.

But innovation did not always have this positive connotation. In the early settlement of America, innovation was a negative concept that meant rebellion, revolt or even heresy.

Come to think about it, today, innovation and disruption are good or bad depending on where your business is when it happens.

Clayton M Christensen said, “Disruption is a process, not an event, and innovations can only be disruptive relative to something else.”

What if the “something else” is under-performance in an area of your business?
Like a pounding drum, each passing day marches a disruptive process closer to your business.

Can you hear the drum?

It’s a subtle change in the order of operations… the elimination of an unnecessary step.

It is the distant drone of shifting markets or the internal silence of a fixed mindset.

Is your business ready for the next big market move?

Markets move fast, and large companies are slow to change, but a small one can spin on a dime.

If you operate a small to medium size company, disruption can be a good thing.

Because what can be disrupted will be disrupted. It is only a matter of time. And there are significant risks if ignored and significant opportunity if embraced.

As Henry Wadsworth Longfellow said:

“In the world’s broad field of battle,
In the bivouac of Life,
Be not like dumb, driven cattle!
Be a hero in the strife!”

May 2020 Client Letter

Dear Kimball Creek Partners and Friends:

Investors like labels for the economy and financial markets—many of them with the word “great” in them. The Great Depression. The Great Recession. The Great Lockdown. Well, we’ve moved
into what we might call the Great Disconnect. How can stocks have rebounded so strongly in the last month amid so much suffering and economic damage? What’s Wall Street seeing that so
many on Main Street are not?

For one, in the United States more than 20 states have already begun to reopen their economies, and others have plans to begin very soon. In Europe, lockdowns are being eased, following Asia’s lead. Even gradual progress like this may help the stock market focus more on what’s ahead than where we are right now.

As lockdown restrictions are lifted, timely indicators like vehicle traffic, electricity consumption, public transportation use, daily consumer confidence surveys, and a wide variety of weekly
economic indicators point to a low mark in economic activity in the United States in April. The “Great Lockdown” recession of 2020 may be over already—although it may not be officially
declared a recession for several more months.

Nowhere to go but up isn’t normally very reassuring, but to the stock market it may be. Historically, when things have looked their worst, the opportunity in stocks has tended to be the
best. The S&P 500 Index has usually hit its bottom and started the climb back up about five months before a recession has ended.

Other factors have helped boost investor sentiment recently. Market participants have gained confidence from the bold stimulus response from policymakers in Washington, DC, and the
Federal Reserve. The total amount of the stimulus this year is about 22% of the entire US economy, based on gross domestic product (GDP). During the entire 2008–09 financial crisis, the
total amount of stimulus was 16.6% of GDP. And there may be more. Surging unemployment and weakening finances at the state and municipal levels may be catalysts for more action.
Though millions of jobs have been lost to this crisis, many millions surely have been saved as well.

The medical community also has provided reasons for optimism. Though no one knows for sure when a COVID-19 vaccine will be ready, rapid progress is being made, and several promising
candidates are now in human trials. Testing capacity has also ramped up, while some of the best capitalized and most innovative companies in the world are developing contact-tracing tools to
help facilitate safe re-openings. While stocks may have come a bit too far, too fast in the short term, markets are clearly responding to these positive developments.

Reopening the US economy will be a gradual process, and temporary setbacks may be possible. Some of the lost jobs may not return. The possibility of disappointment as the “Great Reopen”
unfolds is real. We are facing a tremendous challenge, but it is being met with incredible resilience, resourcefulness, and innovation. Together we will get through this crisis and return to
better times.

Please stay healthy, and don’t hesitate to contact me if you have any questions or concerns.

__________________________________________________________________________________________________________________________________

All data is provided as of May 6, 2020.

This Research material was prepared by LPL Financial, LLC. All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.

#1-05007832

Life is 10% what happens to you and 90% how you respond to it.

April 21, 2020

“Life is 10% what happens to you and 90% how you respond to it.” — Lou Holtz, Hall of Fame football coach

As the battle against the COVID-19 pandemic continues, how we respond to it will determine how we beat it. Continued sacrifices range from everyone in the medical community working on the front lines to the thousands of truck drivers across our country keeping goods flowing, parents who have become homeschoolers, and folks missing their family events to help stop the spread of this terrible outbreak. As Lou Holtz said, we can’t control what happens, but how we respond to it is what matters. Our response to this crisis has shown the resolve and strength of the human spirit, which is why we will overcome.

The response from the economy and stock market, however, has shown a disconnect between the two. Tragically, 22 million people have filed for unemployment in the past four weeks, nearly wiping out all the jobs created during the record 10-year economic expansion. Historic drops in consumer confidence, retail sales, industrial production, oil prices, and housing starts have shown how quickly our economy has gone from solid growth to virtually stopping in its tracks. Yet, stocks have been soaring the past few weeks. Remember, stocks tend to weaken before the economy, and they tend to lead before the economy turns around. Stocks see light at the end of the tunnel before the economy feels it, and the big move recently may be a sign the economy could turn around later this year.

Small businesses have been impacted the most by the economic crisis, and the government and Federal Reserve actions to bridge the gap to better times are unprecedented. The combined stimulus from fiscal and monetary policy is more than 20% of the value of the entire US economy, as measured by gross domestic product, greatly mitigating the economic hardships. The hurried roll out of the small business loan program wasn’t perfect, but it is helping those businesses.

This recession—though not officially declared yet—is unlike any other. It wasn’t caused by the virus itself, but by the government telling people to stay home in an effort to flatten the curve. The government can’t simply turn on a switch to get things back to normal, but with all of the stimulus making its way through the system, it’s possible this could be one of the shortest recessions ever. First quarter earnings season has begun, and it will be interesting to learn how quickly corporate America anticipates the slowdown ending. Estimates for earnings in 2020 have reduced drastically, but there is still hope that a strong second-half economic rebound could help support a recovery in corporate profits.

More than 2 million people worldwide have been infected by the virus, and we all have been impacted in some way. Last week there was very positive news on a potential COVID-19 treatment from Gilead Sciences, while Boeing, one of the hardest hit companies during this crisis, said it might start building planes again soon. We aren’t out of the woods yet, and the economic data and headlines may get worse before they get better, but our response to this crisis reinforces our confidence that the future remains bright.

Sincerely,

Dean S. Bennion, Managing Partner

Kimball Creek Partners

206-508-6442

[email protected]

__________________________________________________________________________________________________________________________________

Important Information
This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change.
References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.
All data is provided as of April 21, 2020.
Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. LPL Financial doesn’t provide research on individual equities.
This Research material was prepared by LPL Financial, LLC. All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.

#1-05000877

April 2020 Client Letter

First, a big thank you to everyone for being “Stay at Home” Heros. Many of you have asked about my wife Lesli. She is a critical care nurse in the Intensive Care Unit (ICU) at our local hospital. She and her coworkers are on the front lines of the medical response to the Covid-19 virus and it has been exhausting work. She is staying healthy and I know she appreciates your expressions of gratitude, kindness and prayers. She especially appreciates your efforts to stay home and help “flatten the curve” so our healthcare professionals can keep up. While we aren’t out of the woods yet, the rate of new cases is slowing.

Let us know how we can help.

We are here for you and stand ready to help answer your questions and concerns. While you are at home this might be a great time to schedule a call or video conference and update your financial plan. This can help you keep your investments current and focused on the longer term.
The changes we implemented in our business last several years are paying off now. The move to Tacoma which included adding additional staff resources and other new technologies like a robust communication system that included video conferencing have helped us be prepared to serve you during these challenging times. We are here for you.
You can now reach us by text, email, phone, video conference through RingCentral, Screen share with Wealthvision and Riskalyze and more. You are our priority.

Hard to believe that just 3 months ago we thought 500 point moves in the Dow Jones Industrial Average were a big deal and now today they hardly make the news. It’s been a long couple months and could be awhile before we get back to normal. Stay healthy and stay safe.

Dean Bennion

Managing Partner

Kimball Creek Partners

The Battle versus Covid-19 Continues

At the Midpoint of 2020

When Will the Economy Get Back to Normal?

Never confuse a single defeat with a final defeat.

Disruptive Embrace

May 2020 Client Letter

Life is 10% what happens to you and 90% how you respond to it.

April 2020 Client Letter

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