Reso 2024-008 3rd Quarter Investment Report

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Economic Update    Recent economic data has shown above trend growth fueled by a rise in consumer spending and a continuing healthy US job market. Inflationary trends are subsiding, but core levels remain well above the Fed’s target.Given the cumulative effects of restrictive monetary policy and tighter financial conditions,we believe the economy will gradually soften and the Fed will remain data dependent as they tread cautiously going forward. As expected at the November meeting,the Federal Open Market Committee voted unanimously to leave the Federal Funds rate unchanged at a target range of 5.25 -5.50%.Market participants interpreted the FOMC statement as somewhat dovish,with the formal statement noting “tighter financial and credit conditions for households and businesses are likely to weigh on economic activity,hiring, and inflation.” Federal Reserve Chair Jerome Powell also noted the stance of policy is restrictive,the full effects of the tightening have yet to be felt,and the process of getting inflation to 2%has a long way to go.We believe monetary policy will remain restrictive for longer,but further tightening will not be required for the Federal Reserve to eventually achieve their policy objectives. The yield curve inversion narrowed considerably in October.The 2-year Treasury yield increased 4 basis points to 5.09%,the 5-year Treasury yield rose 24 basis points to 4.86%,and the 10-year Treasury yield increased 36 basis points to 4.93%.The inversion between the 2-year Treasury yield and 10-year Treasury yield narrowed to -16 basis points at October month-end versus -48 basis points at September month-end. The spread between the 2-year Treasury and 10-year Treasury yield one year ago was -44 basis points. The inversion between 3- month and 10-year Treasuries narrowed to -54 basis points in October from -88 basis points in September.The shape of the yield curve indicates that the probability of recession persists. 3