Reso 2025-166 OPEB & Investments Report

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QUARTERLY MARKET SUMMARY For the Quarter Ended September 30, 2025 Multi-Asset Class Management Inflation (U.S.): •Inflation accelerated in Q3 led by rising goods prices and sticky services costs, keeping core inflation closer to 3%, well above the Fed’s 2% target –a consideration for further rate cuts. •Fed Chair Powell noted tariffs have begun to push up goods prices in some categories, but the base case is for these effects to be short-lived. Economic Growth (Global): •Resilient U.S. growth driven by robust consumer spending and elevated business investment despite growing softness in the labor market. •Trade tensions, elevated tariffs and a prolonged U.S. government shutdown remain key downside risks, while AI driven investment and fiscal support in some regions provide partial offsets. Monetary Policy (Global): •The Fed cut rates by 25 bps in September citing rising downside risks to employment despite inflation remaining above its 2% target. Further rate cuts expected in 2025 and 2026. •Major central banks have already eased (ECB and BOE) or are in the process of further easing (U.S. and Canada) except for the BOJ. Labor Markets (U.S.): •Labor market conditions continued to cool with net new job creation nearing zero while being concentrated in just a few service sectors. Continued weakening can have impact on consumption. •Despite some signs of cooling, the layoff rate remains low and points towards employers adopting a “no hire, no fire” approach. Consumer Spending (U.S.): •Slower nominal wage growth combined with higher inflation has eroded real purchasing power. However, consumer activity remained resilient, driven by spending from higher income households. •Further labor market softness, a significant correction in the equity market or higher pass- through of tariffs to goods prices remain the largest threats to consumer spending. Financial Conditions (U.S.): •Financial conditions eased as tariff announcements were digested, renewing market confidence which resulted in equities reaching new all-time highs and credit spreads tightening to historical lows. •Financial conditions expected to remain tailwind as monetary policy eases. Political/Policy Risks: •Reconciliation bill passage, ongoing trade deals, peace progress on Israel–Hamas conflict are positives on policy front. •Prolonged U.S. government shutdown, legal challenges to tariffs and possibility of further tariffs, Russia-Ukraine conflict are negatives. Valuations: •U.S. equities and credit markets trade at valuations that are expensive relative to their history. •Resilient growth, AI related spending tailwinds and higher profit margins are supportive of the current valuations while inflation and tariff risks are not fully reflected in the current valuations. Corporate Fundamentals: •Earnings growth expectations are positive across global equities, but expectations within U.S. positively impacted by AI spending tailwinds. •In the U.S., capex deduction changes and rate cuts are positives while tariff/cost pressure impact on both earnings growth expectations and profit margins needs attention. Factors to Consider Over the Next 6-12 Months Statements and opinions expressed about the next 6-12 months were developed based on our independent research with information obtained from Bloomberg. The views expressed within this material constitute the perspective and judgment of PFM Asset Management, a division of U.S. Bancorp Asset Management, Inc., at the time of distribution (September 30, 2025) and are subject to change. Information is obtained from sources generally believed to be reliable and available to the public; however, we cannot guarantee its accuracy, completeness, or suitability. Stance Unfavorable to Risk Assets Stance Favorable to Risk Assets Current outlook Outlook one quarter ago PositiveSlightly PositiveNeutralSlightly NegativeNegative 2.8 Exhibit A Resolution No. 2025-166 Page 11