Reso 2026-060 2025 Q4 Investment Report

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Statements and opinions expressed about the next 6-12 months were developed based on our independent research with information obtained from Bloomberg Finance L.P. and FactSet. The views expressed within this material constitute the perspective and judgment of PFM Asset Management at the time of distribution (12/31/2025) and are subject to change. Information is obtained from sources generally believed to be reliable and available to the public; however, PFM Asset Management cannot guarantee its accuracy, completeness, or suitability. Monetary Policy (Global): • The Fed cut rates by 50 bps in Q4 but noted continuing challenges to achieving its dual mandate of maximum employment and stable prices. • The “dot plot” indicates 25 bps of projected cuts in both 2026 and 2027, but the wide dispersion underscores growing differences of opinion. • Markets view policy risks as skewed towards additional easing assuming a more dovish Chair takes office in mid-2026 as expected. • Most major central banks have continued easing with the BOJ being the notable exception. Economic Growth (Global): • Strong consumer and business spending and steadier trade dynamics continue to fuel economic growth. • The effects of U.S. government shutdown are expected to be temporary and fully recouped in 1Q26. • Benefits from the tax and reconciliation bill and increases in anticipated AI capex are expected to support growth in 2026. Inflation (U.S.): • While headline inflation moved lower in Q4, significant gaps in data collection due to the U.S. government shutdown likely biased the data lower. • Lower shelter inflation continues to support disinflation going forward although goods prices continue to experience tariff passthroughs. • Fed Chair Powell noted inflation excluding tariffs is near 2%, suggesting the Fed is looking through these effects. Financial Conditions (U.S.): • Financial conditions eased further as corporate earnings exceeded expectations and tariff concerns abated. • Equities reached new all-time highs, credit spreads remain tight, and volatility remains low. • Fiscal uncertainty and geopolitical risks could reintroduce tighter financial conditions over the next 6-12 months. Consumer Spending (U.S.): • Consumer confidence sank given a more pessimistic views of the labor market, particularly among lower-income cohorts. • Consumer activity remained resilient through the holiday shopping season, highlighting the disconnect between sentiment and actual activity. • Consumer spending is dominated by higher-income cohorts who benefit from elevated wage growth, strong equity markets, and home price appreciation. • A significant correction in the equity market or a material slowdown in the labor market are the largest threats to consumer spending. Labor Markets (U.S.): • Labor market conditions continued to cool with net new job creation close to zero with gains concentrated in the healthcare sector. • The breakeven employment level to keep pace with labor force growth has fallen. Initial jobless claims and layoff rates remains low, easing some concerns over labor weakness. • The unemployment rate continued to tick higher, while job openings declined and the quits rate remain subdued, signaling reduced worker leverage. • Wage growth continues to exceed inflation, supporting consumer spending. Stance Unfavorable to Risk Assets Stance Favorable to Risk Assets Current outlook Outlook one quarter ago Negative Slightly Negative Neutral Slightly Positive Positive Factors to Consider for 6-12 Months City of San Leandro For the Quarter Ended December 31, 2025 Market Update PFM Asset Management | pfmam.com 15 Exhibit A Resolution No. 2026-060