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8.A. - Page 34 of 42 As with employment, all sectors of the economy have fewer small businesses operating than prior to the pandemic. The leisure and hospitality sector is doing particularly poorly, with nearly half of all small businesses in the sector currently closed. Surprisingly, 15.8% of the professional and business services sector's small firms are closed. The trends in numbers of small businesses open is less promising than the trend in consumer spending. Consumer spending appears poised to recover, while business closures have been increasing since July. This downward trend reflects the back and forth in policy regarding in-person activities. With each tightening of the restrictions, greater stress is placed on affected small businesses." In the City's most recent quarterly investment report for the quarter ended December 31, 2020, PFM Asset Management LLC (PFM), reported that 4t" quarter 2020 U.S. economic conditions were impacted by: • A resurgence in global COVID-19 cases, causing the reintroduction of some lockdown measures; • Expedited vaccine approval initiatives, but challenging logistics surrounding mass inoculation; • A contentions U.S. presidential election; • Months of filibustering over a second stimulus package that eventually passed in December; and • Moderating labor market and consumer spending data PFM also reported the following market highlights: • The economic outlook remains uncertain, between the pace and efficacy of the global vaccine rollout and a major resurgence of virus cases. • Political turmoil in the U.S. adds to the unpredictability, but, remarkably, the markets have largely discounted the downside. Underlying the recent low market volatility is confidence in the Federal Reserve and global central banks that have supported economic stability and expansion. • The Federal Reserve reaffirmed its commitment to utilize the full scope of its monetary authority until a full economic recovery is achieved. It kept short-term rates in their current range of 0.00% to 0.25% and committed to continue its plans to buy $80 billion in Treasury securities and $40 billion in agency mortgage-backed securities (MBS) monthly. Due to the economic progress to date, the Fed also released more optimistic expectations for 2021, lowering its unemployment rate projection to 5.0% by year end and raising its forecast for real gross domestic product (GDP) to 4.2% for the upcoming year. After Joe Biden's election as the next U.S. president, Janet Yellen was nominated to be the next Treasury Secretary, which should provide a more welcoming approach to further COVID-related fiscal support. • Amidst a tumultuous year, domestic equity markets continued to surge ahead with the Dow Jones, S&P 500, and Nasdaq posting new record highs during the quarter. U.S. small -cap stocks had a remarkably strong quarter. International and emerging market returns were also robust despite the economic impact of the resurging virus. The implications of COVID-19 continue to materialize. Interest rates are assumed to remain at historically low levels until 2023. Even as interest rates rise, the forecast does not expect any rate increases to be significant enough to change the trajectory of recovery. Fiscal stimulus has been aggressive since April 2020, having two rounds of spending primarily focused on augmented unemployment insurance benefits and transfer payments (direct payments) to households versus government investment. Such policy speeds up the process of providing economic relief by sending money directly to households or 5 565