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6.A. - Page 2 of 49 ANALYSIS The attached investment report indicates that as of December 31, 2020, funds (excluding cash with fiscal agents) from all sources were producing an annual earnings rate of 1.59%, down from 1.78% as of September 30, 2020. The market value of the portfolio as of December 31 was $284,543,649, up from $265,113,111 as of September 30, 2020. This includes the funds held in the San Mateo County Treasurer's investment pool and with the State Treasurer's investment pool. All of these investments comply with the City's investment policy. The City has sufficient liquid resources available to meet expenditure requirements for the next six months. The portion of the City's portfolio that is managed by PFM has a total market value of $161,273,861, down from $161,542,427 as of September 30, 2020. As of December 31, the portfolio was earning an annual yield at cost of 1.77%, down from 1.88% as of September 30, and the yield at market was 0.38%, down from .42% as of September 30. The average maturity of the portfolio was 2.71 years, down from 2.78 years as of September 30. The market benchmark, selected with consultation from the City Council Finance/Audit Subcommittee, is the Bank of America Merrill Lynch (BofA ML) 1-5 year U.S. Treasury Index. Below is a table summarizing the City's portfolio performance compared to the benchmark, for the period ending December 31, 2020. In the fourth quarter of 2020, U.S. economic conditions were impacted by the following: a resurgence in global coronavirus cases causing the reintroduction of lockdown measures; expedited vaccine approval initiatives but challenging logistics surrounding mass inoculation; a contentious U.S. presidential election resulting in the election of President Joe Biden; months of filibustering over a second stimulus package that eventually passed in December; and moderating labor market and consumer spending data. 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 low market volatility is confidence in the Federal Reserve (Fed) and global central banks that have supported economic stability and expansion. The Fed reaffirmed its commitment to utilize the full scope of its monetary authority until a full economic recovery is achieved. The Fed 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 as of December 2020, 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 2021. Page 2 of 5 City of Redwood City 1017 Middlefield Road, Redwood City, CA. 94063 Tel: 650-780-7000 www.redwoodcity.ore 10