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PFM Asset Management LLC <br />For the Quarter Ended March 31, 2022 <br />California Affiliated Risk Management Authorities Market Update <br />For the Quarter Ended June 30, 2024 <br />Market Update <br />© PFM Asset Management LLC | pfmam.com <br />Current Market Themes <br />▸The U.S. economy is characterized by: <br />▹Moderating economic growth following two quarters of exceptional strength <br />▹Recent inflation prints resuming the path towards the Federal Reserve (Fed)’s 2% target <br />▹Labor markets continuing to show strength while unemployment has ticked up modestly <br />▹Resilient consumer spending supported by wage growth that is outpacing inflation <br />▸Federal Reserve pushes out rate cuts <br />▹Fed revises expectations from 3 rate cuts in 2024 to 1 by year end following a lack of progress in the <br />fight against inflation <br />▹Market continues to expect 1 or 2 rate cuts in 2024 <br />▹Fed officials note that the risks to its “dual mandate” of stable inflation and maximum employment are <br />becoming more balanced <br />▸Treasury yields increase in response to economic data over the quarter <br />▹Yields on maturities between 2 and 10 years rose 13-20 basis points during the quarter <br />▹The yield curve has now been inverted for 24 months, the longest period in history <br />▹Spreads across most sectors remain near multi-year tights and represent market expectations for a soft <br />landing <br />6.B. - Page 18 of 65 <br />32