Agda Pkt 2026.05.11 Joint SA PFA

Browse Search

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 (3 /31/2026) 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, c ompleteness, or suitability. Monetary Policy (Global): •The Fed held rates steady in Q1 amid persistent inflation pressures and limited net job creation. •Policymakers acknowledged the path forward is complicated, with geopolitical uncertainty adding additional strain to the Fed’s dual mandate. •The “dot plot” projects 25 bps of rate cuts in both 2026 and 2027; however, this is predicated on inflation progress. •Global central banks remained on pause in Q1 but energy inflation pressures may necessitate hikes. Economic Growth (Global): •Stable consumer and business spending support growth, offsetting the weakness seen from the U.S. government shutdown in Q4 GDP. •Fiscal support and AI investment should aid growth; however, a prolonged conflict in Iran may weigh on consumer discretionary spending. •Risks to global growth prospects have increased amid the escalating conflict due to higher energy prices, supply-chain disruptions, and increased uncertainty. Inflation (U.S.): •The inflation outlook depends on the duration of the Middle East conflict and the degree to which higher energy and commodity costs raise core goods and services prices. •Inflation remains sticky with limited progress on core services and continuing pressure from tariffs passthroughs. •Near-term inflation expectations have increased due to the higher energy prices while long-run expectations remain anchored. Financial Conditions (U.S.): •Corporate fundamentals and underlying demand remain strong. Spread widening has improved valuations, though the sector is still rich from a historic perspective. •The conflict in the Middle East has tightened financial conditions. The duration of the conflict and its impact on the economy will be a key driver of corporate fundamentals. •Geopolitical conflict, higher oil prices, and the evolution of the economy are key risks. At this time we view volatility in private credit as contained and not a systemic risk. Consumer Spending (U.S.): •Modest job growth and inflationary pressures continue to weigh on consumer sentiment. Higher energy and food prices will likely drive consumer sentiment lower. •Wage growth continues to exceed inflation, but this gap has narrowed. Energy shocks may compress real incomes and reduce discretionary spending. •Lower-income cohorts remained more exposed to higher energy prices as a larger share of household budgets are allocated to essentials. •Higher-income cohorts benefit from strong equity markets and home price appreciation in recent years. Labor Markets (U.S.): •Labor market conditions continued to cool with net new job creation close to zero. •The unemployment rate remained unchanged as lower job creation was offset by a reduction in the pace of labor force growth. •The Fed has framed the combination of limited job growth and a stable unemployment rate as an uncomfortable balance. •Initial jobless claims and layoff rates remain low, consistent with a continued “low-hire/low-fire” environment. 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 For the Quarter Ended March 31,2026 Market UpdateCITY OF REDWOOD CITY PFM Asset Management | pfmam.com 28 7.C. - Page 34 of 71 50