PNC Capital Directions Portfolio and Performance Review 

• Stocks and bonds finish in positive territory in January: U.S. equities, as measured by the Russell 3000 index, posted a positive return of 1.55% for the month of January. After the U.S.-led regime change in Venezuela to arrest President Nicolas Maduro on a wide array of charges, investors rotated into value-style stocks like those in the energy, industrials and materials sectors. Markets, however, favored smaller capitalization equities in the U.S. as the Russell 2000 index, a proxy for small cap stocks, rose 5.35% for the month. International equities were another bright spot for investors as the MSCI ACWI ex USA IMI index rose sharply during the month, finishing up 6.04%. U.S. fixed income rose a modest 0.11% as interest rates moved higher amidst changing global market sentiment following Maduro’s ouster in Venezuela.
• Precious metals experienced some intramonth volatility but maintained strong upward momentum on concerns over U.S. policy decision: Global investors continued to move into “safe haven” assets like gold and silver, for example, as concerns over adverse U.S. policy decisions like continued tariff threats, attacks on Federal Reserve (Fed) independence and higher deficit spending weighed on investor sentiment. President Trump’s proposed pick for Chairman of the Fed, Kevin Warsh, calmed fears of executive branch interference regarding future Fed monetary policy decisions, which led to some profit taking in those precious metals at the end of the month. In fact, Gold, as measured by the Dow Jones Commodity Gold index, finished the month up 8.82% - this after rising 62.48% in 2025.
• The Fed votes to leave rates unchanged in January: The Fed Open Market Committee voted to leave the central bank’s policy benchmark unchanged following its January 28 meeting. Positive job growth in December, an indicator of economic health, combined with elevated levels of inflation kept the Fed in a holding pattern with respect to rate cut decisions.
• GDP growth remains solid in the 4Q: The U.S. economy expanded by a better-than-expected 4.4% in the fourth quarter led by strong consumer spending, a bounce back in exports and higher government expenditures. This solid pace of economic growth has also been positive for U.S. corporate results as the S&P 500 index is currently posting another stellar quarter of earnings expansion the fourth quarter. As of January 30, the blended growth rate for the S&P 500 was 11.9%, higher than the initial quarterly estimate of 8.4%.
• The U.S. government enters another shutdown at the end of January: Lawmakers on Capitol Hill failed to solidify a spending package at the end of January, leading to a partial government shutdown. Shutdowns have been known to be a headwind for U.S. economic growth.

• Emerging Markets Equities was a top performer for another month in a row with the MSCI Emerging Markets index rising 8.85% in January
• The next best performer in the models was U.S. Small Value, which benefited from an increase of 6.86% in the Russell 2000 Value index
• Developed International Equities, as measured by the MSCI World ex USA index, posted a solid showing in January as the index moved up by 4.72%

• Despite posting a modestly positive 0.11% return, U.S. Investment Grade Fixed Income, as measured by the Bloomberg U.S. Aggregate Bond index was one of the weakest performers in the models – that as interest rates moved slightly higher during the period
• Albeit positive, Emerging Markets Fixed Income lagged most other index exposures in the models generating only a 0.36% return in January
• High Yield Bonds was another weak relative performer in the models, finishing the month with a 0.51% return

During the month January, there were no changes to target asset allocation models in the program.

Within stocks, we continue to prefer a tactical overweight to U.S. markets versus non-U.S. developed markets for most portfolios, based on what we believe to be the relatively stronger position of the U.S. economy. As part of U.S. allocations, we still favor a tilt to higher-quality, dividend-paying growth stocks as well as lower volatility stocks, that for their potential to mitigate some downside.

In fixed income, we continue to prefer an intermediate duration (i.e., interest rate sensitivity) allocated to mostly higher quality, investment-grade bonds, as we expect slower economic growth over the near term. While some portfolios have positions in below-investment grade bonds, we have tactically underweighted this area (excluding some income-oriented portfolios).

For accounts following our multi-asset income-focused approach, we continue to allocate across asset classes with an eye towards higher distributions versus traditional, broad-based markets. We strategically favor areas such as large cap value stocks and high-yield bonds as well as alternative strategies, such as those which generate income with the use of derivatives.

We continue to diligently monitor the markets and your account, and we will keep you abreast of any changes to your portfolio allocation and investment selection that we deem appropriate so that you’re well positioned for what’s ahead.