PNC Capital Directions Portfolio and Performance Review 

• Stock and Bond Markets Mostly Positive in October: October was another positive month for the broad domestic and international equity benchmarks, as well as for domestic fixed income. The S&P 500 Index, a general proxy for Large Cap U.S. stocks, posted a return of 2.34% for the month with Growth-style investing beating its Value counterpart. Another strong quarter of earnings for S&P 500 stocks provided support for continued price growth in the third quarter. U.S. Small Cap stocks, as measured by the Russell 2000 Index, also generated positive returns with the index rising 1.81% for the period. Internationals stocks, as measured by the MSCI All Country World Index ex USA IMI Index, posted a 2.05% return for the month with strong contributions coming from Emerging Market equities. U.S. Investment-Grade bonds, as measured by the Bloomberg U.S. Aggregate Bond Index, rose 0.62% on falling interest rates across the U.S. Treasury yield curve.
• Federal Reserve Cuts the Fed Funds Rate Again in October: As widely expected, the Federal Reserve (Fed) cut the fed funds rate by 25 basis points on October 29, taking the target range to 3.75% to 4.00%. Fed Chair Powell indicated that another rate cut in December is not a foregone conclusion given moderate economic growth and higher price levels.
• Third Quarter S&P 500 Earnings Off to a Strong Start: Earnings have been strong so far in the third quarter, with the blended earnings growth rate for the S&P 500 Index topping 9.2% (as of 10/27/2025, Factset), higher than the estimated 8.0% growth rate at the beginning of the quarter. If this growth rate holds, this will mark nine straight quarters of earnings growth for the S&P 500.
• Inflation Remains Sticky on the Upside: Despite the U.S. Government shutdown, which has spanned the entire month of October, the Bureau of Labor Statistics published the Consumer Price Index (CPI) for the month of September. According to the report, CPI rose 3.0% on a year-over-year basis, slightly below consensus estimates of 3.1%. Inflation has risen steadily since April, when CPI hit a low of 2.3% for the year.
• Consumer Sentiment Continues to Slide in October: The University of Michigan’s Consumer Sentiment Survey was revised lower in October to 53.6, lower than the preliminary estimate of 55.0 published on October 10. Consumers remain concerned about inflation and higher prices.

• Capital Directions portfolios benefited from strong returns in Emerging Market equities, with the MSCI Emerging Markets Index rising 4.18%
• The next best performing asset class in the models was Large Cap Growth stocks as the S&P 500 Growth Index rose a solid 3.35% during the month
• Domestic Small Cap Growth stocks was another positive contributor to returns with the Russell 2000 Growth Index increasing 1.50% for the period

• The weakest performing asset class in the models was Domestic Mid Cap Value stocks as the S&P MidCap 400 Value Index fell by 1.31%
• High Yield bonds was another weak performer, albeit it positive for the month, as the Bloomberg U.S. Corporate High Yield Index rose a modest 0.16%
• The Russell 2000 Value Index, a proxy for domestic Small Cap Value equities, which only rose 0.25% 

During the month of October, 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, 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.