Key Updates in This Quarter's Forecasts

Our long-term outlook for fixed income assets shifted lower from last quarter, coincident with the decrease in sovereign interest rates in Q1 2025. Adjustments to our 10-year annualized return forecasts include:

• US Aggregate Bonds: Revised to 4.5% from 5.2% last quarter.
• US Long Treasury Bonds: Revised to 4.7% from 5.8% last quarter.
• Global Aggregate Bonds Hedged: Revised to 4.4% from 4.6% last quarter.

Our 10-year forecasts for equity markets outside the US continue to exceed those of large-capitalization US equities, primarily attributable to more favorable valuations, though that differential modestly declined following a quarter in which US equities underperformed global peers:

• US Large-Cap Equities: Forecasted at 6.2%.
• International Equities ex-US: Forecasted at 7.9%.
• Emerging Markets Equities: Forecasted at 9.0%.

This quarter’s portfolio rebalancing recommendations include:

• Reduction in US Investment Grade Bond allocations.
• Reduction in US Aggregate Bond allocations.
• Increase in US REITs exposure.