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Trade Memo – 1st Quarter 2023 February 6, 2023Happy Belated New Years! We hope this trade memo finds you and your family happy and healthy… and hopefully warm! As I write this memo, it is 8 degrees out (that’s the high for today – Ugh!) You may have noticed that we performed our first rebalance for this year. Two of our core beliefs are transparency and investment education. We also aim to provide you some background around the “why”. After last year, I am sure that everyone is looking forward to a better year in the stock market. While we cannot control the market, we can control what we own. On February 1st, the Federal Reserve (The Fed) increased interest rates by 25 basis points to a current range of 4.55 to 4.75%. This move is the smallest increase over the past year which saw four increases of 75 basis points and the prior increase of 50 basis points. The Fed stated “(the)committee anticipates that ongoing increases in the target range will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2% over time." This is in line with their ongoing efforts to try and bring inflation down to their target rate of 2%. But it’s going to take a while to get there. During their press conference, Fed Chairman Jerome Powell focused on these topics: • The U.S. economy “slowed significantly” in 2022, but indicators suggest “modest” growth in this year’s first quarter.• Shifting to a slower pace of rate hikes allows the FOMC to better gauge how the economy isresponding, and the future decisions will be made “meeting-by-meeting.” • The Fed's "focus is not on short-term moves [in financial conditions], but on sustained changes." (The lack of a substantial push-back on the recent loosening of financial conditions probably contributedto the market's turn higher.)• "Ongoing increases" in rates likely means "a couple more hikes" before the terminal rate isreached. (That would bring the rate to a 5% to 5.25% range.)

For now, we believe the U.S. economy remains in the midst of a "rolling recession," with consumer goods and housing and housing segments related in recession, but stronger services spending serving as a positive offset for now. An "official" recession (declared, ultimately, by the National Bureau of Economic Research) remains a risk given the messages emanating from the deeply inverted yield curve and the 10-month plunge in leading economic indicators. Key to remember though is that the stock market is one of those leading indicators and like is typically the case, should lead the economy as it eventually stabilizes. That's not to say the bear market is over, but that a lot of the economic pain and inflation already experienced has been reflected in the bear market that's been underway for more than a year.1 What are we doing today: Our firm typically rebalances your retirement accounts quarterly, unless we have unusual market conditions. If you to have non-retirement accounts, we rebalance up to least twice a year, depending on your tax situation. Here are the key takeaways from this quarters rebalancing: • Recalibrating portfolios for a potential environment that is past peak inflation, peak U.S. dollar, and peak long maturity interest rates. • Unwinding inflation-oriented hedges across the board, selling commodities, energy stocks, and Treasury Inflation Protected Securities (“TIPS”). • Moving 1% overweight stocks, with a tactical regional preference for international Developed Market and Emerging Market stocks. • Moving duration to overweight from underweight and increasing exposure to credit spreads via longer duration Treasuries and Emerging Market bonds. What we know today: While last year was a year much like 2008 where stocks and bonds suffered unusually large losses, we are starting to see downtrends in inflation suggesting that any recession would likely be mild. I’d like to share some points from JP Morgan’s Chief Global Strategist, Dr. David Kelly’s Economic & Market Update to help explain the current investment environment. 1. After a challenging 2022, calmer water lie ahead for markets. Volatility was a defining feature of the markets in 2022, as higher interest rates and inflation, Russia’s war in Ukraine, and recession fears sent markets tumbling. The Asset Class Returns page of the from JP Morgan’s Guide to the Markets shows a sober picture of recent performance, with significant losses in both global stocks and bonds and only commodities posting significant gains. However, calmer waters should

lie ahead for investors. Inflation is falling, the Fed is nearing the end of its tightening cycle, and much of the expected weakness in economic growth is already reflected in market valuations. Moreover, as investors consider this performance, it is important to take a longer-term view. In particular, it is worth noting that a broadly diversified portfolio could have risen by more than 30% between the end of 2018 and the end of 2022. Even after losses this year, many investors are well ahead of the game in their long-term plans and, after this year’s global reset in valuations, they are being offered a much broader menu of investment opportunities and higher potential returns than existed a year ago. 2. The U.S. economy is teetering on the edge of recession. Entering the first quarter of 2023, there is a growing danger that the U.S. economy could slip into recession. While the U.S. consumer has been largely resilient so far, higher interest rates have weighed on home-building, trade and business investment. In particular, higher inflation is squeezing consumer wallets, cutting the personal saving rate to 2.3% and boosting credit card balances. While excess savings from the pandemic supported spending in 2022, this stock is now drying up and it is unlikely consumers will see further aid from the federal government. In addition, mortgage rates have more than doubled since the start of the year, contributing to continued declines in home building, home sales and consumer spending associated with setting up new households. Moreover, the dollar rose by roughly 9% in 2022, even after a late-year sell-off. This very high exchange rate, Asset Class Returns Economic growth and the composition of GDP

combined with weakness overseas, will likely boost imports and curtail exports thus dragging on overall economic growth. As the economy confronts these challenges, it is likely to see very weak real GDP growth with a greater than 50% chance of tipping into a recession by the end of 2023. 3. The labor market is showing early signs of cooling. The labor market continues to be a bright spot in an otherwise gloomy environment, with the unemployment rate at 3.7% as of November, just 0.2% above its 50-year low in 2019. However, the economy is now losing momentum, even in the labor market. Job openings have come down and will likely fall further, as businesses reel back hiring efforts in the face of slower demand and higher costs. Initial and continuing jobless claims have also begun to trend higher, although they still sit below historical averages. However, there is also a limit to how much weakness we may see in employment going forward, as U.S. businesses still face a structurally smaller labor force than prior decades. Diminished legal immigration, particularly over the course of the pandemic, and baby-boomers reaching retirement age have left the economy very short of workers. This will somewhat resolve itself as higher wages and a higher cost-of-living lure some workers back into the labor market, allowing the economy to see additional months of solid job growth and low unemployment. As such, the unemployment rate may only nudge slightly higher in the year ahead. Wage growth has also moderated and will likely slow further, providing some relief to businesses and inflation. 4. S&P 500 earnings continue to be challenged by slower growth. Following a spectacular 2021, in which S&P 500 operating earnings per share (EPS) rose by 70%, profits came under pressure amidst higher costs and receding demand in 2022, leading operating EPS to decline by an estimated 4% over the year. Looking forward, consensus expectations for a double-digit gain in earnings in 2023 look too optimistic, and we expect earnings will more likely be flat-to-down relative to 2022. Unemployment and Wages

Rising costs, rather than deteriorating sales, have caused weakness in earnings and pricing power should continue to differentiate winners and losers in 2023. Energy companies will continue to benefit from high margins, while businesses that provide essential goods and services should be supported. Elsewhere, rising labor costs, higher interest rates and slowing nominal sales growth should bite into profits. In addition, a much higher dollar poses a headwind for companies with overseas sales and recession concerns could cause management teams to further reel in spending and investment. A recession would lead to a further decline in profits and lower inflation tends to coincide with lower corporate profit growth, posing an additional headwind in the year ahead. However, if a recession that eventually leads to less wage pressure and easier monetary policy materializes, it could set up a better long-term environment going forward. 5. Inflation has peaked and should gradually fall. 2022 was undoubtably a year of very high and rising inflation with headline CPI inflation peaking at a 9.1% y/y gain in June. The good news is that there are convincing signs that a sustained inflation downtrend is underway. Most recently, consumer prices rose just 0.1% m/m in November, and just 0.2% when excluding food and energy. As we show on page 29, a modest pace of monthly inflation has been mostly sustained over the last five months. S&P 500 Earnings Continue to be Challenged by Slower Growth Moreover, when looking at the components of inflation, the major hotspots of inflation from earlier this year have now simmered down. After Russia’s brutal invasion of Ukraine sent global commodity prices soaring early in 2022, energy prices declined in the second half of the year. Further, easing supply constraints, combined with lower consumer demand, have allowed inflation to simmer across core goods categories.

While shelter inflation remains elevated, we expect it will soon peak and decline to reflect cooling rental markets. The remaining problem for inflation, therefore, is services prices outside of shelter, which are highly correlated with labor market dynamics. Fortunately, easing labor market tightness should also allow for services ex-shelter inflation to come down. High and rising inflation caused pain for consumers and markets in 2022, but inflation is set to ease over the next few years to much more manageable levels, regardless of whether the economy falls into recession. 6. Global economic momentum has also slowed. Elevated inflation and tighter financial conditions have become a global phenomenon with weakness broad-based in the global economy. Page 51 displays a composite PMI heatmap of the world. Red represents weakness across manufacturing and services while green represents strength. Clearly, economic momentum declined in the second half of 2022. In particular, the Eurozone economies and the UK have been hindered by higher energy prices and energy shortages due to the Ukraine war, resulting in slumps in consumer confidence and spending. In addition, inflation has risen sharply across Europe and caused central banks to adopt more hawkish policy positions. Key policy rates of the ECB and the Bank of England began the year at -0.50% and +0.25% respectively. Today, they have risen to 2.00% and 3.50% Inflation Heatmap Global Economic Activity Momentum

respectively and are both set to move higher in the months ahead even amidst recession risks. While growth was particularly weak in China in 2022, it should improve in the coming years. Actions taken by policymakers, such as the easing of zero-Covid policies, liquidity injections for the real estate sector and efforts to ease geopolitical tensions should act as economic tailwinds. Given this, we expect growth in China will accelerate in 2023 and normalize back to trend in 2024. 7. After soaring in 2022, the dollar should find its footing. The U.S. dollar soared in 2022. As seen on page 31, the dollar is now trading near a 20-year high in nominal terms. In real terms, once inflation is considered, the dollar is close to its highest level since 1985. The dollar’s strength has been a function of weak overseas growth, geopolitical and macroeconomic uncertainty, and the Fed’s aggressive tightening cycle compared to other central banks. This high dollar has contributed to a worsening current account deficit, now amounting to roughly 4% of GDP. Due to lagged effects, this is likely to widen further over the next year, undermining the competitiveness of U.S. manufacturing and diverting U.S. demand towards overseas producers. The rising dollar has also undermined returns on international equities. Over the long run, we expect economic forces to gradually drive the dollar down. In the near term, macroeconomic uncertainty and the Fed’s persistent hawkishness may continue to support the dollar. However, the dollar could peak as the Federal Reserve nears the end of its tightening cycle and global central bank tightening narrows the gap in interest rate differentials. 8. Don’t let how you feel about the economy overrule how you feel about investing. Dollar Drivers For many Americans, 2022 was a very disappointing year with sharply rising inflation and interest rates, falling stock prices and the shock of Russia’s brutal invasion of Ukraine.

These factors drove consumer sentiment down to its lowest level on record in June and has only staged a modest rebound since then. When investors feel gloomy and worried about the outlook, their natural tendency is to sell risk assets. However, history suggests that trying to time markets in this way is a mistake. This slide shows consumer sentiment over the past 50 years, with 8 distinct peaks and troughs, and how much the S&P 500 gained or lost in the 12 months following. On average, buying at a confidence peak returned 4.1% while buying at a trough returned 24.9%. Importantly, this is not to suggest that U.S. stocks will return anything like 24.9% in the year ahead, as many other factors will determine that outcome. However, it does suggest that when planning for 2023 and beyond, investors should focus on fundamentals and valuations rather than how they feel about the world.2 Here are a handful of key principals to keep in mind: • Diversification supports portfolios through market downturns. If you had invested in the equity market at its October 2007 peak, it would have taken you until March 2012 to recover your initial investment. However, if you had invested in a 60/40 stock/bond portfolio instead, your portfolio would have recovered in October 2010 – a year and a half earlier. Diversification captures returns on the upside and protects on the downside to deliver better risk-adjusted returns. • Volatility is normal – A booming consumer, robust profits, and ample fiscal and monetary accommodation drove a 27% gain in the S&P 500 in 2021 with only a -5% drawdown during the year. Yet the S&P 500 falls -14% on average each year, so 2021 was far from normal while this year is in line with historical drawdowns. Ultimately, annual returns have been positive in 32 out of the last 42 years, underscoring the need for patience. • It’s about time in the markets… Being invested in the equity market for any one calendar year since 1950 could have yielded a 47% return or a -39% return. However, over longer time horizons the range of outcomes is compressed significantly and overwhelmingly skews positive, particularly if Consumer Confidence and the Stock Market

diversified with bond exposure. A 50/50 diversified stock/bond portfolio did not experience a period of negative returns over the rolling 5, 10, or 20-year calendar periods since 1950. • …not timing the markets. Investors are often tempted get out when markets get choppy. However, if an investor were to miss the 10 best days in the market rather than staying fully invested, they would have cut their return in half from 9.5% to 5.3% annualized over the last 20 years. What is the chance of missing the 10 best days? Seven of the 10 best days occurred within two weeks of the 10 worst days, often immediately following the worst days. Exiting on a bad day means potentially missing the rebound. • Stay invested when you feel the worst – Sentiment is not a great guide for investor behavior. Looking at the peaks and troughs of consumer sentiment since 1970, average one-year equity returns following peaks in consumer sentiment were 4.1%, but average returns following the bottoms in sentiment were 24.9%. One more crucial point: through multiple wars, recessions, pandemics, and crises, the S&P 500 has never failed to regain a prior peak— and then surpass it. The best strategy during volatile times is to maintain composure and stick to your investment plan. How we can help: It is impossible to know what the future brings. History has proven that these market events are short term and shouldn’t set a new precedent. We understand that these words may not make you feel better, but please remember, we are here to help. One of the most important reasons why we only work with a handful of families is that during times of market and economic uncertainty we want to make sure that we can spend time with you, one-on-one, to walk through your concerns and questions. As always, please feel free to reach out to us if you would like to talk to us about your personal situation. Warmest regards, Kelly L. Olczak, CFP® Managing Partner, Private Wealth Manager Office – (585) 623-5982 eMail – kelly@lynnleighco.com Article Sources

1 Waiting for the End… Just Not Yet, Liz Ann Sonders Charles Schwab February 1 2023 2 JP Morgan Economic & Market Update: Using the Guide to the Markets to explain the investment environment, US 1Q2023, February 1, 2023 - https://am.jpmorgan.com/us/en/asset-management/adv/insights/market-insights/guide-to-the-markets/ This information is provided by LynnLeigh & Co. for general information and educational purposes based upon publicly available information from sources believed to be reliable – LynnLeigh & Co. advisors cannot assure the accuracy or completeness of these materials. The information presented here is not specific to any individual’s personal circumstances. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances. The information in these materials may change at any time and without notice. Past performance is not a guarantee of future returns. Investing involves risk including loss of principal. No strategy assures success or protects against loss. Tactical allocation may involve more frequent buying and selling of assets and will tend to generate higher transaction cost. Investors should consider the tax consequences of moving positions more frequently.