Sun, Storms, and Stocks: Navigating the Heat of Market Highs

Much like the scorching summer sun has risen into the sky, lingering long in to blistering days and casting elongated shadows, so too have the financial markets heated up, blazing to new highs. Like the rising temperatures caused by the relentless sun in peak summer months, the markets have steadily risen above previous records, though this hasn’t been without periods of cooling off.

As the long days of summer unfold, marked by a blend of sweltering heat and the soothing cool of evening breezes, the financial markets this quarter have mirrored this seasonal rhythm. The early volatility that we experienced mirrors a summer storm: intense yet fleeting. The clouds broke and gave way to the warming rays of the sun, just as the markets have broken through the volatility. As the markets recovered and rose higher, investors embraced signs that conditions remained tolerable just as a beachgoer seeks shade or the embrace of ocean waves for a moment of respite to rejuvenate. It was in the Federal reserve’s hints at impending rate cuts and the continuing cooling of inflation that investors found reassurance. These refreshing signs acted as a gentle breeze, providing the necessary balance to the market’s heat, and ensuring that while the temperatures climb, conditions remain conducive, allowing investors to endure.

This season’s narrative is of intensity and stamina, traits that are essential for thriving under the summer
sun. As we navigate summer days, we remain alert to the shifting winds that may signal a change in the
weather. The market, ever reflective of nature’s extremes, reminds us to stay prepared, hydrated, and ready to adapt. As we continue to monitor the horizon, let us value the warmth of our current successes while staying vigilant and proactive against any signs of overheating or storm, aiming to adapt our strategies responsively and thoughtfully in line with changing conditions.

Now let’s dive into the details that have fueled the market’s fiery performance.

The S&P 500 experienced its first real dose of volatility early in the second quarter, but expectations for
interest rate cuts by the Federal Reserve, solid economic growth and continued strong financial performance from AI-related tech companies ultimately pushed the S&P 500 to new all-time highs and
the index finished the quarter with strong gains.

While the S&P 500 hit new highs in the second quarter, the month of April was decidedly negative for
markets as fears of no rate cuts in 2024 (or even a rate hike) pressured stocks. The catalyst for these
concerns was the March Consumer Price Index (CPI), which rose 3.5% year over year, higher than estimates. That hotter-than-expected reading reversed several months of declines in CPI and ignited fears
that inflation could be “sticky” and, if so, delay expected Fed rate cuts. Those higher rate concerns were
then compounded by comments by New York Fed President John Williams, who stated rate hikes (which
investors assumed were over) were possible if inflation showed signs of re-accelerating. The practical impact of the hot CPI report and William’s commentary was to push rate cut expectations out from June
to September and that caused the 10-year Treasury yield to rise sharply, from 4.20% at the start of the
quarter to a high of 4.72%. Those higher yields pressured the S&P 500 in April, which fell 4.08% and
completed its worst month since September.

On the first day of May, however, the Fed largely dispelled concerns about potential rate hikes and
ignited a rebound that ultimately carried the S&P 500 to new highs. At the May 1 FOMC decision, Fed
Chair Powell essentially shut the proverbial door on the possibility of rate hikes, stating that if the Fed
was concerned about inflation, it would likely just keep interest rates at current levels for a longer period
instead of raising them. That comment provided immediate relief for investors and both stocks and bonds
rallied early in May as rate hike fears subsided. Then, later in the month, the April CPI report (released in
mid-May) rose 3.4% year over year, slightly lower than the 3.5% in March and that resumption of
disinflation (the decline in inflation) further increased expectations for rate cuts in 2024. Additionally,
employment data moderated in May, with the April jobs report coming in below expectations (but still at
healthy levels). The practical result of the resumption of disinflation, the supportive Fed commentary and
moderating labor market data was to increase September rate cut expectations, push the 10-year Treasury yield back down below 4.50% and spark a 4.96% rally in the S&P 500 in May.

The upward momentum continued in June thanks to more positive news on inflation, additional
reassuring commentary from the Fed and strong AI-linked tech earnings. First, the May CPI (released in
mid-June) declined to 3.3% year over year, the lowest level since February. Core CPI, which excludes
food and energy prices, dropped to the lowest level since April 2021, further confirming ongoing
disinflation. Then, at the June FOMC meeting, Fed Chair Powell reassured markets two rate cuts are
entirely possible in 2024, reinforcing market expectations for a September rate cut. Economic data,
meanwhile, showed continued moderation of activity and that slowing growth and falling inflation helped
to push the 10-year Treasury yield close to 4.20%, a multi-month low. Finally, investor excitement for AI
remained extreme in June, as strong AI-driven earnings from Oracle (ORCL) and Broadcom (AVGO)
along with news Apple (AAPL) was integrating AI technology into future iPhones pushed tech stocks
higher and that, combined with falling Treasury yields and rising rate cut expectations, sent the S&P 500
to new all-time highs above 5,500.

In sum, markets impressively rebounded from April declines and the S&P 500 hit a new high thanks to
increased rate cut expectations, falling Treasury yields and continued robust earnings growth from AI-linked tech companies.

Second Quarter Performance Review

The second quarter produced a more mixed performance across various markets than the strong return in
the S&P 500 might imply, as AI-driven tech-stock enthusiasm again powered the Nasdaq and S&P 500
higher while other major indices lagged. The Nasdaq was, by far, the best performing major index in the
second quarter while the S&P 500, where tech is the largest sector weighting, also logged a solidly positive gain. Less tech focused indices didn’t fare as well, however, as the Dow Jones Industrial Average
and small-cap focused Russell 2000 posted negative quarterly returns.

By market capitalization, large caps outperformed small caps in Q2, as they did in the first quarter of
2024. Initially, higher Treasury yields in April weighed on small caps, while late in the second quarter
economic growth concerns pressured the Russell 2000.

From an investment style standpoint, growth massively outperformed value in the second quarter, as tech heavy growth funds once again benefited from continued AI enthusiasm. Value funds, which have larger
weightings towards financials and industrials, posted a slightly negative quarterly return as the performance of non-tech sectors more reflected growing concerns about economic growth.

On a sector level, performance was decidedly mixed as only four of the 11 S&P 500 sectors finished the second quarter with positive returns. The best performing sectors in the second quarter were the AI-linked technology and communications services sectors. They posted strong returns, aided by better-than expected earnings results from NVDA, ORCL, AVGO, TSM, MSFT, AMZN and others as AI enthusiasm continued to push the broad tech sector and S&P 500 higher. Utilities also logged a modestly positive quarterly return, as the high yields and resilient business models were attractive to investors given rising concerns about future economic growth, while declining Treasury yields made higher dividend sectors such as utilities more attractive to income investors.

Turning to the sector laggards, the energy, materials and industrials sectors closed the quarter with
modestly negative returns. Their declines reflected growing anxiety about future economic growth as
those sectors, along with small-cap stocks, are more sensitive to changes in U.S. and global growth.

Internationally, emerging markets outperformed the S&P 500 in Q2 thanks to optimism towards a rebound in Chinese economic growth and as falling global bond yields late in the quarter boosted the attractiveness of emerging market investments. Foreign developed markets, meanwhile, lagged both emerging markets and the S&P 500 and posted a fractionally negative quarterly return. Concerns about
the timing and number of Bank of England and European Central Bank rate cuts, along with French and
German political concerns later in the quarter, acted as headwinds for foreign developed equities.

Commodities saw slight gains in the second quarter thanks to aforementioned optimism on Chinese
economic growth and as geopolitical concerns rose throughout the quarter. Gold rallied solidly on the
uptick in geopolitical risks, following the tit-for-tat strikes between Israel and Iran, along with the
growing chances of a direct Israel/Hezbollah conflict. Oil, meanwhile, logged a small loss on signs of
slipping OPEC+ production discipline and concerns about future global growth and demand.

Switching to fixed income markets, the leading benchmark for bonds (Bloomberg Barclays US Aggregate
Bond Index) realized a slightly positive return for the second quarter, as rising expectations for a
September Fed rate cut and moderating U.S. economic growth boosted bonds broadly.

Looking deeper into the fixed income markets, shorter-duration bonds outperformed those with longer
durations in the second quarter, as bond investors priced in sooner-than-later Fed rate cuts. Longer-dated bonds, meanwhile, were little changed on the quarter despite the return of disinflation and moderating U.S. economic growth.

Turning to the corporate bond market, lower-quality, but higher-yielding “junk” bonds rose modestly in
the second quarter while higher-rated, investment-grade debt logged only a slight decline in Q2. That
performance gap reflected continued investor optimism towards corporate profits despite some
disappointing economic reports, which led to bond investors taking more risk in exchange for a higher
return.

Third Quarter Market Outlook

Stocks begin the third quarter of 2024 riding a wave of optimism and positive news as inflation is
declining in earnest, the Fed may deliver the first rate cut in over four years this September, economic
growth remains generally solid and substantial earnings growth from AI-linked tech companies has
shown no signs of slowing down.

Those positives and optimism are reflected in the fact that the S&P 500 has made more than 30 new highs so far in 2024 and is trading at levels that, historically speaking, are richly valued. That said, if inflation continues to decline, economic growth stays solid and the Fed delivers on a September cut, absent any other major surprises, it’s reasonable to expect this strong 2024 rally to continue in Q3.
However, while the outlook for stocks is undoubtedly positive right now, market history has shown us
that nothing is guaranteed. As such, we must be constantly aware of events that can change the market
dynamic, as we do not want to get blindsided by sudden volatility.

To that point, the market does face risks as we start the third quarter. Slowing economic growth,
disappointment if the Fed doesn’t cut rates in September, underwhelming Q2 earnings results (out in
July), a rebound in inflation and geopolitical surprises (including the looming U.S. elections) are all
potential negatives. And, given high levels of investor optimism and current market valuations, any of
those events could cause a pullback in markets similar to what was experienced in April (or worse).

While any of those risks (either by themselves or in combination with one another) could result in a drop
in stocks or bond prices, the risk of slowing economic growth is perhaps the most substantial threat to this incredible 2024 rally. To that point, for the first time in years, economic data is pointing to a clear loss of economic momentum. So far, the market has welcomed that moderation in growth because it has
increased the chances of a September rate cut. However, if growth begins to slow more than expected and concerns about an economic contraction increase, that would be a new, material negative for markets. Because of that risk, we will be monitoring economic data very closely in the coming months.

Bottom line, the outlook for stocks remains positive but that should not be confused with a risk-free
environment. There are real risks to this historic rally and we will continue to monitor them closely in the
coming quarter.

To that point, at Professional Planning Group, we remain committed to helping you effectively navigate
this investment environment. We continue to believe in the truth of the oft repeated market cliche that
“successful investing is a marathon, not a sprint.” In both bull and bear markets, we will remain focused
on the diversified approach originally established to help enable you to meet your long-term investment
goals.

Therefore, it’s critical for you to stay invested, remain patient, and stick to the plan, as we’ve worked with
you to establish a unique, personal allocation target based on your financial position, risk tolerance, and
investment timeline.

We remain focused on both opportunities and risks in the markets, and we thank you for your ongoing
confidence and trust. Please rest assured that our entire team will remain dedicated to helping you
successfully navigate this market environment.

Please do not hesitate to contact us with any questions, comments, or to schedule a portfolio review.

On Behalf of the PPG Investment Committee

David G. Aballo, CFA

Professional Planning Group
9 Granite Street
Westerly, RI 02891
(401) 596-2800

The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Economic commentary provided in part by Sevens Report Research, an independent 3rd party. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Any opinions are those of PPG Investment Committee and not necessarily those of Raymond James. Investing involves risk and you may incur a profit or loss regardless of strategy selected, including diversification and asset allocation. Past performance is not a guarantee of future results.

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when interest rates fall, bond prices generally rise. International investing involves special risks, including currency fluctuations, differing
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diversification. This information is not intended as a solicitation or an offer to buy or sell any security referred to herein. Investments mentioned
may not be suitable for all investors.

The Dow Jones Industrial Average (DJIA), commonly known as “The Dow” is an index representing 30 stocks of companies maintained and
reviewed by the editors of the Wall Street Journal.

The Russell 2000 Index measures the performance of the 2,000 smallest companies in the Russell 3000 Index, which represent approximately 8%
of the total market capitalization of the Russell 3000 Index.

The S&P MidCap 400® provides investors with a benchmark for mid-sized companies. The index, which is distinct from the large-cap
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The MSCI EAFE (Europe, Australasia, and Far East) is a free float-adjusted market capitalization index that is designed to measure developed
market equity performance, excluding the United States & Canada.

The EAFE consists of the country indices of 22 developed nations.

The MSCI ACWI ex USA Investable Market Index (IMI) captures large, mid and small cap representation across 22 of 23 Developed Markets
(DM) countries (excluding the United States) and 24 Emerging Markets (EM) countries. With 6,211 constituents, the index covers approximately
99% of the global equity opportunity set outside the US.

The MSCI Emerging Markets is designed to measure equity market performance in 25 emerging market indices. The index’s three largest
industries are materials, energy, and banks.

The NASDAQ-100 (^NDX) is a stock market index made up of 103 equity securities issued by 100 of the largest non-financial companies listed
on the NASDAQ. It is a modified capitalization-weighted index. It is based on exchange, and it is not an index of U.S.-based companies.

The Bloomberg Barclays US Aggregate Bond Index is a broad-based flagship benchmark that measures the investment grade, US dollar denominated, fixed-rate taxable bond market. The Bloomberg Barclays 1-3 Month U.S. Treasury Bill Index includes all publicly issued zero coupon
U.S. Treasury Bills that have a remaining maturity of less than 3 months and more than 1 month, are rated investment grade, and have
$250 million or more of outstanding face value. In addition, the securities must be denominated in U.S. dollars and must be fixed rate and nonconvertible. The ICE U.S. Treasury 7-10 Year Bond Index is part of series of indices intended to assess the U.S. Treasury market. The Index is
market value weighted and is designed to measure the performance of U.S. dollar-denominated, fixed rate securities with minimum term to
maturity greater than seven years and less than or equal to ten years. The ICE U.S. Treasury Bond Index Series has an inception date of
December 31, 2015. Index history is available back to December 31, 2004. The Barclays Capital Municipal Bond is an unmanaged index of all
investment grade municipal securities with at least 1 year to maturity. The Bloomberg Barclays US Mortgage Backed Securities (MBS) Index
tracks agency mortgage backed pass-through securities (both fixed-rate and hybrid ARM) guaranteed by Ginnie Mae (GNMA), Fannie Mae
(FNMA), and Freddie Mac (FHLMC). The index is constructed by grouping individual TBA-deliverable MBS pools into aggregates or generics
based on program, coupon, and vintage. The Bloomberg Barclays U.S. Corporate High Yield Bond Index is composed of fixed-rate, publicly
issued, non-investment grade debt, is unmanaged, with dividends reinvested, and is not available for purchase. The index includes both corporate
and non-corporate sectors. The corporate sectors are Industrial, Utility and Finance, which include both U.S. and non-U.S. corporations. The
Bloomberg Barclays U.S. A Corporate Bond Index measures the investment-grade, fixed rate, taxable corporate bond market. It includes USD
denominated securities publicly issued by US and non-US industrial, utility, and financial issuers. Gold is subject to the special risks associated
with investing in precious metals, including but not limited to: price may be subject to wide fluctuation; the market is relatively limited; the
sources are concentrated in countries that have the potential for instability; and the market is unregulated. The LBMA Gold Price and LBMA
Silver Price are the global benchmark prices for unallocated gold and silver delivered in London. SS&P GSCI Crude Oil is an index tracking
changes in the spot price for crude oil. Investing in oil involves special risks, including the potential adverse effects of state and federal regulation
and may not be suitable for all investors.

The views expressed represent the opinions of Professional Planning Group as of the date noted and are subject to change. These views are not
intended as a forecast, a guarantee of future results, investment recommendation, or an offer to buy or sell any securities. The information
provided is of a general nature and should not be construed as investment advice or to provide any investment, tax, financial or legal advice or
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Investment Adviser Public Disclosure website. www.adviserinfo.sec.gov Past performance is not a guarantee of future results.