January 23rd, 2024 High-Quality Fixed Income – Overweight duration As expected, the Federal Reserve held rates steady at their meeting last week.  Rates currently  have a 100% likelihood of staying flat at the January 31st FOMC meeting and a nearly 100% chance of being down by the June 12th FOMC meeting according to the CME's FedWatch tool. This signals a high likelihood that short-term rates will be flat to down over the next six months. As such, longer-duration assets are becoming more attractive. The Fed announced they will likely cut rates three times this year at 1/4% each. High Yield Fixed Income – Overweight credit The main drivers of returns in this asset class are defaults and interest rate spreads. Default rates have risen to 2.88% in December, but are still below the long-run average of 3.54%. They are not expected to rise much beyond the long-run average since most companies refinanced their debt to long-term low rates and do not have debt maturities in the next year. That said, spreads  are tight at 3.58%. Also, delinquency rates , which are seen as a leading indicator of defaults, have risen over the past several quarters and remain low at 1.32%. We remain slightly overweight given the mix of low default risk, higher yield, and low delinquency rates. We will return to underweight if we see a rise in delinquency rates. We will increase our overweight to these opportunities if spreads widen beyond their long-run average. US Equities – Underweight, tilt toward value Up over the last month with broad participation except for healthcare and energy. The forward P/E ratio for US equities is 19.5x as of December 31st and has risen sharply in the past month. The 20-year average P/E ratio for the S&P500 is 15.6x which means that US Equities continue to be increasingly expensive relative to history.* Small cap value stocks, however, have a P/E ratio of 16.3x compared to a 20-year average of 16.7x. International Developed Equities – Overweight, tilt toward Japan P/E ratio for the MSCI ACWI ex-US index is 12.9x as of December 31st compared to its 20-year average of 13.1x. This represents a 33.7% discount to the S&P 500 after one corrects for the natural discount of the MSCI ACWI Ex-US to the S&P500.* Japan appears to be poised to outperform in the years ahead as their P/E is historically low and the government is enacting policies that are likely to raise the profitability of companies. The US dollar  continues to fall and provides a positive tailwind for non-dollar assets (and US travelers abroad). Emerging Markets (EM) – Neutral, underweight China, overweight Korea, Mexico, India Neutral Weight with regional preferences. There is generally more risk in this asset class than in International Developed and US Equity. The reasons for this are manifold and include a lesser presence of the rule of law, a higher level of corruption, and increased regional instability. The MSCI Emerging Markets Index Price-to-earnings multiple (11.9x) is roughly in line with the long-run average (11.3x). One area of concern in this area is China, which comprises 25% of the index. We are underweight in China but maintain a neutral weight to EM exposure by being overweight in Korea, Mexico, and India. Post Disclosures Notes: * https://am.jpmorgan.com/us/en/asset-management/adv/insights/market-insights/guide-to-the-markets/ page 35. 2) Ibid, pg. 45. 3) Ibid pg. 46.

What a Portfolio Overlay Is A portfolio overlay is an advanced investment strategy employing an independent options-based approach alongside a fully invested portfolio. It serves to assist investors in managing risk, reducing volatility, influencing outcomes over specific periods, or generating additional income to enhance overall portfolio returns. Why Investors Use Portfolio Overlays Investors are attracted to portfolio overlays for their potential to yield more favorable investment outcomes and capital efficiency. This efficiency results from a single investment producing dual sources of returns. In well-designed overlay techniques, the total return is derived from both the underlying portfolio or holdings and the returns generated by the overlay technique. Portfolio overlays can be applied across various assets, including a portfolio of holdings, an index, ETFs (if a viable options market exists), or a concentrated individual stock position. Avantia’s Expertise in Overlay Strategies As experts in options-based techniques and portfolio overlays, we are well-equipped to assist investors in prudently managing associated risks and aligning goals. Our specialization lies in seamlessly integrating large positions into a well-balanced portfolio and a comprehensive financial plan. This ensures a strategic and informed approach to investment management, maximizing potential returns, and minimizing risks for our clients. At Avantia, we find that investors are often new to options and we don't always use them. But for some clients these strategies can be creative and useful tools in solving financial puzzles such as concentration risk, appreciated positions, cash flow, or a tax and capital-efficient way to access an asset class.

High-Quality Fixed Income – Overweight duration Rate expectations have made a major shift this past week as one can see by comparing the CME FedWatch tool chart from last week with this week (below). This indicates that short-term rates are likely to come down later than expected and less than expected between now and September 18th. Our perspective is that the Fed could be influenced by the "long and variable lags" problem, which is a known issue related to the data they depend on, despite their "data dependence" policy. September rate outlook as of Feb 12th, 2024 September rate outlook as of Feb 5th, 2024 High Yield Fixed Income – Overweight credit Default rates have fallen to 2.08% in January, and are now well below the 25-year average of 3.00%. We do not expect defaults to rise much in the near term. This is because CCC-rated debt historically has the highest default rate and it now represents a much smaller portion of the high-yield universe. Beyond the long-run average since most companies refinanced their debt to long-term low rates and have limited debt maturities in the next year. It makes sense then that spreads  have continued to tighten and are now at 3.38%. Source: J.P. Morgan Guide to the Markets ICE BofA US High Yield Index Option-Adjusted Spread Also, delinquency rates , which are seen as a leading indicator of defaults, have risen over the past several quarters but remain very low at 1.32%. We should receive an update to this data in mid-February. We remain overweight given the mix of low default risk, higher yield, and low delinquency rates. Delinquency Rates US Equities – Underweight, tilt toward small-cap value Equities sustained their upward momentum for a fifth consecutive week, with the S&P 500 Index hitting new highs and surpassing the 5,000-point milestone. Despite the Federal Reserve's pivot pause, investors focused on positive economic data and earnings reports. Earnings season, initially uncertain, has transformed into a solid performance. With nearly 60% of S&P 500 companies reporting, the average earnings surprise rose to almost 4%, inching closer to the 6 – 7% long-term average. Excluding financials, the impressive average upside earnings surprise stands at over 6%. The American Association of Individual Investors (AAII) survey reflects robust investor sentiment, with bullish attitudes approaching 50%, compared to 28% neutral and 22% bearish sentiments. This optimism, rooted in strong market fundamentals, highlights the positive outlook within the investor community. Source: J.P. Morgan - Guide to the Markets International Developed Equities – Overweight, tilt toward Japan Almost every sector of MSCI EAFE is currently trading at a discount relative to the long-term average. Meanwhile, buyback yields, which have been low historically, are now catching up to those in the U.S. which presents interesting investment opportunities. This is also extending to Japan where the number of buybacks has increased significantly showing that Japanese companies are focusing more on their shareholders. The P/E ratio for the MSCI ACWI ex-US index is 13.0x as of January 31st. This represents a 34.2% discount to the S&P 500 after one corrects for the natural discount of the MSCI ACWI Ex-US to the S&P500.  Japan appears to be poised to outperform in the years ahead as their P/E is historically low and the government is enacting policies that are likely to raise the profitability of companies. We also believe the US dollar  will continue to fall and provide a positive tailwind for non-dollar assets. Emerging Markets – Neutral, underweight China, overweight Korea, Mexico, India Emerging market equities bring increased risk and volatility, but potentially strong returns in the long run. Currently, PE ratios are in line with the long-run average. However, China, Mexico, India, and Korea bring unique challenges and opportunities. China is in the midst of a property collapse and may see additional national stimulus to help its economy. This country represents between 25 and 30% of the index. On the other hand, Mexico is well positioned geographically to pick up much of the "nearshoring" investment opportunities as US companies reduce their exposure to China. Post Disclosures

The Banker's Crystal Ball High-Quality Fixed Income – Overweight duration Contrary to market expectations of a rate decrease in March, the Federal Reserve held firm on interest rates during two first-quarter meetings, reaffirming their dedication to achieving a 2% inflation target. Since the onset of rate hikes in March 2022, the Fed has increased rates eleven times, setting the Federal Funds rate between 5.25% and 5.50%. Concurrently, Federal Reserve Chair Jerome Powell has been trimming the Fed’s balance sheet by $95 billion monthly, leading to a 16.5% reduction in assets, or about $1.48 trillion, from its peak in April 2022. In its fifth successive meeting in March, the Federal Open Market Committee (FOMC) chose to maintain the status quo on rates. The anticipated decision was overshadowed by the Fed’s unchanged economic outlook in their Summary of Economic Projections. Notably, the median forecast for 2024 rate cuts remained at three, with divergent views among officials—two predicting no cuts, two foreseeing just two, and only one advocating for more than three cuts. This is a marked deviation from December 2023’s projections, where five members expected over three cuts. Additionally, the Fed has upgraded its economic forecasts, such as GDP for 2024, raised inflation projections for the same year, and adjusted the projected timeline for rate normalization in 2025. Chair Powell acknowledged the persistence of inflation, which has exceeded expectations in recent months. However, he emphasized that the latest figures do not alter the general trend of a gradual decline in inflation towards the 2% goal. He clarified that the Fed would neither overreact to the data from the past two months nor disregard it. September rate outlook as of March 24th, 2024 FOMC "Dot-Plot" as published on March 20th, 2024 High Yield Fixed Income – Neutral Corporate, Overweight Municipal Default rates have fallen slightly to 2.53% in March. While still below the 30-year average of 3.53%, we do not expect defaults to rise much in the near term for two reasons. First, CCC-rated debt, which historically has the highest default rate, now represents a much smaller portion of the high-yield universe. Second, most companies refinanced their debt to long-term low rates and have limited debt maturities in the next year. Recently, spreads have widened slightly to 3.24%. ICE BofA US High Yield option-Adjusted Spread (April 4th, 2024) Also, delinquency rates , which are seen as a leading indicator of defaults, have risen over the past several quarters but remain very low at 1.38% (SA). However, Commercial Real Estate Loans are showing deteriorating conditions as the delinquency rate has gone from 0.84% to 1.15% in just two quarters. This is across all banks. According to Morgan Stanley, there are $1.5 Trillion of commercial real estate loans coming due by the end of 2025. We remain underweight to Real Estate as an asset class and within High Yield debt we seek to be in corporate and municipal credit. That said, we do expect regional banks to be a trouble spot in portfolios given their exposure to commercial real estate. Delinquency Rates (all loans in the index Blue, CRE Red) US Equities – Underweight, tilt toward small-cap value In 2023, the S&P 500 index saw no new peaks, but after a hiatus of over two years, it surged to record-breaking heights, achieving 22 new all-time highs by the close of the first quarter. This set the stage for a potentially historic number of highs. Despite ongoing uncertainties in monetary policy, the stock market remained stable, with the S&P 500 experiencing its smallest quarterly drop in history at just -1.7%. This period also saw gold and the Japanese stock market reach unprecedented levels, with Japan’s market hitting this milestone for the first time since 1989. The once unassailable ‘Magnificent 7’ showed signs of vulnerability this quarter, as Apple, Alphabet, and Tesla did not keep up with the S&P 500’s overall gain of 10.8%. However, ten out of the eleven sectors within the S&P reported positive earnings. Nvidia, propelled by advancements in AI, soared to an impressive 82% return in Q1, while the fervor for meme stocks was reignited with significant investments in the IPOs of Reddit Inc., Trump Media, and Technology. One year on from Silicon Valley Bank’s downfall, the repercussions of higher interest rates on the financial health of smaller and regional banks were brought to light once again. The New York Community Bank’s unexpected losses in their multifamily commercial real estate loans served as a cautionary tale of potential further downturns. A significant portion of regional banks’ loan portfolios is comprised of commercial real estate, which has seen a notable rise in defaults. Nevertheless, the broader market appeared to overlook these concerns and associated risks. International Developed Equities – Overweight, tilt toward Japan Almost every sector of MSCI EAFE is currently trading at a discount relative to the long-term average. Meanwhile, buyback yields, which have been low historically, are now catching up to those in the U.S. which presents interesting investment opportunities. This is also extending to Japan where the number of buybacks has increased significantly showing that Japanese companies are focusing more on their shareholders. The P/E ratio for the MSCI ACWI ex-US index is 13.0x as of January 31st. This represents a 34.2% discount to the S&P 500 after one corrects for the natural discount of the MSCI ACWI Ex-US to the S&P500.  Japan appears to be poised to outperform in the years ahead as their P/E is historically low and the government is enacting policies that are likely to raise the profitability of companies. We also believe the US dollar  will continue to fall and provide a positive tailwind for non-dollar assets. Emerging Markets – Neutral, neutral China, overweight Korea, Mexico, India Emerging market equities bring increased risk and volatility, but potentially strong returns in the long run. Currently, PE ratios are in line with the long-run average. However, China, Mexico, India, and Korea bring unique challenges and opportunities. China is in the midst of a property collapse and may see additional national stimulus to help its economy. This country represents between 25 and 30% of the index. On the other hand, Mexico is well positioned geographically to pick up much of the "nearshoring" investment opportunities as US companies reduce their exposure to China. Post Disclosures

Introduction: The Rise of the SuperCollector In the late 1980s , Vincent Desiderio , an American realist painter, was gaining prominence alongside other notable artists like Eric Fischl , Robert Longo , Cindy Sherman , and Jenny Holzer . During this period, a new type of art patron emerged—the SuperCollector. These collectors had a unique role: they sought out young, promising artists and wholeheartedly supported their work by acquiring their entire body of work and even investing in their future creations. Charles Saatchi and the Power of Patronage One such influential SuperCollector was Charles Saatchi , known for his role in the advertising agency Saatchi & Saatchi . If Saatchi chose to acquire an artist’s entire oeuvre, it was considered a significant endorsement, virtually guaranteeing that the artist would achieve recognition and success in the art world. However, the reverse was also true: if Saatchi decided to remove an artist from his collection (a process known as deaccessioning), it could severely harm the artist’s reputation. Unfortunately, Vincent Desiderio experienced the latter scenario. Saatchi deaccessioned Desiderio’s work, setting a precedent that highlighted the immense influence a SuperCollector could wield over an artist’s career. As a consequence, Desiderio’s artistic trajectory diverged from that of his peers, demonstrating how pivotal these collectors could be in shaping an artist’s destiny. In summary, the tale of Vincent Desiderio underscores the delicate balance between artistic talent, collector patronage, and the power of influential figures within the art world. The Dilemma of Artistic Integrity vs. Financial Backing In the mid-2000s , an emerging artist had their work purchased by the renowned SuperCollector, Charles Saatchi, at a London art fair. Saatchi, known for his influential role in the art world, then approached the gallery representing the artist with an offer: he wanted to acquire not only the existing painting but also the artist’s entire future production. This proposition was a significant opportunity, but the artist had a different vision. The artist made a bold decision: rather than concentrating their artwork in one collector’s hands, they believed it was best to disperse their creations globally. Consequently, they politely declined Saatchi’s offer. However, this rejection did not sit well with the collector. In a vindictive move, Saatchi requested that the gallery take back the purchased painting and refund the money. Fortunately, fate intervened. An encyclopedic museum in St. Louis, Missouri recognized the value of the artist’s work and acquired the painting for its permanent contemporary collection. Unfortunately, destiny played a cruel trick—the painting, carefully crated for its journey, fell victim to a forklift accident. The forklift driver inadvertently drove into the center of the crate, destroying the artwork .   In hindsight, the artist reflected on their decision. Despite the loss, they considered it a fair price to pay for avoiding a Faustian bargain with the powerful SuperCollector. Sometimes, the cost of artistic integrity outweighs financial gains. The story of the artist’s dilemma and the unexpected twists of fate highlights the delicate dance between artistic vision, collector influence, and the unpredictable nature of the art world. Broader Lessons from Art Collecting From the collector’s perspective , here’s a cautionary tale: A couple, passionate about contemporary art, diligently collected works by both emerging and established artists from around the world. Their discerning eye and strategic acquisitions placed them at the forefront of galleries’ lists for highly sought-after artists. Over several years, they amassed a significant contemporary art collection, carefully housed in their primary residence, a climate-controlled warehouse, and a vacation home nestled on the beach in a charming Northwest community. However, as time passed and the couple aged, their art-collecting habits shifted. They no longer frequented international art fairs or galleries as actively as before. Consequently, the galleries that once prioritized them for in-demand artists gradually shifted their attention elsewhere. When the couple decided to add another artwork to their collection, they were met with an unexpected twist—the gallery had already sold it to another collector. Their absence from the art scene had consequences. Conclusion This scenario highlights the finicky nature of the art world. Relationships, timing, and consistent engagement matter. Art collecting isn’t just about acquiring beautiful pieces; it’s a delicate dance of passion, strategy, and staying connected. As ultra-high-net-worth individuals (UHNW) diversify their investments into collectibles, the demand for high-quality art necessitates professional guidance, a deep understanding of the art market, and an unwavering passion for discovering the rare qualities that exceptional contemporary art presents. In this ever-evolving landscape, collectors must navigate not only aesthetics but also the intricate dynamics of the art ecosystem. 7 Top Collectors on the Work That Got Away from Artnet.com Next time: Who are the original SuperCollectors and what is their lasting impact? Disclosures: https://www.avantiamfo.com/post-disclosures

Valuing contemporary art presents several challenges due to its unique characteristics and the dynamic nature of the art market. Here are some key challenges: Limited Historical Data Unlike older artworks, contemporary pieces often lack an extensive auction history. This scarcity of data makes it challenging to assess their value accurately. Subjectivity Art valuation is inherently subjective. While objective factors like size, medium, artist reputation play a role, and known sales history, personal taste and cultural context also influence perceived value. Market Trends and Fads The contemporary art market can be influenced by trends and fads. Prices may surge for certain artists or styles, only to decline later. Predicting long-term value becomes complex. Speculative Nature Predictive analysis for contemporary art can be speculative. Works by lesser-known artists or those without substantial historical recognition pose a challenge. Investors must balance risk and potential reward. Diverse Mediums Contemporary art encompasses various mediums beyond traditional painting, including installations, digital art, and performance pieces. Valuing these diverse forms requires expertise. Global Economic and Geopolitical Factors Economic fluctuations, geopolitical tensions, and currency exchange rates impact art markets.  Changes in the economy, such as inflation or recession, can affect the art market. For example, during periods of high inflation, the price of art sold at auction my increase. Conversely, economic downturns can lead to a decrease in art prices as buyers' purchasing power diminishes. Geopolitical tensions can disrupt trade and economic stability, leading to market volatility. Geopolitical risks can have a stifling effect on private sector innovation, including the art sector, as companies with exposure to foreign markets face increased uncertainty. The art market operates internationally, and fluctuations in currency exchange rates can significantly impact the cost of art. A weakening currency can make artworks more expensive for the buyers using that currency, potentially affecting their willingness to purchase art. On the other hand a strong currency can make artworks less expensive but are you able to act on the opportunity? The recent economic crisis in China serves as an example of these factors at play. The slowdown in China's economy, particularly in the property sector, has lead to a decrease in domestic demand, which in turn has affected global commodity prices and could influence the results of art auctions. This is because the art market is sensitive to economic conditions, and a crisis in a major economy like China's can have ripple effects on global markets, including the art market. Conclusion Despite these challenges, the contemporary art market remains dynamic, attracting collectors and investors. It is important to enlist a qualified art advisor who will guide you through the complexities of contemporary art and updated on market trends. Disclosures https://www.avantiamfo.com/disclosures

The Banker's Crystal Ball Towards the close of the previous year, the Federal Reserve (Fed) underwent a notable shift in its policy stance, signaling a forthcoming ease in rates for the year 2024—a sentiment reinforced during the March meeting. With the realization that policy rates have likely reached their peak for this cycle, there has been a commendable performance in risk assets. Equities have surged to record highs, while credit spreads have approached their cycle lows making navigating the markets increasingly challenging for investors. Economics Source: BEA, Factset, J.P. Morgan Asset Management We foresee the U.S. real GDP growth hovering around 2% in 2024, slightly above trend and consistent with the ongoing pace. Inflation is poised to gradually recede, with headline CPI projected to reach the low 2s by year-end. Consequently, we anticipate the Fed to enact two or three rate cuts this year, with the likelihood of commencement at the June meeting. On a global scale, we anticipate a rebound in European activity from a subdued base, countering the slight deceleration in U.S. growth. This environment advocates for a pro-risk strategy. Within our multi-asset portfolios, we favor overweight positions in credit and equity, while maintaining a neutral stance on duration as bonds are expected to trade within a range. The prospect of rate cuts is anticipated to mitigate the risk of bond yields experiencing significant upward movement. Source: Bloomberg, J.P. Morgan Asset Management While we acknowledge one primary risk to this optimistic outlook—potential stickiness in inflation at current levels, or worse, a reacceleration—recent U.S. inflation indicators, although surprising to the upside, do not alter our belief in the downward trajectory of inflation, particularly in key drivers such as shelter. However, vigilance regarding labor market dynamics is maintained to detect any signs of wage inflation, which have thus far remained subdued. Equities As investors recalibrate economic risk from imminent recession to a softer landing, the S&P 500 has witnessed a significant rally since October. Nonetheless, we recognize that the business cycle still has room to progress, albeit not in its early stages. Consequently, we expect more subdued earnings growth and valuation expansion, while retaining a constructive outlook on stocks over the intermediate term. In the short term, it is conceivable that technical momentum and excessive optimism surrounding the pace of rate cuts may have propelled stocks too swiftly. While we anticipate positive earnings growth in the coming years, recent price momentum may experience a slowdown. Hence, we marginally reduce equity overweights, with the intent of leveraging any consolidation to reassume higher-risk positions. Across equity markets, we continue to identify attractive relative value and stock selection prospects, with a preference for high-quality, cash-generating entities. The recent diversification of market leadership away from the mega-cap technology sector bodes well for long-term market trends and active alpha generation. Regionally, we favor Europe and Japan, while acknowledging an improved outlook for emerging markets (excluding China), specifically, India, Mexico, and South Korea. Although the US offers appealing stock selection opportunities, it fares relatively lower in comparison to other regions. Source: Bloomberg, BLS, FactSet, J.P. Morgan Asset Management Fixed Income While credit spreads have tightened alongside equity market rallies, supportive technical factors, particularly investor demand for new issuances, sustain the credit market's resilience. Even in the event of equity market consolidation, credit spreads are expected to withstand moderate widening, given the strong demand for new issues and minimal concessions to investors. Returns from credit are projected to stem primarily from coupon carry rather than spread tightening at this juncture, underscoring the significance of credit in a portfolio context. Notably, shorter-dated U.S. high-yield, non-agency mortgages, and securitized credit are favored within the credit complex. High-Yield Spreads. Source: FRED Anticipating a decline in riskless rates as policy rates decrease, we keep duration targets at slightly longer than normal. However, we remain cautious, given the marginal offset between carry penalties and yield rallies. While we do not foresee a sharp downturn in U.S. yields barring a significant growth slowdown, we identify relative value opportunities in government bonds and actively manage trading within ranges. Our preferences include the U.S., core and peripheral eurozone, and Australia, while Canada and Japan are underweighted. This positioning allows us to benefit if the Federal Reserve waits too long (for which there is ample historical precedence) to cut rates and we experience a growth slowdown and subsequent sharp drop in rates. The prevailing policy rates, notably 5.5% in USD and 4% in Europe, prompt some investors to favor holding cash. However, we view this as far from a riskless strategy, emphasizing the importance of managing associated negative carry and exploring opportunities across various asset classes. As policy rates are anticipated to decrease mid-year, further declines in rates volatility are expected. While short-lived spikes in volatility may occur amid stock consolidations, we anticipate overall subdued cross-asset volatility throughout the year. This, coupled with declining inflation, suggests a potential reduction in cross-asset correlations, enhancing diversification prospects for asset allocators. The Election All elections, but especially Presidential Elections, introduce uncertainty into financial markets. Both sides of the aisle believe in their candidate and see the other side as being bad for markets. Either way, both sides recognize they can wait to make investment decisions be that in their companies, real estate, or portfolios. This act of waiting generally evaporates as the likely winner becomes more clear and gives both sides of the aisle more clarity on what they are likely to face over the next term. As such, they start to make investments and markets, on balance, tend to move upward going into elections. In conclusion, an environment characterized by moderating growth, declining inflation, policy rate cuts, and sustained low volatility favors a risk-on approach. While acknowledging the tendency of markets to overextend in the short term, we remain steadfast in our conviction that the prevailing conditions are conducive to risk-taking, actively seeking opportunities to augment positions during any consolidation phase. 5-year Investment Outlook Opportunity UW N OW Conviction Rationale U.S. Large Cap ● Overvalued and earnings growth likely to grow into current valuations. U.S. Small Cap ● Favor profitable firms with low leverage Value ▲ Moderate Trading at a discount to growth Growth ● Low Relatively expensive but the AI theme is not yet fully realized International Equity ▲ Moderate Steep discount to historic levels Emerging Equity ▲ Low Earnings outlook shows signs of bottoming China ▼ Low Property sector remains weak Japan ▲ Moderate Solid GDP growth and a new focus on shareholder value Duration ▲ Moderate Fed rate cuts looming but could be pushed farther to the right. we believe this would be a further catalyst for additional duration Treasuries ● Curve likely to steepen, scope for bond rally is limited Inv Grd Municipals ● Inv Grd Corporates ● High Yield Muni ▲ High Limited spread compression, but strong balance sheets mean limited defaults High Yield Corp ▲ High Limited spread compression, but strong balance sheets mean limited defaults Real Estate ▼ Elevated rate environment reducing buyers, shelter inflation falling Gold ● Has had a strong run, near 52-week highs Energy ● Sources and disclosures Post Disclosures More insights from Avantia Post Disclosures

Fine art, often overlooked as an asset class, holds a unique position in the investment world. Unlike traditional investments underpinned by established assets and liabilities, fine art’s value is largely subjective, adhering to the adage—beauty is in the eye of the beholder. Historically, the three fine arts—painting, sculpture, and architecture—distinguish themselves through visual and aesthetic uniqueness that defines their genre, history, conceptuality, and placement in the artistic canon. Fine Art as an Investment Fine art tends to hold its value over time and remains unaffected by equity market volatility, making it operate differently from most other investments. Unlike stocks, fine art is not a liquid investment asset. Liquidating your art asset involves an appraisal, working with an auction house or art consultant to find an appropriate buyer, all of which can take time. Hence, many art investors keep art collections as part of a diversified portfolio, and as part of their estate to be passed down to future generations. Considerations for Art Collectors If you’re looking to start or expand your collection, here are some considerations: Defining your objectives:  Determine the type of art you are interested in collecting before approaching galleries and auction houses. Your collection should reflect your taste as well as your financial interest. Transcending Value: Investing with Zeal and Distinction: Fine art offers a rare opportunity to love your investment for more than its market value. It can color its owner with a more cultured, humanitarian, visceral impression that no hedge fund ever could. There’s an element of prestige in being able to speak with literacy about such investments. The Significance of Investigation in Initial Art Acquisition: Investing in fine art should start with an interest or aesthetic preference. Whether it’s renaissance art or pop art or expressionistic works, investigating your future investment is the first step in meeting your goals. The Value of Professional Guidance: The art world operates on a more nebulous value scale than other kinds of asset classes. Only experts in the rarefied domain of fine art can explore with investors new and old, as the discovery of a downtown graffiti artist in the 1980s by the right gallerist can create an iconic storm around that artist’s name, even if they never live to see it. Broadening Your Portfolio: Just like every other asset class in an investor’s portfolio, diversification is still the number one rule. Invest in both your favorites and in what experts in the field encourage, as well as your own inner signals, which comes with collecting experience. Safeguarding Your Artwork: As with any other high-value property, insurance should be part of the conversation when it comes to your art collection. Specialized art insurance coverage plays a crucial role in protecting valuable collections. Planning and Funding: Art is expensive. When considering a new work or starting a collection, we recommend deciding on a budget and financing plan with your Lead Advisor before speaking to your trusted art advisor. Capitalizing on Your Artwork: Using fine art as collateral for loans can be an effective strategy to enhance liquidity for art owners and collectors. This practice, often referred to as art-secured lending, allows individuals to unlock the value of their art holdings without selling them outright.  Beyond serving as collateral, your collection can gain recognition by collaborating with prestigious museums. This collaboration can showcase your collection or a specific artist within it, thereby establishing what is known as provenance. Disposing, Gifting, and Legating Artwork: This can be one of the most complex aspects of owning a fine art collection and requires input from both your Avantia Lead Advisor and expert independent art advisors to ensure you’re making the most fully informed and tax-advantaged decisions. Conclusion Compared with traditional asset classes with well-established and understood risk and return characteristics, investing in art can feel opaque and mysterious. It can also feel rewarding in certain aesthetic and sentimental ways that more traditional investments cannot. Through Avantia’s Passion Assets partners, your Avantia Lead Advisor can connect you with fine art advisory, museum directors and curators, freeport storage and premier auction houses access to suit your art investing needs. Sources and Disclosures https://www.avantiamfo.com/disclosures

Navigating the Nuances of Art Worth Introduction Art valuation and appraisal are critical processes in the art market, providing insights into the worth of artworks. These practices involve a combination of historical context, aesthetic judgment, and market dynamics to determine the fair market value of art pieces. The Art of Valuation Art valuation is a complex task that unlocks the cultural and financial value of an artwork. It takes into account the historical, aesthetic, and social context, aiming to establish a price that reflects the artwork’s true worth. This process requires a deep appreciation for the cultural significance of art and an understanding of the economic forces at play in the art market. Key Factors Influencing Art Value Several factors can significantly influence the value of an artwork: Artist’s Influence and Reputation : The stature of the artist plays a pivotal role, with works by influential artists commanding higher prices. Subject Matter : The theme depicted can affect value, with certain subjects being more sought after due to their art historical significance or market popularity. Provenance : A well-documented history of ownership can add to an artwork’s value, affirming its authenticity. Condition : The physical state of the artwork is crucial, as any damage can considerably reduce its value. Market Trends : Current demand and trends in the art market can cause fluctuations in an artwork’s value. The Appraisal Process Art appraisal involves a detailed examination of the artwork, considering the aforementioned factors to provide an estimated value. Professional appraisers utilize their expertise, along with market resources and databases, to offer accurate valuations. Conclusion Understanding the intricacies of art valuation and appraisal is essential for collectors, investors, and enthusiasts. By recognizing the various determinants of value and engaging with professional appraisals, stakeholders can navigate the art market with confidence and make informed decisions. How do I find a reliable art appraiser? Finding a reliable art appraiser involves a few steps to ensure that you get a professional who is qualified and experienced. Here are some tips to help you find a trustworthy art appraiser: 1.    Ask Your Family Office Advisor : Avantia's PAD has considerable access to reputable and accredited art appraisers. 2.    Research Professional Credentials : Avantia's PAD vets appraisers who are accredited by reputable organizations such as the International Society of Appraisers, the American Society of Appraisers, or the Appraisers Association of America. 3.    Check for Specialization : We understand the appraiser has expertise in the specific type of art you need appraised, as art can vary widely from modern paintings to antique sculptures. 4.    Verify Experience and References : Avantia's PAD knows experienced appraisers that have a track record of appraising art similar to yours and will be able to provide references or testimonials. 5.    Interview Potential Appraisers : We will provide you a list of potential appraisers. You must interview them to discuss their process, fees, and to gauge their communication and professionalism. Remember, a good appraisal will not only give you the value of your art but also provide insights into its provenance, authenticity, and condition. Take your time to find an appraiser who meets all these criteria to ensure a thorough and accurate appraisal of your artwork. This whitepaper (link in notes) provides a foundational understanding of art valuation and appraisal. For a more in-depth exploration, consider consulting additional resources and engaging with art valuation professionals. Remember, the value of art is not only in its monetary worth but also in its ability to convey cultural and historical significance.   Next time: What are the challenges in valuing contemporary art? Sources and Disclosure The Art of Valuation ( appraisalfoundation.org ) , https://journals.ala.org/index.php/rusq/article/download/5705/7094 , How to Find the Value of a Painting - Art Appraisal 101 ( artincontext.org ) https://www.avantiamfo.com/disclosures

Unlocking the Power of Private Placement Life Insurance for Ultra-Affluent Families When it comes to safeguarding your family’s financial future, life insurance plays a crucial role. In the event of your passing, life insurance can provide the financial support your loved ones need to maintain their quality of life. But for Ultra-affluent individuals and families, traditional life insurance might not be enough. Enter Private Placement Life Insurance (PPLI)—a powerful tool offering unique benefits that go beyond the scope of standard policies. In this article, we'll break down the key differences between traditional life insurance and PPLI, and explore why PPLI could be the smarter choice for affluent families looking to grow their wealth and protect their legacy. Traditional Life Insurance: Reliable, But Limited Traditional life insurance policies are fairly straightforward. You pay premiums, and in return, your beneficiaries receive a death benefit when you pass. After premiums are paid, insurance charges are deducted, and the remaining funds are invested according to the policy type. For example, with a traditional Variable Universal Life (VUL) policy, your funds are placed in a segregated account, which offers some level of protection from the insurance carrier’s creditors. However, traditional policies come with a key limitation: restricted investment options. Much like a 401(k) plan, these policies often offer a pre-selected menu of 75-150 funds. Unfortunately, they usually exclude alternative investments like hedge funds, private equity, or real estate. This can significantly limit the growth potential of your policy's cash value, making traditional policies less appealing for ultra-affluent individuals seeking higher returns and tax-efficient growth. PPLI: A Tailored Approach for Ultra-Affluent Investors Private Placement Life Insurance (PPLI) presents a compelling option for privately held business owners and high-net-worth individuals/families aiming for tax-efficient wealth accumulation. In essence, PPLI functions akin to conventional life insurance policies, yet with a pivotal distinction: it is tailored to encompass tax-inefficient assets within a tax-advantaged framework. Consequently, PPLI policies enable policyholders to diversify their investments across a range of bespoke assets such as hedge funds, private credit, private equity, and real estate—investment avenues typically unavailable through standard insurance products. This level of investment flexibility is a game-changer for ultra-affluent families. It allows you to manage your wealth in a way that aligns with your financial goals while maximizing growth potential. In addition, the assets within the PPLI are typically held in a Separately Managed Account (SMA), offering even more customization and control compared to the off-the-shelf options provided by traditional policies. Typical PPLI Candidate: Access to significant liquidity Net worth over $10 million Able to fund over $2 million in the first five years Appetite for alternative investments Interested in sophisticated income tax & wealth transfer planning Tax Efficiency: A Major Advantage of PPLI One of the standout benefits of PPLI is its tax efficiency. While your policy is active, any investment gains or income are deferred from taxes. This allows your wealth to grow uninterrupted, without the drag of annual tax liabilities. Furthermore, when you need to access your policy’s value, PPLI allows for tax-favored distributions—either by withdrawing up to the cost basis tax free or by utilizing tax-free policy loans. And, just like with traditional life insurance, the death benefit passes to your heirs tax free. Common PPLI Investment Types Real Estate Private Equity Traditional Mutual Funds Hedge Funds Asset Protection and Estate Planning Perks Beyond investment and tax advantages, PPLI also offers compelling benefits for asset protection and estate planning. In many cases, PPLI policies are structured to shield assets from creditors or lawsuits, adding an extra layer of protection. Additionally, PPLI can be strategically designed to reduce estate taxes, making it an excellent tool for transferring wealth to the next generation in a tax-efficient manner. Comparing PPLI and Traditional Life Insurance: The Key Differences While both PPLI and traditional life insurance serve to protect your family’s future, the differences lie in investment flexibility, costs, and liquidity. Traditional life insurance policies often have higher upfront fees and limited investment options. In contrast, PPLI policies offer a vehicle in which to access alternative investments without the tax drag—an advantage that may lead to significantly greater wealth growth over time. Additionally, PPLI typically comes with lower upfront fees and allows for more dynamic portfolio management. Here is what a discovery and execution process might look like for an Ultra-Affluent Family Discovery Process The financial advisor and client collaborate to determine the client’s overall wealth plan including: Purpose of the family's wealth (priorities) Understanding of the family resources Comparing the expected cost of the family's priorities with their current and future expected resources Assessing the need for protection and the family's risk tolerance Understand income tax & estate planning needs The financial advisor and the client work together to determine which solutions (insurance and otherwise) provide the optimal approach to meeting the family's needs. If insurance is an integral part of the solution then the advisor works with the client and insurance consultant to create a customized policy that meets their specific objectives and should include an analysis of the cost to set up and administer going forward. Execution Process Clients engage with an estate planning attorney to set up an irrevocable trust that is uniquely designed to own life insurance. Clients (Grantors) contribute funds to the trust which are used by the trustee to purchase a PPLI policy. The Financial Advisor recommends the selection of appropriate investment options in line with the family's objectives. Depending on how the trust is structured there may be ongoing maintenance such as Crummey letters and various accounting functions that must be completed annually. At the death of the insured, death benefit proceeds will be paid to the trust and the trustee will distribute the assets of the trust in accordance with the terms of the trust. If structured correctly the investments in the PPLI policy will grow income tax free during the life of the insured and then pass estate tax free to the beneficiary of the trust. Is PPLI Right for You? For affluent families focused on growing their wealth, PPLI offers unmatched flexibility, tax advantages, and estate planning benefits. However, it does require a substantial initial investment, making it less accessible to those without significant assets. On the other hand, if your primary goal is maximizing death benefit coverage with lower premiums, traditional life insurance can still be an effective solution for providing estate liquidity and passing wealth to future generations. At the end of the day, choosing the right policy depends on your specific financial goals. A skilled wealth advisor can help you assess your needs and determine whether PPLI or another solution entirely is best for you. Sources and Disclosures: https://www.avantiamfo.com/post-disclosures

At Avantia and BDO, we seek to be highly tax aware advisors for our clients. Many of our clients are asking for help in navigating the new taxes that go into effect on January 1st, 2026. The Luxury Sales Tax on Automobiles The major changes to the purchase of an automobile effective January 1, 2026 are as follows: Increase to the additional motor vehicle sales tax of 0.2% which applies on the full purchase price of the car. A “luxury vehicle” additional sales tax of 8%. This is on the amount the purchase price of the car exceeds $100,000 (this amount increases by 2% each July 1). This tax does not allow an offset for a trade in. Don’t forget the car is still subject to the general sales tax. Note: Due to separate local legislation, the general sales tax in King County is increasing by 0.1% and in the City of Seattle by an additional 0.1%. Alfa Romeo Example Let’s look at a simple example of how this tax would apply if you were in Seattle. Effective 1/1/2026 the sales tax will be 11.050%: January 1, 2026 December 31, 2025 State Sales Tax 6.50% 6.50% Local Sales Tax (Seattle) 4.05% 3.85% Additional Motor Vehicle Sales Tax 0.50% 0.30% Total Combined Sales Tax Rate 11.05% 10.65% Trade in credit allowed for Sales Tax Luxury Tax (Price greater $100k) 8% N/A Trade in credit NOT allowed for Luxury Tax If we purchase a $700,000 car for cash, the total tax will be: Sales tax on $700,000 $77,350 Luxury sales tax on $600,000 $48,000 Total Sales tax $125,350 If the same car was purchased on 12/31/2025, the sale tax would have been $74,550 (no luxury tax, 0.2% lower local sales tax, 0.2% lower additional motor vehicle sales tax). Thus, the incremental cost of purchasing the car under the new laws is $50,800. Ferrari Planning Options A common question we hear from clients is how can they not be subject to this new tax. Let’s walk through some thoughts on approaches that could be taken. Become a non-Resident of Washington and purchase and use your cars outside of Washington. This is by far the easiest and safest approach . That being said, many of our clients have close ties to the communities that they do not want to sever. This generally involves moving to another state and changing your doctors, social clubs, and estate planning documents. It also involves spending fewer days in the state of Washington for several years. The above actions are not all inclusive. Relinquishing a Washington “domicile” is very fact specific and we recommend that it be done with intention and documentation. If this is an approach you wish to pursue, we are happy to schedule a meeting with you. Pay the tax and treat it as a cost of living in Washington. This is the simplest approach . The best way to think about taxes are that they are the cost of living in a certain area. This ultimately becomes a personal value decision. Is it worth it to pay this tax to live in Washington? Purchase the car outside of Washington and don’t bring it into Washington. This would subject the car to the applicable sales tax in the jurisdiction that you purchased the car in. Obviously, the biggest challenge with this approach is that you don’t get to enjoy the use of the car within the state of Washington. A note about Montana LLC’s One of the things that you “hear” about is the fact that you can set up an LLC in Montana and purchase the car through the LLC. For Montana purposes, an LLC’s residency is determined based upon where it was formed. Thus, the LLC as a Montana Resident can register the car in Montana. Since most areas of Montana have no sales tax, this would not attract sales tax in Montana. There are a number of companies that will handle all of this for their clients. A WORD OF CAUTION! For state sales tax purposes, other states are not required to follow Montana’s rules for purposes of applying their sales or use tax to a car that was purchased out of state. The below link involves a recent situation in Tennessee where the owner is being pursued for tax evasion by the state. Several states including Washington are increasing enforcement on this type of transaction targeting vehicles with out of state plates. https://www.dexerto.com/youtube/whistlindiesel-claims-tax-evasion-arrest-is-over-montana-ferrari-purchase-3286075/ The state of Washington has a use tax that is parallel to the sales tax and luxury tax systems. Its purpose is to ensure that if items are purchased without sales tax the state of Washington still gets the appropriate amount of tax on the use of the item within the state of Washington. Washington isn’t bound by Montana domestic law to determine whether the car is subject to sales/use tax. Washington has specific rules that are designed to catch individuals that use entities outside of the state to avoid paying Washington sales/use tax. These rules generally assess Washington sales/use tax on the first use of tangible personal property in the state. We would NOT recommend any of our clients utilize the Montana LLC planning idea to avoid Washington State sales, use, or luxury tax. Used Car Dealership Property purchased for resale generally is not subject to sales tax. For individuals that meet certain criteria, it might make sense to set up a used car dealership and then hold their car collection in their used car dealership. This approach would only work with someone who is generally purchasing and selling cars on a regular basis. Selling a car a year or once every few years would not be enough. This would require a profit motive and activities consistent with what a car dealer normally performs. Your use of the cars would be limited to what is typically allowed by car dealerships. Any intervening use other than as inventory would subject the car to use tax. This approach would also change the taxation of the gain on the sale of cars as they would be considered inventory and would not be considered capital assets subject to capital gain or collectible tax rates. The gains would be taxed at ordinary income tax rates. The tax issues associated with this approach are complex and you should consult with your tax advisor before proceeding with this structure. If you would like to discuss the above options to determine if any of them are appropriate for you, we would be happy to schedule a meeting. Authors: Pat Riley, Avantia Andrew Stuard, BDO PC Disclaimers: This article provides general information and should not be considered legal, tax, or financial advice. Consult with a professional for personalized recommendations. https://www.avantiamfo.com/disclosures

What the One Big Beautiful Act Means for Your Wealth, Taxes, and Legacy Signed into law by President Trump on July 4th, 2025, the One Big Beautiful Bill Act (OBBBA) enacts sweeping tax reforms, extending and expanding many provisions of the 2017 Tax Cuts and Jobs Act (TCJA), while introducing new planning vehicles and deductions. Unlike the TCJA, many provisions are made permanent—eliminating the need for urgent tax planning before sunsets. However, staggered effective dates and some temporary elements still require strategic planning by families. One Big Beautiful Bill Act (OBBBA) Impacts on Individuals Estate, Gift & GST Tax Exemption Permanently Increased 2026 exemptions : $15M individual / $30M married couple, indexed for inflation. Previously, TCJA exemptions were scheduled to halve in 2026. Now, there's no sunset . Planning : Continue lifetime gifting, use irrevocable trusts, and incorporate income tax planning with grantor/non-grantor trusts. Even if your estate is less than the above values and you are domiciled in the state of Washington, you might want to consider pre-death gifting as Washington does not have a gift tax. Permanent Lower Income Tax Rates + AMT Relief The top income tax rate remains at 37% , rather than reverting to 39.7%. AMT exemptions remain elevated, but phase out more aggressively for high earners. Planning : Coordinate income and deductions to stay within advantageous brackets and to maximize new deductions (e.g., senior deduction). Temporary Expansion of SALT Deduction The SALT cap rises to $40,000 in 2025 (from $10,000), phasing up through 2029 for earners under $500K. Adjusted by 1% annually, it then reverts to $10,000 permanently afterwards. No change to passthrough entity workaround , which remains a viable strategy. Planning : Use trusts and passthrough entities to manage exposure; aim to stay under income thresholds to benefit. Standard Deduction Boost + Targeted Deductions New standard deduction : $15,750 (individual) $31,500 (joint). Temporary deductions (2025–2028): $6,000 senior bonus (65+) Tip/overtime income deductions. Note this deduction is based upon what is reported in the W-2 as tips or overtime. Most Seattle area restaurants have moved to a service fee which is not considered a tip for purposes of these rules. $10,000 deduction for domestic vehicle loan interest. Note this deduction phases out for incomes between $100,000 and $150,000 for an individual and $200,000 and $250,000 if you file jointly. Planning : Bunch itemized deductions, time deductible expenses, and explore eligibility for new write-offs. Repeal of Clean Energy Tax Credits (Individuals) Credits for EVs no longer apply to purchases after September 30th, 2025. Energy-efficient home upgrades must be completed by the end of 2025 . Planning : Purchase qualifying assets (cars, solar, HVAC, etc.) before expiration. Introduction of Trump Accounts New tax-free savings IRA for minors , launching July 2026. Annual limit: $5,000 per beneficiary. Government adds $1,000 for kids born 2025–2028. Planning : Families should consider opening accounts early. Contributions can come from any individual. Opportunity Zones Reboot New qualified opportunity zones (QOZs) begin post-2027 . Does not impact the end of the deferral for investments made prior to 2027. Allow capital gains deferral and potential exclusion. Planning : Use installment sales or delayed gain recognition strategies to align with new zones. Impacts on Businesses Investment and Hiring Incentives 100% bonus depreciation made permanent : reinstating what TCJA had scheduled to phase out. Section 179 expensing limit increased to $2.5M . R&D costs fully deductible in year incurred for domestic R&D costs. Reinstates broader business interest deductibility (EBITDA rule). Planning : Revisit cost recovery strategies and determine best approach for R&D transition back to expensing. Repeal of Clean Energy Tax Incentives (Business) Eliminates clean electricity, energy production, and storage credits. Green New Deal provisions repealed between 2025–2027. Planning : Accelerate clean energy projects and purchasing before loss of credits. Qualified Small Business Stock (QSBS) Expansion Gross asset cap increased from $50M to $75M. Gain exclusion increased from $10M to $15M. Partial benefit available after 3 years (was 5). Planning : Entrepreneurs may want to choose C-Corp status. Founders, employees, and investors benefit from shorter holding period and higher exclusion. Impacts on Charities and Donors University Endowment Tax Increased Universities with endowments face a new tax with a sliding rate between 1.4% and 8%, depending on the school’s endowment per student. While schools with fewer than 3,000 students are exempt, schools with significant foreign student populations may face higher taxes. Sliding rate: 1.4% to 8% based on endowment/student ratios. Foreign student populations increase tax burden. Schools with <3,000 students are exempt. Planning : Use donor-advised funds (DAFs), charitable trusts, or private foundations for college support rather than giving directly to endowments. This helps the school directly in the current year and helps mitigate the endowment tax effect. Charitable Deduction Changes New $1,000 universal charitable deduction ** for non-itemizers (starts 2026). New credit for gifts to scholarship funds. Floors for itemized deductions begin in 2026: 0.5% floor for individuals in 37% bracket 1% floor for corporations Planning : Accelerate gifts into 2025 to avoid floors; defer gifts for small donors until 2026 to claim universal deduction. Key Themes & Takeaways Category Permanent or Temporary Key Planning Estate & Gift Exemption Permanent Continue Gifting beyond 2025 Income Tax Rates Permanent Time income & deductions across brackets SALT Deduction Temporary (2025-29) Shift Income to qualify for phase-in Clean Energy Credits Eliminated Make purchases before 2025 year-end Trump Accounts Starts 2026 Open early to qualify for contributions QSBS Enhancements Permanent Consider C-Corp and 3-year holding strategies Opportunity Zones Starts post-2027 Use installment sales for future alignment Charitable Deductions Mixed Accelerate large gifts, defer small ones Final Thoughts While depending on ones political views it is possible to be happy of upset at the outcome of the OBBA, however, as advisors our view is this bill becoming an act delivers the “certainty” that wealthy families, business owners, and their advisors have sought. With estate tax cliffs avoided and many key income tax provisions locked in, the pressure to rush planning has eased, but careful timing , entity structuring , and gift optimization are still crucial. Given the long runway for some provisions and short windows for others, the best approach is to consult with your accounting, estate planning, legal, and wealth advisors in Q3 or Q4 2025 and revisit each year to adjust for phase-ins and thresholds. If you would like Avantia: A Family Office to help coordinate this for you and your family, please reach out. Sources and Disclaimers: https://www.northerntrust.com/united-states/institute/articles/beyond-sunset-tax-planning https://www.congress.gov/bill/119th-congress/house-bill/1/text https://taxfoundation.org/blog/one-big-beautiful-bill-pros-cons/ This article provides general information and should not be considered legal, tax, or financial advice. Consult with a professional for personalized recommendations. https://www.avantiamfo.com/disclosures