Global financial markets are in the middle of a selloff with the resurgence of U.S.-China trade tensions. Even after the recent decline, global equities have still returned over 10% for 2019. On the other hand, perceived safe havens such as U.S. treasuries have advanced during the equity decline, benefitting from a posture that interest rate cuts may happen sooner rather than later. To be precise, balanced funds, including Target Annuitization Date Funds (TAD), the Balanced Fund, and the Bond Fund itself, are benefitting from the diversification qualities that led you to select those Funds in the first place.
As we mentioned in our recent letter, the significant rally in 2019 in global markets has both supporters and sceptics. Bonds are benefitting from the possibility of a global slowdown and low inflation, while equities are depending on economies avoiding recession. Going forward, it will be important to watch for stabilization in global economies, which can support earnings growth, as a needed catalyst for future sustainable market advances.
In terms of the Pension Boards’ opportunistic but thoughtful approach, our asset allocation toward equities has not been overly aggressive, because we understood the volatility of this Administration’s reaction function. If equities sell off to greater degree, we can pivot back towards these assets, if our more positive view on economic growth is still prevalent. This is a fair characterization as of now.
For more detailed market commentaries, please visit the Pension Boards’ website at www.pbucc.org. We thank you for your continued confidence in us.