Market Update from CIO Dave Klassen - 2019 August

MARKETS

  • Global financial markets were mixed in August as equity markets were all negative, while most U.S. fixed income markets were positive.  The S&P 500, which tracks large cap U.S. stocks, was down -1.58% in August and is up 18.34% Y-T-D. The Russell 2000 Index, which tracks domestic small cap stocks decreased -4.94% in August and is up 11.85% Y-T-D.  The International developed equity index (MSCI EAFE), decreased -2.59% in August and is up 9.66% Y-T-D. The emerging markets index (MSCI EM) decreased -4.88% in August and is up 3.90% Y-T-D.
  • In August, bond yields decreased, and prices increased; the 30-year U.S. Treasury bond yield decreased by 57 bps to 1.96%, the 10-year yield decreased by 52 bps to 1.50%, and the 5-year yield decreased by 45 bps to 1.39%.
  • The Barclays Aggregate Index, which is a measure of U.S. Bond prices, increased 2.59% for August and is up 9.10% Y-T-D.

ECONOMIC AND GEOPOLITICAL HEADLINES

  • U.S. gross domestic product (GDP) in the second quarter of 2019 increased 2.0%, according to the “second” estimate released by the Bureau of Economic Analysis. First quarter 2019 GDP increased 3.1%.
  • The August Non-Manufacturing Purchasing Managers Index (PMI) was 56.4% from 53.7% in July.  This was above expectations of 54.0%.  The August Manufacturing PMI was 49.1% from July’s 51.2%.  This was the first month of contraction in the manufacturing sector since January 2016.  Per the Institute for Supply Management (ISM), a reading above 50 is considered economic expansion. 
  • August non-farm employment increased by 130,000 jobs, and the unemployment rate was unchanged at 3.7%, as reported by the Bureau of Labor Statistics on September 6, 2019. Employment trended positively in healthcare and financial activities, while mining lost jobs.  Average Hourly Earnings (wages) increased 3.2% year-over-year.

PERFORMANCE UPDATES

  • Net of all fees, accumulation funds had mixed results in August.  The Equity Fund decreased -2.51% in August and is up 13.38% Y-T-D. The Bond Fund was up 2.19% in August and is up 9.32% Y-T-D. The Stable Value Fund was up 0.15% for August and is up 1.27% Y-T-D. The Northern Trust Global Sustainability Index Fund (GSIF) decreased -1.15% for August and is up 15.32% Y-T-D.
  • The Balanced Fund decreased -0.49% in August and is up 11.24% Y-T-D. The Target Annuitization Date (TAD) 2020; TAD 2025; TAD 2030; TAD 2035; and TAD 2040 were +0.54%, -0.10%, -0.70%, -0.91% and -1.16% respectively for August and are up 4.06%, 9.33%, 11.00%, 11.86% and 12.18% Y-T-D, respectively.