Market Update from CIO Dave Klassen - 2019 September

MARKETS

  • Global financial markets were positive in September as the Fed cut rates an additional 25 bps and European Central Banks restarted their asset purchase programs.  The S&P 500, which tracks large cap U.S. stocks, was up 1.87% in September and is up 20.55% Y-T-D. The Russell 2000 Index, which tracks domestic small cap stocks increased 2.08% in September and is up 14.18% Y-T-D.  The International developed equity index (MSCI EAFE), increased 2.87% in September and is up 12.80% Y-T-D. The emerging markets index (MSCI EM) increased 1.91% in September and is up 5.89% Y-T-D.
  • In September, bond yields increased, and prices decreased; the 30-year U.S. Treasury bond yield increased by 16 bps to 2.12%, the 10-year yield increased by 18 bps to 1.68%, and the 5-year yield increased by 16 bps to 1.55%.
  • The Barclays Aggregate Index, which is a measure of U.S. Bond prices, decreased -0.53% for September and is up 8.52% 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 “third” estimate released by the Bureau of Economic Analysis. First quarter 2019 GDP increased 3.1%.
  • The September Non-Manufacturing Purchasing Managers Index (PMI) was 52.6% from 56.4% in August.  This was below expectations of 55.0%.  The September Manufacturing PMI was 47.8% from August’s 49.1%.  Per the Institute for Supply Management (ISM), a reading above 50 is considered economic expansion. 
  • September non-farm employment increased by 136,000 jobs, and the unemployment rate declined to 3.5%, as reported by the Bureau of Labor Statistics on October 4, 2019. Employment trended positively in healthcare and professional/business services.  Average Hourly Earnings (wages) increased 2.9% year-over-year.

PERFORMANCE UPDATES

  • Net of all fees, accumulation funds had mostly positive results in September.  The Equity Fund increased 2.05% in September and is up 15.71% Y-T-D. The Bond Fund was down -0.58% in September and is up 8.68% Y-T-D. The Stable Value Fund was up 0.18% for September and is up 1.46% Y-T-D. The Northern Trust Global Sustainability Index Fund (GSIF) increased 2.41% for September and is up 18.11% Y-T-D.
  • The Balanced Fund increased 0.88% in September and is up 12.22% Y-T-D. The Target Annuitization Date (TAD) 2020; TAD 2025; TAD 2030; TAD 2035; and TAD 2040 were +0.02%, +0.68%, +1.02%, +1.16% and +1.35% respectively for September and are up 4.09%, 10.07%, 12.13%, 13.16% and 13.69% Y-T-D, respectively.