Market Update from CIO Dave Klassen - 2019 October

MARKETS

  • Global financial markets were positive in October as strong employment, company earnings growth and another Fed rate cut offset slowing leading indicator signals. The S&P 500, which tracks large cap U.S. stocks, was up 2.17% in October and is up 23.16% Y-T-D. The Russell 2000 Index, which tracks domestic small cap stocks increased 2.63% in October and is up 17.18% Y-T-D. The International developed equity index (MSCI EAFE), increased 3.59% in October and is up 16.86% Y-T-D. The emerging markets index (MSCI EM) increased 4.22% in October and is up 10.35% Y-T-D.
  • In October, longer-term bond yields increased, and prices decreased; the 30-year U.S. Treasury bond yield increased by 5 bps to 2.17%, the 10-year yield increased by 1 bps to 1.69%, and the 5-year yield decreased by 4 bps to 1.51%.
  • The Barclays Aggregate Index, which is a measure of U.S. Bond prices, increased 0.30% for October and is up 8.85% Y-T-D.

ECONOMIC AND GEOPOLITICAL HEADLINES

  • U.S. gross domestic product (GDP) in the third quarter of 2019 increased 1.9%, according to the “advance” estimate released by the Bureau of Economic Analysis. Second quarter 2019 GDP increased 2.0%.
  • The October Non-Manufacturing Purchasing Managers Index (PMI) was 54.7% from 52.6% in September.  This was above expectations of 53.5%.  The October Manufacturing PMI increased to 48.3% from September’s 47.8%.  Per the Institute for Supply Management (ISM), a reading above 50 is considered economic expansion. 
  • October non-farm employment increased by 128,000 jobs, and the unemployment rate was little changed at 3.6%, as reported by the Bureau of Labor Statistics on November 1, 2019. Employment trended positively in food service and drinking places, social assistance, and financial activities.  Average Hourly Earnings (wages) increased 3.0% year-over-year.

PERFORMANCE UPDATES

  • Net of all fees, accumulation funds had positive results in October.  The Equity Fund increased 2.44% in October and is up 18.58% Y-T-D. The Bond Fund increased by 0.20% in October and is up 8.98% Y-T-D. The Stable Value Fund was up 0.13% for October and is up 1.66% Y-T-D. The Northern Trust Global Sustainability Index Fund (GSIF) increased 2.41% for October and is up 20.84% Y-T-D.
  • The Balanced Fund increased 1.45% in October and is up 13.90% Y-T-D. The Target Annuitization Date (TAD) 2020; TAD 2025; TAD 2030; TAD 2035; and TAD 2040 were +0.21%, +1.03%, +1.48%, +1.69% and +1.83% respectively for October and are up 4.36%, 11.25%, 13.85%, 15.05% and 15.80% Y-T-D, respectively.