Market Update from CIO Dave Klassen – December 2019

MARKETS

  • Global financial markets ended the year strong in December.  The S&P 500, which tracks large cap U.S. stocks, was up 3.02% in December and was up 31.49% in 2019. The Russell 2000 Index, which tracks domestic small cap stocks increased 2.88% in December and was up 25.52% in 2019.  The developed and emerging market equity index (MSCI ACWI IMI), increased 3.52% and was up 26.60% in 2019.  The International developed equity index (MSCI EAFE), increased 3.25% in December and was up 22.01% in 2019. The emerging markets index (MSCI EM) increased 7.46% in December and was up 18.42% in 2019.
  • In December, longer-term bond yields increased, and prices decreased; the 30-year U.S. Treasury bond yield increased by 18 bps to 2.39%, the 10-year yield increased by 14 bps to 1.92%, and the 5-year yield increased by 7 bps to 1.69%.   
  • The Barclays Aggregate Index, which is a measure of U.S. Bond prices, decreased -0.07% for November and was up 8.72% in 2019.  


ECONOMIC AND GEOPOLITICAL HEADLINES

  • U.S. gross domestic product (GDP) in the third quarter of 2019 increased 2.1%, according to the “third” estimate released by the Bureau of Economic Analysis. Second quarter 2019 GDP increased 2.0%.
  • The December Non-Manufacturing Purchasing Managers Index (PMI) increased to 55.0% from 53.9% in November as growth remained steady.  This was above expectations of 54.5%.  The December Manufacturing PMI decreased to 47.2% from November’s 48.1%.  Per the Institute for Supply Management (ISM), a reading above 50 is considered economic expansion.  
  • December non-farm employment increased by 145,000 jobs, and the unemployment rate was unchanged at 3.5%, as reported by the Bureau of Labor Statistics on January 10, 2020. Employment trended positively in retail trade and health care, while mining lost jobs.  Average Hourly Earnings (wages) increased 2.9% year-over-year.


PERFORMANCE UPDATES

  • Net of all fees, accumulation funds had positive results in December.  The Equity Fund increased 3.58% in December and was up 25.83% in 2019. The Bond Fund increased by 0.29% in December and was up 9.09% in 2019. The Stable Value Fund was up 0.15% for December and was up 1.95% in 2019. The Northern Trust Global Sustainability Index Fund (GSIF) increased 2.97% for December and was up 27.74% in 2019.
  • The Balanced Fund increased 2.16% in December and was up 17.86% in 2019. The Target Annuitization Date (TAD) 2020; TAD 2025; TAD 2030; TAD 2035; and TAD 2040 were +0.26%, +1.52%, +2.17%, +2.32% and +2.65% respectively for December and were up 4.78%, 13.93%, 17.89%, 19.50% and 20.89% in 2019, respectively.