Market Update from CIO Dave Klassen - 2018 November

MARKETS

  • Global markets were mixed, as geopolitical events heavily influenced market moves over the course of November, while the outcome of the U.S. midterm elections was as expected. The S&P 500, which tracks large cap U.S. stocks, increased 2.04% in November and is up 5.11% Y-T-D. The Russell 2000 Index, which tracks domestic small cap stocks, increased 1.59% in November, and is up 0.98% Y-T-D. The International developed equity index (MSCI EAFE), declined 0.13% in November and is down 9.39% Y-T-D. The emerging markets index (MSCI EM) increased 4.12% in November and is down 12.24% Y-T-D.
  • In November, bond yields decreased, and prices increased; the 30-year U.S. Treasury bond yield declined 10 bps to 3.29%, while the 10-year yield decreased 15 bps to 2.99%, and the 5-year yield decreased 17 bps to 2.81%.
  • The Barclays Aggregate Index, which is a well-known measure of U.S. Bond prices, increased 0.60% for November and is down 1.79% Y-T-D.

ECONOMIC AND GEOPOLITICAL HEADLINES

  • U.S. gross domestic product (GDP) in the third quarter of 2018 increased 3.5%, according to the “second” estimate released by the Bureau of Economic Analysis. Second quarter 2018 GDP increased 4.2%.
  • The November Purchasing Managers Index (PMI) increased to 59.3 from 57.7 the previous month, indicating that the economy grew at a faster pace. Per the Institute for Supply Management (ISM), a reading above 50 is considered economic expansion.
  • In November, non-farm employment rose by 155,000 jobs, falling short of economists’ estimates of 197,000. The unemployment rate remained unchanged at 3.7% for the third consecutive month. Over the year, unemployment rate declined by 0.4 percentage points.  Average Hourly Earnings (wages) increased by 3.1% year-over-year.
  • The monetary policy normalization and Fed plan to raise rates is expected to stay on track.

PERFORMANCE UPDATES

  • Net of all fees, all Funds had positive returns for November. The Equity Fund increased 1.30% in November and is down 3.40% Y-T-D. The Bond Fund increased 0.26% in November and is down 2.21% Y-T-D. The Stable Value Fund was up 0.15% for November and is up 1.54% Y-T-D. The Northern Trust Global Sustainability Index Fund (GSIF) increased 2.55% for November and is down 0.61% Y-T-D.
  • The Balanced Fund increased 0.82% in November, and is down 2.86% Y-T-D. The Target Annuitization Date (TAD) 2020 was up 0.28%; TAD 2025 was up 0.65%; TAD 2030 was up 0.82%; TAD 2035 was up 0.91%; and TAD 2040 was up 0.93% in November. These Funds are down 0.47%, 1.82%, 2.64%, 2.83% and 2.84% Y-T-D, respectively.