Market Update from Senior Analyst Minoti Dhanaraj - May 2019

This months Market Update is summarized in the video above.

MARKETS

  • After a strong start to the year, global financial markets declined in May mainly due to growing concerns around U.S.-China trade. The S&P 500, which tracks large cap U.S. stocks, was down -6.35% in May and but is still up 10.74% Y-T-D. The Russell 2000 Index, which tracks domestic small cap stocks decreased -7.78% in May and is up 9.26% Y-T-D. The International developed equity index (MSCI EAFE), decreased -4.80% in May and is up 7.64% Y-T-D. The emerging markets index (MSCI EM) decreased -7.26% in May and is up 4.09% Y-T-D.
  • In May, bond yields decreased, and prices increased; the 30-year U.S. Treasury bond yield decreased 35bps to 2.58%, while the 10-year yield decreased 37bps to 2.14%, and the 5-year yield decreased 35bps to 1.93%.
  • The Barclays Aggregate Index, which is a measure of U.S. Bond prices, increased 1.78% for May and is up 4.80% Y-T-D.

ECONOMIC AND GEOPOLITICAL HEADLINES

  • U.S. gross domestic product (GDP) in the first quarter of 2019 increased 3.1%, according to the “second” estimate released by the Bureau of Economic Analysis. Fourth quarter 2018 GDP increased 2.2%.
  • The May Purchasing Managers Index (PMI) fell to 52.1 from 52.8 in the previous month. Per the Institute for Supply Management (ISM), a reading above 50 is considered economic expansion.
  • May non-farm employment increased by 75,000 jobs, and the unemployment rate remained at 3.6%, as reported by the Bureau of Labor Statistics on June 7th. Employment trended positively in professional and business services and in health care. Average Hourly Earnings (wages) increased 3.1% year-over-year.

PERFORMANCE UPDATES

  • Net of all fees, accumulation funds were mixed depending on their mix of equity versus fixed income. The Equity Fund decreased -5.42% in May and is up 9.14% Y-T-D. The Bond Fund was up 1.44% in May and is up 5.05% Y-T-D. The Stable Value Fund was up 0.15% for May and is up 0.76% Y-T-D. The Northern Trust Global Sustainability Index Fund (GSIF) decreased -5.47% for May and is up 9.45% Y-T-D.
  • The Balanced Fund decreased -2.52% in May and is up 7.09% Y-T-D. The Target Annuitization Date (TAD) 2020; TAD 2025; TAD 2030; TAD 2035; and TAD 2040 were +0.17%, -1.67%, -2.74%, -3.16% and -3.66%, respectively for May and are up 2.42%, 5.78%, 6.98%, 7.54% and 7.97% Y-T-D, respectively.