Market Update from CIO Dave Klassen - 2019 July

MARKETS

  • Global financial markets were mixed in July as the U.S. equity markets grew but at a slower pace, while International equity markets were negative.  Fixed income markets were all positive. The S&P 500, which tracks large cap U.S. stocks, was up 1.44% in July and is up 20.24% Y-T-D. The Russell 2000 Index, which tracks domestic small cap stocks increased 0.58% in July and is up 17.66% Y-T-D.  The International developed equity index (MSCI EAFE), decreased -1.27% in July and is up 12.58% Y-T-D. The emerging markets index (MSCI EM) decreased -1.22% in July and is up 9.23% Y-T-D.
  • In July, bond yields increased slightly, and prices decreased; the 30-year U.S. Treasury bond yield increased by 1bp to 2.53%, the 10-year yield increased by 2bps to 2.02%, and the 5-year yield increased 8bps to 1.84%.
  • The Barclays Aggregate Index, which is a measure of U.S. Bond prices, increased 0.22% for July and is up 6.35% Y-T-D.

ECONOMIC AND GEOPOLITICAL HEADLINES

  • U.S. gross domestic product (GDP) in the second quarter of 2019 increased 2.1%, according to the “advance” estimate released by the Bureau of Economic Analysis. First quarter 2019 GDP increased 3.1%.
  • The July Purchasing Managers Index (PMI) was 51.2 from June’s 51.7.  Per the Institute for Supply Management (ISM), a reading above 50 is considered economic expansion.
  • July non-farm employment increased by 164,000 jobs, and the unemployment rate was unchanged at 3.7%, as reported by the Bureau of Labor Statistics on August 2. Employment trended positively in professional and technical services, health care, social assistance, and financial activities. Average Hourly Earnings (wages) increased 3.2% year-over-year.

PERFORMANCE UPDATES

  • Net of all fees, accumulation funds were positive in July.  The Equity Fund increased 0.47% in July and is up 16.30% Y-T-D. The Bond Fund was up 0.26% in July and is up 6.97% Y-T-D. The Stable Value Fund was up 0.19% for July and is up 1.12% Y-T-D. The Northern Trust Global Sustainability Index Fund (GSIF) increased 0.26% for July and is up 16.67% Y-T-D.
  • The Balanced Fund increased 0.38% in July and is up 11.79% Y-T-D. The Target Annuitization Date (TAD) 2020; TAD 2025; TAD 2030; TAD 2035; and TAD 2040 were up +0.23%, 0.34%, 0.39%, 0.41% and 0.42% respectively for July and are up 3.50%, 9.44%, 11.78%, 12.88% and 13.50% Y-T-D, respectively.