Market Update from CIO Dave Klassen – June 2020

MARKETS

  • Global financial markets continued to move in a positive direction in June with the S&P 500 having the biggest quarterly gain since 1998. The markets remain volatile due to uncertainty around the coronavirus outbreak. The developed and emerging market equity index (MSCI ACWI IMI), increased 3.20% in June and is down -6.25% YTD. The S&P 500, which tracks large cap U.S. stocks, was up 1.99% in June and is down -3.08% YTD. The Russell 2000 Index, which tracks domestic small cap stocks increased 3.53% in June and is down -12.98% YTD. The International developed equity index (MSCI EAFE), increased 3.40% in June and is down -11.34% YTD. The emerging markets index (MSCI EM) increased 7.35% in June and is down -9.78% YTD.
  • In June, longer-term bond yields were mixed; the 30-year U.S. Treasury bond yield remained unchanged at 1.41%, the 10-year yield increased by 1 bps to 0.66%, and the 5-year yield decreased by 1 bps to 0.29% as of June 30th, 2020.
  • The Barclays Aggregate Index, which is a measure of U.S. Bond prices, increased 0.63% for June and is up 6.14% YTD.

ECONOMIC AND GEOPOLITICAL HEADLINES

  • U.S. gross domestic product (GDP) in the first quarter of 2020 decreased - 5.00%, according to the “Third” estimate released by the Bureau of Economic Analysis. The fourth quarter of 2019 GDP increased 2.1%.
  • The June Non-Manufacturing Purchasing Managers Index (PMI) increased to 57.10% from 45.40% in May, this represents expansion after two consecutive months of contraction in the non-manufacturing sector. This was above expectations of 50.10%. The June Manufacturing PMI increased to 52.60% from May’s 43.10% representing a second month of growth after one month of contraction. Per the Institute for Supply Management (ISM), a reading below 50 is considered economic contraction.
  • June non-farm employment increased by 4.8 million jobs, and the unemployment rate declined to 11.1%, as reported by the Bureau of Labor Statistics on July 2nd, 2020. In June employment rose sharply in leisure and hospitality, construction, education and health services, and retail trade. Average Hourly Earnings (wages) increased 5% year-over-year in June.

PERFORMANCE UPDATES

  • The Equity Fund increased 3.02% in June and declined -7.86% YTD. The Bond Fund increased by 0.90% in June and is up 5.33% YTD. The Stable Value Fund was up 0.14% for June and is up 0.78% YTD. The Northern Trust Global Sustainability Index Fund (GSIF) increased 2.23% for June and declined -4.82% YTD.
  • The Balanced Fund increased 2.04% in June and is down -1.92% YTD. The Target Annuitization Date (TAD) 2020; TAD 2025; TAD 2030; TAD 2035; and TAD 2040 were 0.19%, 1.40%, 1.88%, 2.15% and 2.30% respectively for June and +1.27%, -0.25%, -2.56%, -3.35%, and -5.02% YTD.