Market Update from CIO Dave Klassen – July 2020

MARKETS

  • Global financial markets continued to be positive in July led by emerging markets. That is against a backdrop of continued economic uncertainty due to the coronavirus outbreak. The developed and emerging market equity index (MSCI ACWI IMI), increased +5.29% in July and is down -1.29% YTD. The S&P 500, which tracks large cap U.S. stocks, was up +5.64% in July and is up +2.38% YTD. The Russell 2000 Index, which tracks domestic small cap stocks increased +2.77% in July and is down -10.57% YTD. The International developed equity index (MSCI EAFE), increased +2.33% in July and is down -9.28% YTD. The emerging markets index (MSCI EM) increased +8.94% in July and is down -1.72% YTD.
  • In July, longer-term bond yields decreased; the 30-year U.S. Treasury bond yield decreased by -21 bps to +1.20%, the 10-year yield decreased by -11 bps to +0.55%, and the 5-year yield decreased by -6 bps to +0.23% as of June 30th, 2020.
  • The Barclays Aggregate Index, which is a measure of U.S. Bond prices, increased +1.49% for July and is up +7.72% YTD..

ECONOMIC AND GEOPOLITICAL HEADLINES

  • U.S. gross domestic product (GDP) in the second quarter of 2020 decreased – 32.9%, according to the “Advance” estimate released by the Bureau of Economic Analysis. The first quarter of 2020 GDP decreased -5.0%.
  • The July Non-Manufacturing Purchasing Managers Index (PMI) increased to 58.10% from 57.10% in June, this represents expansion and was above expectations of 55.00%. The July Manufacturing PMI increased to 54.20% from June’s 52.60%. Per the Institute for Supply Management (ISM), a reading below 50 is considered economic contraction.
  • July non-farm employment increased by 1.8 million jobs, and the unemployment rate declined to 10.2%, as reported by the Bureau of Labor Statistics on August 7th, 2020. In July employment rose sharply in leisure and hospitality, health services, retail trade, government and professional and business services. Average Hourly Earnings (wages) increased 4.8% year-over-year in July.

PERFORMANCE UPDATES

  • The Equity Fund increased +4.96% in July and declined -3.28% YTD. The Bond Fund increased by +2.22% in July and is up +7.67% YTD. The Stable Value Fund was up +0.16% for July and is up +0.93% YTD. The Northern Trust Global Sustainability Index Fund (GSIF) increased +3.76% for July and declined -1.24% YTD.
  • The Balanced Fund increased +3.69% in July and is up +1.69% YTD. The Target Annuitization Date (TAD) 2020; TAD 2025; TAD 2030; TAD 2035; and TAD 2040 were +0.26%, +2.63%, +3.49%, +3.86% and +4.08% respectively for July and +1.53%, +2.38%, +0.84%, +0.38%, and -1.15% YTD.