Market Update from CIO Dave Klassen – August 2020

MARKETS

  • Global financial markets continued to be positive in August led by the U.S. with continued strength in large cap and growth-oriented stocks. The developed and emerging market equity index (MSCI ACWI IMI), increased +6.12% in August and is up +4.75% YTD. The S&P 500, which tracks large cap U.S. stocks, was up +7.19% in August and is up +9.74% YTD. The Russell 2000 Index, which tracks domestic small cap stocks increased +5.63% in August and is down -5.53% YTD. The International developed equity index (MSCI EAFE), increased +5.14% in August and is down -4.61% YTD. The emerging markets index (MSCI EM) increased +2.21% in August and is up 0.45% YTD.
  • In August, longer-term bond yields reversed course and increased; the 30-year U.S. Treasury bond yield increased by 29 bps to +1.49%, the 10-year yield increased by 17 bps to +0.72%, and the 5-year yield increased by 7 bps to +0.28%.
  • The Barclays U.S. Aggregate Index, which is a measure of U.S. Bond prices, increased +0.51% for August and is up +7.39% YTD.

ECONOMIC AND GEOPOLITICAL HEADLINES

  • U.S. gross domestic product (GDP) in the second quarter of 2020 decreased – 31.7%, according to the “second” estimate released by the Bureau of Economic Analysis. The first quarter of 2020 GDP decreased -5.0%.
  • The August Non-Manufacturing Purchasing Managers Index (PMI) decreased to 56.90% from 58.10% in July, this represents expansion and was in-line with expectations of 57.00%. The August Manufacturing PMI increased to 56.00% from July’s 54.20%. Per the Institute for Supply Management (ISM), a reading above 50 is considered economic expansion.
  • August non-farm employment increased by 1.4 million jobs, and the unemployment rate declined to 8.4%, as reported by the Bureau of Labor Statistics on September 4th, 2020. In August employment rose due to the resumption of activity especially in retail trade, professional and business services, leisure and hospitality, and in education and health services. Average Hourly Earnings (wages) increased 4.7% year-over-year in August.

PERFORMANCE UPDATES

  • The Equity Fund increased +4.88% in August and increased 1.44% YTD. The Bond Fund decreased by -0.64% in August and is up +6.98% YTD. The Stable Value Fund was up +0.15% for August and is up +1.09% YTD. The Northern Trust Global Sustainability Index Fund (GSIF) increased +6.41% for August and increased 5.09% YTD.
  • The Balanced Fund increased +2.52% in August and is up +4.25% YTD. The Target Annuitization Date (TAD) 2020; TAD 2025; TAD 2030; TAD 2035; and TAD 2040 were +0.12%, +1.32%, +2.49%, +2.73% and +3.23% respectively for August and +1.66%, +3.73%, +3.35%, +3.12%, and +2.05% YTD.