Market Update from CIO Dave Klassen – October 2020

MARKETS

  • Global financial markets were mixed in October due to concerns regarding lofty valuations, delays in a stimulus package, and the upcoming U.S. elections. The developed and emerging market equity index (MSCI ACWI IMI) decreased 2.43% in October and is down 1.09% YTD. The S&P 500, which tracks large cap U.S. stocks, was down 2.66% in October and is up 2.77% YTD. The Russell 2000 Index, which tracks domestic small cap stocks increased 2.09% in October and is down 6.77% YTD. The International developed equity index (MSCI EAFE), decreased .99% in October and is down 10.80% YTD. The emerging markets index (MSCI EM) increased 2.06% in October and is up 0.87% YTD.
  • In October longer-term bond yields increased; the 30-year U.S. Treasury bond yield increased by 19 bps to 1.65%, the 10-year yield increased by 19 bps to 0.88%, and the 5-year yield increased by 10 bps to 0.38%.
  • The Barclays U.S. Aggregate Index, which is a measure of U.S. Bond prices, decreased 0.45% for October and is up 6.32% YTD.

 ECONOMIC AND GEOPOLITICAL HEADLINES

  • U.S. gross domestic product (GDP) in the third quarter of 2020 increased 33.1%, according to the “Advance” estimate released by the Bureau of Economic Analysis. The second quarter of 2020 GDP decreased 31.4%.
  • The October Services PMI (formerly Non-Manufacturing Purchasing Managers Index) decreased to 56.60% from 57.80% in September, this represents expansion but lower than market expectations of 57.50%. The October Manufacturing PMI increased to 59.30% from September’s 55.40%. Per the Institute for Supply Management (ISM), a reading above 50 is considered economic expansion.
  • October non-farm employment increased by 638,000 jobs, and the unemployment rate declined to 6.9%, as reported by the Bureau of Labor Statistics on November 6th, 2020. In October employment rose due to the resumption of activity especially in leisure and hospitality, professional and business services, retail trade, and construction. Average Hourly Earnings (wages) increased 4.5% year-over-year in October.

PERFORMANCE UPDATES

  • The Equity Fund decreased by 1.59% in October and down 2.50% YTD. The Bond Fund decreased by 0.53% in October and is up 6.19% YTD. The Stable Value Fund was up 0.14% for October and is up 1.38% YTD. The Northern Trust Global Sustainability Index Fund (GSIF) decreased 3.43% for October and down 1.56% YTD.
  • The Balanced Fund decreased 1.11% in October and is up 1.56% YTD. The Target Annuitization Date (TAD) 2020; TAD 2025; TAD 2030; TAD 2035; and TAD 2040 were +0.12%, -0.72%, -1.05%, -1.24% and -1.30% respectively for October and +1.92%, +2.14%, +0.87%, +0.26%, and -0.97% YTD.