The Pension Boards - PBUCC - Market Update from CIO Dave Klassen

Market Update from CIO Dave Klassen – May 2023

Global equity markets did not exhibit strong conviction in any direction but were slightly negative as measured by MSCI ACWI IMI. The global equity index (MSCI ACWI IMI) decreased by -1.07% in May and is up +7.68% YTD. The S&P 500, which tracks large cap U.S. stocks, increased by +0.43% in May and is up +9.65% YTD. The Russell 2000 Index, which tracks domestic small cap stocks decreased by -0.92% in May and is down -0.04% YTD. The International developed equity index (MSCI EAFE) decreased by -4.23% in May and is up +6.81% YTD. The emerging markets index (MSCI EM) decreased by -1.68% in May and is up +1.05% YTD.
In May, bond yields increased while exhibiting intra-month volatility; the 30-year U.S. Treasury bond yield increased by 18bps to +3.85%, the 10-year yield increased by 20 bps to +3.64%, and the 2-year yield increased by 36 bps to +4.40%.
The Barclays U.S. Aggregate Index, which is a measure of U.S. Bond prices, decreased by -1.09% in May and is up 2.46% YTD.

U.S. gross domestic product (GDP) in the first quarter of 2023 increased by 1.3%, according to the “Second” estimate released by the Bureau of Economic Analysis. In the fourth quarter of 2022 GDP increased by 2.6%.
The May Services PMI (formerly Non-Manufacturing Purchasing Managers Index) decreased to 50.30% from 51.90% in April. This represents expansion but lower than market expectations of 52.20%.The May Manufacturing PMI decreased to 46.90% from April’s 47.10%. Per the Institute for Supply Management (ISM), a reading above 50 is considered economic expansion and below 50 is considered economic contraction.
May non-farm employment increased by 339,000 jobs, and the unemployment rate increased to 3.7%, as reported by the Bureau of Labor Statistics on June 2nd, 2023. In May employment increased in professional and business services, government, health care, transportation and warehousing, and social assistance. Average Hourly Earnings (wages) increased by 4.3% year-over-year in May.

The Equity Fund decreased by -1.26% in May and is up 5.00% YTD. The Bond Fund decreased by -1.11% in May and is up 2.30% YTD. The Stable Value Fund was up +0.19% for May and is up 0.84% YTD. The Northern Trust Global Sustainability Index Fund (GSIF) decreased by -0.68% for May and is up 9.16% YTD.
The Balanced Fund decreased by -0.87% in May and is up +5.56% YTD. The Target Annuitization Date TAD 2025; TAD 2030; TAD 2035; TAD 2040 TAD 2045 and TAD 2050 returns were -0.61%, -1.07%, -1.18%, -1.21%, -1.23% and -1.22% respectively for May and +2.62%, +3.49%, +3.90%, +4.13%, +4.32%, and +4.58% YTD.