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

Market Update from CIO Dave Klassen – July 2023

Global equity markets remained strong in July. The global equity index (MSCI ACWI IMI) increased by +3.66% in July and is up +18.11% YTD. The S&P 500, which tracks large-cap U.S. stocks, increased by +3.21% in July and is up +20.65% YTD. The Russell 2000 Index, which tracks domestic small-cap stocks increased by +6.12% in July and is up +14.70% YTD. The International developed equity index (MSCI EAFE) increased by +3.24% in July and is up +15.28% YTD. The emerging markets index (MSCI EM) increased by +6.23% in July and is up +11.42% YTD.
In July, long-term bond yields increased more than short-term yields while exhibiting intra-month volatility; the 30-year U.S. Treasury bond yield increased by 17 bps to +4.02%, the 10-year yield increased by 16 bps to +3.97%, and the 2-year yield increased by 1 bps to +4.88%.
The Barclays U.S. Aggregate Index, which is a measure of U.S. Bond prices, decreased by -0.07% in July and is up +2.02% YTD.

U.S. gross domestic product (GDP) in the second quarter of 2023 increased by 2.4%, according to the “Advanced” estimate released by the Bureau of Economic Analysis. In the first quarter of 2023, GDP increased by 2.0%.
The July Services PMI (formerly Non-Manufacturing Purchasing Managers Index) decreased to 52.70% from 53.90% in June. This represents expansion and lower than market expectations of 53.00%. The July Manufacturing PMI increased to 46.40% from June’s 46.00%. Per the Institute for Supply Management (ISM), a reading above 50 is considered economic expansion, and below 50 is considered economic contraction.
July non-farm employment increased by 187,000 jobs, and the unemployment rate decreased to 3.5%, as reported by the Bureau of Labor Statistics on August 4th, 2023. In July employment increased in health care, social assistance, financial activities, and wholesale trade. Average Hourly Earnings (wages) increased by 4.4% year-over-year in July.

The Equity Fund increased by +3.44% in July and is up +14.75% YTD. The Bond Fund increased by +0.24% in July and is up +2.65% YTD. The Stable Value Fund was up +0.22% for July and is up +1.24% YTD. The Northern Trust Global Sustainability Index Fund (GSIF) increased by +2.99% for July and is up +18.91% YTD.
The Balanced Fund increased by +1.33% in July and is up +10.20% YTD. The Target Annuitization Date TAD 2025; TAD 2030; TAD 2035; TAD 2040 TAD 2045 and TAD 2050 returns were +1.15%, +1.69%, +2.03%, +2.32%, +2.20%, and +2.75% respectively for July and +5.55%, +8.07%, +9.49%, +10.61%, +11.09 %, and +12.33% YTD.