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

Market Update from CIO Dave Klassen – October 2023

Global equity markets continued to pull back in October as the Federal Reserve remained steadfast on their higher-for-longer interest rates stance and other macroeconomic factors remained challenging. The global equity index (MSCI ACWI IMI) decreased by -3.01% in October and is up +6.75% YTD. The S&P 500, which tracks large-cap U.S. stocks, decreased by -2.10% in October and is up +10.69% YTD. The Russell 2000 Index, which tracks domestic small cap stocks decreased by -6.82% in October and is down -4.45% YTD. The International developed equity index (MSCI EAFE) decreased by -4.05% in October and is up +2.74% YTD. The emerging markets index (MSCI EM) decreased by -3.89% in October and is down -2.14% YTD.
In October, 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 31 bps to +5.04%, the 10-year yield increased by 29 bps to +4.88%, and the 2-year yield increased by 4 bps to +5.07%.
The Barclays U.S. Aggregate Index, which is a measure of U.S. Bond prices, decreased by -1.58% in October and is down -2.77% YTD.

U.S. gross domestic product (GDP) in the third quarter of 2023 increased by 4.9%, according to the “Advanced” estimate released by the Bureau of Economic Analysis. In the second quarter of 2023, GDP increased by 2.1%.
The October Services PMI (formerly Non-Manufacturing Purchasing Managers Index) decreased to 51.80% from 53.60% in September. This represents expansion and is below the market expectations of 53.00%. The October Manufacturing PMI decreased to 46.70% from September’s 49.00%. Per the Institute for Supply Management (ISM), a reading above 50 is considered economic expansion, and below 50 is considered economic contraction.
October non-farm employment increased by 150,000 jobs, and the unemployment rate increased to 3.9%, as reported by the Bureau of Labor Statistics on November 3rd, 2023. In October employment increased in health care, Government, and social assistance. Average Hourly Earnings (wages) increased by 4.1% year-over-year in October.

The Equity Fund decreased by -3.42% in October and is up +3.80% YTD. The Bond Fund decreased by -1.24% in October and is down -1.82% YTD. The Stable Value Fund was up +0.28% for October and is up +1.83% YTD. The Northern Trust Global Sustainability Index Fund (GSIF) decreased by -2.65% for October and is up +8.31% YTD.
The Balanced Fund decreased by -3.02% in October and is up +0.47% YTD. The Target Annuitization Date TAD 2025; TAD 2030; TAD 2035; TAD 2040 TAD 2045 and TAD 2050 returns were -1.06%, -2.08%, -2.44%, -2.72%, -2.96% and -3.06% respectively for October and +1.94%, +1.32%, +1.61%, +1.91%, +1.82 %, and +2.70% YTD.