Global equity markets declined in the quarter driven by higher interest rates around the globe. The most hit sectors domestically were utilities, real estate, consumer staples, and technology while the increase in the price of oil resulted in positive performance for the energy sector. Small-cap stocks were affected more than large-cap companies.
Large-cap stocks (S&P 500 Index) were down -3.27% in the quarter, and small-cap stocks (Russell 2000 Index) were down -5.13%. International developed stocks (MSCI EAFE Index) were down -4.11% for the quarter, and emerging market equities (MSCI EM Index) were down
-2.93% for the quarter.
Fixed-income markets were mixed during the quarter. 10-year U.S. Treasury yields hit a 15-year high. Third-quarter performance for the Barclays Government Credit Index, a proxy for the broad U.S. fixed-income market, was down -3.00% in the quarter; high-yield bonds were up +0.46% in the quarter; and emerging market debt was down -2.63%.
The Stable Value Fund continues to be a positive performer, with returns up +0.52% for the quarter.
The Bond Fund was down -2.91% for the quarter, as interest rates increased especially in longer maturities impacted by Federal Reserve (Fed) action.
The Sustainable Balanced Fund, which has allocations to both sustainability-focused equity and fixed-income managers, was down -4.74% for the quarter. Underlying managers specialize in Environment, Social, and Governance (ESG) leaders, positive and sustainable change, and corporate engagement and were negatively impacted by higher rates.
The Target Annuitization Date (TAD) Funds, which have allocations to the Bond Fund as well as to the Equity Fund (and in a few of the TAD Funds, the Stable Value Fund), had performance between -1.27% and -3.47% for the quarter.
The Equity Fund was down -3.12% for the quarter. Domestic small-cap and international growth stocks were the most negatively impacted.
The Global Sustainability Index Fund (GSIF) declined -3.64% for the quarter.
The Basic Annuity essentially has been protected from interest rate volatilities since 2016, with the addition of sophisticated risk and monitoring tools and the hiring of a completion manager, Voya. As a result, the funded status is healthy and stable.
In the Participating Annuity, the funded status also remains healthy.
In terms of the Equity and Balanced Benefit (pre-2006) Annuities, increases to both based on investment performance through the first six months of 2023, were recently announced.
As a retirement investor, you should focus always on the appropriate asset allocation, or mix among stocks, bonds, and cash/stable value investments, and your long-term retirement objectives. It is rarely wise to react to shorter-term market movements. The easiest way to avoid that is to invest in the Target Annuitization (TAD) Fund nearest to your retirement date. As of January 1, 2021, there are now two new TAD Funds (2045 and 2050) available. Again, these funds are more focused on growth early in your career, and become more conservative as retirement approaches, by owning fewer equities and more bonds and stable value investments.
Our capable and responsive Member Services staff is available to assist you. Please contact the Pension Boards at 1.800.642.6543 with questions about fund information, performance, strategy, and approach.
To speak with a licensed Fidelity Retirement Planner for assistance with your financial wellness goals, call via Pension Boards Members Services and ask to speak with a Fidelity Retirement Planner at 1.800.642.6543, option 4, from 8:30 a.m. to 5:30 p.m., Mon-Fri.