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

Market Update from CIO Dave Klassen – June 2023

Global equity markets were strong in June as macro-economic fundamentals remained strong despite tight monetary policy in the US and other parts of the world. The global equity index (MSCI ACWI IMI) increased by +5.81% in June and is up +13.93% YTD. The S&P 500, which tracks large cap U.S. stocks, increased by +6.61% in June and is up +16.89% YTD. The Russell 2000 Index, which tracks domestic small-cap stocks increased by +8.13% in June and is up +8.09% YTD. The International developed equity index (MSCI EAFE) increased by +4.55% in June and is up +11.67% YTD. The emerging markets index (MSCI EM) increased by +3.80% in June and is up +4.89% YTD.
In June, short-term bond yields increased more than long-term yields while exhibiting intra-month volatility; the 30-year U.S. Treasury bond yield remained unchanged at +3.85%, the 10-year yield increased by 17 bps to +3.81%, and the 2-year yield increased by 47 bps to +4.87%.
The Barclays U.S. Aggregate Index, which is a measure of U.S. Bond prices, decreased by -0.36% in June and is up +2.09% YTD.

U.S. gross domestic product (GDP) in the first quarter of 2023 increased by 2.0%, according to the “Third” estimate released by the Bureau of Economic Analysis. In the fourth quarter of 2022 GDP increased by 2.6%.
The June Services PMI (formerly Non-Manufacturing Purchasing Managers Index) increased to 53.90% from 50.30% in May. This represents expansion and higher than market expectations of 51.00%. The June Manufacturing PMI decreased to 46.00% from May’s 46.90%. Per the Institute for Supply Management (ISM), a reading above 50 is considered economic expansion and below 50 is considered economic contraction.
June non-farm employment increased by 209,000 jobs, and the unemployment rate decreased to 3.6%, as reported by the Bureau of Labor Statistics on July 7th, 2023. In June employment increased in government, health care, construction, and social assistance. Average Hourly Earnings (wages) increased by 4.4% year-over-year in June.

The Equity Fund increased by +5.65% in June and is up +10.93% YTD. The Bond Fund increased by +0.10% in June and is up +2.40% YTD. The Stable Value Fund was up +0.17% for June and is up +1.02% YTD. The Northern Trust Global Sustainability Index Fund (GSIF) increased by +5.76% for June and is up +15.46% YTD.
The Balanced Fund increased by +3.03% in June and is up +8.76% YTD. The Target Annuitization Date TAD 2025; TAD 2030; TAD 2035; TAD 2040 TAD 2045 and TAD 2050 returns were +1.69%, +2.69%, +3.29%, +3.82%, +4.20% and +4.53% respectively for June and +4.35%, +6.27%, +7.32%, +8.10%, +8.70%, and +9.32% YTD.