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

Market Update from CIO Dave Klassen – August 2023

Global equity markets pulled back a little bit in August as the Federal Reserve Bank raised rates yet again at the end of July and reaffirmed their stance of maintaining the policy rates ‘higher-for-longer’. The global equity index (MSCI ACWI IMI) decreased by -2.79% in August and is up +14.80% YTD. The S&P 500, which tracks large-cap U.S. stocks, decreased by -1.59% in August and is up +18.73% YTD. The Russell 2000 Index, which tracks domestic small cap stocks decreased by -5.00% in August and is up +8.96% YTD. The International developed equity index (MSCI EAFE) decreased by -3.83% in August and is up +10.87% YTD. The emerging markets index (MSCI EM) decreased by -6.16% in August and is up +4.55% YTD.
In August, 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 18 bps to +4.20%, the 10-year yield increased by 12 bps to +4.09%, and the 2-year yield decreased by 3 bps to +4.85%.
The Barclays U.S. Aggregate Index, which is a measure of U.S. Bond prices, decreased by -0.64% in August and is up +1.37% YTD.

U.S. gross domestic product (GDP) in the second quarter of 2023 increased by 2.1%, according to the “Second” estimate released by the Bureau of Economic Analysis. In the first quarter of 2023 GDP increased by 2.0%.
The August Services PMI (formerly Non-Manufacturing Purchasing Managers Index) increased to 54.50% from 52.70% in July. This represents expansion and higher than market expectations of 52.50%. The August Manufacturing PMI increased to 47.60% from July’s 46.40%. Per the Institute for Supply Management (ISM), a reading above 50 is considered economic expansion and below 50 is considered economic contraction.
August non-farm employment increased by 187,000 jobs, and the unemployment rate increased to 3.8%, as reported by the Bureau of Labor Statistics on September 1st, 2023. In August employment increased in health care, leisure and hospitality, social assistance, and construction. Average Hourly Earnings (wages) increased by 4.3% year-over-year in August.

The Equity Fund decreased by -2.45% in August and is up +11.94% YTD. The Bond Fund decreased by -0.64% in August and is up +1.99% YTD. The Stable Value Fund was up +0.21% for August and is up +1.46% YTD. The Northern Trust Global Sustainability Index Fund (GSIF) decreased by -1.61% for August and is up +17.00% YTD.
The Balanced Fund decreased by -1.94% in August and is up +8.06% YTD. The Target Annuitization Date TAD 2025; TAD 2030; TAD 2035; TAD 2040 TAD 2045 and TAD 2050 returns were -0.73%, -1.37%, -1.66%, -1.85%, -1.98% and -2.09% respectively for August and +4.77%, +6.59%, +7.67%, +8.56%, +8.89 %, and +9.99% YTD.