September Market Review

October 31, 2016

Shortly after the end of each month, our Chief Investment Strategist David Klassen provides a review of the market and our funds’ performance. Following is a summary of September —

 MARKETS

  • Global financial markets posted modest returns in September. However, volatility increased during the month as the S&P 500 slid 53.94 index points or 2.5% in one day in reaction to Boston Fed President Eric Rosengren’s hawkish remarks.
  • The S&P 500, which tracks large cap U.S. stocks, was up 0.02% in September and is up 7.84% YTD. The Russell 2000 Index, which tracks domestic small cap stocks, increased 1.11% in September, and is positive YTD with a return of 11.46%.  The international developed equity index (MSCI EAFE) was up 1.23% in September and is up 1.73% YTD.  The emerging markets index (MSCI EM), again one of the better performing indices in September, was up 1.29% for the month and is up 16.02% YTD.
  • In September, the bond yield curve slightly steepened. The 30-year U.S. Treasury bond yield increased 18bps to 2.32%, the 5-year yield decreased 5bps to 1.15%, and the 10-year yield stayed at 1.58%. Bond yields move opposite prices, so longer dated treasury prices decreased during the month.

ECONOMIC & GEOPOLITICAL HEADLINES

  • U.S. gross domestic product (GDP), in the second quarter 2016, was up 2.5% year over year according to “third” estimates released by the Bureau of Economic Analysis.
  • At its FOMC meeting on September 21, Federal Reserve (Fed) voting members decided not to raise interest rate, although they acknowledged that conditions favoring an increase in the Fed Funds rate have strengthened in recent months and the economy is nearing the Fed’s goal of maximum employment and price stability. Three voting members dissented at the meeting.
  • The U.S. labor market continues to grow. In September, employers added 156,000 jobs, the unemployment rate went up to 5%, as the Labor Force participation rate increased to 62.9%.

PERFORMANCE UPDATES

  • In September, net of all fees, the Fixed Income Fund was up 0.03% and is up 0.81% for Q3, and its YTD return is 6.76%. The Total Equity Fund was up 0.69%, up 6.85% for Q3 and its YTD return is 7.72%. The International Equity Fund was up 1.27% for September, is up 9.01% for Q3 and its YTD return is up 7.92%. The Small Cap Equity Fund was up 0.84% for September, up 7.01% for Q3 and its YTD return is 7.93%.
  • The UCF equity managers’ performance relative to their respective benchmarks was mixed for September. International managers Ballie Gifford and Oaktree outperformed while LSV lagged.  In Domestic Core Equities, QMA outperformed the index, while Fiduciary lagged. Small Cap Equities continued to trail its benchmark, however, DFA had a good relative performance in September.
  • The Moderate Balanced Fund in September, was up 0.40%, up 4.35% for Q3 and has a return of 7.22% YTD. The Aggressive Balanced Fund was up 0.51% in September, up 5.31% for Q3 and has a return of 7.42% YTD. The Conservative Balanced Fund was up 0.23% in September, up 2.87% for Q3, and has a return of 7.01% YTD. The Alternatives Balanced Fund was up 0.01% in September, up 3.74% for Q3 and has a return of 5.38% YTD. The Beyond Fossil Fuels BFF Balanced Fund was up 0.57% for September, up 4.29% for Q3, and has a return of 6.38% YTD.
 
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