October Market Review

November 22, 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 October —

 MARKETS

  • Global financial markets posted mixed performance in October, as uncertainties surrounding the U.S. Presidential election increased. U.S. equity markets declined across the board in October. The S&P 500, which tracks large cap U.S. stocks, was down 1.82% in October, but is up 5.87% YTD.  The Russell 2000 Index, which tracks domestic small cap stocks, decreased 4.75% in October, but YTD has a return of 6.16%. The international developed equity index (MSCI EAFE) was down 2.05% in October and is down 0.35% YTD.  The emerging markets index (MSCI EM), one of the better performing indices, was up 0.24% in October, and is up 16.30% YTD.
  • In October, bond yields generally increased. The 30-year U.S. Treasury bond yield increased 26bps to 2.58%, the 10-year yield increased 23bps to 1.83%, and the 5-year yield increased 15bps to 1.30%. Bond yields move opposite prices, so most treasury prices decreased during the month.
  • Corporate bond prices as measured by Barclays Aggregate Index were down 0.76% for October, but are up 4.99% YTD.

ECONOMIC & GEOPOLITICAL HEADLINES

  • U.S. gross domestic product (GDP), in the third quarter 2016, was up 2.9% according to “advanced” estimates released by the Bureau of Economic Analysis. The second quarter 2016 GDP increased 1.4%.
  • At its FOMC meeting on November 2, The Federal Reserve (Fed) voting members decided not to raise interest rates, although they acknowledged that conditions favoring an increase in the Fed Funds rate have strengthened and the economy is nearing the Fed’s goal of maximum employment and price stability. Two voting members dissented at the meeting.
  • Economic activity during the month of October in the manufacturing sector showed that the economy expanded. The October PMI registered 51.9, according to the Institute for Supply Management. A reading above 50 is considered economic expansion.
  • The U.S. labor market continues to grow. In October, employers added 161,000 jobs but this reading was below economists’ expectation of 175,000 jobs, and the unemployment rate held at 4.9%. Both the labor force participation rate and the employment participation ratio remained unchanged in October. August and September employment growth were revised up, by a combined total of 44,000 more than previously reported.  The average job gains for 2016 is 181,000 per month.

PERFORMANCE UPDATES

  • In October, net of fees, the Fixed Income Fund was down 0.79% but its YTD return is 6.09%. The Total Equity Fund was down 2.04% for October but its YTD return is 5.78%. The International Equity Fund was down 1.75% for October, but its YTD return is 6.51%. The Small Cap Equity Fund was down 3.43% for October, but its YTD return is 4.61%.
  • The UCF equity managers’ performance relative to their respective benchmarks was mixed for October. International managers LSV and Oaktree outperformed while Ballie Gifford lagged.  Domestic Core Equities managers lagged the index in October. The Small Cap Equity Fund trails its benchmark YTD, however, all small cap managers outperformed their relative benchmarks in October.
  • The Moderate Balanced Fund in October, was down 1.56%, but is up 5.55% YTD. The Aggressive Balanced Fund was down 1.77% in October, but has a return of 5.53% YTD. The Conservative Balanced Fund was down 1.26% in October, but is up 5.67% YTD. The Alternatives Balanced Fund was down 0.80% in October, but has a return of 4.53% YTD. The Beyond Fossil Fuels BFF Balanced Fund was down 1.06% for October but is up 5.26% YTD.
 
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