November Market Review

December 20, 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 November —

MARKETS

  • In response to the U.S. election, U.S. equities surged while global equities posted more muted & mixed performance in November. The U.S. equity surge was led by small-cap indexes, which posted the strongest monthly gains since October 2011. The S&P 500, which tracks large cap U.S. stocks, increased 3.70% in November and is up 9.79% Y-T-D.  The Russell 2000 Index, which tracks domestic small cap stocks, increased 11.15% in November and has a return of 18.00% Y-T-D. The international developed equity index (MSCI EAFE) was down 1.99% in November and is down 2.34% Y-T-D.  The emerging markets index (MSCI EM) was down 4.60% in November but is up 10.94% Y-T-D.
  • In November, bond yields soared. The 30-year U.S. Treasury bond yield increased 45bps to 3.04%, the 10-year yield increased 55bps to 2.38%, and the 5-year yield increased 54bps to 1.84%. Bond yields move opposite prices, thus treasury prices decreased during the month.
  • Corporate bond prices as measured by Barclays Aggregate Index were down 2.37% for November, and are up 2.50% Y-T-D.

ECONOMIC & GEOPOLITICAL HEADLINES

  • In the third quarter of 2016, the U.S. gross domestic product (GDP) was up 3.2% according to “second” estimates released by the Bureau of Economic Analysis. The GDP increased 1.4% in the second quarter of 2016.
  • 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 November in the manufacturing sector showed that the economy expanded at a faster trend over the past three months. The November PMI registered 53.2, according to the Institute for Supply Management. A reading above 50 is considered economic expansion.
  • The U.S. labor market continues to grow. In November, employers added 178,000 jobs and the unemployment rate decreased 0.3% to 4.6%. Both the labor force participation rate and the employment participation ratio changed slightly in November. September and October employment growth were revised by a combined total of 2,000 less than previously reported.  The average job gains for 2016 are 180,000 per month, below the 2015 monthly average of 229,000.

PRELIMINARY PERFORMANCE UPDATES

  • The Total Equity Fund was up 1.78% for November, and its Y-T-D return is 7.66%. The International Equity Fund was down 2.55% for November, but its Y-T-D return is 3.79%. The Small Cap Equity Fund was up 10.01% for November, and its Y-T-D return is 15.08%. In November, net of fees, the Fixed Income Fund was down 2.33%, but its Y-T-D return is 3.62%.
  • The UCF equity managers’ performance relative to their respective benchmarks was mixed for November. International managers LSV and Oaktree outperformed while Baillie Gifford lagged.  Domestic Core equity managers Fiduciary and QMA exceeded benchmark performance in November. In Small Cap, Dimensional Fund Advisors outperformed while FMI and Westfield lagged relative benchmarks in November.
  • The Moderate Balanced Fund, in November, was up 0.02% and is up 5.57% Y-T-D. The Aggressive Balanced Fund was up 0.60% in November and has a return of 6.16% Y-T-D. The Conservative Balanced Fund was down 0.94% in November but is up 4.68% Y-T-D. The Alternatives Balanced Fund was up 0.14% in November, and has a return of 4.68% Y-T-D. The Beyond Fossil Fuels Balanced Fund was down 0.19% for November but is up 5.05% Y-T-D.
 
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