February 2018 Market Review

March 26, 2018

Following is a summary of the markets and our funds’ performance for the month of February 2018, provided by our Chief Investment Strategist David A. Klassen.

MARKETS

  • Global equity markets posted steep declines in February. The S&P 500, which tracks large cap U.S. stocks, decreased 3.69% in February but is up 1.83% Y-T-D. The Russell 2000 Index, which tracks domestic small cap stocks, was down 3.87% and is down 1.36% Y-T-D. The international developed equity index (MSCI EAFE) was down 4.51% in February but is up 0.28% Y-T-D. The emerging markets index (MSCI EM) decreased 4.61%, but is up 3.34% Y-T-D.
  • In February, bond yields rose and the curve steepened; the 30-year U.S. Treasury bond yield increased 19bps to 3.13%, while the 10-year yield increased 15bps to 2.86%, and the 5-year yield increased 12bps to 2.64%.
  • Bond prices, as measured by Barclays Aggregate Index, decreased 0.95% for February but are down 2.09% Y-T-D.

ECONOMIC & GEOPOLITICAL HEADLINES

  • S. gross domestic product (GDP), in the fourth quarter of 2017 increased 2.5%, according to the “second” estimate released by the Bureau of Economic Analysis. Third quarter 2017 GDP increased 3.2%.
  • S. manufacturing continued to expand in February. The February Purchasing Managers Index (PMI) registered 60.8, 1.7 points above the January reading of 59.1. A reading above 50 is considered economic expansion.
  • In February, non-farm employment added 313,000 jobs, and the unemployment rate remained unchanged at 4.1%, for the fifth consecutive month. December and January job gains were revised up by a combined 54,000. Average Hourly Earnings increased by 2.6% year-over-year.  The strong labor market and wage growth prompted increased expectations for monetary policy normalization.

PERFORMANCE UPDATES

  • The Total Equity Fund was down 3.76% for February, but is up 1.33% Y-T-D net of fees. The International Equity Fund was down 4.11% in February, but its Y-T-D return is up 1.35% net of fees. The Small Cap Equity Fund was down 3.60% for February and Y-T-D is down 0.77% net of fees. In February, net of fees, the Fixed Income Fund was down 0.77%, and its Y-T-D return is -1.36%.
  • UCF equity managers’ performances were generally positive compared to their respective benchmarks for February. Both international developed managers outperformed their respective benchmarks while emerging markets manager Oaktree underperformed its benchmark for February, but all three are ahead of benchmarks Y-T-D. Domestic Core equity managers QMA and FMI outperformed their benchmark in February. All small cap managers outperformed their respective benchmarks in February.
  • The Moderate Balanced Fund, in February, was down 2.61%, but is up 0.37% Y-T-D net of fees. The Aggressive Balanced Fund was down 3.05% in February, but has a positive net of fees return of 0.74% Y-T-D. The Conservative Balanced Fund was down 1.87% in February, and is down 0.29% Y-T-D net of fees. The Alternatives Balanced Fund was down 2.43% in February, but is up 0.98% Y-T-D net of fees. The Beyond Fossil Fuels Balanced Fund, net of fees, was down 2.63% for February, but is up 0.36% Y-T-D.
 
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