Following is a summary of the markets and our funds’ performance for the month of August 2018, provided by our Chief Investment Strategist David A. Klassen.
- Most global markets faltered as uncertainty and tension heightened from ongoing trade tariff talks and economic sanctions. U.S. equities were a notable exception as price-levels reached all-time highs in August. The S&P 500, which tracks large cap U.S. stocks, increased 3.26% in August and is up 9.94% Y-T-D. The Russell 2000 Index, which tracks domestic small cap stocks, has been the best performing index in 2018, was up 4.31% in August and is up 14.26% Y-T-D. The International developed equity index (MSCI EAFE), was down 1.93% in August and is down 2.28% Y-T-D. The emerging markets index (MSCI EM) decreased 2.70% in August and is down 7.18% Y-T-D.
- In August, the bond yield declined and prices advanced; the 30-year U.S. Treasury bond yield decreased 6bps to 3.02%, while the 10-year yield decreased 10bps to 2.86%, and the 5-year yield decreased 11bps to 2.74%.
- The Barclays Aggregate Index, which is a well-known measure of U.S. Bond prices, increased 0.64% for August and is down 0.96% Y-T-D.
ECONOMIC AND GEOPOLITICAL HEADLINES
- U.S. gross domestic product (GDP) in the second quarter of 2018 increased 4.2%, according to the “second” estimate released by the Bureau of Economic Analysis. First quarter 2018 GDP increased 2.2%.
- The August Purchasing Managers Index (PMI) jumped to 61.3 from 58.1 the previous month, the highest since May 2004, above the expectations of 57.7. Per the Institute for Supply Management (ISM), a reading above 50 is considered economic expansion.
- In August, non-farm employment added 201,000 jobs, in line with the average monthly gain over the past twelve months. The unemployment rate remained unchanged at 3.9%. The July number was revised down to 147,000, 10,000 less than previously reported. Average Hourly Earnings (wages) increased by 2.9% year-over-year. The monetary policy normalization and Fed plan to raise rates is expected to stay on track.
FUND PERFORMANCE UPDATES
- The Total Equity Fund was up 0.98% for August and is up 3.26% Y-T-D. The International Equity Fund was down 1.70% and is down -3.68% Y-T-D. The Small Cap Equity Fund was up 3.51% and is up 11.27% Y-T-D. In August, the Fixed Income Fund was up 0.14% and is down -1.21% Y-T-D.
- In August, the UCF equity managers’ performance were mixed relative to their respective benchmarks. For international markets, developed managers LSV and Ballie Gifford outperformed. The recently retained emerging markets manager RBC underperformed its benchmark. Domestic Core equity managers State Street and QMA beat their respective benchmarks, while FMI fell short of its benchmark. Small cap manager DFA surpassed its benchmark, while Fiduciary and Westfield underperformed their benchmarks.
- Each of the five balanced funds provided positive results this month. The Moderate Balanced Fund, UCF’s most popular fund, was up 0.49% and is up 1.07% Y-T-D. The Aggressive Balanced Fund was up 0.60% and has returned 1.64% Y-T-D. The Conservative Balanced Fund was up 0.38% and is up 0.16% Y-T-D. The Alternatives Balanced Fund was up 0.44% and is up 1.88% Y-T-D. Finally, the Beyond Fossil Fuels Balanced Fund was up 0.65% and is up 0.43% Y-T-D.