Following is a summary of the markets and our funds’ performance for the month of August 2019, provided by our Chief Investment Strategist David A. Klassen.
- Global financial markets were mixed in August as equity markets were all negative, while most U.S. fixed income markets were positive. The S&P 500, which tracks large cap U.S. stocks, was down -1.58% in August and is up 18.34% Y-T-D. The Russell 2000 Index, which tracks domestic small cap stocks decreased -4.94% in August and is up 11.85% Y-T-D. The International developed equity index (MSCI EAFE), decreased –2.59% in August and is up 9.66% Y-T-D. The emerging markets index (MSCI EM) decreased -4.88% in August and is up 3.90% Y-T-D.
- In August, bond yields decreased, and prices increased; the 30-year U.S. Treasury bond yield decreased by 57 bps to 1.96%, the 10-year yield decreased by 52 bps to 1.50%, and the 5-year yield decreased by 45 bps to 1.39%.
- The Barclays Aggregate Index, which is a measure of U.S. Bond prices, increased 2.59% for August and is up 9.10% Y-T-D.
ECONOMIC AND GEOPOLITICAL HEADLINES
- U.S. gross domestic product (GDP) in the second quarter of 2019 increased 2.0%, according to the “second” estimate released by the Bureau of Economic Analysis. First quarter 2019 GDP increased 3.1%.
- The August Non-Manufacturing Purchasing Managers Index (PMI) was 56.4% from 53.7% in July. This was above expectations of 54.0%. The August Manufacturing PMI was 49.1% from July’s 51.2%. This was the first month of contraction in the manufacturing sector since January 2016. Per the Institute for Supply Management (ISM), a reading above 50 is considered economic expansion.
- August non-farm employment increased by 130,000 jobs, and the unemployment rate was unchanged at 3.7%, as reported by the Bureau of Labor Statistics on September 6, 2019. Employment trended positively in healthcare and financial activities, while mining lost jobs. Average Hourly Earnings (wages) increased 3.2% year-over-year.
FUND PERFORMANCE UPDATES
- In August, the Total Equity Fund decreased by -2.89% and is up 13.63% Y-T-D. The International Equity Fund was down -3.48% and is up 10.45% Y-T-D. The Small Cap Equity Fund decreased by -3.75% and is up 19.03% Y-T-D. The Fixed Income Fund was up 2.01% and is up 9.24% Y-T-D.
- Many UCF equity managers had positive relative returns, but all had negative absolute returns in August. For domestic large cap markets, Fiduciary outperformed while QMA underperformed their respective In domestic small cap markets, all managers outperformed their respective benchmarks except DFA. For international markets, developed manager Baillie Gifford and emerging markets manager RBC outperformed while LSV underperformed their respective benchmarks.
- All Balanced Funds were below their respective benchmarks. The Moderate Balanced Fund, UCF’s most popular fund, decreased -1.03% and is up 11.02% Y-T-D. The Aggressive Balanced Fund was down -1.84% and is up 11.89% Y-T-D. The Conservative Balanced Fund returned 0.18% and is up 10.11% Y-T-D. The Alternatives Balanced Fund was down -0.80% and is up 11.12% Y-T-D. Finally, the Beyond Fossil Fuels Balanced Fund decreased by -0.82% and is up 10.30% Y-T-D.