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August 2022 Market Review - United Church Funds

MARKETS

  • Developed markets across the globe retracted in August, as the Federal Reserve conveyed its conviction to bringing inflation under control. The developed and emerging market equity index (MSCI ACWI IMI) decreased by -3.68% in August and was down -17.75% The S&P 500, which tracks large cap U.S. stocks, decreased –4.08% in August and was down -16.14% YTD. The Russell 2000 Index, which tracks domestic small cap stocks, decreased –2.05% in August and was down -17.16% YTD. The international developed equity index (MSCI EAFE) decreased by -4.75% in August and was down -19.57% YTD. The emerging markets index (MSCI EM) increased slightly by +0.42% in August and was down -17.49% YTD.
  • In August, longer-term bond yields increased: the 30-year U.S. Treasury bond yield increased by +27 bps to 27%, the 10-year yield increased by +48 bps to 3.15%, and the 5-year yield increased by +60 bps to 3.30%.
  • The Barclays U.S. Aggregate Index, which is a measure of U.S. bond prices, decreased by –83% in August and was down -10.75% YTD.

ECONOMIC AND GEOPOLITICAL HEADLINES

  • U.S. gross domestic product (GDP) in the second quarter of 2022 decreased by -0.6%, according to the “Second” estimate released by the Bureau of Economic Analysis. In the first quarter of 2022, GDP decreased by -1.6%.
  • The August Services PMI (formerly Non-Manufacturing Purchasing Managers Index) increased to 56.90% from 56.70% in July, which represents expansion at a higher rate and higher than market expectations of 55.10%. The August’s Manufacturing PMI stayed the same at 52.80%. Per the Institute for Supply Management (ISM), a reading above 50 is considered economic expansion.
  • August’s non-farm employment increased by 315,000 jobs, and the unemployment rate rose to 3.7%, as reported by the Bureau of Labor Statistics on September 2. In August employment increased in professional and business services, health care and retail trade. Average Hourly Earnings (wages) increased +5.2% year-over-year in August.

PERFORMANCE UPDATES

  • In August, the Total Equity Fund decreased -4.03% and was down -19.55% YTD. The International Equity Fund decreased -4.17% in August and was down -23.87% YTD. The Small Cap Equity Fund decreased -3.16% in August and was down -18.47% YTD. The Fixed Income Fund decreased -2.11% in August and was down -10.61% YTD.
  • All the equity managers except SSGA underperformed in the month of August. The managers that underperformed their benchmarks were Westfield, Blackrock, Baillie Gifford, PGIM (formerly QMA), Channing, LSV and RBC.
  • The UCF Balanced Fund (formerly Moderate Balanced Fund), UCF’s most popular fund, underperformed its benchmark, decreasing by -3.15% in August and was down -15.68% YTD. The Alternatives Balanced Fund decreased by -1.97% in August and was down -10.87% YTD. Finally, the Beyond Fossil Fuels Balanced Fund underperformed its benchmark, decreasing -3.21% in August; it was down -14.81% YTD.