MARKETS:
- Global equity markets pulled back slightly in August as the Federal Reserve Bank raised rates again at the end of July and reaffirmed their stance of maintaining the policy rates “higher for longer.” The global equity index (MSCI ACWI IMI) decreased -2.79% in August and was up +14.80% The S&P 500, which tracks large cap U.S. stocks, decreased -1.59% in August and was up +18.73% YTD. The Russell 2000 Index, which tracks domestic small cap stocks, decreased -5.00% in August and was up +8.96% YTD. The international developed equity index (MSCI EAFE) decreased -3.83% in August and was up +10.87% YTD. The emerging markets index (MSCI EM) decreased -6.16% in August and was up +4.55% YTD.
- In August, long term bond yields increased more than short-term yields, while exhibiting intra-month volatility: the 30-year U.S. Treasury bond yield increased +18 bps to 20%; the 10-year yield increased +12 bps to 4.09%; and the 2-year yield decreased –3 bps to 4.85%.
- The Barclays U.S. Aggregate Index, which is a measure of U.S. bond prices, decreased -0.64% in August and was up +1.37%
ECONOMIC AND GEOPOLITICAL HEADLINES
- U.S. gross domestic product (GDP) in the second quarter of 2023 increased +2.1%, according to the “Second” estimate released by the Bureau of Economic Analysis. In the first quarter of 2023, GDP increased +2.0%.
- The August Services PMI (formerly Non-Manufacturing Purchasing Managers Index) increased to 54.50% from 52.70% in July. This represents expansion and higher than market expectations of 52.50%. The August Manufacturing PMI increased to 47.60% from July’s 46.40%. Per the Institute for Supply Management (ISM), a reading above 50 is considered economic expansion and below 50 is considered economic contraction.
- August non-farm employment increased by 187,000 jobs, and the unemployment rate increased to 3.8%, as reported by the Bureau of Labor Statistics on September 1. In August, employment increased in health care, leisure and hospitality, social assistance and construction. Average Hourly Earnings (wages) increased +4.3% year-over-year in August.
PERFORMANCE UPDATES
- The Total Equity Fund decreased -3.29% in August and was up +13.58% YTD. The International Equity Fund decreased -5.09% in August and was up +8.40% YTD. The Small Cap Equity Fund decreased -3.81% in August and was up +10.45% YTD. The Fixed Income Fund decreased -0.63% in August and was up +1.78% YTD.
- Equity managers’ performance was strong during the month, and the managers that outperformed their respective benchmarks were PGIM’s quantitative strategies, Westfield, Blackrock, Channing and LSV, whereas the managers that underperformed were Ballie Gifford and RBC.
- The UCF Balanced Fund, UCF’s most popular fund, underperformed its benchmark, returning -2.28% in August, and was up +8.87% YTD. The Alternatives Balanced Fund decreased -1.79% in August and was up +7.55% YTD. Finally, the Beyond Fossil Fuels Balanced Fund outperformed its benchmark, returning -1.84% in August, and was up +10.20% YTD.