- Markets across the globe retracted after a strong rebound in November as the Federal Reserve and other central banks became more hawkish on monetary policy. The developed and emerging market equity index (MSCI ACWI IMI) decreased -3.94% in December and was down -18.36% for 2022. The S&P 500, which tracks large cap U.S. stocks, decreased -5.76% in December and was down –18.11% for 2022. The Russell 2000 Index, which tracks domestic small cap stocks, decreased -6.49% in December and was down -20.44% for 2022. The international developed equity index (MSCI EAFE) increased slightly +0.08% in December and was down -14.45% for 2022. The emerging markets index (MSCI EM) decreased –1.41% in December and was down -20.09% for 2022.
- In December, longer-term bond yields increased: the 30-year U.S. Treasury bond yield increased +17 bps to +3.97%, the 10-year yield increased +20 bps to +3.88%, and the 5-year yield increased +17 bps to +3.99%.
- The Barclays U.S. Aggregate Index, which is a measure of U.S. bond prices, decreased – 0.45% in December and was down -13.01% for 2022.
ECONOMIC AND GEOPOLITICAL HEADLINES
- U.S. gross domestic product (GDP) in the third quarter of 2022 increased +3.2%, according to the “3rd” estimate released by the Bureau of Economic Analysis. In the second quarter of 2022, GDP decreased by -0.6%.
- December’s Services PMI (formerly Non-Manufacturing Purchasing Managers Index) decreased to 49.60% from 56.50% in November, which represents contraction territory and was lower than market expectations of 55.00%. The December’s Manufacturing PMI decreased to 48.40% from November’s 49.00%. Per the Institute for Supply Management (ISM), a reading above 50 is considered economic expansion and below 50 is considered economic contraction.
- December’s non-farm employment increased by 223,000 jobs, and the unemployment rate unexpectedly reduced to 3.5%, as reported by the Bureau of Labor Statistics on January 6, 2023. In December, employment increased in leisure and hospitality, health care, construction and social assistance. Average Hourly Earnings (wages) increased +4.6% year-over-year in December.
- In December, the Total Equity Fund decreased -3.58% and was down -19.86% YTD. The International Equity Fund increased +0.07% in December and was down -21.13% YTD. The Small Cap Equity Fund decreased -5.71% in December and was down -20.66% YTD. The Fixed Income Fund decreased -0.31% in December and was down -12.99% YTD.
- Equity managers’ performance versus their respective benchmarks was mixed during the month. Equity managers that outperformed included international developed markets manager LSV, and U.S. small cap managers Westfield and Blackrock.
- The UCF Balanced Fund, UCF’s most popular fund, outperformed its benchmark in December, returning -2.32% and was down -16.60% YTD. The Alternatives Balanced Fund decreased -1.94% in December and was down -11.62% YTD. Finally, the Beyond Fossil Fuels Balanced Fund underperformed its benchmark, returning -2.78% in December and was down -15.78% YTD.