MARKETS:

  • Global equity markets posted strong returns in December as the Fed indicated that interest rates are likely at their peak and the markets started expecting rate cuts in 2024. The global equity index (MSCI ACWI IMI) increased +4.80% in December and was up +22.20% in 2023. The S&P 500, which tracks large cap U.S. stocks, increased +4.54% in December and was up +26.29% in 2023. The Russell 2000 Index, which tracks domestic small cap stocks, increased +12.22% in December and was up +16.93% in 2023. The international developed equity index (MSCI EAFE) increased +5.31% in December and was up +18.24% in 2023. The emerging markets index (MSCI EM) increased +3.91% in December and was up +9.83% YTD.
  • In December, bond yields decreased across maturities while exhibiting intra-month volatility. The 30-year U.S. Treasury bond yield decreased –51 bps to 4.03%, the 10-year yield decreased -49 bps to 3.88%, and the 2-year yield decreased -50 bps to 4.23%.
  • The Barclays U.S. Aggregate Index, which is a measure of U.S. bond prices, increased +3.83% in December and was up +5.53% in 2023.

ECONOMIC AND GEOPOLITICAL HEADLINES

  • U.S. gross domestic product (GDP) in the third quarter of 2023 increased +4.9%, according to the “Third” estimate released by the Bureau of Economic Analysis. In the second quarter of 2023, GDP increased +2.1%.
  • The December Services PMI (formerly Non-Manufacturing Purchasing Managers Index) decreased to 50.60% from 52.70% in November. This represents expansion and lower than market expectations of 52.60%. The December Manufacturing PMI increased to 47.40% from November’s 46.70%. Per the Institute for Supply Management (ISM), a reading above 50 is considered economic expansion and below 50 is considered economic contraction.
  • December non-farm employment increased by 216,000 jobs, and the unemployment rate remained unchanged at 3.7%, as reported by the Bureau of Labor Statistics on January 5. In December, employment increased in government, health care, social assistance and construction. Average Hourly Earnings (wages) increased +4.1% year-over-year in December.

PERFORMANCE UPDATES

  • The Total Equity Fund increased +5.86% in December and was up +20.44% YTD. The International Equity Fund increased +5.51% in December and was up +14.22% YTD. The Small Cap Equity Fund increased +12.19% in December and was up +18.34% YTD. The Fixed Income Fund increased +3.70% in December and was up +5.70% YTD.
  • Equity managers’ performance was mixed during the month, and the managers that outperformed their respective benchmarks were PGIM’s domestic quantitative strategy, Westfield, Blackrock, Ballie Gifford, LSV and RBC; whereas the managers that underperformed were PGIM’s global quantitative strategy, Xponance and Channing.
  • The UCF Balanced Fund, UCF’s most popular fund, outperformed its benchmark returning +4.97% in December and was up 14.53% YTD. The Alternatives Balanced Fund increased +3.46% in December and was up 11.03% YTD. Finally, the Beyond Fossil Fuels Balanced Fund underperformed its benchmark, returning +4.38% in December and was up +16.52% YTD.