- Global financial markets were positive in February led by small cap and value stocks. The developed and emerging market equity index (MSCI ACWI IMI) increased +2.32% in February and +1.85% YTD. The S&P 500, which tracks large cap U.S. stocks, was up +2.76% in February and +1.72 YTD. The Russell 2000 Index, which tracks domestic small cap stocks increased +6.23% in February and +11.58% YTD. The international developed equity index (MSCI EAFE) increased by +2.24% in February and +1.15% YTD. The emerging markets index (MSCI EM) increased +0.76% in February and +3.85% YTD.
- In February longer-term bond yields increased: the 30-year U.S. Treasury bond yield increased by 30 bps to 2.17%, the 10-year yield increased by 33 bps to 1.44%, and the 5-year yield increased by 30 bps to 0.75%.
- The Barclays U.S. Aggregate Index, which is a measure of U.S. bond prices, decreased -1.44% for February and -2.15% YTD.
ECONOMIC AND GEOPOLITICAL HEADLINES
- U.S. gross domestic product (GDP) in the fourth quarter of 2020 increased +4.1% according to the “second” estimate released by the Bureau of Economic Analysis. The third quarter of 2020 GDP increased +33.4%.
- The February Services PMI (formerly Non-Manufacturing Purchasing Managers Index) decreased to 55.30% from 58.70% in January. This increase represents expansion at a lower rate and was well below market expectations of 58.7%. The February Manufacturing PMI increased to 60.80% from January’s 58.70%. Per the Institute for Supply Management (ISM), a reading above 50 is considered economic expansion.
- February non-farm employment increased by 379,000 jobs, and the unemployment rate decreased slightly to 6.2%, as reported by the Bureau of Labor Statistics on March 5, 2021. In February, employment increased in leisure and hospitality, healthcare and social assistance, and retail trade and manufacturing but saw by losses in state and local government, education, construction and mining. Average Hourly Earnings (wages) increased +5.3% year-over-year in February.
FUND PERFORMANCE UPDATES
- In February, the Equity Fund increased by +2.88% and was up +3.16% YTD. The International Equity Fund increased by +2.27% in February and was up +2.73% YTD. The Small Cap Equity Fund increased by +7.17% in February and was up +10.12% YTD. The Fixed Income Fund decreased by -1.43% in February and was down -2.18% YTD.
- Most UCF equity managers outperformed their respective benchmarks in February. Managers that outperformed their benchmark included Westfield Capital Management, Blackrock, Channing Capital Management, RBC and LSV asset management.
- All Balanced Funds except the Alternatives Balanced Fund outperformed their respective benchmarks in February. The Moderate Balanced Fund, UCF’s most popular fund, increased by +1.32% in February and was up +1.25% YTD. The Aggressive Balanced Fund was up +1.95% in February and was up +2.03% YTD. The Conservative Balanced Fund was up +0.24% in February and was down -0.10% YTD. The Alternatives Balanced Fund was up +1.22% in February and was up +2.11% YTD. Finally, the Beyond Fossil Fuels Balanced Fund increased by +1.02% in February and was up +1.17% YTD.