- Markets across the globe rebounded strongly after retracting in December as they entered the new year and expected risk of recession in the U.S. declined. The developed and emerging market equity index (MSCI ACWI IMI) increased +7.17% in January and YTD. The S&P 500, which tracks large cap U.S. stocks, increased +6.28% in January and YTD. The Russell 2000 Index, which tracks domestic small cap stocks, increased +9.75% in January and YTD. The international developed equity index (MSCI EAFE) increased +8.10% in January and YTD. The emerging markets index (MSCI EM) increased +7.90% in January and YTD.
- In January, longer-term bond yields decreased: the 30-year U.S. Treasury bond yield decreased –32 bps to +3.65%, the 10-year yield decreased by -36 bps to 3.52%, and the 5-year yield decreased -36 bps to 3.63%.
- The Barclays U.S. Aggregate Index, which is a measure of U.S. bond prices, increased +3.08% in January and YTD.
ECONOMIC AND GEOPOLITICAL HEADLINES
- U.S. gross domestic product (GDP) in the fourth quarter of 2022 increased +2.9%, according to the “Advanced” estimate released by the Bureau of Economic Analysis. In the third quarter of 2022, GDP increased +3.2%.
- The January Services PMI (formerly Non-Manufacturing Purchasing Managers Index) increased to 55.2% from 49.60% in December, which represents expansion territory and higher than market expectations of 50.40%. The January Manufacturing PMI decreased to 47.40% from December’s 48.40%. Per the Institute for Supply Management (ISM), a reading above 50 is considered economic expansion and below 50 is considered economic contraction.
- January’s non-farm employment increased sharply by 517,000 jobs, and the unemployment rate reduced to 3.4%, as reported by the Bureau of Labor Statistics on February 4. In January, employment increased in leisure and hospitality, professional and business services, health care and government. Average Hourly Earnings (wages) increased +4.4% year-over-year in January.
- The Total Equity Fund increased +7.94% in January and YTD. The International Equity Fund increased +9.08% in January and YTD. The Small Cap Equity Fund increased +9.86% in January and YTD. The Fixed Income Fund increased +3.01% in January and YTD.
- Equity managers’ performance versus their respective benchmarks was mixed during the month. Equity managers that outperformed included PGIM Quant U.S. Core, Channing Capital, Ballie Gifford and RBC.
- The UCF Balanced Fund, UCF’s most popular fund, outperformed its benchmark, returning 5.89% in January and YTD. The Alternatives Balanced Fund increased +4.27% in January and YTD. Finally, the Beyond Fossil Fuels Balanced Fund underperformed its benchmark, returning 5.11% in January and YTD.