Following is a summary of the markets and our funds’ performance for the month of July 2018, provided by our Chief Investment Strategist David A. Klassen.
MARKETS
As the earnings season for publicly traded companies began in July, investors celebrated the strong economy and corporate profit growth, particularly in the U.S. The S&P 500, which tracks large cap U.S. stocks, increased 3.72% in July and is up 6.47% Y-T-D. The Russell 2000 Index, which tracks domestic small cap stocks and is one of the better performing indices in 2018, rose 1.74% and is up 9.54% Y-T-D. The MSCI EAFE, the international developed equity index, was up 2.46% and is down -0.36% Y-T-D and MSCI EM, the emerging markets index increased 2.20% in July and is down -4.61% Y-T-D.
- In July, the yield on U.S. Treasury bonds rose; the 30-year bond yield increased 9bps to 3.08%, while the 10-year yield increased 11bps to 2.96%, and the 5-year yield increased 11bps to 2.85%.
- The Barclays Aggregate Index, the recognized benchmark for U.S. Bond prices, rose a negligible 0.02% for July and is down -1.59% Y-T-D.
ECONOMIC & GEOPOLITICAL HEADLINES
- U.S. gross domestic product (GDP), in the second quarter of 2018 increased 4.1%, according to the “advanced” estimate released by the Bureau of Economic Analysis (BEA). The increase reflected positive contributions from consumer spending, exports, nonresidential fixed investment and federal, state and local government spending. The BEA revised GDP growth in the first quarter 2018 to 2.2% from 2.0%.
- The July Purchasing Managers Index (PMI) registered 58.1, a decrease of 2.1 from the May reading of 60.2. Per the Institute for Supply Management, a reading above 50 is considered economic expansion.
- In July, non-farm employment added 157,000 jobs, versus the expected 190,000. The unemployment rate edged down slightly by 0.1% to 3.9%. The June number was revised up to 248,000; 35,000 more than previously reported. Average Hourly Earnings increased by 2.7% year-over-year. The monetary policy normalization is expected to stay on track.
FUND PERFORMANCE UPDATES
- The Total Equity Fund was up 2.66% for July and is up 2.26% Y-T-D. The International Equity Fund was up 2.01% and is -2.01% Y-T-D. The Small Cap Equity Fund was up 2.45% and is up 7.50% Y-T-D. In July, the Fixed Income Fund was up 0.31% and is down -1.34%
Y-T-D. - In July, the UCF equity managers’ performance were mixed relative to their respective benchmarks. For international markets, developed manager LSV outperformed while Baillie Gifford lagged. The recently retained emerging markets manager RBC outperformed its benchmark. Domestic Core equity managers State Street and QMA beat their respective benchmarks, while FMI fell short of its benchmark. Small cap managers Westfield and Fiduciary surpassed their benchmarks, while DFA underperformed its benchmark.
- Each of the five balanced funds provided positive results this month. The Moderate Balanced Fund, UCF’s most popular fund, was up 1.76% and is up 0.58% Y-T-D. The Aggressive Balanced Fund was up 2.10% and has returned 1.04% Y-T-D. The Conservative Balanced Fund was up 1.20% and is down -0.22% Y-T-D. The Alternatives Balanced Fund was up 2.06% and is up 1.43% Y-T-D. Finally, the Beyond Fossil Fuels Balanced Fund was up 1.59% and is down -0.22% Y-T-D.