MARKETS:
- Global equity markets continued to pull back in October, as the Federal Reserve remained steadfast on its higher-for-longer interest rates stance, and other macroeconomic factors remained challenging. The global equity index (MSCI ACWI IMI) decreased -3.01% in October and was up +6.75% The S&P 500, which tracks large cap U.S. stocks, decreased -2.10% in October and was up +10.69% YTD. The Russell 2000 Index, which tracks domestic small cap stocks, decreased -6.82% in October and was down -4.45% YTD. The international developed equity index (MSCI EAFE) decreased -4.05% in October and was up +2.74% YTD. The emerging markets index (MSCI EM) decreased -3.89% in October and was down -2.14% YTD.
- In October, long-term bond yields increased more than short-term yields while exhibiting intra-month volatility. The 30-year U.S. Treasury bond yield increased +31 bps to 04%; the 10-year yield increased +29 bps to 4.88%; and the 2-year yield increased +4 bps to 5.07%.
- The Barclays U.S. Aggregate Index, which is a measure of U.S. bond prices, decreased -1.58% in October and was down -2.77%
ECONOMIC AND GEOPOLITICAL HEADLINES
- U.S. gross domestic product (GDP) in the third quarter of 2023 increased +4.9%, according to the “Advanced” estimate released by the Bureau of Economic Analysis. In the second quarter of 2023 GDP increased by 2.1%.
- The October Services Purchasing Manager Index (PMI) decreased to 51.80% from 53.60% in September. This represents expansion and below market expectations of 53.00%. The October Manufacturing PMI decreased to 46.70% from September’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.
- October non-farm employment increased by 150,000 jobs, and the unemployment rate increased to 3.9%, as reported by the Bureau of Labor Statistics on November 3. In October, employment increased in health care, government and social assistance. Average Hourly Earnings (wages) increased +4.1% year-over-year in October.
PERFORMANCE UPDATES
- The Total Equity Fund decreased -3.89% in October and was up 4.26% YTD. The International Equity Fund decreased -4.88% in October and was down -0.97 YTD. The Small Cap Equity Fund decreased -6.88% in October and was down -2.59% YTD. The Fixed Income Fund decreased -1.44% in October and was down -2.15% YTD.
- Equity managers’ performance was weak in the month, with only Blackrock and RBC beating their respective benchmarks, whereas other managers underperformed.
- The UCF Balanced Fund, UCF’s most popular fund, underperformed its benchmark, returning -2.92% in October, and was up 1.83% YTD. The Alternatives Balanced Fund decreased -2.36% in October and was up 2.25% YTD. Finally, the Beyond Fossil Fuels Balanced Fund underperformed its benchmark, returning -2.66% in October, and was up 4.21% YTD.