- Global financial markets turned negative in September due to concerns regarding lofty valuations (U.S. big tech), delays in a stimulus package and the upcoming U.S. elections. The developed and emerging market equity index (MSCI ACWI IMI) decreased -3.22% in September and is up +1.37% YTD. The S&P 500, which tracks large cap U.S. stocks, was down -3.80% in September and is up +5.57% YTD. The Russell 2000 Index, which tracks domestic small cap stocks, decreased -3.34% in September and is down -8.69% YTD. The International developed equity index (MSCI EAFE) decreased -2.60% in September and is down –7.09% YTD. The emerging markets index (MSCI EM) decreased -1.60% in September and is down -1.16% YTD.
- In September, longer-term bond yields reversed course and increased; the 30-year U.S. Treasury bond yield decreased by –3 bps to +1.46%; the 10-year yield decreased by -3 bps to +0.69%; and the 5-year yield stayed flat at +0.28%.
- The Barclays U.S. Aggregate Index, which is a measure of U.S. Bond prices, increased +0.03% for September and is up +6.83% YTD.
ECONOMIC AND GEOPOLITICAL HEADLINES
- U.S. gross domestic product (GDP) in the second quarter of 2020 decreased -31.4%, according to the “third” estimate released by the Bureau of Economic Analysis. The first quarter of 2020 GDP decreased -5.0%.
- The September Services PMI (formerly Non-Manufacturing Purchasing Managers Index) increased to 57.80% from 56.90% in August, which represents expansion and was in line with expectations of 57.00%. The September Manufacturing PMI decreased to 55.40% from August’s 56.00%. Per the Institute for Supply Management (ISM), a reading above 50 is considered economic expansion.
- September non-farm employment increased by 661,000 jobs, and the unemployment rate declined to 7.9%, as reported by the Bureau of Labor Statistics on October 2, 2020. In September, employment rose due to the resumption of activity, especially in retail trade, professional and business services, leisure and hospitality, and health care and social assistance. Average Hourly Earnings (wages) increased +4.7% year-over-year in September.
FUND PERFORMANCE UPDATES
- In September, the Equity Fund decreased by -3.01% and is down -0.32% YTD. The International Equity Fund decreased by -1.90% in September and is down -1.50% YTD. The Small Cap Equity Fund decreased by -2.55% in September and is down -4.07% YTD. The Fixed Income Fund decreased by -0.18% in September and is up 5.55% YTD.
- All UCF equity managers had negative absolute returns with the exception of RBC Emerging market equity, and relative returns were mixed in September. Managers that outperformed included Westfield Capital Management, SSGA, Baillie Gifford and RBC.
- The Balanced Fund that was ahead of its respective benchmark in September was Alternatives Balanced Fund; other Funds underperformed. The Moderate Balanced Fund, UCF’s most popular fund, decreased by -2.02% in September and up +2.45% YTD. The Aggressive Balanced Fund was down -2.47% in September and up +1.21% YTD. The Conservative Balanced Fund was down ‑1.37% in September and up +3.32% YTD. The Alternatives Balanced Fund was down ‑1.56% in September and up +2.06% YTD. Finally, the Beyond Fossil Fuels Balanced Fund decreased by -2.14% in September and was up +5.08% YTD.