- Global equity markets pulled back significantly in September, as the Federal Reserve remained steadfast in its higher-for-longer interest rates stance and the markets saw some sign of consumer weakness. The global equity index (MSCI ACWI IMI) decreased -4.14% in September and was up +10.06% The S&P 500, which tracks large cap U.S. stocks, decreased -4.77% in September and was up +13.07% YTD. The Russell 2000 Index, which tracks domestic small cap stocks, decreased -5.89% in September and was up +2.54% YTD. The international developed equity index (MSCI EAFE) decreased -3.42% in September and was up +7.08% YTD. The emerging markets index (MSCI EM) decreased -2.62% in September and was up +1.82% YTD.
- In September, long term bond yields increased more than short term yields while exhibiting intra-month volatility. The 30-year U.S. Treasury bond yield increased +53 bps to 4.73%; the 10-year yield increased +50 bps to 4.59%; and the 2-year yield increased +18 bps to 5.03%.
- The Barclays U.S. Aggregate Index, which is a measure of U.S. bond prices, decreased -2.54% in September and was down -1.21%
ECONOMIC AND GEOPOLITICAL HEADLINES
- U.S. gross domestic product (GDP) in the second quarter of 2023 increased +2.1%, according to the “Third” estimate released by the Bureau of Economic Analysis. In the first quarter of 2023 GDP increased +2.2%.
- The September Services PMI (formerly Non-Manufacturing Purchasing Managers Index) decreased to 53.60% from 54.50% in August. This represents expansion and was in line with market expectations. The September Manufacturing PMI increased to 49.00% from August’s 47.60%. Per the Institute for Supply Management (ISM), a reading above 50 is considered economic expansion and below 50 is considered economic contraction.
- September non-farm employment increased by 336,000 jobs, and the unemployment rate remained the same at 3.8%, as reported by the Bureau of Labor Statistics on October 6. In September employment increased in leisure and hospitality, government, healthcare and social assistance, as well as professional, scientific and technical services. Average Hourly Earnings (wages) increased +4.2% year-over-year in September.
- The Total Equity Fund decreased -4.49% in September and was up 8.48% YTD. The International Equity Fund decreased -3.96% in September and was up 4.11% YTD. The Small Cap Equity Fund decreased -5.29% in September and was up 4.61% YTD. The Fixed Income Fund decreased -2.46% in September and was down -0.72% YTD.
- Equity managers’ performance was mixed during the month, and the managers that outperformed their respective benchmarks were PGIM’s Quantitative Strategies, Xponance, Westfield, Blackrock and LSV, whereas the managers that underperformed were Ballie Gifford, Channing and RBC.
- The UCF Balanced Fund, UCF’s most popular fund, underperformed its benchmark, returning -3.66% in September, and was up 4.89% YTD. The Alternatives Balanced Fund decreased -2.64% in September and was up 4.71% YTD. Finally, the Beyond Fossil Fuels Balanced Fund outperformed its benchmark, returning -2.86% in September, and was up 7.05% YTD.