The Pension Boards - PBUCC - Market Update from CIO Dave Klassen

Market Update from CIO Dave Klassen – January 2023

Markets across the globe rebounded strongly after retracting in December as they entered the New Year and expected risk of recession in the US declined. The developed and emerging market equity index (MSCI ACWI IMI) increased by 7.17% in January and YTD. The S&P 500, which tracks large cap U.S. stocks, increased by 6.28% in January and YTD. The Russell 2000 Index, which tracks domestic small cap stocks increased by 9.75% in January and YTD. The International developed equity index (MSCI EAFE) increased by 8.10% in January and YTD. The emerging markets index (MSCI EM) increased by 7.90% in January and YTD.
In January longer-term bond yields decreased; the 30-year U.S. Treasury bond yield decreased by 32 bps to +3.65%, the 10-year yield decreased by 36 bps to +3.52%, and the 5-year yield decreased by 36 bps to +3.63%.
The Barclays U.S. Aggregate Index, which is a measure of U.S. Bond prices, increased by 3.08% in January and YTD.

U.S. gross domestic product (GDP) in the fourth quarter of 2022 increased by 2.9%, according to the “Advanced” estimate released by the Bureau of Economic Analysis. In the third quarter of 2022 GDP increased by 3.2%.
The January’s Services PMI (formerly Non-Manufacturing Purchasing Managers Index) increased to 55.2% from 49.60% in December, this represents expansion territory and higher than market expectations of 50.40%. The January’s 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 4th, 2023. In January employment increased in leisure and hospitality, professional and business services, health care, and government. Average Hourly Earnings (wages) increased by 4.4% year-over-year in January.

The Equity Fund increased by 6.80% in January and YTD. The Bond Fund increased by 2.93% in January and YTD. The Stable Value Fund was up 0.22% for January and YTD. The Northern Trust Global Sustainability Index Fund (GSIF) increased by 7.22% for January and YTD.
The Balanced Fund increased by 5.31% in January and YTD. The Target Annuitization Date TAD 2025; TAD 2030; TAD 2035; TAD 2040 TAD 2045 and TAD 2050 returns were 3.03%, 4.53%, 5.21%, 5.54%, 5.80% and 6.09% respectively for January and YTD.