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

Market Update from CIO Dave Klassen – March 2023

Global equity markets rallied in March despite volatility created by U.S. regional bank and European bank failures. The global equity index (MSCI ACWI IMI) increased by +3.08% in March and is up 7.31% YTD. The S&P 500, which tracks large cap U.S. stocks, increased by +3.67% in March and is up 7.50% YTD. The Russell 2000 Index, which tracks domestic small cap stocks decreased by -4.78% in March and is up 2.74% YTD. The International developed equity index (MSCI EAFE) increased by +2.48% in March and is up 8.47% YTD. The emerging markets index (MSCI EM) increased by +3.03% in March and is up 3.96% YTD.
In March longer-term bond yields decreased; the 30-year U.S. Treasury bond yield decreased by 26 bps to +3.67%, the 10-year yield decreased by 54 bps to +3.48%, and the 2-year yield decreased by 75 bps to +4.06%.
The Barclays U.S. Aggregate Index, which is a measure of U.S. Bond prices, increased by +2.54% in March and is up 2.96% YTD.

U.S. gross domestic product (GDP) in the fourth quarter of 2022 increased by 2.6%, according to the “third” estimate released by the Bureau of Economic Analysis. In the third quarter of 2022 GDP increased by 3.2%.
The March Services PMI (formerly Non-Manufacturing Purchasing Managers Index) decreased to 51.20% from 55.10% in February. This represents expansion territory but was below market expectations. The March Manufacturing PMI decreased to 46.30% from February’s 47.70%. Per the Institute for Supply Management (ISM), a reading above 50 is considered economic expansion and below 50 is considered economic contraction.
March non-farm employment increased by 236,000 jobs, and the unemployment rate changed a little to 3.5%, as reported by the Bureau of Labor Statistics on April 7th, 2023. In March employment increased in leisure and hospitality, government, professional and business services, and health care. Average Hourly Earnings (wages) increased by 4.2% year-over-year in March.

The Equity Fund increased by +2.04% in March and is up 6.25% YTD. The Bond Fund increased by +2.28% in March and is up 2.87% YTD. The Stable Value Fund was up 0.14% for March and up 0.53% YTD. The Northern Trust Global Sustainability Index Fund (GSIF) increased by +3.65% for March and is up 8.14% YTD.
The Balanced Fund increased by +2.82% in March and is up 6.01% YTD. The Target Annuitization Date TAD 2025; TAD 2030; TAD 2035; TAD 2040 TAD 2045 and TAD 2050 returns were +1.31%, +1.98%, +2.14%, +2.12%, +2.12%, and +2.14% respectively for March and +3.00%, +4.30%, +4.85%, +5.16%, +5.42%, and +5.72% YTD.