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

Market Update from CIO Dave Klassen – May 2024

Global equity market returns turned positive in May as quarterly earnings came in stronger than expected and the A.I. rally continued. The global equity index (MSCI ACWI IMI) increased by +4.06% in May and is up +8.88% YTD. The S&P 500, which tracks large cap U.S. stocks, increased by +4.96% in May and is up +11.30% YTD. The Russell 2000 Index, which tracks domestic small cap stocks increased by 5.02% in May and is up +2.68% YTD. The International developed equity index (MSCI EAFE) increased by +3.87% in May and is up +7.07% YTD. The emerging markets index (MSCI EM) increased by +0.56% in May and is up +3.41% YTD.
In May, bond yields decreased across maturities; the 30-year U.S. Treasury bond yield decreased by 14 bps to 4.65%, the 10-year yield decreased by 18 bps to 4.51%, and the 2-year yield decreased by 15 bps to 4.89%.
The Barclays U.S. Aggregate Index, which is a measure of U.S. Bond prices, increased by 1.70% in May and is down -1.64% YTD.

U.S. gross domestic product (GDP) in the first quarter of 2024 increased by 1.3%, according to the “second” estimate released by the Bureau of Economic Analysis. In the fourth quarter of 2023 GDP increased by 3.4%.
The May Services PMI (formerly Non-Manufacturing Purchasing Managers Index) increased to 53.80% from 49.40% in April. This represents expansion and is higher than market expectations of 50.80%. The May Manufacturing PMI decreased to 48.70% from April’s 49.20%. Per the Institute for Supply Management (ISM), a reading above 50 is considered economic expansion and below 50 is considered economic contraction.
May non-farm employment increased by 272,000 jobs, and the unemployment rate increased to 4.0%, as reported by the Bureau of Labor Statistics on June 7th, 2024. In May employment increased in health care; government; leisure and hospitality; and professional, scientific, and technical services. Average Hourly Earnings (wages) increased by 4.1% year-over-year in May.

The Equity Fund increased by 3.59% in May and is up 7.89% YTD. The Bond Fund increased by 1.47% in May and is down -1.56% YTD. The Stable Value Fund was up +0.15% for May and is up 0.88% YTD. The Northern Trust Global Sustainability Index Fund (GSIF) increased by 4.81% in May and is up 9.98% YTD.
The Balanced Fund increased by 2.65% in May and is up 3.29% YTD. The Target Annuitization Date TAD 2025; TAD 2030; TAD 2035; TAD 2040 TAD 2045 and TAD 2050 returns were 1.29%, 2.29%, 2.64%, 2.92%, 3.11% and 3.23% respectively for May and up +2.05%, +3.04%, +3.61%, +4.92%, +5.53%, and +6.14% YTD.