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

Market Update from CIO Dave Klassen – January 2025

January was a volatile start for the U.S. equity market with a selloff due to a new AI competition from China and then ending up due to strong company earnings and consumer confidence. The global equity index (MSCI ACWI IMI) increased by +3.36% in January and is up +3.36% YTD. The S&P 500, which tracks large cap U.S. stocks, increased by +2.78% in January and is up +2.78% YTD. The Russell 2000 Index, which tracks domestic small cap stocks increased by +2.62% in January and is up +2.62% YTD. The International developed equity index (MSCI EAFE) increased by +5.26% in January and is up +5.26% YTD. The emerging markets index (MSCI EM) increased by +1.79% in January and is up +1.79% YTD.
In January, bond yields increased across maturities; the 30-year U.S. Treasury bond yield decreased by 13 bps to 4.65%, the 10-year yield decreased by 13 bps to 4.45%, and the 2-year yield decreased by 4 bps to 4.21%.
The Barclays U.S. Aggregate Index, which is a measure of U.S. Bond prices, increased by +0.53% in January and is up +0.53% YTD.

U.S. gross domestic product (GDP) in the fourth quarter of 2024 increased by 2.3%, according to the “Advanced” estimate released by the Bureau of Economic Analysis. In the third quarter of 2024 GDP increased by 3.1%.
The January Services PMI (formerly Non-Manufacturing Purchasing Managers Index) decreased to 52.80% from 54.00% in December. This represents expansion and is above market expectations of 51.00%. The January Manufacturing PMI increased to 50.90% from 49.30% in December. Per the Institute for Supply Management (ISM), a reading above 50 is considered economic expansion and below 50 is considered economic contraction.
January non-farm employment increased by 143,000 jobs, and the unemployment rate declined to 4.0%, as reported by the Bureau of Labor Statistics on February 7th, 2025. In January employment increased in health care, retail, and social assistance. Average Hourly Earnings (wages) increased by 4.1% year-over-year in January.

The Equity Fund increased by +3.49% in January and is up +3.49% YTD. The Bond Fund increased by +0.53% in January and is up +0.53% YTD. The Stable Value Fund was up +0.21% for January and is up +0.21% YTD. The Northern Trust Global Sustainability Index Fund (GSIF) increased by +2.34 in January and is up 2.34% YTD.
The Balanced Fund increased by +1.64% in January and is up +1.64% YTD. The Target Annuitization Date TAD 2025; TAD 2030; TAD 2035; TAD 2040 TAD 2045 and TAD 2050 returns were +1.03%, +1.74%, +2.21%, +2.47%, +2.69% and +2.92% respectively for January and up +1.03%, +1.74%, +2.21%, +2.47%, +2.69% and +2.92% YTD.