July 2, 2019 edition

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Investment Department Update

The second quarter saw a return of uncertainty and volatility as May posted the first down month in 2019. The month also saw the worst May performance in 9 years, illustrating how quickly both economic data as well as outside market factors can shift overall sentiment.

While equity markets entered May with the S&P 500 at an all-time high, by the end of the month stocks were in the negative by roughly -6.5%. The broader OCERS’ equity benchmark Russel 3000 was down -6.47% for the month. Bonds rallied and yields contracted as capital moved in a flight to quality. The benchmark 10-year Treasury yield tightened to their lowest yields in nearly two years to 2.14%. Other fixed income instruments also rallied amid the uncertainty. This caused some parts of the yield curve to invert for a second time in 2019 as concerns about how longer-term impacts of a protracted trade war might affect already slow or slowing global growth.

As of May 31, 2019 OCERS’ total fund was $16.2 billion, down roughly -1.65% from the month prior. The portfolio fared better than its benchmark indices as it benefited from its broad diversification and positive performance of the recently established Risk Mitigation asset class, which was up 1.94% during the month. The Fund’s overall continued positive performance relative to its benchmarks continues to be reflected over the longer-term trailing period. OCERS’ trailing one-year net performance was 3.0% percent and OCERS’ portfolio has returned 5.35% over the past five years and 8.03% over the last 10 years.

Looking forward it appears that a less aggressive Federal Reserve and a momentary truce in the trade war will support positive market performance as the S&P recovered from its May loses to hit new highs in June. Still, conflicting hard and soft data in some recent economic and sentiment indicators leave many investors in the same cautious mindset that they held at the end of the first quarter.

Upcoming Board of Retirement, Investment Committee Meetings

OCERS’ next Board of Retirement meeting will be held at 9 a.m. on Thursday, July 11, 2019. 

The next regular Investment Committee meeting will be held at 1 p.m. on Wednesday, July 31, 2019.