September 6, 2019 edition

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Investment Department Update

The start of the third quarter started with somewhat muted performance in July as the summer slowdown set in across some parts of the market. As the end of the summer approached, August showed itself to be a volatile month for financial markets, with the VIX, commonly referred to as the market ‘fear gauge’, averaging 19, compared to 13 in July. While the Fed met market expectations with a July rate cut, future policy remained uncertain and market remained unstable through August following President Trump’s tweeting early in the month that an additional 10% in tariffs would be levied against China starting in September. In retaliation to the announcement of the new tariffs China later announced that it would also increases tariffs on roughly $75 billion of US imports, including agricultural goods, crude oil and cars.

For the month of August the S&P 500 was down roughly 1.6 percent. OCERS’ equity benchmark Russell 3000 was down just over 2 percent. As investors sought safe assets most segments of the fixed income markets rallied, including 30-year US Treasuries, whose yields dropped below 2 percent for the first time. Global investment grade corporate credit was also positive for the month delivering a nearly 1.9 percent return as investors continued to seek a home for money coming out of equities even if yields were negative. The total market value of negative yielding debt in the Bloomberg Barclays Global Aggregate Index now sits at over USD 16 trillion.

Looking forward, more signs of slowing global growth may materialize and increasingly the potential risk of an economic downturn. While new monetary and fiscal stimulus is being considered to support different parts of the global economy downside risks warrant an element of caution in the intermediate-term.

Upcoming Board of Retirement, Investment Committee Meetings

OCERS’ Board of Retirement will hold its Strategic Planning Workshop and Investment Forum on Wednesday, September 18 and Thursday, September 19, 2019. The special two-day event will begin at 8 a.m. on both dates.

That two-day workshop and forum will be held at Embassy Suites by Hilton Santa Ana Orange County Airport, 1325 East Dyer Road, Santa Ana, CA 92701.