Market Update – Summer 2018
It’s important to the team at the LCMS Foundation that you, our partners in ministry, are kept up to date on big picture economic trends and activity in the US and around the world, and how that may affect your investments, whether they are held with us or another firm. That’s why we’ve created this short newsletter to provide a brief overview of some of the key investment trends we are observing.
With the current bull market beginning its tenth year, including a very strong year in 2017, US Equities saw increased volatility in the first half of 2018, but gained ground. The broad Russell index was up 2.9% in the first half of the year, after being up 21.3% in for the full year in 2017.
Non-US Equities have had a more difficult year in 2018. After increasing 24.2% in 2017, the MSCI All Country Word Index excluding the US was down 2.7% for the first half of 2018. International Equity returns have lagged those in the US since the 2008-2009 recession, leading some observers to expect that non-US equities may rally.
Returns for US investment grade Bond investors were negative for the first half of the year, as the Federal Reserve continues to raise rates to head off inflation. Longer term returns remain low but positive, and Bonds continue to provide a stable balance to equity investor’s portfolios.
The US Economy continues to show signs of strength in the key categories that should drive future spending and growth. GDP growth was 4.1% in the second quarter of 2018; unemployment was at 4.0% in June of 2018; and US Corporate Profits have been strong in 2018, at or near record levels. Nearly all major economies around the world showed positive GDP growth in the first quarter of 2018; the US is growing faster than nearly all of these, with the exception of China.
The Foundation’s Preference and Standard Funds have seen good returns in recent years. The Foundation’s portfolio is managed by 16 professional fund managers, each with targeted investment strategies. These managers have seen strong performance in recent years, and also over the longer term.
The actions of the Federal Reserve, continued trade negotiations, and the fall mid-term elections are all expected to impact equity returns and rates in 2018. Over the longer term, factors like demographics, innovation, and productivity are more likely to affect the path of asset prices. The Foundation is hopeful that ministries can achieve returns in the high single digit range to grow resources and help fund future ministry work.
The LCMS Foundation offers highly diversified investment options, with a long-term focus, low fees and professional fund management. The Foundation’s Standard Funds are re-balanced monthly to match long-term asset class targets, enabling our account holders to buy low and sell high between asset classes.
Please contact Ralph Simon, Vice President Investment Services, at email@example.com or 314-996-1056, or Mark Cannon, Chief Financial Officer, at firstname.lastname@example.org or 314-996-1462, if you would like to learn more, or inquire about opening an account with the Foundation for your ministry.