PNC Capital Directions Portfolio and Performance Review

 

1-month

1-year

3-year

5-year

Russell 3000

(1.93%)

14.76%

9.81%

10.25%

MSCI ACWI ex USA

(4.52%)

11.89%

3.99%

3.33%

Bloomberg US Aggregate Bond

(0.64%)

(1.19%)

(4.41%)

0.49%

 

Source: Morningstar

  • The Core PCE Price Index Annual Change (the Federal Reserve’s preferred inflation metric) in July met expectations at 4.24% but was still up from the previous month’s 4.09% number. Inflation remains well above the Fed’s 2% target raising questions as to the course of future monetary policy moves. Markets were mostly flat after the release of the information.
  • The U.S. economy added 187,000 jobs in August, which was slightly above expectations, but there were also noticeable downward revisions to job growth in June and July. Over the past three months, the economy has added on average about 150,000 jobs per month.
  • Despite the job gains seen in August, the unemployment rate in the U.S. increased to 3.8%. This was due to an increase in the Labor Force Participation Rate.
  • In August, the Chinese government announced that it would no longer report the youth unemployment rate in the country, after the unemployment rate for 16- to 24-year-olds climbed to a record 21.3% in June. Additionally, volatility in Chinese markets spiked further driven by increased fear surrounding China’s property market. The MSCI China Index in August dropped 8.96% from the prior month.
  • Elsewhere in the world, Germany, generally considered an economic powerhouse in Europe, has been in a technical recession for the last several quarters. In the second quarter of 2023, the German economy showed a 0% growth rate with the preceding two quarters modestly contracting (-0.1% in the first quarter of 2023 and -0.4% in the fourth quarter of 2022). This economic malaise resulted in a decline of the MSCI Germany Index of 4.84% for the month of August. Moreover, the broader MSCI Europe Index, which includes Germany, declined as well, dropping 3.97% during the month of August.

There were no asset allocation changes for the Capital Directions program in August.

  • Despite concerns in credit markets, high yield corporate bonds performed relatively well in a rough month for markets, with the Bloomberg US Corporate High Yield index returning 0.28%.
  • U.S. Quality Stocks, those that exhibit high profitability, low leverage, and stable earnings growth, held up well during August’s market turmoil, with the MSCI USA Sector Neutral Quality Index falling just 0.44%.
  • U.S. Large Cap Growth saw mixed results, but with the S&P 500 Growth index returning -0.62%, the asset class held up well relative to others.

  • U.S. Small Cap Growth stocks were particularly hard-hit last month with the Russell 2000 Growth Index falling 5.21%.
  • U.S. Small Cap Value stocks did not fare much better than Growth, with the Russell 2000 Value index decreasing 5.00%.
  • Growth stocks in international markets also performed poorly, with the MSCI World Ex U.S. Growth index coming down 4.81%.

For questions about your account holdings or performance, please contact your PNCI Financial Advisor.