PNC Capital Directions Portfolio and Performance Review

 

1-month

1-year

3-year

5-year

U.S. Equities:
Russell 3000

(0.67%)

11.40%

11.41%

15.12%

International Equities:
MSCI ACWI ex USA IMI

3.76%

11.41%

7.58%

10.11%

U.S. Fixed Income:
Bloomberg US Aggregate Bond

0.39%

8.02%

1.95%

(0.67%)

Source: Morningstar

  • U.S. Economy Shrinks in the 1st Quarter: In the first quarter of the year GDP declined 0.3%, marking the first contraction since 2022. Economists surveyed by the Wall Street Journal had predicted that it would grow 0.4%. The main driver was a 41.3% increase in imports, which led to net exports subtracting 4.83 percentage points from GDP. Markets moved lower after the news came out on April 30th, but most major indices ended the day in positive territory despite the news. 
  • Consumer Confidence Continues to Fall: According to the Conference Board’s Consumer Confidence survey, U.S. consumers are increasingly more worried about the path forward for the U.S. economy. The most recent reading of the survey fell 7.9 points to 86 in April, the lowest the index has been since May 2020. Given the importance of consumer spending to the economy, there are concerns that if consumers become too pessimistic about the economy they may begin to pull back on spending, increasing the risk of further economic contraction. 
  • Inflation Eases: The Federal Reserve’s preferred measure of inflation, the Core Personal Consumption Expenditures Index, slowed from an annual rate of 3% in February to 2.6% in March. This is still higher than the Federal Reserve’s long-term target of 2%, but the data is reassuring news after several months of higher-than-expected inflation numbers.
  • Housing Sales Slump: Sales of existing homes fell 5.9% in the month of March, marking the largest drop since November 2022. Economic uncertainty seems to be a major driver of the decline, but it is certainly not the only factor. Interest rates for mortgages remain high and housing prices have increased noticeably in the last several years. These two factors have made buying a home more expensive and kept a number of buyers out of the market.

  • International Small Cap was a top contributor for the second month in a row with the MSCI World Ex USA Small Cap Index increasing 5.52%
  • International Quality was another top contributor with the MSCI World Sector Neutral Quality Index moving 4.66% higher
  • International Developed also showed the strength of non-U.S. markets with the MSCI All Country World Index rising 3.76%

  • U.S. MidCap Value was the lead detractor with the S&P MidCap 400 Value index falling 4.36% 
  • U.S. Small Cap Value further displayed the weakness in U.S. Value stocks with the Russell 2000 Value Index dropping 4.02% 
  • U.S. Large Cap Value cemented the weak month for Value with the S&P 500 Value Index moving 3.57% lower

During the month of April, there were several changes to asset allocation models in the program.

The first change was to reduce small and mid-cap stock exposure across domestic and international equities. Due to Macro headwinds which includes elevated interest rates, uncertain U.S. fiscal policy, and slowing economic growth, PNC Investments reduced small and mid-cap exposure. US small and mid-cap allocation reduction were invested in Large Cap Value. International small cap exposure was reinvested into international large cap.

The second change was to increase high yield and emerging markets bond exposure. With spreads widening, valuations have grown more attractive across high yield bonds and EM bonds. We are shifting from a tactical underweight, back to a neutral weight across high yield and EM bonds.

For accounts in our liquid alternative models we have shifted the allocations to levalize liquid alternative allocations across risk ranges, while also targeting the risks faced by different investors more directly.

We continue to diligently monitor the markets and your account, and we will keep you abreast of any changes to your portfolio allocation and investment selection that we deem appropriate so that you’re well positioned for what’s ahead.

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

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