January 2011 Investment Report


  • U.S. equities represented by the Russell 3000 Index advanced 2.2% for the month of January. Markets reacted positively to the gross domestic product (GDP) and the employment reports, along with the Federal Reserve’s continued actions to stimulate the economy. The Dow Jones Industrial Average surpassed 12,000 for the first time since the 2008 market collapse.
  • Large-company U.S. equities outperformed small-company U.S. equities. Among large-company U.S. equities, those with strong earnings growth performed better than companies classified as “value.”
  • International equities also advanced during January. The bellwether MSCI EAFE Index, which measures performance of developed-country equities in U.S. dollar terms, increased 2.4%. This increase is attributable largely to the strength of the European markets, led by Greece, Portugal and Spain. Stocks in these markets have partially recovered, thanks to a higher level of confidence that they will be able to avoid defaulting on their sovereign debt. Equities of developing countries as measured by the MSCI Emerging Markets Index, however, declined 2.8%. The markets of India and South Africa fell approximately 13% due to higher inflation and borrowing rates in India and lower consumer confidence in South Africa. The U.S. dollar declined 1.6% versus a basket of developed-market currencies, as measured by the U.S. Dollar Index.
  • The yield on the 10-year U.S. Treasury note remained relatively stable for the month and finished at 3.37%. However, the yield on the 30-year U.S. Treasury bond increased nearly a quarter of one percent to 4.57%. The steepness of the yield curve (the difference between the interest rates for two-year U.S. Treasury notes and 30-year U.S. Treasury bonds) is near historic highs.
  • Investment grade bonds, represented by the Barclays U.S. Credit Index, gained 0.2% during January. Corporate bond issuance set a record in January, as companies raised $157 billion in the credit markets.

Economics Highlights

  • The U.S. jobless rate unexpectedly fell to 9.0% in January, the lowest level since April 2009. There is market debate as to whether the numbers reflect improvement in employment conditions or simply a growing number of discouraged workers no longer looking for work.
  • GDP grew at a 3.2% annual rate in the fourth quarter, up from 2.6% in the prior quarter. U.S. economic output finally regained the level reached before the recession, as growth accelerated on stronger consumer spending and exports.
  • Manufacturing in the U.S. unexpectedly increased in January at the fastest pace in more than six years, reinforcing forecasts that the economic recovery will strengthen during 2011.
  • Japanese Finance Minister Yoshihiko Noda announced in January that the Japanese government plans to buy European bonds. His comments helped to calm nerves about how European governments would sell debt to fund an $85 billion euro aid package for Ireland announced in November. For the month of January, the euro strengthened against the yen and the U.S. dollar.
  • Rising food prices have had a disproportionately larger impact on poorer countries because a larger portion of poorer countries’ income is spent on food. Central bankers in these lesser-developed markets may have to consider more aggressive interest rate increases to fight inflation arising from increasing food prices.

Geopolitical Headlines

  • Hundreds of thousands of Egyptian citizens gathered in major cities to call for the ouster of President Hosni Mubarak. Popular grievances have focused on legal, political and economic issues including corruption, free speech and food price inflation.
  • President Barack Obama and President Hu Jintao of China met at the White House in the first full state visit to the U.S. by a Chinese leader since 1997. The leaders agreed to foster commercial ties between the two countries while working through differences on currency policy and human rights.
  • A federal district court judge in Florida ruled that the Health Care Reform legislation passed in 2010 (the Patient Protection and Affordable Care Act) was unconstitutional. The Florida court was the second to hold that the individual mandate in the law exceeds Congress’ authority (two other federal courts have upheld the law). The Administration is appealing the rulings. The U.S. Supreme Court will eventually have to rule on the matter.

Key Monthly Economic Statistics

This table contains a list of key monthly economic statistics. Each statistic is listed with a link to a Web page that provides a thorough description of the economic indicator.

  Positive Statistics
  Neutral Statistics
  Negative Statistics

Source: Econoday

Investment Fund Review

Inflation Protection Fund

Fund January
Inflation Protection Fund -0.1%
Barclays Capital U.S. Government Inflation-Linked Bond Index +0.1%
Difference -0.2%
  • The Inflation Protection Fund slightly underperformed its benchmark in January primarily due to its exposure to international sovereign inflation-linked bonds. Unrest in the Middle East adversely affected bonds from lesser-developed countries, which declined 2.2%. However, the fund’s 10% allocation to commodities added value to the fund with a 2.4% increase during the month.

Fixed Income Fund

Fund January
Fixed Income Fund +0.5%
Barclays Capital U.S. Universal (ex MBS) Index +0.3%
Difference +0.2%
  • The Fixed Income Fund modestly outperformed its benchmark in January. The fund benefited from its larger-than-benchmark exposure to below-investment-grade bonds, as both dedicated high-yield portfolios in the fund gained nearly 2%, thanks to improving prospects for continued economic growth. The fund also benefited from its exposure to non-dollar denominated bonds as the U.S. dollar declined relative to other currencies. However, a nearly 2% decline in the value of the emerging market debt portfolio partially offset the contribution from these factors because of market fears resulting from unrest in the Mideast.

U.S. Equity Fund

Fund January
U.S. Equity Fund +1.8%
Russell 3000 +2.2%
Difference -0.4%
  • U.S. stocks were the best performing asset class in January and the U.S. Equity Fund gained 1.8%, although it underperformed the fund’s benchmark by 0.4%. The fund’s larger-than-benchmark allocation to small and mid-sized companies detracted from performance as large-sized companies—measured by the S&P 500 Index—gained 2.4% and small companies—measured by the Russell 2000 Index—declined 0.3%.

International Equity Fund

Fund January
International Equity Fund -0.2%
MSCI ACWI x US +0.8%
Difference -1.0%
  • The International Equity Fund produced a disappointing performance in January; it slightly declined but underperformed its benchmark by a full percentage point. The fund’s larger-than-benchmark allocation to stocks from lesser-developed countries impaired performance as a result of Middle East unrest. In addition, the fund’s other diversifying strategies in small international companies and international real estate investment trusts also detracted from returns. Finally, seven of the fund’s eight investment managers underperformed their respective benchmarks.

Multiple Asset Fund

Fund January
Multiple Asset Fund +0.9%
Composite Benchmark +1.2%
Difference -0.3%
  • The Multiple Asset Fund underperformed its benchmark primarily because of the below-benchmark performance of the International Equity Fund.

Balanced Social Values Plus Fund

Fund January
Balanced Social Values Plus Fund +1.0%
Composite Benchmark +1.0%
Difference +0.0%


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