The following market commentary provides context for the investment performance of your charitable assets.

From Cambridge Associates, investment advisor

Risk assets soared in the fourth quarter, sending 2023 returns for several asset classes to multiyear highs. Global equities (+11.0% for the MSCI All Country World Index) led the way, and global bonds (+8.1% for the Bloomberg Global Aggregate Bond Index) experienced their greatest quarterly return in more than two decades. Returns were driven by steeply declining global government bond yields as inflation declined faster than expected. This, along with softening economic data, led investors to price in earlier rates cuts than prior estimates.

US equities (+11.8%) outperformed developed markets ex US (+10.5%) peers in the fourth quarter, bringing total outperformance for 2023 to nearly 9%. Fourth quarter US stock outperformance was boosted by expectations that the Federal Reserve will cut rates sooner than previously anticipated. This view supported an increased risk appetite for investors, as the “Magnificent Seven” stocks contributed roughly one-third of the total returns in the fourth quarter, driving growth stocks to outgain their value peers. Of note, these seven firms contributed 60% of the broad US index’s gains in 2023.

Developed international equity market segments advanced as well in the fourth quarter, boosted by a weaker US dollar as interest-rate differentials versus the United States are expected to narrow. Developed Europe ex UK outperformed the most, as investors ramped up expectations for the European Central Bank to cut rates as early as March 2024 with inflation now approaching its 2% target. Emerging markets equities (+7.9%) trailed developed market peers in the fourth quarter for the tenth time in the last 12 quarters. China (-4.2%) was a significant detractor for the MSCI EM Index as it continued to face economic headwinds.

US fixed income assets (+6.8%) soared in the fourth quarter to their largest return since the 1980s. Yields steeply declined as investors were increasingly convinced that the Fed would cut its policy rate sooner than previously anticipated. This unexpected dovish signal boosted investor buying of longer-dated fixed income securities to lock in current rates before the expected decline next year.

We continue to monitor portfolio exposures and review portfolio positioning carefully, rebalancing in order to remain in line with the targeted risk profile. The portfolios continue to remain well-diversified with ample liquidity.