The following Q3 market update provides context for the investment performance of your charitable assets.
From Cambridge Associates, investment advisor
Capital markets performance was mixed in the third quarter, with muted gains or losses across asset classes. Several key themes provided uncertainty near the end of the quarter, particularly signs that central banks were prepared to tighten monetary policy. Additionally, political uncertainty including partisan standoffs in the United States, pivotal elections in Germany and Japan, and ongoing regulatory crackdowns in China added to market volatility. U.S. Federal Reserve Chairman Jerome Powell indicated that higher prices could last for longer than initially expected.
Despite global equities declining for the first time since the onset of the pandemic, US equities advanced for the sixth consecutive quarter. Six of 11 S&P 500 Index sectors gained, led by financials, utilities, and communications services, whereas industrials, materials, and energy declined. Growth stocks topped value stocks, and large caps bested small caps for the full quarter, although the reverse was true in September amid market volatility.
European equities gained but underperformed broader developed markets while emerging markets equities declined in the third quarter, their first quarterly drawdown since the onset of the pandemic. Sovereign bonds trailed corporate equivalents, and investment-grade corporates lagged high-yield peers. Inflation-linked bonds advanced. Real assets were mixed as commodities were the top-performing asset class, but natural resources equities and developed REITs declined. The US dollar appreciated during the quarter.
With US equity valuations near all-time highs and interest rates poised to rise from low starting levels, we believe traditional US stock/bond portfolios will be challenged to earn returns comparable to those experienced over the past decade. We continue to believe that Thrivent Charitable’s diversified investment approach positions the portfolios well to navigate this challenging market backdrop and generate superior performance.