The following Q3 2022 market commentary provides context for the investment performance of your charitable assets.
From Cambridge Associates, investment advisor
Risk assets declined again in the third quarter. Global equities recorded the worst three-quarter decline since the 2008–09 Global Financial Crisis. The pattern of global equity price movements resembled that of a rollercoaster, first experiencing a steep ascent before sharply plunging to end the quarter at the lowest levels since 2020. Higher-than-expected global inflation readings and unified hawkish messaging from major central banks have forced investors to come to terms with the reality that elevated interest rates could persist for longer than expected. As yields surged higher, bond markets experienced yet another historically steep decline.
US equities declined in the third quarter on an absolute basis but outperformed global ex US equities as the dollar surged. US small caps and growth stocks held up better than large-cap and value peers. Most losses occurred late in the quarter as stocks sharply repriced from earlier gains. As recently as mid-September, all 11 S&P 500 sectors were positive for the quarter and more than half had amassed gains of at least 10%. However, by quarter end, only two sectors logged positive gains—energy, which continued to benefit from elevated prices, and consumer discretionary, which advanced due to its heavy concentration in two individual stocks.
Cash was the only asset class to gain in the quarter and is now one of two major asset classes with a positive return over the trailing 12 months. US high-yield bonds were nearly flat, outperforming Treasuries and US investment-grade corporate peers. Treasuries held up better than TIPS as real interest rates touched their highest levels since the GFC. Developed equity markets outperformed emerging markets, which were weighed down by Chinese equities; emerging markets equities declined the most among major asset classes in third quarter and over the trailing 12-month period. Other bottom performers include US REITs, pressured by rising interest rates, and commodities, which sold off on dampened global growth outlook.
Given the above, we continue to carefully monitor portfolio exposures and review portfolio positioning, rebalancing as needed to ensure the portfolio stays in line with its targeted risk profile. Thrivent Charitable’s portfolios are built to withstand, not avoid, volatility so that we stay invested and benefit from the long-term upward trend in equity markets. The portfolios continue to remain well-diversified with ample liquidity. We believe that staying calm, invested, and prepared remains the best course of action going forward.