Noteworthy Developments

Global equities, as represented by the MSCI ACWI Index, declined 2.4% with all regions experiencing negative performance.

Global Equities

Global equities declined by 2.4%, with US large-cap equities (S&P 500) down 2.4% while international developed (-2.3%) and emerging market equities (-0.1%) delivered negative returns. US equities gave back some of the post-election bounce as bond yields rapidly increased in December and investors digested prospects for increased volatility arising from potential Trump policies including increased tariffs. Internationally developed stock returns in USD were impacted by further USD strengthening as the MSCI EAFE index was modestly up in local currency terms.

Globally, growth stocks (0.4%) materially outperformed value stocks (-5.2%) with outperformance driven by appreciation of the Magnificent Seven (3.7%). Value stocks were hurt by rising bond yields and by increased investor pessimism surrounding potential negative effects should Trump’s proposed tariffs be enacted. Technology and consumer discretionary sectors performed best (2.2% and 1.7% led by bellweather US companies with AI theme exposure like Broadcom and Tesla) while cyclical sectors such as materials and energy (-7.9% and -7.1%) performed poorly. Healthcare and industrial sectors also struggled, down 5.9% and 5.7% respectively. US Small Cap stocks were down 8.3% and gave back much of November’s gains as bond yields rose.

Fixed Income

The US Aggregate Bond Index declined 1.6.% with declines due to increases in bond yields more than offsetting coupon interest. US government bonds were down 1.5% while investment grade corporate bonds were down by 1.9%. Bond yields increased by 15bps to 40bps across various maturities with longer-dated bond yields climbing more than shorter-dated maturities. High-yield bonds declined by 0.4% as high coupon rates were offset by declines in price due to rising base yields. Leveraged loans were up 0.6%, with high coupon income driving returns.

Alternatives

The HFRX Global Hedge Fund Index delivered flat performance with mixed performance across strategies. Event-driven and global macro/trend following strategies performed best (0.5% and 0.3%) while convertible arbitrage and credit strategies performed worst at -0.9% and -0.6% respectively.

Manager Comments

Eminence: -8.8%

Underperformed vs. blend of MSCI World (-2.6%) and S&P SMID Cap (-7.5%) indices due to larger exposure to smaller-cap companies coupled with idiosyncratic weakness across certain positions.

Russell 1000 Growth ETF: 0.9%

Outperformed the S&P 500 (-2.4%) given its high exposure to Magnificent Seven stocks which performed well as investors continued to favor AI themes.

Russell 1000 Value ETF: -6.8%

Underperformed the S&P 500 (-2.4%) given exposure to more cyclically oriented or slower-growth companies. Investors penalized these companies as bond yields rose.

These companies also suffered due to perceptions that they would be more negatively affected under certain Trump policies such as tariffs.