Market Sector Update

• Broad international markets were up approximately 3.5% in U.S. dollars for the second quarter, despite several headwinds. The U.S. dollar depreciated approximately 1% relative to a basket of other currencies. The period was marked by increasingly accommodative central banks, a deteriorating geopolitical backdrop and a very narrow equity market led by quality growth stocks. Earnings revisions were again negative in the quarter.
• With regards to monetary policy, the U.S. Federal Reserve’s (Fed) is expected to cut the federal funds rate by 25 basis points in July, with the anticipation of at least one additional cut by year end. Consensus expectations are the European Central Bank and Bank of Japan are prepared to further loosen monetary policy and to add stimulus in an attempt to ensure the euro and yen do not appreciate relative to the U.S. dollar. However, both countries are already running negative rates, so it is hard to imagine they can “out ease” the Fed. In China, the enactment of minor fiscal policy changes was insufficient to overcome the weight of U.S. trade issues.
• Global economic data was generally weak for the quarter, as the continuation of trade wars weighed heavily on the markets. In early May, U.S.-China trade negotiations deteriorated and the U.S. increased tariffs from 10% to 25% on $200 billion of Chinese goods. On a positive note, at quarter end, the U.S. and China agreed to resume trade discussions. In Europe, which has been experiencing little growth, trade negotiations with the U.S. seem to be moving in a negative direction, which will be key issue to monitor as we move forward.

Portfolio Strategy

• A passively managed index fund, the Fund delivered a positive return for the quarter and slightly outperformed its benchmark.
• Ten of the 11 sectors represented in the Fund delivered positive returns. The strongest sector contributors were financials, information technology, consumer discretionary and industrials. Communication services, utilities, consumer staples and materials were among the sector laggards for the quarter. Conversely, energy was the only sector to deliver a negative return for the period.
• From a country allocation standpoint, the Fund’s large allocations were to the U.S., Japan, and the U.K. The combined weight of these allocations comprised 65% of the Fund’s total weight.

Outlook

• Shifts in central bank policy, the rise of nationalism, the Brexit saga and trade negotiations – particularly between the U.S. and China – are standout issues affecting the current economic environment. We believe geopolitics will continue to have a meaningful impact on asset values across the world. The question remains: How much longer will the cycle extend uninterrupted by looming risks? While we think U.S.-China trade tensions will persist, we expect some positive agreements in 2019, in line with market expectations.
• In much of the world, global monetary policy remains at the extremes of easy and we do not see that changing materially unless inflation accelerates at a higher-than-expected rate. Virtually all countries are struggling with high levels of debt. As a result, we believe central banks will attempt to keep rates below nominal gross domestic product growth to monetize debt and continue to stimulate their economies.

The opinions expressed are those of the Fund’s manager and are not meant as investment advice or to predict or project the future performance of any investment product. The opinions are current through June 30, 2019, are subject to change at any time based on market and other current conditions, and no forecasts can be guaranteed. This commentary is being provided as a general source of information and is not intended as a recommendation to purchase, sell, or hold any specific security or to engage in any investment strategy. Investment decisions should always be made based on an investor’s specific objectives, financial needs, risk tolerance and time horizon. Past performance is not a guarantee of future results.

The Fund is a passively managed index fund designed to track the performance of its stated benchmark index. It does not invest in securities based on the managers' view of the investment merit of a particular security or company, nor does it conduct conventional investment research or analysis or forecast market movement or trends, in managing the assets of the Fund. The Fund seeks to remain fully invested at all times in securities that, in combination, provide exposure to its respective benchmark Index without regard to market conditions, trends or direction.

The MSCI ACWI Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed and emerging markets.The MSCI ACWI consists of 46 country indexes comprising 23 developed and 23 emerging market country indexes. The developed market country indexes included are: Australia,Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden,Switzerland, the United Kingdom and the United States. The emerging market country indexes included are: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary,India, Indonesia, Korea, Malaysia, Mexico, Peru, Philippines, Poland, Qatar, Russia, South Africa, Taiwan, Thailand, Turkey and United Arab Emirates. It is not possible to invest directly in an index.

Alexander Ilyasov served as a portfolio manager on the Fund until April 2019.

Risk factors: The value of the Fund's shares will change and you could lose money on your investment. International investing involves additional risks, including currency fluctuations. political or economic conditions affecting the foreign country, and differences in accounting standards and foreign regulations. These risks are magnified in emerging markets. The Fund entails other risks, including imperfect benchmark correlation and market price variance that may decrease performance. While the Fund attempts to track the performance of its stated index, there is no guarantee or assurance that the methodology used to create the Index will result in the Fund achieving high, or even positive, returns. The Index may underperform, and the Fund could lose value, while other indices or measures of market performance increase in value. A number of factors may affect the Fund's ability to achieve a high degree of correlation with the Index, and there is no guarantee that the Fund will achieve a high degree of correlation. Failure to achieve a high degree of correlation may prevent the Fund from achieving its investment objective. The Fund's use of derivatives presents several risks, including the risk that these instruments may change in value in a manner that adversely affects the Fund's net asset value and the risk that fluctuations in the value of the derivatives may not correlate with the reference instrument underlying the derivative. An investment in the Fund is not a bank deposit and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. These and other risks are more fully described in the Fund's prospectus. Not all funds or fund classes may be offered at all broker/dealers.