Market Sector Update

• Broad international markets were up approximately 10% in U.S. dollars, reversing the majority of last quarter’s losses. The U.S. dollar appreciated about 1% relative to a basket of other currencies. More accommodative central bank policy, an improving geopolitical backdrop and signs of bottoming in some international markets, particularly China, helped ease looming fears of a recession. For much of the quarter, earnings revisions were negative but leveled out at quarter end.
• With regards to monetary policy, the U.S. Federal Reserve’s (Fed) 180 degree turn in policy stance was notable, signaling rate hikes are to be placed on hold, while balance sheet reduction will end sooner than anticipated. The European Central Bank (ECB) also extended the duration of its accommodative policy, announcing plans to launch a new round of long-term loans to eurozone banks and extending a pledge to hold off on any rate increases before year end. China has implemented a mix of monetary and fiscal policies in an effort to drive growth.
• Targeted steps by China to stimulate its economy showed signs of success as the economy improved from a very low level over the quarter. Europe, Japan and the U.S. generally delivered disappointing economic data, but largely appear to be bottoming. On the geopolitical side, both China and the U.S. sent positive signals on the likelihood of a trade resolution, which benefitted markets. Meanwhile, the ongoing Brexit negotiations delivered very little progress towards reaching a resolution. The rebound in the markets is a signal that expectations for better economic growth are on the rise. While we see the merits to this view, we would feel a lot better about this prospect if the U.S. dollar was weaker.

Portfolio Strategy

• A passively managed index fund, the Fund delivered a positive return for the quarter and slightly outperformed its benchmark for the period.
• All 11 sectors represented in the Fund delivered positive returns. The strongest absolute performing sectors were information technology, real estate, energy and industrials. Health care, financials and utilities were among the laggards for the quarter. Relative to the benchmark, stock selection was key as all but one sector outperformed the benchmark. The greatest contributors were the stock selection within industrials and consumer discretionary sectors. Conversely, materials were the only sector to lag the benchmark 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 66% of the Fund’s total weight. Both the U.S. and the U.K. outperformed the benchmark.

Outlook

• There are many factors we are carefully monitoring in the current economic environment. Shift in central bank policy, the rise of nationalism, the Brexit saga and trade negotiations – particularly between the U.S. and China – are standout issues. Going forward, we believe geopolitics will be as important to asset performance as monetary policy. The question remains: How much longer will the cycle extend uninterrupted by looming risks? As a result, we are watching closely for signs of change, and continue to seek stocks that should better withstand an economic downturn. 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 in order to monetize the debt. As such, we believe there is a long-term cap on how high rates can go. Our base case is continued slow, deliberate exiting of quantitative easing and narrowing of negative interest rate policy globally. Unfortunately, this may result in many economies heading into the next economic downturn with very easy monetary policies.

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 March 31, 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.

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.