Note: The views and opinions expressed in this newsletter are those of the authors and do not necessarily reflect the official policy or position of Newday Impact. Any content provided by our authors is of their opinion and is not intended to malign any religion, ethnic group, club, organization, company, individual, or anyone or anything.

Investors should seek financial advice regarding the appropriateness of investing in any security or investment strategy discussed or recommended in this report and should understand that statements regarding future prospects may not be realized. Investing in securities involves risks, and there is always the potential of losing money when you invest in securities. Past performance does not guarantee future performance.

IMPACT COMMENTARY

Make a Difference This National Volunteer Month

April is a time to celebrate and appreciate the selfless individuals who dedicate their time and energy to making a difference in the world. In fact, this year, April 16-22, is the official week we recognize the contributions that our Nation’s volunteers make every day. 

Volunteering is a crucial aspect of our society that provides countless benefits to individuals, communities, and the world as they help address social issues, create positive change, and contribute to society’s overall well-being. Volunteering also has personal benefits, such as improved mental health, increased personal and professional connections, and a sense of purpose and fulfillment. According to a study by the National Institutes of Health, volunteering can also reduce symptoms of depression and anxiety. Individuals who volunteered had higher levels of happiness and life satisfaction than those who didn’t volunteer.

According to the 2021 Volunteering in America Report by the Corporation for National and Community Service, 60.7 million adults, or 23.2% of Americans, volunteered 4.1 billion hours. The economic value of volunteering was estimated at $122.9 billion. While this looks impressive on the surface, this was a decline of eight percentage points for women and five percentage points for males from 2019 levels and nearly a 36% reduction in economic value added. These rates remain below pre-pandemic levels and represent the most significant change since AmeriCorps and the U.S. Census Bureau began monitoring the data in 2002. 

While the pandemic increased the demand for services of many non-profits, the reduction in the available volunteer workforce can contribute to some of this decline. However, a Harvard University study by Robert Putnam showed that stagnating and even declining volunteering participation rates in elections, social clubs, unions, and other charitable groups have declined since the 1990s. Robert Grimm Jr. and Nathan Dietz of the University of Maryland found in “A Less Charitable Nation” that declining religious affiliation, delayed family formation, and baby boomer aging drove down volunteering and civic engagement. Some argue the decline is due to decreased available leisure time due to increased work hours and longer commutes. Additionally, the rise of digital entertainment has made engaging people in traditional volunteering activities challenging. Another factor is the shift towards individualism and focusing on personal fulfillment, leading to less emphasis on community service. 

It is interesting to note that the findings of the 2022 Snapshot of Today’s Philanthropic Landscape report that was produced by CCS Fundraising, which has compiled and analyzed industry research to provide a current state of philanthropy for the past eleven years, found that although giving is on an upward trajectory when measuring dollars donated, the number of individual donors continues to decrease. This pattern of events is commonly referred to as “dollars up, donors down.”

Regardless of the reason for the decline, what can organizations do to improve the number of volunteers and philanthropic donors in America? It will likely take a concerted effort by many stakeholders to increase public awareness of the need and importance of volunteers and the various opportunities available to them around their local communities.  

Below are some ways to get involved to make your own difference in making the world a better place. 

• Check with your local United Way or Volunteer Center. These organizations can connect you with local nonprofits and volunteer opportunities that align with your interests and skills.
• Follow local organizations on social media to stay informed about volunteer opportunities and attend community events.
• Find ways to virtually give back, like online tutoring or writing letters, or making calls to individuals, such as nursing home residents, active military members, or hospital patients. These are resourceful ways to give back without leaving the comforts of your own home.
• Donate to a nonprofit online that aligns with your interests and values and encourage your friends and family to do the same.
• Organize a neighborhood clean-up event and pick up litter and debris in your community.
• Attend your employers’ volunteer events, and if they don’t offer one, encourage them to start one and offer paid volunteer time off if they don’t already.

National Volunteer Month gives us an excellent opportunity to appreciate and recognize those volunteers making a difference. Also, it serves as a catalyst to encourage people to give back and make a difference in their communities. Volunteering not only provides countless benefits to individuals, communities, and society as a whole but also has a positive impact on the mental health of that volunteer, providing individuals with a sense of purpose, social connection, and improved self-esteem. 

At Newday Impact, we are proud of our employees who have dedicated themselves to something greater than themselves and supported and volunteered for causes that are important to them. So whether you’re a seasoned volunteer or just starting, there are many ways to get involved and make a positive impact, not only this month but all year round. Remember, there is always time to start volunteering, and a little of your time can make a big difference!

“Be the change that you wish to see in the world.”

― Mahatma Gandhi

APRIL GLOBAL EQUITY COMMENTARY

Written by: Newday Investment Team

Positive momentum in risk assets resumed in March despite a spike in volatility after the collapse of Silicon Valley Bank and mounting anxiety around a number of prominent regional banks.  Concerns that were initially focused around lending within the tech sector and the startup community appeared to broaden as deposit outflows from regional banks gathered pace and funding stress escalated.  We believe scrutiny increased around bank exposure to commercial real estate lending and the stress may have been compounded by the rising probability of an impending economic recession caused by tighter financial conditions.  The KBW US bank index fell 26% in March[1] and the VIX spiked intra-month to 30.[2]

Despite the worries around bank deposits and balance sheet quality, PMIs continued to rise even as the yield curve remained inverted and expectations for a recession persisted.  The JP Morgan global composite PMI rose further into expansionary territory, moving from 52.1 in February to 53.4 in March.[3]  PMIs in the US, Europe, and China all rose together in March.[4]  The rising growth optimism was accompanied by signs of an emerging “goldilocks” environment, with nonfarm payrolls growth and wage growth both decelerating to the lowest level in more than a year.[5]  Likewise, U.S. Bureau of Labor Statistics data showed headline CPI decelerated more than expected to 5.0% YoY in March (from 6.0% the prior month) even as core CPI accelerated modestly to 5.6% YoY (from 5.5% YoY).[6]  Eurostat data showed Eurozone inflation also fell sharply, decelerating to 6.9% YoY in March compared to 8.5% YoY in February.[7]  The bond-equity correlation continued to remain positive although bonds and stocks rallied together while the US dollar fell,[8] the reverse of what had occurred in February, on speculation about the Fed approaching the end of its tightening cycle.

The front end of the yield curve was relatively stable, with Fed Funds futures contracts continuing to price in a terminal rate close to 5%.[9]  In mid-March the Fed hiked the Fed Funds rate by another 25bps, bringing the target Fed Funds rate to a range of 4.75-5.00%.  The current Fed Effective rate is 4.83%,[10] indicating a final 25bps hike is partially priced-in at the Fed’s April meeting.  The yield curve continues to be inverted with the spread between 2-year and 10-year Treasurys at -0.51%.[11]  The slope of the yield curve appears to show that we are already at or very near the end of this Fed hiking cycle. 

Despite the recent stickiness in core inflation, we continue to believe disinflation is likely to persist in the near-term.  We are encouraged that Fed actions to backstop banks helped alleviate concerns around systemic risk in the financial sector.  We continue to monitor the debt ceiling debate in Congress, which could cause volatility to emerge in late Q2.  

One challenge for our portfolios has been a narrowing of breadth in the market, which has meant the rally in benchmark stock indices has been caused by a small number of stocks with outsized up-moves.[12]  Portfolios lacking exposure to a narrow sub-set of names in the tech sector have underperformed.  Portfolios were also challenged by the dramatic selloff in bank and other financial stocks.  Financial institutions with healthy balance sheets were dragged down with the dicier names as the lack of confidence hit the entire sector.  We established new positions in two new tech stocks (NYSE: POWI, MCHP) we believe have secular tailwinds that will create attractive upside and also fit the mandates of our portfolios.[13]  

We continue to believe that despite upheaval in the banking sector, global growth expectations bottomed at the end of 2022 and disinflation progress should continue to support risk assets.  Given we also believe that the end of the Fed hiking cycle will cause the US dollar to remain weaker, we are looking at opportunities to add more exposure to non-US companies to our strategies.  Robust European ESG disclosure standards support a wide range of attractive ESG-themed investment opportunities in the region.  We will continue to share updates to our strategies in future newsletters.

Footnotes: 

[1] See https://tradingeconomics.com/bkx:ind

[2] See https://tradingeconomics.com/vix:ind

[3] See https://tradingeconomics.com/world/composite-pmi

[4] See https://tradingeconomics.com/china/nbs-general-pmi, https://tradingeconomics.com/united-states/composite-pmi, https://tradingeconomics.com/euro-area/composite-pmi

[5] See https://tradingeconomics.com/united-states/non-farm-payrolls, https://tradingeconomics.com/united-states/average-hourly-earnings-yoy

[6] See https://tradingeconomics.com/united-states/inflation-cpi, https://tradingeconomics.com/united-states/core-inflation-rate

[7] See https://tradingeconomics.com/euro-area/inflation-cpi, https://tradingeconomics.com/euro-area/core-inflation-rate

[8] See below chart from S&P Global as well as table citing ETF performance calculations using Trading Economics data.

[9] See https://www.cmegroup.com/markets/interest-rates/stirs/30-day-federal-fund.quotes.html

[10] See https://www.newyorkfed.org/markets/reference-rates/effr

[11] See https://fred.stlouisfed.org/series/T10Y2Y

[12] See https://on.ft.com/3KipvJb

[13] See https://www.linde.com/-/media/linde/merger/documents/sustainable-development/2021/2021-sustainable-development-report-v2.pdf

COUNTRY GOVERNANCE RESEARCH COMMENTARY

Russia’s winter offensive stalls, Ukraine’s counteroffensive expected soon

Moving into the second spring of Russia’s invasion of Ukraine, the front-lines of the war have changed relatively little over the past winter despite Russia’s renewed offensive to seize the rest of the Donetsk province it does not already occupy.   Reports were that the Kremlin had set a goal of capturing the province by the end of March, but despite putting tremendous resources into the fight Russia has not been able to achieve any significant breakthroughs.  The Russians have managed to advance into the long-contested city of Bakhmut, and there are claims that as much as 75% of the city is now occupied. The Ukrainian ground force commander has said in order to make gains Russia has resorted to “scorched earth tactics” reminiscent of their bombing campaign in Syria.  Meanwhile, with the arrival of more Western heavy weaponry expectations are that Ukraine will undertake its own counteroffensive soon, though Ukrainian officials have tried to downplay the significance of any particular start date.  One possible target for Ukraine could be the occupied city of Melitopol in southern Ukraine, which if retaken would sever Russia’s land bridge to Crimea.  Numerous locations in the city have recently been hit by Ukrainian long-range artillery, likely aiming to weaken Russia’s defenses, which is a similar tactic Ukraine had used in their earlier counteroffensive when they successfully liberated the city of Kherson.  

Implications: Underscoring Russia’s strategic miscalculation in invading Ukraine, formerly neutral Finland has become the 31st member of NATO doubling Russia’s border with the alliance.  Sweden is also expected to join soon, but its membership has been delayed over objections from Turkey and Hungary.  Another significant development this month is the indictment of Vladimir Putin by the International Criminal Court for the unlawful deportation of children from occupied parts of Ukraine to Russia.  It marks the first time the court has indicted a leader of one of the permanent members of the UN Security Council.

Macron stands firm on pension reform despite on-going protests

The government of President Emmanuel Macron has pushed through a widely unpopular pension reform plan that will incrementally raise the retirement age from 62 to 64 by 2030.  With his government having lost its absolute majority in the last legislative elections, the changes were passed using a constitutional power, known as Article 49:3, to force through the legislation without a vote. Macron has made the proposed pension changes the key priority of his second and final term as president, and he has said he is ready to be unpopular in order to make changes he sees as necessary to make the pension system more financially sustainable.  Like many countries, France is facing the demographic changes of an aging population with fewer young workers available to support the pension payments of retirees.  Supporters argue that without raising the retirement age the only alternatives would be equally unpopular cuts to future pensions payments or increased taxes on current workers.  Opponents in parliament tried to revoke the changes through no-confidence motions against the government. While the motions failed, the second came only nine votes short, highlighting the precarious position of Macron’s government.  Unions have organized strikes and marches since January calling on the government to withdraw the reform.

Implications:  Macron is hoping that after three months of unrest that the protests will begin to subside.  Unions for their part have called for a new day of strikes on April 13, the day before a decision on the constitutionality of the reforms is expected to be delivered by the Constitutional Council, which could invalidate all or part of the proposed changes.

Netanyahu pauses controversial judicial reform

Prime Minister Benjamin Netanyahu announced he was postponing his controversial judicial reform plans in order to “avoid a civil war.”  The plans had sparked weeks of protests that came to a head after Netanyahu fired his defense minister, Yoav Gallant, who had called the proposed overhaul a threat to national security.  Netanyahu’s proposed legislation would allow the country’s parliament the power to overrule the Supreme Court with a simple majority, and it would also give the government the majority on the committee that appoints judges.  Critics of the reform plans have said the planned changes to the judiciary would undermine the country’s checks and balances.  Netanyahu agreed to delay the overhaul until the next parliamentary session in May in order to allow time for negotiations with the opposition.  However, he has said he still intends to pass the legislation in some form, which has been a priority for his right-wing coalition partners.  The legislation’s supporters argue the changes are needed to rein in an overly activist court.

Implications:  Netanyahu is in a difficult position.  He was forced to rely on parities from the far-right to form a governing coalition because more centrist parties refused to sit with him because of his continuing trial over corruption.  If he were now to lose support from his far-right partners for backing down on judicial reform his government could collapse.