| August 2023 To the People of Oklahoma: The Office of the State Treasurer is pleased to issue the monthly investment performance report. This report is an important part of my office and commitment to disclose our economic environment and portfolio results. Portfolio Performance, Diversification, and Strategy August portfolio yielded 2.71% with a weighted average maturity of 2.75 years. Total assets equaled $15.3 billion, up $2 billion in comparison to August 2022. U.S. government agencies were 13% of the portfolio, and 18% were mortgage-backed securities. As a share of assets, 61% were U.S. treasuries, 7% money market mutual funds and 0.5% certificates of deposit. State bond issues and foreign bonds totaled 0.5%, comprising the balance of funds invested. |
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| Market Conditions for August The benchmark 10-year treasury closed the month at 4.11%, the 2-year was 4.86% and the 30-year closed at 4.21%. “Positive economic data has pushed many investors to believe that the Fed will keep rates higher for longer to tame inflation, buoying yields on longer-term government debt,” as reported by Dow Jones Newswire. |
| S&P Dow Nasdaq For the month -1.7% -2.3% -2.1% Year-to-date 34% 4.7% 17.4% Dow Jones Newswire said, “The S&P 500 and NASDAQ Composite snapped five-month winning streaks, while the Dow Jones Industrial Average posted its first monthly loss since May.” |
The minutes from the July Federal Reserve meeting reflected that Fed officials were still concerned about inflation and the Fed raised interest rates by 0.25%. CNBC reported, “Almost all the meeting participants, which includes nonvoting members, were in favor of the rate increase. However, those opposed said they thought the committee could skip a hike and watch how previous increases are impacting economic conditions.” |
| Economic Developments for August The nonfarm jobs for July were upwardly revised by over 14% to 371,000 from the previously reported number. The number of jobs created for the month of August were below expectations coming in at 177,000. |
| According to Reuters, “There were 1.51 job openings for every unemployed person in July, the lowest ratio since September 2021, compared with 1.54 in June. A survey from the Conference Board also showed consumers’ views of the labor market less upbeat in August.” |
The Bureau of Labor Statistics said the Consumer Price Index for All Urban Consumers increased 0.6% in August on a seasonally adjusted basis, after increasing 0.2% in the previous month. Over the last 12 months, the all-items index rose 3.7% before seasonal adjustment. Half the index increase was attributed to the cost of gas. Shelter costs also added to the index, rising for the 40th consecutive month. The headline Producer Price Index (PPI) came in at 0.3% and rose 0.8% on a year-over-year basis. Core PPI, which takes out food, energy and trade services components, gained 0.2%. |
Retail sales beat expectations in July coming in at 0.7% month-over-month. The sales number for the previous month was also upwardly revised by 0.1% to 0.3%. Consumer spending remains solid despite higher interest rates and inflation. |
| According to Trading Economics, “Sales in July likely got a boost from Amazon’s Prime Day. Sales at non-store retailers recorded the biggest increase followed by sporting goods, hobby, musical instruments and books.” Retail sales would have increased to 1% if autos, gas, building materials and food services were removed. |
Mortgage rates and limited inventory continued to negatively affect the sales of existing homes. The seasonally adjusted annualized rate of existing home sales dropped to 4.07 million in July in comparison to 4.16 million in June. This was the lowest level of homes sales since January and was below market expectations. Sales dropped 16.6% on an annualized basis. |
| According to Trading Economics, “The inventory of unsold existing homes increased 3.7 percent from the previous month to 1.11 million at the end of July, or the equivalent of 3.3 months’ supply at the current monthly sales pace.” |
The second estimate of gross domestic product (GDP) was downwardly revised to a 2.1% annualized rate from 2.4% for the second quarter of 2023. |
| Reported by Reuters, “Inventory investment was sharply revised down to show it declining at a $1.8 billion pace instead of increasing at the previously reported $9.3 billion rate. Inventories were a small drag to GDP growth rather than adding 0.14 percentage point as estimated last month. There were also downward revisions to business spending on equipment and intellectual products. These offset a slight upgrade to consumer spending.” |
Collateralization All funds under the control of this office requiring collateralization were secured at rates ranging from 100% to 110%, depending on the type of investment. Payments, Fees, and Commissions Securities were purchased or sold utilizing competitive bidding. Bank fees and money market mutual fund operating expenses are detailed in the attached pages, as is the earnings split between the State Treasurer and the master custodian bank on securities lending income. Total Funds Invested Funds available for investment at market value include the State Treasurer’s investments at $11,878,146,452 and State Agency balances in OK Invest at $3,506,396,841, for a total of $15,384,543,293. |
Best regards,
