PORTFOLIO PERFORMANCE, DIVERSIFICATION, AND STRATEGY
September portfolio yielded 3.05% with a weighted average maturity of 976 days.
Total portfolio market value of $15.8 billion, up $1.9 billion in comparison to December 2022.
Total portfolio contained 66% in U.S. Treasurys, 8% in U.S. government agencies,
17% in mortgage-backed securities, 8% money market mutual funds, 0.3% in certificates of deposit,and 0.6% in state bond issues and foreign bonds, comprised the balance of funds invested.
TOTAL FUNDS INVESTED Funds available for investment at market value include the State Treasurer’s investments at $12,348,659,042 and State Agency balances in OK Invest at $3,528,661,428 for a total of $15,877,320,470.
MARKET CONDITIONS
The treasury market fluctuated with the 10-year treasury ending 2023 at 3.88% which was very close to where it began the year. The 10-year rate reached a 16-year high above 5% but retreated by year-end. Meanwhile, the 2-year treasury closed at 4.25% in comparison to 4.43% on January 1. The 30-year came in at 4.03% which was only 0.06% higher than at the beginning of the year. The 2023 equity market reflected a bull environment beating expectations for the year. The S&P 500, Dow Jones Industrial Average and Nasdaq had rates of return for the year of 24%, 14% and 43%, respectively. The S&P earned 4%, the Dow was at 5% and the Nasdaq at 5% for the month of December. According to Barron’s the Dow topped 37000 for the first time and set seven record closes in the final days of 2023. A mania surrounding artificial intelligence and big technology stocks sent the Nasdaq soaring.
The Federal Reserve met on December 13 and decided to hold interest rates steady, reflecting the third consecutive policy meeting in which there was no increase in the federal funds rate. Fed officials projected that interest rates could be lowered to approximately 4.6% by the end of 2024.
ECONOMIC DEVELOPMENTS
The unemployment rate for November fell to 3.7% from 3.9% in October and near historic lows. The nonfarm payroll was at 199,000. The Wall Street Journal said, “That number was aided by the end of auto strikes, which resulted in roughly 30,000 jobs added back to payrolls. November marked the second consecutive month job gains have fallen below the average for 2023”.
The consumer price index (CPI) increased slightly from the prior month coming in at 0.1% and on a year-over-year basis was 3.1%. Core CPI, which removes food and energy prices, was 0.3% for November and 4% annualized. According to CNBC, “A 2.3% decrease in energy prices helped keep inflation in check, as gasoline fell 6% and fuel oil was off 2.7%. Food prices increased 0.2%, boosted by a 0.4% jump in food away from home. On an annualized basis, food rose 2.9% while energy was down 5.4%”. The producer price index (PPI) was flat and the October number was downwardly revised by 0.4%. On a year-over-year basis, PPI advanced 0.9% in comparison to 1.2% the previous month. The core PPI reflected a gain of 0.2%.
Retail sales beat expectations gaining 0.3% for November and year-over-year sales rose 4.1%. When automobile and gasoline was removed, retail sales came in at 0.6%. The previous months sales were downwardly revised by 0.1%. The holiday shopping season started strong at food services and drinking places, non-store retailers, health and personal care and furniture stores reflecting largest increases. Retail Monitor released, “figures on December sales were up in six out of nine retail categories on a yearly basis, led by online sales, health and personal care stores, clothing and accessory stores.”
Home sales continue to be affected by low supply with the median price in November rising by 4% on an annualized basis to $387,600. The inventory of unsold existing homes dropped by 1.7% to 1.13 million which represented a 3.5 months’ supply.
The final estimate for the third quarter real gross domestic product (GDP) was at an annualized rate of 4.9% in comparison to 2.1% the previous quarter. The Bureau of Economic Analysis said, “compared to the second quarter, the acceleration in real GDP in the third quarter primarily reflect an upturn in exports and accelerations in consumer spending and private inventory investment that were partly offset by a deceleration in nonresidential fixed investment. Imports turned up”.
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.
Best regards,
TODD RUSS
STATE TREASURER
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