January 2016                                                                                                                                                   Volume 12 - Number 1

Monthly Market Update

In This Issue
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President's Perspective

CalTRUST Funds Enter 2016 With $2.3 Billion in Assets; Portfolios Well-Positioned For A Challenging Rate Environment


The CalTRUST funds enter 2016 on a high note, with assets of $2.3 billion. Moreover, with the launch of the CalTRUST Government Money Market Fund in the Fall of 2015, CalTRUST gives local agency investors even greater ability to allocate their funds across the 0-5 year maturity range permitted under the California Government Code; and maximum flexibility in the management of local funds. 


Rates at the front-end of the yield curve trended higher throughout the latter part of 2015, in anticipation of the Federal Reserve's first rate hike since before the financial crisis, which the Fed instituted in mid-December. Emblematic of this trend, the two-year treasury increased from 0.69% to 1.06% from July 1, 2015, to December 31, 2015. On the other hand, rates at the longer end of the curve have been wrestling with conflicting signals: 

  • A strengthening US economy, putting upward pressure on rates; and 
  • Stagnating growth in China, along with deflation fears stoked by the continued decline in energy prices and other commodities, prompting a flight to quality and downward pressure on rates. 

The CalTRUST Short- and Medium-Term Funds are positioned to adapt to a changing, and potentially volatile, rate environment, the duration of the funds is at the shorter end of their targets, at 0.48 years for the Short-Term Fund and 1.66 years for the Medium-Term Fund.    

For more information on the CalTRUST funds, please contact me by email at the address listed below, or contact:   


Lyle Defenbaugh, Wells Fargo Asset Management            916-440-4890  

Laura Labanieh, CSAC Finance Corporation                    916-650-8186 
Norman Coppinger, League of CA Cities                           916-658-8277
Neil McCormick, CA Special Districts Association            916-442-7887


Chuck Lomeli is CalTRUST President,  
Chairman of the Board of Trustees
and Solano County Treasurer
Financial Markets Update
Forecast For Moderate, Unspectacular Growth in 2016 Could Be Derailed By 'Identifiable Uncertainties'


As 2016 gets underway, the consensus baseline outlook is for moderate, unspectacular economic growth - much as we have seen throughout this post-financial crisis recovery cycle. The difference this time is that such modest growth is seen as adequate enough to support a modest rise in inflation, gradual interest-rate increases over the course of the year, and a stock-market rally in the single digits (following a flat 2015 performance). 

As always, however, there are uncertainties and potential 'shocks' which could upend this forecast. In his first Market Comment  of 2016, WellsCap Senior Economist Gary Schlossberg takes a look at some of the most significant, such as: 
  • A mild recession, triggered by the Fed's premature - in retrospect - rate hikes sidetracking a fragile growth recovery; 
  • Oil prices rebounding earlier - and stronger - than expected, due to OPEC cuts or a supply disruption caused by Mid-East upheaval; 
  • A decline in long-term US rates, pushed lower by foreign demand for US securities and a persistent lack of any inflationary pressures; 
  • A resurfacing of questions regarding the long-term viability of the Euro amid Britain's looming 'Brexit' vote and gains by anti-austerity parties on the continent; and
  • Global 'deflation' prompting a growing number of central banks to implement increasingly negative interest rates, risking distortions such as housing and other asset bubbles and cash hoarding.  
The complete Market Comment can be accessed here. 
CalTRUST Portfolio Snapshot (as of December 31, 2015)

1. CalTRUST Short-Term and Medium-Term and LAIF yields are net of fees.  Merrill 1-5 Year Indexes are unmanaged; and do not reflect any deduction for administrative fees or expenses.
2. CalTRUST and LAIF returns are net of all investment advisor, administrative and program fees.
3. Annualized.
4. The CalTRUST Short-Term and Medium-Term portfolios commenced operations on February 13, 2005.
CalTRUST Heritage Money Market Fund


Treasury Yield Curve 


2016 Calendar

January 18

Martin Luther King Day

Closed for Trading


February 15

President's Day

Closed for Trading


March 24

Good Friday Observed

Early Closure - 10:00 am PST


March 25

Good Friday

Closed for Trading

May 27

Memorial Day Observed

Early Closure - 10:00 am PST


May 30

Memorial Day

Closed for Trading


July 1 

Independence Day Observed

Early Closure - 10:00 am PST


July 4

Independence Day Observed

Closed for Trading


September 5

Labor Day

Closed for Trading


October 10

Columbus Day

Closed for Trading


November 11

Veterans Day

Closed for Trading


November 24


Closed for Trading


November 25

Thanksgiving Holiday

Early Closure - 10:00 am PST


December 23 Observed

Christmas Eve

Early Closure - 10:00 am PST


December 26

Christmas Observed

Closed for Trading


December 30

New Year's Eve Observed

Early Closure - 10:00 am PST


January 2, 2016

New Year's Day Observed

Closed for Trading


The CalTRUST Monthly Market Update  is prepared monthly by the Investment Trust of California (CalTRUST) for participants in the CalTRUST Joint Powers Authority pooled investment program.  The Newsletter is prepared solely for informational purposes and is not to be construed as the solicitation of an offer to sell or of an offer to buy any security, nor is it intended to constitute a recommendation for the purchase or sale of any security.  The information contained herein is based upon data obtained from sources believed to be reliable, but is not guaranteed by us as being accurate and does not purport to be a complete summary of the available data.  Additional data will be provided upon request. Past performance should not be taken as an indication or guarantee of future performance, and no representation or warranty, express or implied, is made regarding future performance.  Information, opinions and estimates contained in the Monthly Market Update reflect a judgment at its preparation date by CalTRUST and are subject to change without notice.  The price, value of, and income from any securities or financial instruments issued by the entities mentioned in this Monthly Market Update may fall as well as rise.