March 26, 2018                                                                                                                                              Volume 14 - Number 3
In This Issue
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 CalTRUST Update
CalTRUST Service Improvements

CalTRUST Is pleased to announce two new service improvements, effective April 1, 2018.  First, your March statements will reflect a new statement format that will provide greater clarity in total return.  Should you have any problems reading your statement, please contact the CalTRUST Fund Accountant, Gemini Fund Services, at 833-CalTRUST (833-225-8787) ext 1. Additionally, effective April 1, 2018, the medium-term liquidity will be further improved for your convenience with redemptions now providing liquidity in two days (t+2) and purchases only requiring one-day notice (t+1). 

CalTRUST Annual Meeting

The CalTRUST Board of Trustees will hold their Annual Meeting in Riverside County on April 17-18, 2018.  If there are any items you would like to request be added to the Board agenda for consideration, or if you would like to attend the meeting, please contact CalTRUST Administrator Laura Labanieh. 

CalTRUST Webinar Scheduled! 

CalTRUST held a webinar this month which provided a market update, discussed NAV volatility, and provided an introduction to the new proposed new CalTRUST ultra-short-term fund.  The proposed new fund would be a GASB 79 compliant, 2A7 look-alike fund with a stable net asset value. If you would like additional information about the new fund please contact Laura Labanieh.  A copy of the static presentation can be accessed here and a recording of the webinar can be accessed here. 

Laura Labanieh
(916) 650-8186;
Kyle Tanaka
Member Services Associate
(916) 650-8114;

Financial Markets Update
Market / Macro Update

Summary: In February, volatility spiked, with the VIX volatility index ending the month up more than 46% and global equity markets suffering a sharp reversal after a string of record highs recorded the previous month. Global government bonds also sold off with the move in the US more pronounced. The yield on policy-sensitive 2-year Treasury reached 2.25% for the first time since 2008 and the 10-year Treasury yield hit a level not seen since December 2013 (2.95%). The 2s10s and 5's30's yield spread curves steepened led by a greater sell-off in the back-end of the curve. Stronger-than-expected US weekly earnings data, concern over rising inflation and the possibility of the Federal Reserve (Fed) hiking interest rates more aggressively than previously expected, as well as the hawkish inaugural congressional testimony from the new Fed chair, Jay Powell, all contributed to the movements in the rates market. Toward the end of the month yields rallied, reversing some of the sell-off seen intra-month, following President Trump's remarks that he was considering placing tariffs against imported steel (25%) and aluminum (10%). 

US non-farm payrolls: January nonfarm payrolls gained 200K jobs, well above the consensus estimate of 180K. A very positive surprise in the data was the return of stronger wage growth, at 0.3% (mom) in January and at 2.9% (YoY), which doesn't even fully account for the benefits stemming from the tax bill, minimum wage increases, and bonuses. The unemployment rate held steady at 4.1% (lowest since 2000). 

FOMC Meeting: In its policy statement, the Fed subtly upgraded its outlook for inflation and said conditions would warrant "further" interest rate increases, suggesting that a policy rate hike at the March meeting is all but a inevitable conclusion. Overall the committee intends to keep going with normalization and was explicit on that point, but retained its "gradual" guidance. Effective February 3rd, with the new Fed Chair Jeromy Powell will assuming his post, as well as a new Vice Chair to be appointed, along with other Board seats, the composition of the FOMC at the end of the year will be meaningfully different than today.

CPI: The headline CPI print came in at 0.5% (mom) and at 2.1% (yoy), while the core measure rose 0.35% (mom) and 1.8% (yoy), above expectations. Some of the upside surprise in the January data was driven by strength in core services, specifically in shelter prices which rose by 0.3%, as well as core goods which posted strong 0.4% (mom) on the back of an unusually solid reading in apparel and residual strength in auto prices. 

Portfolio Positioning: Given our view that front-end rates will be pressured higher, both the short and medium term portfolios were positioned short duration versus the benchmark. Despite the recent bout of market volatility, the management team feels that accelerating global growth, tax reform and continued strength in the U.S. economy will keep spreads supported. Consequently, the portfolios maintained underweights to lower yielding government sectors while favoring high quality spread sectors such as corporates. ABS and taxable municipals.

Performance (as of February 28, 2018)

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.
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.