Overview
- The S&P Target Date® Scorecard provides performance comparisons and analytics covering the U.S. target date fund (TDF) universe.
- The S&P Target Date Index Series is a consensus-driven, multi-asset benchmark for TDFs. It is designed to be an accurate representation of TDFs in the U.S. market and to be the basis against which managers can assess their performance.
- The series is constructed from indices that represent the actual allocations of funds in the U.S. target date space.
- The assets used in the construction of the index series are all investable, and the weights are published in advance of the index series’ rebalancing.
- S&P Dow Jones Indices also produces S&P Target Date Style Indices. The “To” style indices aim to reduce the impact of market drawdowns around the expected retirement date, while the “Through” style indices aim to mitigate longevity risk—the risk of outliving one’s assets in retirement.
- The series consists of 13 S&P Target Date Indices, 11 S&P Target Date “To” Indices and 12 S&P Target Date “Through” Indices. New index vintages are launched in five-year intervals.
Market Commentary
2023 was a strong year across equities and fixed income after the brutal repricing of 2022. Potentially the biggest news was that the highly anticipated U.S. recession failed to materialize, at least by official government numbers. Consumer spending remained high as did government spending to prop up GDP.
While the U.S. equity market was driven by positive performance in tech names, most notably the Magnificent 7, the rally was broader in scope. 9 of the 11 sectors of the S&P 500® had positive performance (all except Utilities and Energy). Beyond the U.S., global equity markets were overall positive despite geopolitical tensions, including the ongoing Ukraine war and the conflict in the Middle East that began in October.
The bond market reversed an unheard-of two straight years of negative returns. With softening inflation through the year and the last Fed rate hike in July, by December, markets began to anticipate rate cuts per comments from Jerome Powell.
Equities
- Region: The U.S. outperformed both developed and emerging market equities in 2023. The S&P 500 TR returned 26.29%, versus the S&P Developed Ex-U.S. BMI NTR at 17.47% and the S&P Emerging BMI NTR at 10.46%.
- Capitalization: Within the U.S., large caps outperformed both small caps (the S&P SmallCap 600® TR at 16.05%) and mid caps (the S&P MidCap 400® TR at 16.44%).
- REITs:S. REITs substantially outperformed developed market REITs. The Dow Jones U.S. Select REIT Index TR returned 13.96%, while the S&P Developed Ex-U.S. Property NTR returned 5.56%.
Fixed Income
- High Yield: High yield was the best-performing segment of the bond market within the target date index universe, despite the spread widening that occurred during the March bank crisis and October equity sell-off. The S&P 500 High Yield Corporate Bond Index posted 10.95% for the year.
- U.S Aggregate: The back half of the year saw a trend up in bond performance as inflation continued cooling and the market began anticipating Fed rate cuts. The S&P U.S. Aggregate Bond Index finished the year up 5.77%.
- Short-Term: Shorter dated paper had a solid performance as well, with the S&P U.S. Treasury Bond 0-1 Year Index up 5.05%.
- TIPS: TIPS also posted a positive year, with returns dwindling in the second For 2023, the S&P U.S. TIPS Index posted 4.26%.
Commodities
- The S&P GSCI TR started off the year rocky but reversed some of those losses in the second half of the year to finish down 4.27%. Gold was one of two commodities to finish in positive territory due to global demand fostered by a falling U.S. dollar, persistent inflation and geopolitical instability.
