Note: The following is Chad Horning's President's letter from the Praxis Mutual Funds® 2020 Semiannual Report.
What started as a typical year for investors in these times – a strong stock market, persistently low interest rates, and the anticipation of a rancorous election season – quickly morphed into an all-encompassing global health and economic crisis. Early on, investors in the West discounted reports of a mysterious respiratory virus spreading through Wuhan, China, a place unknown to many Americans before January, but the inevitability of its spread around the globe eventually became clear.
Not only has COVID-19 been stealthy in its impact on a host, affecting some with little more than an ache or a sniffle while debilitating and killing others, its effects on businesses and the financial markets have been similarly capricious. The U.S. stock market, measured by the S&P 500 Index, fell precipitously beginning in late February and recovered nearly all that was lost by early June. But the true economic impact of stay-at-home orders, business closures, lost jobs and restrictions on certain activities continues to ravage the economy.
Not unrelated to the impact of the virus on all aspects of society, the death of George Floyd in late May at the hands of Minneapolis police officers spurred a re-awakening to the unfinished work of racial justice and has shaken our collective sense of who we are and what we stand for as a people. This is an important reckoning, especially for people of faith who profess the example of Jesus, who encouraged us to love our neighbors as ourselves. Whether and how this experience impacts financial markets is uncertain and maybe even irrelevant to the state of our national soul.
Our team’s work and the performance of the Funds were direct products of this tumultuous half year. Investors in the Impact Bond Fund benefited as global assets flowed to bonds in search of relative safety, driving interest rates to generational lows and bond values higher. The Praxis Growth Index Fund, with its focus on companies with consistent profit growth despite the pandemic, rose in value during the period, while the Praxis Value Index Fund reflected investors’ continued skepticism in the value style of investing. Small Cap and International stocks fell and recovered along with the broad equity market, but in both cases, generated losses for investors during the period.
Most of our investors choose to invest in the Praxis Funds because they do much more than generate investment performance. Our Stewardship Investing team was busy guiding our proxy voting program that is particularly relevant during the winter and spring when most corporate annual shareholder meetings are held. In addition to its ongoing work on climate change and modern slavery, the team pursued advocacy goals related to the pandemic and racial justice by leveraging our access to corporate power to encourage meaningful change. The results of our votes – as well as stories about our advocacy efforts – can be found at praxismutualfunds.com.
And, of course, we do all of this by incorporating the values you hold dear into our screening and portfolio management techniques. During 2020, we are incorporating new environmental data into our process to help us identify companies moving effectively into a low-carbon economy. It is this integration of values – driven by faith and with an eye to the future – and investment expertise that we believe makes Praxis just right for our times.
Thank you for joining Praxis in this endeavor. We are grateful you have chosen to use your investment dollars to make the world a better place along with us.