Quarterly Market Update – Q2 2020 By: Gabriel PotterMBA, AIFA® 2020.07.15

Key news stories

The first half of 2020 was all about the coronavirus.  The first quarter saw a sickening plunge.  We entered an official recession in February, but the good news is we’re probably already growing again.  The second quarter saw an incredible rebound in investor confidence.  While the economy itself has not rebounded to its pre-COVID19 highs (and it isn’t likely to for a year at least), investors are looking past the current crisis.  The ability to ignore the short-term picture for the long-term trend is admirable, but we wonder if investors’ expectations have perhaps advanced beyond the fundamentals given the damage that has been incurred.  While we do expect explosive positive growth in the third quarter, we also expect historically high unemployment, depressed profit margins, weak earnings to linger for a few quarters yet.


Almost by definition, value stocks tend to trade on current earnings while growth stocks tend to trade on projections for future earnings.  Given the weakness in current earnings and the natural immunity to service-slowdowns around growth-leaning sectors (i.e. technology), it is no surprise that growth stocks continued to dominate value stocks.  Smaller companies, which rely less on international commerce, have been relative winners in the second quarter since trading and commerce was necessarily curtailed in response to the coronavirus lockdowns.     



2Q 2020

YTD 2020

US Large Cap Growth - Russell 1000 Growth



US Large Cap Value - Russell 1000 Value



US Small Cap Growth - Russell 2000 Growth



US Small Cap Value - Russell 2000 Value



Developed International Markets - MSCI EAFE



Emerging Markets - MSCI EM





The Federal Reserve’s response to the coronavirus crisis has been enormous, with more than $2 trillion dollars added to its balance sheet.  This widespread buying advanced all sectors of the fixed income market.  The stresses on the credit market were alleviated by massive monetary and fiscal support, leading to a substantial rebound in the most distressed tranches of corporate credit, like the high yield universe.   



2Q 2020

YTD 2020

Barclays Capital US Aggregate Bond



Barclays Capital US Intermediate Credit



Barclays Capital US Government



Barclays Capital US Gov’t/Credit Long Duration



ICE B. of America US High Yield



Barclays Capital Global Aggregate – Hedged to USD



Barclays Capital Global Aggregate - Unhedged






While some sectors of the real estate market were not affected by the coronavirus crisis (e.g. self-storage), others were put under great stress as in-person contact was severely limited by government mandate (e.g. retail).   Real estate materially recovered in the second quarter as businesses began to reemerge from hiding.  The overall slowdown has led to huge depression in raw materials and energy.  Energy particularly suffered due to depressed demand in the travel industries.  Inflation is likely to be stable for the time being as massive spending.






2Q 2020

YTD 2020

Real Estate - FTSE NAREIT All REITs TR



Commodities - Morningstar Long Only Commodity TR



Inflation - Barclays US Treasury TIPS





The information contained herein has been obtained from sources that we believe to be reliable, but its accuracy and completeness are not guaranteed.  Westminster Consulting, LLC reserves the right at any time and without notice to change, amend, or cease publishing the information.  It has been prepared solely for informative purposes.  It is made available on an "as is" basis.  Westminster Consulting, LLC does not make any warranty or representation regarding the information.  Without prior written permission from Westminster Consulting, LLC, it may not be reproduced, in whole or in part, in any form.  The information in this document is confidential and proprietary to Westminster Consulting, LLC including its business units and may be legally privileged. Any unauthorized review, printing, copying, use or distribution of this document by anyone else is prohibited and may be a criminal offense. Indices mentioned are unmanaged and cannot be invested into directly.  Past Performance does not guarantee future results.




Gabriel Potter

Gabriel is a Senior Investment Research Associate at Westminster Consulting, where he is responsible for designing strategic asset allocations and conducts proprietary market research.

An avid writer, Gabriel manages the firm’s blog and has been published in the Journal of Compensation and Benefits,...

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