Quarterly Market Update Q3 2020 By: Gabriel PotterMBA, AIFA® 2020.10.23

Key news stories

The third quarter of 2020 was about the attempt to more accurately estimate the rate of improvement the economy might enjoy following the COVID crash of February and March.  Again, the economy itself shouldn’t rebound to pre-COVID highs until 2021 at least, but improvement and solidification is still welcome.  Notably, the US stock market had truly exceeded the bounds of optimism, so when the number of coronavirus cases began to advance again in September, investors began to take some of their profits off of the table in an attempt to lock in some of the speculative gains.  It seems likely that our collective efforts (mask wearing, social distancing, advancing vaccines and therapeutics) to contain coronavirus expansion will have a marked (if not proportional) impact on the direction of global markets.

Equities

Technology stocks are the largest part of the US stock market and they are carrying the US stock market indices higher.  Here’s how much the five largest holdings in the stock market are up year-to-date:  Apple +59%, Microsoft +34%, Amazon +70%, Facebook +28%, and Google +10%.  These tech stocks are driving up the US stock market, growth stocks in particular.  Elsewhere, other equities have a long way to go to catch up to pre-COVID highs. 

 

INDEX

3Q 2020

YTD 2020

US Large Cap Growth - Russell 1000 Growth

13.22

24.33

US Large Cap Value - Russell 1000 Value

5.59

-11.58

US Small Cap Growth - Russell 2000 Growth

7.16

3.88

US Small Cap Value - Russell 2000 Value

2.56

-21.54

Developed International Markets - MSCI EAFE

4.80

-7.09

Emerging Markets - MSCI EM

9.56

-1.16

 

Bonds

The bond market was relatively quiet this quarter.  Much of the fireworks were uncorked earlier in the year as massive capital injections and interventions from national banks, both in the US and abroad, worked to offset the damage of the COVID crash.  Unsurprisingly, the winner for the past quarter was the high yield bond sector, which tends to correlate to equity markets. 

 

INDEX

3Q 2020

YTD 2020

Barclays Capital US Aggregate Bond

0.62

6.79

Barclays Capital US Intermediate Credit

1.24

5.45

Barclays Capital US Government

0.18

8.81

Barclays Capital US Gov’t/Credit Long Duration

1.22

14.20

ICE B. of America US High Yield

4.71

-0.30

Barclays Capital Global Aggregate – Hedged to USD

0.73

4.65

Barclays Capital Global Aggregate - Unhedged

2.66

5.72

 

Alternatives

The recovery in commodity prices over the quarter took top position during the quarter, but real assets have a long way to go.  Within commodities, the suppression of demand and economic activity is negatively impacting the price of raw materials and energy requirements but key precious metals are retaining value as a safety proxy during economic stress.

 

INDEX

3Q 2020

YTD 2020

Real Estate - FTSE NAREIT All REITs TR

1.46

-13.77

Commodities - Morningstar Long Only Commodity TR

8.45

-19.38

Inflation - Barclays US Treasury TIPS

3.03

9.22

 

DISCLOSURES & DISCLAIMERS:

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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