capital markets commentary
Global risk assets mostly retreated in October on the back of rising new coronavirus cases in the U.S. and Europe, fresh lockdowns in Europe, signs of a tightening election in the U.S., and the absence of any progress towards a pre-election fiscal stimulus. Energy returns once again declined with oil prices hitting four-month lows on demand concerns.
The third quarter started off with a bang in a continuation of the second quarter’s sharp rebound. By August 18, the S&P 500 Index fully recovered the 34% loss experienced during the February-March correction. As cities across the globe continued their re-opening plans after pandemic-induced shutdowns and central banks sustained their support for global markets, markets moved higher during July and August. In September, market sentiment turned negative, with most risk assets posting losses. Still, the third quarter was solid overall, with most market segments posting positive results.
Mega-cap technology companies experienced a swift sell-off in September and briefly pushed major U.S. indices into correction territory before hopes of further U.S. fiscal stimulus helped alleviate concerns at month-end. U.S. growth companies were the most impacted while non-U.S. equity declines were more muted. Demand concerns weighed on energy returns while metals prices also retreated.
Major domestic indices reached record highs in August, bolstered by an ultra-accommodative Federal Reserve policy and growing optimism for a COVID-19 vaccine. U.S. growth continues to lead the way while U.S. value, small cap, international developed equity, and emerging markets experienced less torrid appreciation. Rising yields hampered fixed income returns whereas commodities gained, supported by a weaker U.S. dollar.
The return to risk continued during July with U.S. growth and emerging markets equity leading the charge. Cyclicals continued to lag the broader equity market highlighted by more modest returns from U.S. value, small cap, and international developed equity. Precious metals rallied with gold reaching an all-time high.
In January 2020, Ellwood published its annual Investment Outlook which expressed our asset class views for the year. Ellwood was generally cautious going into the year as the economic cycle indicators we monitor were decelerating. Now as we provide a brief update to our views, we face the considerable challenge of assessing the impact of COVID-19 for the remainder of 2020.
After a devastating first quarter where equity markets experienced the fastest decline since the Great Depression, global equity and credit markets rebounded with the S&P 500 posting its best return since the fourth quarter of 1998. Aggressive central bank policy, coupled with hopes that economic indicators have bottomed, fostered a market rally. Since the March 23 market low, the S&P 500 has rebounded 39.3% leaving the index with a 3.1% decline for 2020.
With heightened market volatility and significant news flow over the past week, Ellwood shares a brief, high-level observations on the investment environment for the week of May 31, 2020.
With heightened market volatility and significant news flow over the past week, Ellwood shares a brief, high-level observations on the investment environment for the week of April 26, 2020.
With heightened market volatility and significant news flow over the past week, Ellwood shares a brief, high-level observations on the investment environment for the week of April 9, 2020.