Apr 2020 | Q1 Takeaways
Mar 2020 | Chasing Performance
Jan 2020 | Q4 Takeaways
Oct 2019 | Q3 Takeaways
Sep 2019 | Volatility
Key Takeaways, Second Quarter 2020
By Ralph Goldsticker, CFA | 20 July 2020
The second quarter of 2020 was dominated by the COVID-19 pandemic and its impact on world health and the global economy. Supported by unprecedented monetary and fiscal policy responses, global stock markets rebounded sharply from dramatic first quarter drawdowns. Nonetheless, equity markets remain volatile due to ongoing pandemic concerns, governmental policies and still significant economic uncertainties. Sovereign yields, and Treasury interest rates in particular, are expected to remain at or near record lows.
After the fastest bear market plunge in history, stock markets reversed course and realized the fastest recovery on record.
The S&P 500 dropped 34% from 2/19 to 3/23, and then rebounded almost as quickly.
The broad US stock market gained 22% during the quarter and is down 3.5% year-to-date at June 30.
Large cap stocks gained 20.5% in Q2 and are down 3.1% YTD. Small caps gained 25.4% but are still down 13% YTD.
Developed international and emerging markets gained 14.9% and 18.1% during the quarter, while YTD those markets are down 11.3% and 9.8%, respectively.
Growth stocks continued to outperform value, gaining 27.8% versus 14.3%. YTD the numbers are +9.8% versus -16.3%, an extraordinary gap.
Interest rates on US Treasury securities fell slightly at the short end and climbed a bit at the long end.
The yield on the 1-year Treasury note fell 1 basis point, the 5-year note fell 8 bps, and the 10-year bond 5 bps. At the longer end, the yield on 20-year Treasury bonds increased 3 bps, and 30-year Treasury bond yields increased by 6 bps.
Driven by the same factors that catalyzed the Q2 rally in stocks, credit and liquidity spreads narrowed during the quarter.
Investment Grade credit spreads narrowed 113 bps while High Yield spreads compressed by 254 bps.
During the quarter, Investment Grade corporate bonds returned 8.2% and High Yield returned 9.6%. YTD the numbers are +4.8% and -4.8%, respectively.