Q3 2020 Update:
While the S&P 500 is up for the year, this has been a year of “haves and have nots.” Here are the winners and losers so far this year:
- The NASDAQ is up 24.46%, as technology and biotechnology stocks have dominated the market.
- Gold prices are up 24.19% for the year, while the S&P Goldman Sachs Commodities Index dropped 19.72% during the same period.
- Long-term U.S. treasuries are up 21.35%, as U.S. investors flocked for safety, and foreign investors continue to avoid investing in the $16 trillion of negative yielding bonds worldwide.
- Emerging markets have eked out a 2.67% return (in their own currency). You would have lost all of this return as a U.S. investor, because the dollar has dropped 2.75%.
- Developed international investing was a weak spot, with the EAFE (Europe, Australia, Far East) dropping 9.44% through the third quarter.
- Third quarter was good for most sectors, with only energy showing a loss. The energy sector dropped 19.7% during the quarter, bringing it to a 48.1% loss for the year. Even though the other sectors were up for the quarter, financials, real estate, utilities, and industrials are all under water for the year (-20.2%, -6.8%, -5.7%, & -4.0%).
- Third quarter was led by the consumer discretionary, materials, and industrial sectors, up 15.1%, 13.3%, and 12.5% respectively. Technology, consumer discretionary, and communication services are the top performing sectors for the year, up 28.7%, 23.4%, and 8.6% respectively.
- All nine style boxes were up during the third quarter, but growth continued to outperform value at a level we haven’t seen since the late 90s. Five of the nine style boxes remain negative for the year, with large-cap growth leading the positive performance, up 24.3% for the year. Mid-cap growth is up 13.9%, large-cap blend is up 5.6%, and small-cap growth is up 3.9% for the year.
Current Market Environment
The secular bull market remains intact, even though the United States is in a recession. As we’ve discussed before, a secular bull market is a long-term upward trend in the market. The last one we had was from 1982 through 2000. That secular bull market endured the 1987 stock market crash, the 1990 recession, and the 1994 near recession. The average secular bull market lasts 14 years, with the shortest lasting just 9 years. We began our secular bull market in 2013, giving us reason to believe that the markets will continue to generally trend up for several years to come.