June 2020 Financial Market Memo
While global markets spent the first quarter in negative territory as a result of the current pandemic, the second quarter was a stark contrast in performance. US markets (VTI) posted one of the strongest quarters in years while finishing the month up 2.29% but the benchmark remains down (3.45%) for the year. International markets, which outperformed during the month, remains significantly behind US Markets for the first half of the year. International Developed (VEA) and Emerging Markets (VWO) were up 3.49% and 6.47% in June, but down 11.11% and 10.38% respectively for the year.
Although markets have seen a significant rebound since the first quarter, there remains a considerable degree of uncertainty in the global economy and its potential recovery. Recent upticks in COVID cases, which have topped 2.5M nationally, have provided additional evidence of a potential second wave (or extended first wave), which has caused many government officials to consider pressing pause on reopening plans or have signaled intentions to do so. As a result, this unprecedented economic disruption has pushed the Fed to maintain a clear stance on supporting the economy for the foreseeable future.
How long this pandemic will last and its impact on the global economy is anyone’s guess. Recent reports by the FOMC project a 6.5% decline in US GDP this year but a 5% rebound in 2021. The unemployment rate currently stands at 13.3%, but approximately 5 million jobs were added during the month. Also, the Fed recently reaffirmed its commitment to keep rates at 0% and support an accommodative policy for as long as needed until the economy can recover.
The first six months of 2020 have provided a myriad of headlines and events which have undoubtedly impacted the lives of the entire nation. And with elections right around the corner, and polls suggesting a close presidential election, the second half of the year may bring more of the same. Over the coming months, US election news may create volatility and influence investor perceptions about the speed and strength of an economic recovery. Election outcomes remain uncertain, therefore we believe it’s inadvisable to position investments to a particular outcome. The key is to remain disciplined in your approach and maintain a globally diversified portfolio, geared to your long-term goals.
Major Market Index Returns
Period Ending 6/30/2020 (Annualized)
Selections include ETFs generally available to consumers. Returns are net of management fees but do not include trading and Advisory fees. Return source: Morningstar. AP disclosure.
Sample Portfolio Mix Returns (Annualized)
Global portfolio mixes are Stocks/Bonds and are represented by VT/BND; returns are annualized. Vanguard funds are net of all management fees but do not include trading and Advisory fees. Return source: Morningstar. AP disclosure.
What You Pay For: The Percentage of Active Managers That Underperform Their Benchmarks
Trailing 10 Years Numbers As of December 31, 2019 — S&P SPIVA Scorecard