Perspectives Newsletter: Q3, 2020
Despite a negative return for the month of September, equities ended the quarter with the best two quarter advance since 2009. The historic rally over the previous six months can be attributed to the remarkable economic progress made in the wake of the Covid lockdown together with a lack of investment options at a time when the money supply is growing at 24% year over year. Both the economic and market rebounds owe a great deal to the unprecedented support from the Federal Reserve and Federal Government. Generating heightened volatility in the final weeks of the quarter, however, questions arose over the continuation of fiscal stimulus from the Federal government. The result was the first negative monthly return for stocks since March. September was also notable for a rotation from growth into value, led by Materials, Utilities and Industrials. Emerging market stocks were relative standouts in September, helping them to best US indices for the quarter; developed markets continued to lag. Value and emerging outperformance can be early indicators of economic expansion and increasing investor appetite for risk. Value stocks have a long way to go before establishing a trend and catching up to growth, however; they still lag significantly for the quarter and year (where they are still in fact negative).
