07/06/2020

07/06/2020

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Monthly Investment Update

<!– {"name":"Case Study","type":"layout","children":[{"name":"Top Image (Featured Image)","type":"section","props":{"style":"default","width":"default","vertical_align":"middle","title_position":"top-left","title_rotation":"left","title_breakpoint":"xl","image_position":"center-center","height":"full","padding_remove_top":false,"padding_remove_bottom":false,"image_size":"cover","padding":"xlarge","image_effect":"parallax","image_parallax_bgy_end":"100","image_parallax_bgy_start":"-100","animation":"fade","animation_delay":true,"image_parallax_breakpoint":"m","image_width":"1560"},"children":[{"name":"","type":"row","props":{"layout":"1-3,2-3","divider":true,"vertical_align":true},"children":[{"name":"","type":"column","props":{"image_position":"center-center","vertical_align":"middle","media_overlay_gradient":"","width_small":"1-3"},"children":[]},{"name":"","type":"column","props":{"image_position":"center-center","text_color":"light","vertical_align":"middle","media_overlay_gradient":"","width_small":"2-3"},"children":[]}]}],"source":{"query":{"name":"posts.singlePost"},"props":{"image":{"name":"featuredImage.url","filters":{"search":""}}}}},{"name":"Blog Content","type":"section","props":{"style":"default","width":"default","vertical_align":"middle","title_position":"top-left","title_rotation":"left","title_breakpoint":"xl","image_position":"center-center","padding":"large","padding_remove_bottom":false,"animation_delay":false},"children":[{"name":"","type":"row","props":{"layout":"1-3,2-3","vertical_align":false},"children":[{"name":"","type":"column","props":{"image_position":"center-center","media_overlay_gradient":"","width_small":"1-3"},"children":[{"type":"image","props":{"margin":"default","image_svg_color":"emphasis","image":"wp-content\/uploads\/sites\/8\/2020\/06\/Trans_Blue-Crown.png"}},{"name":"","type":"headline","props":{"title_element":"h2","title_decoration":"bullet","title_style":"h3","content":"07\/06\/2020"},"source":{"query":{"name":""},"props":{}}},{"name":"","type":"headline","props":{"title_element":"h2","title_decoration":"bullet","title_style":"h3","content":"07\/06\/2020"},"source":{"query":{"name":"posts.singlePost"},"props":{"content":{"filters":{"search":""},"name":"author.nickname"}}}},{"type":"list","props":{"show_image":false,"show_link":true,"image_svg_color":"emphasis","image_align":"left","image_vertical_align":true,"list_size":"","list_element":"ul","column_breakpoint":"m"},"children":[{"type":"list_item","props":{"content":"

Categories”}},{“type”:”list_item”,”source”:{“query”:{“name”:”categories.customCategories”,”arguments”:{“id”:0,”offset”:0,”limit”:10,”order”:”term_order”,”order_direction”:”ASC”}},”props”:{“content”:{“name”:”name”,”filters”:{“search”:””}},”link”:{“name”:”link”,”filters”:{“search”:””}}}}}],”name”:”Blog Category List”}]},{“name”:””,”type”:”column”,”props”:{“image_position”:”center-center”,”media_overlay_gradient”:””,”width_small”:”2-3″},”children”:[{“name”:””,”type”:”headline”,”props”:{“title_element”:”h1″,”item_maxwidth”:”large”,”content”:”Monthly Investment Update”},”source”:{“query”:{“name”:””},”props”:{}}},{“name”:””,”type”:”text”,”props”:{“margin”:”default”,”column_breakpoint”:”m”,”content”:”

Risk assets rose sharply in July as investors digested US economic and corporate earnings data for the second quarter 2020 and tracked the progress of a potential new stimulus bill from Washington.\u00a0 The S&P 500 returned 5.6% during the month, led by the consumer discretionary sector, which is now significantly composed of e-commerce companies like Amazon, which returned 9.0% during the month.\u00a0 Large technology companies like Apple, Alphabet, and Microsoft also outperformed earnings expectations and moved higher during the month.\u00a0 Following July, the S&P 500 is now just 3% below the all-time closing high of 3,386 set in mid-February.”},”source”:{“query”:{“name”:””},”props”:{}}},{“name”:””,”type”:”text”,”props”:{“margin”:”default”,”column_breakpoint”:”m”,”content”:”

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COVID-19 Pandemic”,”text_size”:”large”,”text_color”:”primary”},”source”:{“query”:{“name”:””},”props”:{}}},{“name”:””,”type”:”text”,”props”:{“margin”:”default”,”column_breakpoint”:”m”,”content”:”

The COVID-19 pandemic has been a significant source of influence across global markets and economies during 2020.\u00a0 As the world anxiously awaits a vaccine from one of the dozens of companies and institutions racing to find a cure, confirmed cases in the US significantly increased during the summer as stay-at-home orders and business closures were relaxed across the country.\u00a0 The chart below highlights that the rolling average of new cases began to trend modestly lower later in July, which may be an encouraging sign that this potential second wave and abating.\u00a0 The true test for the United States will be the reopening of schools, colleges, and universities in a few weeks.\u00a0 Successful reopening with containment of any infections will be a significant step toward normalcy and greater resumption of economic activity. However, another semester of closures and remote learning could create havoc for parents attempting to balance employment and their children\u2019s education, along with the college and university system which employees thousands of people and relies on room, board, and auxiliary revenue.”},”source”:{“query”:{“name”:””},”props”:{}}},{“type”:”image”,”props”:{“margin”:”default”,”image_svg_color”:”emphasis”,”image”:”wp-content\/uploads\/2020\/08\/daily-reported-Covid-19-cases-in-the-U.S..png”}},{“name”:””,”type”:”text”,”props”:{“margin”:”default”,”column_breakpoint”:”m”,”content”:”

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Corporate Earnings”,”text_size”:”large”,”text_color”:”primary”},”source”:{“query”:{“name”:””},”props”:{}}},{“name”:””,”type”:”text”,”props”:{“margin”:”default”,”column_breakpoint”:”m”,”content”:”

As of July 31, more than three hundred companies in the S&P 500 index have reported results for the second quarter.\u00a0 While the quarter\u2019s numbers have been abysmal, markets are reacting favorably to the fact that most companies have outperformed analysts\u2019 consensus expectations.\u00a0 To date, 84% of companies that have reported results have beat analysts\u2019 expectations for earnings, and 69% have outperformed revenue expectations.\u00a0 Outperforming revenue expectations is particularly encouraging given that this number is much less subject to management reporting discretion, and is a more-direct indication of a company\u2019s customer activity.\u00a0 When the quarter began, analysts\u2019 consensus expectations for S&P 500 earnings blended to a year-over-year decline of -44%.\u00a0 Encouragingly, that number now stands at -36% when blended actual company results with analysts\u2019 expectations for those companies that have not yet reported.\u00a0 Sectors like healthcare, technology and e-commerce companies have performed well relative to expectations during the pandemic.”},”source”:{“query”:{“name”:””},”props”:{}}},{“type”:”image”,”props”:{“margin”:”default”,”image_svg_color”:”emphasis”,”image”:”wp-content\/uploads\/2020\/08\/sp-earnings-growth_8.1.20.png”}},{“name”:””,”type”:”text”,”props”:{“margin”:”default”,”column_breakpoint”:”m”,”content”:”

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US Economy”,”text_size”:”large”,”text_color”:”primary”},”source”:{“query”:{“name”:””},”props”:{}}},{“name”:””,”type”:”text”,”props”:{“margin”:”default”,”column_breakpoint”:”m”,”content”:”

Like corporate earnings, the impact of the COVID-19 pandemic on US economic activity has been stark.\u00a0 US gross domestic product (GDP) declined 33% in the second quarter, a significantly deeper quarterly decline that any witnessed during the financial crisis of 2008.\u00a0 Not surprisingly, elements of the personal consumption expenditure component of GDP focused on consumer services such as transportation, recreation, and food services (restaurants) all declined sharply during the quarter.\u00a0 Encouragingly, motor vehicles & parts was relatively resilient, advancing 5.5%.\u00a0 US net exports also fell sharply.”},”source”:{“query”:{“name”:””},”props”:{}}},{“type”:”text”,”props”:{“margin”:”default”,”column_breakpoint”:”m”,”content”:”

US Gross Domestic Product (Annualized Quarterly Change)”}},{“type”:”image”,”props”:{“margin”:”default”,”image_svg_color”:”emphasis”,”image”:”wp-content\/uploads\/2020\/08\/US-Gross-Domestic-Product.png”}},{“type”:”text”,”props”:{“margin”:”default”,”column_breakpoint”:”m”,”text_size”:”small”,”content”:”

Source: FactSet”}},{“name”:””,”type”:”text”,”props”:{“margin”:”default”,”column_breakpoint”:”m”,”content”:”

The US employment picture has shown signs of improvement, but is still very challenged.\u00a0 Initial claims for unemployment benefits have been filed by more than one million Americans every week since March, and the weekly claims rose for the first time since March in late July.\u00a0 Similarly, weekly claims for continuing unemployment benefits rose in late July for the first time since the early days of the pandemic\u2019s impact on the US.\u00a0 These are potentially troubling signs that the path toward an economic recovery may be slower than many have hoped for.\u00a0 The US headline unemployment rate stands at 11.1% when it was last reported in early June, and even more Americans are underemployed or not counted in the total if they\u2019ve stopped looking for work.\u00a0 As of this writing in early August, Congress and the White House are still in negotiations for another round of fiscal stimulus, which is expected to provide additional direct payments to Americans.\u00a0 This money could be a lifeline for many households as mortgage and credit delinquencies have been rising.”},”source”:{“query”:{“name”:””},”props”:{}}},{“type”:”text”,”props”:{“margin”:”default”,”column_breakpoint”:”m”,”content”:”

Initial Unemployment Claims (30 Year History)”}},{“type”:”image”,”props”:{“margin”:”default”,”image_svg_color”:”emphasis”,”image”:”wp-content\/uploads\/2020\/08\/Initial-Unemployment-Claims.png”}},{“type”:”text”,”props”:{“margin”:”default”,”column_breakpoint”:”m”,”text_size”:”small”,”content”:”

Source: FactSet”}},{“type”:”text”,”props”:{“margin”:”default”,”column_breakpoint”:”m”,”content”:”

Initial Unemployment Claims (1 Year History)”}},{“type”:”image”,”props”:{“margin”:”default”,”image_svg_color”:”emphasis”,”image”:”wp-content\/uploads\/2020\/08\/Initial-Unemployment-Claims-1-year-history.png”}},{“type”:”text”,”props”:{“margin”:”default”,”column_breakpoint”:”m”,”text_size”:”small”,”content”:”

Source: FactSet”}},{“type”:”text”,”props”:{“margin”:”default”,”column_breakpoint”:”m”,”content”:”

Continuing Unemployment Claims (30 Year History)”}},{“type”:”image”,”props”:{“margin”:”default”,”image_svg_color”:”emphasis”,”image”:”wp-content\/uploads\/2020\/08\/Continuing-Unemployment-Claims.png”}},{“type”:”text”,”props”:{“margin”:”default”,”column_breakpoint”:”m”,”text_size”:”small”,”content”:”

Source: FactSet”}},{“type”:”text”,”props”:{“margin”:”default”,”column_breakpoint”:”m”,”content”:”

Continuing Unemployment Claims (1 Year History)”}},{“type”:”image”,”props”:{“margin”:”default”,”image_svg_color”:”emphasis”,”image”:”wp-content\/uploads\/2020\/08\/Continuing-Unemployment-Claims-1-year-history.png”}},{“type”:”text”,”props”:{“margin”:”default”,”column_breakpoint”:”m”,”text_size”:”small”,”content”:”

Source: FactSet”}},{“name”:””,”type”:”text”,”props”:{“margin”:”default”,”column_breakpoint”:”m”,”content”:”

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Implications for Portfolio Management”,”text_size”:”large”,”text_color”:”primary”},”source”:{“query”:{“name”:””},”props”:{}}},{“name”:””,”type”:”text”,”props”:{“margin”:”default”,”column_breakpoint”:”m”,”content”:”

Following the 46% rally in the S&P 500 since the near-term lows of March 23, the index is now just 3% below the all-time highs set just a month before in mid-February.\u00a0 The charts below highlight the price investors are willing to pay for the index\u2019s expected earnings in the next two calendar years.\u00a0 These charts imply that the index is over-extended, but we have also entered an unprecedented period of global fiscal and monetary stimulus providing direct cash support for economies and zero-interest rates and seemingly infinite liquidity for risk assets.\u00a0 Market participants seem to be looking beyond 2020 earnings and are willing to pay a higher multiple for growth in the recovery years.\u00a0″},”source”:{“query”:{“name”:””},”props”:{}}},{“type”:”text”,”props”:{“margin”:”default”,”column_breakpoint”:”m”,”content”:”

S&P 500 Price-to-Expected Earnings (1 Calendar Year Forward)”}},{“type”:”image”,”props”:{“margin”:”default”,”image_svg_color”:”emphasis”,”image”:”wp-content\/uploads\/2020\/08\/SP-500-Price-to-Expected-Earnings.png”}},{“type”:”text”,”props”:{“margin”:”default”,”column_breakpoint”:”m”,”text_size”:”small”,”content”:”

Source: FactSet”}},{“type”:”text”,”props”:{“margin”:”default”,”column_breakpoint”:”m”,”content”:”

S&P 500 Price-to-Expected Earnings (2 Calendar Years Forward)”}},{“type”:”image”,”props”:{“margin”:”default”,”image_svg_color”:”emphasis”,”image”:”wp-content\/uploads\/2020\/08\/SP-500-Price-to-Expected-Earnings-2-calendar-years-forward.png”}},{“type”:”text”,”props”:{“margin”:”default”,”column_breakpoint”:”m”,”text_size”:”small”,”content”:”

Source: FactSet”}},{“type”:”text”,”props”:{“margin”:”default”,”column_breakpoint”:”m”,”content”:”

Asset Class Returns”}},{“type”:”image”,”props”:{“margin”:”default”,”image_svg_color”:”emphasis”,”image”:”wp-content\/uploads\/2020\/08\/asset-class-returns_8.1.20.png”}},{“type”:”text”,”props”:{“margin”:”default”,”column_breakpoint”:”m”,”text_size”:”small”,”content”:”

Source: Morningstar, Bloomberg, US Treasury (total returns shown gross of fees)
As of July 31, 2020″}},{“type”:”text”,”props”:{“margin”:”default”,”column_breakpoint”:”m”,”content”:”

Prices & Interest Rates”,”position_bottom”:”0″}},{“type”:”image”,”props”:{“margin”:”default”,”image_svg_color”:”emphasis”,”image”:”wp-content\/uploads\/2020\/08\/prices-and-interest-rates_8.1.20.png”}},{“type”:”text”,”props”:{“margin”:”default”,”column_breakpoint”:”m”,”text_size”:”small”,”content”:”

Source: Morningstar, Bloomberg, US Treasury (total returns shown gross of fees)
As of July 31, 2020\n

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Past performance may not be representative of future results. \u202fAll investments are subject to loss.\u202f Forecasts regarding the market or economy are subject to a wide range of possible outcomes. \u202fThe views presented in this market update may prove to be inaccurate for a variety of factors.\u202f These views are as of the date listed above and are subject to change based on changes in fundamental economic or market-related data. \u202fPlease contact your Financial Advisor in order to complete an updated risk assessment to ensure that your investment allocation is appropriate.\u202f\u202f\u00a0″,”text_align”:”left”,”text_size”:”small”,”text_color”:”muted”}}]}]}]}],”version”:”2.2.2″} –>