“Injustice anywhere is a threat to justice everywhere.” -- Dr. Martin Luther King, Jr.
The events of recent weeks may have a deeper long term impact on our country than the pandemic we have been enduring the last few months. The murder of George Floyd at the hands of law enforcement is unfortunately emblematic of deep underlying problems for our nation. We recognize it will take dedication to change the structural racism and heal from the pain of discrimination that has plagued our country for centuries.
The most important step we can all take right now is to create the space for meaningful conversations. While these may be tough conversations to have, they’re absolutely necessary to effect change.
Markets have continued their upward trajectory. A surprisingly positive May jobs report propelled the Dow above 27,000. We believe volatility will continue through the recovery period. You can read our quarterly market commentary HERE.
This is what I am reading this week:
- BlackRock released their monthly chart pack, which always provides nice perspective
- Historic market volatility: 2020 has given us 8 consecutive +/- 4% trading days, the most in the history of the S&P 500. The 16 total +/- 4% days so far this year is much higher than the historical annual average of 3.2.
- Big dispersion in asset class returns: There has been a wide dispersion in returns across asset class so far this year. In total, 78% of Morningstar categories have lost money since 1/1/20.
- Growth versus Value: The 10-year rolling returns for both large and small growth stocks currently outperform those of their value counterparts. 10-year rolling returns for large growth stocks have outperformed large value stocks only twice before in the history of the S&P (10-year returns ending 1939 & 2000).
- One of our research partners checks in on their May theses
- The economy will likely experience a U-shaped recovery
- Market volatility will remain elevated, but we do not expect a retest of March lows
- Widening market breadth should lead to a shift in market leadership
The tech sector has been the clear driver of broad market returns over the last 12 months & has more than tripled the return of the S&P 500 (+35.8% versus +11.0%).
Recessions tend to be a driver for shifting sector leadership.
A Tough Road For Bonds -- BlackRock
Past performance is not a guarantee of future results. One cannot invest directly in an index. INDICES USED:
U.S. Aggregate Bonds - Bloomberg Barclays U.S. Aggregate Index
U.S. Agency Mortgage Backed Securities - Bloomberg Barclays U.S. MBS Index
U.S. Credit (All Maturities) - Bloomberg Barclays U.S. Credit Index
U.S. Credit (10+ Years) - ICE BofAML Corporate Investment Grade 10+ Year Index
U.S. Government Bonds (All Maturities) - Bloomberg Barclays Government Index
U.S. Government Bonds (10+ Years) - Bloomberg Barclays Long Government Index
U.S. Inflation-Linked Government Bonds - Bloomberg Barclays U.S. Government Inflation-Linked Bond Index
Global ex-U.S. Government Bonds - Bloomberg Barclays Global Aggregate Treasury Index ex-U.S.
U.S. Cash - Citigroup 3-Month Treasury Bill Index