The second quarter of 2020 was a story of divides. Covid-19 related shutdowns cratered the economy and destroyed tens of millions of jobs while US stocks posted their biggest quarterly gains in over twenty years. Doomsday fears about the virus faded in late spring and shutdowns were able to be eased in some early hotspots.
Investor sentiment also polarized. On one side, many investors remained on the sidelines, nervous about the virus and its economic impact. Alternatively, some were enthusiastically piling into high momentum growth stocks with little concern for valuation or price.
This sentiment divide helped split the market. Growth stocks got more expensive while value stocks were shunned. The stay-at-home narrative provided reachable justification for the widening spread.
Bonds also posted gains, stabilizing after wild gyrations in Q1. Corporates led the way while long dated treasuries gave back some of their Q1 advance.
Late in the quarter, Joe Biden surpassed Donald Trump to become the favorite in the presidential election. Interestingly, stocks did not react significantly to swings in the polls in either direction.
Personal Capital Managed Portfolios: Portfolios took advantage of the massive volatility with partial rebalances from bonds back into battered stocks. Smart Weighting was outperforming the S&P 500 for most of the quarter but surrendered its lead in the last half of June as mega-cap technology stocks strongly rallied and value stocks declined. Additional exposure to emerging markets and small cap boosted relative return within International stocks, which lagged the US. Bond holdings generally outperformed the US Aggregate Bond market due to greater exposure to corporate and international bonds. Alternatives were strongly positive, led by REITs and gold, though trailed the strong return of stocks.
This communication is for informational purposes only and does not constitute a recommendation to buy or sell securities nor does it reflect performance or investment outlook of aggregated accounts managed by a third party. Past performance is not a guarantee of future return or indicative of future performance. Investing involves risk. Commentary about Personal Capital Managed Portfolios applies solely to Personal Capital Advisors investment client portfolios. Actions taken in, or performance returns of, your portfolio may differ from the general commentary provided.