Equities
The week ended with solid gains for tech stocks and large caps, but not so much for other equity areas.
As the chart above shows, tech ripped over the past few days to close the week up 4% while European stocks had a rough few days, dropping 1.9% for the week. Large caps finished the week with modest gains, while Small caps and Emerging Markets were mostly flat.
For the month most stock indices, especially the Nasdaq and Emerging Markets, saw good gains, save for European equities which, by and large, missed out on the party…
In the S&P 500 notable positive performers were AMD and L-Brands, while airlines led the losers for the month.
Among small caps, Overstock and Tupperware led the way, while all ten of the worst performers were Health Care stocks (clustered tightly). I left out Kodak, which did have the best gains for the month, because it is less of a stock and more of an elaborate scam.
On the factor side, Momentum and Large Growth were the best factors for the month, while Value stocks and High Dividend stocks fared the worst. It is notable the the brief period mid-month when Small Cap, Value and Low Volatility outperformed, proved to be quite temporary, as the decades winning factors (Growth and Momentum) recovered well to finish out the month.
ESG performance, as measured relative performance between XTrackers S&P 500 ESG Fund and SPY. For the month, ESG slightly outperformed the broader S&P.
For the year, ESG has had a definitive advantage over the vanilla S&P.
But as mentioned before, a lot of this performance difference has been driven by higher allocations to FAANG stocks, whose performance has been driving index performance for the year. For the YTD Amazon, Google, Apple, Netflix, and Facebook have contributed 5.2% to the S&P’s return; so without FAANG, we’d have negative YTD returns for the S&P. Even just excluding Apple and Amazon would drag the S&P into negative territory.
Fixed Income
Fixed income markets had a positive month led by excellent performance in Emerging Markets Debt and High Yield Bonds.
Other major fixed income sectors bumped along and saw decent gains. This good performance from High Yield Bonds and Emerging Markets Debt brings their YTD performance closer to positive territory, while the broad US Bond Market and International Bonds have showed quality performance for the year through July. Of course, given where rates have gone, Long Term Bonds have blown everything else out of the water, posting YTD returns of close to 19%
While the continued recovery of riskier fixed income assets is by no means guaranteed, it seems quite unlikely that the Fed will raise rates at any point in the near future. Most market watchers expect nothing but extra accommodating policy and actions.
Over the next few weeks we will get a whole slew of big earnings reports, big economic releases and hopefully some good news on the COVID situation…
Nathan