Fidelity Bank - Wealth Management
June 2020 Market Review
US Equities markets oscillated in June but ended the month up 1.99%. June began with the rate of daily new COVID-19 infections significantly down from their mid-April peak and reopening plans were at full steam ahead. By June 8th, the S&P 500 was up over 6.2% for the month; by June 11th, the S&P 500 was down 1.32% for the month. The spike of daily new cases, particularly in the southern and western States, briefly rattled investors. As economies have started to reopen, economic data has shown signs of a sharp rebound. For example, US retail sales rose 17% in May and ISM Manufacturing PMI rose to 52.6 for June. Bond markets rallied on the back on spread compression with the Bloomberg Barclays Aggregate Bond Index gaining 0.63%.
Through the end of June US Stocks gained more than 38.5% from their March 23rd low. For the second quarter, the S&P 500 returned 20.54%. This spectacular market performance marks the highest quarterly return since 1998. Year-to-date, the US stocks have lost 3.08%.
Much of the rebound in stocks can be attributed to better than expected economic data. Institute of Supply Management PMI surveys, which tracks sentiment among purchasing managers at manufacturing, construction and/or services firms, rebounded from negative levels not seen since the Global Financial Crisis to expansion levels in June. A PMI reading above 50 indicate expansion, while below 50 indicates contraction. June expansion reading of 52.6 is a welcome reprieve after a low 40s reading in April and May.
From a Style and Cap perspective, Growth stocks fared better than Value stocks across market cap. Large Cap and Small Cap Growth gained 4.35% and 3.84% respectively, on the back of technology stocks, while Large Cap value lost 0.66% and Small Cap Value gained 2.90%.
All 6 of 11 of the Global Industry Classification (GIC) sectors were positive in June. Technology and Consumer Discretionary led the way gaining 7.14% and 3.01%, respectively. Utilities and Health Care were the laggards, only losing 4.67% and 2.38% respectively.
The US Dollar gave back some of its year-to-date gains in June against Developed Market and Emerging Market currencies. The Dollar Index, which measures the US Dollar against Developed Market currencies, lost about 0.45%. The MSCI EAFE index gained 2.64% in local currency terms but gained more than 3.40% in US Dollar terms. The MSCI Emerging Market Currency Index gained 0.64% versus the US Dollar in June. The MSCI Emerging Markets Index gained 6.63% in local currency and the conversion to US Dollars caused that gain to become a 7.35% for US investors.
After ballooning in March, fixed income spread continued to compress in June. The Federal Reserve swiftly enacted several market operations that has helped propel fixed income assets’ recoveries. Bloomberg Investment Grade Corporate Bond Index rallied 1.96% during June and has gained almost 9% for the second quarter. High yield Corporates had another positive month gained 0.82% and have gained more than 10.10% in the second quarter.
Treasury prices gained slightly in June, only gaining 9 basis points; however, Treasury Inflation Protected Securities (TIPS) gained 1.12%, as inflation expectations continued to rebound in June. Ten-year inflation expectations bottomed in March as market participant priced in expected inflation of only 0.55%, although the Federal Reserve continues to target a 2.00% inflation goal.
In international Fixed Income, Emerging Markets Debt cooled down from its strong 5.18% gain in May and only gained 0.47% in June. Quarter-to-date Emerging Markets Debt is up 9.82% and currently yields about 6.00%.
Overall, Commodities produced another month of strong returns in June . The Bloomberg Commodity Index gained 2.28%. WTI Crude Oil gained nearly 9% as investors priced in increasing demand. Consumers may have noticed their wallets are a little lighter after filling up at the pump. Unleaded Gasoline rose 9.10% in June as summer driving season shifted into high gear. On a quarterly basis, both WTI and Unleaded Gasoline rebounded sharply, up 23.58% and 69.52%, respectively. Year-to-date, however, consumers are still receiving a significant reprieve on energy prices as WTI Crude Oil and Unleaded Gasoline are still down significantly. WTI Crude Oil is down 58.63% and while Unleaded Gasoline is down 45.92%.
Real Estate Investment Trusts (REITs) gained about 2.31% in June, as state economies began opening and confidence in tenants’ ability to meet rent and mortgage payments increased. Still, there is significant uncertainty for retail concentrated REITs, as many suspect consumers’ behavior will be significantly altered by the lockdowns. Year-to-date, REITs are down more than 13%.
Daniel J. Santaniello, President and CEO, of Fidelity Bank, publishes Financially Fit with Fidelity, your guide to financial well-being, every Thursday. If you’re interested in a financial topic we haven’t yet covered or want to subscribe to our emails, please feel free to drop us a line at blog at fddbank dot com. We would love to hear from you.
June 2020 Market Review is intended solely to report on various investment views held by Fidelity Deposit & Discount Bank and is distributed for informational and educational purposes only and is not intended to constitute legal, tax, accounting, or investment advice. Opinions, estimates, forecasts, and statements of financial market trends that are based on current market conditions constitute our judgment and are subject to change without notice. Fidelity Deposit & Discount Bank does not have any obligation to provide revised opinions in the event of changed circumstances. All data is provided by Bloomberg Finance, LP and Morningstar Direct. We believe the information provided here is reliable but should not be assumed to be accurate or complete. Data, if not otherwise noted, is as of 5/31/2020. References to specific securities, asset classes and financial markets are for illustrative purposes only and do not constitute a solicitation, offer or recommendation to purchase or sell a security. Past performance is no guarantee of future results. All investment strategies and investments involve risk of loss and nothing within this report should be construed as a guarantee of any specific outcome or profit. Investors should make their own investment decisions based on their specific investment objectives and financial circumstances and are encouraged to seek professional advice before making any decisions. Index performance does not reflect the deduction of any fees and expenses, and if deducted, performance would be reduced. Indexes are unmanaged and investors are not able to invest directly into any index. The S&P 500 Index is a market index generally considered representative of the stock market as a whole. The index focuses on the large‐cap segment of the U.S. equities market.