by P.J. DiNuzzo July 7, 2020
2020 Second Quarter Investment Market Report
This year, investors have been treated to a rare real-world lesson in the mathematics of investing—namely, 
the fact that after a market decline, it takes a greater market recovery to get back to even. The first quarter saw a pronounced downturn that delivered 20% losses across the U.S. and developed foreign markets. Then we experienced a breathtaking 20% gain in the second quarter, the fourth-best quarterly rise since 1950. Work out the mathematics, and virtually all indices are still showing a loss for the year.
You can see this dynamic everywhere you look. The Wilshire 5000 Total Market Index—the broadest measure of U.S. stocks—fell 20.70% in the first three months of the year, then gained 22.69% in the ensuing quarter. By the mathematics of the market, investors in the index are still down 2.88% so far this year. The comparable Russell 3000 index is down 3.48% in the first half of 2020.
Looking at large cap stocks, the Wilshire U.S. Large Cap index lost 19.88% in the first quarter, gained 21.64% in the second, and is still down 2.29% for the first half of the year. The Russell 1000 large-cap index now stands at a 2.81% loss, while the widely-quoted S&P 500 index of large company stocks gained 19.95% in the second quarter after a 20% drop in the first quarter–and is now down 4.04% for calendar 2020.
As measured by the Wilshire U.S. Small-Cap index, investors in smaller companies were hit with a very significant 31.40% decline in the first quarter, and then recovered 25.63% in the second. The index is down 13.82% for the year. The comparable Russell 2000 Small-Cap Index is down 12.98% so far this year.
International investors experienced the same lurching investment ride as U.S. stock holders, but with a shallower recovery. The broad-based EAFE index of companies in developed foreign economies lost 23.43% in the first quarter, then gained back 14.17% in the second quarter. Add it up, and the index is returning negative 12.59% so far this year. In aggregate, European stocks gained 14.33% in the second quarter, but because they were down 24.81% in the first part of the year, they’re still sitting on a 14.03% loss for the first half of the year. EAFE’s Far East Index meanwhile, gained 10.82% in the second quarter, but for the year it’s in losing territory, down 9.29%. Emerging market stocks of less developed countries, as represented by the EAFE EM index, gained 17.27% in the most recent quarter, making up some of the 23.87% losses in the first three months of the year. The index is down 10.73% for the year.
Looking over the other investment categories, real estate, as measured by the Wilshire U.S. REIT index, posted a 25.63% decline during the year’s first quarter, and then saw a nice 10.56% rebound in the second. Real estate investors are still down 17.77% for the year. The S&P GSCI index, which measures commodities returns, gained 27.37% in the second quarter, recovering some of the 42.34% 1st quarter loss. The index now posts a 25.39% loss for the year.
In the bond markets, rates continue to drag on at historic lows. Coupon rates on 10-year Treasury bonds stand at an astonishing 0.68%, while 3-month, 6-month and 12-month bonds are still sporting coupon rates of 0%. Five-year municipal bonds are yielding, on average, 0.46% a year, while 30-year munis are yielding 1.70% on average.
Sincerely,
P.J. DiNuzzo, CPA, PFS™, AIF®, MBA, MSTx
President, Founder, and Chief Investment Officer
Sources:
Wilshire index data: https://www.wilshire.com/indexcalculator/index.html
Russell index data: http://www.ftse.com/products/indices/russell-us
S&P index data: http://www.standardandpoors.com/indices/sp-500/en/us/?indexId=spusa-500-usduf–p-us-l–
Nasdaq index data:
http://quotes.morningstar.com/indexquote/quote.html?t=COMP
http://www.nasdaq.com/markets/indices/nasdaq-total-returns.aspx
International indices: https://www.msci.com/end-of-day-data-search
Commodities index data: https://us.spindices.com/indices/commodities/sp-gsci
Treasury market rates: http://www.bloomberg.com/markets/rates-bonds/government-bonds/us/
Bond rates:
http://www.bloomberg.com/markets/rates-bonds/corporate-bonds/
General:
https://www.investors.com/market-trend/stock-market-today/dow-jones-today-futures-slip-boeing-reporting-fail-beyond-meat-alibaba-deal-fedex-q4-win/
https://www.marketwatch.com/story/heres-what-history-tells-us-happens-after-the-sp-500s-best-quarters-of-all-time-as-strategist-says-its-set-to-repeat-2020-07-01?siteid=yhoof2&yptr=yahoo
https://www.multpl.com/s-p-500-pe-ratio
https://finance.yahoo.com/news/virus-fears-keep-p-500-141727598.html