Investors enjoyed further gains in risk assets during July 2020 thanks to the unprecedented amount of liquidity provided by central banks and the exceptional messaging power of Fed Chair Powell. Sure, some folks will credit improving trends in COVID-19 case counts or better than anticipated economic data, but let’s not kid ourselves, the Fed, accompanied by President Trump, is holding the biggest party markets have ever seen.
I won’t even attempt to comment on the first half of 2020 as whether it was our personal lives or our investment portfolios, both were turned upside down and let’s hope that level of tumult is now in the rear view mirror. However, I am pleased to report that each of our Alternative Funds delivered positive returns during the first six months of 2020.
In my books, the 4 most notable events since I last published ‘Market Thoughts’ on May 26th have been 1) the relentless and almost desperate messaging by various Fed officials that interest rates won’t go up for a very long time, 2) the possibility that the EU may agree to issue common area bonds, 3) unsettling signs that COVID-19 is not yet ready to fade away, and 4) the rise in the polls of the Democrats for this November’s U.S. election. In today’s ‘Thoughts’ I’ll review these four points, discuss graphs that highlight recent market performance, and table a couple of thoughts about what lies ahead including what investors predict forward returns will be for stocks.
The unhelpful but apropos cliché ‘time heals all wounds’ speaks to the performance of equity markets during May 2020 as the S&P 500 furthered its strong performance in April with an additional 4.76% total return during May 2020. Regardless as to why it has happened, for now there’s little question stocks have moved past the trauma of the COVID-19 crisis. Here at home the total return for the TSX was a solid 3.04%, leaving Canada’s main index down -9.70% on a year to date basis.