September 2020 started strongly for equities with the S&P 500 notching its 21st and 22nd year-to-date all-time closing highs. Direction then changed as equities proceeded to take it on the chin until the last few days of the month, shedding more than half of August’s advance. It’s possible this shift was catalyzed by factors related to COVID-19 or growing U.S. election uncertainty, or perhaps just plain levity, since the SPX had climbed 60% during the previous 114 trading days.
August 2020 was a month for the record books, as mega cap tech stocks ‘went to the moon’ as shown by the year-to-date indexed graph of the ‘Big 6’ (white line) versus the rest of the S&P 500 (red line) on the below left. Interestingly, excluding those six index stocks, as of 8/31/20, the cumulative YTD price performance of the other 494 companies remained 1.5% below break-even. Then there’s Tesla (TSLA.US), a stock yet to be added to an index, up 74% last month, and as you can see from the table on the below right, now the 7th largest market cap in the U.S. For Tesla’s cap to be $30B more than long-term fund holding VISA Inc (V.US) is sheer lunacy in my books, but I guess that’s what happens when the Central Banker of the world says “we’re not even thinking about thinking about raising rates”, as the longest duration equities rise the most! More on this later, but first let’s recap the performance of our funds.
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.