The following Q1 market update provides context for the investment performance of your charitable assets at InFaith Community Foundation.
From Cambridge Associates, InFaith Investment Advisor
In this time of economic, geopolitical and market uncertainty, we continue to believe that InFaith’s diversified approach positions the portfolios well to manage through the current difficult period and emerge well-positioned on the other side. Thus far into the COVID-19 crisis, the portfolios have offered the downside protection we would expect relative to equity markets and less diversified portfolios.
First quarter saw the emergence of a global pandemic, sending financial markets into turmoil, opening the door to a deep worldwide downturn, and prompting policymakers to take unprecedented actions in hopes of curtailing the fallout. With market volatility spiking, stocks entered into bear market territory at the fastest pace on record. Central bankers cut policy rates, establishing or boosting existing lending facilities, and expanding asset purchase programs to stabilize markets and prevent a severe liquidity dislocation from becoming a new financial crisis. Authorities at all levels began announcing strict social distancing and quarantining directives, limiting non-essential economic activity and severely disrupting commerce. Attempting to mute the coming economic hit, national governments have responded with fiscal stimulus worth approximately 5% of global GDP.
US equities edged broader developed markets in first quarter. After reaching a new all-time high in mid-February, the S&P 500 plunged 34 percentage points (ppts) in just over a month. The rapid decline ended the longest bull market run in US history. All 11 S&P 500 sectors declined, weighed down by energy (which declined more than 50%). Growth stocks outperformed value counterparts, while large caps topped small caps. Emerging Markets equites underperformed developed markets counterparts in major currency terms. Heavily weighted emerging Asia bested emerging Europe, the Middle East & Africa and Latin America, supported by Chinese equities, the top performer in emerging markets. Investment-grade bonds, led by sovereigns, outperformed high-yield equivalents as the COVID-19 outbreak weighed on yields and credit spreads widened. US Treasuries rallied, as five- and ten-year Treasury yields fell 132 and 122 basis points (bps) to 0.37% and 0.70%, respectively. Commodities and natural resource equities sharply declined as oil prices declined almost 70%.
While it is very difficult to predict what the future holds in 2020, we expect uncertainty and market volatility to remain high. Our focus will continue to be on staying disciplined in our investment process, valuing liquidity, being patient, and looking for opportunities.
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