The following Q2 market update provides context for the investment performance of your charitable assets at InFaith Community Foundation.
From Cambridge Associates, InFaith Investment Advisor
Investors grew optimistic as global equities swiftly recoupled the bulk of their first quarter losses, in part due to abundant central bank and fiscal policy measures. The quarter began with the global economy in virtual standstill, with many countries following stringent lockdown guidelines in efforts to flatten the curve of COVID-19 cases. As new cases steadily declined, countries began taking steps to reopen, supporting a shift in risk appetite amid signs that the economy was beginning to improve.
US equities posted their largest quarterly gain since 1998, outperforming developed ex-US counterparts by 12 percentage points over the past year. US stocks have retraced 77% of their peak-to-trough drawdown, gaining 40.1% since the March 23 low, and are just 8% below their all-time high. Tech stocks, represented by the Nasdaq Composite Index, reached record highs in June and finished the quarter nearly 50% above their March 23 lows. All 11 S&P 500 sectors advanced, led by cyclicals; consumer discretionary, information technology, energy, and materials all advanced more than 25%. Defensive utilities and consumer staples were the only sectors not to experience double-digit gains. Small caps topped large caps, while growth stocks’ dominance over value continued. Over the past 12 months, growth has outperformed value by the widest margin since data began in 1975. Emerging markets trailed developed market peers, despite a weakening US dollar. Credits rallied in second quarter as spreads narrowed amid investors’ search for yield. High-yield and investment-grade corporate bonds outperformed Treasuries as the Fed officially began purchasing corporate bond ETFs (and later in the quarter, individual corporate bonds), supporting borrowing conditions and leading to record issuance. US Treasuries modestly advanced; ten-year and five-year yields fell 4 and 8 bps to 0.66% and 0.29%, respectively.
Some public health experts warned that prematurely lifting restrictions could have serious consequences causing an additional toll on economic activity. Noting that the recovery is projected to be more gradual than previously forecasted, the International Monetary Fund (IMF) downgraded global growth forecasts again in June (now expecting a decline of 4.9% for 2020) and that the extent of the recent rebound in financial market sentiment appears disconnected from shifts in underlying economic prospects.
We continue to believe that InFaith’s diversified investment approach positions the portfolios well. 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 compelling new investment opportunities.
For more information, visit InFaith's Financials & Reports page.