July 2020 Financial Markets Summary

Growth vs. value, large vs. small and domestic vs. international are some of the most common ways to categorize stocks.  However, James Investment Research, Inc. has recently coined a new label: reopening vs. quarantine.

James suggests that in this market, there have been two type of stocks, the reopening and the quarantine stocks.  The latter consists of technology, communication services, healthcare, consumer staples and utilities stocks, while the rest of the sectors are considered more economically sensitive and need successful reopening to shine.

In general, the quarantine stocks tend to outperform in weeks when the virus news is bleak.  During the last week of June, the quarantine stocks, such as Zoom and Kroger, were leading again, while the rebound stocks such as Royal Caribbean Cruises and American Airlines struggled. This tug of war between the two camps will likely be the theme for markets for quite some time until a vaccine or treatment for COVID-19 is found.

New categories for stocks will come and go, especially as technology evolves, but the divide between the classic growth and value stocks has continued to widen.  Growth stocks have outperformed by 22% in 2020 and by an annualized 8% over the past 5 years.  This trend will eventually swing back in favor of value companies, but many experts have been suggesting this for years.  At PDS, we advocate for a more diversified approach to maintain exposure to both growth and value, large and small, domestic and international, reopening and quarantine in this ever-changing environment.

During these unique times of market stress, investors’ natural instinct is to turn on the news.  Hartford Funds suggests that “investors are drawn toward negative news – it’s survival instinct to keep us safe.  On March 31, 2020 Google searches for CNBC reached their highest level in the past 15 years as the market sold off due to the coronavirus outbreak.  As an investor, reacting to this negative news can be harmful to your portfolio.”  Fast forward to June 30th, and domestic stocks bounced back by over 20% in just three months.  As hard as it may be, the best course of action would be to turn off the news which is designed to play on your emotions.  At least the Tony award winning Hamilton was an option this week!

Asset Index Category Category Category 5-Year 10-Year
2020 YTD 1-Year Average Average
S&P 500 Index – Large Companies -4.0% 5.4% 8.5% 11.6%
S&P 400 Index – Mid-Size Companies -13.5% -8.3% 3.5% 9.6%
Russell 2000 Index – Small Companies -13.6% -7.9% 2.8% 9.0%
MSCI ACWI – Global (U.S. & Intl. Stocks) -7.1% 1.1% 6.1% 9.1%
MSCI EAFE Index – Developed Intl. -11.3% -5.1% 2.1% 5.7%
MSCI EM Index – Emerging Markets -9.8% -3.4% 2.8% 3.3%
Short-Term Corporate Bonds 1.7% 3.1% 2.2% 2.1%
Multi-Sector Bonds 6.1% 8.7% 4.3% 3.8%
International Government Bonds 0.9% 0.2% 3.1% 1.2%
Bloomberg Commodity Index -19.4% -17.4% -7.7% -5.8%
Dow Jones U.S. Real Estate -13.4% -6.9% 6.3% 9.8%


Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment, strategy, or product or any non-investment related content, made reference to directly or indirectly in this newsletter, will be suitable for your individual situation, or prove successful. This material is distributed by PDS Planning, Inc. and is for information purposes only.  Although information has been obtained from and is based upon sources PDS Planning believes to be reliable, we do not guarantee its accuracy.  It is provided with the understanding that no fiduciary relationship exists because of this report.  Opinions expressed in this report are not necessarily the opinions of PDS Planning and are subject to change without notice.  PDS Planning assumes no liability for the interpretation or use of this report. Consultation with a qualified investment advisor is recommended prior to executing any investment strategy. No portion of this publication should be construed as legal or accounting advice.  If you are a client of PDS Planning, please remember to contact PDS Planning, Inc., in writing, if there are any changes in your personal/financial situation or investment objectives.  All rights reserved.