Momentum in global equities continued in July with a 5.28% gain following the 19.2% Q2 return. However, markets continued to show a lopsided rally, with the majority of those gains coming from a handful of the largest names in the U.S. Amazon, Apple, Facebook, and Google parent company Alphabet all reported profits larger than Wall Street expectations. Along with Microsoft, these five names make up almost 12% of the global investable universe and accounted for almost 24% of global equities’ return in July.
Despite a 32.9% drop in U.S. Gross Domestic Product (the worst quarterly decline in U.S. history) and a quarterly loss of 20 million jobs, the S&P 500 posted its best July numbers since 2010, gaining 5.51% to bring its 2020 return into the black at 1.25%. The aforementioned “Big Five” made up over 38% of the July climb and over 680% of the index’s YTD gain.
Utilities were the best-performing U.S. sector in July, gaining 7.81%, while energy was the worst performing, falling 4.91%.
Internationally, both Developed and Emerging Markets rallied 2.33% and 8.94% in July, following impressive Q2 returns of 19.2% and 18.1%. However, both indexes remain in the red for 2020, with YTD returns of -9.28% and -1.72% respectively. China, the largest component in the MSCI EM index, hit an all-time high while gaining 8.89% in July, and accounted for almost 41% of the EM monthly return. China is the best-performing EM country in 2020, up 11.07% for the year.
Fitch Ratings, one of the world’s major credit-rating companies, cut its credit outlook on the U.S. to “negative” on Covid-19 concerns and election uncertainty, but maintained its overall AAA rating on U.S. debt.
Gold hit an all-time high of $1,970.81 per ounce as a weakening dollar and dire economic numbers sparked a rush to safety. Gold’s price gained 10.79% in July, its best monthly performance in nearly a decade.
U.S. bonds continue to rally: The U.S. Aggregate Bond Index gained 1.49% in July to bring 2020 returns to 7.72% YTD. Treasury yields, which move inversely to bond prices, continued lower with short-maturity rates reaching record lows amid investor worries about the pace of economic recovery. The rates on the 3-year and 5-year notes hit new all-time lows of 0.122%. and 0.214% respectively as the Federal Reserve pledges to keep rates near zero until the economy recovers.
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Data Source: Bloomberg Pricing Data, as of July 31, 2020.
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