Q1 Market Update - AssetMark

First Quarter 2020

Zoë Brunson, CFA

Market Review Q1 2020

Zoë Brunson, CFA

Senior Vice President, Investment Strategies

AssetMark, Inc.

  • Equity markets took their fastest tumble in history from a record high. In 18 trading days, the US equity markets fell more than 30%. For the full quarter, US equity markets returned -19.6% marking its worst start to the year in history.
  • Surprisingly, it wasn’t a defensive sector that held up best in the downturn. Technology was the best performing sector, returning -11.9% helped by Microsoft that saw a positive 1 basis point return for the quarter. Consumer staples and utilities, the bond proxy sectors, outperformed the broad market while energy saw the weakest returns at -50.5%, hurting from the over 50% drop in oil prices for the quarter.

    Source: AssetMark, Morningstar
  • International markets fell along with the US markets with the developed markets returning -22.7% and the emerging markets returning -23.6%. Only two countries, New Zealand and Denmark, fell by less than 10% over the quarter and China only fell by 10.2%, which was the main reason emerging markets outperformed developed markets in local-currency terms. Once again, the strengthening dollar weakened returns for US investors.
  • The tumultuous fall in the equity markets created carnage in the bond market. As liquidity dried up in the bond markets, with investors selling anything they could, the Federal Reserve stepped in to help limit any further carnage to the bond market. Lowering rates and offering almost unlimited quantitative easing programs, bond sectors gaining support from the Federal Reserve started to recover and regain ground.
  • The US bond market ended the quarter up 3.1% aided by the strength of Treasuries. The flight to safety saw Treasuries rally, with the longer duration Treasuries seeing a return of 20.9% for the quarter.
  • The sensitivity of high-yield bonds to the equity markets saw them register double digit losses at -12.7%. Bank loans also saw double-digit losses, at -12.0% as the Fed lowered interest rates to 0%.
  • Within the securitized sector asset-backed securities (ABS) and agency mortgage-backed securities (MBS) regained ground following the market rout and saw a small positive return for the quarter. However, without the support the Federal Reserve, the non-agency MBS market saw a return of -13.4%.
  • REITs (real estate investment trusts) and commodities were among the weakest asset classes, falling 23.4% for US REITs, 29.9% for global REITs and 23.3% for commodities. Social distancing impacted REITs with the biggest pain felt in malls, retail and hotels, while commodities were significantly hurt by energy, with only gold providing a positive return for the quarter reflecting the flight to safety.

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C20-15780 | 04/2020 | EXP 04/30/2021

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