Q1 Market Update - AssetMark

First Quarter 2020

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.

Ask a question about Zoë's update

View Q1 Market Update

C20-15780 | 04/2020 | EXP 04/30/2021
794721-10377

For general public use.

AssetMark sends communications to keep financial advisors up-to-date on events and webinars, investment approaches, technology enhancements, business best practices and service updates.

IMPORTANT INFORMATION
This report is for informational purposes only, is not a solicitation, and should not be considered investment advice. The information in this report has been drawn from sources believed to be reliable, but its accuracy is not guaranteed, and is subject to change. Investors seeking more information should contact their financial advisor. Financial advisors may seek more information by contacting AssetMark at 800-664-5345.

Investing involves risk, including the possible loss of principal. Past performance does not guarantee future results. Asset allocation cannot eliminate the risk of fluctuating prices and uncertain returns. There is no guarantee that a diversified portfolio will outperform a non-diversified portfolio. No investment strategy, such as asset allocation, can guarantee a profit or protect against loss. It is not possible to invest directly in an index.

Investments in mutual funds and exchange traded funds that hold equities, bonds, and other securities can decline significantly in response to adverse market conditions, company-specific events, changes in exchange rates, and domestic, international, economic, and political developments. Investments in bonds and fixed income related securities also involve market and interest rate risk (prices can decline, if interest rates increase), and default risk (an issuer being unable to repay principal and interest). High-yield bonds are generally subject to greater risk of default and volatility, than investment-grade bonds. Real estate investments are subject to credit and market risks, typically based on changes in interest rates and varied economic conditions. Investing in alternative investments, including managed futures, commodities, and currencies is not appropriate for all persons, as the risk of loss is substantial. Investments in futures involve market, counterparty, leverage, liquidity, interest rate, foreign currency, commodity, volatility, and other risks.

For more complete information about the various investment solutions available, including the investment objectives, risks and fees, please refer to the Disclosure Brochure and applicable Fund Prospectus. Please read them carefully before investing. For a copy, please contact your AssetMark Consultant or Financial Advisor.

CFA^® and Chartered Financial Analyst^® are registered trademarks owned by CFA Institute.

Jason Thomas is also Chief Executive Officer & Chief Investment Officer of Savos Investments, a division of AssetMark, Inc. Savos Investments is a division of AssetMark.

AssetMark, Inc. is an investment adviser registered with the Securities and Exchange Commission.

We respect your right to privacy - view our policy