Second quarter 2020 capital markets outlook

July 2020


  • For risk-oriented assets, Q2 was a mirror image of Q1. Equity markets across the globe retraced a material portion of their Q1 drawdowns, with certain markets (e.g., US growth stocks) now standing in positive return territory on a year-to-date basis. While not the strongest month of Q2, June saw most equity indices produce returns in the low-to-mid single digit range.
  • The triumph of growth stocks over value stocks continued during June. In an extension from May, small cap stocks outperformed large cap stocks during June and over the most recent quarter in aggregate. There continues to be a material divergence in trailing period performance for growth vs. value and small vs. large, and this is exemplified at the extremes with large cap growth stocks (e.g., Russell 1000 Growth) outperforming small cap value stocks (e.g., Russell 2000 Value) by over 30% thus far in 2020.
  • As the Federal Reserve continued to implement unprecedented monetary policies, US Treasuries produced flat-to-positive returns during June.
  • The US Treasury interest rate curve was essentially unchanged from the end of May to the end of June. Intramonth volatility did occur at the long end of the curve, however, as 10- to 30-year bonds saw their yields fluctuate within a range of approximately 30 basis points (at current levels, 30 basis point swings represent material bond price fluctuations).