U.S. Versus International
The S&P 500, an index of large U.S. companies, posted a total return of +20.0% for the Second Quarter of 2020, following -19.9% return for the First Quarter of 2020. U.S. stocks outperformed international for the quarter as measured by the iShares MSCI EAFE ETF, a representation of international stocks outside the U.S. EAFE. Total return for the Second Quarter of 2020 was 15.5%.
The reopening of businesses following the COVID-19 shutdown prompted a recovery in stocks across the world. China and Europe have begun recovery faster than the U.S. Outbreaks in the U.S. began later than overseas, so it stands to reason that the U.S. will deal with the virus longer than overseas countries.
Argentina was a top performer for the quarter, rising over 40%. The Argentina economy has struggled significantly over the years and now is no different. The primary benefit to Argentina stocks is that they are priced for significant weakness. Therefore, any opportunity for recovery is rewarded. Qatar and other middle eastern nations were among the weakest performers among countries. These stocks have experienced less volatility over the past year versus other countries.
U.S. Sectors
Top performing U.S. S&P 500 sectors as reported by Koyfin.com investment performance software for the second quarter of 2020 by total return included Energy (31.9%), Consumer Discretionary (30.5%) and Technology (30.4%). Laggards for the second quarter include Utilities (2.7%), Consumer Staples (8.5%) and Financials (11.9%).
Energy stocks staged a massive rally following the drop in oil prices to near zero. Steps by OPEC to control supply and a pickup in economic activity following quarantine helped drive the strong recovery. Despite the massive recovery, Energy stocks remain down over 30% year-to-date. However, purchases near the low have proved very fruitful.
Amazon represents more than 23% of the U.S. Consumer Discretionary sector. Amazon has been a significant beneficiary of the quarantine, as homebound consumers turned to internet purchases. Within the Technology sector, Microsoft and Apple represent over 40% of the sector. Both companies stand to benefit from the shift to work from home.