U.S. Versus International
The S&P 500, an index of large U.S. companies, posted a total return of 8.9% for the Third Quarter of 2020, bringing performance to 5.6% year-to-date in 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 Third Quarter of 2020 was 4.8% and year-to-date was -7.4%.
A resurgence of the virus in Europe is prompting renewed closures in the area. European stocks remain well behind U.S. and Asian stocks for the year. The prospects of recovery in Europe is seen as weaker than other areas of the world. Europe continues to slowly recover from the financial crisis. Uncertainty surrounding the United Kingdom exit from the European Union (Brexit) also remains an overhang on the overall economy.
Global recovery from the COVID-19 shutdown continued at a slower pace for much of the world markets. Asian stock markets continued to outperform, as they appear to be moving out of the slowdown faster than other areas.
U.S. Sectors
Top performing U.S. S&P 500 sectors as reported by JPMorgan for the third quarter of 2020 by total return included Technology (28.7%), Consumer Discretionary (23.4%) and Communications (8.6%). Laggards for the third quarter include Energy (-48.1%), Financials (-20.2%) and Utilities (-5.7%).
Technology and Consumer Discretionary stocks continue to far outpace the rest of the market. These sectors continue to benefit from shifting trends in the way companies do business and consumers shop. Innovators in cloud storage and security are seen as major benefactors of the work-from-home trend. On-line shopping has tremendously benefited Amazon and other consumer discretionary stocks tied to delivery-based items.
Energy has been on a sharp roller coaster ride this year. After rising 31.9% in the second quarter, sector stocks plunged 48.1% this quarter. Volatility is attributable to fluctuating supply/demand forces across the globe. Continued slowdown in travel industries has posed significant demand weakness. And an oversupply of crude oil in the face of trend changes is concerning investors. Most notable was the passage of an executive order from the governor of California banning the sale of gas-powered cars by 2035 in the state.