July 9, 2020
Market Highlights 2Q 2020
The S&P 500 Index bottomed on March 23rd and began its rebound during the 2nd quarter while the COVID-19 pandemic continued to spread around the world. The United States became the country with the highest death toll worldwide as protesters revolted against government mandated shutdowns. As the world’s economies were brought to a standstill, oil futures turned negative for the first time in history despite unprecedented OPEC production cuts in early April (9.7 million barrels per day cut) as storage hit capacity. Since the April 20th low, oil recovered to the $40s as OPEC capacity cuts continue to be extended and US producers pull back. Phased re-openings to reignite economies around the world were followed by increases in COVID cases. So far, some countries have been forced to pull back or reverse reopening plans, but the market has continued its climb as economic data continues to be positive. Non-farm payroll in June hit 4.8M jobs (a 7.5M rise over the last two months, reversing 1/3rd of the 22M job collapse in March and April) and New Orders in June hit 56.4 versus 27.1 in April – the second largest 2-month change going back to 1948. The killing of George Floyd in Minneapolis by police sparked additional protests around the world as the Black Lives Matter movement gained additional momentum. The quarter ended with China passing a sweeping, new security law for Hong Kong that makes it easier to punish protesters and dissidents and reduces the city’s long protected autonomy. The move was largely criticized.
The Nasdaq Composite hit a new high on June 23rd returning 30.95% for the quarter. This was followed by the S&P500 and the Dow Jones Industrial Average returning 20.54% and 18.51%, respectively. All eleven sectors in the S&P 500 posted positive returns during the period with Consumer Discretionary, Information Technology and Energy posting the largest increases with returns of 32.86%, 30.53%, and 30.51%, respectively. Small-cap stocks outperformed mid-cap stocks, which beat large-cap names but all were positive for the quarter. Specifically, the Russell 2000 Index’s 25.42% rise did better than the Russell Mid-Cap Index and the Russell 1000 Index which posted gains of 24.61% and 21.82%, respectively for the quarter. Growth stocks continued to beat their value counterparts, as the Russell 1000 Growth Index gained 27.84% compared to the 14.29% rise of the Russell 1000 Value Index over the same period. Bonds trailed behind all equity markets with long-dated US Treasuries returning 0.12% while US corporates did better with the Barclays Aggregate returning 2.90%. The US Dollar Index declined -1.67% for the quarter while gold gained 12.77% and oil gained 91.75%. Bitcoin followed equities higher returning 41.13% over the period.
Bill Miller’s 2Q 2020 Market Letter
The views expressed in this commentary reflect those of Miller Value Partners analyst(s) as of the date of the commentary. Any views are subject to change at any time based on market or other conditions, and Miller Value Partners disclaims any responsibility to update such views. The information presented should not be considered a recommendation to purchase or sell any security and should not be relied upon as investment advice. It should not be assumed that any purchase or sale decisions will be profitable or will equal the performance of any security mentioned. Past performance is no guarantee of future results.
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