Category: Monthly Commentary

Monthly Commentary

June Market Commentary

US stocks’ recovery continued in June as optimism over business reopenings remained high and economic news topped expectations. US stocks posted their best quarterly performance since 1998 as all states opened up for business to some degree in June. For the quarter, the Fed’s moves and stimulus measures by the US government provided support for US stocks.  Economic news began to improve despite the US officially entering a recession beginning in February.  While new claims for unemployment insurance remain high, employers added 2.5 million jobs in May, the most on record, significantly better than the further job losses expected. The unemployment rate fell from 14.7% in April to 13.3% in May.  US retail sales soared 17.7%, significantly outpacing expectations, and new homes sales jumped 21% in May.  Us manufacturing output continued to contract, but at a slower pace and purchasing manager surveys showed global business activity had slower declines in May suggesting the recent economic weakness could be bottoming out.

Foreign stocks were the top performing asset class in June and posted their best quarter in nearly 10 years driven by the loosening of lockdowns, improving economic numbers, and central bank support.  Providing a glimpse of the trough of economic performance brought on by the virus, the UK said April GDP was down 25% from a year earlier.  The European Central Bank (ECB) significantly increased its bond buying program to $1.52 trillion, moving it more in line with the Fed.  EU officials are still negotiating on a $2 trillion coronavirus response plan, but most European countries have fully reopened and have not seen a new surge in cases.  Oil continued to rebound, rising 10.6% over the month to finish at $39.27 a barrel driven by OPEC production cuts as well as reduced production in the US.  China continues to bounce back from Covid-19 with manufacturing activity and the service sector showing growth in May.  Emerging markets have outpaced developed markets for June, the second quarter, and the year to date.

Bonds rose in June as interest rates remained flat.  After the Fed’s June meeting they stated they planned to not raise interest rates through 2022 and they will continue their current pace of Treasury and mortgage backed security purchases.  The Fed also announced during the month they were expanding the municipalities allowed to borrow directly from the Fed’s lending program and it would expand its bond buying program to include debt from individual companies.  Since the virus began significantly impacting the US, the Fed has implemented nine different emergency lending programs to support the economy.  The 10-year Treasury yield was flat over the month ending at 0.66%, only down slightly from 0.70% where it started the second quarter.  However, it has declined significantly from 1.92% to start the year.  For the month and quarter, credit bonds were the top performers with longer term maturities outpacing short term maturities. Over the year to date, it was US government bonds leading the way with longer maturities outpacing.

Index Performance  June2QYTDTrl. 1 Yr.
US Stock (Russell 3000)2.29%22.03%-3.48%6.53%
Foreign Stock (FTSE AW ex US)4.48%16.56%-10.65%-3.99%
US Bond Mkt. (BarCap Int. Gov/Credit)0.62%2.81%5.28%7.12%
Municipal Bonds (BarCap 1-10yr Muni)0.39%2.68%2.06%3.65%
Cash (ICE ML 3Month T-Bill)0.01%0.02%0.60%1.63%

There is no guarantee that any investment strategy, including those described here, will be successful. Any investment or investment strategy can lose money. Past performance does not guarantee or predict future results. You should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from Raffa Wealth Management, LLC. This information was gathered from reliable sources but we cannot guarantee accuracy. Indexes do not reflect the fees associated with actual investments and such fees would reduce the performance illustrated.  Source: Morningstar, Inc.


May Market Commentary

In May US stocks continued to rebound driven by optimism over businesses reopening and the potential for vaccines.  Many states began to roll back their restrictions on business with all states expected to be open by early June.  Currently, there are more than 10 different vaccines that have shown promise and are going through various levels of testing, driving investors hopes that prevention from the virus could exist as soon as early next year.  With nearly all S&P 500 companies reporting earnings, 64% posted earnings that topped estimates, however, earnings as a whole fell 14.6% for the quarter.  Economic news was rough in May, but economists hope that the numbers posted reflect the economy at or near the bottom.  There were 20.5 million job losses in April and the unemployment rate surged to a high last seen during the depression at 14.7%.  Initial jobless claims filed since mid-March reached 38 million in mid-May.  However, near the end of the month, the total number of workers receiving unemployment benefits declined for the first time since February.  US retail sales fell 16.4% and manufacturing output dropped 13.7% in April.  Both were records.  First quarter GDP was revised down to a 5% contraction.  On the positive side, purchasing manager surveys showed global business activity had slower declines in May, and consumer sentiment in May improved over April.  For the month, US stocks climbed 5.35% and are now only down 5.63% for the year to date.

Foreign stocks gained as well in May driven by the loosening of lockdowns and stimulative measures.  EU officials projected that the region would suffer “a recession of historic proportions this year” due to the pandemic.  Germany fell into recession in the first quarter with GDP dropping 8.6%.  It was the second fastest rate of contraction since reunification.  France, Italy, and Spain posted GDP declines of 21.4%, 17.7%, and 19.4%, respectively. As a result, the EU is working on a $2 trillion coronavirus response plan that would significantly deepen the country bloc’s economic union. Japan moved into recession in the first quarter when its GDP contracted 3.4%.  Oil surged over the month, rising 88% to finish at $35.49 a barrel on improved demand and production cuts.  China has shown some gains since lifting its lockdown with industrial output improving, but retail sales remain weak. China elected for the first time in 25 years to not list a GDP growth target for 2020.  China’s central bank said it would continue to roll out measures to support its economy and be flexible with its monetary policy.  Emerging markets trailed developed markets over the month and year to date.  Foreign stocks rose 3.62% in May, but are still down 14.48% over the year to date.

Bonds gained in May as interest rates were steady.  Fed chief Powell said in congressional testimony the Fed would use “its full range of tools to support the economy” and that further fiscal stimulus was likely needed to help support the economy.  Comments made by Fed Governors make it unlikely the Fed would use negative interest rates as a monetary tool.  The 10-year Treasury yield was essentially flat over the month ending at 0.65%.  For the month, muni and credit bonds were the top performers with longer term maturities outpacing short term maturities. Over the year to date, it was US government bonds leading the way with longer maturities outpacing.  In May, the US bond market rose 0.76% and has gained 4.63% over the year.



Index Performance  MayYTDTrl. 1 Yr.
US Stock (Russell 3000)5.35%-5.63%11.46%
Foreign Stock (FTSE AW ex US)3.62%-14.48%-2.67%
US Bond Mkt. (BarCap Int. Gov/Credit)0.76%4.63%7.60%
Municipal Bonds (BarCap 1-10yr Muni)2.48%1.65%3.69%
Cash (ICE ML 3Month T-Bill)0.00%0.58%1.84%


April Market Commentary

In April US stocks posted their best month since 1987 as stocks rebounded off their March lows supported by interventions from the Federal Government, the Federal Reserve, and optimism over the easing of lockdowns.  A new $484 billion deal was reached in Congress to aid small businesses and hospitals.  The majority of the funds will go towards replenishing the Paycheck Protection Plan and the Economic Injury and Disaster Loan funds that were quickly loaned out from the CARES Act.  Economic news started to reflect the impact of the shutdown of the economy.  There were 701,000 jobs cut in March and the unemployment rate moved from 3.5% in February to 4.4% in March, however, due to the timing of the reading the results don’t reflect the full extent of recent job cuts.  Since mid-March, more than 30 million people have filed for unemployment benefits.  US retail sales fell a record of 8.7% in March.  Factory and business activity and auto sales all saw a significant contraction in March.  First quarter GDP posted its fastest decline since the Financial Crisis falling 4.8%, more than projected.  For the month, US stocks surged 13.24%, but remain down 10.42% for the year to date.

Foreign stocks bounced back as well in April driven by monetary and fiscal stimulus measures as well as an easing of lockdowns.  To fight the impact of the virus on Europe, the EU reached an agreement on a $590 billion coronavirus relief bill.  The European Central Bank announced it would buy $820 billion of European government bonds.  These steps were taken as the lockdown of the region was showing its effects.  Factory activity and the service sector plunged in Europe and the Eurozone posted its largest quarterly decline of GDP ever, falling 14.4%.  The Bank of Japan said it would nearly triple its holdings of corporate debt to help support the Japanese economy.  The US, Saudi Arabia, and Russia reached an agreement for the 23 major oil producing countries around the world to cut oil production by 9.7 million barrels a day to help support the price of oil.  However, oil experienced extreme volatility over the month with the current month’s futures contract falling below zero at one point during the month before oil ended down 8% at $18.84 a barrel.  China contracted 6.8% in the first quarter, the first ever decline in growth for the country since the data was first tracked in 1992.  However, the decline was better than the 8.3% projected as business activity improved and the bank of China implemented additional stimulus measures.    Emerging markets have topped developed markets over the month and year to date.  Foreign stocks jumped 7.67% in April, but have declined 17.47% over the year to date.

Bonds climbed in April as interest rates edged down and Fed intervention helped ease volatility.  The Fed announced a new $2.3 trillion loan program supporting small and midsize businesses, municipalities, and riskier types of debt that had been previously excluded.  They also said they were prepared to expand that program if needed to prevent long lasting damage to the US economy.  After their meeting at the end of April, the Fed stated that it will use “its full range of tools to support the US economy in this challenging time.” They also called on the federal government to take on additional stimulus actions.  The 10-year Treasury yield edged down slightly over the month to end at 0.64%, down from 0.70% to start the month.  For the month, credit bonds were the top performer with longer term maturities performing the best. Over the year to date, it was US government bonds leading the way with longer maturities outpacing.  Muni bonds were down over the month over concerns of how the lockdowns would impact state and local revenues.  In April, the US bond market rose 1.41% and has gained 3.84% over the year.


Index Performance  AprilYTDTrl. 1 Yr.
US Stock (Russell 3000)13.24%-10.42%-1.04%
Foreign Stock (FTSE AW ex US)7.67%-17.47%-10.91%
US Bond Mkt. (BarCap Int. Gov/Credit)1.41%3.84%8.18%
Municipal Bonds (BarCap 1-10yr Muni)-0.19%-0.80%2.21%
Cash (ICE ML 3Month T-Bill)0.01%0.58%2.07%


March Market Commentary

US stocks plunged in March ending the 11 year bull market as the spread of COVID-19 in the US brought the economy to a near stop.  Residents of many states were told to stay home and non essential businesses were ordered to be closed.  Stocks posted their worst month since the Financial Crisis and worst first quarter ever.  In an attempt to blunt the impact on the economy the Federal government passed fiscal stimulus measures, including a package totaling $2 trillion, and declared a national state of emergency freeing up funds to fight the virus.  Economic news released in March did not reflect the full scale of the impact with only a glimpse towards the end of the month.   US companies added 273,000 jobs in February, but the weekly reading of filings for unemployment benefits surged at the end of the month to a record of 3.3 million.  Service sector and manufacturing activity expanded in February, but posted their steepest drop since October 2009 in March.  For the month, US stocks dropped 13.75% and they were down 20.90% over the first quarter.

Foreign stocks plummeted as well in March driven by the spread of COVID-19.  Italy, Iran, Spain and France were some of the particularly hard hit places as the virus spread swiftly across the world and ground economic activity to a halt in many countries.  As a result, central banks around the world announced cuts to their benchmark lending rates as well as other measures.  The European Central Bank offered banks loans as low as –0.75%, increased its bond buying program to $819 billion, and expanded the types of bonds it would purchase.  The Bank of England cut its benchmark interest rate to a record low and said it would buy $232 billion of UK government bonds. Similar to the US, countries all over the world including Germany, Japan, the UK, and France announced significant rescue packages to support businesses and workers.  Early in the month an oil price war broke out between Saudi Arabia and Russia sending oil prices plummeting.  Oil fell 66% over the first quarter to finish at $20.48 a barrel.  Its lowest level since 2002.  The bright spot was China as manufacturing climbed sharply as the country and factories got back to work after significantly recovering from the virus.  Emerging markets trailed developed markets in March and over the year to date.  Foreign stocks dropped 14.42% in March and have declined 23.35% over the quarter.

High quality bonds posted solid performance in March as investors flocked to safe havens over fears of a derailed global economy.  The Federal Reserve took multiple emergency steps during the month moving faster and further than the central bank did during the Financial Crisis.  The Fed cut the Fed Funds Rate to near 0%, restarted their bond buying program pledging unlimited purchases of government bonds, will begin making loans directly to American businesses and injected trillions of dollars into the short term funding markets.  The 10-year Treasury yield was volatile over the month, hitting a record low early in the month, rising sharply before falling to end the month at 0.70%, down from 1.13% to start the month.  For the quarter and month, government bonds were the top performer with longer term maturities performing the best. Most other bond sectors struggled with shorter term maturities holding up better.  In March, the US bond market ticked down 0.44%, but was up 2.40% for the quarter.



Index Performance  MarchYTDTrl. 1 Yr.
US Stock (Russell 3000)-13.75%-20.90%-9.13%
Foreign Stock (FTSE AW ex US)-14.42%-23.35%-15.05%
US Bond Mkt. (BarCap Int. Gov/Credit)-0.44%2.40%6.88%
Municipal Bonds (BarCap 1-10yr Muni)-2.37%-0.61%2.50%
Cash (ICE ML 3Month T-Bill)0.29%0.57%2.25%


February Market Commentary

US stocks sank, posting their worst month since 2009, on concerns over the economic impact of the spread of the coronavirus. After first being mostly contained to China it became evident over the second half of the month that it was spreading globally and would have a significant impact on consumers and business operations. With the vast majority of S&P 500 companies reporting fourth quarter earnings, 70% have beaten expectations. However, many companies have lowered earnings outlooks for the year over impacts from the virus. Economic news was relatively positive over the month, though it had yet to reflect much impact from the coronavirus. US hiring remained strong with 225,00 new hires in January. The unemployment rate ticked up to 3.6%, but it was a result of more people entering the workforce. Retail sales rose and consumer sentiment climbed. Manufacturing unexpectedly improved expanding for the first time since July. On the downside home sales fell by 1.3% in January. Oil descended 13.2% over the month to finish at $44.76 a barrel. In February, US stocks dropped 8.19% and are down 8.29% over the year to date.

Foreign stocks fell as well in February weighed down by the potential impact from the coronavirus. As part of its pledge to deliver on the purchase of US goods, China said it would cut tariffs on $75 billion worth of US goods in half from 10% to 5% and for other goods from 5% to 2.5%. China also launched fresh stimulus measures to support its economy. The government is planning to step in to help businesses adjust their supply chains given the work stoppages that have occurred in the country. Japan’s GDP growth contracted 6.3% in the fourth quarter much worse than the 3.9% contraction projected. The decline was driven by an increase to the national sales tax. The country could enter into a recession if there isn’t a substantial improvement in the coronavirus hampered first quarter. Industrial activity eased in Germany, France, and Spain in December. Emerging markets topped developed markets in February and over the year to date. Foreign stocks dropped 7.93% in February and have declined 10.43% for the year to date.

Bonds continued to surge in February as investors rushed to safe havens over fears of the pace of global growth. In testimony before Congress earlier in the month, Fed Chief Powell said they were watching the impacts of the coronavirus carefully, but the Fed planned to continue its wait and see approach to policy changes in the Fed’s benchmark rate. After seeing significant stock market declines to end the month Powell made a surprise statement that the Fed was ready to cut the Fed Funds Rate to help support the US economy. The 10-year Treasury yield ended the month at 1.13%, down from 1.52% to start the month, a record low. For the month, longer term bonds outperformed shorter term bonds and government bonds were the top performing sector. In February, the US bond market jumped 1.41% and is now up 2.85% for the year.


Index Performance  Feb.YTDTrl. 1 Yr.
US Stock (Russell 3000)-8.19%-8.29%6.90%
Foreign Stock (FTSE AW ex US)-7.93%-10.43%-0.06%
US Bond Mkt. (BarCap Int. Gov/Credit)1.41%2.85%8.81%
Municipal Bonds (BarCap 1-10yr Muni)0.63%1.80%5.78%
Cash (ICE ML 3Month T-Bill)0.13%0.26%2.09%