1st Quarter 2020

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The S&P 500 stock index closed at an all-time high on February 19, 2020. Then Covid-19 abruptly ended the 126-month bull market, the longest bull run in modern history. By March 23, stocks lost 34%. Despite a surge at the end of the quarter, the S&P 500 posted a -19.6% loss in the first quarter of 2020.

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But applying the rubrics of modern portfolio theory requires judgment from a professional and personal attention because the rules of MPT are changing.

For example, emerging markets and foreign stocks have underperformed for years.

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Energy stocks lost half of their value in the quarter. With stay-at-home orders mandated across the globe and U.S., cars, planes, and trains came to a near-standstill, resulting in a global oil glut. In contrast, tech, healthcare, consumer staples, and utilities sustained losses about a quarter the size.

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Over the five years ended March 31, 2020, the S&P 500, the growth engine of a diversified portfolio, was the No. 1 investment across a broad range of assets — despite the Covid-19 bear market in the final three months of the period. Even in the shadow of the coronavirus bear market, the five-year period was not terrible for stocks.

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This scattergraph shows Wall Street strategists' performance based on their sector predictions in Barron's for 13 years. If Wall Street had been correct, the black dots would fall on the red line or cluster around it. The randomness shows Wall Street cannot predict the best and worst sectors

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The 60 economists surveyed in early April by The Wall Street Journal expected the U.S. economy to shrink this quarter by an unprecedented -25.3%. However, they expected a v-shaped recovery, with +6% growth in gross domestic product in the third quarter of 2020 and +6.6% growth in the fourth quarter.

Past performance is never a guarantee of your future results. Indices and ETFs representing asset classes are unmanaged and not recommendations. Foreign investing involves currency and political risk and political instability. Bonds offer a fixed rate of return while stocks fluctuate. Investing in emerging markets involves greater risk than investing in more liquid markets with a longer history.



Market DataBank: 2Q 2021
Market DataBank: 1Q 2021
Market DataBank: 4Q 2020

This article was written by a professional financial journalist for Blattel & Associates and is not intended as legal or investment advice.
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