Pressured by COVID-19 stress and pre-election uncertainty, U.S. equities retreated in the last three weeks of October. Following the election in early November, equities moved higher and were further bolstered by encouraging vaccine news from both Pfizer and Moderna. The market then broadened, and value indices outperformed growth indices for the first full quarter since 2018.
Fiscal and monetary largesse overcame declining income and revenue estimates and pushed equity markets higher in April, starting with an 11.3% gain for the S&P 500 Index for the week ending 4/8/20. This was the highest weekly gain for the Index since 1974. The market continued a gentle rise to month end, even as earnings disappointments were more frequent than usual.
Investors got a lesson in viral economics during the first quarter of 2020. A novel coronavirus (COVID-19) went unnoticed by most of the world as we celebrated the western new year. But as the Chinese (lunar) new year approached, disruptions in supply chains in China started to affect some stocks. Still, U.S. equities continued to rise, with the price for the S&P 500 Index peaking at a record high close of 3386.15 on February 19, a healthy +4.8% increase from the end of 2019.
U.S. equities continued climbing a wall of worry to produce record highs in Q4. Despite stumbling during the first two days of October, the S&P 500 Index reached new highs 22 times during the quarter, including 9 records in the final 13 trading days of the year. The S&P 500 Index rose +9.07% in Q4 and finished 2019 with a stellar total return of +31.49%, its strongest yearly performance since 2013.
Despite ongoing trade frictions, political turmoil, monetary policy uncertainty, and slowing global growth, large-cap U.S. stocks moved higher in Q3, while small-cap indexes moved lower. By quarter end, the S&P 500 Index had returned +20.55% year to date. Earnings reports in July included just enough good news to provide support to the market, but then in August investors turned cautious amid growing economic and policy concerns. The Fed cut interest rates twice during Q3, which helped to support prices of risk assets.
U.S. equity markets were positive in Q2 while building upon the impressive returns from Q1. This resulted in the S&P 500 Index experiencing the best first half of the year since 1997. However, it was not an entirely smooth path through the quarter, as many policy issues worked to buffet investor enthusiasm. Early earnings reports in April helped allay fears of a possible year-over-year earnings decline for the S&P 500 Index.