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Investment Strategy Committee Notes – Q2 UpdateSubmitted by The Wealth Consulting Group on August 28th, 2020
ISC Model Updates Q2:
Equities continued their rally off the March 23rd low on the back of further easing from both monetary and fiscal authorities the world over as well as optimism around economies beginning to reopen. Markets did take a pause toward the beginning of June with concerns over increasing infections leading to a delay in many states reopening efforts being front and center. As a result, we have seen a continuance of the market bifurcation between large-cap growth and everything else post the June 8th highs in the major indices.
The Russell 2000 handily outperformed from the March 23rd lows to the June 8th highs.
However, the trend was fleeting as the S&P 500 outperformed during the June selloff. The Russell 2000 as seen below was briefly down low double digits from June 8th.
Looking only at the NASDAQ 100 up 16.3% YTD through the end of the 2nd quarter you could be forgiven for missing that whole global pandemic induced recession thing. The S&P 500 too was almost back to positive territory by June 30th. The small-cap value was another story still down -23.5% percent over that same period. While on the surface, the market appears to be shrugging off any concerns around the economy or the virus. Due to the concentration of market indices like the S&P 500, the strength of the largest constituents is masking weakness more befitting the economic backdrop underneath the surface.
The ISC Growth & Income Benchmark is a blend of 33% S&P 500, 9.6% S&P 400, 2.4% S&P 600, 10.8% MSCI EAFE, 4.2% MSCI Emerging Markets, 37% Barclays Aggregate, and 3% Cash.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested in directly.
The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
Investing in stock includes numerous specific risks including the fluctuation of dividends, loss of principal, and potential illiquidity of the investment in a falling market.
The prices of small and mid-cap stocks are generally more volatile than large-cap stocks.
Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and bonds are subject to availability and change in price.
The fast price swings in commodities and currencies will result in significant volatility in an investor’s holdings.
International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.
Value investments can perform differently from the market as a whole. They can remain undervalued by the market for long periods of time.
WCG Wealth Advisors, The Wealth Consulting Group and LPL Financial are not affiliated with any of the entities referenced.
The S&P 500 Index is a capitalization-weighted index of 500 stocks designed to measure the performance of the broad domestic economy through chanced in the aggregate market value of 500 stocks representing all major industries
The S&P Growth and Value Indices are companies in each U.S. index that are split into two groups bases on the price-to-book ratio to create growth and value indices. The Value index contains companies with lower price-to-book ratios, while the Growth index contains those with higher ratios.
The S&P Midcap 400 Stock Index is an unmanaged index generally representative of the market for the stocks of mid-sized US companies.
The S&P Small Cap 600 Index is an unmanaged index generally representative of the market for the stocks of small-capitalization U.S. companies.
The MSCI EAFE Index is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the US & Canada.
The MSCI EM (Emerging Markets) Index is a free float-adjusted market capitalization-weighted index that is designed to measure the equity market performance of the emerging market countries of the Americas, Europe, the Middle East, Africa, and Asia.
The Russell 2000 Index is an unmanaged index generally representative of the 2,000 smallest companies in the Russell 3000 index, which represents approximately 10% of the total market capitalization of the Russell 3000 Index.
The NASDAQ-100 is a capitalization-weighted stock market index made up of 103 equity securities issued by 100 of the largest non-financial companies listed on the NASDAQ stock market.
The Bloomberg Barclays U.S Aggregate Bond Index is an index of the U.S. investment-grade bond market, including both government and corporate bonds.