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Market Commentary

May 2020



Civista Wealth Management Logo
Frank P. Sudal, CFP®, CFA
Trust Investment Management

Total Returns (%) as of April 30, 2020

Fixed Income YTD 1 Mo 3 Mo 1 Yr 3 Yrs 5 Yrs 10 Yrs
U.S Aggregate

4.98

1.78

3.00

10.84

5.17

3.80

3.96

High Yield

-8.75

4.51

-8.78

-4.11

1.87

3.44 5.86
Global

-0.40

1.51

-1.47

3.99

3.10

2.32

1.62

Equities






U.S. Large Cap

-9.29

12.82

-9.26

0.86

9.04

9.12

11.69

U.S. Small Cap

-21.08

13.74 -18.47

-16.39

-0.82 2.88

7.69

Developed International

-17.84

6.46 -16.09

-11.34

-0.58 -0.17 3.55
Emerging Markets

-16.60

9.16

-12.52

-12.00

0.57

-0.10

1.45
Source: Morningstar.  U.S. Aggregate - BBgBarc US Agg Bond.  High Yield - BBgBarc US Corporate High Yield.  Global - FTSE WGBI NonUSD.  U.S. Large Cap - S&P 500.  U.S. Small Cap - Russell 2000.  Developed International - MSCI EAFE.  Emerging Markets - MSCI EM.
 

April 1st is widely known for April Fools’ Day. This year it largely went unrecognized as investors were reeling from historic equity declines in March along with concerns over continued spread of the coronavirus. While friends and family may have abandoned their tricks this year, the market certainly did not hold back. April 1st began a month that ended with the S&P 500 posting its best monthly performance in decades. Plans to reopen the economy and hopes for effective coronavirus treatments bolstered stock prices.

U.S. small caps led the pack by posting a robust 13.74% return in April. U.S. large caps were not far behind, up 12.82%, continuing their lead on a year to date basis. Developed international and emerging market equities also posted positive returns of 6.46% and 9.16%, respectively. High yield bonds recovered 4.51% as investor’s risk appetite returned. U.S. aggregate bonds added 1.78% for the month, allowing it to be the sole asset class in the green for the year. Global bonds lagged behind, but managed to post a 1.51% gain. All asset classes finished the month in positive territory.

2020 may be the year of an unprecedented economic downturn. The U.S. unemployment rate could surpass 20% alongside a 20% decline in quarterly GDP, according to White House economic adviser Kevin Hassett and Treasury Secretary Steven Mnuchin. While coronavirus shocked the global economy into an almost certain recession, businesses are starting to reopen and we may see a quicker recovery than in previous downturns.

The latest projections from the International Monetary Fund (IMF) indicate a decline in GDP of 5.9% for the U.S. and 3% globally this year. The brunt of the declines are expected to occur in the second quarter. However, the IMF also projects a robust increase in GDP of 4.7% for the U.S. and 5.8% globally next year. The market, a leading indicator, is currently looking through the forming economic valley and pricing in the expected recovery.

While we believe that significant volatility will continue, March and April has reminded us why panic is not an effective investment strategy. Investment decisions should focus on individual long-term goals, time horizons, and risk tolerance.  Stay well.