Market Commentary July 2020

on Jul 17, 2020 4:15:00 PM By | Theresa Gusman | 0 Comments | Market Commentary
A Wild Ride By Theresa Gusman, Chief Investment Officer |  Download the PDF Overview It’s been a wild ride – and like the terminus of a dizzying, high-speed roller coaster, we’re right back where we started. After hitting an all-time high in mid-February, plunging 34% from its peak, bouncing in late March, and advancing 20.5% in the second quarter, the S&P 500 is down less than 2% year-to-date. The Consumer Discretionary, Technology, and Energy Sectors performed best in the second quarter, and the Utilities, Consumer Staples, and Financials were the worst performers as investors’ risk appetite returned. The growth versus value chasm continued to widen in the second quarter, which is not surprising given the increase in risk appetite and sector performance in the second quarter. Strategies incorporating environmental, social, and governance (ESG) factors broadly outperformed traditional strategies and indices in the second quarter as the emphasis continued to shift to quality and sustainability. Uncertainty surrounding the COVID-19 led to a sharp rise in volatility in March, which continued through the – albeit to a lesser extent and to the upside (which always feels better). Attention remains focused on the trade-offs among rising COVID-19 cases, quarantine-fatigue, progressively easing the shutdown that crippled the global economy, and “whatever it takes” monetary and fiscal policies. The effort to weigh conflicting and potentially disastrous outcomes – both personally and collectively – sets the backdrop for continued market volatility and unpredictability in the coming month
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Economic Overview July 2020

on Jul 17, 2020 4:15:00 PM By | Holly Testa | 0 Comments |
By Holly Testa  |  Download the PDF Economic Overview Below is our compilation of the economic views expressed by First Affirmative’s key data providers. You may click on the links provided in the footnotes to access the complete report. “The COVID-19 shock altered the course of the global economy and ravaged financial markets, prompting policymakers to step in quickly and with scale. Unprecedented monetary and fiscal stimulus, combined with signs of an economic recovery as lockdowns eased, triggered a rapid rebound in risk assets.” (1) “The National Bureau of Economic Research declared the economic peak and end of the 11-year long record economic expansion as of February 2020. As investors try to size up the damage of this current recession, it is helpful to reflect on past recessions as a comparison. The x-axis shows the years in which a given recession occurred, the y-axis shows the length of a given recession and the bubble size represents the severity of a given recession. The severity is defined as the peak to trough decline in real GDP.” (3)  – See chart below.
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Advocacy and Impact July 2020

on Jul 17, 2020 4:00:00 PM By | Holly Testa | 0 Comments |
By Holly Testa  |  Download the PDF 2020 Proxy Voting Season? Better Than Expected! Investors and corporations have good reason to be distracted from routine events such as annual shareholder meetings this year. We were skeptical that participants in the process would prioritize their commitment to environmental, social, and governance issues, but we are happy to have been proven wrong. Early reports from Institutional Shareholder Services point to a year of record-setting votes on environmental and social proposals and substantial withdrawals; First Affirmative’s outcomes conform to this trend. Progress continues on a wide range of issues in spite of, or perhaps because of, ongoing events that have exposed the consequences of our collective failure to act on systemic failures — failures that, all too often, are the focus of advocacy efforts undertaken by our investor community.
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Affirmative Impact June 2020

on Jul 17, 2020 12:30:00 PM By | George Gay | 0 Comments | Affirmative Impact
Sustainable and Impact Investing in the New World By George R. Gay |  Download the PDF Many pundits discuss the “New Normal” that will arise when the pandemic ends and the economy recovers. For many in the U.S. and for most in the developing world, the “Old Normal” was not that great. The “Next Normal” will need to provide more equitable and more sustainable living conditions for a much larger portion of the population. As I near the end of my 33rd year at First Affirmative Financial Network, I reflect on what I have experienced in, and hopefully have learned from, the financial marketplace. The “Crash of 1987.” The “Asian Contagion.” September 11, 2001. The “Dot-Com Bubble and Burst.” “The Great Recession.” “The Flash Crash.” Except for 9-11, these market experiences were all the result of government, economic, or market decisions or conditions, frequently combined with some type of “financial engineering.”
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Affirmative Impact April 2020

on May 13, 2020 10:15:00 AM By | Holly Testa | 0 Comments | Affirmative Impact
Shareholder Engagement in the Midst of COVID-19 By Holly Testa  |  Download the PDF The traumatic impacts of the ongoing COVID- 19 outbreak are necessarily focusing attention to immediate concerns at the expense of just about everything else. Some thoughts on the challenges and opportunities we see as we navigate the changing day-to-day landscape:  Our Work Continues The COVID-19 crisis will do much to shape our agenda going forward, but we continue to focus on long-term systemic issues even as we re-focus our short-term strategy. We had already filed 11 shareholder proposals on behalf of clients for the 2020 proxy season prior to the onset of COVID-19, taking leadership on two resolutions.
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Market Commentary April 2020

on May 11, 2020 10:15:00 AM By | Theresa Gusman | 0 Comments | Market Commentary
Markets Respond to a Global "Time Out" By Theresa Gusman, Chief Investment Officer The US equity market was persistently hitting new highs following a 31.5% gain last year – until a few weeks ago. This surge drove the Dow Jones Industrial Average to an all-time high of 29,551 on February 12th. Then the bottom fell out. In response to the spreading coronavirus pandemic and resultant global “time out”, the S&P 500 plunged 33.9% from its peak on February 19th to its trough on March 23rd. For the quarter, US stocks lost 20.6% and global equities fell 24.0%. The healthcare (-13.9%), technology (-14.4%), and utilities (-15.5%) sectors fared best. Energy stocks had their worst quarter ever, falling 53.4% as oil prices plunged 66.4% to $20.50 per barrel from $61.10 at the start of the year. Strategies incorporating environmental, social, and governance (ESG) factors broadly outperformed traditional strategies and indices in the first quarter as the emphasis shifted to quality and sustainability during the “flight to quality” and energy related companies, which are often excluded from ESG strategies, underperformed. Uncertainty surrounding the virus led to a sharp rise in volatility. In mid-January, we noted, “according to the Wall Street Journal, the stock market is in one of its longest historic streaks without a daily move of 1% or more”. In contrast, in March, there was only one day where the S&P 500 did not move by more than 1%. Attention is now beginning to turn to the trade-off between easing the “time out” that has crippled the global economy and spurring new outbreaks of COVID-19. The effort to balance these two conflicting and potentially disastrous outcomes has created a no-win situation for policymakers – and set the backdrop for continued market volatility and unpredictability in the coming months.
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Economic Commentary April 2020

on Apr 9, 2020 10:15:00 AM By | Mel Miller | 0 Comments | Stock Investing Economic Commentary Economy
"March Madness" Turns to March Sadness By Mel Miller, CFA®, Chief Economist  |  Download PDF As an economist, I rely on government and industry statistics to determine not only my analysis of the current economy but to formulate my forecast of the future direction of the economy.  Tempering my investigation is the built-in lag time in the releases of at least one month. Typically a one month lag is of little consequence as an economy does not change rapidly but merely continues or reverses well-established trends. In a “normal” economy, I feel reasonably confident in describing the current situation, adding my interpretation, and forecasting the next quarter’s economic outcome within a small margin of error.  I define this process as writing “non-fiction.”
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What's An Investor To Do?

on Mar 17, 2020 10:15:00 AM By | Theresa Gusman and Mel Miller | 0 Comments |
By Theresa Gusman and Mel Miller |  Download the PDF We are going to try and answer the question of “What is an investor to do?” Going into 2020, the economy and the market seemed on reasonably stable ground. Expecting the record-breaking eleven plus years of economic expansion to continue, the stock market, as measured by the S&P 500, reached a record level on February 19th.    What has caused the dramatic change in less than a month? The expanding coronavirus pandemic, disrupting life and supply chains in addition to existing restrictive trade policies, has roiled the markets as valuation measurers become meaningless. Short-term investors and speculators sought safe havens. Gold and treasury bonds became the investments of choice as both gold and the treasury index recorded approximately 10% returns since February 19th. Amazing.   
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Advocacy and Impact January 2020

on Jan 31, 2020 10:15:00 AM By | Holly Testa | 0 Comments |
By Holly Testa  |  Download the PDF Proxy Voting Trends Our track record on proxy voting continues to contrast sharply with overall averages, as our proxy voting guidelines establish standards not typical within the mainstream investment community. We voted against over 40% of nominating committee board members due to lack of gender and racial diversity and against almost 50% of compensation committee board members due to their oversight and approval of excessive executive compensation.
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Market Commentary January 2020

on Jan 27, 2020 10:15:00 AM By | Theresa Gusman | 0 Comments | Market Commentary
Buy on the Rumor, Sell on the News By Theresa Gusman, Chief Investment Officer  |  Download PDF US equities continue to hit new highs. A 9.1% fourth quarter surge propelled the S&P 500 to a 31.5% increase in 2019 – and the index continues to advance. A mixed start to 2019 yielded to strong fourth quarter gains in international equity markets. The MSCI ACWI, Ex US index advanced 8.9% in the fourth quarter and 21.5% in 2019. Volatility diminished during the gradual climb in global equity prices. In fact, according to the Wall Street Journal, as of mid-January the stock market is in one of its longest historic streaks without a daily move of 1% or more. Amid the improving global economic and earnings backdrops, global markets look poised to continue to shrug off myriad geo-political risks and stretched valuations in the near term. As we move through the year and the election looms, we anticipate increased volatility in the US – which could provide a chance for international equity markets to stage a relative comeback.
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