Monthly Archives: October 2020
U.S. Stock Prices were Mixed as the S&P 500 Index Declined
Market Data as of Week Ending 10/23/2020 unless noted otherwise
EQUITIES
U.S. stock prices were mixed as the S&P 500 Index declined, ending a streak of gains. Small and medium sized company stocks generally outperformed large company peers, while value stocks rotated into a leadership position and outperformed growth. Performance diverged across sectors as prices advanced in the communication services, utilities, energy, and financials sectors. However, those gains were more than offset by losses in the real estate, information technology, consumer staples, consumer discretionary, industrials, and materials sectors. Developed foreign stocks in Europe and Asia outperformed U.S stocks while Emerging Market stocks outperformed developed foreign markets.
BONDS
U.S. Treasury yields rose this past week as the 10-year Treasury note reached its highest level since early June. High yield corporate bonds were the top performing asset class, whereas investment grade corporate bonds declined. Investment grade corporate bonds are yielding approximately 2% and high yield corporate bonds are yielding more than 5%.
MACROECONOMIC DATA
Economic data released during the week was mostly positive and headlined by encouraging housing data. Existing home sales were up more than 9% in September and reached their highest level since May 2006. Initial unemployment claims for the week, coming in at 787,000, were lower than expected and the lowest level since March. More than 8 million Americans continue to claim ongoing unemployment benefits. In Europe, coronavirus restrictions have slowed their economic recovery as IHS Markit’s Flash Composite Purchasing Managers’ Index (PMI) fell to 49.4 in October. Export data in Japan was better than expected as exports to the U.S. increased for the first time in 14 months and shipments to China, Japan’s largest trading partner, advanced 14%.
401(k) Balances Returned to Positive Territory for 2020
After a rollercoaster performance across the 1st half of 2020, the Mid Atlantic Trust Company 401(k) Benchmark delivers a second straight positive quarterly return, which means the hypothetical 401(k) investor now has a positive YTD return for 2020.
Following up on a return of over 15% in the second quarter of 2020, the Mid Atlantic Trust Company 401(k) Benchmark continued its momentum in the third quarter and tipped the year-to-date return for the hypothetical 401(k) participant* into positive territory. The benchmark, which reflects the portfolio performance across 401(k) plans serviced by the company, finished the second quarter up 6.05% for the three months ending September 30, 2020, and now stands at a 2.72% year-to-date return for 2020.
Just like the ups and downs we have experienced in all aspects of our lives throughout 2020, the performance for the 401(k) Benchmark in 2020 has been like a rollercoaster. Out of the gate for the year, the Benchmark saw a 16% dip in the first quarter, and even after an over 15% return in the second quarter, the hypothetical investor was still starring at a negative balance halfway through the year. Even with a market pullback during the month of September, the third quarter delivered enough of a return for the hypothetical investor to see a positive year-to-date return in their accounts — a true testament as to why experts recommend 401(k) participants “stay the course” even during the most turbulent markets.
| 3Q20 | Year-to-Date | |
| Nasdaq Composite (Principal Return) | 11.02 | 24.46 |
| S&P 500 | 8.93 | 5.57 |
| Mid Atlantic Trust Co. 401(k) Benchmark | 6.05 | 2.72 |
| Dow Jones Industrial Average | 7.63 | ‑2.65 |
In terms of asset allocation within the Mid Atlantic Trust Company 401(k) Benchmark, U.S. Stock holdings continued to climb, down from a low of 52% of holdings at the end of the first quarter, up to 54% at the end of the third quarter. This is still below where U.S. Stocks stood coming into the year when they represented 57% of holdings. That allocation shift towards U.S. Stocks has continued to come from U.S. bond market holdings, which stood at 18% at the end of the third quarter, down from 20% at the end of the first quarter.
ABOUT THE MID ATLANTIC 401(k) BENCHMARK
Mid Atlantic Capital Group is a leading financial services organization that provides a wide array of brokerage, advisory, and trust services to a diverse national client base of financial advisors and institutions, asset managers, and benefits administrators through its various subsidiary companies. Because we provide these services, Mid Atlantic Trust Company has plan investment data on approximately 95,000 401(k) plans representing approximately $100 billion in assets. Data used for this benchmark uses approximately 31,000 of those plans (see fact sheet for further information on actual sample). In response to requests from our institutional clients, we have created the Mid Atlantic Trust Company 401(k) Composite Benchmark which is designed to reflect the portfolio performance across 401(k) plans serviced, in any capacity, by Mid Atlantic.
For a copy of the full report of the Mid Atlantic Trust Company 401(k) Composite Benchmark, click here.
Contact Mr. Scott Hervoyavich of Mid Atlantic Trust Company at 800-693-7800 or by emailing him at shervoyavich@macg.com
* For the hypothetical participant balances, we used a starting balance based on the average 401(k) participant balance provided by the Investment Company Institute for the year of the starting balance. In our calculation, we assumed a starting annual salary of $50,000, a combined employee/employer 9% annual contribution rate, and a 3% annual salary increase and applied the monthly rate of return of the benchmark.
Investment Grade Corporate Bonds were the Top Performing Asset Class
Market Data as of Week Ending 10/16/2020 unless noted otherwise.
EQUITIES
U.S. stock prices were mixed and the S&P 500 Index advanced for the third consecutive week. Small and medium sized company stocks generally lagged large company peers, while growth stocks maintained their leadership position and outperformed value. Performance diverged across sectors as prices declined in the energy, financials, and real estate sectors. However, those losses were more than offset by gains in the industrials, communication services, utilities, information technology, and consumer staples sectors. Developed foreign stocks in Europe and Asia lagged U.S stocks while Emerging Market stocks outperformed developed foreign markets.
BONDS
U.S. Treasury yields declined this past week as investors and the Fed continue to support demand for high quality bonds. Investment grade corporate bonds were the top performing asset class, followed by gains from U.S. government bonds. High yield corporate bonds also delivered positive gains, but lagged investment grade peers. Investment grade corporate bonds are yielding approximately 2% and high yield corporate bonds are yielding more than 5%.
MACROECONOMIC DATA
Initial unemployment claims for the week unexpectedly rose from 840,000 to 898,000 and approximately 10 million Americans continue to claim ongoing unemployment benefits. Economic data released during the week was headlined by encouraging retail sales that reported an increase of 1.9% for the month of September and more than 5% compared to September 2019. Some of the largest cities in Europe, such as Berlin and Paris, implemented stricter and more targeted measures to contain the spread of the coronavirus.
Approximately 11 Million Americans Continue to Claim Ongoing Unemployment Benefits
Market Data as of Week Ending 10/09/2020 unless noted otherwise.
EQUITIES
U.S. stock prices advanced again last week as investors embraced risk assets. Small and medium sized company stocks generally outperformed large company peers, while growth stocks moved back to a leadership position and outperformed value. All major economic sectors delivered positive returns with notable gains in the energy, materials, information technology, and utilities sectors. Developed foreign stocks in Europe and Asia narrowly lagged U.S stocks while Emerging Market stocks outperformed developed foreign markets.
BONDS
U.S. Treasury yields rose this past week as investors demonstrated a strong preference for yield over quality. High yield corporate bonds were the top performing asset class. Investment grade corporate bonds also delivered positive gains, whereas U.S. government bonds lagged across the curve. Investment grade corporate bonds are yielding approximately 2% and high yield corporate bonds are yielding more than 5%.
MACROECONOMIC DATA
Initial unemployment claims for the week were little changed at 840,000 and approximately 11 million Americans continue to claim ongoing unemployment benefits. Economic data released during the week was sparse, headlined by PMI numbers that show the global economy is continuing to recover as the global composite PMI index came in at 52.1 for last month. Coronavirus cases rose in Spain, Italy, France, and the UK despite measures to reduce virus transmission. China reported strong PMI data for the services sector that rose from 54.0 in August to 54.8 in September. That was the fifth consecutive monthly improvement for the services sector and the latest evidence of China’s post-COVID-19 recovery.
Stock Prices Advanced Last Week
Market Data as of Week Ending 10/02/2020 unless noted otherwise.
EQUITIES
U.S. stock prices advanced last week and put an end to consecutive weekly losses. Small and medium sized company stocks generally outperformed large company peers, while value stocks rotated back to a leadership position and outperformed growth. Defensive sectors such as real estate and utilities were the top performing sectors whereas a mix of cyclical and economically sensitive sectors such as materials, energy, information technology, and communication services lagged. Developed foreign stocks in Europe and Asia narrowly lagged U.S stocks while Emerging Market stocks outperformed both U.S. and developed foreign markets.
BONDS
U.S. Treasury yields edged higher this past week as investors pivoted back toward risk assets across most asset classes. High yield corporate bonds were the top performing asset class and the only segment to record gains across short, intermediate, and long maturities. Investment grade corporate bonds were mixed with positive gains in short and intermediate term bonds, while U.S. government bonds lagged across the curve. Investment grade corporate bonds are yielding approximately 2% and high yield corporate bonds are yielding more than 5.5%.
MACROECONOMIC DATA
Initial unemployment claims for the week were lower than anticipated at 837,000 and approximately 11.8 million Americans continue to claim ongoing unemployment benefits. Economic data released during the week was mixed as the September monthly payrolls came in well below consensus with 661,000 jobs added, whereas consumer confidence rose to 101.8 this month from 86.3 in August. According to the Conference Board, that was the biggest one-month increase in 17 years. Several European countries such as Spain ordered partial lockdowns to combat a recent spike in coronavirus cases. Inflation data in the Eurozone declined for a second consecutive month in September and the year-over-year inflation rate hit a four-year low of -0.3%.