Commentaries
Major indices ended the third quarter with gains despite continued global economic challenges. The S&P 500 Index rose 8.93% and the MSCI ACWI ex US Index rose 6.34%. However, for the entire year of 2020 (1/1/2020 – 9/30/2020) the S&P 500 Index is only up 5.57% and the MSCI ACW ex US Index is down -5.07%. Even if an investor entering the year held throughout the whole year to match indices, the risks far outweighed the rewards. Keep in mind, during the pandemic in March, the S&P 500 Index was down over -11% in ONE SINGLE DAY. Hyper uncertain periods of time are met by large swings in volatility, which may be far from over...
Global asset returns in Q2 of 2020 displayed a stark contrast to the panic of Q1, when equity markets experienced drawdowns over -30%. Fortunately for investors, an unparalleled barrage of both Federal Reserve market intervention and government aid and spending in the U.S. stopped the bleeding. After a vertiginous start to 2020, asset prices suffered a precipitous fall, leading the S&P 500 Index to experience virtually the worst quarter ever in Q1 – only to then rise dramatically off the lows reached in March, to close one of the best quarters ever in Q2. At one point...
Redwood Portfolio Managers Richard Duff and Michael Cheung recaps the first quarter of 2020 and explain why it is still important to manage risk from here.
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The numbers are important. Investors no longer have to wonder when the next major market correction (and bear market) will arrive. In Q1 of 2020, the historic bull market was met, and ended, with a historic selloff. No more “what-ifs”, no more looking backwards at data such as “how would it have done in a crisis like 2008”, no more Monte-Carlo simulations and predictions. Investment portfolio construction, and more importantly, investment process in times of distress, was tested in real-time. In the first quarter of 2020...