The coronavirus pandemic has made for an interesting year so far in the financial markets. So, we chose to focus this post on a 2020 mid-year review of market volatility and returns.
Let’s begin by looking at the stock (equity) and bond (debt) markets. The time series below shows the significant volatility in both markets. The green line is the total return of the iShares Core S&P 500 ETF (ticker: IVV). The blue line is the total return of the iShares Core U.S. Aggregate Bond ETF (ticker: AGG). Notable, for the second quarter of the year, the S&P 500 had its biggest return since 1998. Unfortunately, the S&P 500 total return (including dividends) is still down for the year.
Year-to-Date Returns
The year-to-date total returns for the stock and bond market appear in the next figure. Alongside them, you can see the total returns of the ETFMathGuy Moderate and Aggressive portfolios. We found these portfolio returns by reviewing my account balances, so they represent returns that include portfolio turnover and the bid-ask spread from actual trades. However, they do not include the effect of taxes. Like many individual investors, I won’t file my 2020 returns until early next year.
Both portfolios continued to outperform the total return of the S&P 500. Premium subscribers can now access the July 2020 portfolios. Free subscribers are invited to review previous month portfolios. We also encourage free subscribers to upgrade their subscriptions to enable access to the portfolios built from the latest market dynamics.
Market Volatility
Stock market volatility continues to trend down, but is still higher than historical norms. Current volatility is 27.7% using our market volatility calculator that updates daily. Thus, over the last month, the volatility has come down from the 96th percentile to the 90th percentile, based on historical norms.
We interpret this lower volatility as the markets reaction to less uncertainty about future economic growth. But, as the chart shows, we are still in a time of elevated uncertainty.
We hope you find this 2020 mid-year review educational as your consider your investments in the second-half of 2020.
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