Acumen Portfolio Performance Q2 2020
Commentary on Portfolio Performance – Quarter 2 2020
Acumen & Trust’s portfolios recovered a significant element of their Q1 losses and provided stable returns throughout Q2. In stark contrast to Q1, volatility was much more muted across asset classes as hopes of economies exiting lockdown increased and risk appetite improved.
Our belief of allocating across a diverse range of asset classes proved successful once again with all asset classes, except property, gaining for the quarter. This diversification also lead to smoother returns for our portfolios in comparison to the broader equity index.
Markets in Quarter 2 2020
The easing of lockdowns across the world, continuing loose monetary policy from Central Banks and the prospect of a Covid-19 vaccine were the main drivers of gains for equity markets. Technology stocks were the big winners during the quarter as the world continued to move online. Indices posted one of the best quarters for many years (S&P500 has its best quarter since 1988). As volatility settled and economic indicators improved, particularly employment figures, markets rose sharply in April. This rise continued through May as economies started to lift restrictions and hopes of businesses returning started to emerge. However, optimism was tempered somewhat by a rise in Covid-19 cases in some parts of the world, notably the U.S., leading to some countries reversing the easing of restrictions. EU shares received a boost from the European Commission as a €750 billion recovery fund was announced at the end of May, on top of the €540 billion rescue package agreed in April. The ECB also announced it will be expanding the Pandemic Emergency Purchase Programme (PEPP) by €600 billion to a total of €1.35 trillion.
European sovereign bonds moved mostly sideways during the quarter as fears of a Depression-like downturn decreased. Sovereign bonds did receive a slight boost as the ECB and European Commission announced support measures. Bond prices did increase towards the end of the quarter as fears of a second wave of Covid-19 cases resurfaced.
Corporate bonds did slightly outperform sovereign bonds over the quarter as risk appetite increased. Prospects of lockdowns easing and businesses returning to normal meant corporate profits wouldn’t be affected as much as initially feared.
Irish property funds declined for the quarter as there is still material uncertainty surrounding the market. Transactions were effectively non-existent as restrictions meant site visits were not possible. Constructions sites and some retail shops have reopened and the easing of restrictions meant that footfall has increased towards the end of the quarter.
Although the precious metal ended Q2 near 8 year highs, it saw nearly all its quarterly return wiped out at the start of June. Gold was up nearly 10% for the quarter coming into the end of May, as investors favoured the metal over low interest rate bank accounts. However, strong employment figures and other economic indicators saw most of this gain disappear as investors gain confidence in the market. The metal then rallied for the last three weeks of June as fears of an overbought market and the return of lockdowns increased.