Market Overview

Recap

  • During the 2nd quarter risk assets were extremely resilient due to both the liquidity provided by global central banks as well as the reopening of business following months of mandated quarantine related shutdowns;

  • U.S equities had one of their best quarters on record, with the S&P 500 Large-Cap and Russell 2000 Small-Cap Indexes returning 20.54% and 25.42%, respectively;

  • U.S. employment rebounded more quickly than expected in May and June, which bolstered investor sentiment;

  • Also, as companies were able to cut costs quickly 2nd quarter earnings were more stable than our team expected;

  • Given the accommodation provided by the Federal Reserve, interest rates remained stable during the quarter, something that we expect to continue through the 3rd quarter;

  • For the same reason, credit outperformed both mortgages and U.S. Treasuries as the Federal Reserve stepped in to put a floor under credit;

Outlook

  • The upside for U.S. equities is becoming more and more limited due to extremely high valuations, even when considering for record low interest rates, and the risk of second surge of Covid-19 occurring;

  • However, at the same time given animal spirits, or the optimism of investors as a whole, the S&P 500 could come close to reaching its all-time high set in February this year;

  • As portfolio managers, this dilemma between valuation and animal spirits is making our job ever harder, and we believe that a slightly more neutral stance on asset allocation is becoming even more suitable for our investors;

  • In regard to fixed income, we believe that the actions taken by the Federal Reserve will continue to propel credit spreads tighter, and therefore we have been adding exposure to credits in which we see relative value, especially further out on the yield curve;

  • Our current stance is one of slightly de-risking on the equity side of the portfolio, while dialing up the risk on the fixed income side;

Positive Earnings Revisions

Positive Earnings Revisions - CIM 

 

3rd Qtr. Gains

 

3rd  Qtr. Gains - CIM Investments 

Amazon Drives Consumer Discretionary

Amazon Drives Consumer Discretionary

 

Employment Rebounds

Employment Rebounds 

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