2020 q3 u.s. market review - cibc wood gundy
TRANSCRIPT
CIBC WOOD GUNDY
2020 Q3 U.S. MARKET REVIEWSUSYN WAGNER, CIM®, FCSI, CFP
INVESTMENT ADVISOR, SENIOR PORTFOLIO MANAGER
403 508-3252 [email protected], www.susynwagner.ca
S&P 500 Performance 2020 Q3 (Price Return)
3700
3500
3300
3100
2900
2700
2500
2300
2100July August September
After five consecutive positive months, the index declined inSeptember.
+ 5.5% + 7.0% -3.9%
8.5%
U.S. Market Performance (Total Return)
July August September Q3
S&P500 5.6% 7.2% -3.8% 8.9%
S&P400 4.6% 3.5% -3.2% 4.8%
Russell2000 2.8% 5.6% -3.3% 4.9%
DJIA 2.5% 7.9% -2.2% 8.2%
NASDAQ 6.9% 9.7% -5.1% 11.2%
14%
12%
10%
8%
6%
4%
2%
0%
-2%
-4%
-6%
Afterfivemonthsofmarketrebound,allfiveindicesfell intoredterritory inSeptember.
The S&P 500 and particularly the NASDAQ exhibited the best returns for the quarter.
July August September Q3
S&P500 73% 73% 32% 71%
S&P400 63% 72% 25% 57%
S&P600 55% 66% 24% 47%
80%
60%
40%
20%
0%
Market Breadth (% of stocks with a positive totalreturn)
The S&P 500 fell -3.9% in September.
32% of its constituents had a positive return.
Quarterly Market Breadth (% of S&P 500 stocks with a positive total return)
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Market breadth for Q3 fell to 71% from 92% in the previous quarter.
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GICS Sectors: 2020 Q3 Total Returns
-20.00% -15.00% -10.00% -5.00% 0.00% 5.00% 10.00% 15.00%
25 Consumer Discretionary
15 Materials
20 Industrials
45 Information Technology
30 Consumer Staples
50 Communication Services
55 Utilities
35 Health Care
40 Financials
60 Real Estate
10 Energy
S&P 500 Sector Results
25%
20%
15%
10%
5%
0%
-5%
-10%
-15%
-20%
-25%
71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15 17 19
%To
tal R
etur
nHistoric Performance –Q4
S&P 500 Total Return –4th Quarter Performance: 1971 to 2019
88
Q4
# positive quarters 39
# negative quarters 10
% positive 80%
Q1 Q2 Q3 Q4
Average 3.3% 2.8% 0.8% 4.16%
Median 2.5% 2.5% 2.6% 5.57%
Std Dev 8.0% 7.2% 8.9% 8.5%
Q4 Historic Performance
GICS Sector Q4 Performance Since 1989
Return(%)Energy Materials Industrials
Consumer
Disc.
Consumer
Staples
Health
Care Financials I.T. Telecom UtilitiesReal
Estate
Median 1.8% 7.4% 6.8% 7.4% 6.1% 6.2% 7.5% 8.7% 7.4% 4.0% 4.8%
Std Dev 9.9% 11.1% 9.2% 10.8% 7.1% 7.3% 11.9% 16.7% 11.4% 6.4% 13.7%
% Positive 65% 77% 84% 81% 87% 87% 77% 77% 65% 81% 72%
Historically, IT is the best performer in Q4, while Energy is the worst.
The chart below illustrates the historic median return, standard deviation and
probabilityofaprofitablequarter foreach sector intheUS:
Earnings: Year-over-year earnings growth of the S&P 500
86%
14%
CommunicationServices
78%
22%
ConsumerDiscretionary
91%
ConsumerStaples
9%
73%
27%
Energy
78%
Financials
2%20%
89%
HealthCare
11%
93%
Industrials
1%
6%
75%
11%
14%
Utilities
93%
Materials
7%
48%52%
RealEstate
84%
15%1%
S&P 500 EarningsResults
BEAT MISS MET
95%
Information
Technology1%
4%
GICS Sectors: 2020 Q3Overview
Earningsestimates werecuttoomuchbytheanalysts inQ2,explainingthepositiveEstimateRevisions
inQ3. Nonetheless, fortheyeartoSeptember30,EstimateRevisions aredramaticallynegative.
SectorCurrent
P/B
Expected
ROE
Expected EPS
GrowthEarnings Surprise Estimate Revisions
10 Energy 0.7x 2.80% -62.50% 7.80% 12.90%
15 Materials 2.0x 12.30% -21.40% 7.40% 9.20%
20 Industrials 2.4x 13.50% -22.00% 9.40% 5.30%
25 Consumer Discretionary 2.4x 15.00% -15.10% 14.70% 9.50%
30 Consumer Staples 2.7x 14.90% -1.30% 6.30% 3.60%
35 Health Care 4.1x 15.40% -10.60% 10.20% 1.60%
40 Financials 0.9x 9.10% -21.00% 5.70% 1.90%
45 Information Technology 3.3x 15.40% -6.90% 10.60% 4.80%
50 Communication Services 1.9x 8.20% -10.80% 10.30% 0.80%
55 Utilities 1.7x 11.50% 0.00% 0.80% -0.70%
60 Real Estate 1.5x 3.40% -17.20% 0.40% -4.40%
The Asset Mix Decision
Dividend yield on the S&P 500 is still greater than the 10-year bond yield and
the gap has slightly decreased since last quarter.
EconomicSnapshot
Unemployment, Capacity Utilization and inflation rates all rebounded in Q3
from their Q2 extremes.
Summary
FUNDAMENTALSVALUATIONS:
The median P/B in the CPMS universe has recovered to about the mid-point of its range of the past seven years.
PROFITABILITY:CPMS median reported ROE (net of T-bills) has declined 180 basis points since March. It is projected to rise again significantly in 2021.
EARNINGS
GROWTH:Reported earnings continued to decline in Q3 but bounced from Q2 lows.
ASSET MIX DECISION
Dividend yield on the S&P 500 is still greater than the 10-year bond yield and the gap has slightly decreased since last quarter.
ECONOMICSANALYSIS
Unemployment, Capacity Utilization and inflation rates all rebounded inQ3 from their Q2extremes.
CIBC WOOD GUNDY
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403 508-3252 [email protected], www.susynwagner.ca
Susyn Wagner is an Investment Advisor with CIBC Wood Gundy in Calgary, Alberta, Canada.
The views of Susyn Wagner do not necessarily reflect those of CIBC World Markets Inc.
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