Fixed Income Basics: Three Reasons to Hold Bonds in a Portfolio
What functions are bonds playing in an investment portfolio? Read on to explore three primary reasons why investors might choose to allocate a portion of their portfolio to fixed income instruments.
Then & Now
May 3, 2022
The current environment illustrates how quickly market conditions can change. Read on for an update from George Smith, Chairman of the Investment Policy Committee.
Public Relations PRimer: How to Get Your News Out
Every successful business will eventually have to deal with the press. Watch as veteran journalists Andy Poarch and Greg Gilligan teach us the ropes with a presentation titled “Public Relations Primer: How to Get Your News Out.”
A Lightning Round on Markets
March 21, 2022
Much has transpired since our late February update when Russia’s invasion of Ukraine commenced. Interestingly, however, markets are now higher than they were at the timing of that update. Read on for an update from George Smith, Chairman of the Investment Policy Committee. Click below to read the full update
Kiplinger: Davenport Equity Opportunity Hunts for Cash Generators
The Davenport Equity Opportunities Fund (DEOPX) was recently profiled by Kiplinger. Read on as they analyze how DEOPX’s hunt for cash generators has led to benchmark-busting results.
Fixed Income Viewpoints: Russia, Volatility and Rate Hikes
March 2, 2022
To say February was a volatile month may be the understatement of the year. Read on for an update from Davenport Asset Management’s Fixed Income Team.
Markets and the Situation in Ukraine
February 24, 2022
Markets had already been on shaky footing so far this year and news of Russia’s invasion of Ukraine has accelerated declines. Read on for an update from George Smith, Chairman of the Investment Policy Committee.
Investing In Your Organization’s Success
As a part of Davenport Asset Management’s Virtual Investor Summit Series, Scott Andrews-Weckerly and Beth Vann-Turnbull recently spoke over Zoom to discuss “Investing in Your Organization’s Success: Strategic Planning for Sustainability”.
The first quarter brought investors yet another curve ball with Russia’s invasion of Ukraine. This sent shockwaves through global markets and added to already notable inflation pressures, while also casting a new light on international investing. Meanwhile, the Federal Reserve raised interest rates as policymakers began to reign in monetary stimulus. Markets ultimately proved more resilient than one might expect given these circumstances, with energy and commodity-related stocks leading the way. While the S&P 500® Index and Russell 2000® Index were down 12% and 14% at one point during the quarter, they finished down 4.6% and 7.5%, respectively. It’s worth noting, however, that the major indices belie underlying weakness in the market. Many stocks, especially in riskier corners of the market, have experienced steep declines.
Another year is in the books and what a wild year it was. Indeed, 2021 was quite an encore for 2020. We had a riot at the Capitol, vaccine introduction, economic “re-opening”, meme stock rally, the SPAC craze, supply chain snarls, widespread inflationary pressures, the Delta variant and more recently the Omicron variant. Many, including us, thought it would be difficult for investors’ risk appetites to sustain levels reached in late 2020. While some speculative pockets of the market weakened, there was no broad-based let down and we saw surprising gains powered by improved economic growth, accommodative policy and abundant liquidity. The S&P 500® Index finished the year up a stunning 28.7% while the Russell 2000® Index advanced 14.8%. Our equity portfolios also enjoyed solid gains for the year.
We are three-quarters of the way through 2021, and stocks are holding onto meaningful gains. As of September 30, the S&P 500® Index was up 15.9% year-to-date while the Russell 2000® Index had gained 12.4%. The third quarter itself was a bit more subdued, with the S&P up 0.6% and Russell down 4.4%. We were pleased to see solid relative performance from our portfolios as market conditions became more tumultuous. Stocks initially powered through headwinds associated with the Delta variant, but weakened late in the quarter alongside fears surrounding supply chain disruptions, waning economic stimulus and rising interest rates. In fact, the S&P was down 4.7% for the month of September. We think such a breather may be healthy given the torrid pace of gains through August, when the S&P seemed on pace for a record number of new highs in a year.
Equity markets remained strong in the second quarter with the S&P 500® Index and the Russell 2000® Index gaining 8.6% and 4.3%, respectively. Year-to-date, the S&P and Russell finished the quarter up 15.3% and 17.5%, respectively. Most Americans are vaccinated, the economic recovery from COVID has been in full swing and corporate earnings have generally exceeded expectations. More cyclical and value-oriented sectors such as energy and financials have been very strong; however, we’ve seen concurrent strength in durable growth sectors such as technology and communication services. It seems investors have migrated from stay-at-home plays to reopening plays to now buying everything.
Equity markets continued their remarkable run in the first quarter as risk taking was in full swing. The S&P 500® Index and Russell 2000® Index gained 6.2% and 12.7%, respectively. It’s hard to fathom how far we’ve come since early last year when COVID fears gripped the globe, businesses were shutting down and markets were in turmoil. Today, the narrative is markedly different as we are making significant vaccination progress, economies are re-opening and equity markets are near all-time highs.
Equity markets capped off a bizarre and turbulent year with a stunning fourth quarter rally. The S&P 500® Index gained 12.2% while the Russell 2000® Index was up an astonishing 31.4%. Election fears quickly became a distant memory in November and gave way to a buying stampede that went into high gear alongside the unveiling of a COVID vaccine. For the year, the S&P and Russell finished up 18.4% and 20.0%, respectively. Suffice it to say, such remarkable gains seemed unthinkable back in March when virus concerns had the S&P down over 30% for the year.
Equity markets continued their strong positive performance off the March lows in the third quarter. Despite a modest selloff in September, the S&P 500® Index gained 8.9% in the third quarter. Combined with Q2’s 20.5% gain, it was the best two-quarter stretch for large cap stocks since 2009, when markets were recovering from the financial crisis. Small caps’ gains were less robust, with a 4.9% rise in the Russell 2000® Index during Q3. Year-to-date, the S&P 500 is up 5.6% through the end of the third quarter, and the Russell 2000 is down 8.7%.
Equity markets find themselves in a much different place than a quarter ago. When we penned our first quarter update, coronavirus fears gripped financial markets around the world and stocks had retreated sharply from their highs. Since then, we’ve witnessed an astounding recovery for equities. In the second quarter, the S&P 500® gained 20.5% (its best quarter since 1998) while the Russell 2000® advanced 25.4%. Year-to-date, the S&P finished the period down 3.1%, a manageable decline that flies in the face of the dire predictions from just a few months ago. The Russell finished year-to-date down 13.0%, clearly a meaningful decline but much better than negative 30.6% at the end of March.
These are frightening and unusual times. Economies, financial markets, and people around the world are gripped with coronavirus fears. We’ve gone from a buoyant economy that was supported by a very healthy consumer to a full-blown crisis. The S&P 500® Index declined 19.6% in the first quarter and experienced the fastest move into bear market territory in history. The Russell 2000® Index declined 30.6% and the Dow Jones Industrial Average had its worst first quarter ever. The market’s swoon has been nauseating and very few stocks have been defensive.
2019 was an extraordinary year for equity investors. The S&P 500® Index surged a whopping 31.5% while the Russell 2000® Index advanced 30.6%. For the fourth quarter, the S&P 500 and Russell 2000 gained 9.1% and 7.1%, respectively. Such impressive performance represented a sharp turnaround from year-end 2018, when markets retreated alongside fears of tighter monetary policy and slowing growth.
Equity investors experienced a wild ride in the third quarter. After a solid start in July, we witnessed a sharp swoon in August as trade tensions again took center stage. The S&P 500® Index posted declines of nearly 3% on August 5th and August 14th as volatility surged. Fortunately, the damage was mitigated by a late August rally followed by a decent September. In the end, the S&P 500 Index finished the quarter up 1.7% while the Russell 2000® Index was down 2.4%. Year-to-date, the S&P 500 Index and Russell 2000 Index finished the period up 20.1% and 14.2%, respectively.
Stocks continued their hot streak in the second quarter. The S&P 500 Index advanced 4.3% while the Russell 2000 Index gained 2.1%. Year-to-date, the S&P 500 Index and the Russell 2000 Index have posted total returns of 18.5% and 17.0%, respectively. Interestingly, the S&P 500 Index had its best first half of a year since 1997.