Q3 2019 Quarterly Investment Review

October 17, 2019

Growth has outperformed value in the U.S. since the beginning of 2018. In September, however, there was a sharp unwinding of this trend as value outperformed.

Kevin Barr, Head of our Investment Management Unit, provides an overview of the global financial markets and our perspective on them.

Looking back on the third quarter

Transcript

Hi, I'm Kevin Barr, Head of SEI's Investment Management Unit. Over the next few minutes I will provide an overview of the global financial markets and our perspective on them.

Equity markets climbed through July, plummeted at the beginning of August, and recovered through mid-September. U.S equities, as measured by the S&P 500 Index, hit an all-time high in early July but failed to set a new record during the September rebound. Global equity markets, represented by the MSCI ACWI Index, followed a similar path but finished the quarter flat.

Growth has outperformed value in the U.S. since the beginning of 2018. In September, however, there was a sharp unwinding of this trend as value outperformed.

Looking at large-cap stocks, we can see how growth’s leadership in July and August was just enough to edge out value’s performance for the full quarter. Still, the huge performance gap in September is worth noting.
With small-cap stocks, the August-September swings were more intense. Value finished the quarter far ahead of growth.

It’s hard to say whether this reversal in favor of value will be sustained, although SEI’s equity portfolios have been positioned for such an eventuality.

Questions about the strength of the current economic expansion have also been putting downward pressure on government bond yields.

Longer-term yields have fallen amid signs of slowing growth. Short-term yields have come down along with the Federal Reserve’s back-to-back rate cuts in July and September.

We can see that the U.S. Treasury rates fell across all maturities for the full quarter. The yield on the 30-year Treasury declined to its lowest ever-level. It was actually yielding less than the 1-month Treasurys from late August to early September.

Exposure to equities and other risk-oriented assets can feel uncomfortable during bouts of volatility. But we believe that investors with long time horizons should avoid attempts to time the market.

Accordingly, we always favor a diversified approach to investing. Uncertain times only reinforce our perspective.
On behalf of everyone at SEI, thank you, as always for your trust and confidence. 

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Index Descriptions 

MSCI ACWI Index: The MSCI ACWI Index  is a market capitalization weighted index composed of over 2,800 companies, and is representative of the market structure of 49 developed and emerging market countries in North and South America, Europe, Africa, and the Pacific Rim. The index is calculated with net dividends reinvested in U.S. dollars.

S&P 500 Index: The S&P 500 Index is an unmanaged, market-capitalization weighted index that consists of the 500 largest publicly traded U.S. companies and is considered representative of the broad U.S. stock market.

Legal Note

Disclosures:
There are risks involved with investing, including loss of principal. International investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles or from economic or political instability in other nations. Emerging markets involve heightened risks related to the same factors as well as increased volatility and lower trading volume. Diversification may not protect against market loss.

This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice and is intended for educational purposes only.

Index returns are for illustrative purposes only and do not represent actual fund performance. Index performance returns do not reflect any management fees, transaction costs or expenses. Indexes are unmanaged and one cannot invest directly in an index. Past performance does not guarantee future results.

Information provided by SEI Investments Management Corporation, a wholly owned subsidiary of SEI Investments Company (SEI).