U.S.-Stock Funds Rose 7.5% in a Choppy Quarter -- Journal Report
October 04 2020 - 09:08PM
Dow Jones News
By William Power
The third quarter for investors was the closest thing that
passes for "normal" markets these days.
Yes, it was choppy. Nerves were short, as they have been in life
overall. But there was nothing close to the historic movements --
down and up -- of the first and second quarters. In those dizzying
two quarters that preceded the most-recent one, the average
diversified U.S.-stock fund slid 25% and then snapped back 24%.
In the third quarter, in contrast, the average U.S.-stock fund
rose a solid 7.5%, according to Refinitiv Lipper data, to push
slightly into the black for the year, at 0.4%.
Big tech stocks including Appleand Microsoft are the most
prominent group that has thrived during the pandemic lockdowns and
the remote-working era that has ensued. The Nasdaq Composite Index,
dominated by such stocks, is up 23% for the year to date, drubbing
other major indexes. Tech investors are banking on the companies to
continue growing even after the pandemic.
That is reflected in the positive results, on average, for
growth-stock funds -- those powered by corporate-earnings
potential. Lipper's measure of funds that invest in large-cap
growth stocks was up 11.8% in the quarter and is up 23% for the
year to date -- while most other stock-fund categories are in the
red.
"Even though there is a lot of uncertainty in the short term
about the economy and the upcoming election, we think the economy
is making strides toward normalization," says Matt Stucky,
portfolio manager at Northwestern Mutual Wealth Management in
Milwaukee. He notes that there has been a recovery in retail sales
and housing. "There are reasons to say things are getting better
rather than worse," he says.
That said, as the markets begin the fourth quarter, volatility
is still high, and most strategists expect more in the lead-up to
the election.
International-stock funds rose in line with U.S. funds overall
in the quarter, though they continue to trail their American
counterparts so far this year. The average international fund was
up 6.8% in the quarter, to trim the year-to-date loss to 2.8%.
Bond funds rose. Funds tied to intermediate-maturity,
investment-grade debt (the most common type of fixed-income fund)
rose 0.9% in the quarter, to push the year-to-date gain to
6.3%.
Through it all, investors continue to be grateful for the
stock-fund gains, but hedging their bets by pushing more money into
bond funds. Investors withdrew a net $121.1 billion from U.S.-stock
mutual funds and exchange-traded funds and $17.0 billion from
international-stock funds in the quarter, based on Investment
Company Institute estimates. They invested a net $218.0 billion in
bond funds in the quarter.
"There's still reasons to understand uncertainty is going to be
with us for a while," says Mr. Stucky. "The good thing is we don't
expect broad-based shutdowns, which had a crippling effect on the
economy in the second quarter, to be the recipe that policy makers
turn to if there are more outbreaks."
Mr. Power is a Wall Street Journal news editor in South
Brunswick, N.J. Email him at william.power@wsj.com.
(END) Dow Jones Newswires
October 04, 2020 20:53 ET (00:53 GMT)
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