ESG Shines Brighter in 2019
In the first half of the year, U.S. funds considering environmental, social, and governance (ESG) factors when investing attracted a net $8.4 billion, according to a Morningstar report. That already surpassed the 2018 annual record of $5.4 billion. Since 2013, clients have committed $35 billion to ESG funds.
The rush of new ESG money coincides with the divestments from actively-managed funds (which try to outperform market benchmarks through different expensive methodologies). Investors would rather invest in passive funds that mimic market indexes and have a double bottom line. Since 2015, investors have pulled a net $860 billion from actively managed funds, while adding a net $2.22 trillion to cheaper funds that are passively managed.
Another Yields Situation
The 10-year treasury bill rates may have been moving the markets itself by its tiny but powerful changes. This week, the Federal Reserve Chairman Jerome Powell reiterated the Fed’s intention to “act as appropriate to sustain the expansion.” We believe many investors have interpreted that line as the central bank’s statement to lower its benchmark interest rate at its next policy meeting on July 30-31.
Markets are High Scoring
All three major indexes (Dow Jones, S&P 500, and NASDAQ) reached all-time new highs this week, following a rally in investor’s sentiment. We believe it was that a surge in healthcare stocks pushed the Dow Jones Industrial Average over 27000 points for the first time after the Trump administration abandoned a plan to curb drug rebates. The S&P 500 surpassed 3000 points and Nasdaq went above 8000 points.
Tech stocks, including Amazon and Netflix, led the pack during the S&P 500’s rise, while oil companies were among the laggards. The S&P 500 first reached the 2000 mark on August 26, 2014. During the index rise from 2000 to 3000, Abiomed was the top performer (+892%), followed by Nvidia in second place (+723%) and Advanced Micro Devices in third (+706%). Behind, National Oilwell Varco was the worst performer in the index, plunging 74%, followed by Apache Corp., an oil producer, down 73%.
We feel stocks may have been supported this week as Federal Reserve Chairman Jerome Powell has stated the possibility of a rate cut later this month. The Dow has risen 16% so far this year(maybe say: year to date), while the S&P 500 has jumped nearly 20%, and NASDAQ hitting a 23%.