German stocks were among the better performing in Europe in the past month, thanks in part to champions in two key sectors.
The US market appeared to run out of steam in September, with the latest data from the S&P Dow Jones Indices showing that the S&P 500 lost 3.8% over the course of last month. That was a notable reversal from August, when the index was able to record a return of 7%. Largely, this poor performance has been driven by a sell-off in big name technology stocks.
However, over a longer time scale, the US market has continued to power ahead. In the third quarter of 2020, the S&P 500 gained 8.9%, while year-to-date the index is up 5.5%.
Other US indices also booked monthly losses and quarterly gains. The S&P MidCap 400 lost 3.2% in September, but gained 4.7% over the course of the third quarter.
The latest data also showed that the Dow Jones Industrial Average lost just over 2% in September, but recorded a gain of 8.2% over the quarter. Measured over the course of the calendar year, the Dow is still down by 0.9%.
The impact of the stock market sell-off in recent weeks can also be seen in the return of the S&P’s factor indices - rules-based indexes that seek to provide exposure to drivers of positive returns.
Over the course of September, the S&P 500 Growth index, which is heavily weighted to tech stocks, lost 4.7%. In contrast, the S&P 500 Value index, which generally includes fewer tech stocks, lost just 2.4%.
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Generally, international markets performed better. The S&P Developed Ex-US BMI (Broad Market Index) and S&P Emerging BMI were up 6% and 9%, respectively.
However, European equities stumbled last month, with the S&P Europe 350 losing 1.45% over the quarter. For the third quarter, European equities were flat, posting a small loss of 0.03%.
According to Tim Edwards, managing director of index investment strategy at S&P Dow Jones Indices, German stocks were among the better performing in Europe, thanks in part to champions in the Discretionary and Industrials sectors.
Edwards also identifies several sectors in Europe that have continued to post positive returns over the quarter. He notes: “Consumer Discretionary led with a gain of 8%, followed closely by Industrial and Materials, which both gained 7%.” These three sector indices, however, are still negative year-to-date.
Energy, meanwhile, had the worst performance over the quarter, with the S&P Europe 350 Energy index declining 18% as the prospects of a recovery to pre-pandemic levels of demand for fossil fuels faded. Year-to-date the index is down 47.8%.
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For UK stocks, performance continued to be disappointing in September, with the S&P United Kingdom index down by 1.7%. Measured over the quarter, the index was down 4.8%.
Edwards notes: “British equities lagged in the third quarter as the approaching deadline for the still-as-yet-uncertain terms of its departure from the EU loomed over weak economic data. Continued struggles from large British banks also weighed down the S&P United Kingdom.”
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