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Virtus Viewpoints – Q2 SGA

Finding Hope Amid Continued Uncertainty

Global equity markets posted strong returns for the second quarter with the U.S. outperforming non-U.S. developed and emerging markets. The advance was relatively narrow with companies in the information technology, consumer discretionary, and materials sectors leading. Retailers and those businesses most levered to the reopening of economies benefited the most, as did information technology and e-commerce companies that attracted increased traffic. In contrast, more defensive sectors such as utilities, consumer staples, and real estate, performed the worst.

With corporate profit growth expected to plunge in 2020, growth stocks outperformed value stocks in the quarter as investors sought businesses that could generate attractive earnings growth despite widespread economic weakness. Within the MSCI All Country World Index (ACWI), consistent with investors’ more positive evolving outlook, higher beta stocks, companies with lower returns on equity, lower levels of debt, and no earnings performed best during the quarter. Globally, developed markets led by Australia, New Zealand, and Germany outperformed emerging markets despite strong performances by South Africa and Brazil. The UK and Hong Kong were among the weaker performers during the quarter, while China trailed the broader ACWI Index.

z - Cover Image: SGA Market Review & Outlook 2Q20

The commentary is the opinion of SGA. This material has been prepared using sources of information generally believed to be reliable; however, its accuracy is not guaranteed. Opinions represented are subject to change and should not be considered investment advice or an offer of securities.

Past performance is not indicative of future results.

All investments carry a certain degree of risk, including possible loss of principal.

Index definitions: CBOE Volatility Index (VIX) is a measure of implied volatility, based on the prices of S&P 500 Index options; a rising VIX indicates expectations for rising S&P 500 volatility, while a lower VIX indicates expectations for quieter trading. S&P 500 measures performance of 500 of the largest U.S. companies. MSCI All Country (AC) Asia measures large and mid-cap equity performance of Asia’s developed and emerging markets. MSCI AC Asia Pacific measures large and mid-cap equity performance of developed and emerging markets countries in the Asia Pacific region. MSCI World measures equity performance of developed global markets. MSCI All Country World (ACWI) measures equity performance of developed and emerging markets. MSCI EAFE® measures developed foreign market equity performance, excluding the U.S. and Canada. MSCI AC World ex U.S. measures equity performance of developed and emerging markets, excluding the U.S. MSCI Emerging Markets measures equity market performance in global emerging markets. MSCI Europe measures equity market performance of Europe’s developed markets. MSCI Latin America EM measures equity performance of Latin America’s emerging market countries. S&P and MSCI indexes are free float-adjusted market cap-weighted and calculated on a total return basis with dividends reinvested.