While it is still early days, with only 9 percent of S&P 500 companies reporting as of the end of last week, the initial earnings reports seem to show that things are still not good. According to FactSet, quarterly earnings are down, so far, by 44 percent. If this number holds, it would be the second-worst quarterly drop since the end of 2008 during the financial crisis. Scary news—but not unexpected.

Brad here. “Value” is an often-mentioned word, but few people have really considered what it means in the context of the whole economy. A short while ago, Pete Essele, one of Commonwealth’s most senior portfolio managers, wrote a post for this blog in which he discusses value investing and its underperformance. That was the first part of the story. Here, he takes a deeper look at why that underperformance happened—with very interesting implications for the future. Take it away, Pete!

This week’s update is somewhat worse than last week’s. Medical risks are still rising. Outbreaks in several states (notably, Arizona, California, Florida, and Texas) continued to get worse, even as other states began showing faster outbreaks.

This week’s coronavirus update is pretty much the same as last week’s. The medical risks are still rising. Outbreaks in several states (notably, Arizona, California, Florida, and Texas) have continued to get worse. All have shown significant spikes in cases in recent days, and health care capacity is now a concern in some cities. Further, multiple other states are also seeing expanded case growth, although not yet at the levels of those four. At the national level, as of July 9, the number of new cases broke above 60,000 for the first time, and the daily spread rate is now at 2 percent per day. Similarly, even as the number of tests continues to rise, the positive rate is also increasing. The breadth and magnitude of the outbreaks continue to increase the risk at a national level.

Brad here. Another question I have been getting repeatedly is whether value is dead. Just as with emerging markets, a long run of underperformance has raised this question. Is the situation different now? Peter Essele, one of Commonwealth’s most senior portfolio managers, is very well positioned to answer that question. Over to you, Pete!

June was a mixed month. The national reopening in May and June led to new viral outbreaks and a spike in new infections in multiple states. Surprisingly, though, both the economic recovery and financial markets did very well. As we enter July, the question of many minds is whether the medical situation will improve—and whether the good economic and market news will continue.

The bad news this past week is that the medical risks are still rising. Outbreaks in several states, notably Arizona, California, Florida, and Texas, have continued to get worse. All have shown significant spikes in cases in recent days, and health care capacity is becoming a concern in some cities. Multiple other states have also seen expanded case growth, although not yet at the levels of those four. At the national level, as of July 1, the number of new cases broke above 50,000 for the first time, and the daily spread rate is now approaching 2 percent per day. Similarly, even as the number of tests continues to rise, the positive rate is also increasing. The breadth and magnitude of the outbreaks continue to increase the risk at a national level.

Right now, we seem to be seeing a disconnect between the rising case counts and the rising stock market. Yes, there was a bit of a pullback on the news that case growth was hitting a new high. But since then, the markets have started to bounce again, even as case counts continue to increase. I get many questions about this disconnect. Indeed, on the surface, it seems to make no sense. What is going on here?

The bad news this past week is that the chances of a national second wave of infections are increasing as localized outbreaks in several states continue to get worse. The states in question are Arizona, California, Florida, and Texas, with the Carolinas also under pressure. All have shown significant spikes in cases in recent days. Multiple other states are also seeing expanded case growth, although not yet at the levels of those four. While the virus remains under control in many states, the breadth and magnitude of the outbreaks continue to increase the risk at a national level.

Brad here. One of the questions I have been hearing a lot recently is whether it still makes sense to invest in international stocks. Indeed, it is a good question. Here, Anu Gaggar, Commonwealth’s international analyst, provides a timely and compelling look at why international markets may still make sense in your portfolio. Thanks, Anu!