Rappahannock Investment Group of Davenport & Company LLC

Equities moved substantially higher in the weeks following the Presidential election as
the decisiveness of the victory removed some uncertainty around the post-election
political environment and leadership transition. The favorable market backdrop is fueling
optimism for a “Santa Claus” rally to cap off what has been a strong year for equities.
Despite this optimism, however, questions are emerging regarding potential Trump
administration economic policies and the upcoming mid-December Federal Reserve
interest rate decision that could represent possible hurdles for investors to clear going
into year-end.

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The conclusion of the Presidential election cycle resolves a key driver of equity market uncertainty with the outcome spurring a post-election rally on November 6th. Investors have moved past the short-term uncertainty presented by two candidates with sharply differing policy platforms, polling near 50:50, towards handicapping future policy shifts with a keen focus on energy, health care, taxes, tariffs, and the potential for reduced regulatory headwinds. The initial positive market reaction to the election was accompanied by a sharp decline in the VIX Index, or fear gauge, which dropped to the mid-teens range post-election, having peaked at over 23 in the days preceding the election. Although equity markets have climbed post-election, we note that for the full month of October, the Dow Jones Industrial Average decreased by 1.3%, the S&P 500® index was down 1.0%, and the smaller cap weighted Russell 2000® decreased by 1.5%.

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The 50 basis points rate cut by the Federal Reserve in September represented a shift from “higher for longer” monetary policy and provided the fuel to sustain the market rally with all major indices rising through month-end. With a more accommodative monetary policy in place, investor sentiment turned positive, and the S&P 500 made multiple new highs during the month. Despite a backdrop of rising geopolitical risks and an upcoming presidential election, the VIX Index, commonly referred to as the fear gauge, suggests that investors may have turned somewhat complacent with the index declining to the mid-teens by month end. For the full month of September, the Dow Jones Industrial Average increased by 1.9%, the S&P 500® index was up 2.0%, and the smaller cap-weighted Russell 2000® increased by 0.6%.

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After a sharp downturn in early August coinciding with an unraveling of the Japanese Carry Trade, the Dow and S&P rallied to end the month in positive territory. The early August downturn was associated with a significant spike in the VIX Index, commonly referred to as the fear gauge, which reached its highest level seen since 2020. Despite the early month weakness, equity markets rebounded as dovish rate expectations were confirmed late in the month by Fed Chair Powell. For the full month of August, the Dow Jones Industrial Average increased by 1.8%, the S&P 500® index was up 2.3%, and the smaller cap-weighted Russell 2000® decreased by 1.6%.

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Equity market performance broadened noticeably in July with smaller capitalization
issues leading the market higher as mega cap tech stocks lagged. This performance
coincided with a softening in market interest rates as expectations increased for a more
accommodative Fed. Strength in equity markets during July occurred despite broad
uncertainty in the macro and geopolitical environment including the assassination
attempt on former President Trump. These gains came under pressure, however, in early
August as concerning economic data fueled a market pullback and a sharp spike in
volatility. For the full month of July, the Dow Jones Industrial Average increased 4.4%,
the S&P 500® index was up 1.1%, and the smaller cap weighted Russell 2000® increased
by 10.1%.

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The S&P 500^® continued to grind higher in June to finish out a strong first half of 2024 led by a small group of technology titans. The market’s narrow strength, led by the technology sector, comes despite emerging signs of housing and consumer weakness as well as geopolitical uncertainty. Nevertheless, the VIX Index or “fear gauge” remained in complacent territory, tracking sideways through much of June. Meanwhile, the Federal Reserve held interest rates steady at the June FOMC meeting while indicating the possibility of a rate cut later this year. For the full month, the Dow Jones Industrial Average increased by 1.1%, the S&P 500^® index was up 3.5%, and the smaller cap-weighted Russell 2000^® decreased by 1.1%.

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Time will tell how well the old saying “Sell in May and Go Away” works this year but, at least for May, bullish investors were rewarded with major equity indexes solidly positive for the month. Continued large cap tech leadership combined with cautious optimism about the potential for Fed policy to remain neutral if not outright supportive seemed to provide encouragement for bullish sentiment. Meanwhile, the VIX Index or “fear gauge” which had spiked to near 20 last month on Middle East hostilities, eased back to the low teens for much of May. For the full month, the Dow Jones Industrial Average increased 2.3%, the S&P 500® index was up 4.8%, and the smaller cap weighted Russell 2000® increased by 4.9%.

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After a strong start to the year, equity markets gave back a portion of year-to-date gains in April. A combination of geopolitical and macroeconomic factors coalesced, moving some investors to the sidelines during the month. Strength in the economic backdrop fueled rising concerns that the Fed might shift back to a somewhat more restrictive stance, thereby adding a potential headwind to equity performance. The VIX Index or “fear gauge” peaked mid-month in the high-teens, reflecting fears linked to rising Middle East hostilities before easing back to the mid-teens by month-end. For the full month, the Dow Jones Industrial Average decreased 5.0%, the S&P 500® index was down 4.2%, and the smaller cap-weighted Russell 2000® decreased by 7.1%.

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Equity markets closed out a robust first quarter with continued gains in March as investor fears of a recession have diminished. Market breadth expanded in the quarter as performance spread beyond the Magnificent Seven tech-related equities across sectors and market capitalizations. The economic backdrop has also been cooperative despite ongoing restrictive monetary policy, with investors appearing to lean into the markets in anticipation of potential interest rate cuts later in the year. The VIX Index or “fear gauge” reflected the positive investor sentiment, with the index tracking in the low to mid-teens for much of the month. For the full month, the Dow Jones Industrial Average increased 2.1%, the S&P 500® index was up 3.1%, and the smaller cap-weighted Russell 2000® increased by 3.4%.

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Markets moved sharply higher in February, continuing the 2024 rally while expanding breadth
across sectors and market capitalizations. Generally better-than-expected earnings through
the first quarter reporting season supported investor enthusiasm, as did the prospect of a
potentially more restrained rate environment. The VIX Index or “fear gauge” reflected the
positive investor sentiment, with the index tracking in the low to mid-teens for much of
February, despite a backdrop of geopolitical issues and mixed economic reports. For the
full month, the Dow Jones Industrial Average increased by 2.2%, the S&P 500® index was up
5.2%, and the smaller cap-weighted Russell 2000® increased by 5.5%.

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Tech-related issues led markets higher in January, with many large-cap stocks rebounding from a relative pause in December, while smaller caps lagged sharply following the gains seen in December. Despite concerns going into fourth-quarter earnings reports, the VIX Index or “fear gauge” hovered in the low teens for much of January as investors appeared complacent around a host of geopolitical issues and economic events. For the full month, the Dow Jones Industrial Average increased by 1.2%, the S&P 500® index was up 1.6%, and the smaller cap-weighted Russell 2000® decreased by 3.9%.

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Equity markets closed out December and the 2023 trading year, with all major indices solidly higher. Investor enthusiasm reflected optimism around easing inflation, the employment environment, and a strengthening U.S. economy. With prospects improving for an easing rate cycle, the VIX Index or “fear gauge” reflected market sentiment, with the index hovering in the low teens for much of December. For the full month, the Dow Jones Industrial Average increased 4.8%, the S&P 500® index was up 4.4%, and the smaller cap-weighted Russell 2000® increased 12.1%.

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Equity markets surged in November, with all major indexes moving sharply higher. Optimism around the economic environment and a pullback in interest rates appeared to be drivers of market gains in the month. The VIX Index, or “fear gauge,” reflected the market sentiment as it pulled back from the high teens starting in November to end the month at 12.9. For the full month, the Dow Jones Industrial Average increased 8.8%, the S&P 500® index was up 8.9%, and the smaller cap-weighted Russell 2000® increased 8.8%.

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Following a weak September, equity markets continued to slide in October as all major indices declined. The surprise attack in Israel, combined with ongoing high interest rates and inflation, provided a challenging backdrop for equities. However, more recently, the Fed’s decision to hold rates steady offered some market support. The VIX Index or “fear gauge” spiked to almost 22 in mid-October before rolling back to around the 18 level at the end of the month. For the full month, the Dow Jones Industrial Average decreased 1.4%, the S&P 500® index was down 2.2%, and the smaller cap-weighted Russell 2000® decreased 6.9%.

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Equity investors were punished in September as all major indexes declined sharply. A more hawkish tone from the Federal Reserve added to uncertainty, while high-interest rates and stubborn inflation provided a challenging framework for equities. Against this backdrop, the VIX Index or “fear gauge” started September at a little over 13 and climbed through the month, ending at about 17 ½. For the full month, the Dow Jones Industrial Average decreased 3.5%, the S&P 500® index was down 4.9%, and the smaller cap-weighted Russell 2000® decreased 6.0%

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August was a challenging month for equity investors following two solidly positive gains in June and July. Contributing to the August equity performance was weakness seen across the seven large-cap technology leaders that have paced the 2023 equity market rally. Against this backdrop, the VIX Index or “fear gauge,” which started the month at a little under 14, ended the month relatively flat. For the full month, the Dow Jones Industrial Average decreased 2.4%, the S&P 500® index was down 1.8%, and the smaller cap-weighted Russell 2000® decreased 5.2%.

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Following a strong June, equity markets stayed in bullish territory through July as investors cheered the potential for a soft economic landing. The 2023 rally, which has been led by a handful of technology related issues, broadened during July across multiple sectors. Against this bullish backdrop, the VIX Index or “fear gauge” which started the month at a little under 14 was relatively flat suggesting investor complacency could be high. For the full month, the Dow Jones Industrial Average increased 3.4%, the S&P 500® index was up 3.1%, and the smaller cap weighted Russell 2000® increased 6.1%.

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Equity markets surged higher in June finishing off a strong first half of 2023 with the NASDAQ
posting the best performance in forty years. Although technology stocks continued to pace
the broader market, breadth increased with market leadership rotating to other sectors.
Against this bullish backdrop, the VIX Index or “fear gauge” which started the month at a
little under 18 closed the month under 14 suggesting investor complacency could be high.
For the full month, the Dow Jones Industrial Average increased 4.6%, the S&P 500 index
was up 6.5%, and the smaller cap weighted Russell 2000® increased 8.0%.

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Despite a late-month move higher fueled by investor enthusiasm around all things linked to Artificial Intelligence, equity markets were generally mixed in May. With very narrow market breadth, equities seemed to be reflecting a “have or have not” attitude by investors seeking to participate in the bright prospects linked to artificial intelligence and large language models. Against this backdrop, the VIX Index or “fear gauge” which started the month at a little under 16 generally moved sideways ending the month at slightly under 18. For the full month, the Dow Jones Industrial Average decreased by 3.5%, the S&P 500® index was up 0.3%, and the smaller cap-weighted Russell 2000® declined 1.1%.

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Markets worked generally higher in April as investors digested the challenges in the financial sector fueled by recent bank failures. With widespread financial contagion appearing less likely, investors felt confident to support rising markets with large-cap leaders pushing the Dow and S&P 500 higher. Against this backdrop, the VIX Index or “fear gauge” which started the month at a little under 19 moved lower through the month ending under 16. For the full month, the Dow Jones Industrial Average increased 2.5%, the S&P 500^® index was up 1.5%, and the smaller cap-weighted Russell 2000^® declined 1.9%.

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Equity markets were shaken in March by turmoil in the banking sector resulting from the failure of Silicon Valley Bank and Signature Bank of New York. Swift regulatory agency backstopping of the financial sector served to calm equity markets with major indexes turning in mixed performances for the month. Against this backdrop, the VIX Index or “fear gauge” which started the month at a little over 20 jumped higher to briefly break the 30 level amidst the banking crisis before retracing and ending the month under 19. For the full month, the Dow Jones Industrial Average increased by 1.9%, the S&P 500® index was up 3.5%, and the smaller cap-weighted Russell 2000® declined by 5.0%.

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Equity markets in February gave back some of the strong gains from January as investors digested new economic datasets pointing to a resilient labor market and rising price levels in the U.S. With few signs emerging supportive of a disinflation outlook, the higher rates for a longer narrative appeared to gain traction with investors thereby pressuring equities. Against this backdrop, the VIX Index or “fear gauge” ticked slightly higher from the sub20 level at the start of the month to end February at about 21. For the full month, all three major equity indexes decreased with the Dow Jones Industrial Average down 4.2%, the S&P 500^® index down 2.6%, and the smaller cap weighted Russell 2000^® declining 1.8%.

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Coming off a challenging 2022, equity markets broadly rebounded in January with all major indexes up sharply as investor sentiment improved in the new year. Increasing confidence in the likelihood of a soft landing and the potential for the Fed to further slow the pace of interest rate hikes appear to have provided support for the January rebound. Reflecting this environment, the VIX Index or “fear gauge” declined from the 23 level at the start of January to end the month at under 20. For the full month, all three major equity indexes increased with the Dow Jones Industrial Average up 2.8%, the S&P 500^® index up 6.2%, and the smaller-cap weighted Russell 2000^® increasing a quite strong 9.7%.

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Equities suffered through a tough year in 2022 with all major indexes down sharply as investors grappled with a host of challenges ranging from rising interest rates and inflation to war in Europe. Year-end weakness reflected ongoing effects from Fed tightening as well as concerns that hawkish monetary policy could lead to recession in 2023. For the full month, all three major equity indexes decreased with the Dow Jones Industrial Average down 4.2%, the S&P 500^® index down 5.9%, and the smaller-cap weighted Russell 2000^® decreasing 6.6%.

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Equity markets in November moved broadly higher continuing the trend set in October as companies generally delivered better than expected third quarter earnings. In November, the outlook for a more benign monetary policy backdrop appears to have provided further market support with commentary from Fed Chair Powell adding to investor optimism around the potential for easing rate headwinds. With this backdrop, the VIX Index or “fear gauge” continued its move to the downside dropping from the 26 range at the beginning of the month to end at just over 20. For the full month, all major equity indexes were positive with the Dow Jones Industrial Average increasing 5.7%, the S&P 500 index up 5.4%, and the smaller cap weighted Russell 2000^® up 2.2% for the month.

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Markets powered sharply higher in October reversing September’s weakness as companies delivered generally better than expected earnings for the third quarter. A strong earnings season and relatively steady macro allowed investors to shake off some of the gloom that had been weighing down markets following a series of macro shocks ranging from surging energy prices to higher interest rates. With this backdrop, the VIX Index or “fear gauge” retreated from over 31 to end the month under 26. For the full month, all major equity indexes were strongly positive with the Dow Jones Industrial Average increasing 14.0%, the S&P 500® index up 8.0%, and the smaller cap weighted Russell 2000® up 10.9% for the month.

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Market pessimism weighed on equities in September and was reflected in a sharp drop in all major indexes. The gloomy mood was exacerbated by mounting concerns that the Federal Reserve may have become overly aggressive and that tight monetary policy could push the economy into recession. With this backdrop, the VIX Index or “fear gauge” rose from near 27 before ending the month at over 31. For the full month, all major equity indexes were negative with the Dow Jones Industrial Average decreasing 8.8%, the S&P 500^® index down 9.3%, and the smaller cap weighted Russell 2000^® down 9.7% for the month.

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From Equity Research
Hawkish commentary from the Fed weighed on markets in August as investors parsed the outlook for rising rates amidst broad economic uncertainty. It was a challenging month for equities with recession fears and rising interest rates providing an overhang all while consumers and businesses grappled with a difficult inflation environment. With this backdrop, the VIX Index or “fear gauge” rose from near 21 to end the month near 27. For the full month, all major equity indexes were negative with the Dow Jones Industrial Average decreasing 4.1%, the S&P 500^® index down 4.2%, and the smaller cap weighted Russell 2000^® down 2.2% for the month.

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From Equity Research
Equity markets rallied strongly in July with particular strength seen in beaten down sectors such as Consumer Discretionary and Information Technology. Although recession fears continue to weigh on the market, it appears that some investors may be handicapping the potential for a soft landing for the economy. With this backdrop, the VIX Index or “fear gauge” dropped from near 30 to end the month at a three-month low near 21. For the full month, major equity indexes were all positive with the Dow Jones Industrial Average increasing 6.7%, the S&P 500^® index up 9.1%, and the smaller cap weighted Russell 2000^® up 10.4% for the month.

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From Equity Research
Equity markets closed out June and the first half of 2022 to the downside as investors chose to stay on the sidelines in the face of a challenging bear market. Amidst an environment of rising rates and surging inflation, equity valuations have moved relentlessly downward this year most recently fueled by rising fears of recession. With this uncertain backdrop, the VIX Index or “fear gauge” repeatedly broke above 30 during the month, and by month-end it had trended down towards the high-20’s range. For the full month, major equity indexes were all down sharply with the Dow Jones Industrial Average declining 6.7%, the S&P 500^® index down 8.4%, and the smaller cap weighted Russell 2000^® down 8.4% for the month.

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From Equity Research
Although markets oscillated sharply during May, equity indexes closed out the month in relatively flat territory as swings in prices generally were not sustained. Geopolitical events continued to pressure markets during the month with the war in Ukraine adding uncertainty against a backdrop of rising interest rates and inflation. Although the VIX Index or “fear gauge” repeatedly broke above 30 during the month, by month-end it had trended down towards the mid-20’s range. For the full month, major equity indexes were flat to up very slightly with the Dow Jones Industrial Average up 0.04%, the S&P 500^® index up 0.01%, and the smaller cap weighted Russell 2000^® flat for the month.

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From Equity Research
Investors endured another volatile month of market swings with stocks closing out April with the worst performance dating to the financial crisis of 2008. A range of persistent uncertainties related to evolving Fed policy, inflation at 40-year highs, an ongoing invasion by Russia into Ukraine, and spiking COVID caseloads in China threatening widespread lockdowns have created volatile market conditions. Reflecting this environment, the VIX Index or “fear gauge” climbed from around the 20 level at the beginning of April to end the month near the mid-30’s. For the full month, major equity indexes declined sharply with the Dow Jones Industrial Average down 4.9%, the S&P 500^® index down 8.8%, and the smaller cap weighted Russell 2000^® decreasing 10.0%.

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From Equity Research
Markets faced significant new challenges and uncertainties in February with the Russian invasion of The war in Ukraine captured market and world attention in March with daily developments swinging global equities and commodities in an already uncertain macro environment. Adding to investor concern has been the inflation and interest rate backdrop with the yield curve inverting. Reflecting this environment, the VIX Index or “fear gauge” spiked at one point early in the month to the high 30s before rolling over to end the month at just over 20. For the full month, major equity indexes were able to finish out in positive territory with the Dow Jones Industrial Average up 2.3%, the S&P 500^® index up 3.6%, and the smaller cap-weighted Russell 2000^® increasing 1.1%.

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From Equity Research
Markets faced significant new challenges and uncertainties in February with the Russian invasion of Ukraine spiking energy prices higher while pressuring global equities. Reflecting this environment, the VIX Index or “fear gauge” continued its volatile path rising from the low 20’s mid-month to surge over 30 near month-end. For the full month, major equity indexes were volatile with the Dow Jones Industrial Average down 3.5%, the S&P 500^® index down 3.1%, and the smaller cap weighted Russell 2000^® increasing 1.0%.

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From Equity Research
January was a challenging month for equity investors with major indexes experiencing significant declines in the face of interest rate, pandemic, and geopolitical concerns. Oil prices surged as fears around a potential incursion by Russia into Ukraine gained currency through the month. Reflecting this environment, the VIX Index or “fear gauge” surged towards 40 before easing back to about 25 at month-end. For the full month, all three major equity indexes declined with the Dow Jones Industrial Average down 3.3%, the S&P 500^® index down 5.3%, and the smaller cap weighted Russell 2000^® declining 9.7%.

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From Equity Research
Equity markets finished strongly in 2021 overcoming concerns on multiple fronts providing a third year of gains for investors with the S&P 500^® index up over 27% for the year. Year-end market enthusiasm reflected ongoing effects from stimulative policies as well as optimism that 2022 may prove to be a turning point for the pandemic. During December, equities added to gains for the year while the VIX Index or “fear gauge” declined as the new year approached. For the full month, all three major equity indexes increased with the Dow Jones Industrial Average up 5.4%, the S&P 500^® index up 4.4%, and the smaller cap weighted Russell 2000^® increasing 2.1%.

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From Equity Research
Equity markets performed well in October with all eleven sectors within the S&P 500 ending in the green for the Equity markets slipped in November with nine of the eleven sectors within the S&P 500 declining for the month. Market weakness came against a backdrop of ongoing COVID-19 concerns including the appearance of the new Omicron variant as well as pressure from a more hawkish tone emerging from the Fed. Investor confidence in November weakened with the VIX index or “fear gauge” increasing sharply from the mid-teens to reach almost 30 as fears around the risks from the Omicron variant spiked. For the full month, the Dow Jones Industrial Average decreased 3.7%, the S&P 500^® index decreased 0.8%, and the smaller cap weighted Russell 2000^® decreased 4.3%.

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From Equity Research
Equity markets performed well in October with all eleven sectors within the S&P 500 ending in the green for the month. Market strength came despite pressures ranging from rising energy prices to snarled supply chains amidst the backdrop of the COVID-19 pandemic. Investor confidence in October appeared strong with the VIX index or “fear gauge” steadily dropping from over 23 at the beginning of October to end the month in the mid-teens range. For the full month, the Dow Jones Industrial Average increased 5.8%, the S&P 500^® index increased 6.9%, and the smaller cap weighted Russell 2000^® increased 4.2%.

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From Equity Research
September lived up to its reputation as a tough month for equities as markets faced a wide range of macro concerns. Congressional gridlock, ongoing COVID-19 challenges, questions about China growth, delays in global logistics networks, the outlook for interest rates, inflation rising and oil prices surging all combined to create a challenging market backdrop for September. Market volatility reflected the tough environment with the VIX index or “fear gauge” steadily rising from about 16.5 at the beginning of September to end the month above the 23 level. For the full month, the Dow Jones Industrial Average decreased 4.3%, the S&P 500^® index decreased 4.8%, and the smaller cap weighted Russell 2000^® decreased 3.1%.

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From Equity Research
Equity markets broadly rose in August despite the ongoing spread of the COVID-19 Delta variant with the rally fueled at least in part by ongoing accommodative monetary policy. Market volatility was relatively flat for the month although the VIX index or “fear gauge” spiked mid-month as news deteriorated around Afghanistan reaching a mid-month high over 24 before settling to end the month in the mid-teens. For the full month, the Dow Jones Industrial Average increased 1.2%, the S&P 500^® index increased 2.9%, and the smaller cap weighted Russell 2000^® increased 2.1%

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From Equity Research
The spread of the COVID-19 Delta variant weighed on markets in July with economically sensitive sectors, in particular, lagging. Despite this backdrop, the VIX index or “fear gauge” ended the month at just over 18 having reached a high near 25 mid-month amidst concerns that the surge in the virus could derail the economic recovery. For the full month, the Dow Jones Industrial Average increased 1.3%, the S&P 500^® index increased 2.3%, and the smaller cap weighted Russell 2000^® decreased 3.7%.

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From Equity Research
Markets digested a range of conflicting signals during June with inflation in key commodities rising amidst increasing COVID concerns linked to the Delta variant. Nevertheless, market complacency appears to be holding relatively high as reflected in the VIX index or “fear gauge” which ended the month at just below 16 having reached a high near 21 mid-month. For the full month, the Dow Jones Industrial Average decreased 0.1%, the S&P 500^® index increased 2.2%, and the smaller cap weighted Russell 2000^® increased 1.8%.

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From Equity Research
Equity markets continued to move higher in May as enthusiasm around reopening combined with widespread vaccinations appeared to overcome concerns around rising inflation. Optimism in the markets was reflected in the VIX index or “fear gauge” which ended the month at about 17 having reached a high of 28 early in the month in the midst of the uncertainty created by the Colonial Pipeline hack. For the full month, the Dow Jones Industrial Average increased 1.9%, the S&P 500^® index increased 0.6%, and the smaller cap weighted Russell 2000^® increased 0.1%.

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From Equity Research
News of improving economic growth and surging vaccinations in the U.S. provided a constructive backdrop for equity markets in April leading to across the board gains in major indices. Although the news in the U.S. appears quite good for a summer reopening, other regions of the world continue to experience challenges with spread of the virus that represent a persistent global threat as new mutated strains emerge. For the full month, the Dow Jones Industrial Average increased 2.7%, the S&P 500^® index increased 5.2%, and the smaller cap weighted Russell 2000^® increased 2.1%.

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From Equity Research
Signs of a robust economic recovery and accelerating vaccinations in the U.S. helped fuel broad based market gains in March. The combination of the new $1,400 stimulus checks with the announcement of a major new infrastructure proposal helped reinforce the magnitude of fiscal stimulus efforts being pursued in the U.S. Reflecting shifting sentiment, there was a noteworthy decline during March in the VIX Index or “Fear Gauge” which ended the month below 20 reflecting growing market confidence. For the full month, the Dow Jones Industrial Average increased 6.6%, the S&P 500^® index increased 4.2%, and the smaller cap weighted Russell 2000^® increased 0.9%.

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From Equity Research
During February, equity markets responded positively to improving daily COVID-19 case count trends and the broadening distribution of vaccines amid signs of improving economic news. The VIX Index or “Fear Gauge” which had spiked at the end of January, generally trended down for the month although concerns around rising interest rates appeared to boost the index near month-end. For the full month, the Dow Jones Industrial Average increased 3.2%, the S&P 500^® index increased 2.6%, and the smaller cap weighted Russell 2000^® increased 6.1%.

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From Equity Research
The New Year ushered in continuing uncertainties for equity markets as the COVID-19 pandemic weighs on consumers both in the U.S. and abroad. During January, equity market performance was mixed with smaller caps generally outperforming large cap stocks. Reflecting a notable shift, the VIX Index or “Fear Gauge” which had been tracking in the low 20 range spiked to over 37 near month end as investors reacted to unusual social media driven stock price behavior. For the full month, the Dow Jones Industrial Average dropped 2.0%, the S&P 500^® index dropped 1.1%, and the smaller cap weighted Russell 2000^® increased 5.0%.

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From Equity Research
Despite the ravages caused by the global COVID-19 pandemic, 2020 will go down in history as a volatile but overall very strong year for equity investors. It was a year that saw the S&P 500^® index crater by 32% in the first quarter of 2020 before rebounding sharply on the heels of unprecedented fiscal and monetary stimulus efforts. The U.S. Federal Reserve and other major central banks along with strong government stimulus efforts drove a second quarter 2020 snapback followed by solid further recovery through year-end. During December, equities added to gains for the year while the VIX Index or “fear gauge” climbed as the new year approached. For the full month, all three major equity indexes increased with the Dow Jones Industrial Average up 3.3%, the S&P 500^® index up 3.7%, and the smaller cap weighted Russell 2000^® increasing 8.5%.

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From Equity Research
Equity markets during November generated powerful gains as investors focused on a future where highly effective vaccines might allow a return to a more normal life. This optimism came despite increasingly dire news around the rapid acceleration in the spread of the COVID-19 case counts across the U.S. in recent days. The optimistic market outlook was reflected in the VIX Index, or “fear gauge,” which started the month at about 38 and steadily declined to end the month at just over 20. For the full month, all three major equity indexes increased strongly with the Dow Jones Industrial Average up 11.8%, the S&P 500^® index up 10.8%, and the smaller cap weighted Russell 2000^® increasing 18.3%.

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From Equity Research
Equities were broadly down in October as investors grew cautious in response to surging COVID-19 case counts and the uncertainties around the Presidential election which have continued as vote counting continues post-election. The VIX Index, or “fear gauge,” started the month in the mid-25 range and spiked at month-end to over 38. For the full month, two of the three major equity indexes declined with the Dow Jones Industrial Average down 4.6%, the S&P 500^® index down 2.8%, and the smaller cap weighted Russell 2000^® increasing 2.0%.

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From Equity Research
Equities took a breather in September following a strong August as uncertainties around the upcoming election combined with ongoing concerns linked to the pandemic weighed on markets. The VIX Index, or “fear gauge,” was volatile through the month ending the period around where it began in the mid-25 range. For the full month, all three major equity indexes declined with the Dow Jones Industrial Average down 2.3%, the S&P 500^® index down 3.9%, and the smaller cap weighted Russell 2000^® down 3.5%.

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From Equity Research
Equity markets surged higher during August despite the challenging backdrop created by the COVID-19 pandemic. Investors cheered on gains in a select group of leading technology companies that have been at the core of the market rebound seen this year. Concerns in August around the progress of the virus and increasing civil unrest appeared to have been largely shrugged off by investors with the VIX Index, or “fear gauge,” moving up only slightly from about 24.5 at the start of the month to end at about 25.6. For the full month, all three major equity indexes increased with the Dow Jones Industrial Average up 7.6%, the S&P 500^® index up 7.0%, and the smaller cap weighted Russell 2000^® up 5.5%.

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From Equity Research
The rebound in U.S. equity markets continued during July despite surging levels of new COVID-19 cases emerging across the country. The market advance remained narrow, however, with a handful of leading technology companies fueling gains. Although concerns around the spread of the coronavirus represented headline news, the VIX Index, or “fear guage” suggests that investors broadly shrugged it off with the index dropping from a little over 30 at the start of the month to end at 24.5.

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From Equity Research
The World Health Organization warned that “The worst is yet to come” as the spread of the coronavirus pandemic appears to be accelerating in the U.S. The potential economic ramifications of an upsurge in the virus weighed on equity markets in late June although for the full month equities advanced broadly. The VIX Index, or “fear gauge” spiked to over 40 mid-month before settling back to near 30 range at month-end. For the full month, all three major equity indexes increased with the Dow Jones Industrial Average up 1.7%, the S&P 500® index up 1.8%, and the smaller cap weighted Russell 2000® up 3.4%.

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From Equity Research
Rebounding equity markets during May captured investor optimism that the worst may be behind the economy against a backdrop of continuing fiscal and monetary support from governmental policies. Market enthusiasm seemed to increase as the month progressed as pandemic lockdowns were lifted spurring equities to move into valuation bands that could be ahead of fundamentals. Investor optimism improved as seen in the VIX Index, or “fear gauge” which trended down from April levels in the mid-30’s to about 27.5 at the end of May. For the full month, all three major equity indexes increased with the Dow Jones Industrial Average up 4.3%, the S&P 500® index up 4.5%, and the smaller cap weighted Russell 2000® up 6.4%.

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From Equity Research
Equity markets rallied in April on unprecedented levels of government stimulus combined with rising hopes that shelter-in-place mandates may be slowing the spread of the virus. More bullish sentiment amongst investors was reflected in the VIX Index, or “fear gauge” which backed off March highs in the 80’s to end April in the mid-30’s. For the full month, all three major equity indexes increased with the Dow Jones Industrial Average up 11.1%, the S&P 500® index up 12.7%, and the smaller cap weighted Russell 2000® up 13.7%.

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From Equity Research
March was a tumultuous month for equity markets closing out the worst Q1 performance ever as the COVID-19 pandemic spread across the United States sowing fear and uncertainty. As markets searched for a bottom, investors grappled with social and economic fallout from the crisis which will reverberate for years to come. Against this backdrop, fiscal and monetary stimulus spigots were opened wide in March providing some needed support for wary investors. Fear, as measured by the VIX Index, appeared to peak mid-March as the gauge broke through the 80 mark before easing to the mid-50’s by month-end. For the full month, all three major equity indexes declined with the Dow Jones Industrial Average down 13.7%, the S&P 500® index down 12.5%, and the smaller cap weighted Russell 2000® down 21.9%.

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From Equity Research
During February our disease vocabulary unfortunately expanded beyond coronavirus to the even more scary sounding COVID-19 as the epidemic moved from China to virtually all corners of the planet. With the spreading virus came concerns around health, supply chains, energy, and global GDP as both the total number of cases and deaths rapidly increased. Not surprisingly, equity markets shuddered from the onslaught with fear spiking and stock markets slumping. The VIX Index or ‘fear gauge’ which started the month at about 18 reached levels not seen since the financial crisis hitting 40 by the end of February. For the full month of February, all three major equity indexes declined with the Dow Jones Industrial Average down 10.07%, the S&P 500® index down 8.41%, and the smaller cap weighted Russell 2000® down 8.53%.

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From Equity Research
Following an impressive 2019, equity investors were greeted with a range of challenges to kick off the New Year ranging from geopolitics to health concerns. The U.S. air strike in early January targeting an Iranian official added to turbulence in energy markets that had been striving to reach a better supply/demand balance. These concerns were overshadowed later in the month with the emergence of the coronavirus outbreak spreading through China and beyond. Adding in to the mix the ongoing political uncertainty from the impeachment trial and it is not surprising that the VIX volatility index or “fear gauge” spiked from about 12-13 in early January to reach multi-month highs in the 18 range by month-end. For the full month of January, all three major equity indexes declined with the Dow Jones Industrial Average down 0.99%, the S&P 500 index down 0.16%, and the smaller cap weighted Russell 2000 down 3.26%.

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From Equity Research
The 2019 bull market rally was sustained in December with equity indexes closing out the year in solidly positive territory albeit giving back some gains at the start of the New Year following the airstrike in Iran. For the full year, 2019 proved to be outstanding for equity investors with the S&P 500® closing out with a performance among the best in the past 50 years. The solid gains in the market were far from expected a year ago after the sharp market pullback in December 2018 following Fed rate hikes. Sentiment started to shift in January 2019, as Fed Chair Powell announced the Fed would ‘pause’ on its interest rate hiking strategy that was subsequently followed by three, 25 basis point, rate cuts as 2019 progressed with the Fed shifting to an easing stance. Lower rates drove a marked expansion of P/E ratios with the forward market multiple expanding from ~15.5x to the current ~18.6x during the year. During December of 2019, the VIX Index or “fear gauge” was relatively stable generally tracking around the 13 level before inching into the 15 range near month end. For the full month of December, all three major equity indexes rose sharply with the Dow Jones Industrial Average up 1.7%, the S&P 500 index up 2.9%, and the smaller cap weighted Russell 2000® up 2.7%.

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