The Bottom Line: S&P 500 Index records fifth consecutive monthly gain while sustainable stock indices bounced back in June to eclipse their conventional counterparts.
Fears of inflation and the end of Fed stimulus failed to halt another rise in the S&P 500 Index, which recorded a fifth consecutive monthly increase with a gain of 2.3% in June
Fears of inflation and the end of Fed stimulus failed to halt another rise in the S&P 500 Index, which recorded a fifth consecutive monthly increase, gaining 2.3% in June, 8.55% over the second quarter and 15.25% year-to-date. The US was reopening, even as concerns were growing about a possible new COVID-19 wave in regions there were under vaccinated, as consumers started to spend and corporate earnings were expected to remain strong but perhaps not as high as the results achieved in the first quarter. The S&P 500 actually notched eight new closing highs during June to close the month at an all-time high, but the trajectory was not a smooth one and much of the gain was achieved in the last eight trading sessions of the month. Refer to Chart 1.
The Nasdaq Composite added 5.6% and the Dow Jones Industrial Average was flat for the month. Growth outperformed value stocks across the capitalization range, with the Russell Midcap Growth Index adding 6.8%; and large cap stocks eclipsed small caps. Overseas, another wave of COVID-19 in certain countries threatened to limit reopening growth. The MSCI ACWI, ex USA posted negative results, -0.6%, while MSCI EAFE came in at an even lower -1.1%. Emerging markets, on the other hand, as measured by the MSCI Emerging Markets Index, were up 0.2%. Fixed income markets were higher in June, benefiting in part from declining yields as the 10-year Treasury declined 13 bps to end the month at 1.45%. The Bloomberg Barclays Aggregate Bond Index added 0.7%, and 2.0% in the second quarter but remained negative -1.6% year-to-date.
Two of three sustain indices outperformed in June
The Sustainable (SUSTAIN) Large Cap Equity Fund Index and the Sustainable (SUSTAIN) Bond Fund Index both posted returns in excess of their conventional benchmarks while the Sustainable (SUSTAIN) Foreign Fund Index lagged by 37 bps.
The Sustainable (SUSTAIN) Large Cap Equity Fund Index added 2.72% in June, posting the fifth consecutive monthly gain. The excess index results were powered by the performance of just three funds that eclipsed the S&P 500 with returns ranging from 2.4% to 6.91%. The best fund performance in June was turned in by the Eventide Gilead Fund I that registered a gain of 6.91% while at the other end of the range the Hartford Capital Appreciation Fund A recorded a much narrower 1.14% increase. Refer to Chart 2.
The SUSTAIN Large Cap Equity Fund Index had also overtaken the S&P 500 over the trailing 3-month interval, twelve months as well as three years (average annual) with results of 8.77%, 41.32% and 19.2%, respectively.
The Sustainable (SUSTAIN) Bond Fund Index outperformed the Bloomberg Barclays US Aggregate Bond Index for the 15th consecutive month, after adding 0.88% in June versus 0.70% for the conventional benchmark. All ten funds that comprise the index posted returns equal to or in excess of 0.76%. Transamerica Bond Fund I led with a gain of 1.08% while the Calvert Bond Fund I brought up the rear with an increase of 0.76%.
The SUSTAIN Bond Fund Index also bested the Bloomberg Barclays US Aggregate Bond Index over the trailing 3-month interval, twelve months as well as three years (average annual) with results of 2.15%, 2.38% and 5.9%, respectively. Refer to Chart 3.
The only one of the fund indices to lag behind its conventional index in June, the Sustainable (SUSTAIN) Foreign Fund Index gave up -1.02% versus the -0.65% registered by the MSCI ACWI ex USA Index (Net). That said, the SUSTAIN Index is still in the lead over the trailing 12-months and since inception time interval. Refer to Chart 4.
Six of the ten funds that comprise the SUSTAIN Index lagged behind the MSCI ACWI ex USA Index (Net), with the two value oriented funds giving up between 2% and 3%. The Federated Hermes International Equity Fund, the only fund in the group to end the month in positive territory, gained 0.15% while Templeton Foreign A dropped -2.95%.
ESG sustainable stock indices bounced back in June to eclipse their conventional counterparts
- ESG stock market indices, as measured by selected MSCI ESG Leaders indices as well as the S&P 500 ESG Index, bounced back in June to eclipse their conventional counterparts. Excepting the MSCI USA ESG Leaders Index, five ESG indices recorded positive performance differentials ranging from a low of 1 bps to a high of 56 bps posted by the MSCI Emerging Markets ESG Leaders Index.
- Contributing to the performance of the non-ESG MSCI USA Index were holdings in Apple, Amazon and Facebook, excluded from the MSCI USA ESG Leaders Index, that together accounted for 11.8% of and produced returns from 6.5% to 9.9% in June.
- While one-year relative results vary, ESG indices continued to lead their conventional counterparts over the trailing three-to-10-year intervals. The only exception is the MSCI USA ESG Leaders Index that trails by 82 bps and 53 bps, average annual, over the five and ten year periods. Refer to Table 1 and Chart 5.
|Index Name||1 MO(%)||3-M(%)||1-YR(%)||3-YRS(%)||5-YRS(%)||10-Years(%)|
|BB MSCI ESG Focus Aggregate Bond||0.71||1.84||-0.3|
|BB US Aggregate Bond||0.70||1.83||-0.33||5.34||3.03||3.39|
|S&P 500 ESG||2.80||9.23||40.74||20.14||18.34||15.22|
|MSCI USA ESG||2.65||8.88||40.98||19.95||17.93||14.49|
|MSCI ACWI ex USA ESG||-0.23||5.23||34.84||10.85||11.53||6.84|
|MSCI ACWI ex USA||-0.65||5.48||35.72||9.38||11.08||5.45|
|MSCI EAFE ESG||-0.93||4.66||30.05||9.48||10.32||6.61|
|MSCI Emerging Markets ESG||0.73||5.00||41.63||13.3||14.28||7.3|
|MSCI Emerging Markets||0.17||5.05||40.9||11.27||13.03||4.28|
|SUSTAIN Large Cap Equity Fund||2.72||8.77||41.32||19.2||`|
|SUSTAIN Foreign Equity Fund||-1.02||4.99||37.36|
|SUSTAIN Bond Fund||0.88||2.15||2.38||5.9|