Drastic volatility hit the U.S. stock market in the first half of 2020. The S&P 500® declined by 3.1%, with negative returns also posted by the S&P MidCap 400® (-12.8%) and the S&P SmallCap 600® (-17.9%). The S&P 500 reached an all-time high on Feb. 19, 2020, followed by a rapid 33.8% drop through March 23, 2020, as pandemic-driven restrictions suppressed economic activity. In April, stocks rebounded and the S&P 500 posted its best monthly return since January 1987. Encouraged by government stimulus programs and the expectation of economic reopening, the stock market continued its recovery in May and June.
In 11 out of the 18 categories of domestic equity funds, the majority of funds continued to underperform their benchmarks. For example, 67% of domestic equity funds lagged the S&P Composite 1500® during the one-year period ending June 30, 2020. Additionally, the majority of large-cap (63%) and multi-cap (65%) funds lagged their benchmarks. In contrast, mid-cap and small-cap active funds performed relatively better. Approximately 56% of mid-cap and 53% of small-cap active managers outperformed their benchmarks for the one-year period.