As we exited 2020, investors looked forward to turning the page on the health and economic impacts of the pandemic, the political upheaval of a contentious election cycle, and the unprecedented volatile swings across markets. The first quarter of 2021 initially greeted investors with more of the same.
However, by the end of the quarter, global markets rallied, driven by continued optimism on COVID-19 vaccines, a final resolution of a transition of political power, and ongoing fiscal and monetary stimulus.
Global equities finished the quarter in positive territory, powered by a remarkable run in the US. The S&P 500 posted its best 12-month performance since 1936, touching the 4000 level for the first time ever, nearly doubling its coronavirus pandemic low of 2,192 in just over a year, and finished the quarter up 6.17%. The Dow Jones Industrial Average posted a positive 8.29% for the quarter, and NASDAQ Composite finished up 2.95%. While the MSCI EAFE and MSCI Emerging Markets indexes kept pace with positive returns of 3.60% and 2.34% for the quarter. In a dramatic reversal of last year’s pattern, smaller caps outperformed, particularly those demonstrating value characteristics, with the Russell 2000 Value up a whopping 21.17% for the quarter.1 Volatility also declined, as the VIX closed the quarter at 19.40.2
Fixed income performance across most markets was mostly negative, as inflation fears led to higher rates. The Bloomberg Barclays US Aggregate Bond Index, or the “Agg”, which is frequently used as a stand-in for measuring the performance of the US bond market, finished down -3.37% on the quarter. The Bloomberg Barclays Global Aggregate Index, a multi-currency benchmark which includes treasury, government-related, corporate, and securitized fixed-rate bonds from both developed and emerging markets, ended down -2.50% for the quarter.3
Exposure to investment risk factors was a mixed bag for the quarter. A strong reversal of the recent trend against the original “Fama-French” factors of Value and Size resulted in both factors contributing positively to portfolios on both an absolute and relative basis across all markets. Momentum, Quality, and Minimum Volatility posted mixed results on an absolute basis, but lagged across all markets on a relative basis for the quarter.4
The Senate passed the $1.9 trillion American Rescue Plan Act COVID-19 stimulus bill, helping to push stocks to new closing highs, as individual stimulus checks were sent out to over 90 million individuals (mostly electronically), prompting economists to anticipate an uptick in expenditures.5
However, the good news driving markets has really been the rollout of the COVID-19 vaccines. It has been a stunning scientific, manufacturing, and distribution achievement. To have a vaccine at all is amazing; to have several of them only a year after the virus was identified is unprecedented. The Biden Administration set a goal of 200 million vaccines within the first 100 days (April 30, 2020); as of the end of March, 130 million have been given and we recently had a record four million shots in one day. According to the New York Times, ”Doing so has required a campaign that resembles wartime mobilization in its speed and complexity. It has involved state and local governments as well as the private sector. It has combined existing infrastructure like pharmacies with brand-new mass-vaccination clinics at sports stadiums and amusement parks.”6
Despite inflation worries, ongoing production-capacity constraints, material shortages, weather, and challenges in logistics and human resources continuing to cause supply chain disruption, market participants have displayed a level of ebullience about the future, as stimulus checks hit bank accounts, vaccination rates have risen, and job growth showed promising signs of return.
1 Morningstar Direct, as of Apr 1, 2021
2 S&P Dow Jones Indices LLC and/or its affiliates. Data as of March 31, 2021
3 Morningstar Direct, as of Apr 1, 2021
4 Morningstar Direct, as of Apr 1, 2021
5 Rovnick, Naomi “Wall Street Stocks In Strongest Rebound Rally Since 1936”, Financial Times, Mar 29, 2021
6 Leonhardt, David “Three Million Daily Shots Achieved”, New York Times Apr 6, 2021
MARKET COMMENTARY: Q1 2021 DISCLOSURE
Symmetry Partners, LLC, is an investment advisory firm registered with the Securities and Exchange Commission. All data is from sources believed to be reliable but cannot be guaranteed or warranted. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, product or any non-investment related content made reference to directly or indirectly in this commentary will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may not be reflective of current opinions or positions. Please note the material is provided for educational and background use only. Moreover, you should not assume that any discussion or information contained in this material serves as the receipt of, or as a substitute for, personalized investment advice.
Diversification seeks to improve performance by spreading your investment dollars into various asset classes to add balance to your portfolio. Using this methodology, however, does not guarantee a profit or protection from loss in a declining market. Past performance does not guarantee future results.
Index Disclosure and Definitions
Investors cannot invest directly in an index. Indexes have no fees. Historical performance results for investment indexes do not reflect the deduction of transaction and/or custodial charges or the deduction of an investment management fee, the occurrence of which would have the effect of decreasing historical performance results. Actual performance for client accounts will differ from index performance.
S&P 500 Index represents the 500 leading U.S. companies, approximately 80% of the total U.S. market capitalization.
The VIX Index is a calculation designed to produce a measure of constant, 30-day expected volatility of the U.S. stock market, derived from real-time, mid-quote prices of S&P 500® Index (SPXSM) call and put options. On a global basis, it is one of the most recognized measures of volatility— widely reported by financial media and closely followed by a variety of market participants as a daily market indicator.
Dow Jones Industrial Average (DJIA) Is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange (NYSE) and the NASDAQ.
The Nasdaq Composite Index (NASDAQ) measures all Nasdaq domestic and international based common type stocks listed on The Nasdaq Stock Market, and includes over 2,500 companies.
Russell 2000 Value TR USD index measures the performance of the small capitalization value sector of the U.S. equity market.
MSCI EAFE Index is a free float-adjusted market capitalization index that is designed to measure the developed equity market (as defined by MSCI) equity performance, excluding the U.S. and Canada.
MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance in the global emerging markets (as defined by MSCI). The index consists of the 25 emerging market country indexes.
Bloomberg Barclays US Aggregate Bond Index measures the performance of the U.S. investment grade bond market. The index invests in a wide spectrum of public, investment-grade, taxable, fixed income securities in the United States – including government, corporate, and international dollar-denominated bonds, as well as mortgage-backed and asset-backed securities, all with maturities of more than 1 year.
Bloomberg Barclays Global Aggregate (USD Hedged) Index is a flagship measure of global investment grade debt from twenty-four local currency markets. This multi-currency benchmark includes treasury, government-related, corporate and securitized fixed-rate bonds from both developed and emerging market issuers. Index is USD hedged.
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