A Quality Focus Amid A ‘Return to Normal’
Global equity markets had moderately good performance in the first quarter of 2021. Vaccine distribution and optimism about an end to COVID restrictions, combined with further stimulus packages, particularly a large infrastructure bill in the U.S., continued to buoy markets.
Rising 10-year Treasury yields and a view that inflation is picking up have driven some of the more cyclical areas of the market. Cyclical sectors and stocks hit hardest by the pandemic, including energy and financials, performed well. The good news is that this has been due to signs that many economies are recovering more rapidly than previously projected.
At the other end of the spectrum, some of the momentum-driven stocks of 2020 pulled back. In emerging markets, Brazil, Russia, and Turkey all raised their key interest rates in the latter part of the quarter. Investors have witnessed similar periods over the past 10 years where rates spiked upwards in the short term, such as during the “Taper Tantrum” of 2013 and Donald Trump’s election in 2016.
MSCI All Country (AC) World measures equity performance of developed and emerging markets. MSCI EAFE® measures developed foreign market equity performance, excluding the U.S. and Canada. MSCI Europe measures equity market performance of Europe’s developed markets. MSCI Japan measures performance of the Japanese market’s large and mid-cap segments. MSCI AC Asia Pacific ex Japan measures equity market performance of Asia’s developed and emerging markets (excluding Japan), Australia and New Zealand. MSCI Emerging Markets measures equity market performance in global emerging markets. MSCI AC World ex US measures equity performance of developed and emerging markets, excluding the U.S. S&P 500® measures performance of 500 of the largest U.S. companies. All indexes are free float-adjusted market cap-weighted and calculated on a total return basis with dividends reinvested.
The commentary is the opinion of Vontobel Asset Management. This material has been prepared using sources of information generally believed to be reliable; however, its accuracy is not guaranteed. Opinions represented are subject to change and should not be considered investment advice or an offer of securities.
Past performance is no guarantee of future results.
All investments carry a certain degree of risk, including possible loss of principal.