Winter 2021 Quarterly Newsletter
Author: Patrick Bobbins, CFA®CIMA®
2020 ended the year very polarized for the U.S. equity markets, with large growth companies (+38.5%) vastly outperforming large value companies (+2.8%) by one of the widest margins in history. That same theme of growth outperforming value was present across all equity markets both domestic and foreign. The hardest hit sectors, energy, REITs and financials have yet to fully recover. Industries based in online retail, home improvement and technology were the big winners last year. In the bond market we witnessed historically low interest rates, which helped boost returns in the fixed income markets (+7.5%).
Despite a phenomenal year in financial markets, the economy remains plagued with high levels of unemployment and increasing business closures. Much of this negativity is currently being offset by the large stimulus measures from global governments. We expect fiscal stimulus to continue through much of the year and the Federal Reserve to remain very accommodative through low interest rates.
Our 2021 outlook remains cautious as high valuations, especially in the growth equities, are concerning. We continue to closely monitor for signs of inflation and are looking for signals of a rebound in industries more tied to the physical economy.
As we enter 2021, we expect pockets of volatility as clarity around the new administration’s policies on personal taxes, regulation, corporate taxes, stimulus measures and the virus develop. As always, if you have any questions or concerns about your investment portfolio, please reach out to us. We look forward to this new year and hope you and your family stay safe and healthy.
This article was featured in our Winter 2021 Quarterly Newsletter available here:Market Update, Quarterly Newsletter