2Q2021 Market Summary

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Inflation and the pace of the economic reopening continued to drive investment returns in the second quarter, although recent market activity may reflect a wide range of expectations.

The Federal Reserve announced during its June meeting that Fed members expect to begin raising short-term rates in 2023, almost a year earlier than previously projected. This announcement resulted in short-term rates increasing slightly, but also surprisingly led to long-term rates declining at the same time, despite Consumer Price Index growth of 5% through May 2021. The decrease in the 10-year Treasury rate from 1.74% to 1.45% suggests that recent inflation data may be transitory in nature, although these macroeconomic trends are notoriously difficult to predict and higher inflation trends remain a likelihood. 

Equity markets responded well to these changing expectations, although value stocks again lagged their growth counterparts. Non-US stocks also performed well, but recent Chinese government clampdowns on certain businesses rattled investors and added to volatility. 


All major equity asset classes generated positive returns during the quarter, with the S&P 500 Index returning 8.6%. Growth stocks outperformed their value counterparts as inflation concerns hampered expectations for more economically sensitive companies. Most sectors were positive for the quarter except utilities, which lost 0.4%. 

The Russell 2000 Index of small-capitalization companies returned 4.3% while non-US stocks also provided positive returns. The MSCI EAFE Index and MSCI Emerging Markets Index returned 5.2% and 5.1%, respectively. 

Fixed Income

The yield curve flattened slightly during the quarter after short-term rates increased and longer-term interest rates fell. Declining rates helped bond prices and the Bloomberg Barclays US Aggregate Bond Index returned 1.8%. 

Corporate bonds also performed relatively well. The Bloomberg Barclays US Corporate Bond Index of investment grade bonds returned 3.6%, while high yield bonds generated a 2.7% return. Municipal bonds also benefited from declining rates in the quarter and the Bloomberg Barclays Municipal Bond Index returned 1.4%. 


Commodities mostly enjoyed a strong second quarter of 2021. The Bloomberg Commodity Index returned 13.3% and gold prices rebounded 3.2% after a difficult first quarter. Oil prices also climbed from $59 to $73 for a barrel of West Texas crude oil.  

Important Information:
The Standard & Poor’s 500 Index is an American stock exchange market index based on the market capitalizations of 500 large companies having common stock listed on the NYSE or NASDAQ. The S&P 500 index components and their weightings are determined by S&P Dow Jones Indices.
The Russell 1000 Growth Index is a broadly diversified index predominantly made up of growth stocks of large U.S. companies.
The Russell 1000 Value Index is a broadly diversified index predominantly made up of value stocks of large U.S. companies.
The Russell 2000 Index is a small-cap stock market index of the bottom 2,000 stocks in the Russell 3000 Index. The index is maintained by FTSE Russell, a subsidiary of the London Stock Exchange Group.
The Russell Microcap Index measures the performance of the microcap segment of the U.S. equity market. It includes 1,000 of the smallest securities in the Russell 2000 Index based on a combination of their market cap and current index membership and it also includes up to the next 1,000 stocks.
The MSCI EAFE Index is a stock market index that is designed to measure the equity market performance of developed markets outside of the U.S. and Canada.
The MSCI Emerging Markets Index is an index designed to measure equity market performance in global emerging markets.
The Bloomberg Barclays US Aggregate Bond Index is a broad-based flagship benchmark that measures the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market.
The Bloomberg Barclays US Corporate Bond Index measures the investment grade, fixed-rate, taxable corporate bond market. It includes USD denominated securities publicly issued by US and non-US industrial, utility and financial issuers.
The Bank of America Merrill Lynch High Yield Bond Index tracks the performance of below-investment-grade U.S. dollar-denominated corporate bonds publicly issued in the U.S. domestic market.
The Bloomberg Barclays U.S. Municipal Index covers the USD-denominated long-term tax exempt bond market. The index has four main sectors: state and local general obligation bonds, revenue bonds, insured bonds and prerefunded bonds.
The LBMA Gold Price Index is the global benchmark for unallocated gold and silver delivered in London.
The West Texas Intermediate (WTI) oil, also known as Texas light sweet, is a grade of crude oil used as a benchmark in oil pricing. This grade is described as light because of its relatively low density, and sweet because of its low sulfur content.
Bloomberg Commodity Index (BCOM) is calculated on an excess return basis and reflects commodity futures price movements.

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