Q1 2021 Market ChartBook - Baird Financial Advisor

[Pages:42]Q1 2021 Market ChartBook

Baird Private Wealth Management

March 31, 2021

Wealth Management | Capital Markets ? Investment Banking | Private Equity | Asset Management

Charlotte

Chicago

Frankfurt

London

Milwaukee

Shanghai



Table of Contents

03

15

22

30

Economy & Markets

Market Highlights Markets at a Glance Returns by Asset Class S&P 500 Index Economic Growth Inflation Watch Jobs Market Corporate Profitability Market Volatility Commodity Markets Mutual Fund and ETF Flows

Domestic Equity

Equity Snapshot Asset Class Performance Sector Performance Investment Style Leadership Historical Market Valuations Mutual Fund Performance

International Equity

Global Performance Map Equity Snapshot Country Performance Sector Performance Investment Style Leadership Global Market Valuations Historical Market Valuations

Fixed Income

Bond Market Snapshot Maturity/Credit Performance Yield and Volatility U.S. Treasury Bonds Municipal Bonds Corporate Bond Yields Bonds Spreads Sector Yields & Returns Mutual Fund Performance

Economy and Markets

Q1 2021 Market ChartBook

Q1 2021 Market Highlights

Economy and Market

At a Glance: Equity markets began 2021 in the same manner as they closed 2020: strongly and with a decided tilt towards Value and Cyclical stocks. Vaccine momentum, reopening progress, and ~$3 trillion in fiscal stimulus hitting the economy provided gasoline for the risk-on sentiment fire this quarter, seen both in traditional assets (stocks, commodities) and non-traditional (cryptocurrencies, NFTs, SPACs, meme stocks). On the back of a strong (and strengthening) near-term economic outlook, Value (+11.3%) outperformed Growth (+0.9%) handily while Small Cap (+12.7%) bested Large (+6.2%). In-line with the equity market rotation and boosted by heightened growth and inflation expectations, 10-year Treasury yields skyrocketed from 0.93% at year-end to as high as 1.77% in March,.

Economy: The US economy sustained its recovery in 4Q20 - real GDP +4.3% - and into the new year. Labor markets continue their steady improvement, though remain well off pre-Covid levels (and will likely remain that way until vaccination-led reopening allows service sector employees to return en masse). Though February data was choppy due in part to a stimulus gap, weather issues, and supply-side bottlenecks, forward-looking data looks robust. Consumer confidence spiked to a Covid-era high, and higher frequency data indicates that mobility and consumer spending are improving rapidly.

Stimulus Arrives (again): On that note, the ~$3T in stimulus sent out in Q1 provided plenty of direct consumer support (refund checks + enhanced unemployment), which should continue to boost retail spending in the near-term. While fiscal support is certainly one leg of the bullish case for risk assets, increased government spending has begun to stir up inflation fears; five-year forward inflation expectations closed Q1 around their highest level since 2008.

Domestic Equity

Market Cap and Style: Value continued its stretch of recent outperformance over Growth, turning in its best relative quarter since 2001. In a similar vein, smaller-cap names continued their outperformance of the Large and Mega-cap stocks that dominated most of last year. Small-cap Value led all domestic style box categories with +21.2% for the quarter.

Sector: In-line with the Value and Cyclical outperformance described above, Energy (+30.9%), Financials (+16.0%), and Industrials (+11.4%) were the top returning sectors over the quarter. Rising commodity prices and the strong growth outlook boded well for these oft-troubled areas of the market. Yield-sensitive and defensive sectors like Consumer Staples (+1.1%) and Utilities (+2.8%) took a back seat, while Technology (+2.0%) also took a pause. Elevated valuations, near-term economic growth prospects, and rising yields hurt the Tech sector, which had been one of the preeminent benefactors of the Covid-19 pandemic landscape.

International Equity

At a Glance: International equities, both Developed (+3.6%) and Emerging (+2.3%), were positive on the quarter, though they again lagged domestic shares. A combination of a stronger USD and some pandemicspecific pain points caused international to lag, though local currency Developed markets bested the S&P on the back of a more cyclically-oriented sector profile. Sweden (+18.3%) and the Netherlands (+15.7%) led on the Developed side, while South Africa (+12.9%) and Taiwan (12.7%) fared well in the Emerging Markets. China (-0.2%) took a backseat to other countries despite a strong Growth outlook and virus response; the Tech-heavy nature of the country's economy remained a weight.

Fixed Income

At a Glance: The broad US bond market, measured by the Bloomberg Barclays Agg Index, fell -3.4% in Q1 as rising rates, rising inflation expectations, and strong near-term growth prospects hurt fixed income. Long-duration and high-quality debt were especially weak; the Bloomberg Barclays Treasury Index turned in its worst quarter since 1980. The rise in interest rates was particularly rapid ? despite the low base of 0.93% on the 10-yr at 4Q20 end, the move as high as 1.77% in March represented a once-in-a-blue moon level event. Rate volatility has been heightened over the last year (alongside equity market volatility) and 1Q21 was no exception.

Taxable Bonds: Despite the general underperformance across the fixed income landscape, risk-on areas held up better. High Yield Corporate (+0.8%) and High Yield Muni (+2.1%) were two of the only fixed income sectors in the black last quarter as the economic environment painted a better backdrop for riskier debt. Global bonds (-5.3%), Investment Grade Corporates (-4.6%), and Treasuries (-4.3%) were among the weaker performing areas. Duration was hit especially hard as long rates skyrocketed; the Bloomberg Barclays US Aggregate 10+ Year Index fell -10.4% for the quarter as long-term Treasurys entered a rare bear market.

Municipal Bonds: Municipal bonds returned -0.4% in Q1, outpacing taxable peers by 3.0%. Amid trillions in fiscal stimulus and better-than-feared state and local tax revenues, the outlook for muni bonds held up fairly well despite the broad carnage in the fixed income space. Lower quality and shorter duration instruments faired the best. As mentioned above, High Yield Municipal fixed income was the one of the best performing sectors across the bond landscape.

Robert W. Baird & Co. Member SIPC.

4

Markets at a Glance

As of March 31, 2021

Asset Class

U.S. Stocks Large Cap Large Cap Value Large Cap Grow th Mid Cap Small Cap

International Stocks Developed Markets Emerging Markets

Bonds Short-Term Taxable Intermediate-Term Taxable Short-Term Municipal Intermediate-Term Municipal

Cas h Cash/Cash Equivalents

Sate llite High Yield Real Estate Commodities

Last Qtr

YTD

6.2

6.2

11.3

11.3

0.9

0.9

8.1

8.1

12.7

12.7

3.6

3.6

2.3

2.3

(0.0) (1.9) 0.2 (0.5)

(0.0) (1.9) 0.2 (0.5)

0.0

0.0

0.8

0.8

8.5

8.5

6.9

6.9

Trailing Returns (%)

1-Ye ar

3-Ye ar

5-Ye ar

10-Ye ar

Annual Returns (%)

2020

2019

2018

Benchm ark

56.4

16.8

16.3

13.9

18.4

31.5

(4.4) S&P 500

56.1

11.0

11.7

11.0

2.8

26.5

(8.3) Russell 1000? Value

62.7

22.8

21.0

16.6

38.5

36.4

(1.5) Russell 1000? Growth

73.6

14.7

14.7

12.5

17.1

30.5

(9.1) Russell Midcap?

94.8

14.8

16.4

11.7

20.0

25.5

(11.0) Russell 2000?

45.2

6.5

9.4

6.0

8.3

22.7

(13.4) MSCI EAFE USD

58.9

6.9

12.5

4.0

18.7

18.9

(14.2) MSCI Emerging Mkts USD

1.6

3.0

2.0

1.6

3.3

4.0

1.6 BBgBarc 1-3 Yr Govt/Credit

2.0

4.4

2.8

2.9

6.4

6.8

0.9 BBgBarc Intermed. Govt/Credit

2.4

2.2

1.6

1.4

2.1

2.8

1.8 BBgBarc 1-3 Yr Municipal

5.6

4.7

3.0

3.9

5.1

6.7

1.7 BBgBarc 7 Yr Municipal

0.1

1.5

1.2

0.6

0.7

2.3

1.9 BBgBarc 3 Month T-Bill

23.7

6.8

8.1

6.5

7.1

14.3

(2.1) BBgBarc US Corporate High Yield

37.0

10.4

7.3

9.1

(5.7)

28.2

(4.0) DJ Composite All REIT

35.0

(0.2)

2.3

(6.3)

(3.1)

7.7

(11.2) Bloomberg Commodity

Source: Factset; Russell, MSCI, Bloomberg, Barclays, FTSE, and Dow Jones benchmarks. Performance greater than one year is annualized. Performance is represented by the benchmark listed in the "representative benchmark" column. See important disclosures and definitions included with this publication.

Robert W. Baird & Co. Member SIPC.

5

Returns by Asset Class

As of March 31, 2021

Year-to-Date Performance of Various Asset Classes (USD)

Market Cap

US Sectors

Global Developed Markets

Emerging Markets

Fixed Income

Source: Factset. Asset classes are represented by the following benchmarks (in local terms): Large Cap (S&P 500), Mid Cap (Russell Mid Cap), Small Cap (Russell 2000), Cons. Discretionary (S&P 500 Sectors/Consumer Discretionary), Cons. Staples (S&P 500 Sectors/Consumer Staples), Energy (S&P 500 Sectors/Energy), Financials (S&P 500 Sectors/Financials), Health Care (S&P 500 Sectors/Health Care), Industrials (S&P 500 Sectors/Industrials), Info. Technology (S&P 500 Sectors/Info. Technology), Materials (S&P 500 Sectors/Materials), Communications Services. (S&P 500 Sectors/Communications Services), Utilities (S&P 500 Sectors/Utilities), Real Estate (S&P 500 Sectors/Real Estate), Australia ((MSCI Australia), Canada (MSCI Canada), France (MSCI France), Germany (MSCI Germany), Japan ((MSCI Japan), Switzerland ((MSCI Switzerland), United Kingdom (MSCI United Kingdom), United States (S&P 500), Brazil (MSCI Brazil), China (MSCI China), India (MSCI India), Korea (MSCI Korea), Mexico (MSCI Mexico), Russia (MSCI Russia), South Africa (MSCI South Africa), Taiwan (MSCI Taiwan), Agency (BBgBarc US Agency), Broad Market (BBgBarc US Agg. Bond), Corporate (BBgBarc US Corporate IG), High Yield (BBgBarc US Corporate HY), Municipal (BBgBarc Municipal), TIPS (BBgBarc US Treasury US TIPS), Treasury (BBgBarc US Treasury)

Robert W. Baird & Co. Member SIPC.

6

S&P 500 PR Index

As of March 31, 2021

Year-to-Date Performance of the S&P 500 Price Return Index

YTD +5.8%

Source: Factset. The S&P 500 Index, computed by the Standard & Poor's Corporation, is a well-known gauge of stock market movements determined by the weighted capitalization of the 500 leading U.S. common stocks. Indices are unmanaged and it is not possible to invest directly in an index.

Robert W. Baird & Co. Member SIPC.

7

Economic Growth

As of December 31, 2020

US GDP Growth

Contribution to US GDP Growth

Source: US Department of Commerce: Bureau of Economic Analysis (GDP Growth)

Gross Domestic Product (GDP)

GDP is a basic measure of U.S. economic output. Alternatively, it can be thought of as the final value of all goods and services produced within the U.S. Positive GDP growth signals an expanding economy. GDP is comprised of four major categories: personal consumption, private investment, government spending and net exports.

Robert W. Baird & Co. Member SIPC.

8

 ................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download