Market Review - January 2021
Source: Zephyr Style Advisor
US equities started the month with a bang as the vaccine distribution and hopes of additional fiscal stimulus fueled new record highs. However, US equities lost steam at the end, to finish down -1%, as speculative angst in select stocks sparked concerns about bubbles in markets. Small-cap stocks, which have led the market for the past several months, maintained their strength, with the Russell 2000 index gaining 5%. Emerging market equities outperformed developed markets to post +3% as China’s economy continues to rebound.
Sector performance was mixed with only four out of eleven sectors with positive returns. Energy was the best performing sector, while consumer staples was the worst.
US bonds started with negative returns in the first half but, as equity markets sold off in the second half, it pared back some of its losses to end the month down -0.7%. International bonds and emerging market bonds also lost ground and posted negative returns. While most bonds struggled, high-yield and municipal bonds posted positive returns. Fear of potential higher taxes in the new administration led municipal bonds to outperform taxable bonds.
Gold fell -2.6% as the global economic recovery showed improvement, and the US dollar rose. Commodities gained as oil and grains rebounded after being crushed by weak demand in 2020.
Relative to a globally balanced (60/40) equity/bond index, allocations to commodities, US REITS and global equities helped, while global bonds and gold hurt for the month.
Source: Zephyr Style Advisor
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