Second quarter 2021 capital markets outlook

May 2021

Takeaways

  • The rotation to value and cyclical stocks took a pause in June, as growth stocks outperformed value stocks.
  • Outside the US, emerging market equities outperformed developed market equities, and like the US, growth
  • outperformed value.
  • Fixed income markets posted modest positive returns, with the Barclays TIPS index returning 0.6% and the
  • Barclays Aggregate index gaining 0.7%.
  • The Bloomberg Commodities index returned 1.9% in June, but commodity-related stocks retraced some of
  • their gains, with the S&P Global Natural Resources index returning -2.2%.
  • Global infrastructure stocks posted mixed returns in June, while REITs saw small gains.
  • The US vaccination efforts combined with the re-opening of major parts of the US economy have lifted 2021
  • GDP forecasts for the US to 6.5%.
  • COVID-related setbacks have eased in Europe, likewise lifting growth expectations there for 2021.
  • According to the World Health Organization, global COVID cases have been falling since January. While
  • the efficacy of many of the vaccines is promising, governments are closely monitoring new COVID variants.
  • Questions around the Biden administration’s policy agenda and its ability to implements it are paramount
  • on investors’ minds, especially on questions related to growth and inflation.
  • Investors are likewise keeping an eye on monetary policy, specifically the timing and pace of which the Fed
  • may start to dial back some of its stimulus.