February 2021

Positive 2H Outlook Still Intact

• Global stocks experienced the first monthly decline since October and fell by -0.4%.
• However, performance was mixed as emerging markets gained 3.1% and developed markets were -1.0% lower. In the US, large caps suffered (-1.0%) while the more cyclically-driven small caps delivered 5.0% and the Nasdaq was positive by 1.4%.
• The US 10-year Treasury gained 15 bp to ~1.1% and is near the highest of the recovery since March.
• While realized inflation remains low, signs of price pressure continue to grow as derived expectations have risen substantially.
• A slower-than-expected vaccine roll out, rising Covid cases, the emergence of new virus variants, and accompanying restrictions have slowed growth and tempered near-term sentiment; however, the more positive 2H outlook remains intact.
• Low consumer confidence remains a key concern along with slowing labor market progress.
• Once the epicenter of the Covid crisis, China’s recovery continues to outperform.
• The next round of Biden’s policy stimulus is heavily targeted to the consumer.
• As the yield curve steepens, we continue to expect a rotation to more value and cyclical oriented areas of the economy.