Economic & Market Review: Second Quarter 2021

by The Gould Asset Management Team Note: This post is an excerpt from Gould Asset Management’s Economic and Market Review for the Second Quarter of 2021. The excerpt is posted here for the benefit of our blog subscribers.

Stocks Set New Highs as Vaccination Rates Climb and Economies Continue to Rebound

US and foreign stocks surged again to new highs in Q2, buoyed by strong economic growth and rising vaccination rates.

US stocks continue to lead globally, with large cap stocks rising 8.6% over the quarter, as measured by the S&P 500 index. The index finished at a fresh all-time high, boosted by the prospects of a bipartisan infrastructure spending bill, and has gained a remarkable 15.3% in the first six months of 2021.  

Technology stocks (up 11.6% in Q2) were back in favor after a lackluster first quarter, as growth stocks outperformed value. The healthcare and financial sectors—both up 8.4% on the period—were the next best performing sectors. Year-to-date, financials (up 25.7%) lead all sectors, followed by industrials (up 16.4%).   

Mid and small cap US stocks underperformed large cap stocks in the second quarter (the Wilshire 4500 stock index rose 6.8%) but they remain modestly ahead (up 16.1%) of large cap year-to-date.

Global vaccination rates lagged the US, resulting in slower economic recovery abroad, and more modest international stock returns year-to-date. As an example, international developed stocks, as measured by the MSCI EAFE index, rose 5.4% in Q2 and are now up 9.2% in 2021.

Emerging markets tell a similar story, with the MSCI Emerging Markets index up 7.6% through June, including a 5.1% gain in the second quarter, despite struggles to tame the pandemic in many developing countries.

Market volatility continued its descent in 2021 despite a few short-lived upturns. After finishing Q1 around 19, close to its historical average, the VIX volatility index ticked steadily lower, dipping below 16 at quarter-end to a level not seen since February 2020, before the pandemic.

To continue reading, please see our entire Economic and Market Review.

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