First Quarter 2021: Does the Game Have to Stop?
A bland return of 1.4% for a global 60/40 portfolio hid significant churn beneath the surface in the first quarter. Investors turned their attention from work-from-home companies that had soared in 2020 and rotated to shares of companies ready for the re-opening economy. Value-oriented, small-cap, and energy-related investments were particularly strong during the first quarter of 2021. The overall result was a choppy market with elevated volatility.
The retail investing wave that had been building for years broke into the mainstream in January. Aided by easy-to-use online brokers, retail investors, who loosely organized themselves on raucous online forums, helped enact an unprecedented “social squeeze” on the heavily-shorted stock of brick-and-mortar video game retailer GameStop. The investment excitement spilled into other millennial, nostalgia-inducing companies as investors bid up the price of companies like AMC Theaters and BlackBerry to gaudy levels. The rise in share price was short-lived for most, but GameStop rallied again in March, suggesting that there could be more to come from the online retail investing crowd.
The runoff election in Georgia was an inflection point for US Treasurys as yields bounced higher on the promise of additional fiscal stimulus coming from newly elected President Biden and the new Democrat-controlled Senate. Time will tell how much of the recent jump in bond yields is here to stay, but the rise in rates did push the Bloomberg Barclays Aggregate down 3.4% in the first quarter. Bonds with significant duration were hit particularly hard, with the Bloomberg Barclays US Long-Term Treasury Index down 13.5%, after rallying 17.7% in 2020.