Market Data Bank

1Q 2021

3q20 1
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Stocks posted a +6.2% gain in 1Q2021, after a +12.2% gain in 4Q2020, an +8.9% gain in 3Q2020 and a +20.5% surge in the second quarter of 2020, which followed the COVID bear market loss in 1Q2020 of -19.6%. Not only did the S&P 500 recover from the -33.9% COVID bear market loss, but it broke its pre-pandemic high.




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M2, currency held by the public plus checking, savings and money market accounts, shot up like never before after unprecedented US stimulus and aid payments in response to the pandemic. Unlike previous “quantitative easing” when the Fed bought US long-term bonds, Americans are loaded with cash to spend.




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Not that predicting which sectors perform best is possible, this bar chart shows slow and steady sectors definitely did not win the 12-month race, with utilities and consumer staples trailing growth-sector returns sharply. After six straight quarters in last place, energy-sector stocks came in at the No.2 slot.




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US stocks returned 10 times more than bonds in the five years ended 3/31/21, while US large-company stocks returned twice as much as foreign stocks. US stocks are the growth engine of a prudent portfolio, which makes the outperformance by stocks fantastic news for retirement investors guided by modern portfolio theory.




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The green boxes highlight the nine quarters, of the past 25, when the S&P 500 returned +6.2% or more. How good is +6.2%? It’s extraordinary! Six years and three months of bull market gains interrupted by the February-March 2020 -33.9% bear market plunge. And the M2 surge could keep the bull running.




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It generally takes a recession to cause a bear market in stocks. The big downturns in the stock market almost all occurred concurrent with recessions. We’re almost certainly not headed for another recession right now. In fact, because of the surge in M2, we’re in an unprecedented boom!





Past performance is never a guarantee of your future results. Indices and ETFs representing asset classes are unmanaged and not recommendations. Foreign investing involves currency and political risk and political instability. Bonds offer a fixed rate of return while stocks fluctuate. Investing in emerging markets involves greater risk than investing in more liquid markets with a longer history.

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