US Market in 7 Charts

How did stock and bond markets perform in the second quarter as the global economy moved in fits and starts toward a recovery?

Katherine Lynch 06.07.2021
Facebook Twitter LinkedIn

Hourglass in Hand

 

The Morningstar U.S. Market Index ended the second quarter up 8.4%, adding to a 6% return posted in the first quarter. The index hit a new record high on the last day of the quarter and has gained 43% from a year ago.

The contrast between growth and value stocks faded as growth stocks bested value for the quarter across large and mid-cap Morningstar Categories. Small value continues to beat small growth.

 

In U.S. equity markets, one of the most dominant trends from late 2020 and the first quarter began to fade: the outperformance of value stocks over growth stocks. This shift came as the Federal Reserve indicated in June that it may raise rates somewhat sooner than expected amid signs inflation was beginning to take hold. (Morningstar Direct and Office clients can find out full-length market summary here.)

In the bond market, the headlines out of the Fed sent the yield of the 10-year note down 29 basis points to 1.45% from a recent high of 1.74% in the first quarter.

 

As the Fed signaled that it recognized the building inflation pressures by bringing forward rate increase expectations, longer-term yields fell, in turn causing the yield curve to flatten from the first quarter. The 10-year yield fell 29 basis points to 1.45% after reaching a recent high in March.

With the Fed keeping the current level of interest rates in place into 2023, markets weren’t spooked. In fact, stock market volatility fell to levels unseen since before the pandemic. In the U.S. market, volatility fell to its lowest level since 2019.

A wide divergence in sector performance during the first quarter narrowed in the second, with all but the utilities sector posting gains. Energy stocks still led, gaining 12%, but technology stocks rose 11.3% after trailing all other sectors in the first quarter. Stronger-than-expected earnings and expectations for a slower economic recovery may have revived tech shares in in the second quarter as investors sought out the category’s growth potential.

Real estate stocks performed better as housing prices rose across the country. The basic materials and industrials sectors cooled from the first quarter but finished the second quarter up still up on the year. 

The clear divide in performance between growth and value stocks that dominated the market since October 2020 faded in the second quarter. Value stocks outperformed growth stocks in May, but April and June were strong months for growth stocks as energy returns fell back into step with other sectors and tech shares surged.

For the quarter, large- and mid-cap growth stocks beat their value counterparts but small-cap value still led small-cap growth.

 

©2021 Morningstar. All rights reserved. The information, data, analyses and opinions presented herein do not constitute investment advice; are provided as of the date written, solely for informational purposes; and subject to change at any time without notice. This content is not an offer to buy or sell any particular security and is not warranted to be correct, complete or accurate. Past performance is not a guarantee of future results. The Morningstar name and logo are registered marks of Morningstar, Inc. This article includes proprietary materials of Morningstar; reproduction, transcription or other use, by any means, in whole or in part, without prior, written consent of Morningstar is prohibited. This article is intended for general circulation, and does not take into account the specific investment objectives, financial situation or particular needs of any particular person. Investors should consult a financial adviser regarding the suitability of any investment product, taking into account their specific investment objectives, financial situation or particular needs, before making any investment decisions. Morningstar Investment Management Asia Limited is licensed and regulated by the Hong Kong Securities and Futures Commission to provide investment research and investment advisory services to professional investors only. Morningstar Investment Adviser Singapore Pte. Limited is licensed by the Monetary Authority of Singapore to provide financial advisory services in Singapore. Either Morningstar Investment Management Asia Limited or Morningstar Investment Adviser Singapore Pte. Limited will be the entity responsible for the creation and distribution of the research services described in this article.

Facebook Twitter LinkedIn

About Author

Katherine Lynch

Katherine Lynch  is a data journalist at Morningstar

© Copyright 2024 Morningstar Asia Ltd. All rights reserved.

Terms of Use        Privacy Policy        Disclosures