February 2021


Continued progress on US vaccine rollout initiatives and expanded economic stimulus paved the way for continued optimism on an economic return to normalcy. Equity markets and interest rates rose in February, with investors favoring cyclical stocks amid creeping inflation concerns.


Equities generated positive returns despite a late-February retracement with continued outperformance from small caps. The expectation for re-opening continued to buoy smaller stocks, as the vaccine rollout picks up the pace in the States. International stocks were also positive for the month – developed economies led emerging markets, where currency detracted from equity returns.

Fixed Income

Treasury rates rose sharply in February before settling off highs at the close of the month. The US 10-year Treasury touched 1.55% but finished the month at 1.40%, a 33 basis point rise from January. Similar increases in the 5 and 30-year Treasury rates produced negative returns for the investment-grade bond market, though modest spread tightening offset some of the losses in fixed income. High yield bonds saw more aggressive spread compression to generate positive returns for the month. Inflation breakevens rose slightly, as real yields realized most of the monthly gains.

2 – MSCI – EM
Source: Bloomberg

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