Learn To Invest
Stocks Special Reports LICs Credit Funds ETFs Tools SMSFs
Video Archive Article Archive
News Stocks Special Reports Funds ETFs Features SMSFs Learn
About

News

US market performance in 7 charts: Q2 2021

Katherine Lynch  |  05 Jul 2021Text size  Decrease  Increase  |  
Email to Friend

As the global economy moved in fits and starts toward a recovery, global stock and bond markets posted broad gains in the second quarter.

Highlights

  • 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.
  • Volatility across equity markets fell to pre-pandemic levels.
  • International stocks continue to lag the U.S. market, with China a drag on returns.
  • After the Federal Reserve signalled it was on watch for inflation pressures, bonds mostly recovered from a rough first quarter. The Treasury 10-year yield fell 29 basis points from its high in March to 1.45%. 
  • High-yield bonds continue to outpace government and corporate bonds, with the Morningstar High Yield Bond Index rising 2.7% in the second quarter and 15.4% over the past year.
  • Renewed demand for oil pushed prices higher and energy stocks topped the sector list, followed by technology stocks. Utilities and industrial sectors dragged.
  • 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.

Morningstar US Market Index

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.

Market performance barometer

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.

US treasury yield curve

Investing Compass
Listen to Morningstar Australia's Investing Compass podcast
Take a deep dive into investing concepts, with practical explanations to help you invest confidently.
Investing Compass

As the Fed signalled that it recognised 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.

Corporate high yield and core bond 2021 performance

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.

Standard deviation

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. 

Morningstar sector indexes

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.

Index market barometer

is a data journalist at Morningstar

© 2021 Morningstar, Inc. All rights reserved. Neither Morningstar, its affiliates, nor the content providers guarantee the data or content contained herein to be accurate, complete or timely nor will they have any liability for its use or distribution. This information is to be used for personal, non-commercial purposes only. No reproduction is permitted without the prior written consent of Morningstar. Any general advice or 'regulated financial advice' under New Zealand law has been prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), or its Authorised Representatives, and/or Morningstar Research Ltd, subsidiaries of Morningstar, Inc, without reference to your objectives, financial situation or needs. For more information, refer to our Financial Services Guide (AU) and Financial Advice Provider Disclosure Statement (NZ). Our publications, ratings and products should be viewed as an additional investment resource, not as your sole source of information. Morningstar’s full research reports are the source of any Morningstar Ratings and are available from Morningstar or your adviser. Past performance does not necessarily indicate a financial product's future performance. To obtain advice tailored to your situation, contact a licensed financial adviser. Some material is copyright and published under licence from ASX Operations Pty Ltd ACN 004 523 782. The article is current as at date of publication.

Email To Friend