Q1QUARTERLY REVIEW FIRST QUARTER 2021
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Q1
Quarterly Review
First Quarter 2021Quarterly Market Review
First Quarter 2021
In This Issue
Greystone Perspective
Market Summary
Long Term Market Summary
World Stock Market
Performance
US Stocks
International Developed
Stocks
Emerging Markets Stocks
Real Estate Investment Trusts
(REITs)
Fixed Income
Global Fixed Income
2Greystone Perspective First Quarter 2021 The Winds, They Are A’ Changing There is always a path higher for stocks, but it is becoming quite clear that there are a host of financial and economic changes afoot as we close out the first quarter of 2021. Just over one year ago, on March 23, 2021, the U.S. stock market hit bottom. At that moment of considerable fear and misery, just as the pandemic was taking hold of the entire nation (and world), it would have been quite a stretch to foresee U.S. financial markets charging higher over the next 12 months, delivering stock market returns of over 75% (as measured by the S&P 500 Index). Nor would one likely have envisioned multiple vaccines coming to market in record time, offering hope that the long pandemic nightmare might finally end. This liquidity driven stock bull market proves once again that the old adage “Don’t Fight the Fed” is more often than not advice that should be heeded. Much is changing a year later. No longer is unlimited support from the Federal Reserve a given. No longer are income and capital gains taxes safe from potential increases. No longer are stocks likely to be the only game in town (as yields rise over time there will be increased competition for investment dollars). Bond Vigilantes Stir Up a Fight While the Federal Reserve can keep very short-term interest rates anchored near zero (and in recent testimony, Fed Chairman Powell indeed signaled such a goal for at least the next year or two), it has far less control over intermediate and longer term rates, which have indeed been rising of late. With the Biden administration’s proposed $1.9 trillion infrastructure plan, coupled with the vaccine rollout and renewed hope for the economy, bond market investors, collectively, have decided to forge ahead and take matters into their own hands. Yields on the 10-year Treasury Bond started the year at 0.92%. Since then, selling by the “bond vigilantes” as they are called, has resulted in yields rising (and thus bond prices falling) to 1.75% at quarter end. That may not seem like a lot on an absolute yield basis but certainly hurt investors in the 10-year Treasury Bond on a total return basis. Driving all of this is the expectation that a full-fledged economic recovery (and possibly higher inflation) is upon us. The bond market itself predicts inflation over the next 10 years to average 2.37% as measured by the 10-Year TIPs/Treasury breakeven rate. While that level would actually be a relatively healthy rate and about in line with the Federal Reserve goal, the quick rise is a bit troublesome. The measure bottomed at 0.50% on March 19 of last year and has steadily risen over the last year, picking up steam this first quarter of 2021 as economic recovery hopes took hold. Past performance is not a guarantee of future results. Indices are not available for direct investment. Index performance does not reflect the expenses associated with the management of an actual portfolio. Market segment (index representation) as follows: US Stock Market (Russell 3000 Index), International Developed Stocks (MSCI World ex USA Index [net div.]), Emerging Markets (MSCI Emerging Markets Index [net div.]), Global Real Estate (S&P Global REIT Index [net div.]), US Bond Market (Bloomberg Barclays US Aggregate Bond Index), and Global Bond Market ex US (Bloomberg Barclays Global Aggregate ex-USD Bond Index [hedged to USD]). S&P data © 2019 S&P Dow Jones Indices LLC, a division of S&P Global. All rights reserved. Frank Russell Company is the source and owner of the trademarks, service marks, and copyrights related to the Russell Indexes. MSCI data © MSCI 2019, all rights reserved. Bloomberg Barclays data provided by Bloomberg. 3
Greystone Perspective First Quarter 2021 Higher and higher levels of inflation are, in our minds, the key risk that could send interest rates higher and lead to a material sell-off in equities. Suffice it to say, inflation data is worth watching closely. Last Valuation Metric Standing The only valuation metric on which U.S. equities are not overvalued is that of dividend yield (stocks) relative to interest rates (10-year Treasuries). Other measures are not so benign. The traditional S&P 500 price/earnings multiple is extremely high relative to its historical average. The Buffet Indicator (Warren Buffet’s favorite macro valuation measure) is also quite high. It measures the ratio of the value of the entire U.S. stock market divided by Gross Domestic Product (GDP). At a current 226%, the indicator now stands at or near the highest on record. If the increase in Treasury yields continues, particularly at a rapid pace, that will likely not bode well for stocks. We are not convinced, however, that they will. We are not fully confident that the U.S. economy is “out of the woods” just yet. There has been incalculable damage to businesses over the past year and many simply will not come back. Our “new normal”, a phrase popularized by PIMCO over a decade ago, includes more Zooming, telecommuting, virtual collaboration and many other changes to the way we live and work. One trend which we are confident will continue is that of value-oriented equities outperforming their growth- oriented counterparts. That is not to say that all the great tech names that have driven the bull market for so many years will not continue to rise. We just feel that the recent rotation into more value-oriented sectors like banks, energy and infrastructure will continue. We have traditionally had a tilt toward value equities in most client portfolios and we expect that this recent rotation into value stocks will prove beneficial going forward, both in the near-term as well as over long periods of time (as borne out by historical market returns). We appreciate your continued trust. Timothy Clark Greystone Wealth Advisors LLC Past performance is not a guarantee of future results. Indices are not available for direct investment. Index performance does not reflect the expenses associated with the management of an actual portfolio. Market segment (index representation) as follows: US Stock Market (Russell 3000 Index), International Developed Stocks (MSCI World ex USA Index [net div.]), Emerging Markets (MSCI Emerging Markets Index [net div.]), Global Real Estate (S&P Global REIT Index [net div.]), US Bond Market (Bloomberg Barclays US Aggregate Bond Index), and Global Bond Market ex US (Bloomberg Barclays Global Aggregate ex-USD Bond Index [hedged to USD]). S&P data © 2019 S&P Dow Jones Indices LLC, a division of S&P Global. All rights reserved. Frank Russell Company is the source and owner of the trademarks, service marks, and copyrights related to the Russell Indexes. MSCI data © MSCI 2019, all rights reserved. Bloomberg Barclays data provided by Bloomberg. 4
Market Summary
Index Returns
Equity markets around the globe posted positive returns in the first quarter. Looking at broad market indices,
US and non-US developed markets outperformed emerging markets.
Value outperformed growth across regions. Small caps outperformed large caps across regions as well.
REIT indices outperformed equity market indices in the US and underperformed in non-US developed
markets.
Global
International Emerging Global Bond
US Stock Developed Markets Real US Bond Market
Market Stocks Stocks Estate Market ex US
1Q 2021 STOCKS BONDS
6.35% 4.04% 2.29% 6.22% -3.37% -1.90%
Since Jan. 2001
Avg. Quarterly
2.4% 1.6% 3.0% 2.5% 1.1% 1.1%
Return
Best 22.0% 25.9% 34.7% 32.3% 4.6% 4.6%
Quarter 2020 Q2 2009 Q2 2009 Q2 2009 Q3 2001 Q3 2008 Q4
Worst -22.8% -23.3% -27.6% -36.1% -3.4% -2.7%
Quarter 2008 Q4 2020 Q1 2008 Q4 2008 Q4 2021 Q1 2015 Q2
Past performance is not a guarantee of future results. Indices are not available for direct investment. Index performance does not reflect the expenses associated with
the management of an actual portfolio. Market segment (index representation) as follows: US Stock Market (Russell 3000 Index), International Developed Stocks (MSCI World
ex USA Index [net div.]), Emerging Markets (MSCI Emerging Markets Index [net div.]), Global Real Estate (S&P Global REIT Index [net div.]), US Bond Market (Bloomberg
Barclays US Aggregate Bond Index), and Global Bond Market ex US (Bloomberg Barclays Global Aggregate ex-USD Bond Index [hedged to USD]). S&P data © 2019 S&P Dow
Jones Indices LLC, a division of S&P Global. All rights reserved. Frank Russell Company is the source and owner of the trademarks, service marks, and copyrights related to the
Russell Indexes. MSCI data © MSCI 2019, all rights reserved. Bloomberg Barclays data provided by Bloomberg. 5Long-Term Market Summary
Index Returns as of March 31, 2021
Global
International Emerging Global Bond
US Stock Developed Markets Real US Bond Market
Market Stocks Stocks Estate Market ex US
1 Year STOCKS BONDS
62.53% 45.86% 58.39% 36.05% 0.71% 1.45%
5 Years
16.64% 8.92% 12.07% 3.52% 3.10% 3.28%
10 Years
13.79% 5.21% 3.65% 6.23% 3.44% 4.22%
Past performance is not a guarantee of future results. Indices are not available for direct investment. Index performance does not reflect the expenses associated with
the management of an actual portfolio. Market segment (index representation) as follows: US Stock Market (Russell 3000 Index), International Developed Stocks (MSCI World
ex USA Index [net div.]), Emerging Markets (MSCI Emerging Markets Index [net div.]), Global Real Estate (S&P Global REIT Index [net div.]), US Bond Market (Bloomberg
Barclays US Aggregate Bond Index), and Global Bond Market ex US (Bloomberg Barclays Global Aggregate ex-USD Bond Index [hedged to USD]). S&P data © 2019 S&P Dow
Jones Indices LLC, a division of S&P Global. All rights reserved. Frank Russell Company is the source and owner of the trademarks, service marks, and copyrights related to the
Russell Indexes. MSCI data © MSCI 2019, all rights reserved. Bloomberg Barclays data provided by Bloomberg. 6World Stock Market Performance
MSCI All Country World Index with selected headlines from Q1 2021
350
300
250
200
Dec 31 Jan 31 Feb 28 Mar 31
“Bitcoin “Nasdaq Falls Into
“Industrial Production Trades Correction as
in US Rose a Solid “GameStop Above Yields Take Off” “U.S. Jobless
1.6% in December” Turmoil $50,000 Claims Reach
Produced Huge for First Lowest Level of
Gains for Hedge Time” the Pandemic”
“Biden Takes Office “President Biden
Funds” Signs $1.9 Trillion
as 46th President”
Relief Package
“Yield on 30-year into Law ”
Treasury Hits 2% “US Consumer
“US Existing-Home for First Time “Small Stocks Widen Confidence Hits
Sales Reach Since Pandemic” Their Lead; Russell Highest Point
Highest Level in 2000 Up 15% This Year” Since Pandemic
14 Years” “Covid-19 Vaccine Started”
Setbacks Damp Europe’s
Prospects for Normal “Recovery Broadens as
Summer” Retail Sales Join Upswing”
“China Overtakes US as World’s Leading
Destination for Foreign Direct Investment” “UK Economy Suffers Biggest Slump in
300 Years amid Covid-19 Lockdowns”
These headlines are not offered to explain market returns. Instead, they serve as a reminder that investors should view daily events from a
long-term perspective and avoid making investment decisions based solely on the news.
Graph Source: MSCI ACWI Index [net div.]. MSCI data © MSCI 2020, all rights reserved.
It is not possible to invest directly in an index. Performance does not reflect the expenses associated with management of an actual portfolio. Past performance is not a
guarantee of future results. 7US Stocks
First Quarter 2021 Index Returns
The US equity market posted positive Ranked Returns (%)
returns for the quarter and outperformed
non-US developed markets and
emerging markets.
Small Value 21.17
Value outperformed growth across large
and small cap stocks. Small Cap 12.70
Small caps outperformed large caps. Large Value 11.26
Marketwide 6.35
REIT indices outperformed equity market
indices. Large Cap 5.91
Small Growth 4.88
Large Growth 0.94
World Market Capitalization—US Period Returns (%) * Annualized
Asset Class YTD 1 Year 3 Years** 5 Years** 10 Years**
Small Value 21.17 97.05 11.57 13.56 10.06
Small Cap 12.70 94.85 14.76 16.35 11.68
Large Value 11.26 56.09 10.96 11.74 10.99
57%
US Market
Marketwide
Large Cap
Small Growth
6.35
5.91
4.88
62.53
60.59
90.20
17.12
17.31
17.16
16.64
16.66
18.61
13.79
13.97
13.02
$40.3 trillion Large Growth 0.94 62.74 22.80 21.05 16.63
Past performance is not a guarantee of future results. Indices are not available for direct investment. Index performance does not reflect the expenses associated with the
management of an actual portfolio. Market segment (index representation) as follows: Marketwide (Russell 3000 Index), Large Cap (Russell 1000 Index), Large Cap Value (Russell
1000 Value Index), Large Cap Growth (Russell 1000 Growth Index), Small Cap (Russell 2000 Index), Small Cap Value (Russell 2000 Value Index), and Small Cap Growth (Russell 2000
Growth Index). World Market Cap represented by Russell 3000 Index, MSCI World ex USA IMI Index, and MSCI Emerging Markets IMI Index. Russell 3000 Index is used as the proxy
for the US market. Dow Jones US Select REIT Index used as proxy for the US REIT market. Frank Russell Company is source and owner of trademarks, service marks, and copyrights
related to Russell Indexes. MSCI data © MSCI 2020, all rights reserved. 8International Developed Stocks
First Quarter 2021 Index Returns
Developed markets outside the US Ranked Returns (%)
posted positive returns for the quarter,
underperforming US equities but Local currency US currency
outperforming emerging markets.
Value 11.68
Value outperformed growth.
8.33
Small caps outperformed large caps.
Small Cap 8.33
4.88
Large Cap 7.64
4.04
Growth 3.47
-0.36
World Market Capitalization—
International Developed Period Returns (%) * Annualized
Asset Class YTD 1 Year 3 Years** 5 Years** 10 Years**
Value 8.33 47.17 2.25 6.81 3.54
Small Cap 4.88 65.17 6.89 10.55 7.14
30%
International
Large Cap
Growth
4.04
-0.36
45.86
43.55
6.34
10.02
8.92
10.72
5.21
6.69
Developed Market
$21.2 trillion
Past performance is not a guarantee of future results. Indices are not available for direct investment. Index performance does not reflect the expenses associated with
the management of an actual portfolio. Market segment (index representation) as follows: Large Cap (MSCI World ex USA Index), Small Cap (MSCI World ex USA Small Cap
Index), Value (MSCI World ex USA Value Index), and Growth (MSCI World ex USA Growth Index). All index returns are net of withholding tax on dividends. World Market Cap
represented by Russell 3000 Index, MSCI World ex USA IMI Index, and MSCI Emerging Markets IMI Index. MSCI World ex USA IMI Index is used as the proxy for the
International Developed market. MSCI data © MSCI 2020, all rights reserved. Frank Russell Company is the source and owner of the trademarks, service marks, and copyrights
related to the Russell Indexes. 9Emerging Markets Stocks
First Quarter 2021 Index Returns
Emerging markets posted positive Ranked Returns (%)
returns for the quarter, underperforming
the US and developed ex US equity Local currency US currency
markets.
Small Cap 10.10
Value outperformed growth.
7.67
Small caps outperformed large caps. 5.88
Value
4.11
Large Cap 3.96
2.29
Growth 2.18
0.59
World Market Capitalization—
Emerging Markets Period Returns (%) * Annualized
Asset Class YTD 1 Year 3 Years** 5 Years** 10 Years**
Small Cap 7.67 87.13 5.19 9.59 3.33
Value 4.11 52.53 2.60 8.42 1.03
13%
Emerging
Large Cap
Growth
2.29
0.59
58.39
63.78
6.48
10.10
12.07
15.53
3.65
6.15
Markets
$9.0 trillion
Past performance is not a guarantee of future results. Indices are not available for direct investment. Index performance does not reflect the expenses associated with
the management of an actual portfolio. Market segment (index representation) as follows: Large Cap (MSCI Emerging Markets Index), Small Cap (MSCI Emerging Markets
Small Cap Index), Value (MSCI Emerging Markets Value Index), and Growth (MSCI Emerging Markets Growth Index). All index returns are net of withholding tax on dividends.
World Market Cap represented by Russell 3000 Index, MSCI World ex USA IMI Index, and MSCI Emerging Markets IMI Index. MSCI Emerging Markets IMI Index used as the
proxy for the emerging market portion of the market. MSCI data © MSCI 2020, all rights reserved. Frank Russell Company is the source and owner of the trademarks, service
marks, and copyrights related to the Russell Indexes. 10Real Estate Investment Trusts (REITs)
First Quarter 2021 Index Returns
US real estate investment trusts Ranked Returns (%)
outperformed non-US REITs during
the quarter.
US REITS 10.00
Global ex US REITS 2.23
Total Value of REIT Stocks Period Returns (%) * Annualized
Asset Class YTD 1 Year 3 Years** 5 Years** 10 Years**
38% US REITS
Global ex US REITS
10.00
2.23
36.66
36.18
7.55
2.12
3.94
2.92
7.89
4.74
World ex US
$523 billion
278 REITs
(25 other
countries)
62%
US
$845 billion
114 REITs
Past performance is not a guarantee of future results. Indices are not available for direct investment. Index performance does not reflect the expenses associated with
the management of an actual portfolio. Number of REIT stocks and total value based on the two indices. All index returns are net of withholding tax on dividends. Total value of
REIT stocks represented by Dow Jones US Select REIT Index and the S&P Global ex US REIT Index. Dow Jones US Select REIT Index used as proxy for the US market, and
S&P Global ex US REIT Index used as proxy for the World ex US market. Dow Jones and S&P data © 2020 S&P Dow Jones Indices LLC, a division of S&P Global. All rights
reserved. 11Fixed Income
First Quarter 2021 Index Returns
Interest rates generally increased in the US US Treasury Yield Curve (%)
Treasury fixed income market during the first
quarter. The yield on the 5-Year US Treasury 4.00
note rose 56 basis points (bps), ending at
0.95%. The yield on the 10-Year T-note
3.00
increased 81 bps to 1.74%. The 30-Year 3/31/2021
Treasury bond yield increased 75 bps to 2.39%.
2.00
12/31/2020
On the short end of the curve, the 1-Month US 3/31/2020
Treasury bill yield decreased 3 bps to 0.05%, 1.00
and the 1-Year T-bill yield fell 5 bps to 0.08%.
The yield on the 2-Year US Treasury note 0.00
climbed 6 bps to end at 0.15%. 1 5 10 30
Yr Yr Yr Yr
In terms of total returns, short-term corporate
bonds declined 0.59%. Intermediate-term Bond Yields across Issuers (%)
corporate bonds declined 2.19%.
2.33 2.39
1.74 2.00
The total return for short-term municipal bonds
was flat, while intermediate-term municipal
bonds lost 0.52%. Revenue bonds
outperformed general obligation bonds.
10-Year US State and Local AAA-AA A-BBB
Treasury Municipals Corporates Corporates
Period Returns (%) *Annualized
Asset Class QTR 1 Year 3 Years** 5 Years** 10 Years**
Bloomberg Barclays US High Yield Corporate Bond Index 0.85 23.72 6.84 8.06 6.48
ICE BofA 1-Year US Treasury Note Index 0.07 0.17 2.14 1.52 0.92
ICE BofA US 3-Month Treasury Bill Index 0.03 0.12 1.49 1.19 0.63
Bloomberg Barclays Municipal Bond Index -0.35 5.51 4.91 3.49 4.54
FTSE World Government Bond Index 1-5 Years (hedged to USD) -0.36 0.57 2.88 2.05 1.96
Bloomberg Barclays US TIPS Index -1.47 7.54 5.68 3.86 3.44
FTSE World Government Bond Index 1-5 Years -2.39 3.20 1.29 1.43 0.09
Bloomberg Barclays US Aggregate Bond Index -3.37 0.71 4.65 3.10 3.44
Bloomberg Barclays US Government Bond Index Long -13.39 -15.60 5.84 3.17 6.30
One basis point equals 0.01%. Past performance is not a guarantee of future results. Indices are not available for direct investment. Index performance does not reflect
the expenses associated with the management of an actual portfolio. Yield curve data from Federal Reserve. State and local bonds are from the S&P National AMT-Free
Municipal Bond Index. AAA-AA Corporates represent the ICE BofAML US Corporates, AA-AAA rated. A-BBB Corporates represent the ICE BofAML US Corporates, BBB-A rated.
Bloomberg Barclays data provided by Bloomberg. US long-term bonds, bills, inflation, and fixed income factor data © Stocks, Bonds, Bills, and Inflation (SBBI) Yearbook™,
Ibbotson Associates, Chicago (annually updated work by Roger G. Ibbotson and Rex A. Sinquefield). FTSE fixed income indices © 2019 FTSE Fixed Income LLC, all rights
reserved. ICE BofAML index data © 2019 ICE Data Indices, LLC. S&P data © 2019 S&P Dow Jones Indices LLC, a division of S&P Global. All rights reserved. 12Global Fixed Income
First Quarter 2021 Yield Curves
Government bond yields generally increased in the Changes in Yields (bps) since12/31/2020
global developed markets for the quarter. 1Y 5Y 10Y 20Y 30Y
US -4.7 56.1 89.6 86.0 74.9
Longer-term bonds generally underperformed shorter- UK 13.9 46.2 67.6 66.5 62.2
term bonds in developed markets. Germany 10.6 10.6 27.5 39.7 40.4
Japan -1.0 2.5 7.6 7.8 2.7
Short- and intermediate-term nominal interest rates Canada 1.7 57.8 88.3 82.3 74.7
were negative in Japan and Germany.
Australia 2.9 43.2 76.9 79.5 73.2
US UK
4.0 4.0
3.0 3.0
3/31/2021
2.0 2.0
3/31/2021
Yield (%)
Yield (%)
12/31/2020
1.0 1.0
12/31/2020
0.0 0.0
-1.0 -1.0
1Y 5Y 10Y 20Y 30Y 1Y 5Y 10Y 20Y 30Y
Years to Maturity Years to Maturity
Germany Japan
4.0 4.0
3.0 3.0
2.0 2.0
Yield (%)
Yield (%)
1.0 1.0 3/31/2021
3/31/2021 12/31/2020
0.0 0.0
12/31/2020
-1.0 -1.0
1Y 5Y 10Y 20Y 30Y 1Y 5Y 10Y 20Y 30Y
Years to Maturity Years to Maturity
Canada Australia
4.0 4.0
3.0 3.0 3/31/2021
3/31/2021
2.0 2.0 12/31/2020
Yield (%)
Yield (%)
1.0 12/31/2020 1.0
0.0 0.0
-1.0 -1.0
1Y 5Y 10Y 20Y 30Y 1Y 5Y 10Y 20Y 30Y
Years to Maturity Years to Maturity
One basis point (bps) equals 0.01%. Source: ICE BofA government yield. ICE BofA index data © 2021 ICE Data Indices, LLC. 13You can also read
