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Market Commentary

July 2021

Civista Wealth Management Logo
Frank P. Sudal, CFP®, CFA
Trust Investment Management

Total Returns (%) as of June 30, 2021

Fixed Income YTD 1 Mo 3 Mo 1 Yr 3 Yrs 5 Yrs 10 Yrs
U.S Aggregate

-1.60

0.70

1.83

-0.33

5.34

3.03

3.39

High Yield

3.62

1.34

2.74

15.37

7.45

7.48 6.66
Global

-6.00

-2.10

0.45

3.06

2.81

1.28

0.79

Equities






U.S. Large Cap

15.25

2.33

8.55

40.79

18.67

17.65

14.84

U.S. Small Cap

17.54

1.94 4.29

62.03

13.52 16.47

12.34

Developed International

8.83

-1.13 5.17

32.35

8.27 10.28 5.89
Emerging Markets

7.45

0.17

5.05

40.90

11.27

13.03

4.28
Source: Morningstar.  U.S. Aggregate - BBgBarc US Agg Bond.  High Yield - BBgBarc US Corporate High Yield.  Global - FTSE WGBI NonUSD.  U.S. Large Cap - S&P 500.  U.S. Small Cap - Russell 2000.  Developed International - MSCI EAFE.  Emerging Markets - MSCI EM.
 

Equities did not disappoint investors during the second quarter.  Pandemic restrictions continued to ease and economic activity picked up, which encouraged equities to push higher. U.S. large caps soared 8.55% bringing the total return to a robust 15.25% for the year. Although U.S. small caps rose 4.29%, and trailed behind other equity asset classes, they maintained their leadership for the year with an exceptional 17.54% total return. Developed international advanced 5.17% for the quarter, with emerging markets ending slightly lower at 5.05%. Both developed international and emerging markets advanced a commendable amount for the year, up 8.83% and 7.45%, respectively. Fixed income also gained ground during the quarter as elevated inflation fears somewhat subsided. 

The economic outlook continued to improve, as progress with vaccinations helped reduce the spread of COVID-19. At the conclusion of the June 15-16, 2021 joint meeting of the Federal Open Market Committee (FOMC) and Board of Governors, the members indicated that they believe the most negative effects of the pandemic on the U.S. economy most likely have passed. Overall financial conditions eased during the intermeeting period, as market participants appeared to remain confident that the economic recovery was broadly on track, inflation over the medium term would stay contained, and monetary policy would remain accommodative.

The Organization for Economic Cooperation and Development (OECD) revised their economic growth projections higher. According to the OECD, global economic growth is now expected to be 5.8% this year, a sharp upwards revision from the December 2020 Economic Outlook projection of 4.2% for 2021. The vaccine rollouts in many of the advanced economies have been driving the improvement, as well as the massive fiscal stimulus by the United States.

The economy has benefitted from a rebound in spending as more and more consumers get out and about. Ongoing progress with overcoming the pandemic will continue to steer the economy; however, concerns regarding higher inflation will most certainly factor in as well. While the outlook is positive, the markets are overvalued and will likely be volatile in the second half of the year, as growth in earnings attempt to catch up to valuations.