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Asset Class Reports
Canterbury Review: First Quarter 2021

Equity Markets Rally and Bond Markets Fall

  • U.S. stock markets ended the quarter in positive territory supported by an optimistic economic growth outlook and continued vaccine progress. Value stocks and small cap companies led the way as growth stocks cooled. Airlines, energy, and hospitality sectors rebounded whereas technology underperformed.

  • European equities slightly outperformed emerging market (EM) equities in the quarter. Unlike in the U.S. and other Asian countries, slow vaccination progress in Europe is delaying the ease of restrictions and negatively affecting the pace of economic recovery. Curfews and lockdowns remain commonplace amongst many EU countries.

  • U.S. core bonds ended the first quarter with negative returns as higher inflation expectations put upward pressure on interest rates. Rapid vaccine distribution, higher growth projections, and a persistently accommodative Fed resulted in higher long-term rates and a steeper U.S. yield curve.

  • Investment grade (IG) and high yield (HY) spreads marginally tightened over the quarter. Corporate credit spreads have continued to narrow since the peak in March 2020 and are now at levels that pre-date the pandemic.

  • Low-rated credits continued to outperform higher quality credits as optimism over increased economic activity in the U.S. grew. Conversely, emerging market debt ended the quarter with negative returns as yields rose in tandem with that of Treasurys.

  • Inflation, measured by CPI, marginally increased over the quarter to 1.7%, creeping closer to the Fed's 2% target. Commodities and energy-related assets continued to benefit from renewed demand from an economic reopening.


To view the first quarter reports, click on the links below: