JUSA - 2021: Midyear Commentary

• Fortunately, the current year has been a bit kinder to prognosticators than the previous one. The bull market that began in 2009 didn’t end when the coronavirus panic pushed the S&P 500 down 34 percent from its previous high.
• The post-Covid rally, and particularly the fascination with junky meme stocks and cryptocurrencies, filled in the final missing piece of this long bull market: the irrational exuberance that usually serves as the final stage of the growth cycle.
• Market volatility has settled down recently, after persisting at very elevated levels well after the worst of the 2020 market crash had passed. Conditions in asset markets are remarkably quiet at present.
• In Q1, factor investment strategies based on momentum were buying more value and small-cap names, which reinforced the momentum effect. But this played out largely without any structural shift in underlying fundamentals. With H2 now underway, the value performance edge has all but disappeared. Small cap retains an edge, but that too has been shrinking.

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