2021 Market Recap

A Data-Driven Look at the Expansion Phase and Broad Equity Strength

In 2021, global markets progressed through a strong Expansion phase, supported by improving economic activity and consistently positive market-premium signals. Monthly snapshots show nominal premiums commonly in the +5% to +7% range and inflation contributions around +1.5% to +1.7%, while real rates remained negative across major currencies—an environment that reinforced risk appetite and supported broad equity strength. 2021 Market Letter

Equities led performance throughout the year, with major indices such as SPY and QQQ appearing repeatedly in top-ranked momentum clusters. Small-cap and value factors also posted strong results, while long-duration bonds underperformed as yield curves steepened, producing –5% to –22% zero-coupon declines across several maturities. Sector leadership rotated through Technology, Financials, Real Estate, and Consumer sectors as margins and earnings recovered from the prior year’s disruptions. 2021 Market Letter

FX activity remained steady but sensitive to shifting rate and inflation expectations, with USD–EUR and USD–JPY showing moderate month-to-month adjustments that influenced hedged and unhedged global returns. Taken together, 2021 delivered robust economic recovery, resilient equity gains, and supportive monetary conditions—foundational trends that set the stage for the regime shifts and volatility that emerged in 2022. 2021 Market Letter