Envestnet | PMC provides independent advisors, broker-dealers, and institutional investors with comprehensive manager research, portfolio consulting, and portfolio management to help improve client outcomes. Every month our Global Macro Team offers insights into the themes currently shaping the markets to help you quickly take note of recent trends that your clients may be inquiring about.

A Rough Quarter For Bonds

After a steep decline amid the onset of the COVID pandemic, benchmark U.S. Treasury yields –closed a substantial portion of the gap with their pre-pandemic levels. This sharp increase in benchmark yields made for one of the worst quarters of bond performance in living memory. The Bloomberg Barclays U.S. Treasury Index fell 4.25 percent, marking the first time since 1980 that it has fallen more than 4.00 percent in a single quarter.1 Many retail investors will likely experience sticker shock upon seeing results like these from one of their safest asset classes, and invariably some will suspend prudence and sell. 

Learn more about recent bond performance on the PMC website.

The Return Of Inflation

Inflation has been low in high-income countries for over four decades.2 Along with interest rates, there has been a steady decline since the 1970’s. That trend may see a reversal, as a number of companies have warned of supply-chain bottlenecks, an increase in the cost of materials, and higher labor costs.3 As costs have increased, many S&P 500 companies have responded by raising prices. The pandemic has exacerbated many issues that increase input costs, but as the vaccine continues to roll out and back orders are filled, hope remains that many of the issues are transitory.3

Stimulus Money

After the GameStop fiasco, many have wondered if there would be a new round of retail investors pouring money into the stock market after the most recent round of stimulus checks. Although there may not be a reprise of the events, some money will find its way towards equities. According to a Deutsche Bank survey of people with online brokerage accounts, about 37 percent of respondents indicated their checks would go into the stock market.4 Where else will the money go? Looking at a Google Trends tracker, queries for “Google flights” are among the highest they have observed.5 Travel and entertainment, due to pent-up demand, seems to be a more likely destination for many of the stimulus dollars.

China’s Latest Five-Year Plan

China recently released its fourteenth five-year plan, which lays out the nation’s vision for social and economic development over the next half decade. Several headlines include increasing the percentage of the country’s population that lives in urban cities, decreasing the carbon dioxide intensity, and balancing human development with environmental conservation.6

However, one implicit, but perhaps more noteworthy, theme is China’s goal to reduce its reliance on America through the promotion of its dual-circulation strategy – a two-pronged development strategy that keeps China open to the rest of the world, while emphasizing its domestic market as the mainstay. This dual-circulation strategy includes increasing household income and consumption to support the domestic market from a demand perspective. But, it also addresses key supply-side issues through a multi-faced approach using R&D funding, supply chain security, and increased market openness to attract foreign direct investment in order to boost China’s production of critical supply-chain functions – particularly the production of semiconductors.6

From a global economic standpoint, the implications of boosting China’s domestic production of semiconductors has serious implications. The United States has historically been a leader in the semiconductor industry and controlled 48 percent of the market share as of 2020 – but a paradigm shift may be imminent. China has been repeatedly successful in delivering on its five-year plan objectives, and its goal is to increase the percentage of semiconductors produced domestically from 30 percent to 70 percent by 2025.7

Value Continues To Run

Value stocks continued to beat growth stocks in March, with the Russell 3000 Value Index outperforming the Russell 3000 Growth Index by 440 bps, +5.8 percent versus +1.4 percent. For the quarter, the margin is even wider, with the Value Index outperforming the Growth Index by more than 1,000 bps, +11.9 percent versus +1.2 percent.

  • Energy led the gain for the quarter, surging more than 30 percent as crude oil price jumped more than 20 percent.
  • Financials, the largest sector of the value index, gained nearly 20 percent, driven by sharply higher Treasury yields.
  • Industrials and Materials, two quintessential cyclical sectors, each rose approximately 13 percent, inspired by significant development in vaccination progress and economy reopening.

The re-emergence of value is not only a U.S. phenomenon, but a global one: MSCI All-Country ex U.S. Value Index outperformed MSCI All-Country ex U.S. Growth Index by more than 700 bps for the quarter.10, 11

Learn more about the resurgence of value stocks on the PMC website.


  1. “Bloomberg Barclays US Treasury Total Return Unhedged USD,” last accessed on April 9, 2021, https://www.bloomberg.com/quote/LUATTRUU:IND.  
  2. Martin Wolf, “The return of the inflation spectre,” FinancialTimes.com, last modified on March 26, 2021, https://www.ft.com/content/6cfb36ca-d3ce-4dd3-b70d-eecc332ba1df.
  3. Aziza Kasumov, Colby Smith, and Eric Platt, “US companies sound inflation alarm,” FinancialTimes.com, last modified on March 29, 2021, https://www.ft.com/content/f0bbed31-bea8-4542-b953-096762d2e59f.  
  4. Matthew Rocco, “US retail investors poised to deploy stimulus cheques in stocks,” FinancialTimes.com, last modified on March 15, 2021, https://www.ft.com/content/51cd6faf-dc42-4d77-b232-fddf447a46fa.   
  5. Brandon Kochkodin, Kamaron Leach, and Vildana Hajric, “Americans Signal They’ll Spend Stimulus on Travel, Not GameStop,” Bloomberg.com, last modified on March 18, 2021, https://www.bloomberg.com/news/articles/2021-03-18/for-stock-bulls-there-s-potential-downside-to-economic-opening.  
  6. “China’s 5-year plan to lead global recovery,” GlobalTimes.com, last modified on March 8, 2021, https://www.globaltimes.cn/page/202103/1217749.shtml.
  7. “Semiconductors and the U.S.-China Innovation Race,” ForeignPolicy.com, last modified on February 16, 2021, https://foreignpolicy.com/2021/02/16/semiconductors-us-china-taiwan-technology-innovation-competition/#:~:text=China%20is%20a%20net%20importer,of%2014.6%20percent%20from%202019.  
  8. “Russell 3000 Growth Index,” MarketWatch.com, last accessed on April 9, 2021, https://www.marketwatch.com/investing/index/rag?countrycode=xx.  
  9. “Russell 3000 Value Index,” MarketWatch.com, last accessed on April 9, 2021, https://www.marketwatch.com/investing/index/rav?countrycode=xx.
  10. “MSCI World ex USA Value Index (USD),” MSCI.com, last modified on March 31, 2021, https://www.msci.com/documents/10199/d21c8ec0-cb33-4689-aaa2-58ca2cafa46f.
  11. “MSCI World ex USA Growth Index (USD),” MSCI.com, last modified on March 31, 2021, https://www.msci.com/documents/10199/86ba2cf4-771c-4ec2-985f-076c795ebbe5.

The information, analysis and opinions expressed herein are for informational purposes only and do not necessarily reflect the views of Envestnet. These views reflect the judgment of the author as of the date of writing and are subject to change at any time without notice. Nothing contained in this piece is intended to constitute legal, tax, accounting, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type.


PMC Global Macro Team

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