- February started off strong, continuing the 2021 rally and allowing for major indexes to hit fresh all-time highs. However, rising bond yields reduced those returns to more modest levels.
- With hopes of this pandemic being slowed, and over 200 million COVID-19 vaccine shots administered across the globe, the S&P 500 finished up 2.6%, the NASDAQ was up just shy of 1% and MSCI Global index ended February up 2.45%.
- The big move we saw ended being on the bond markets with Us treasuries dropping and yields shooting up towards pre-COVID levels. The 10 year treasury yields made the significant move from 1.09% to start the month to 1.46% to end. The 30 year closed February at 2.18%
What we did:
- Witnessing new market highs, we decided to trim back some exposure towards the S&P (IVV) and shift towards ETFs with a higher quality bias. We also used the late month pull back in the equity markets add to US small cap as well as Real Estate.
- Additionally, we significantly decreased duration exposure in all fixed income positions used in our models to hedge equity exposure. We also increased gold exposure, as it hit 8 months lows amongst the equity market rally.
- As for individual stocks held in our strategies, we continued to trim from some large tech names and looked to add more growth at a reasonable price. We also focused on identifying lesser known “recovery stocks’, such as SABR.
What we are watching:
- Still, the next round of stimulus in the US is front and center. The $1.9 Trillion package remains fairly unchanged as the Biden administration looks to push it through.
- With an eye towards the future, we are some anticipating inflation, raising rates and tax increases. More immediately will be looking towards the Fed for guidance as we see yields rise.
- Proxy believes this year more traditional market valuations will play a larger roll in determining stock princes. As this might currently be playing out, we will look to see if a true sector rotation is forming or if this is just a temporary flight towards quality.
We continue to keep an eye on the COVID-19 vaccination numbers globally, and how new COVID mutations and new waves might hinder recent efforts.
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