Quarterly Investment Review: Q2 2021

Given the outlook of steady, low “nominal” yields, how might your organization’s excess portfolio liquidity be utilized more efficiently for increasing yield? It may be time for for a consideration of new asset classes takes time and thoughtful Board education. Smaller organizations now have access to more yield-oriented risk asset classes that may have a role in your organization’s overall asset allocation.

Corporate bonds performed well, outpacing government bonds. Investment grade credit was helped by falling yields, while high yield benefited from the economic recovery and positive fundamentals, including low expected default rates.

The second quarter was strong for US equities, and the S&P 500 reached a new all-time high in late June. Almost all sectors made gains over the quarter. Overall, the economic picture remained rosy.

Long-term inflation expectations remain muted after a scare in Feb/Mar as subsequent economic data and Federal Reserve commentary soothed investors. Although Fed guidance has mildly changed given the pace of economic recovery, expect the Fed to maintain its course through 2023 barring material changes regarding inflation and/or employment metrics.

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