The first quarter of 2021 was an eventful one. Additional federal stimulus payments lined many pocketbooks; a group of amateur traders banded together through social media to drive shares of video game company GameStop to astronomical heights; interest rates jumped, stoking fears that inflationary pressures were rapidly building; and equities ultimately enjoyed robust returns. Tech shares, which had driven the market for much of 2020, slumped during much of the quarter, but still gained enough ground to push higher by the end of March.

Local governments also began relaxing lockdown-related restrictions during the period, allowing more businesses the ability to return to a bit of pre-pandemic normalcy. Coupled with the added stimulus in the pockets of consumers, the market began to reflect a broader economic recovery that had previously been only hope. The structural gyrations from growth to value that the market had demonstrated in previous quarters finally began to take shape, as value indexes strongly outperformed growth indexes and small caps outperformed large caps.
Interest rates rose through much of the quarter, leading to negative returns in certain fixed income assets like U.S. investment grade corporate bonds, but halal fixed income proved resilient due to less sensitivity to longer term rate increases.

Looking ahead, the U.S. economy is likely to continue its progress as more vaccines are rolled out and more jobs are made available. Investors will continue to watch for signs of escalating inflation, despite the Federal Reserve’s forecasts to maintain interest rates at their present levels through 2023.
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