The S&P500’s return in 2020 was very different from what we have seen work thus far in 2021. In 2020,  77% of the total return was driven by the top 10 holdings.  The mega-cap technology companies that were market leaders last year have been replaced by a rotation to Value stocks and companies that were poor performers in 2020.

The chart below shows the factors that have been the best performers in February.

Across the broad market companies with low quality, low growth and high volatility characteristics have performed well.  These are all factors that most active managers would try to avoid when building their portfolio. We believe the potential earnings recovery from a reopening economy has largely been priced into that segment of the market with the significant run up those types of stocks have had since the November vaccine announcements. They must now deliver.

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