Which Way is Up?

As the end of the pandemic came into view in the U.S. and the new administration’s stimulus plan became more probable, expectations for economic growth and inflation have increased. The economic optimism had broad consequences for markets—risky assets fared well and defensive assets were less in demand.

The new administration has brought significant changes to economic policy. Its $1.9 trillion stimulus package reflects a fundamental shift toward a more progressive fiscal policy. In taking a confrontational approach toward China, Biden demonstrated his commitment to making the U.S. economy more competitive globally.

New Frontier Global Index and Performance

All New Frontier strategies attained new highs during the quarter. The New Frontier Global (60/40) Institutional Index (NFGBI) returned 1.6% in Q1, while the New Frontier

U.S. (60/40) Institutional Index (NFDBI) returned 2.9%, as calculated by S&P Dow Jones Indices. However, these strategies underperformed their benchmarks by 1.5% and 0.7%, respectively, due to the poor performance of Treasurys and corporate bonds.

However, New Frontier’s all-equity strategies performed well. The New Frontier Global Equity Index (NFGEI) rose 6.0% in Q1, while the ACWI IMI returned 5.1%. The New Frontier U.S. Equity Index (NFDEI) also had a good quarter, rising 7.0% and outperforming the S&P 500 NR by 1.0%.

Market Performance

Following the theme of economic optimism, the quarter was good for equities but not bonds. The S&P 500 was up 6.2% but the AGG declined 3.4% in what was the worst quarter for Treasurys since 1980.1 Tax-Sensitive and Multi-Asset Income portfolios fared better due to their higher exposure to municipal bonds and dividend stocks, respectively.