July 30, 2021
“The curve is more powerful than the sword.”
– Mae West
The recovery and reflation trade persisted for most of the second quarter. Commodities were up 15.2% from April to June. Equity markets were also strong. The S&P 500 was up 8.4% and the MSCI All-Country World Index was up 7.1%. In an unusual twist, “risk-off” asset classes similarly performed well. Gold was up 3.5% and long-dated US Treasury bonds were up 7.0%.
Grey Owl’s All-Weather strategy increased 1.7% for the quarter bringing the total return for the first half of year to 8.7%. In comparison, a 60/40 benchmark was up 6.7% from January through June. Returning 5.0% in the second quarter, the global 60/40 benchmark played catchup to our strategy beginning in mid-May when bonds began a multi-month rally (we are underweight bonds) and especially in June when small capitalization value stocks meaningfully underperformed larger capitalization and growth-oriented equities (we had been overweight small value).