2Q 2021 Investor Letter - Interest Rate Whiplash

What a difference a quarter makes. In the first quarter of 2021, rising interest rates, expectations of higher economic growth and inflation, and the rally in commodity prices combined to extend the ‘rotation’ from growth stocks into value that began in October of 2020. In the second quarter all that changed, as declining interest rates and a flattening of the yield curve (See blog Why Do We Care About the Shape of the Yield Curve?) led to a reversal of that rotation, and growth stocks, particularly technology stocks, outperformed value. While the market was roiling under the surface, the S&P 500 managed to grind higher, ending the first half up 14.5%.