Investment Commentary: Q2 2021

The second quarter of 2021 saw equity markets continue to rally to new highs, in large part due to the continued historic fiscal and monetary stimulus, strong consumer balance sheets and the improving COVID-19 situation. Vaccinations, with approximately 54% of the U.S. population having received at least one dose, allowed large parts of the economy to reopen. Given the relative health of the consumer and corporations, demand was strong, businesses remained eager to hire, and industrial production expanded.

The surging demand has not been without some concerns, however, as inflationary pressures are the highest in a decade. These pressures have been made more acute by labor shortages, supply chain disruptions and chip shortages. Many commodities, such as oil and lumber rose to multi-year highs, home price appreciation accelerated meaningfully, and used car prices reached all-time highs. While the Federal Reserve maintains that inflation is transitory and remains accommodative for now, given the strength of the economy, the Fed took a slightly more hawkish tone in June and signaled potential rate hikes for early 2023.

The Community Foundation’s Corporation* year-to-date return through June 30th was 7.6% versus the market benchmark of 6.5%.

In the most recent quarter, the Corporation was in line with the benchmark, returning 4.8% versus 4.9%. The allocation to fixed income and cash was 12.2% and was below the target, which helped as equity markets once again outperformed. Global equities, although pared back during the quarter for rebalancing, remained slightly overweight due to their strong performance. For the one-year ended June 30th, the Corporation returned 29.3% vs. the market’s 23.2%, primarily driven by the performance of global equities and private equity.

Our managers continue to find compelling opportunities to put money to work as the economy continues to improve and evolve, and we believe the long-term portfolio construction is firmly situated as we look forward to the second half of 2021.

Questions? Contact A.F. Drew Alden
SVP and Chief Investment Officer, The Community Foundation;
President and CEO, TCF Mission Investments Company

*The Corporation is a Connecticut registered investment adviser and part of The Community Foundation for Greater New Haven.