2021 Q1 Letter

“Right now I’m having amnesia and déjà vu at the same time. I think I’ve forgotten this before.”

– Steven Wright

Dear Client,

The reflation trade continued in earnest during the first quarter of 2021. Commodities were up another 13.3% from January to March, following a 14.7% move in the fourth quarter of 2020. Equity markets were also strong, though not to the same extent as commodities and equities’ growth slowed from the rapid pace of 2020’s fourth quarter. The S&P 500 was up 6.4% and the MSCI All-Country World Index was up 4.9%. “Risk-off” asset classes suffered significant losses during the quarter. Gold was down 12.7%. Long-dated US Treasury bonds were down 13.9%.[1]

Grey Owl’s All-Weather strategy was up 6.9% for the quarter, keeping pace with the broad US equity index and outperforming a global 60/40 benchmark up 1.6%.[2] An encouraging start to the year.

Growth and Inflation

Markets are assertively forecasting the end of the Coronavirus pandemic and the associated government actions that stifled economic activity. Daily new Coronavirus case counts in the US have plummeted from their early January highs.[3]

As such, the Dallas Federal Reserve Bank’s Mobility and Engagement Index for the whole US shows March 2021 activity at the highest level since “lockdowns” were first implemented just over one year ago.[4]

With that backdrop (not to mention a massive digitization effort by businesses both large and small during the past twelve months AND significant government payments to both business and consumers), retail sales are surging.[5]