The Winners And Losers Of The First Quarter

By: Spencer Israel

The first quarter of 2021 has certainly staked its claim to history.

In just the year’s first 3 months we experienced the most tumultuous inauguration period in our country’s history, a once-in-a-lifetime short squeeze, the beginning of the COVID-19 vaccine dissemination, and we watched as global trade got disrupted by a single ship.

Winners

Small Caps

For the second straight quarter, the Russell 2000 (up 11%) outperformed the S&P 500 (up 4%), Nasdaq 100 (flat), and Dow Jones Industrial Average (up 8%).

This continues the trend from 2020, during which small caps barely outperformed large caps after three straight years of lagging.

Energy

 Oil rose 23% in the first quarter, opening 2021 at about $48/barrel and closing at $59. As a result, energy was the top-performing sector in the S&P 500. The sector rose about 30% in Q1, nearly doubling the performance of the second-strongest sector, financials.

Marathon Oil (MRO) Occidental Petroleum (OXY) and Diamondback Energy (FANG) were the leaders of the energy pack in Q1.

Cannabis

The quarter ended on a high note for cannabis, thanks to New York finally approving the drug for recreational use.

And though the sector gave back a chunk of gains from a rally in early February that was downright silly, it was an overall strong quarter for cannabis. The 6 cannabis ETFs closed higher between 39-66% for the quarter.

SPAC Sponsors

 According to Bloomberg, nearly 300 SPACs were launched in the first quarter, raising almost $100 billion in the process. For those keeping score at home, that’s about 5 SPACs and $1.3 billion raised PER DAY.

These stunning figures come on the heels of what had been a record-setting 2020 that saw 237 SPACs raise about $80 billion.

Losers

SPAC Investors

Unlike 2020 however, the performance just hasn’t been there for SPACs.

According to data from University of Florida finance professor Jay Ritter, SPACs that IPO’d in March traded higher by an average of 0.1% on their first day, down from a 5% first-day average in January and February.

From November to February, 231 consecutive SPACs went public without dropping below their $10 par value. However, according to Dealogic, 93% of SPACs that went public in the third week of March traded below that threshold.

Volatility

Traders hoping for volatility were surely disappointed in Q1. The Cboe Volatility Index fell from 23 to 19 in the first quarter. Currently, the VIX is sitting at its lowest level since mid-February 2020.

Gold and Bonds

The first quarter was punctuated by rising inflation fears and a corresponding rise in 10-year Treasuries to their highest point since January 2020. And yet somehow, gold, long seen as an inflation hedge, fell 9.5%. Go figure.

Too Soon To Tell

GameStop

Was GameStop a winner or loser in Q1? The case can be made for either. On one hand, the stock did go from $17 to $380 in three weeks, inspiring a movement in the process the likes of which had never been seen on Wall Street.

On the other, it promptly fell 90% over the next three weeks, which was followed by several Congressional hearings and a general decrease of trust in the system among many retail traders.

Right now the stock is sitting at about the middle of its first-quarter range. We’ll see where it goes from here.

Surely the second quarter of 2021 can’t be as eventual as the first. Right?

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The author is long the S&P 500 in his retirement account.

Lightspeed Financial Services Group LLC is not affiliated with these third-party market commentators/educators or service providers. Data, information, and material (“content”) are provided for informational and educational purposes only. This content neither is, nor should be construed as an offer, solicitation, or recommendation to buy or sell any securities or contracts. Any investment decisions made by the user through the use of such content is solely based on the users independent analysis taking into consideration your financial circumstances, investment objectives, and risk tolerance. Lightspeed Financial Services Group LLC does not endorse, offer nor recommend any of the services or commentary provided by any of the market commentators/educators or service providers and any information used to execute any trading strategies are solely based on the independent analysis of the user.

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