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.
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.
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.
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.
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.
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.
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
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.
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