Harbor Monthly Market Recap November 2021

U.S. Equities

Equities started the month of November off with continued positive momentum from the previous quarter, but gains were offset later in the month when investors sold risk assets after news of a new COVID-19 variant. U.S. equities sold off, with the S&P 500 (-0.69%) grinding lower during the month.

Large caps outperformed small cap stocks during the month, a trend which continues YTD. While both benchmarks were negative, the Russell 1000® Index outpaced the Russell 2000® Index by 280 bps in November and delivered +21.53% YTD vs. +12.31% for its small cap counterpart.

From a style perspective, large cap growth outpaced large cap value by 413 bps while small cap value outpaced small cap growth by 140 bps in August, but both indices were negative during the period.

From a sector perspective, the best performing U.S. sector was Information Technology (+2.98%). Meanwhile, energy lagged (-5.85%). All sectors delivered negative absolute returns in November, except for Information Technology and Consumer Discretionary. Energy is the top performing sector YTD at 50%, followed by Financials at 30.7%.

Looking through a factor lens, momentum, earnings yield, and long-term reversal led U.S. equity performance while growth, volatility, and liquidity lagged in November.

Global equities, as measured by the MSCI ACWI Index, delivered total returns of -2.41% in November and +13.98% YTD, lagging U.S. equities (as measured by the Russell 3000® Index) by nearly 700 bps in 2021. Digging deeper into global markets, growth handily bested value (-0.73% vs. -3.85%%, respectively), while large caps returned -2.21%%, outpacing small caps by 240 bps. Similarly, international stocks returned -4.65% as measured by the MSCI EAFE Index, with growth besting value and small caps underperforming their large cap counterparts.

Emerging markets stocks continued to be hampered by Chinese policy interventions as well as rising virus concerns, the MSCI Emerging Markets Index returned -4.08% for the month. Large companies reversed course and underperformed small caps, while EM value and growth performed in line with each other. Growth had a slight edge during the quarter outperforming by 11 bps during November.

Fixed Income

Longer term U.S. Treasury yields fell during November 2021, with the yield on the 10-year note dropping from 1.55% to 1.43% and the yield on the 30-year bond declining from 1.93% to 1.78%. Shorter term yields climbed, resulting in an overall flattening of the Treasury yield curve. The Bloomberg US Treasury Index gained 0.77% for the month of November.

Corporate bond spreads widened over the month, from 87 to 99 basis points. Supply was very strong during the month, but demand didn’t keep up. Long-dated issues led intermediate-term issues, and Utilities outpaced Financials and Industrials. For November, the Bloomberg US Corporate Bond Index gained 0.06%.

Mortgage-backed securities lagged the investment-grade areas as refinancings picked up amid falling yields. The Bloomberg US MBS Index fell by -0.09% last month.

For the month of November, the Bloomberg US Aggregate Bond Index gained 0.30%. This brings the benchmark’s year to date loss to -1.15%. The index ranked in the Morningstar Intermediate Core Bond category’s 21st percentile for the month and the Intermediate Core Plus Bond category’s 11th percentile for the month. For year-to-date 2021, the index places just ahead of the Core group’s median and in the Core Plus universe’s 77th percentile.

High yield bonds sold off during the month, with the ICE BofA US High Yield Bond Index declining by -1.02%. This mark was the index’s weakest since September 2020 (-1.04%). The index’s spread widened from 315 to 367 basis points. The BB rating tier led the index—falling by -0.94%--while the CCC and lower tier lagged—dropping by -1.44%. From a sector standpoint, Publishing and Printing led, while Broadcasting, Energy, and reopening sectors lagged. The ICE BofA US Non Distressed Index declined by -0.96%, dropping its year-to-date return to 2.87%. The monthly return ranks just ahead of median for the Morningstar US High Yield Bond category, while the year-to-date figure is just below median.

Convertible securities felt pressure as equities delivered mid-single-digit monthly declines. The ICE BofA US Convertible ex Mandatory Index fell by -3.90%. Financials were a weak sector within the convertibles market, dropping by nearly 5%. For the month, the index’s return ranked in the Morningstar US Convertibles category’s 86th percentile, though its 5.15% year-to-date return ranks just inside the category’s third.

Legal Notices & Disclosures

The information provided in this presentation should not be considered as a recommendation to purchase or sell a particular security. The weightings, holdings, industries, sectors, and countries mentioned may change at any time and may not represent current or future investments.

^© [2021] Morningstar, Inc. All rights reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete, or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results.

Past performance is no guarantee of future results.

Investing entails risks and there can be no assurance that any investment will achieve profits or avoid incurring losses

The S&P 500 Index is an unmanaged index generally representative of the U.S. market for large capitalization equities. This unmanaged index does not reflect fees and expenses and is not available for direct investment.

The MSCI EAFE Index is an unmanaged index generally representative of major overseas stock markets. This unmanaged index does not reflect fees and expenses and is not available for direct investment.

The MSCI Emerging Markets Index is a market capitalization weighted index of equity securities in more than 20 emerging market economies. This unmanaged index does not reflect fees and expenses and is not available for direct investment.

The Bloomberg US Long Treasury Index is an unmanaged index that measures the performance of US dollar-denominated, fixed-rate, nominal debt issued by the US Treasury with a maturity greater than 10 years. STRIPS are excluded from the index because their inclusion would result in double-counting. This unmanaged index does not reflect fees and expenses and is not available for direct investment.

The Bloomberg US Aggregate Bond Index is an unmanaged index of investment-grade fixed-rate debt issues with maturities of at least one year. This unmanaged index does not reflect fees and expenses and is not available for direct investment.

The Bloomberg US Corporate Bond Index measures the investment grade, fixed-rate, taxable corporate bond market. It includes USD-denominated securities publicly issued by US and non-US industrial, utility and financial issuers. This unmanaged index does not reflect fees and expenses and is not available for direct investment.

The Bloomberg US Mortgage Backed Securities (MBS) Index tracks fixed-rate agency mortgage backed pass-through securities guaranteed by Ginnie Mae (GNMA), Fannie Mae (FNMA), and Freddie Mac (FHLMC). This unmanaged index does not reflect fees and expenses and is not available for direct investment.

The ICE BofA US Non-Distressed High Yield Index is a subset of the ICE BofA US High Yield Index (H0A0) including all securities with an option-adjusted spread less than 1,000 basis points. The ICE BofAML US High Yield Index (H0A0) is an unmanaged index that tracks the performance of below investment grade U.S. Dollar-denominated corporate bonds publicly issued in the U.S. domestic market. All bonds are U.S. Dollar-denominated and rated Split BBB and below. These unmanaged indices do not reflect fees and expenses and are not available for direct investment.

The ICE BofA US Convertible Ex Mandatory Index is broadly representative of the U.S. convertible securities market, consisting of publicly traded issues, denominated in U.S. Dollars, of all credit qualities, and excluding mandatory (equity-linked) convertibles. This unmanaged index does not reflect fees and expenses and is not available for direct investment.

Investing entails risks and there can be no assurance that any investment will achieve profits or avoid incurring losses.

Harbor Capital Advisors, Inc.