By Jason Teed Equities were up in the first quarter despite some market choppiness during the rise. Domestic large-cap stocks were the worst performers, but the S&P 500 Index still gained more than 6.1%. The Russell 2000 small-capitalization index led the pack once again, gaining more than 12.5% for the quarter. Value stocks outperformed Growth stocks for the quarter. Emerging markets and developed international markets made small gains as COVID-related concerns continued to depress returns in those regions. This distribution of returns indicates a risk-on economic environment in the U.S. as COVID vaccinations accelerated during the quarter while the rest of the world lagged both economically and in vaccinations. Offensive sectors mostly outperformed. Energy was up the most, gaining over 30%. Financials also performed well, up by more than 16%. Consumer Staples performed the worst but still gained over 1.8%. Health Care lagged for the fourth straight quarter with a nearly 3.3% return. The outperformance of Health Care in 2020 may have tempered subsequent returns. Markets moved up in line with increasing corporate earnings. Valuations were unchanged during the past few months but remain at historically high levels. High valuations can make stock and sector selection even more important than in times with lower overall market multiples. Safe-haven assets were down for the quarter. Gold lost about 10.3%, while long-term Treasurys fell nearly 14%. Both appeared to fall as a result of rising interest rates in anticipation of an economic recovery. Rising rates make gold less attractive than income-generating assets, and bond prices fall as interest rates rise. The yield curve continued to steepen, though rates are low overall. This indicates that continued economic growth is expected. The curve has also moved upward in general. The only nod to a recent recession in the curve is that rates remain at historically low levels. The recent strong performance from equities led to quarterly gains in about 65% of our strategies. Our top performers were mostly aggressive trend-following equity strategies and aggressive strategies with access to the equity markets. The quarter was challenging for fixed-income strategies. Long-term Treasurys and bonds in general were down last quarter, and many of our conservative strategies had little to take advantage of in the market, resulting in lower returns for the quarter. About 90% of OnTarget Monitors for the quarter were “in the yellow” or better, with 82.3% “OnTarget” (“in the green”) or better (“in the blue”).