By Jason Teed Equities were up significantly in the fourth quarter despite a dip in October. Domestic large-cap stocks were the worst performers, but the S&P 500 Index still gained more than 11%. The Russell 2000 small-capitalization index led the pack, gaining more than 30% for the quarter. Value stocks outperformed Growth for the quarter. Emerging markets gained over 18% for the quarter, and international developed stocks rose 15.7%. This distribution of returns indicates a robust appetite for investment risk. The economy continues to recover from the pandemic-related downturn in early 2020, and vaccines are being distributed worldwide. Offensive sectors mostly outperformed. Energy was up the most, gaining over 28%. Financials also performed well, up by more than 23%. Utilities performed the worst but still gained over 6%. Health Care lagged for the third straight quarter with a return of nearly 8%. The outperformance of Health Care in early 2020 may have tempered subsequent returns during the remainder of the year. Markets appear to be frothy in terms of valuations and some stocks’ behavior in the Technology sector. Valuations remain at historically high levels, highlighting the importance of rotational equity investment and stock picking in the near term. Safe-haven assets were mixed for the quarter. Bonds were not the place to be, as long-term Treasurys fell nearly 3%. Gold rose about 0.7%, significantly less than the previous quarter’s gain. Investors’ earlier attraction to gold may have been due to its function as an inflation hedge rather than as a safe haven, as traditional safe-haven investor behavior was not present during the quarter. The yield curve, which was heavily inverted at the beginning of the second quarter, has completely normalized, though rates are low overall. This indicates that continued economic growth is expected, though at a low rate. The curve has also moved upward in general. The only nod to a recent recession in the curve is that rates are exceptionally low overall. The recent strong performance from equities led to quarterly gains in over 90% 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. Bonds had minimal price action, long-term Treasurys were down for the quarter, and many of our conservative strategies had little to take advantage of in the market, resulting in lower returns for the quarter. About 94% of OnTarget Monitors for the quarter were “in the yellow” or better, with 89% “OnTarget” (“in the green”) or better (“in the blue”).