Macro Minutes: Why Growth in 2021

Key Points

• The magnitude of last year’s drawdown was bear-like, but was quick, recovering within months, similar to a standard correction.
• When 10Y minus 3M US Treasury yield spreads are greater than 2%, value equities frequently outperform. When spreads are below 2%, growth equities tend to outperform. Currently, the Treasury spread is around 1.4%, which is too narrow for value outperformance historically.
• Market breadth has narrowed instead of resetting, a late cycle condition.