For the quarter ended June 30th, 2021, the DJIA advanced by 4.5%, the S&P 500 increased by 8.2% and the NASDAQ Composite Index appreciated by 10.8%. US M2 money supply grew by 3.8% in the quarter.
By way of comparison, the large cap global portfolio increased in value from $485.38 USD per share to $570.53 USD per share, a return for the quarter of 17.5%.
For the first half of 2021, the DJIA increased by 12%. The S&P 500 increased by 14.3% and the NASDAQ composite Index advanced 12.5%. US M2 money supply increased by 6.5%. Over that same interval, the Gnostic large cap portfolio increased by 20.9%.
Despite having no cyclical component to the portfolio; which, from an allocation perspective, should normally represent a material headwind; one that is difficult to overcome in a strongly inflationary producer price cycle, the overall portfolio return seemed respectable.
Key global economies continued to increase money supply at double digit annualized rates in the first half of 2021. This currency expansion continues to provide the public with the view that, despite significant increases in the price of fixed assets and important producer inputs, they have far more money than before. Deflating currencies, rather than raising interest rates, has proven to be a virtually riskless activity for politicians to propitiate the electorate.
It seems to be a very consistent theme within the portfolio, as constructed, that leadership in terms of price appreciation rotates throughout the account on almost a quarter by quarter basis. Invariably, an investment that had posted a strong prior quarter generally enters into a sort of dormancy for an indeterminant period; or, more often than not, gives back some gains, if that appreciation was extraordinary.
For the second quarter of 2021, Moderna, Inc. (MRNA-NASDAQ, $234.98) and BioNtech SE (BNTX-NASDAQ, $223.88) both doubled in price, from the 30th of March. I would normally find such an advance to be surprising but equity markets have far too much liquidity. Bidding wars do erupt from time to time in real estate and other asset classes, why cannot that also take place in the stock market, if investors perceive an equity to be in a prime “location”? In any event, ownership of both vaccine manufacturers, through the quarter, greatly enhanced the overall return.
I am profoundly curious to find out which investments within the account will assume leadership, for the remainder of the year.