One theme dominated market trends in the first quarter – just as it did in Washington D.C.: a change in leadership.

With hopes for progress against COVID-19 leading to optimism about the economic rebound, struggling investment classes and sectors turned in strong performances. At the same time, the corners of the markets that had been hot – in some cases for years – turned cold. 

Laggard value stocks leapt to the lead, richly valued growth stocks faded, energy stocks bested all other sectors, and technology stocks landed in the unusual position of worst performers. Smaller companies more likely to have their fortunes tied to the strength of the U.S. economy were among the best performers. Dividend-payers, which struggled in 2020, also saw a first-quarter recovery.

In the bond market, dormant expectations for inflation began to emerge, leading to losses across interest-rate-sensitive sectors of the market even as the Federal Reserve…

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