- Ongoing macroeconomic stabilization paired with additional U.S. fiscal stimulus supported the equity market’s rally, which was invariably interrupted throughout the quarter. Renewed concerns regarding the outlook for inflation, ongoing labor market imbalances and the potential for rising interest rates led to a brief S&P 500® Index drawdown of 3.99% from May 7 through May 12.
- The Cboe® Volatility Index averaged 18.00 in the second quarter of 2021. Consistent with its normal relationship, average implied volatility exceeded realized volatility, as measured by the standard deviation of daily returns for the S&P 500® Index, which was 11.16% for the quarter. Implied volatility was generally rangebound over the period.
- Early in the quarter, Gateway’s investment team focused on exchanging index call options with contracts featuring higher strike prices to maintain a typical amount of equity market exposure as the market advanced while protecting the Composite from the potentially adverse impact of a sharp reversal. Later in the quarter, the team focused on extending weighted-average time to expiration to take advantage of the relatively elevated implied volatility priced into longer-dated contracts. Gateway’s index put option activity during the quarter focused on managing the cost of downside protection by trading select contracts in advance of their expiration in order to maintain the Composite’s typical risk profile.
* The portfolio statistics reflected for the Composite are those measured by a representative account. This information represents supplemental information to the GIPS® Composite Report. This representative account was selected as it is the largest account in the Composite. Data as of March 31, 2021, unless noted otherwise. Past performance is not indicative of future results. Sources: Morningstar DirectSM and Bloomberg, L.P.