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Hi, my name is Chris Lipari. I'm a member of the Quant Equity Team at QMA, and I'm here to discuss with you our second-quarter performance.
Our second quarter began right where we left off in the first quarter, with all of our strategies outpacing their benchmarks for April and May. During these first two months of the quarter, each factor contributed positively to performance, led by our value factors. However, June was a bit of a different story, where some of our strategies gave back a portion of their year-to-date outperformance. In June, investors tended to favor those stay-at-home growth stocks in the IT, discretionary, and communication services sectors, the ones that did really well in 2020 during COVID lockdowns. And what they did at the same time (investors) was to stay away from the economically sensitive sectors, like industrials and financials and materials. This obviously resulted in a drag from our value factors. But nonetheless, despite that drag, some of our strategies still ended up with positive alpha for the second quarter, notably our EAFE small-cap and EM small-cap strategies, as well as, on the US side, our midcap and our SMID cap strategies. This was a result of other factors in our model contributing positively to performance, and our factors really complemented each other. Which was encouraging to see given that our multifactor strategies are designed to perform that way.
Now I'd like to spend a few moments dissecting June's performance a bit further, given June was the worst month for value factors in the US dating back to March 2020. And at the same time, value did pretty poorly across the globe as well. There have been a lot of theories as to why the reflation trade suddenly paused as we got into June. Some mention that the economy reached peak growth and all near-term growth was already priced into stock multiples. But we think a much more likely scenario was fear-driven trading resulting from the highly contagious delta variant of the COVID-19 virus spreading globally and becoming the majority share of virus cases in the US and around the globe. This had investors remember those lockdowns that are still fresh in their minds, and it really led to these investors flocking to the high-growth stocks that can perform well in a lockdown or stay-at-home environment. All of this resulted in June looking like 2020, where the winners were concentrated to those stay-at-home stocks and doesn't bode well for a diversified strategy like ours. However, June of 2021 is not 2020. There's a very different macroenvironment right now. For starters, just looking at the Q1 earnings reports from companies, we've seen the majority of companies in the Russell 1000 and Russell 2000 indexes report beats on both sales and earnings for their first-quarter earnings. And, so far, second-quarter earnings reports have been just as strong. Moreover, consumer spending is expected, and has been recently as well, to be very robust. This is due to the pent-up demand that consumers have right now as well as the very expensive government stimulus. Lastly, we have vaccines for the virus right now, which we did not have in 2020.
All of this leads us to feel that as delta fears subside, cyclicals, bond yields, and reopening themes should perform well. After this, inflation will be back in the spotlight. And history has shown that inflation bodes very well for value stocks, while at the same time presenting challenges for growth stocks. We're proud to say that all of our strategies still had positive output through the first two quarters of the year. And based on the aforementioned dynamics, we expect near-term performance to look a lot more like it did in the first five months of the year and a lot less like it did in June. Now I'd like to switch gears and finish by talking about our exciting research agenda.
On the international side, we added a top-down element to our EM strategies. This component uses fundamental factors to identify attractive industry/country opportunities. And we're also doing additional research to add this factor to our developed strategies by year end. On the US side, due to the muted growth performance we had last year in our model, we've dedicated substantial resources to working on our growth factor suite. We've developed an information momentum factor which we're going to add to our growth factor suite this quarter. This factor looks at company growth prospects outside of earnings-related events. So it's going to add a lot of diversified growth exposure to our portfolios. Our back tests show it has very strong performance while having positive but lower correlation with our existing growth factors. This should lead to strong but stable performance over time. While staying on growth for a moment, we're also investigating analyst momentum, which would complement our earnings estimate revisions factor. Through analyst momentum, we're going to incorporate magnitude of revision changes, as well as number of analysts revising and the timeframe of those revisions, to our estimate reasons factor. So we're sort of adding a momentum element to that estimate revisions factor that's worked so well for us for so long.
Now, regarding our value factors, we're looking to better take advantage of the wide earnings yield spreads that we have seen lately without actually increasing exposure to our value factor suite as a whole. To do this, we can tilt to different value factors while tilting away from others when market opportunities present themselves. Lastly, we're investigating stakeholder quality from an ESG standpoint. What we want to do is consider the interactions that key stakeholders have with companies and use those interactions to formulate ESG scores for said companies. All of these measures should result in more balanced and adaptive portfolio construction for our model, for our portfolios, for our clients and allow us to be more adaptive to different markets over time.
I want to thank you for taking the time to hear about our second-quarter performance, and, as always, we look forward to taking these discussions a bit deeper during our update meetings. Again, thank you for your time.