The Bottom Line: Markets rose in April as economic activity and corporate earnings rebounded; ESG securities market indices diverged while sustainable mutual fund indices outperformed.

Market Summary
• Economic activity in the US rebounded strongly, fueling first quarter corporate earnings that beat analyst expectations, both in number and magnitude, and was on track to set a new year-over-year record.
• The S&P 500 added 5.34%, rising through mid-April and staying there. Refer to Chart 1. This was the best monthly return since November 2020 when the same index recorded an increase of 10.95%.
• Growth outperformed value stocks, but that did not extend to mid-caps; at the same time, small cap stocks lagged. The Russell 2000 Index recorded a total return gain of 2.1%.
• Global stocks registered a gain of 4.4% in April, pushed higher by US markets.
• Europe, according to the MSCI EAFTE Index, recorded an increase of 4.7% with France’s 6.2% gain in the lead.
• Emerging markets added 2.5%, led by Brazil that was up 6.5%.
• Investment-grade fixed income rebounded in April as long-term rates declined, dropping from 1.74% to 1.65% based on 10-year Treasuries. For the first time so far this year, intermediate investment-grade bonds posted positive results, gaining 0.79% according to the Bloomberg Barclays Aggregate US Bond Index. The same benchmark is still in negative territory at -2.61% year-to-date.

ESG securities market indices: Near-term results diverge while intermediate-to-long term records covering foreign indices outperform
• The MSCI Emerging Markets ESG Leaders Index outperformed by 26 bps in April while three MSCI ESG Leaders developed market benchmarks trailed their conventional counterparts. For 3-, 5- and 10-year intervals, the results achieved by ESG benchmarks are fairly consistent. Foreign ESG indices continue to outperform while a similar index tracking US firms fails to do so consistently. Refer to Chart 2.
• The Bloomberg Barclays MSCI US Aggregate ESG Focus Index closely tracked its non-ESG counterpart for intervals up to 1-year.
• Using a different ESG scoring methodology and based on backcasting prior to 2019, the S&P 500 ESG Index outperformed over intervals to 10-years.

Sustainable (SUSTAIN) indices outperformed in April
• The Sustainable (SUSTAIN) Large Cap Equity Fund Index added 5.68% in April and outpaced the S&P 500 by 34 bps but lagged behind the S&P 500 ESG Index by 15 bps. The SUSTAIN equity fund index achieved its results on the performance of seven funds that eclipsed the S&P 500 with returns ranging from 5.38% recorded by the BlackRock Advantage Large Cap Core Fund Institutional shares to 7.47% achieve by the T. Rowe Price Blue Chip Growth Fund. The SUSTAIN Large Cap Equity Fund Index continues to lead the S&P 500 on a trailing 12-month and three-year basis. Refer to Chart 3.
• The Sustainable (SUSTAIN) Bond Fund Index extended its streak of monthly outperformance to 13-months, adding 0.90% in April versus 0.79% registered by both the conventional Bloomberg Barclays US Aggregate Bond Index and its ESG counterpart benchmark, for a positive differential of 11 bps. Nine of the ten fund constituents beat the conventional index with returns ranging from 81 bps achieved by JPMorgan Core Bond Fund R6 to 1.1% registered by the Neuberger Berman Strategic Income Fund I. The SUSTAIN Bond Fund Index also widened its outperformance over the trailing 12-months and 3-years to 3.64% and 1.63%, respectively. Refer to Chart 4.
• The Sustainable (SUSTAIN) Foreign Fund Index posted a gain of 3.07% versus 2.94% registered by the MSCI ACWI ex USA Index, for a positive differential of 12 bps. The differential was an even wider 36 bps relative to the equivalent ESG Leaders Index. This marked the third month in a row of outperformance for the SUSTAIN Foreign Fund Index, which benefited from gains ranging from 3.03% captured by Harbor Diversified International All Cap Fund Retirement shares to 6.08% realized by the Morgan Stanley Institutional International Advantage Fund I. The SUSTAIN Foreign Fund Index also led for the trailing 3-month and 12-month intervals. Refer to Chart 5.