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Who needs safety when the world’s about to get back to normal?

Risky stocks seen as nearly untouchable a year ago burst to the market’s best performances during the first three months of 2021, headlining a fourth straight quarter of gains for the S&P 500. Stocks of airlines, oil producers and banks soared on expectations that COVID-19 vaccinations and massive spending by the U.S. government are setting the stage for a roaring economic recovery this year.

They’re part of a flip-flop for the market’s leaderboard, as investments seen as the safest and most reliable earlier in the pandemic suddenly fell to the back of the pack.

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The tumbling around within the market has sometimes been chaotic — witness the sudden surge for GameStop in January, as a band of smaller-pocketed investors pumped up the struggling video-game retailer’s stock to levels way beyond what analysts thought was rational. But to a casual observer, the shifting tides have remained mostly beneath the market’s surface.

The S&P 500 logged its mildest quarterly swing since the summer of 2019, even as prices for risky investments climb high enough to raise more alarm bells that a dangerous bubble may be forming. Here’s a look at some of the winners and losers of the first quarter:

BANKING ON A REVIVAL

Bank stocks soared during the quarter for several reasons, each tied to expectations for a stronger economy.

With more people getting jobs and businesses reopening, the hope is that banks will see fewer borrowers fall behind on their loans. They also may net bigger profits on new loans, as longer-term interest rates have climbed since last autumn. The yield on the 10-year Treasury has jumped above 1.70% after starting the year close to 0.90%, lifted by optimism for the economy and expectations for a possible increase of inflation.

It’s a sharp turnaround from March of last year, when bank stocks were plummeting on uncertainty about how many of their loans would go bad as the pandemic shut down economies worldwide and interest rates tumbled.

ENERGIZED RETURNS

Energy stocks had an even more violent snapback, soaring to the S&P 500′s biggest gains last quarter after plunging last year. The price of oil rose roughly 25% through the quarter, as of Tuesday.

If people start travelling again, that would mean more cars driving to offices and planes flying to vacation spots.

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SMALL CHANGE

Smaller companies tend to have thinner financial cushions to carry them through downturns, and that’s why smaller stocks were particularly hard hit during last year’s sell-off.

During the first quarter, though, they soared. With the economy set to rebound, companies can get back to growing again instead of merely trying to survive. The Russell 2000 index of smaller stocks roughly doubled the gain of their larger rivals in the S&P 500 index during the first quarter.

BOND BLUES

Bond funds are supposed to be the ballast in any investors’ portfolio, largely holding steady while other investments swing up and down.

But many bond funds turned in losses during the first quarter as Treasury yields climbed. One factor weighing on prices for Treasury notes and bonds, and thus across the corporate bond market, was the rise in optimism for the economy. When that happens, fewer buyers are looking for safe investments.

Worries are also rising that one the worst enemies of bond investors, inflation, may be set to return. With so much U.S. government spending on the way and an economy primed to snap back, some investors are expecting prices at cash registers across the country to pick up after years of very modest gains. That would mean the fixed payments bonds make in the future won’t be able to purchase as much.

The drops in bond prices sent the average intermediate-term core bond fund down 2.9% in the first quarter, as of Tuesday, according to Morningstar.

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TECH TIME OUT

One of the most surprisingly safe — and powerful — investments from earlier in the pandemic suddenly ran out of momentum.

Technology stocks carried the market higher for much of last year on expectations that they can continue to grow, even in a stay-at-home economy. Investors were also willing to pay higher prices for stocks of companies where big profit growth seemed possible many years in the future, because ultralow interest rates on bonds meant they weren’t giving up much of a return in the meantime to wait that long.

But investors now are turning their focus back to companies whose profits are set to jump the most along with a reawakening economy. Higher interest rates are adding more pressure on high-growth stocks, which were often lagging the market during the first quarter.

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