Quarterly Investment Review: Q3 2020

Signs of economic recovery continued during the 3rd quarter despite a slight decline in risk appetite during September. The Federal Reserve has expressed it remains highly accommodative. While Covid-19 vaccines are gaining developmental traction, uncertainty is shifting towards the US presidential election 1 month away…

US shares gained in Q3, supported by signs of economic recovery and loose monetary policy. The Federal Reserve will now use average inflation targeting in setting interest rates, allowing for temporary overshoots in inflation.

Broadly, government bond yields were mixed. European government bonds performed well as sentiment toward the region improved markedly after the EU announced a €750 billion pandemic recovery fund.

Given the sharp decline in UST yields due to Federal Reserves policy actions, fixed income Investment portfolios will face investment income erosion due to lower reinvestment yields for the foreseeable future. Shorter maturity portfolios will see this impact much sooner than longer maturity portfolios.

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