Global equities gained in Q4 as a number of vaccine breakthroughs fostered hopes of a return to economic normality (whatever new definition that may have). Government bond performance was mixed, with US yields rising (meaning prices fell). Corporate bonds gained ground. Commodities gained on vaccine news and a weaker US dollar.
The short end of U.S. Treasury yield curve was unchanged during the quarter as inflation remained low and the Federal Reserve stayed on the sidelines. Yields on longer maturities drifted higher on deficit concerns. Until the economy is fully healed from the pandemic, expect interest rates to remain low.
The support of historically huge monetary and fiscal stimuli worldwide absolutely mitigated the COVID-driven market drawdown in March 2020 as compared to the two most recent negative market events, the Tech Bubble and the Global Financial Crisis. Markets continued upward in January 2021, but the speed and breadth of COVID vaccinations during the year, in SAA’s opinion, will heavily influence near-term market and consumer sentiments.
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