The easing of Covid-19 lockdowns and early signs of economic recovery saw risk appetite return rapidly in Q2, supporting equity and credit markets. As June ended, cases were rising across the world and economic recovery expectations remain wildly volatile. And, the US presidential election is about four months away…
US equities rebounded in Q2 and outperformed (value underperformed growth across large and small cap stocks) other major equity markets as improving jobs and retail sales data provided cause for optimism. However, investor optimism was tempered by a subsequent rise in Covid-19 cases that has prompted some states to rethink or reversing the easing of lockdown measures. US-wide, the trend of new cases accelerated rapidly into the end of June potentially impacting the perceived pace of economic recovery.
A global health natural disaster that continues to evolve is the catalyst for a global financial crises, which assures that capital market and societal uncertainty will remain high for the next few quarters.
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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