Sept. 30, 2020
Investment Outlook Q3 2020
- The economic recovery continues to support financial markets, although momentum is being dictated by the government response to the volatile path of the pandemic.
- The yield curve steepened with longer-term bonds underperforming, incorporating some of the improving economic outlook and rising inflation expectations.
- Many market advances in the quarter were substantially influenced by the degree to which the virus has been contained and subsequent progression on the re-opening of economies.
- Progress towards a vaccine alongside unprecedented monetary and fiscal stimulus have seemingly overshadowed increasing signs of a second wave of the global pandemic.
- While real (after inflation) yields are in some cases negative, the bond market still provides relatively better downside protection, as has been clearly illustrated this year.
- As ever, discipline around what to buy and how much to pay is critical given significant bifurcations in valuations in equity markets today.