JFL

Sept. 30, 2020

Investment Outlook Q3 2020

Economic Review

  • 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.

Investment Outlook

  • 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. 

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