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Global equities (+12.9%) rose for the third straight quarter, ending the year with a gain of 14.8%. Markets rebounded sharply after two COVID-19 vaccines demonstrated high efficacy rates in Phase 3 trials, fueling optimism that the pandemic could be alleviated in the near term. Despite this favorable development, the logistical challenges of distributing and administering the vaccines are significant, and high COVID-19 case counts threaten to undermine the global economic recovery. In the US, infections hit record highs, while the government agreed on a pandemic relief plan that will extend many of the Coronavirus Aid, Relief, and Economic Security (CARES) Act support measures. The European Central Bank (ECB) expanded its massive monetary stimulus program by €500 billion, as new lockdown measures weighed on the eurozone’s economic recovery. The European Union (EU) and China struck an agreement on an investment treaty that opens up opportunities for European companies in the Chinese market, while the US government strengthened its recent sanctions on companies with links to the Chinese military. The UK and the EU agreed to a trade deal, setting the terms for a post-Brexit future and ending four years of political negotiations since the UK’s 2016 referendum on EU membership.
Global fixed income sectors generated positive returns over the fourth quarter.
Encouraging vaccine developments propelled market confidence despite growing global COVID-19 infections and the UK’s formal exit from the EU. Most fixed income spread sectors outperformed as global credit spreads tightened, the US presidential elections concluded, and major central banks adopted policies aimed at mitigating risks. Sovereign yield curves generally steepened outside Europe, with easy central bank policies anchoring frontend yields, while the prospect of additional fiscal stimulus lifted inflation expectations. The US dollar weakened versus most currencies.
Commodities (+14.5%) ended the quarter sharply higher, with all four sectors finishing in…
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