Financial Market Review: Second quarter 2020

A quarterly review of results in the global equity, fixed income, currency, and commodity markets.

The views expressed are those of the authors at the time of writing. Individual teams may hold different views. The value of your investment may become worth more or less than at the time of original investment. For professional or institutional investors only.

Global equities (+18.4%) surged to their best quarterly return since December 1999. Markets were fueled by optimism about successful earlystage trials for a potential coronavirus vaccine, ongoing fiscal and monetary stimulus, and signs that global economic activity is improving. As new coronavirus cases declined in most countries, governments shifted their focus toward gradually lifting lockdown restrictions and supporting the recovery of their economies; however, new cases rose sharply in some areas of the US, while India and much of Latin America struggled to bring the virus under control. The European Commission (EC) announced a proposal for a €750 billion recovery fund to provide grants and loans to European Union (EU) economies that have been devastated by the coronavirus pandemic. Tensions between the US and China escalated during the quarter after China’s decision to impose a controversial national security law on Hong Kong invoked a host of retaliatory responses from the US and raised concerns about the city’s future as a global financial center. After plummeting to historic lows in April amid a pandemic-induced collapse in demand, oil prices rebounded later in the quarter as the global economy began to recover.

Global fixed income sectors generated positive returns in the second quarter. Political tensions were a focal point, with US-China disputes reigniting, a wave of protests engulfing the US, and Brexit uncertainty increasing. Sovereign yields remained broadly rangebound near record lows across most developed markets, supported by central bank purchase programs. Fixed income credit spreads tightened as countries began to gradually emerge from lockdowns, vaccine developments progressed, and asset purchases by the US Federal Reserve (Fed) commenced through its credit facilities. The US dollar…

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