Financial Market Review: Third 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 (+7.1%) rose for the second straight quarter, ending with a year-to-date gain of 1.6%. Markets were bolstered by the impact of the massive fiscal and monetary stimulus from governments and central banks, further signs of a recovery in global economic growth, and the potential for COVID-19 vaccines in the near future. However, the recovery was threatened by the pandemic. The worldwide death toll eclipsed one million, with infections escalating in Europe, the US, India, and Latin America. Europe faced an alarming rise in cases, as the number of new infections reached record highs in some countries. Global economic indicators showed that the global economic recovery strengthened, if at a more moderate pace. The European Union (EU) reached an agreement on a €750 billion recovery fund to aid countries in the region that have been most severely impacted by the pandemic. The US grappled with political uncertainty ahead of the upcoming presidential election and the lack of additional fiscal stimulus. Brexit negotiations deteriorated after a controversial bill that could override elements of the Brexit Withdrawal Agreement passed its first parliamentary hurdle in the UK’s House of Commons.

Global fixed income sectors generated positive returns over the third quarter. Global COVID-19 cases swelled amid encouraging developments in vaccine trials, and economic data continued to rebound as restrictions eased in most countries. Sovereign yield curves generally steepened, as accommodative central bank policies anchored front-end yields and lifted inflation expectations. Fixed income credit spreads tightened, supported by expansionary fiscal policies, including an agreement on…

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