During the second quarter, global equity markets experienced a dramatic recovery after the bear market of the first quarter. This recovery was ignited as a result of nearly unprecedented central bank and fiscal support to counter the economic impact of the COVID-19 virus, and its resulting shutdown of a meaningful portion of the global economy. A flood of liquidity to individuals and companies likely spurred the purchase of risk assets, helping to start the rebound. Additionally, investor confidence returned as the economic re-opening led to improvement in such indicators as nonfarm payrolls, consumer confidence, and manufacturing and services activity.
- During Q2 the S&P 500 Index gained 20.5%. Most bond segments recovered from Q1’s declines. Of note, the Bloomberg Barclays U.S. High Yield Index rose 10.2% and the Bloomberg Barclays Investment Grade Corporate Index was 9.0% higher.
- Commodity prices likewise recovered in the second quarter as the markets anticipated a post-COVID recovery in demand. Oil experienced a significant recovery from the first quarter plunge in prices as demand appeared to bottom, and the U.S. government intervened to help facilitate a stabilization in prices partly through purchasing for the U.S Strategic Petroleum Reserve and coordinating global supply adjustments. Gold also experienced strong returns in the second quarter.
- The Bloomberg Barclays U.S. Treasury Bond Index experienced a 0.5% gain as demand for “safe haven” bonds remained and Treasury yields remained low. The 10-yr Treasury yield ended the period at 0.66%; nearly unchanged from the close of Q1.
As we enter the third quarter, U.S. fiscal and monetary policymakers are debating further stimulus and policy support, while the Federal Reserve indicated its near-zero interest rate policy will remain for the foreseeable future. U.S. mortgage rates sit at historic lows, helping to support demand for home prices.
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