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Asset Class Reports
Canterbury Review: Second Quarter 2020

Historic Market Rally

  • Global equities experienced the fastest 30% drawdown in history in the first quarter of 2020. The second quarter witnessed the largest 50-day advance in market history. In the U.S. equity market, the NASDAQ hit a record-high in June and the S&P 500 ended the quarter only a few percentage points below where it started in 2020. Strong fiscal stimulus, low interest rates, low inflation, and country reopenings have been supportive of equity markets.

  • International and emerging market (EM) countries experienced market rebounds, supported by global monetary and fiscal stimulus. Despite concerns from China and the U.S. over security issues tied to Hong Kong and Taiwan, EM equities outperformed international developed equities. A weaker U.S. dollar was an additional tailwind for both international and EM equities.

  • U.S. interest rates were range-bound as the Fed continued to backstop the bond market with quantitative easing (QE) and credit programs. While equity markets experienced a meaningful rebound, Treasury rates resisted a move higher as investors questioned sustained future growth.

  • Investment grade (IG) and high yield (HY) spreads tightened significantly as the Fed purchased several billion dollars worth of IG bonds, ETFs, and HY ETFs. From peak-to-trough, IG spreads tightened approximately 240 basis points while HY spreads tightened approximately 540 basis points. From a global perspective, a slightly weaker dollar benefited emerging market debt and local currencies.

  • Inflation breakeven rates remained subdued and were well below 2% as the market continued to discount inflation given the lack of economic demand. Commodities and energy-related assets benefited from the broad market rebound as well as from more certainty related to oil supply/demand.


To view the second quarter reports, click on the links below: