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Asset Class Reports
Canterbury's Outlook: Second Quarter 2016

U.S. Markets Approach Record Highs Despite ‘Brexit’ Volatility

  • In June, the U.K. surprised global markets by electing to exit from the European Union. The news immediately led to a sell off in risk assets and a subsequent bid for safe government bonds. Fast forward a week later, global equity and currency markets reversed course as investors considered the prospect of more accommodative central bank policies.
  • U.S. equities finished the quarter near record highs. Value stocks rallied sharply, as low and falling interest rates drove an ongoing quest for yield, and the over-sold commodities complex continued to rebound from first quarter lows.
  • International developed equities were the only asset class in the red for the quarter, as investors weighed the economic uncertainty surrounding the U.K.’s decision to leave the E.U. Emerging markets ended higher, with investors optimistic that lower interest rates in response to ‘Brexit’ will benefit emerging equities.
  • Developed market bond yields continued to decline as investors sought safe haven assets. The U.S. 10 Year Treasury rate declined to 1.43% and short term rates in Japan and Europe resumed their move into negative territory. High yield spreads widened after the ‘Brexit’ news, however risky bonds subsequently rebounded along with the equity markets.

 

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