Second Quarter 2021
Expanding vaccine availability combined with massive monetary and fiscal support aided the economic recovery and drove improving economic growth outlooks. This backdrop proved beneficial for equity investments and challenging for high-quality bonds, highlighting the importance of active, experienced portfolio management.
Economy. Global growth is likely to continue, led by improving data in the U.S., where vaccine distribution is generally outpacing availability in other nations. In this environment, we expect pent-up consumer demand, along with central bank stimulus and record fiscal aid, to fuel economic growth.
Rates. While U.S. rates increased sharply in the first quarter and the yield curve steepened, we expect the 10-year Treasury yield to stabilize near 1.75%. Meanwhile, U.K. and European yields remain lower than U.S. yields amid lingering coronavirus-related lockdowns.
Inflation. We expect improving growth, massive government debt, a weaker U.S. dollar and onshoring trends to push longer-term inflation higher. In our view, these influences highlight continued value in inflation-linked bonds.
Investment return and principal value of security investments will fluctuate. The value at the time of redemption may be more or less than the original cost. Past performance is no guarantee of future results.
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