Global Bond Market Brief

Fourth Quarter 2020

Our Global Outlook

The global economy continued to mend, and risk assets remained in favor during the third quarter. Central banks provided important market support but slowing growth and political uncertainty late in the period created headwinds. Additionally, rising COVID-19 cases in Europe threatened the global outlook. We believe this ongoing uncertainty highlights the value of active, experienced portfolio management.

Economy. Upbeat consumer, manufacturing and employment data suggest third-quarter GDP may top 30% (annualized). Going forward, though, we believe the economy needs more fiscal relief to power the recovery. Also, approval of a COVID-19 vaccine and/or effective drug therapies should aid growth.

Rates. Yields remained unusually low against a backdrop of substantial monetary stimulus and lingering economic and political uncertainties. Key lending rates are likely to remain historically low for several years.

Inflation. We expect global inflation to remain low in the near term. Longer term,  massive government debt, a weaker U.S. dollar and onshoring trends among businesses should push U.S. inflation higher. In our view, these influences aren’t adequately reflected in the market, highlighting the value of inflation-linked bonds.

Global Bond Market Brief

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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