With the Covid-19 pandemic in retreat in some—but certainly not all—parts of the world, many investment markets were swept by a warm breeze of optimism in the second quarter. Risk assets continued to climb.
After clawing back its losses from the Covid-19 selloff throughout much of the second and third quarters, the high yield market moved solidly into positive territory for the year during the fourth quarter.
As long-term investors, we think it is important to take the right message from the strong broad market returns in 2020. As we’ve often cautioned, extrapolating trends is a risky way to commit capital, particularly when these trends reflect an extraordinary operating environment like that in 2020.
While equity markets continued their rebound from the depths of the Covid-19 selloff, leadership shifted as signs of a “reflation” trade that emerged in September persisted.
With the Covid-19 pandemic in retreat in some—but certainly not all—parts of the world, many financial markets have been swept by a warm breeze of optimism.