Risky securities have shown a very good return performance in recent weeks. Equity prices have continued to rise and credit spreads have reached, or are well on their way to pre-pandemic levels.
Arguably the most important element for capital markets is the positive vaccine news. The baseline scenario is for a bumpy, uneven and partial recovery. Bumpy, because GDP in Europe will contract in the fourth quarter and that in the U.S. could also fall in the first quarter. Inconsistent, because some sectors and countries are less affected by the pandemic than others. Sectors in the service sector, those with direct customer contact, have been particularly hard hit.
The prospect of herd immunity fuels hopes for a sustained recovery in the global economy. The risk lies in a more abrupt than expected recovery and, in some cases, longer-term economic damage in certain sectors.
Development of bond yields of US- and EUR-Government-Bonds and EUR-Corporate-Bonds
Development of bond yields of European High-Yield-Bonds compared with global High-Yield-Bonds and Emerging-Markets-Corporate-Bonds (12/2015-12/2020)
The development of historic yields is not a reliable indicator for future developments of a specific asset category or asset class. The charts above do not include any fees or costs.
Ratio-Overview (more information and all risk notes can be found at www.erste-am.com)
Prognoses are no reliable indicator for future performance.