Weekly Market Insight

Latest Economic & Market Update 23rd October 2020

23rd October 2020

Good afternoon, it is October 23rd 2020 and here is your economic and market update from BlackBee. 

Graph of the Week: The Hunt for Yield

Source: Bloomberg

Following the crash in financial markets in March, Central Banks around the world unleashed massive stimulus pushing liquidity into the system. Equities have seen a rapid recovery with some measures considering them to be overvalued. Volatility also remains persistent. The VIX currently stands above 27, prior to the crisis the VIX level was fluctuating around 13. The price of publicly traded debt has also climbed as a result of unprecedented stimulus and has pushed yields lower – yields fall when prices rise. Government yields are incredibly low with some yields in negative territory meaning investors will lose money. The real yield on all US Treasury Bonds are in negative territory. Italy, which is considered one of the riskier countries in Europe, sold a 3-year zero coupon bond last week – the first zero coupon bond they have sold – and have since sold a 30-year bond with the yield on the bond at 1.76%, the second-lowest yield ever for a 30-year Italian bond. Public corporate debt has also seen yields compress with investment-grade corporate debt standing c. 2% and high yield (risky) debt just above 5%.

To move away from public markets, asset managers are now looking to raise funds for private lending. The Financial Times reported that these asset managers are aiming to raise $292 billion for private lending, up from $192 billion in January. With equity markets volatile and yields compressed (and negative for many) on government and corporate bonds, there is value to be seen in private markets especially in strategies that are underpinned by identifiable economic trends. They can deliver strong returns for investors. BlackBee’s strategy is underpinned by strong economic trends and provides investors with the opportunity to make strong returns in an unprecedented low yield environment.   

At a glance:

  • IHS Markit eurozone PMI fell to 49.4 in October indicating that a majority of businesses reported a contraction in activity in comparison to September.
  • US jobless claims dropped to 787,000 last week, the lowest level since March.

Best & Worst Performers of Large Cap US Stocks on Thursday
Click image to enlarge

Global Market Update
(as at close of markets 22/10/2020)