Morgan Stanley: Volatility and Uncertainty Continue

Volatility and Uncertainty Continue

Why have government bonds and other fixed income assets prevailed in the current market environment while other sectors and asset classes have struggled?

14.10.2019 | 10:52 Uhr

Government bonds and the U.S. dollar continued their exceptional performance in August while other sectors and asset classes struggled. The reason: rising anxiety about the global economic outlook and policy responses. The causes: the U.S./China trade dispute escalated, economic data weakened (or did not improve as anticipated) and there was uncertainty about future central bank actions. Importantly, despite these issues, high-yield bonds and equities have weathered the storm well, preserving strong year-to-date returns. In fact, most fixed income assets, including credit, delivered positive returns in August. The problem: much of these returns are due to the dramatic fall in bond yields, which is unlikely to be repeated.

Display 1: Asset Performance Year-To-Date

Asset Performance Year-To-Date

Note: USD-based performance. Source: Thomson Reuters Datastream. Data as of August 30, 2019. The indexes are provided for illustrative purposes only and are not meant to depict the performance of a specific investment. Past performance is no guarantee of future results. See below for index definitions.

Display 2: Currency Monthly Changes Versus USD

Currency Monthly Changes Versus USD

Source: Bloomberg. Data, as of August 30, 2019. Note: Positive change means appreciation of the currency against the USD.

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