Week Ending: September 18, 2020
U.S. stocks were mixed last week as volatility remains elevated and investor sentiment has shifted toward contrarian themes. Small and medium sized company stocks generally outperformed large company peers and value stocks outperformed growth. Cyclical sectors such as energy, industrials, and materials outperformed whereas the consumer and technology oriented sectors lagged. Developed foreign stocks in Europe and Asia outperformed U.S stocks while Emerging Market stocks outperformed both U.S. and developed foreign markets.
U.S. Treasury yields edged higher this past week (bond prices and yields move in opposite directions) as investors balance seeking quality and yield. Short duration high yield (below investment grade) corporate bonds were the top performing segment followed by long duration investment grade corporate bonds. Short and intermediate corporate bonds have fully recovered and are outperforming government peers on a year-to-date basis. Investment grade corporate bonds are yielding approximately 2% and high yield corporate bonds are yielding more than 5.5%.
The Fed revealed that policymakers expect official short-term rates to remain near 0% through 2023 and made no changes to its quantitative easing (QE) program. Initial unemployment claims declined again from the previous week to 860,000 and there are approximately 12.6 million Americans claiming ongoing unemployment benefits. In the UK, the Bank of England left policy measures unchanged but indicated that the central bank was ready to take further action if needed. Yoshihide Suga was elected as Japan’s prime minister by both houses of parliament and will fill the remainder of Abe’s term, until September 2021.