The world continued to make progress against the COVID-19 pandemic during the second quarter as vaccine distribution broadened, not only geographically, but also among differing age groups. While financial markets arguably recognized these improvements were coming months ago, the signs of returning toward a pre-pandemic normal were welcome, nonetheless. Global economic activity expanded, corporate earnings
forecasts improved, and the debate on the implications for inflation dominated market commentary and, at times, market direction. The broad improvements in activity have led some to question the need and size for additional fiscal stimulus from the new administration, while narrow majorities in Congress suggest difficult negotiations lie ahead.
Financial markets generated mostly positive returns during the quarter, and we are continuing to find attractive investment opportunities across the many sectors of the bond market. We believe sector and issuer selection in this environment is critical and favors active over passive management. Elevated cash levels and a high degree of personal savings we expect will be a tailwind to growth in the coming quarters. We continue to take advantage of periods of market volatility consistent with the same multi-sector investment approach we’ve implemented for close to three decades.
Bloomberg Barclays U.S. Aggregate Bond Index measures the U.S. investment grade fixed rate bond market. Bloomberg Barclays Municipal Bond Index is a market capitalization weighted index that measures the long-term tax-exempt bond market. J.P. Morgan GBI-EMGD tracks total returns for local currency debt instruments issued by emerging markets sovereign and quasi-sovereign entities to which international investors can gain exposure. J.P. Morgan CEMBI Index tracks U.S. dollar-denominated debt issued by emerging market corporations. J.P. Morgan EMBI Global Index tracks the total return for the U.S. dollar-denominated emerging markets debt, including Brady bonds, Eurobonds and loans. The Credit Suisse Leveraged Loan Index is a market-weighted index that tracks the investable universe of the U.S. dollar denominated leveraged loans. The Bloomberg Barclays U.S. High-Yield 2% Issuer Capped Bond Index is a market capitalization-weighted index that measures fixed rate non-investment grade debt securities of U.S. and non-U.S. corporations. No single issuer accounts for more than 2% of market cap. The indexes are calculated on a total return basis. The indexes are unmanaged, returns do not reflect any fees, expenses, or sales charges, and are not available for direct investment.
The commentary is the opinion of the subadviser. This material has been prepared using sources of information generally believed to be reliable; however, its accuracy is not guaranteed. Opinions represented are subject to change and should not be considered investment advice or an offer of securities.
All investments carry a certain degree of risk, including possible loss of principal.
Past performance is not indicative of future results.