• Global equity markets recovered in April boosted by the Federal Reserve’s unlimited QE announcements and public optimism about the path of COVID-19. US equities led international markets. See Exhibit 1.
  • Our concern about future tail risks has subsided due to aggressive action by global central banks and governments. We foresee additional near-term stimulus packages aimed at bridging businesses, workers and state and local governments directly impacted by mandated shutdowns.
  • We do not foresee a V-shaped recovery in global economies. The longer term effects of demand destruction directly impacting discretionary spending and service oriented businesses are not currently priced into equity markets, particularly the US.
  • Current aggressive government debt programs will likely limit growth following a recovery. Central bank purchases have
    kept interest rates low and lessened the near-term burden of higher debt. Longer-term, a rise in interest rates due to a rise ininflation may materially impact government budgets. We expecthigher tax rates in the future.
  • Central bank buying and demand for US dollar assets will keep US Treasury
    yields low. The
    Fed has restoredliquidity to the investment grade corporate bond and mortgage backed securities (MBS) markets. Securities not eligible forFed purchase programs remain illiquid and offer high potential total returns.

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