The close of the third quarter saw the continuation of positive momentum for financial markets.
Expectations of continued favorable monetary policies coupled with the potential for more stimulative fiscal policies post-Brexit resulted in a “risk-on” environment driving strong returns across capital markets. While returns were strong across asset classes, the third quarter marked the continuation of the rolling corrections that have been occurring internally within the market since the fourth quarter of 2014. Defensive sectors, including “bond-substitutes” such as utilities, performed poorly as the market shifted towards sectors more leveraged to improving economic growth. Likewise, in fixed income, high yield significantly outperformed more traditional fixed income investments as the combination of attractive spreads (valuation) and an improving economic outlook drove equity-like returns.
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