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    Quarterly Economic Report, Q3 2020

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    Key takeaways

     
    The SVB Asset Management Economic Report is a quarterly review and outlook on economic and market factors that impact global markets and business health. In this edition, we review the ongoing impacts of the Coronavirus and how the pandemic continues to throw the global economy into uncharted territory as resurgence of the virus spikes.

    01

    Q2 2020 showed a constant push and pull of two opposing forces.

    Unemployment was expected to worsen from 14.7 to 19 percent. Instead, it improved to 11.1 percent by June.

    02

    Q2 was strong for consumers, with a retail surge in May and June.

    While a remarkable rebound, how much was due to inflated unemployment benefits that expired in July?

    03

    The Fed has committed to being the lender of last resort.

    The Fed’s message: “We’re not even thinking about thinking about raising rates.”

    Quarterly Eco Book Graphs 484 x 306 Global Economy 150 dpi

    Global Economy: Deeper recession with a tempered recovery

     

    Except for China, the global economy is projected to experience a sharper output contraction in 2020 before an anticipated rebound in 2021.

    GDP: Beginning of a recession

     

    Q1 GDP showed the US economy contracted by 5 percent, marking the beginning of a recession triggered by the global pandemic.

    Quarterly Eco Book Graphs 484 x 306 GDP and Components 150 dpi transparent
    Quarterly Eco Book Graphs 484 x 306 Historical Interest Rates 2 150 dpi

    Historical Interest Rates

     

    The Fed cut the fed funds rate to zero in March 2020 and remains committed to purchasing assets with an unlimited capacity.

    Broad Market Performance: “Off the lows”

     

    The unconventional Fed facilities, along with the other monetary and fiscal policy responses, have helped improve financial markets.

    Quarterly Eco Book Graphs 484 x 306 Broad Market Performance 150 dpi transparent
    Quarterly Eco Book Graphs 484 x 306 Fixed Income Returns 150 dpi

    Fixed Income Returns

     

    High-grade corporate returns outpaced other asset classes as credit spreads significantly tightened in Q2.

    Corporates: Operating margin and debt coverage

     

    Operating margin declined in two major sectors due to COVID-19 impacts; debt coverage showed a notable contrast.

    Quarterly Eco Book Graphs 484 x 306 S& P 500 Financial and Industrial Index 150 dpi transparent

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    Our Team and Report Authors

     

    Down Arrow
    Renuka Kumar, CFA Headshot
    Renuka Kumar, CFA
    |
    Head of Portfolio Management
    Renuka Kumar oversees SAM’s portfolio management and trading teams while also managing investment portfolios for clients.
    Jon Schwartz Headshot
    Jon Schwartz
    |
    Senior Portfolio Manager
    Jon Schwartz and his team are responsible for the development and execution of the strategy, security selection and risk management of client portfolios.
    Jose Sevilla Headshot
    Jose Sevilla
    |
    Senior Portfolio Manager
    Jose Sevilla calls on more than two decades of experience in financial services to analyze, structure and monitor fixed-income portfolios for his clients.
    Jason Graveley Headshot
    Jason Graveley
    |
    Senior Manager, Fixed Income Trading
    Jason Graveley and his team are responsible for carrying out investment strategies for numerous separately managed portfolios.
    Hiroshi Ikemoto Headshot
    Hiroshi Ikemoto
    |
    Fixed Income Trader
    Hiroshi Ikemoto and his team oversee the buying and selling of fixed income securities for separately managed accounts.
    Timothy Lee, CFA Headshot
    Timothy Lee, CFA
    |
    Senior Credit Analyst
    Tim Lee researches and recommends fixed-income investments in the corporate, municipal, sovereign and securitized product sectors.


    Views expressed are as of the date of this report and subject to change. This material, including without limitation the statistical information herein, is provided for informational purposes only. The material is based in part upon information from third-party sources that we believe to be reliable but which has not been independently verified by us and, as such, we do not represent that the information is accurate or complete. This information should not be viewed as tax, investment, legal or other advice, nor is it to be relied on in making an investment or other decision. You should obtain relevant and specific professional advice before making any investment decision. Nothing relating to the material should be construed as a solicitation, offer or recommendation to acquire or dispose of any investment or to engage in any other transaction.

    None of this material, nor its content nor any copy of it, may be altered in any way, transmitted or distributed to any other party without the prior express written permission of SVB Asset Management. Intended for institutional use only. SVB Asset Management is a registered investment advisor and nonbank affiliate of Silicon Valley Bank, and member of SVB Financial Group. For institutional purposes only.

    SVB Asset Management, a registered investment advisor, is a non-bank affiliate of Silicon Valley Bank and member of SVB Financial Group.

    Investment Products and Services offered by SVB Asset Management:

    Are Not insured by the FDIC or any other federal government agency
    		 Are Not deposits of or guaranteed by a Bank
    		 May Lose Value


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