The broad-based recovery in “risky” assets that got underway on 23rd March has run out of steam since 8th June. That is not because policy support has been dialled back. Instead, it appears to reflect renewed concerns about the spread of the coronavirus – chiefly its resurgence in the US over the past two months, but also more recent worries about a second wave of infections in Europe. Admittedly, equities in the US and EM Asia, as well as industrial metals, have managed further gains, benefiting from the resilience of a handful of sectors such as IT, and the strength of China’s economic recovery. But other equity markets have fared less well, held back by their larger weighting of sectors such as energy, financials, and industrials, which have consistently underperformed when worries about the virus have grown.
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