The Fed vs. Fundamentals

A Bird's-Eye View of the Bond Market

Financial market performance and economic fundamentals were at odds in Q2 2020. Markets rallied hard despite continued deterioration in the underling fundamental data, both at the company level and in the broader economy. The single most important reason for the divergence was Fed intervention. Since the last podcast three weeks ago, markets took on a more “risk off” tone in equities and rates while investment grade spreads held in much better.