2021: A year for the economic recovery.

As we leave the nefarious 2020 behind and enter 2021 with the lurking legacy of the pandemic still feeding the daily headlines of worldwide newspapers, the resilience of most asset markets to the COVID-19 storm—almost one year later—is truly mind-boggling. Roughly nine months ago, the pandemic threatened to be the single gloomiest event of the 21st century, forcing most developed economies to a halt as lockdowns were imposed by governments to stop the virus’ spread. As a result, and in the lapse of just three weeks, some developed equity markets corrected as much as 40% and the US Treasury yield fell 130 bps, flattening the yield curve. Prices of corporate and high yield markets dropped 20% and 25%, respectively, as the default probability surged. On the commodities front, the month of April 2020 will be remembered as being the first time in history that the West Texas Intermediate traded in negative territory due to the economic shutdown, unbridled production, and significant storage scarcity. Even gold, a safe-haven asset, reacted to the initial stages of the global shutdown with a $200 market correction, down to $1470.

Against all odds, the S&P 500, Nasdaq, and the Dow Jones closed at all-time highs at the end of the trading session on December 31, while the MSCI AC World Index ended last year 14% higher. All the main categories of debt increased their prices over the year, with advances that oscillated between the 11.8% that was achieved with inflation-linked bonds and the 1.7% achieved by European high yield. The Global debt index ended 2020 with gains of around 9% in an environment where the number of investment firms considering bonds severely overpriced is increasing.