Uncertainty fuels flight to quality, large caps and gilts

What a difference a month makes. Less growth or more inflation - take your pick. The rise in uncertainty seemed to take markets by surprise and the risk premia demanded by investors increased inversely to the quality of the underlying asset. Hence, emerging markets underperformed G7, small caps fared worse than large, and investment grade corporate bonds did better than high yield bonds. Somewhat surprisingly, corporate bonds held up well during the recent market turbulence, albeit with pockets of weakness in high beta financials and insurers. Recent months have seen significant supply in...