Fixed Income Market Performance Summary - Q2 2020

Banking executive Colin Robertson is the executive vice president of Northern Trust in Chicago, Illinois. From his Chicago office, Colin Robertson manages all the firm’s fixed income investments, evaluating market performances every quarter to inform investment decisions.

The last market quarter (Q2 of 2020) was particularly better for investors than Q1 as asset classes posted a recovery from their previous declines. While overall the returns for most equity markets were down year-to-date, US growth and technology stocks moved toward positive territory. The gains were propelled by easing of lockdown measures, loose monetary policy by the Federal Reserve, and a reduction in weekly claims for unemployment insurance.

In the fixed income market, US 10-year yields saw little change, staying near record lows and channeling the effects of weak economic activity and quantitative easing measures. Fixed income assets more sensitive to risk, however, saw their yields decline.

Corporate bonds performed strongly in the quarter, far outpacing their government counterparts. High yield bonds that were more speculative returned 11 percent while investment-grade bonds returned 7.9 percent. Overall, US energy companies performed well across both.

About the ABA Foundation's Safe Banking for Seniors Program

A Chicago-based banking executive, Colin Robertson has in-depth experience in the financial services industry spanning more than three decades. In addition to serving as an executive vice president at Northern Trust in Chicago, Colin Robertson maintains membership with the American Bankers Association (ABA) where he is part of the Investment Advisory Committee.

The American Bankers Association supports America’s banks as they perform their role of strengthening the economic and financial landscape as well as assisting communities to thrive. The association consists of banks of various sizes and shares the latest industry news. ABA runs some of its programs using the ABA Foundation which provides free resources and programs to assist bankers to improve the well-being of both their customers and the entire community.

Sponsored by the ABA Foundation, Safe Banking for Seniors (SBFS) is a free national program that provides bankers with the required tools and resources to offer assistance to seniors, their families, and caregivers. The program offers bankers access to presentations, resource sheets, activity sheets, and guides to enable bankers to connect with their local communities. Bankers can use this training to advise on how to choose a financial caregiver, identify and avoid scams, prevent identity theft, and become a responsible financial caregiver.

Fixed Income Securities in Goals-Driven Wealth Management

Banking executive Colin Robertson is an executive vice president at Northern Trust in Chicago. From his office in Chicago, Colin Robertson oversees the firm’s fixed income investments.

Fixed income investments are usually low risk and include quality fixed income securities and cash.

They have an unassailable role in goal-oriented wealth management, which is to meet near-term goals such as medium-sized purchases. They are different from higher risk assets like global equities and high yield bonds. These are also included in wealth management, but are used to fund longer term goals because of the higher return premium on equities.

However, while fixed income investments are low risk, that does not mean they are risk free. Risks that could undermine their performance are inflation, default by issuing institutions, rising real interest rates, taxation, and lack of liquidity. Because principal amounts are used primarily to meet near term needs, it is absolutely crucial to protect them from these risks, offering a positive return even in distressed economic times and despite taxes and inflation.

Ultimately, no single fixed income asset can achieve this on its own. That’s why a mix of fixed income assets is appropriate. A good mix usually includes inflation-protected treasuries, liquid securities, tax-efficient bonds, and low duration investment grade bonds, to mitigate real interest rate risk. The risk of default is kept to a minimum by selective preference for assets with high credit quality.