Consistency through high conviction

This week we are right in the middle of the European banks’ Q2 reporting period. Today for example we had results from a diverse group of Europe-listed banks, with Credit Suisse, BBVA, Lloyds and Standard Chartered all reporting. All have very different business models and footprints across varying geographies.

After the most incredible first quarter of 2020, we have seen an almost equally incredible second quarter. It is clear to us that the market overreacted in March, but it has also overreacted in its interpretation of the recovery.

Today’s Federal Open Market Committee (FOMC) meeting in some way represents a big step towards normality for investors, as they await what the Fed will do next having returned to its scheduled programme of meetings. So what can we expect from the Fed today?

A few weeks ago Bank of America Merrill Lynch’s CEO, Brian Moynihan, said that loan losses were not coming through as thick or as fast as he would normally expect for a recession, in particular a recession of this magnitude.

Rarely has there been so much uncertainty across global markets. Mark highlights some of the opportunities we are seeing in the credit markets, as well as some of our likes and dislikes in terms of sectors, and detail the strategy we believe fixed income investors could look to adopt going forward.

Thursday saw the reopening of the bond market for bank Additional Tier 1 (AT1) debt, more colloquially known as ‘Coco’ bonds.