Risk assets rally despite unsecured recovery

ON ASSET ALLOCATION

Insight's Matthew Merritt says despite risk appetite remaining fragile the performance of risky assets has improved

Risk appetite remains fragile amid uncertainty surrounding the path of the recovery. Nonetheless, we have seen an improvement in risky asset performance since the Q2 sell off. Falling government bond yields explain part of the rebound. They reflect an easing of fears surrounding the sustainability of sovereign balance sheets – for example in southern Europe – and a recognition that further QE is likely. The irony in the recent risk asset rally is additional support would not be forthcoming but for the fact the recovery is, as yet, unsecured. The recent falls in core inflation in the U...