• Amid the volatility experienced in Q4 2018, the performance of equity and fixed income markets reflected rising investor risk aversion as equities sold off and Treasuries rallied.
  • So far in 2019, however, equity and fixed income performance tell a tale of diverging market views. While the S&P 500 has recovered all of its Q4 decline, bond markets reflect a more cautious outlook.
  • Prior to the May pullback in the equity markets, the S&P 500 returned 18.2% through April 30. Even with the May decline, the S&P 500 has returned 15.6% year to date amid generally positive employment data and a strong, yet cautious, consumer.1
  • Meanwhile, government bond yields have steadily declined in 2019 and this week nearly touched their March lows. In fact, the 3M-10Y Treasury yield curve briefly inverted this week for the second time since March as demand for safe-haven assets drove down the yield of the 10-year Treasury.2
  • Fresh tariffs and a breakdown of trade negotiations injected a fresh bout of volatility into the markets this month amid a year in which volatility has otherwise been low. As the U.S. economic expansion ages and policy uncertainty remains, equity and fixed income markets may reflect differing outlooks – yet all investors would be wise to prepare for periods of uncertainty and the volatility they often create.

1 As of May 17, 2019.
2 Bloomberg, as of May 16, 2019.

The chart of the week and any accompanying data is for informational purposes only and shall not be considered an investment recommendation or promotion of FS Investments or any FS Investments fund. The chart of the week is subject to change at any time based on market or other conditions, and FS Investments and FS Investment Solutions, LLC disclaim any responsibility to update such market commentary. The chart of the week should not be relied on as investment advice, and because investment decisions for the FS Investments funds are based on numerous factors, may not be relied on as an indication of the investment intent of any FS Investments fund. None of FS Investments, its funds, FS Investment Solutions, LLC or their respective affiliates can be held responsible for any direct or incidental loss incurred as a result of any reliance on the chart of the week or other opinions expressed therein. Any discussion of past performance should not be used as an indicator of future results.