Anna Rathbun, Chief Investment Officer

It would seem that reopening an economy should be as simple as artificially shutting it down. Perhaps that would be true for a short time period, such as the two-weeks to “flatten the curve” when the pandemic first began. But over a year later, recovering from the artificial shutdown is proving to be difficult. A part of the problem is the virus itself, still propagating across the globe as vaccination results vary in different countries. This situation is applying continued pressure on the supply chain disruption. Another issue is that things can change for individuals over the course of many months – incentive structures and shifting perceptions of risk influence consumption and labor choices for Americans. Throughout the second quarter, we saw the markets revise some expectations because a lot can happen in a year. And expectations based on old assumptions may not play out going forward.


  • Even as consumer price and producer price indices registeredsizable gains, the 10-year benchmark yield continued to fall throughout thequarter, signaling concerns that recovery may not be so swift.
  • The equity markets also expressed changing expectations despite the positive returns for the quarter for the major indices as investors wondered about the pace of recovery in the value-oriented sectors and for companies most impacted by the pandemic.
  • In the fixed income markets, the U.S. Treasury yield curve flattened throughout the quarter. Indices with longer duration profiles performed well and corporate spreads continued to tighten
  • Developing nations have lagged developed countries in the vaccination scorecard, but despite the challenges exporting countries benefited from the reopening of the U.S. and European economies and elevated commodities prices.
  • Personal spending followed the pattern of reliable wages, which means that the extra checks from the government did not spur additional activity that is sustainable to stimulate the economy in a meaningful way. 
  • Our recovery is not taking off like a rocket because our economy is a complex system of individual incentives, willingness to pay, and personal risk assessment all chained together. 
  • The picture of financial markets is one of healing: current valuations on equity investments are high, but earnings future looks optimistic; forward price-to-earnings ratio is slowly coming down; and credit market spreads are tight, but the default rate remains below long-term average and distressed investment opportunities have dwindled. 

Looking Ahead

Expectations are a thing we form based on our previousexperiences. We extrapolate and imagine based on past data and knowledge. Thefirst half of this year reminded us that the future, even the immediate futureis difficult to predict, and that is why markets tend to overshoot thencorrect. During the first half of the year, the world had underestimated thevaccine’s efficacy, then overestimated the growth that would soon follow. As welook out into the second half of the year, we assume a sober posture regardingthe global recovery. COVID-19 flareups and even localized lockdowns willcontinue to be a headwind in the healing of the global supply chain. Thosedisruptions have ripple effects, causing shortages, increased prices, and impacton business and consumer behaviors. As we have stated multiple times in pastpublications, for a globalized economy to heal, vaccination success needs to beachieved on a global scale. And we expect that the healing process may takesome time.

More Information

For more information on the second quarter financial market activity, please contact CBIZ Investment Advisory Services.

The information included in this update is provided for informational purposes only and should not be construed as investment advice. The views expressed are those of the author based on the data available when this update was written and are subject to change based on market conditions or other factors. CBIZ Investment Advisory Services and/or CBIZ Retirement Plan Services disclaims any liability for any direct or incidental loss incurred by applying information supplied in this update.

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Published on July 29, 2021