You Have More Duration than You Think

2020 has seen a pandemic inflict enormous human and economic cost. In 2Q, the global economy contracted by the largest amount on record and, as autumn approaches, major questions around returning to school, work and other aspects of daily life remain.

But for investors, 2020 has been something different. Year-to-date, the value of the global equity market is broadly unchanged. The value of the global bond market is significantly higher. Home prices in many markets have risen. Indeed, an uncomfortable aspect of 2020 is that this terrible year has generally meant gains for asset owners. US household wealth/GDP has made a new record high.

Many factors are behind this. The global economy is improving, in line with the V-shaped recovery thesis of Morgan Stanley’s economists. Initial progress on a vaccine has been promising, lowering the probability of a larger, more permanent shock. And both fiscal and monetary policy have been aggressive, with trillions spent and bought in an attempt of offset the impact of COVID-19...

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