Investor optimism prevails over uncertainty
Despite lingering risks, investor optimism about the near-term outlook set the tone for financial markets during the review period. The global economy seemed to be heading for a smooth landing, and the results of the US presidential election were conclusive. As a result, stock markets rose and credit spreads narrowed, easing global financial conditions. At the same time, rising government bond yields and an appreciating US dollar tightened them, pulling in different directions. Measures of risk premia and volatility ticked up in bond markets, amid signs that investors were pricing in higher fiscal and (geo-)political risks. However, the markets for risk assets mostly shrugged off these uncertainties and sentiment remained positive on balance.
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The views expressed here do not necessarily reflect the views of the BIS member central banks.