Market conditions have generally improved in recent months, with government bond yields remaining low, corporate bond spreads almost back to their pre-coronavirus levels and the FTSE 100 recovering almost half of its 33% slump in February and March. And we think that there is scope for the FTSE 100 and the pound to rise further this year due to a continued return of risk appetite as the economy recovers from the coronavirus crisis, and monetary policy remaining ultra-loose. However, the renewed sell-off in global equities highlights the downside risks. Indeed, a resurgence of the virus, a disappointing economic recovery, or the Brexit transition period ending without a trade deal would mean that equities and the pound make little progress, and perhaps suffer renewed falls.
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