Like the election, the path forward on additional stimulus funding remains TBD. Though the initial $1,200 direct payment helped many pay off debt and gave a temporary boost to disposable income and savings, the glow is fading. The housing market is also feeling the effects of the pandemic era with surging demand, climbing home prices, and a looming rent crisis that has millions facing eviction. And could signals from the manufacturing sector and a look back at 2016 indicate that higher yields may finally be on the horizon? The FOMC kicked off their first post-election day meeting today, but they’ve already made their stance on rates clear…

U.S. equities appear to be growing nervous ahead of the election—the S&P 500® Index suffered its worst week since March and fell nearly 6% last week—but could the dip leave them with more room to grow? Surprise earnings beats are at historic highs, though they are aren’t being rewarded in the typical fashion—investors seem aware of just how difficult a job analysts were tasked with in 2020’s unprecedented landscape. Over in the bond market, could higher yields finally be on the horizon?

U.S. GDP rose 7.4% in Q3—a record 33.1% annualized rate—but it still has a lot of ground to cover to break even after Q2’s historic 9% drop. That may be difficult as Covid-19 rates set records across the U.S. and nearly 23 million Americans remain dependent on unemployment assistance. Meanwhile, the tech giants reported strong earnings yesterday, but could the sector soon run into some issues reminiscent of the Y2K era? And as equity volatility ticks up, traditional diversifiers are offering less support. Will the trend continue as earnings season rolls on?

Economic activity in the Midwest has taken a hit as Covid-19 spreads across the U.S. at its fastest pace since the onset of the pandemic; the Chicago Fed National Activity Index came in at about a third of the expected result in October. Consumers are continuing to curb spending in response to the pandemic and while that’s likely contributed to the boost in average FICO scores, it also poises significant deflationary risk. Earnings meanwhile have offered some pleasant surprises—S&P 500® Index earnings beats are coming in at a record pace—and this comes among a season where the ratio of guidance coming in above consensus verses below is also at record highs. Does this bode well for Q4, or will performance be undercut by the lingering—and accelerating—threat of Covid-19?

The U.S. saw continued growth in both the manufacturing and services sectors in October according to the preliminary Markit PMI report. The services sector, which has been slower to recover in the wake of the initial Covid shutdowns, exceeded forecasts to come in at 56.0. Despite the strong growth from manufacturing though, the U.S. trade deficit with China has reached an all-time high, as have Chinese exports to the U.S. And in a big week for earnings—about 30% of the S&P 500® Index reports this week—we’re seeing once again how performance can diverge dramatically from earnings. Are we poised to see more of the same this week?

The manufacturing recovery may have slowed in September, but we’re still seeing some good numbers from the Kansas City Fed and other regional indices. Covid-induced changes to the workforce remain a major concern as laborforce outflows, hour reductions, and stimulus uncertainty weigh on consumer confidence, which has ticked down amid an apparent third wave of infection. The markets are also feeling the effect of prolonged stimulus negotiations, as well as growing political uncertainty as the election approaches. How have markets historically reacted during election season?

The battle over stimulus continues in Washington as many Americans grow increasingly reliant on savings and other non-paycheck measures to cover expenses amid the accelerating shift from temporary to permanent layoffs and the expiration of the Paycheck Protection Program. Over in the equities market, new offerings are outnumbering buybacks for the first time in a decade and the U.S. Net Equity Supply is growing—thanks in large part to the recent IPO boom. And though the yield curve is inching toward “normal,” the situation is complicated by uncertainties around stimulus measures and the Fed’s capacity to cope, given that their ownership of the Treasury market is already at record highs.

American consumers have returned to the retail space with far greater swiftness than expected—September sales growth came in at more than double the Dow Jones consensus estimates—but they may not necessarily be “buying American.” The U.S. trailing 12-month trade deficit has soared to ~$3.12 trillion, enough to put even 2008 to shame. And though we’ve seen some recent signs of strength from the manufacturing sector, the recovery looks to be plateauing. That’s not the case for negative-yielding debt though, which has returned with a vengeance. Is the fixed income space poised for more struggles?

The Philadelphia Fed manufacturing index surged to 32.3 this month, its highest reading since the onset of the Covid-19 crisis, more than doubling both the expected figure and September’s reading of 15. Manufacturing growth has also continued in the New York region and is projected to surge further globally over the next few months, but the services sector is still facing serious struggles. Public debt has surged to historical highs in 2020 and, though it’s yet to spark significant inflation, its presence is sure to be felt in the bond market. And as second (or even third) waves of infection take hold, are global economies prepared to cope?

U.S. CPI grew 0.2% in September—its slowest pace in four months—to 1.4%, directly in line with expectations but again short of the Fed’s 2% target. Still, it’s a rosier picture here than in Europe, where core inflation looks to be cruising downward toward zero. And we’ll say it again: the bond market is under threat. As corporate debt soars, credit risk is climbing, and net issuance is poised to approach record highs. What’s more, bankruptcy filings don’t typically peak until 5-6 quarters after a recession, so these struggles aren’t likely to disappear as quickly as we might hope. Do you have a plan to meet return goals if yields continue to disappoint?