As we move off the S&P 500® Index’s best week since July, small and mid-caps remain down year-to-date but have gained significant ground in recent weeks. Risk appetite appears to be growing among investors—perhaps unsurprising in a historically low interest rate environment—and we’re noticing a couple of potential trends in yields, but time will tell if they’ll bear out and/or how long they’ll last. Finally, the USD’s recent weakness—it just fell to a 17-month low against the yuan—is giving a boost to commodities. Could it be enough for them to break out from a nearly decade-long downward trendline?

The recovery is rolling on as we enter Q4, but momentum has slowed significantly. Employment in particular looks to be plateauing—another 840,000 Americans applied for first-time unemployment benefits last week. Central banks are struggling to spark inflation, and businesses in need of funding have been issuing a massive wave of new debt. High yield fund flows are elevated, but with corporate bankruptcies brewing and U.S. insolvencies projected to hit 57% in 2021, it could prove a risky prospect.

Global manufacturing growth has staged a massive recovery to hit a ~2-year high, but cost cutting in other nations is causing a headache for the U.S. as the trade deficit surges to $67.1 billion—its highest level in 14 years. As the debate (and messaging) around additional stimulus measures wears on, federal and local government debt has already soared to historic heights and is raising concerns about both inflation and a potential oversupply of muni bonds. Over in Europe, a second wave of infection has taken hold and already dealt a blow to the Eurozone services PMI. Could this further erode the region’s already-shrinking share of global GDP?

Jobs are still coming back, but at a slower pace. Approximately half of the jobs lost since the onset of the pandemic have been recovered, and—while not exactly forming a full V (we see more of a checkmark)—are returning at a significantly faster pace than in past periods of significant losses. State and local governments have seen massive losses to tax revenue in 2020 in a development that could spell trouble for muni-bond investors. And while 10-year UST yields may look strong from a certain angle, the trend likely isn’t sustainable. Do you have an alternative in place?

Personal spending climbed 1.0% in August, though spending on services is still lagging. The trade deficit has widened in 2020, bucking the typical pattern from past recessions as the U.S. suffers a 10.1% decline in real GDP. U.S. equities have outperformed the global market since 2012 with large-caps leading the charge, but fixed income yields are continuing to disappoint. Is it time for corporate DB plans to consider GTAA as an alternative?

Economic reopenings are rolling on—NYC welcomes back indoor dining today—but small businesses are still struggling. 43% of those surveyed reported seeing revenue more than halved since the onset of the pandemic, and it’s being reflected in their employment numbers… which are very reminiscent of 2009. But how does the broader employment recovery stack up against previous recessions? Meanwhile, S&P 500 Index companies look to be feeling optimistic on the earnings front as we close out Q3, and October and November have historically been strong months for the index. With political tensions ratcheting ever-higher ahead of the election, will the trend continue?

Americans—particularly those with higher credit scores—are paying down credit card debt at a record pace in 2020, but could that spell trouble for consumer spending? Equity funds saw significant (re: $25 billion+) outflows last week in what could indicate weakening confidence in a rebound. Over in the bond market, high-yield funds also saw massive outflows last week, and bond indices have outperformed the S&P 500® Index year-to-date. But with rates at record lows, is the trend likely to continue?

While some employers are rehiring and the total number of people receiving unemployment benefits has ticked down, weekly new claims have yet to fall below 1 million since the onset of the pandemic. And as VIX futures climb on election nerves and news that the DOJ is seeking to weaken legal immunity for tech giants like Facebook and Google, tech remains positive month-to-date—even after recent losses. Finally, as yields creep ever lower to hit multi-century lows, junk bond sales have gone through the roof and set new records. Will investors get crushed by an approaching wave of corporate defaults that’s projected to surpass 2009?

As Fed Chair Jerome Powell and Treasury Secretary Steve Mnuchin’s testimony on the economic recovery continues today, we see that momentum is slowing—though the manufacturing sector is still showing signs of strength. Equities have also eased off the gas and appear to have hit a long-term resistance level—will it hold? Finally, though we might typically expect to see small caps outperform during this phase of the economic cycle, anemic earnings and historic leverage during the coronavirus era have contributed to ongoing weakness. Will the trend continue into 2021?

Momentum looks to be slowing for the economic recovery, though leading indicators still see growth on the horizon. While the housing market doesn’t look to be mirroring the days of the Great Recession, Hedge funds are revisiting a trend from the era and currently hold the largest net-short position in Nasdaq 100 futures since 2008—could it be a sign of trouble ahead for the recently battered index? And as commodity prices climb—with many possible indications—we’re again seeing how plummeting yields are forcing bond investors to take on more risk for less return.