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?
1. Small and mid-caps have participated as of late but have a long way to go to catch the big boys…
![small caps](https://blog.investbcm.com/wp-content/uploads/2020/10/10.12-Small-and-mid-caps-have-participated-as-of-late-but-have-a-long-way-to-go-to-catch-the-big-boys....png)
Source: The Chart Store, from 10/12/20
2. The U.S. trade deficit is now at the highs of the “great recession”…
![trade deficit](https://blog.investbcm.com/wp-content/uploads/2020/10/10.12-The-U.S.-trade-deficit-is-now-at-th.png)
Source: The Chart Store, from 10/12/20
3. Fund flows are indicating risk is back in vogue. Why? With yields near zero, are investors unknowingly or blindly taking on more risk? Is 80/20 the new 60/40?
![yeilds near zero](https://blog.investbcm.com/wp-content/uploads/2020/10/10.12-Fund-flows-are-indicating-risk-is-back-in-vogue..png)
Source: Datastream, Haver Analytics, Goldman Sachs Global Investment Research, from 10/12/20
4. Even for the risk-free 10 year UST, economics 101 still applies…large increases in supply have softened prices…
![treasury actions](https://blog.investbcm.com/wp-content/uploads/2020/10/10.12-Even-for-the-risk-free-10-year-US.png)
Source: The Daily Shot, from 10/12/20
5. Have long-term (40-year +) interest rate trends finally bottomed?
![interest rates](https://blog.investbcm.com/wp-content/uploads/2020/10/10.12-Have-long-term-40-year-.png)
Source: The Chart Store, from 10/12/20
6. Commodities are trying to break out to the upside on the back of the USD’s recent ~10% decline…
![commodities](https://blog.investbcm.com/wp-content/uploads/2020/10/10.12-Commodities-are-trying-to-break-out.png)
Source: The Chart Store, from 10/12/20
7. The surge in the market weight of internet-related tech is not confined to the U.S. large caps; here is one EM index share:
![em tech](https://blog.investbcm.com/wp-content/uploads/2020/10/10.12-The-surge-in-the-market-weight-of-internet-related.png)
Source: BofA Global Investment Strategy, Bloomberg, Datastream, from 10/12/20
8. How many “cups of ambition” do you need?
![coffee addiction](https://blog.investbcm.com/wp-content/uploads/2020/10/10.12-How-many-cups-of-ambition-do-you-need.png)
Source: Statista, from 10/12/20