Two key themes have driven financial markets in 2019: the drag on economic activity and risk assets from trade tensions (our “protectionist push” theme); and a dovish pivot by central banks that has supported the expansion (“stretching the cycle”). What lies ahead? We believe these two market drivers may be testing limits over the next year.

Equity markets rose again last week, as investors continued to focus on the positives. The possibility of more progress on the trade front, improved manufacturing readings, decent third-quarter earnings results and accelerating corporate deal activity all helped stocks to rise for a fifth straight week.

The US unemployment rate is worth singing about, with the widely followed and reported upon Household Survey Unemployment Rate (also known as U3) coming in at 3.6% in October, up ever so slightly from its 50-year low of 3.5% in September. For those who question how representative the Household Survey Unemployment Rate is of today’s US labor market, we would point you toward the  less widely followed and reported upon but much more comprehensive U6 unemployment rate, also known as Total Unemployed, Plus All Marginally Attached Workers Plus Total Employed Part Time For Economic Reasons, As A Percent Of All Civilian Labor Force Plus All Marginally Attached Workers.

U.S. Treasury yields rose sharply last week, led by longer maturities.1 Investors reacted to speculation that U.S./China tariffs may be rolled back, and Treasury yields made their biggest jump for the week on Thursday.

The domestic equity markets returned to a more risk-on posture from the more defensive tone of the previous month. Interest rates were cut for a third consecutive time, planned tariffs on Chinese goods were postponed, and Brexit was delayed for another three months.