The third quarter was a fairly placid one for investors, though there was major diversity in return profiles depending on what asset class, sector, or country one was invested in. In the U.S., the leading sector was clearly technology stocks, while elsewhere, Japan, Emerging Markets, and European stocks also had positive returns for the quarter. Within fixed income, the broad bond market indices slowed down and posted flat returns, though credit related sectors performed well along with other risk assets. Commodities brought up the rear in the third quarter, as they cooled off from their torrid run in the first half of the year. Summing it up, returns by asset class were mixed, but most investors in globally diversified portfolios enjoyed modest gains during the period.

With the third quarter in the books, the focus now turns to assessing prospects for the fourth quarter and beyond.

Global Economics Misfiring

Economic growth in the U.S. has been frustratingly slow, averaging an anemic 1% during the first half of 2016. While the third quarter showed some early promise of a second half pickup, momentum faded towards the end of the quarter. The good news for now is that the U.S. consumer appears to be in good shape, job growth has held up, and both interest rates and inflation are historically subdued. The bad news is that consumers still appear cautious about spending, and businesses don’t seem confident enough in the future to invest given the lack of top line revenue growth and earnings that remain under pressure.

To add fuel to the fire, world trade continues to struggle in a growth-starved world, and it’s hard to believe that exports will accelerate, considering that our trading partners are facing many of the same challenges as we are here. The bottom line is that we appear to be stuck in an odd zone, where the U.S. economy is grinding forward, but at very low levels of growth.

From a global perspective, the developed world has also been mired in what feels like a perpetual slump. Japan has flat lined, Europe is hovering around 1.5% levels of growth, and while emerging markets have stabilized with commodity prices, many are also levered to exports that are dependent on stagnant growth within the developed world.