We have a pro-cyclical market outlook through the first half of next year. We expect yields to trend higher (albeit at a slow pace), the curve to steepen, and TIPS breakevens to widen…

 …Look for more realized volatility surrounding those trends initially and as the market digests the current COVID-19 wave and implications; but, look for those trends to turn more linear thereafter.

 Look for 5-year note backups to struggle to move through support in the 0.40-0.50% area, while the 30-year bond can potentially cheapen to support at 1.90-2.065% by midyear...

 …We think the 5s/30s curve releases through 130bp resistance into the early part of the year, extends to next resistance at 138-142.5bp, and has the potential to stretch as far as 155bp.

 10-year TIPS breakevens are likely to see more backing and filling below 180-185bp resistance, and then eventually break toward the 200bp area into early 2021.

 After one of the sharpest and shortest recession-driven bear markets in history, we expect the S&P 500 Index rally to extend next year. More importantly, we look for a pro-cyclical rotation to dominate the equity market narrative…

 The S&P 500 Value Index pattern breakout and reshaping of the OIS forward curve marked an important sentiment shift in our view, which followed the positive vaccine headlines in early-Nov. The technical developments added conviction to our view that the Value/Growth ratio had been forming a mediumto longer-term reversal pattern through the summer and into the fall…

 …Look for a breakout from that ratio base pattern into 2021 to confirm the trend reversal, which we expect will lead to a multi-month and even multi-quarter period of Value, Cyclicals, and Small Cap leadership.

 Given the sector weighting and correlation to the style index performance, Financials will likely have to take leadership position. We think that is a likely outcome despite the constrained nature of the Treasury bear market in the first half of 2021, especially if bond price action is a function of easy monetary policy.