Three Themes:

Blackrock is out this week with three themes they think will shape investing in the 4th quarter.  Blackrock thinks they will be:

1. Policy limits:  "Central banks are nearing the limits of extraordinary monetary easing, as monetary policy is becoming less effective in boosting growth and additional easing measures may have diminishing returns—and unintended consequences."

2. Low Returns:  "Blackrock's  return expectations across most asset classes are at post-crisis lows, but we believe investors are getting compensated for taking on risk in equities, selected credit/emerging markets (EM) and alternatives."

3.  Volatility:  "Central bank asset purchases have smothered volatility and pushed investors to take greater risks, but we see potential for higher equity and bond volatility amid looming political risks and as the Fed presses ahead with higher rates. We expect volatility to pick up ahead of the U.S. presidential election in November, similar to previous elections. We also see bond market volatility heading higher. Rock bottom yields leave the potential for snapbacks."

My take:  Regarding policy limits I think the next move at least in the United States will be policy measures to stimulate the economy.  I think the next President is going on a spending spree regardless of which candidate wins next month.  Interest rates may rise slightly but I cannot see an increase to the point that threatens economic growth next year.  After all we're talking about minimal increases over the next 6-12 months, perhaps at worst a rise of a full percentage point increase.  However, the Federal Reserve is economic data dependent.  We were supposed to see four increases this year and will at most see two.  In terms of market returns the market is fairly valued by our work but I could see the possibility of us tacking on a few percentage points from these levels if the right set of circumstances occurs after the elections.  Finally you know I think there's a distinct possibility of a pick-up in volatility, especially through the election.  If you want to see more of my thoughts on volatility go read this.