The temporary pause in the long bond bull may be close to over. While phase one of the recovery proved that fiscally supported incomes can fuel spending on goods, we shouldn’t fall for looking backward to see what’s happening now and in front of us. Phase two of the recovery is significantly slower, with muted employment gains and reduced fiscal aid weighing on incomes. Plus, a worsening Covid outbreak is once again limiting activity. The US health situation is going from bad to worse, and this will have important consequences on economic activity in coming weeks, especially in the absence of additional fiscal stimulus. Household income is gradually falling back as fiscal aid no longer offsets the 10 million jobs shortfall relative to February. In this environment, the recovery’s fragilities are becoming apparent. While lower-income families drove the rebound in consumer spending during the recovery’s first phase, they’re likely to cut back if the second phase doesn’t feature as much, or any, additional fiscal support in the form of government transfers. Such a pullback would predominantly constrain retail and holiday sales. The slowing economy will restart the bond bull in earnest.