(Houston)

Oil lost big time over the last few weeks and entered a bear market late last week. However, it is surging today as new hope of an OPEC output cut has come to light. Saudi Arabia, the leader of OPEC, says OPEC is willing to consider another round of output cuts as a measure to keep prices high. The last time OPEC agreed to a round of cuts, the market was pulled out of its deep bear market and more than doubled in price.

FINSUM: We used to be skeptical that OPEC could pull off a coordinated cut because of the competing interests of members. But the success it saw last time around means no one should doubt it.

(New York)

Here is a mundane but important question: what is the best single fund to track the whole market? There is now a wealth of options, from Fidelity’s free index tracker all the way to popular, but more costly SPY. The answer to this question is not as straightforward as one might think, as each of the funds has its own characteristics. For instance, while Vanguard’s VTI is popular, it has a quirky structure that can boost unrealized gains. It is also harder to trade without fees. Fidelity’s zero fee index mutual fund is a good choice, but only available on its own platform. Blackrock’s ITOT might be the best choice overall when considering fees, performance, and availability.

FINSUM: For being considered “vanilla”, there certainly are a lot of different flavors of index tracker these days.

(New York)

Advisors have probably started to see some discussion of so-called “opportunity zone” investing. The idea of the concept is to invest in designated “opportunity zones”, which are economically depressed areas, and reap benefits. But the real opportunity is in the tax treatment of such investments. Barron’ sums it up this way, saying “How significant? If you roll the capital gains from the sale of anything—your home, shares of Amazon.com , a Modigliani—into a “qualified opportunity fund,” and hold for 10 years, you get to defer paying capital-gains tax until the end. Then you’re taxed on just 85% of the original investment, and 0% on any money generated by that initial money”.

FINSUM: This is a very good plan for people who don’t need the immediate liquidity associated with some asset sale and want to defer a lot of capital gains. There are several firms that are setting up special funds just for this new purpose.

(Washington)

In what could be a very worrying sign for the industry, it is being reported today that the SEC may be inserting the word “fiduciary” in its new best interest rule. The word had been conspicuously absent, much to the chagrin of DOL rule advocates. However, the SEC’s own advisory committee now says the word should be included. The SEC’s Investor Advisory Committee saw a majority vote for the inclusion of the word and a fiduciary standard to be applied, something the SEC had diligently avoided until now. The Committee voted 16-3 in favor of the changes.

FINSUM: This seems very likely to now be included in the new rule. Does that mean it should no longer be called the BI rule, but the SEC Fiduciary Rule?

(New York)

The market had a relief rally right after the election results came in. Yesterday wasn’t so good. The big question on everyone’s mind is where the market is headed from here. Looking historically, the current political arrangement (split Congress, Republican presidency) is the worst for markets. The S&P 500 has had the lowest returns in the current political set up, though it has only occurred four times since 1900.

FINSUM: The market’s outlook for 2019 appears fairly bleak to flat for us. The main reason why is that there won’t be another major tax package, and the great earnings of this year will make 2019 comparisons look weak. Growth is also likely to slow.