(New York)

The market is doing what everyone hoped it would. Just as the big losses of the last few weeks saw both stocks and bonds falling at the same time, both markets are now rising in unison. Stocks rose strongly on Friday and are up on positive news out of China today, while bond yields are also falling. China had its biggest trading day in three years as the government announced it would support the economy following the slowest economy growth in nine-years.

FINSUM: One thing to watch in Treasuries is that there is such a supply of them right now that demand itself is starting to negatively affect the bonds. Therefore, it is not just the Fed and rates weighing on Treasuries, but the sheer volume that the market is having trouble consuming.

(New York)

One of the questions that not many are covering is how preferred stock will behave as interest rates rise. Preferreds have been seeing their dividend yields rise as investors have shed Treasuries and exited some preferred-focused ETFs. Some preferreds from prominent companies like JP Morgan and Bank of America are yielding 6%. The largest preferred ETF, PFF, currently yields 5.8%. “We’re incredibly constructive on the market now”, says a preferred fund manager at Nuveen.

FINSUM: Remember that preferreds have a major credit component to them and that issuers are not obligated to pay dividends like they are on bonds. However, corporations take doing so very seriously, which means you can often get junk-like yields from good companies, all with significantly less risk. That said, rates rising will probably spark some further losses.

(Washington)

In what seemed an attention-grabbing and worrying story, it appears that the DOL and SEC rules are merging into some sort of hybrid, but not in the way you might think. Despite the DOL rule being effectively dead due to a court ruling, the DOL seems to be pressing ahead and is planning to modify its Conflicts of Interest rule to mirror the SEC’s new language in its BI rule. “It’s the DOL and the SEC trying to end up in the same place in terms of regulation”, says a senior policy official.

FINSUM: While this is not as worrying as if the SEC were trying to mirror the DOL, it does seem like the DOL is pressing ahead with the regulation. Perhaps we have not heard the last of the fiduciary rule?

(New York)

Barron’s ran an interesting article today chronicling the market views of famed investor Leon Cooperman. The legendary hedge fund manager argues that investors should stay away from bonds, but that stocks are “fundamentally cheap”. “My world is cash and stocks … I think bonds are the bubble”, says Cooperman. He argues that a big downturn in stocks is not in the cards because the economy “if anything, is too strong”.

FINSUM: This argument makes sense, bonds do seem overvalued. However, what if stocks and bonds are too pricey? That seems logical too.

(Washington)

Republicans are feeling a lot of heat on the campaign trail because of one of their most contentious tax policy changes. Anecdotal evidence suggests that many voters says they will vote democrat in high-tax states because of the Republican-led change to greatly reduce SALT deductions, which has sent tax bills soaring for many affluent residents of high-tax states. Democrats have promised to abolish the SALT deduction limit.

FINSUM: The interesting thing here is that the most pain from the tax change is being in felt in some of the districts that went red in 2016. For example, there are many affluent suburbs in New Jersey that are now feeling the pinch from the changes, which could, in aggregate, change the outlook for midterms.