(New York)

The next recession has been talked about seriously for the last year or so, and discussion of it is rising now. But what might actually trigger the next downturn? The New York Times sees three possible triggers. The first is the Fed playing the economy wrong and sending the the country into a recession by being overly aggressive with rate hikes. In this scenario, 2020 seems like the doom year. Then there is the risk of the debt bubble bursting (just like the last recession), this time in corporate debt, which has seen a huge surge in issuance since the Crisis. Finally, the looming trade war could drive the whole global economy downward, sparking a major recession.

FINSUM: The corporate debt bubble bursting is a good insight, but much less discussed than the others. It is also interesting because it would be highly linked to the Fed. Maybe that is the double whammy?

(San Francisco)

Tech stocks have been through a rough patch, FAANGs especially. Facebook has been absolutely obliterated, while Netflix has had some steep falls. But is there still a bull case for the FAANGs? Barron’s says yes. Given Apple’s great numbers recently, the FAANGs have a little bit of momentum back. The core of the argument is dead simple—FANG stocks (leaving out Apple) are still growing at 35x the rate of the broader market, so it is hard not to see them rising. The article argues that the group is a generational trade that captures the growth of the internet.

FINSUM: When you get right down to it, the business models of the FANGs (lets leave Apple aside for a moment because it is a very different business) are very solid. We think investors will come around to that sooner rather than later.

(New York)

Every investor knows ETF have surged in popularity. However, one the big questions of major importance in the industry is “who owns them?”. The answer is, mostly, investment advisors. There has been a major shift in the ETF industry since the Crisis, as ETF consumption by Investment Advisors has surged as AUM in that area has grown. What’s more, that holding is rocketing year on year, with total AUM ownership in the segment growing by around $400 bn between 2016 and 2017. Brokers, by contrast have seen their total share of ETF ownership plummet, from 16% in 2007 to just 2.2% now.

FINSUM: Retail still owns the majority, but investment advisors have been the major growth driver for the segment and their influence is widening considerably.

(New York)

They had been paused for a couple of months, but in the last week, things started to change. Treasury yields once again broke above the 3% barrier last Wednesday. The number is a psychologically important and has proved a stalwart level for the yield to breakthrough. It did so earlier this year, before quickly falling back into the 2.8% range. Yields seemed to be pushed higher by a sharp rise in Japanese bonds yields following action by the BOJ.

FINSUM: Treasury yields are hard to handle right now. On the one hand, the economy looks fantastic, which should send them higher, but at the same time the Fed looks hawkish and the risk of recession seems to be rising, which would keep things in check.

(Istanbul)

Emerging markets had a rough first half to the year. Between rising western rates and a trade war, there was not a lot to be happy about in EM assets. Then, a few weeks ago, many sources were saying the bear market was over and it was time for a rally. However, investors need to stay sharp, as EM currencies are still sliding, which will lead to lower growth. Weaker currencies also make it hard to pay back Dollar-denominated debt, which could hurt credit. There are also country-specific issues, like the growing trade battle between Turkey and the US.

FINSUM: There are still a lot of macroeconomic developments moving against EMs, but to be fair, the best rallies start in the darkest hours.