(New York)

The stage was set for Goldman to knock it out of the park. JP Morgan had just released the best US bank earnings ever and other banks were looking strong heading into earnings season. Goldman has a new CEO and has made big changes to its business. It felt like this might be the start of a new era for the bank signified by some great earnings. Instead, it all fell flat. Goldman’s net income fell a whopping 26% and missed earnings per share estimates by a mile. That said, revenues did rise 23%, but litigation costs hurt the bottom line.

FINSUM: It wasn’t meant to be this quarter, and don’t be fooled by the big revenue growth as it mostly came from a huge surge in fixed income revenue, which is not sustainable quarter to quarter.

(Washington)

Rollovers are one of the key areas of focus for advisors within the new SEC Best Interest rule (“Reg BI”). This is not just because of their importance for advisors generally, but because there was still a good degree of uncertainty over how the new rule would be applied to the area. Recent edits to the rule clarify its application, and the results are likely to seem a little unfavorable, as they are more strict than previously. In the past, rollovers were only subject to Rule 2111 if securities were to be bought or sold in the plan. This left a bit of wiggle room. However, the new Reg BI has been modified and Rule 2111 now applies to any situation, regardless of whether securities are involved. Thus, rollover recommendations by broker-dealers are now completely governed by the best interest standard in all scenarios.

FINSUM: Not unexpected, but many were hoping for more flexibility. At least there is now confirmation.

(New York)

Ban of America says it is a very good time for investors to buy TIPS, or Treasury Inflation-protected securities. The bank thinks inflation expectations are going to rise this year and they are bullish on long-dated TIPS. The call is notable as many fund managers lost money with similar bets after the Crisis, when many thought inflation would jump alongside QE. This time may be different as the Fed has explicitly said it would let inflation run hot to compensate for the slow inflation we have had for the last decade.

FINSUM: We just don’t see inflation rising much in the near term. There are still a lot of worries about the economy. We feel like 2019 would have been the year for big inflation worries/rises, but it didn’t materialize.

(New York)

If you are looking for dividends in this low rate world, you still have some good options. What about dividend growth stocks? They can be a nice investment in a low rate market, but where to look? Healthcare and tech stocks look like a great place. Analysts think dividends in those sectors will rise 10% and 9% respectively, handily outperforming dividend-focused sectors like utilities and REITs. Healthcare looks particularly healthy. Check out Abbvie (5.3% yield), Gilead 3.9%), Pfizer (3.9%), and Eli Lilly (2.2%).

FINSUM: Profits in healthcare have been ballooning and executives seem to be quite focused on returning money to shareholders.

(New York)

There is big risk to the muni bond market that you are probably aren’t thinking about. That risk is how increasingly frequent weather-related calamities are befalling US cities as the climate changes. The market is already starting to price these risks, and according to BlackRock, many current muni bond issuers could see 1% knocked of their economic output. According to the head of muni bonds at BNY Mellon, “The risk has been identified by market participants … Looking at the severity of storms picking up . . . it will start to be factored in”. When choosing bonds, investors need to start demanding or checking on plans from issuers. “What plans are they making? Are they hardening their infrastructure . . . are they trying to insulate central services? If they’re just stating the obvious, that’s not sufficient”, says BNY Mellon.

FINSUM: This is an important consideration for all those that hold munis. Think of the weather-related calamities that have happened lately and consider the implications (e.g. Houston).