(New York)

Gold has been surging on the back of fears of rising tensions between the US and Iran. The metal just hit $1,600 per ounce, its highest level in almost seven years. However, what is going to drive gold once all of this fear calms down? Gold has been known to spike in times of fear, but the positive effect on its price usually fades quickly. What will really drive gold is the same thing that always does: Treasury yields and their outlook. Ever since the Crisis, the relationship between gold and Treasury yields has been pretty strong. When yields rise, gold falls.

FINSUM: We don’t see a lot of upward pressure on rates right now, which taken on its own might make one think gold has a solid path ahead of it.

(Washington)

Conservatives and investors, consider yourselves notified: Bernie Sanders could very well be the next president. Bernie is jumping in the Democratic race and now looks like the frontrunner after what looked like a failing campaign just a few months ago. Bloomberg is draining votes from Biden, which is helping Bernie. He is looking very good in the first three big contests of the Democratic primary, and it looks more likely than not that he will win the bid. He had a huge fundraising round in Q4, leading the democratic field. What made his dominance in fundraising so impressive was not just the size relative to the crowded race, but the fact that his average donation was only $20, showing the scale and intensity of his support.

FINSUM: We still think Bernie would falter against Trump in the main race, but his odds for getting the bid are improving.

(New York)

The election may still be ten months away, but the whole year is likely to be framed by it, markets being no exception. With that in mind, Morgan Stanley has some advice for investors. The first thought they offer is that in this case, being reactive is probably better than being proactive. If you reflect on 2016, everyone thought that a Trump victory would hurt stocks. The exact opposite happened. In this case, don’t assume a Democrat victory would be bad. Accordingly, it may be wise to wait until the election and then allocate as seems fit at that time. The other thing to bear in mind is that a Democratic sweep could be surprisingly good for stocks. According to Morgan Stanley, ““We would expect that a Democratic sweep in 2020 could deliver the greatest impulse to the economy” because of its greater odds of bringing a fiscal stimulus than when the government is divided between parties.

FINSUM: We really like this line of reasoning from MS.

(New York)

Investors are currently afraid of the turmoil in the Middle East. The US killing of Iran’s military leader has greatly stoked tensions, and markets are worried about a war breaking out in the Middle East. Since there have been many geopolitical issues in the region in recent history, there are a lot of examples of how markets have reacted. Suntrust bank analysts summarize how the market usually reacts, saying “While it is not unusual to see short-term weakness, these geopolitical events tend to have a transitory market impact … For example, when looking at a sample of geopolitical/military events, the S&P 500 was higher 12 months later in nine of the 12 events we reviewed. The three instances where stocks were down a year later coincided with a recession”.

FINSUM: If a full on war does not happen, we expect the effects will be transitory. The other non-military issue that could cause a problem is a big supply shortage in oil.

(New York)

In a move that seems highly in contrast to its nature (or at least its “old” nature), Goldman Sachs is changing the way it reports its earnings as part of an effort to be more transparent. The bank is not doing this because of some general high-mindedness, but rather so that investors can better grasp the progress it is making in its various divisions, including in consumer finance. That area includes its new consumer savings and online lending unit—Marcus—as well as its new credit card venture with Apple.

FINSUM: This seems like a smart play and we could see this as a catalyst for Goldman to break out of its long-term stock stagnation.