(New York)

Market breadth has not been very good this year. In fact, it has generally been terrible. Tech stocks have delivered virtually all the gains. However, one bright spot in this uneven landscape has been healthcare shares, and that seems likely to continue. According to Barron’s, “Positives in the sector include attractive valuations, upward earnings revisions, share buybacks, and policy tailwinds”. Drug price pressure is still a concern for pharma companies, but right now things look strong, with over 90% of companies in the sector beating earnings forecasts.

FINSUM: We will be honest in saying that we do not have much expertise in the sector, but demographics also seem to be a supportive factor for the long-term investor.

(New York)

One the biggest and most conservative asset managers on the street has just put out an ominous warning to investors. Vanguard has just told investors that a near term recession (by 2020) is looking more likely. The asset manager is worried about the flattening yield curve and rising credit risk for sub-investment grade bonds. Vanguard says the odds of a recession in the next six months are 10%, and 30-40% by the end of 2020. The comments are unusual for Vanguard, who has stayed positive on the economy and is usually very conservative in calling markets and the economy.

FINSUM: Our own view is that the chances of a recession by the end of 2020 are much higher than what Vanguard is calling for.

(Washington)

Any advisor will know that the SEC’s new Regulation Best Interest has been under serious fire for the last couple of months. While it initially had a relatively warm reception from industry, brokers have railed against it more recently. Now, state attorney generals are mounting a furious push. The AGs of 17 states have come together to denounce the rule and demand a revision that mirrors the standard laid out in the old DOL rule. Specifically, the groups wants Reg BI to hold broker-dealers to the same standard as RIAs.

FINSUM: The SEC probably won’t do anything about this now, but this sets the stage for a major legal challenge before the rule may actually be implemented.

(Istanbul)

Investors may be watching the markets anxiously, and with good reason. Turkey is in the middle of a full blown financial crisis, and the threat of it leaking into western markets via European banks seems tangible. Emerging market stocks are down 18% from their peak in January and there is pressure on other EMs like South Africa, China, Russia, and India. However, the worries over a full-scale emerging markets meltdown seem overdone, especially considering the economies of EMs are actually quite strong and healthy at the moment, which should keep things from falling into dire straits.

FINSUM: EMs currently have good currency reserves and many are running budget surpluses, so they are not entering this period of turmoil in weak shape.

(New York)

If you are a gold bull, this has been a really rough period. While gold has been weakening for years (relative to the market), the last several weeks has been particularly concerning. Despite all the turmoil in global markets that has come alongside Turkey’s financial crisis, gold just hit its weakest level since March 2017. Further, despite many panics in markets this year, gold has fallen 9% and has not gained from its reputation as a safe haven. The rising strength of the US Dollar has not helped gold’s prospects.

FINSUM: Gold is down to around $1,200 an ounce despite all that has happened this year. If the bear market had not been going on so long, it would almost seem like a buying opportunity, but rising rates and a rising Dollar are strong headwinds even if fundamentals changed.