(Washington)

In what sounds like a classic case of “buy the rumor, sell the news”, a major Wall Street figure is arguing that as soon as the US and China reach a trade deal, the big rally in risk assets will be over. The former CEO of Cantor Fitzgerald, Shawn Matthews, argues that “Right now, it’s a risk-on mentality -- you want to be long riskier assets until you get a deal with China … When that happens you certainly want to be looking to scale back”. One of Matthews’ worries is that bond markets are following suit, signaling to him that this is a false rally. “If it was truly a risk-on world and people believed it and it was an extended trade, then you would see the 10-year start to back up. That’s a clear sign there’s some concern about what’s going on out there”, said Matthews.

FINSUM: This is quite an interesting take on the whole situation. We are going to hold off on giving our full view until we have had more time to digest, but we thought this angle was definitely worth sharing.

(New York)

Is the US headed for a major slowdown? That is the big question, especially as the economic clouds darken around the globe. The rest of the world, from Europe to China, is slowing, but the US continues to hum along nicely. So are we the last ship that is going to sink, or will the US manage to defy the tides and keep growing strongly? Looking to markets, yields around the world have fallen (including a dramatic increase in negative yielding European bonds), showing that investors are growing more bearish about the economic outlook.

FINSUM: With the Fed paused, we do not see an imminent recession by any means. We do, however, feel the US economy and markets lack a strong narrative at the moment, which makes us slightly nervous.

(New York)

Looking for the best big tech stock to buy? Look no further than Google. Alphabet, the parent company of Google, is a better deal than it seems on paper right now. Yes, it is trading for 24x forward earnings, a 50% premium to the S&P, but it has some very strong redeeming qualities. Get this—revenue growth at Google has raged from 21% to 25% per quarter for the last 14 quarters. Further, the important thing about that valuation metric above is that it does not include Google’s massive $105 bn in cash. If you strip that out, along with the loss from its “moonshots” division, and Alphabet is trading at 19x earnings—not bad for a company with that kind of growth! The stock has been beat up lately because of significantly higher spending, which has hurt margins.

FINSUM: Okay, so margins are down a bit, but the c-suite says they are investing for the future. We think this may present a good buying opportunity. We never thought we’d be talking about a FAANG as a value stock!

(Washington)

Advisors across the country are nervous about how the fiduciary rule-best interest rule saga may play out. To be honest, the situation has been growing bleaker by the week: numerous states are issuing their own fiduciary rules while the SEC and DOL both rework their original rules. This all means there is a good deal of regulation yet to come. Today, there is more reason to be sullen, especially if you are on the east coast, as Maryland has just announced plans for its own fiduciary rule. “(Financial professionals) have a fiduciary responsibility, morally, to make sure that their advice is in your best interest, but that has not been the law," said Senator James Rosapepe of Maryland.

FINSUM: State-based fiduciary rules with no federal rule, or a lighter federal rule, is just about the worst situation possible, as it will create a spider’s web of confusing and overlapping regulation with many grey areas and loop holes.

(Miami)

FINSUM is at the Inside ETFs conference in Hollywood, FL this week, and we wanted to bring you a little live coverage. Yesterday, there was a major session at the event discussing the outlook for fixed income. The consensus was that even though the Fed has paused, there is now way to tell when rates may rise again. Further, while China’s economy looks weak right now, that could turn around rapidly in the event of a trade deal with the US. Finally, all of the five panelists discussing fixed income said the ”liquidity mismatch” between ETFs and fixed income instruments is overblown and that there is not nearly as much to worry about as some think.

FINSUM: Fixed income’s outlook is murky right now. On the one hand, the Fed has paused, but on the other, rates could start rising anytime. On balance, we do think the risk-reward is slightly in favor of a shorter-duration long position.