(New York)

Alongside the rise in bond yields, investors have been pouring money into short-term bonds, says Barron’s. With rates and yields rising, short-term bonds have less rate risk. But even more, their yields look very attractive versus long-term bonds. Two-year treasury yields are now over 2.5%, versus just 3% on a ten-year note.

FINSUM: Why wouldn’t one be putting money in short-term bonds right now? They are relatively insensitive to rate hikes and are offering solid above-inflation yields.

(San Francisco)

For all the worries about tech companies and the threat of regulations, one of the best supporting points for the stocks was the strength of their underlying businesses. Despite suffering some losses in share price over the last couple of months, Facebook showed yesterday why the FANGS still look like a good buy. Net income in the first quarter was up 63% versus last year to $5 bn. Earnings per share was up 25% versus estimates. Revenue also jumped 49% versus last year.

FINSUM: Despite all the controversies, Facebook’s advertising business continues to rake in cash by the truckload.

(New York)

On Tuesday markets seemed to reverse course. Even as stocks plunged, it appeared that for the first time in recent memory, they were the asset class driving bonds rather than the other way around. Yesterday, the idea of equities taking on a life of their own seemed to reinforce itself, as stock rose modestly even as bond yields jumped higher and stayed steady above 3%.

FINSUM: This is a very tenuous time for markets. Something is definitely happening in bonds, but no one—Wall Street included—knows exactly what.

(New York)

Bloomberg has just made a bold call—they say the bull market ended yesterday. While stocks dropped sharply, 1.7% for the Dow, which basically eliminates all the progress they had made over the last couple of weeks, it is hard to say that it means the end of the bull market. The reason Bloomberg argues so is that the market has been stuck in a rut for three months, and yesterday, investors digested a dark survey which showed that Americans, on average, expect stocks to be lower 12 months from now, a sharp turnaround in sentiment. One portfolio manager from Stifel Nicolaus summarizes where the market is now, ”Investors have this understanding that equity markets are at lofty levels and we are in a low-return environment, so as the risk-free rate moves higher, even in a gradual manner, that becomes more of a competitive asset class”.

FINSUM: We are not particularly bearish, but do concede that if rates keep moving higher it is going to be hard for equities to do the same.

(Washington)

Many advisors seem to be confused about the new SEC fiduciary rule proposal, and we can commiserate. While the rule is called a new fiduciary rule, by all accounts, it really is not. While it does compel additional disclosures to clients and efforts to minimize them, it does not try to eliminate conflicts entirely. It has no best interest contract, and no capacity for clients to sue advisors they are unhappy with. It also has no uniform standard for brokers and advisors and maintains the distinction.

FINSUM: This rule is very different than many were expecting. Perhaps its biggest impact will be in reforming and restricting who can use the word broker, which in our opinion does a great deal to make the market more transparent to clients.