(New York)

Goldman Sachs has been pushing into a lot of new business lines over the last few years—consumer lending being the principal one, as well as further into wealth management. However, the company is in the midst of launching yet another—business banking. The bank is working on a suite of tools for large businesses to use, such as deposit accounts, cash management tools etc. The move is seen by some as an odd one, as such services are dominated by huge-balance sheet integrated banks, such as JP Morgan and Citi.

FINSUM: This could become a good business, but it is not clear that Goldman has any strategic advantage to gain market share.

(New York)

While there are a lot of concerns about the bond market right now, one of the risks that is being ignored is credit quality itself. Well, there might be a bomb set to go off in credit. In particular, there appear to be major risks in the Triple BBB category of bonds. This group is considered investment grade, but only just so. There are currently $2.5 tn in US debt with this rating, double the level of five years ago, according to Morgan Stanley. MS says that in a downturn, investors may abandon this type of debt, raising rates for the borrowers, and in turn exacerbating the economic contraction. All of which seems likely to hurt the stock market.

FINSUM: This part of the bond market is so huge, that an exodus from this area would greatly wound the economy.

(New York)

We at FINSUM have been keeping a close eye on the economy, and in particular, looking for any signs of the end of the current business cycle. Today, we might have found one. One of the big worries of economists and investors of late has been the slowdown in consumer spending—a concern in its own right, but not conclusive. Today, we might be seeing why. Lenders all over the US have been tightening their businesses and lending out less cash. That has left less money available for purchases. From 2011 through the end of 2016, credit standards had loosened, but since then they have tightened, even as wages have grown and unemployment has fallen.

FINSUM: This decline in lending seems to show that many lenders think there is more risk than reward in the economy, which may in turn bring on the recession they sense is coming.

(San Francisco)

Tech has been doing very poorly lately. Between the heat on Facebook and the growing threat of regulation to Amazon and other big tech companies, things look bleak. However, they may not be as bad as they seem. The reason why is two-fold. Firstly, many experts think any tech regulation won’t be hugely disruptive to the industry. Secondly, the underlying businesses look strong and the worries about regulation have not really dented earnings expectations. All of this leads many to believe that the whole selloff is overdone and things will blow over.

FINSUM: We can’t see any major tech regulations coming out that would really dent the industry, so all else equal, we do think the selloff might be overdone.

(New York)

Barron’s put out a very troubling article today. The piece contends that even great earnings are not going to save the current market rout. The reason why is two part. Firstly, worries about the broader economy, and things like regulation of tech, are overwhelming the influence of strong earnings. But secondly, markets have seen these good earnings coming for a year, and have already priced them in. Therefore, strong numbers’ influence on investors is weak. In fact, the good earnings are more of a risk than a boost at the moment, as any underperformance could cause a big bout of selling.

FINSUM: This makes perfect sense to us. Everyone has seen these earnings coming from a mile away and has been betting on them for a year. They definitely have more risk than upside right now.