(San Francisco)

What should investors do about tech stocks? That is a big question. After an extraordinary run over the last couple of years, things have a hit a real rough patch. Worries about regulation loom. With that said, Goldman Sachs is optimistic on some large and midsize tech stocks. One of its high conviction picks is Netflix, which is down around 30% recently. Goldman is steadfastly a believer, however, saying “We believe Netflix represents one of the best risk/reward propositions in the Internet sector”. Other names to look at from Goldman include Expedia and Etsy.

FINSUM: What we like about these three names is that they seem the least likely to be impacted by any new privacy regulations.

(New York)

Retail stocks are in a tenuous position. They thrived to begin 2018, and for three quarters rolled to solid gains. Then in the fourth quarter they got rocked despite the fact that they had been gaining momentum from healthier consumer spending and a stronger than expected holiday shopping season. So what to do? Jefferies says it is time to buy the dip, based on the fact that “The consumer is strong, Amazon isn’t killing retail, the Federal Reserve is more dovish, oil down, first-half weather compares easy, free cash flow piling up, margins are moving up and consumer discretionary stocks are cheap on absolute and relative basis”. Check out these names: Gap, American Eagle Outfitters, Five Below, Foot Locker, Kohl’s, Urban Outfitters, Under Armour, Tapestry, and Lululemon Athletica.

FINSUM: Our view is that at some point soon (has it already happened?), ecommerce and brick and mortar are going to fall into equilibrium. When that happens, it will be good for traditional retailing stocks.

(New York)

The big market rout has left no shortage of stocks trading at large discounts to their previous valuations. The important question is which ones are actually a good value given the eruption in markets. With that in mind, here are four well-known names to take a look at. They are General Motors, CVS Health, Macy’s, and American Airlines. GM and AA are trading at near 5x earnings, the latter despite a thriving business. AT&T is interesting too, as shares have fallen 20% in the last year, and the dividend has swelled to 6.7%.

FINSUM: This seems like a good chance to pick up some healthy stocks that have been heavily dented by a selloff, but are poised to recover. We particularly like American Airlines and AT&T.

(New York)

One of the most well-known finance professors in the nation, Jeremy Siegel of Wharton, says that the market looks sets for a great stretch. The catch is in order for that great run to happen, we need to avoid a recession. According to Professor Siegel, “My feeling is that the market is virtually positioned for a mild recession, but I just don’t think that it’s going to happen … If we avoid a recession, we’re going to have a really good market”. He continued “I think we swung too positive last summer and now I think we’ve swung too negative”. Siegel believes that if a recession does hit, the market is in for another 5-10% fall.

FINSUM: We would have to agree. This selloff, which has corresponded with great earnings in 2018, is basically a recession already being priced in (maybe not quite), so if the recession never comes, at some point there is going to be an “all clear” rally.

(Beijing)

Happy new year—the Dow opened down 350 points this morning on fears over a Chinese slowdown. New data is out of the country which shows that Beijing’s manufacturing sector is contracting, a sign that tariffs may be flowing through to the economy. That makes markets hope more than ever for a trade agreement between the US and Beijing, which would likely alleviate the economic strain. The S&P 500 has fallen 20.2% on an intraday basis, an official bear market.

FINSUM: The implications of a big Chinese slowdown are serious. Firstly, how does the country react politically to what they likely view (or will project) as a US-imposed slowdown? Secondly, how much does the slowdown drag down the global economy?

(New York)

If you are a fan of behavioral economics and the way investor psychology impacts the market, then there is some interesting new data to look at. The amount of people searching the internet for “recession” and “bear market” has been spiking. People have been increasingly searching for such terms and their level of searches has hit its highest since 2008. Tweeting activity on such topics has also nearly reached a new peak in records going back to 2010.

FINSUM: This may seem like statistical noise, but when you consider that millions of Americans are calling their advisors in a panic, you can start to see how such concern starts flowing through to indexes.

(Washington)

If that headline sounds like relief to your ears, read further. While there are no clear signs out of the Fed yet (other than increasingly dovish talk), new data is showing that the Fed may cut rates in 2019. The forward spread shows that traders are anticipating a rate cut at the beginning of the year. Two-year Treasuries have seen their yields slip below one-years’. This is the first time this has happened since 2008. According to a market strategist at Pimco, “This is a crystal ball, it’s telling you about the future and what the market thinks of the Fed and what it will do with its policy rate”.

FINSUM: We don’t think the Fed will cut in the first quarter unless something more drastic happens, but we are quite sure they won’t hike.

(New York)

Some investors may be breathing a sigh of relief this week alongside the huge rally. The massive gain of 5% earlier this week was the biggest single day gain since 2009. However, taking a broader view, such major gains have usually mean the market is in deep trouble. To give some context, every comparable rally in stocks since 1900 occurred during the bear market of 2008-2009. Overall, it was the 9th time the market reversed an intraday move of at least 1 percent this quarter. That is the most since the US downgrade in 2011.

FINSUM: In itself, we think the rally means precisely nothing for markets. Investors’ emotions are whipsawing all over the place and the market is yet to find solid footing behind any positive narrative.

(New York)

While the stock market is getting all of the attention, the bond market is experiencing a lot of turbulence as well. The riskiest corners of the debt market, including junk bonds and loans, are on pace for their worst month since the US downgrade in August 2011. High yield’s spread to Treasuries has surged a whopping 110 basis points since the start of the month, and unlike in stocks, there aren’t signs of a rebound. The average yield on the index is 8%.

FINSUM: It is reasonable to be nervous about credit right now given the huge volume of issuance in recent years and the pending threat of a recession and accompanying earnings slowdown.

(New York)

2018 was a tough year for most income investors. Rates rose considerably, making the dividend yield of the market look rather poor compared to many other short-term assets. Strong corporate dividend hikes helped, but the big question is what will happen in 2019. Most analysts think the pace of dividend hikes will slow, but so will the pace of rate hikes, meaning that income stocks seem likely to do well. Dividends rose 9% this year and are expected to rise 6% in 2019.

FINSUM: Goldman says that financial firms will raise their dividends by 16% in 2019, more than any other sector. Perhaps that is a good place to look.