(New York)

The market has been very bearish lately, with last week seeing the worst declines for the S&P 500 since march. The market fell 4.6% last week. This may seem like just another bout of volatility, one in a series we have had this Fall. However, the market’s fear gauge, the VIX, suggests that this selloff is different. The VIX just recently hit levels close to during October’s rout, but what is different this time is that it has sustained its momentum in a way that hasn’t happened since 2016. “This shows that unlike October, investors no longer see the market correction as a temporary dislocation, but rather driven by more persistent macro risks”, says Credit Suisse.

FINSUM: The market is continuing to reflect a comment we made yesterday—that the problems plaguing stocks are not simple to resolve, so is easy to see how prices could continue to fall for some time.

(San Francisco)

There has been a lot of momentum flowing against tech stocks right now, and especially the FAANGs. Facebook has taken a great deal of the pain, with numerous headwinds facing shares. However, the reality is that the company has a very solid underlying business, and the recent volatility means it also has an attractive valuation. According to Deutsche Bank, “We continue to view Facebook as the best risk/reward in large cap internet given the potential for core Facebook engagement to stabilize … and given the extremely attractive current valuation”.

FINSUM: Facebook has been going through a very rough period over the last year, but the negative news cycle is going to abate, and when it does, the stock seems likely to gain.

(New York)

Retail stocks have seen management boost outlooks recently, but that hasn’t helped prices, which have been falling to end the year. However, despite headwinds in the sector, there are a handful of retailers that look likely to see good performance in the near term. Those stocks are Ulta Beauty, Target, and Kohl’s. All three stocks are up for the year but down big in the fourth quarter. One stock analyst summarized his views this way, saying “We like these three stocks given the strong underlying consumer, not easily replicable product assortments, digital investments and innovation”.

FINSUM: These are very consumer-staple oriented, which we think is a good choice for the currently tenuous market environment.

(New York)

Something very odd is happening at both the DOL and SEC. Ever since the fiduciary rule was killed by the courts earlier this year, a renewed sense of purpose seems to have washed over both agencies. While many thought complacency and a light hand would be the guiding approach of both regulators in the Trump era, somehow the opposite has happened. Now, industry lawyers say both regulators are pursuing enforcement at “epic levels of tenacity”. The focus has increasing been on the 401(k) business, but attention and activity has expanded across the board.

FINSUM: When the DOL declined to push its rule further, and the SEC stopped short of using the word “fiduciary”, most somewhat suspected there was going to be a lighter touch approach. Something has really changed.

(New York)

Banks are usually the last ones to forecast a recession. Saying things are heading south is usually not good for business. However, despite this a slew of major banks, including Goldman Sachs, JP Morgan, and BofA, are all saying that the risks of a recession in 2019 are rising. While they are still loath to say a recession will happen next year, JP Morgan just increased the odds considerably, saying there is a 35% chance. In March they said it was just 16%. Jobs data has just started to weaken, which is a warning sing, and the yield curve has begun to invert, another indicator of trouble ahead.

FINSUM: We know a recession is on the way, but the timing is the tough part. Our best bet is towards the end of 2019 or Q1 2020.

(New York)

This market is going against all precedent. December is usually a strong month for stocks, with momentum usually dominating trading. However, everyone knows this month has been brutal, continuing the strong volatility and losses that have plagued the market since October. The same old problems are dogging the market too—rising rates, a trade war, and the threat of recession. What has really gotten worse is that part of the rate curve has inverted, which seems to have really spooked investors globally. Last week the S&P 500 saw it worst performance since March, falling 4.6% for the week.

FINSUM: Here is a question for our audience: what is going to stop this market from falling? There are so many factors pushing the market down, none of them easy to resolve. This makes us worry that there is no floor on prices right now. Even the Trump-Xi “truce” didn’t save things.

(Brussels)

So far Brexit has been the complete mess everyone expected. The whole deal looks like it is hurdling towards a chaotic no-deal departure. Parliament looks very likely to reject PM May’s deal, a vote on which she has delayed in order to save face. However, the EU has just extended a major olive branch by virtue of its judiciary. The top EU court just ruled that the UK can unilaterally back out of Brexit at any time despite the fact that they have formally enacted Article 50, or the official leaving process from the EU.

FINSUM: All they have to do is hold a Parliamentary vote or second referendum and this whole mess would be over. IT is a long way from something that simple happening.

(San Francisco)

Amidst all the gloom gripping the markets, there have been a handful of positive publications about 2019. One of them was just put out by Nomura. The bank published a list of 5 tech stocks that might surge in 2019. The call is an ambitious one given the trend of how tech shares have been going. The shares are not all FAANGs either, which makes them more interesting. With further ado, the list is: Google, Amazon, Salesforce, Broadcom, and AT&T.

FINSUM: Amazon seems like a good call to us, especially after its recent declines. The company is going to see increasing margins as it consolidates its dominant position and earns more recurring revenue. Salesforce is also an interesting business.

(Washington)

Markets plunged on Tuesday, at least partly because of fears over the fragility of the US-China truce on trade. China tried to bolster belief in a deal this week by publicly reaffirming its commitment. However, any hopes of a trade agreement took a definitive nose dive today as the CFO of Chinese giant Huawei was arrested in Canada at the US’ request. Futures markets dove so sharply on the news that the CME had to stop trading for a period.

FINSUM: This could be a very wild day. Market are off to a rough start this morning, but the mood in the afternoon will be the big test of sentiment, in our opinion.

(Houston)

Oil has been whipsawing all over the place lately. For the last several weeks, oil has mostly fallen, with some short term big rallies along the way. One of those was just a couple days ago when Saudi Arabia and Russia announced an agreement to cut output. However, the bottom has fallen out of the commodity as Saudi Arabia’s energy minister announced that he would only favor a small cut. This led to big doubts about whether the efforts will actually lower supply, sending prices spiraling down 5%.

FINSUM: This seems to be a direct consequence of the US’ ability to boost its production to offset any declines by OPEC. Accordingly, Saudi Arabia doesn’t want to lower its revenue by cutting only for the US to take advantage.