(Houston)

The oil market is nervous, which seems likely to lead to volatility. The surprise is that sharp moves may trend to the upside rather than the downside. The two big concerns are about how sanctions on Iran may crimp output, as well as how OPEC lacks spare capacity to boost output. Such concerns are a stark change from the attitude that accompanied the sharp price falls in recent weeks, when supply seemed to be expanding strongly.

FINSUM: The Saudis are saying they will expand production to a record, but the reality is they do not want to do so because they don’t want prices to fall. It seems like OPEC will walk a line to keep prices where they are.

(New York)

Investors have been really afraid of the next bear market for the last few months. Ever since spreads grew tighter and the economy became very strong, fears of a looming recession and accompanying bear market have been rampant. Here are six signs to consider about a potential bear market. Firstly, look at high yield bond spreads. When they start to rise, its shows the credit cycle is ending, potentially signaling a recession. Yield curve steepness (or inversion) is another key metric. Deal activity in M&A is also excellent sign. Weekly jobless claims are another strong leading indicator. Finally, look at investor sentiment. When investors are very confident, that tends to be when the bear bites.

FINSUM: This is a pretty good list of leading indicators. Some are flashing red right now, while other are humming along nicely.

(Washington)

Investors can breathe a sigh of relief, but only for a moment, as it looks unlikely that the Fed will hike again in its next meeting this week. The Fed will not be releasing updated projections after this meeting. That said, improvements in the labor market recently make it likely that the central bank will hike rates at its meeting next month. The Fed is supposed to discuss this week all the things you might expect: “the economy, financial markets, and the future path of rates”, according to the WSJ. Fed chairman Powell will not be holding a press conference after the meeting.

FINSUM: This Fed is so hawkish and the economy is rolling so well that even a month’s break from hikes seems like a reprieve. We are a long way from 2013.

(Washington)

With the midterms finally over, investors need to think critically about how the market will respond. In particular, specific sectors will have different reactions. With that in mind here are six sectors to watch. Drugmakers seem likely to be seen favorably as the split between the parties means new regulation governing prices seems less likely. Banks could go either way, but most expect Trump’s deregulatory agenda to continue. Technology is looking less favorable as regulation and scrutiny of the sector is one of the few areas of bipartisan agreement. Industrials are looking less favorable as well, as the odds of a big infrastructure package have decreased. Energy seems neutral, as no big changes appear likely. Finally, marijuana stocks are likely to jump.

FINSUM: There is going to be quite a range of reactions over the next few months as each sector digests how the newly split Congress will affect them.

(Los Angeles)

More bad news is flowing out of the housing market. For the last several months, home sales, new builds, and demand has been falling. Prices are down in some major metropolitan areas. Now, new data shows that mortgage demand is contracting. US mortgage applications fell to their lowest level since 2014 in recent weeks. This comes on the back of mortgage rates rising to their highest since 2010.

FINSUM: There have been eight rate hikes since 2018 and home prices are at lofty levels. A downturn should come as no surprise.

(Washington)

The midterms are finally over, and with it the possible end to the volatility of the last month. Many on Wall Street now say stocks are ready to gain as buying fever takes over. The election went almost exactly as expected, which has set up a possible goldilocks scenario for markets. With Congress split, it is likely that policy gridlock will take over, a situation many think is ideal for stocks. The idea is that the less government does, the more room the market has to operate uninhibited.

FINSUM: The key here is that a split Congress means there likely won’t be any huge policy changes over the next two years. That seems favorable for stocks given the political uncertainty over the last 24 months.

(Washington)

This midterm election might have ended up being very consequential for muni bond markets. Some in the muni market feared the possibility of the Republicans maintaining control of both the House and Senate because of how further tax changes could have hurt the finances of municipalities. However, now that Congress is split, the outlook seems more favorable. The reason why is that Congress now looks more likely to restore a tax exemption for a debt refinancing strategy that is often used by local governments.

FINSUM: Just like in other asset classes, having a split Congress looks favorable for munis.

(Washington)

The midterm elections are finally in the rearview mirror, and generally speaking, the results are exactly what the market expected. That means it may be time for a rush back into stocks after the turmoil of the last month. One analyst put it this way, saying “Following this week’s volatility and the FANGs selloff this week, we’re likely to see traders getting back in and buying the dip. The elections have been a win for both the Republicans and the Democrats, and this will bring balance to the market”.

FINSUM: We do suspect investors will breath a sigh of relief. Firstly, things went according to plan, but secondly, a split Congress is in some ways the best case scenario for stocks.

(New York)

Something very ominous has been occurring in junk bond markets over the last week. The lowest tier of junk credits—which had been outperforming the market for much of this year—have been getting hammered. There has been a crash in CCC credits. According to Bank of America, since early October CCCs “have lost 3.25% in total and 3.50% in excess returns … effectively wiping out five months of performance”. That contrasts with the highest quality credits in the junk universe, which appreciated.

FINSUM: CCC had been doing quite well, so one can see this either as a normal return to earth, or early signs of trouble.

(Washington)

Well the midterms are finally here. However, one thing has become apparent—how these elections will affect financial advisors has not been discussed nearly enough. One of the big concerns advisors should have is about what happens if the Democrats take the House. In this scenario, it seems likely regulation would grow much toughed as fire & brimstone-like Maxine Waters (D-Calif.) would taken the helm of the House Financial Services Committee. Additionally, Republican-led deregulatory measures could be scuttled. One area of possible positivity could be on new legislation for retirees, including new measures to encourage people to save for retirement.

FINSUM: Perhaps the biggest worry regards some sort of defeat of the new SEC rule with renewed support for the DOL rule 2.0. The Democrats fiercely advocate for a comprehensive fiduciary standard, so their ascendance in the House could lead to that becoming a reality.