(New York)

A lot of investors are worried about the stock market. The market has been essentially flat this year, but given fears over a looming trade war, a potential recession, and higher rates, there is much concern about the potential for falling prices. All that said, here is a factor that may boost markets, but doesn’t seem to be fully priced-in by the market: growing buybacks. Goldman Sachs forecasts that companies in the S&P 500 will buyback a record $650 bn worth of stocks this year, far outpacing the record set in 2007. This should lead to a buyback yield of about 3% for investors, which combined with the dividend yield should net investors about 5%.

FINSUM: A record setting year for buybacks would be a big boost for markets that are lacking a growth story at the moment.

(New York)

Advisors considering putting client capital into smart beta funds need to be prepared for what to expect. The reality is that smart beta strategies tend to accentuate the returns of the market, or run counter to them altogether. In up times a smart beta strategy playing into the market’s strengths can do much better than the index overall, the opposite can happen in down markets. However, even in decent markets, many smart beta strategies can perform terribly because of the nature of the rise.

FINSUM: If you are just getting into smart beta funds, it is really important that you understand the strategy inside and out to make sure you understand how it will sit within your portfolio.

(Washington)

The saga of the fiduciary rule seems to be never ending. Odysseas had an easier time. Now, just when things were starting to look clear—the DOL rule is effectively gone and the SEC has proposed a new one—everything is murky again. A senior figure, Michael Piwowar, at the SEC has just resigned. According to InvestmentNews, “Mr. Piwowar’s departure could significantly delay a rulemaking that already was projected to last for months — or make it impossible to complete”. Piwowar was a major ally of SEC chief Clayton, and now there are an equal number of Democrats to Republicans on the SEC commission. Trump could try to replace Piwowar and Democrat Kara Stein (whose term has lapsed) all at once, but the Senate would need to fast track approval.

FINSUM: Even if everything gets fast-tracked by Trump, the Senate needs to get the approval done, and that very well may not happen soon, especially because the Democrats might take the Senate back.

(New York)

Bloomberg has published a thoughtful and interesting article arguing that there is a little-known sign in the market that prices are likely to fall. This year’s trading activity has been in major contrast to the last few years, and not just because of more volatility. Rather retail investors have come back en masse. In the March of this year, retail trades from TD Ameritrade’s and E*Trade’s platforms accounted for more than 25% of all trading volume. Historically, investors coming back to the market is such fashion has been negative for prices.

FINSUM: If you combine this view with the reality that stocks have not really gained despite the best earnings season in many years, you do start to worry the bottom might be ready to fall out.

(New York)

There has been a lot of fear about bonds lately. Higher inflation readings, a more hawkish Fed, and 3% Treasury yields have gotten investors nervous. However, bonds might be in for some big gains, especially Treasuries. The reason why is that there is a huge pile of short positons held by hedge funds who are betting against Treasuries. Yet, yields have been stubborn over the last couple of weeks and now it appears the positon might be broken by a strong short squeeze that would send prices higher.

FINSUM: We had not paid much attention to this, but given the weak US inflation reading that has just been released, this may play out very soon.