(Shanghai)

The US is considering some new rules that could cause a stock market calamity in China. The government is considering putting new restrictions on US capital flowing to the Chinese mainland. The move is considered the third and worst-case-scenario stage for Chinese markets in the current trade war. In particular, the big risk is that MSCI de-lists Chinese stocks from its broader indexes, meaning all that capital would need to be pulled out. That amount is currently around $50 to $60 bn.

FINSUM: This is not hugely massive, but it is certainly enough to hurt markets on a technical front, but perhaps even more from a perception angle.

(New York)

If you are looking for some good muni bonds to add to your portfolio, take a look at an interesting new offering from a group of US universities. Georgetown, University of Pennsylvania, and Rutgers have all issued “century” muni bonds, and they may prove a good investment. Rutgers’, as an example, yields 3.9% and has an A+ rating, a significant spread to the typical 3.2% yield on other long-term muni bonds. Even BBB bonds, which are in a tenuous position, are only yielding 3.2%.

FINSUM: The yield is great, but your great grandchildren will be getting the principal back!

(New York)

It actually took longer than we expected. Last week there was a big splash in markets and media when Schwab, TDA, and E*Trade all cut their commissions in response to a first move by Schwab. Now, unsurprisingly—except for how long it took—Fidelity has followed suit. The unique part about Fidelity’s move is that in addition to free trades, it is also offering free money market funds for any cash left in accounts. Those are currently 1.58%, and way ahead of the near zero yield you get on cash at Schwab, TDA, and E*Trade.

FINSUM: The whole market has gone to zero on trading commissions. One wonders if the same is going to happen on large ETFs.

(New York)

Have you ever thought to yourself “I would love if they could put the downside protection of structured products into an ETF”? Probably not, but someone did, as there is a new category of ETFs, called Buffer ETFs, which are seeing big capital inflows. The ETFs work by guaranteeing only a certain level of losses in exchange for limiting potential gains. The ETFs have a year-long term, and their details change constantly. But a good example would be one with a 9% “buffer”. This means that if the ETF loses 12% in the year, the holder would only see a 3% loss and the product provider would absorb the rest. The first and only provider of these ETFs is called Innovator and has partnered with MSCI, Nasdaq and more to create a handful of exchange traded funds. Check out KOCT, NOCT, EJUL, and IJUL.

FINSUM: These are very tricky ETFs, just like the structured products from which they drew their inspiration. That said, they seem like they have some utility if they are executed properly.

(New York)

If there were ever a small cap sector overwhelmed by their larger cousins, it would be in technology. Small cap tech stocks are so overshadowed by FAANGs and the like that one would be forgiven for not even realizing they exist. However, they do, and they may very well be a good buy at the moment. The S&P 600 Small-Cap Technology currently trades at half the valuation of the S&P 500 Technology index, way down from its historical spread. What’s more, profit estimates are healthier too. Calling small cap stocks “mini-fangs”, Leuthold Group argues that “the mini-Fangs offer a significantly higher growth profile at a substantially lower valuation”.

FINSUM: A couple notes here. Firstly, the FAANGs aren’t even really “tech” stocks anymore after the sector realignment, so the valuation comparisons are not perfect. Secondly, what is the catalyst? Leuthold argues that if the economy does a little better than expected then higher inflation will boost tech stocks. That sounds flimsy.