(New York)

JP Morgan looks like it is about to push further into wealth management. JP Morgan has always had a solid wealth management practice, but one much smaller than wirehouses or other large broker-dealers. However, the firm has now announced that it is planning to grow headcount in the area by nearly 20%, adding over 1,000 new advisors. According to CEO Jamie Dimon, “We are expanding our footprint to capture more of the opportunity across the U.S. wealth management spectrum — from mass affluent ($500,000 to $3 million) to high-net-worth ($3 million to $10 million) to ultra-high-net-worth ($10 million or greater)”.

FINSUM: Wealth management is a very good business if you can get assets, and it seems like JP Morgan is waking up to the fact that it has a better opportunity in the area than it formerly realized.

(New York)

What is the biggest short-term risk to markets? Is it a recession, China trade relations, and EU meltdown? None of the above. Rather, it is the upside risk of better economic data. A short burst of good US economic data, and the resulting comments from the Fed, could send US bond markets into a tailspin after the huge rallies of the last several weeks. The market for long-term Treasuries looks overbought, which means a reversal in economic data could bring a lot of volatility which could even whiplash equities.

FINSUM: At this point, a round of good economic data, and a stray hawkish comment from the Fed, would deeply wound bonds and hurt equities too (because everyone would again grow fearful of hikes).

(New York)

Do you remember those glory years between the taper tantrum and the end of 2017? The time when inflation was low, but not totally weak, growth was solid but not great, and the Fed decided to do nothing and say little? That was the time when the market surged. Well, those days may be here again as the economic signals right now, and the Fed’s language, are starting to look like they are returning to the post-Crisis “new normal” of moderate growth and inflation, but not enough to bring on a policy response.

FINSUM: Our own view is that we are not headed for recession, but rather a return to the pre-tax cut rate of growth and inflation. This is a solid setup for markets as it produces a dependable environment and a good atmosphere for corporate earnings growth.

(New York)

The S&P 500 is up almost 4% since the end of February. Those are good numbers in anyone’s book. But some stocks in the index are absolutely scorching the market. Take a look at: Nvidia (NVDA), Advanced Micro Devices (AMD), Conagra Foods (CAG), Dentsply Sirona (XRAY), and Chipotle (CMG). NVDA is up 24% since the end of February, while Chipotle is up 17% since then, and about 123% in the last year. All the stocks have positive drivers behind them.

FINSUM: If you are momentum investor, these stocks are certainly top picks.

The so-called “feemageddon” in the asset management industry has been unequivocally good for investors. Fees have dropped across the board, starting with ETFs, but also flowing through to actively managed mutual funds. However, the downward pressure on fees has also created interesting new fee structures. The first one to discuss is the most obvious—free funds. Both Fidelity and Sofi have introduced free index mutual funds and free ETFs, so the line in the sand on fees has been crossed. Other firms, such as Westwood Holdings and AllianceBernstein, have come up with entirely new concepts. AllianceBernstein has a “Flex Fees” actively managed mutual fund which has a low basic fee (ETF-level fee) and then only charges a mark up if it outperforms, offering much better economics to investors. Westwood Holdings, has a little bit different but similar fee arrangement which tries to mitigate the potential for misaligned incentives in “fee only when you outperform” structures, which incentivize portfolio managers to take risks. Their approach is called Sensible Fees, and only rewards incentive compensation to managers based on risk-adjusted performance.

FINSUM: We think the fee disruption going on in the industry is leading to some healthy innovation amongst fund managers. These new funds seem like they will only grow in popularity, especially as fiduciary advisors get more popular.