(New York)

Technology, trade wars, and social attitudes are changing the world and economy rapidly. How can investors adapt their strategies to keep up and “future proof” their portfolios? Well, Barron’s has run a piece doing just that. The stocks chosen include: Bridgestone, BNP Paribas, Lix, Dabur India, and Bharti Infratel. Bridgestone, a Japanese tire company, seems as though it would be hurt by tariffs and the rise of Uber. However, the opposite is the case, as most tires are made close to where they are sold (so no tariffs), and the rise of Uber and self-driving cars will actually increase the most important performance metric for tire companies: miles driven.

FINSUM: We wrote an article espousing tire makers a few months ago but we like the view even better now. No matter who, or what, is driving a car, rubber will still meet road, meaning tires will be in demand. Further, since parking for self-driving cars may be expensive, we can imagine fleet operators keep them driving around 24/7, increasing demand for rubber.

(New York)

Investors be warned, JP Morgan has just issued an ominous warning—that ten-year Treasury yields will jump to 5%. JP Morgan’s CEO, Jamie Dimon, has long argued that yields would rise to 4%, but now says the figure might be 5%. “I think rates should be 4 percent today … You better be prepared to deal with rates 5 percent or higher - it’s a higher probability than most people think”. Dimon sees a recession on the horizon, but he does admit there may be time for the bull market to continue, saying it could “actually go for 2 or 3 more years”.

FINSUM: Ten-year yields are currently having trouble sustaining 3%, so it is hard to imagine them going to 5% any time soon. Still we thought the warning was worth sharing.

(New York)

The next recession has been talked about seriously for the last year or so, and discussion of it is rising now. But what might actually trigger the next downturn? The New York Times sees three possible triggers. The first is the Fed playing the economy wrong and sending the the country into a recession by being overly aggressive with rate hikes. In this scenario, 2020 seems like the doom year. Then there is the risk of the debt bubble bursting (just like the last recession), this time in corporate debt, which has seen a huge surge in issuance since the Crisis. Finally, the looming trade war could drive the whole global economy downward, sparking a major recession.

FINSUM: The corporate debt bubble bursting is a good insight, but much less discussed than the others. It is also interesting because it would be highly linked to the Fed. Maybe that is the double whammy?

(San Francisco)

Tech stocks have been through a rough patch, FAANGs especially. Facebook has been absolutely obliterated, while Netflix has had some steep falls. But is there still a bull case for the FAANGs? Barron’s says yes. Given Apple’s great numbers recently, the FAANGs have a little bit of momentum back. The core of the argument is dead simple—FANG stocks (leaving out Apple) are still growing at 35x the rate of the broader market, so it is hard not to see them rising. The article argues that the group is a generational trade that captures the growth of the internet.

FINSUM: When you get right down to it, the business models of the FANGs (lets leave Apple aside for a moment because it is a very different business) are very solid. We think investors will come around to that sooner rather than later.

(New York)

Every investor knows ETF have surged in popularity. However, one the big questions of major importance in the industry is “who owns them?”. The answer is, mostly, investment advisors. There has been a major shift in the ETF industry since the Crisis, as ETF consumption by Investment Advisors has surged as AUM in that area has grown. What’s more, that holding is rocketing year on year, with total AUM ownership in the segment growing by around $400 bn between 2016 and 2017. Brokers, by contrast have seen their total share of ETF ownership plummet, from 16% in 2007 to just 2.2% now.

FINSUM: Retail still owns the majority, but investment advisors have been the major growth driver for the segment and their influence is widening considerably.