(New York)

One of the weakest sectors over the last year has been asset management. If you take a close look at some top asset managers, including Invesco, BlackRock, etc, you will see that many are down 20% or more. The growth of passives, pressure on fees, and weak inflows have all combined to bring down the managers. According to Barron’s they look like big bargains. BlackRock, T.Rowe, Franklin Resources, and Legg Mason look like the good bets. There are some great payers in the group too, with Invesco and BlackRock both sporting yields over 4% and AllianceBernstein paying a whopping 8.6%.

FINSUM: Yes, the industry’s traditional model is under fire, but those with very good scale will win out. Therefore, we do think the very top managers are a good buy, especially at these valuations/yields.

(Washington)

It looks like the EU is going to pullout all the stops to try to avoid a trade war with the US. EU commissioner head Juncker is going to meet in Washington this week with President Trump to offer some new avenues for discussion as a way to avoid a broad tariff package. Trump is threatening a $50 bn tariff package on the EU, which he says has taken advantage of the US in trade. Europe is particularly worried for their car exports to the US, which are very vulnerable to Trump’s potential tariffs.

FINSUM: We have a hard time imagining Juncker is going to say anything to dissuade Trump, but maybe the EU has something sweet to offer.

(Washington)

The SEC best interest rule has been facing a very tough time. All sides of the argument seem to be against it. Consumer protectionist groups hate the muddled and weak delineating between brokers and advisors, while the industry dislikes the strong rules on title use. Now, there is a new weak spot in the SEC’s approach. The SEC has decided to have “roundtables” with consumers to discern their level of understanding of the rule and get feedback. The move is unusual and the SEC has not disclosed who or how they will do it. All sides again hate this idea, with the head of the Consumer Federation of America saying “Asking investors whether they like the disclosures is virtually meaningless … That needs to be done by disclosure testing experts who know how to design the tests and interpret the results”.

FINSUM: It is very obvious that the SEC’s current poorly defined delineation between brokers and advisors is not going to be easy to understand for consumers. We suspect any kind of consumer testing will help them realize that, but this does seem to be a rather odd and opaque approach.

(New York)

The rise in yields across the world has seemed to stall over the last couple of months. Ten-year Treasuries are back under 2.9%, and while the yield curve is flattening, the risk of big losses from rising long-term yields seems to be mitigated. Not so fast. The Wall Street Journal is reporting that many of the world’s central banks are now aligning themselves with the Fed and are preparing to begin lifting rates. The pattern is emerging across both the developed and emerging markets (e.g. the Bank of England and the Reserve Bank of India).

FINSUM: We think this could be a risk for US investors. The main reason why being that one of the things that has kept long-term yields low is demand from overseas investors for our relatively higher-yielding bonds. If that changes, there won’t be such a lid on Treasuries.

(Washington)

Anyone hoping the current trade war might have stalled will be sorely mistaken today. While Trump says he plans to to impose an additional $200 bn of tariffs on China in September, he has just said he is ready to go to a full $500 bn of tariffs on Chinese imports. When asked if he thought his plans would cause the stock markets to drop, Trump responded “Well, if it does, it does. Look, I'm not doing this for politics. I'm doing this to do this right thing for our country”.

FINSUM: We think the US does currently get a raw deal in a lot of foreign trade, especially with China. However, the manner in which this “negotiation” is proceeding does seem to be unnecessarily disruptive.