(Houston)

The commodities market is taking a wallop across the board today. It seemed to start earlier this week with oil dropping on fears over weakening Chinese GDP. Weaker growth would mean less demand for oil. Now, those fears have spread across most of the commodities market, with metals currently selling off strongly on the same fears. The renewed selling follows losses nearing 20% in industrial metals over the last month.

FINSUM: Remember that commodities markets are often a leading recession indicator, so this data does not bode well. Though in this case, it seems to be GDP data leading commodities, which is a bit back-to-front.

(Atlanta)

All of the worries in the real estate market have been focused on commercial property. While commercial real estate is supposed to be overvalued and over-supplied (a dangerous combo), US residential real estate is supposed to be healthy, with manageable price rises and tight supply. However, the residential market has just gotten some bleak news. US Housing starts plunged by over 12% in June, and new building permits dropped over 2%. The reasons cited for the drop are a lack of skilled workers to build and a higher cost for materials.

FINSUM: The question is whether this is a demand-led problem (new buyers pulling away) or a supply-led one (meaning the supply of everything is too tight). The first would indicate falling prices, the second the opposite.

(New York)

A lot of investors may be asking themselves whether stocks will be directly impacted by a trade war. In the last several trading days, the market seems to have shrugged off the increasing trade tensions. However, JP Morgan is warning that the burgeoning trade war may wreak havoc on the market. The rising tariffs now occurring globally follow 50 years of increasing free trade, so there is little modern precedent for what is occurring.

FINSUM: In our view, the market does not have a good feel for pricing the risk of a trade war because it has been so long since investors have seen anything like it. Beware.

(New York)

Those seeking to buy income-focused investments have a dilemma on their hands right now. Is it safer to buy high-yielding blue chips like AT&T, or better to buy a diversified high yield fund? Barron’s tries to answer this question and gives a definitive opinion—the bond fund. While both may offer similar yields of between 5-6%, holding money in just one or a small handful of blue chips offers much more risk. Not only could dividends be cut, but underlying businesses could deteriorate. And without the benefit of diversification that a broad ETF offers, a portfolio could see heavy losses.

FINSUM: This is a good, basic article to share with any clients who ask why they are buying debt instead of just owning a few stocks.

(New York)

Investors look out, it is time to go on the defensive, at least according to JP Morgan. The top strategist at JPMorgan Asset & Wealth Management, Michael Cembalest, has just told investors that the growing trade war and its threat to markets and the economy means investors need to be very worried. Cembalest points out that this will be the first sustained rise in tariffs across the global economy in 50 years and it is a profound shift away from decades of historical precedent. If the US proceeds with a further $200 bn tariff package on top of its $34 bn package, then markets could be in for a wild ride, says JP Morgan. They advise to focus on consumer staples and tech stocks.

FINSUM: This is a pretty stark warning from JP Morgan and it does make sense. Because there is little recent precedent for trade war, the market may not be accurately pricing the threat it poses.