(Washington)

The election is far from decided, but the outcome may very well fall into Biden’s favor. With that in mind, it is worth considering how the industry’s regulatory agenda would change were he to become president. He would almost surely replace Jay Clayton as head of the SEC, but the bigger questions are about Reg BI, the new DOL rule, and whether his administration would seek a strong fiduciary standard. Most industry lawyers think Biden would not seek to throw out existing rules and draft entirely new ones. That would take a great deal of work and time. Much more likely, it appears, would be amendments to Reg BI. The infrastructure of the rule is such that simple tweaks could make it much more robust. Chief among those changes would be defining what “best interest” means and changing the approach to enforcement.

FINSUM: If the SEC put a wide-ranging definition of “best interest” in place and changed to stricter enforcement, you would quickly have a much more robust rule.

(New York)

One of the most eye-opening aspects of the pandemic’s impact on the economy has been in housing. The housing market has been on fire since Spring, with a gigantic boom in suburban home sales. The big question is whether this is the start of a sustained trend or a more temporary one. Most analysts think it was just a short-term move. Overall mortgage applications have flattened in recent months at the same time as listings have been rising, showing that supply and demand are changing. Additionally, there is a divergence in the type of demand. Demand for high end homes is stronger, but for cheaper housing it is much weaker.

FINSUM: The pandemic has affected those at the lower end of the socio-economic latter more strongly than those at the top, and combined with how the virus itself has incented social isolation, it is no wonder suburban housing has boomed. That said, it seems temporary almost by definition.

(New York)

The election couldn’t really be more stressful. Investors are anxious not only on the investment front, but on the personal front as well. With that in mind, here are five stocks that should do well no matter who ends up in the White House: Abbott Laboratories (ABT), Newmont (NEM), SBA Communications (SBAC), Roper Technologies (ROP), and Carlisle (CSL). Two things that seem likely to do well no matter who wins the election are companies which provide COVID tests and gold. COVID testing is an obvious one—there needs to be more COVID tests available, and faster/better quality tests. Abbott Laboratories has a $5 test that gets results in 15 min and are connected to a mobile app. Gold seems equally likely to do well as inflation concerns are rising alongside the weakening Dollar, growing US debt issuance, and slumping oil prices.

FINSUM: We think ETFs covering large sections of companies who will be in COVID testing are a good buy. Gold seems like a smart bet too given the likely growing US debt and weaker Dollar.

(Chicago)

Small caps are looking strong, and seem likely to outperform large caps over the next year. Small caps have seen two decidedly positive trends over the last month—an outperformance relative to the S&P 500, and increasing breadth. From a technical perspective, those are both encouraging. On the fundamental front, small caps are starting to follow a well-trodden path to success. Historically, every period since 1990 in which the Russell 2000 has outperformed the S&P 500, spreads have been widening. Bond watchers will have noticed that Treasuries have risen 28-40 bp recently across different maturities. Since that rise in yields seems likely to continue because of the growing debt needs of the US government, small caps may be in for a good run.

FINSUM: We really like this logic. Small caps tend to have a higher beta to GDP, so rising yields (hopefully indicating a better economic environment) should create additional spread widening, and thus be positive and create some continued outperformance.

(San Francisco)

The anti-trust probe into Google elicited little more than a shrug from markets. Investors seem to think this just Washington saber-rattling. However, what is not well understood is that the probe is not just a risk for Google, but a major one for Apple. Apple is intimately connected to the case the DOJ is trying to form. In particular, Google pays Apple billions of Dollars a year to be the default search engine on iPhone, a fact which the DOJ has centered its case on. That money flows into Apple’s services unit, which has been its biggest growth driver in recent years. According to an analyst from Bernstein “There’s a risk, if you play it out, that there actually could be more financial impact to Apple than there is for Google”.

FINSUM: The market seems to have fundamentally misunderstood the risk here. Google got the headlines, but Apple potentially has even bigger risk.