(New York)

The market has been very up and down lately. 50 bp losses or gains in a day feel pretty standard by now. But all of that may be wreaking havoc on investors’ nerves and portfolios. So what is the best way to hedge against the volatility? Most low volatility funds invest in stocks with a low beta, or those that change little compared to market movements. However, there may be an even better way to go about hedging. AGF has an ETF call BTAL, which not only buys low beta names, but also shorts high beta ones, all in equal weight with equal sector balance. In bouts of volatility, those shorts tend to really help gains in a way that holding long-only positions does not.

FINSUM: This seems like a smart approach that gives a sophisticated level of protection to investors. Worth a look.

(Washington)

It had seemed somewhat of a formality to this point, but it is now official: Eugene Scalia has been confirmed by the Senate as the head of the Department of Labor. Scalia has long been a legal crusader against both financial regulations and worker’s rights, and will now take the helm of what is likely to be a very different Department of Justice. This has made opponents of the the fiduciary rule 2.0 cheer. However, Scalia announced recently he may have to recuse himself from being involved in that regulation given government ethics guidelines. Still, many argue that his influence will mean the DOL moves in a much more conservative direction on all fronts.

FINSUM: The fiduciary rule seems like the biggest thing the DOL has going at the moment (at least it seems that way if you are in wealth management). This seems to be backed up by how much political attention it is getting. It is hard to see him not being involved, or at least heavily influencing the approach, even if he is not directly taking part.

(New York)

Wall Street research teams have been pretty split in their market outlooks recently. While the general mood is always bullish in equity research, an inordinate number of banks have been pessimistic lately. Do not count Morgan Stanley in that group, as they have just come out with what cannot be considered anything other than a bullish note given the current environment. The bank says there is only an 11.4% chance of a recession in the next year. Morgan Stanley also pointed out that each asset class has its own positioning right now, saying “Rates are generally pricing in a higher risk of recession than equities, giving equities greater relative downside should a recession emerge and bonds greater relative downside should economic growth begin to trough/reaccelerate”.

FINSUM: As Morgan Stanley also added in this piece, the real time to worry is if companies start cutting jobs to maintain margins. Once that happens, consumer spending and sentiment will fall rapidly.

(New York)

The world’s biggest family offices are feeling very bearish. A new study by UBS found that over half of them are expecting a recession and over 40% of them are increasing their cash reserves. 45% are taking steps to mitigate risk. Family offices have struggled in the last year, averaging only a ~5% return; much lower than the 9-13% returns they typically target.

FINSUM: Normally speaking we might think this is a good counter-indicator, but family offices represent so much AUM that they could have a real impact on the market.

(New York)

Peloton went public yesterday, and the results were much less than impressive. In its first day of trading, the company saw its shares fall 11%. The company priced shares at $29, but saw them fall throughout the day. The company produces exercise equipment and classes and has a cult following among its customers. Despite the fall though, in some way the IPO is a big success, at least for the founders of the company. In its last private funding round in 2018, it was valued at $4.15 bn, but opened at $7.7 bn yesterday. That is a much better showing than other recent big IPOs.

FINSUM: This company is losing almost $200m per quarter on revenue of less than $1 bn. It is fortunate it did not fall further given the current environment.