(Washington)

It may seem very far out right now, but the 2020 election is looking like it could be a very bad outcome for markets. Democrats are still leading in the polls, which is bad news because pretty much every candidate (perhaps with the exception of Biden) looks like they would be quite bearish for markets. Between higher taxes, more regulations, and government run healthcare, the outlook for markets from most of the leading candidates appears bleak.

FINSUM: When you take even a casual glance at how this election is shaping up, things look rough. You have the most leftist Democratic candidates in memory, and they are leading the polls. We think the polls are off and Trump still has better odds, but there is undoubtedly a very large risk.

(Washington)

Advisors look out, the potentially easy Fiduciary Rule you have been counting on is now seriously in doubt. For several months the consensus view was that the DOL would create a companion rule to the SEC’s Best Interest rule, but in a significantly less onerous way than the original Fiduciary Rule. That assumption now looks misguided because DOL chief Acosta has resigned, meaning there will be a major leadership change and a likely revisiting of strategic priorities.

FINSUM: Acosta has been pretty industry friendly, so this review is nerve-racking as there seems to be an equal likelihood of a either a tougher new chief, or a similar/relaxed one.

(Washington)

Most investors spend their time worrying the Fed is going to cut the party short. Historically speaking, that has often been the role of the central bank—keeping things from getting too out of hand. However, Fed chief Powell does not appear to want to be the sober chaperone at the party this year, as the dovish positioning is heavy. Accordingly, there seems to be a strong chance of a melt up in stocks right now, or a big late stage rally. UBS, however, says the opposite, arguing that investors will stay hesitant because of high valuations and weak earnings.

FINSUM: We don’t think there will be a melt up. We just think the market will re-enter the post-Crisis goldilocks mode they were in, where rates are low and the economy is healthy, clearing the way for multiple expansion.

(San Francisco)

A year ago you were a considered a maniac if you didn’t have your portfolio loaded with FAANGs and other tech stocks. What a difference a year makes! Tech stocks are now largely out of favor after a rough year that has underperformed the S&P. There are a lot of fears of regulatory scrutiny and slowing financial performance. The tide has turned so much against the stocks that it is fair to call them a contrarian bet.

FINSUM: It sounds quite ridiculous to call some of the world’s most popular stocks over the last few years “contrarian”, but it seems true at this point. It appears it might be a good time to buy, though regulatory fears may prove legitimate.

(Washington)

Have you been concerned about the newest iteration of the DOL’s Fiduciary Rule, which is due out by the end of this year? You should have been. While investors have been anxious about it, the generally more industry-friendly DOL under Trump has alleviated some anxieties. However, some thing very big just happened—DOL chief Acosta has resigned (amidst the Jeffrey Epstein scandal). That means there is likely to be a significant review and change of priorities as new leadership comes in. That leaves the fate and direction of the DOL very uncertain.

FINSUM: This is not necessarily good news. One could get giddy and think the Fiduciary Rule might no longer be a priority, but there is an equal chance the next head of the department may come in and say “this isn’t tough enough”.