(New York)

The market’s outlook grew significantly dimmer yesterday. The Fed made clear that investors should not expect a rate cut in a July, which took the wind out of equity investors’ sails. With that in mind, here is a list of ten stocks that should help investors win in a downturn. The theme here is “low volatility” stocks, or stocks with less risk that should outperform the market in a choppy environment. The list: Aflac, Amdocs, American States Water, Atmos Energy, DTE Energy, Duke Energy, McDonalds, NextEra Energy, OGE Energy, WEC Energy Group.

FINSUM: Given the Fed’s reversal from what the market thought was its stance yesterday, right now does seem like a good time for low volatility stocks.

(Washington)

A US District Judge is allowing a lawsuit from Democrats against President Trump to proceed. The lawsuit is from Congressional Democrats and the green light they have received will allow them to begin collecting records from businesses owned by the president. The judge denied a request by the DOJ to pause the case in order for it to be reviewed by a higher court. “This case should have been dismissed. It presents important questions that warrant immediate appellate review and is another impractical attempt to disrupt and distract the president from his official duties”, said the DOJ. The department will now try a long-shot emergency plea to an appeals court in Washington.

FINSUM: This did not get covered much in the media, but it is an important development as this will bring the Democrats closer to getting all the records they want. The fight is escalating.

(Washington)

The SEC’s Best Interest rule is still being digested by markets. It contains some potentially big changes, including the definition of fiduciary duty. The DOL is yet to release its new Fiduciary Rule, but it will reportedly work smoothly alongside the SEC’s rule. One of the questions that has arisen in this context is whether under the new rules it may be increasingly easy for fiduciaries to accept commissions. The idea of fiduciaries accepting commissions is generally a big no-no in the current paradigm, but top industry lawyers like Fred Reish see this loosening under the new rules. In particular, it is seeming as though broker-dealers could accept commissions when offering fiduciary advice, but the jury is still out on RIAs.

FINSUM: This is just one of the many new changes that are on the horizon. The combination of new rules will likely create grey areas, risks, and opportunities that are not yet apparent.

(New York)

Yes, the market is at or near all-time highs. Yes, the Fed is dovish, which is mildly bullish for markets (or very bullish if the economy stays in decent shape). However, equities are sending some strong warning signals too. In particular, two sectors which often act as bellwethers are showing that the market may be headed for a decline. Both small caps and transportation stocks have been struggling, a development usually associated with a market headed south. The sectors have declined at a rapid pace, and relative to the S&P 500 as a whole, are at their weakest point since 2009.

FINSUM: This is a signal similar in nature to the yield curve inversion. Is it material or just an aberration? Anyone’s guess.

(New York)

The dovishness from the Fed has been bullish for most of the debt market, with sovereign yields falling and corporate debt getting a boost. However, the riskiest corner of the market, triple C junk bonds, have been left out, with the group falling by 1.5% since May. Triple B bonds, by comparison, were up. The odd part about the losses is that signs of an interest rate cut are usually very bullish for junk bonds because they would mean lower interest burdens for the companies. That said, anxiety about the economy is high enough that such benefits were negated.

FINSUM: This whole situation makes sense in that the downside risk of a sinking economy is greater than the upside of lower interest rates for this subsector. Thus, the bonds are losing. In other parts of the credit spectrum, the risk-reward balance is different.