(New York)

Some of the market’s most important indicators are sending warning signs. Both oil and gold are trading in a way that has traditionally signaled that a big downturn is headed our way. Oil has fallen to near a bear market on concerns over growth, while gold has shot higher on the same worries. The extent of the moves is unique and has often presaged nasty movements in broader asset prices. In both the Dotcom bust and the Financial Crisis, oil and gold behaved similarly, so the question is whether they are sending the same message now. One market analyst noted, “Only three other times in history precious metals surged while oil plunged! All of them happened during severe bear markets and recessions … Buckle up, folks”.

FINSUM: It is odd to think that this has not happened more often as it is exactly what you would expect in times of anxiety about growth. Accordingly, this must be noted.

(New York)

The market is overly reliant on a rate cut, say UBS and Goldman Sachs. Both banks think investors are banking too strongly on the Fed cutting rates. The market is currently forecasting three 25 bp rate cuts by the end of the year. Treasury markets have surged, but too far says Goldman. UBS believes “Markets now imply that the Fed will cut rates by around 70 basis points this year and 35 bps next year. We find this excessive … We believe it would take a recession to provoke the magnitude of rate cuts currently being priced by the market, and this remains unlikely in our view”.

FINSUM: We do not believe the Fed will cut rates this sharply unless there is a recession, but maybe that is exactly what markets are expecting (just look at the yield curve).

(New York)

Everyone is trying to figure out how to protect their own and clients’ portfolios from a trade war. “Which sectors will be the hardest hit”, “and by how much” are common questions. Well, a small Virginia based ETF provider has just come to the market with a new fund that is designed to protect investors from that very issue. The new ETF, TWAR, is designed to track 120 companies who are likely to outperform the market during a trade war because of “government patronage”, or special contracts or subsidies which insulate them.

FINSUM: There is some skepticism in the market about this approach, but it does stand to reason that companies who are less exposed to global trade will suffer less than the market.

(Washington)

Investors have been unsure of how the Fed would handle the trade war. Recent minutes from the Fed showed no indication that the central bank was thinking of cutting rates even though the market expects it. However, the silence has finally been broken as Fed chairman Powell announced yesterday that the trade war is on the list of the Fed’s concerns and that the central bank would act to protect the economy from its fallout. In his own words, Powell said the Fed would “act as appropriate to sustain the expansion”.

FINSUM: We took this as a pretty strong affirmation that the Fed is watching the trade war situation closely and is ready to act. Markets liked it.

(New York)

Independent or wirehouse? It is a big decision, especially because it not only means moving firms, but going from being an employee to running one’s own business. Well, to fill the void between those two possibilities, LPL has just launched a new program designed to let advisors half-breakaway. The program lets advisors be independent, but also employees. The new new offering is short on details but follows in the footsteps of Raymond James and Wells Fargo, both of whom have similar opportunities.

FINSUM: This seems like a good option if you are an advisor that wants more flexibility, but does not want the difficulty associated with running your own firm.