(New York)

The market seems to have finally regained its footing after a very turbulent couple of weeks. This selloff felt different than any in recent memory and serious damage to the market’s psyche seems to have been done. But what might it say about the wider economy? The answer is little, according to the Wall Street Journal. The selloff will probably be just that, a market fall. In reality, tech companies, which led the losses, reported very solid earnings, with margins expanding very well. Little can be drawn from the results that might show the economy is in trouble.

FINSUM: The only aspect of this selloff we are somewhat worried about is how it might impact consumer confidence and spending this holiday season. However, so long as the market stays strong this month, we expect the impact to fade.

(New York)

One of the big worries in the Treasury market is that foreign demand is waning for Treasury bonds at the same time as supply is surging. This is leading many to stress that US government bond prices could be in for a big fall. However, Bloomberg says that won’t happen. The logic just isn’t there, and neither is the data to back it. Inflation and rates are rising, and so is the Dollar, making the bonds more attractive to hold. Further, US yields and credit-worthiness are looking increasingly positive given the bond market turmoil in Europe.

FINSUM: Because the Dollar is still the dominant world currency, there is a lot of built-in demand for Treasuries. And given the state of US yields versus the rest of the developed world, we don’t think foreign demand is going to shrink.

(New York)

Inflation has been ticking higher, but it has not been high enough to cause real concerns. Despite this, the Fed has still been very hawkish, hiking rates several times. Well, that mild inflation may be about to change. Anecdotal evidence of corporate behavior shows that companies are increasingly passing along costs to consumers. In everything from soda to bleach to cookies, companies have been raising prices. Explaining the moves, the CEO of Mondelez says “The consumer environment is strong”. Prices across the supply chain have been rising, helping to drive higher pricing.

FINSUM: Consumer sentiment and spending is strong and this seems like the ideal environment in which to raise prices. Thus we think headline inflation is going to start to rise.

(New York)

Financial advisors appear to not give a hoot about the forthcoming SEC Best Interest rule. Fatigue from the endless on-again-off-again DOL saga seems to have taken hold of the industry. A new survey by Fidelity found that 40% of advisors says that even though they are aware of the proposals, they are currently taking no action. A further 78% of advisors say they will need help in assessing and evaluating the proposals.

FINSUM: While there is definitely some fatigue, the reality is that most advisors did a lot of preparation for the fiduciary rule, and thus they think they are in a good position for the forthcoming SEC rule.

(New York)

Investors need to face reality (not that they aren’t), this Fed is more hawkish than any since the Crisis, and despite the market turmoil there will be yet another hike before the end of the year. Rates will keep rising so long as the economy stays strong. That means investors need to prepare. They have mostly done so by fleeing bond funds, but that may not be wise, as there are some very attractive funds that can help offset interest rate risk. For instance, check out the ProShares Investment Grade—Intr Rt Hdgd (IGHG) and the iShares Interest Rate Hedged Corp Bd ETF (LQDH). IGHG is particularly interesting because while both funds go long corporate bonds and short treasuries to produce zero duration, IGHG holds less BBB rated bonds and has a higher quality portfolio, all of which has let the fund appreciate this year even as rates rose strongly.

FINSUM: There are some very solid and creative bond funds out there to help offset rate risk while still earning decent yields. Given where equities are right now, these seem like good buys.