(New York)

There has been a lot of focus in the media lately about rising rates and what they will mean for investor portfolios. The ten-year yield is now well over 3% again, and the Fed looks likely to hike twice more before the end of the year. If your fixed income exposure (and equity exposure) isn’t carefully hedge, it could spell losses. Accordingly, here are three ETFs to help offset rate risk: the SPDR Blmbg Barclays Inv Grd Flt Rt ETF (FLRN), the iShares Floating Rate Bond ETF (FLOT), and the ProShares High Yield—Interest Rate Hdgd (HYHG). The first two rely on floating rate bonds of short maturities, while the ProShares fund goes long corporate bonds and short Treasuries.

FINSUM: The performance of these kind of hedged ETFs has been good since rates started rising a couple years ago. They seem to have an important role to play in portfolios right now.

(Seattle)

A provocative headline, we know. But it turns out there are some good reasons why Amazon should consider splitting itself up before regulators do. There are two big reasons the company should consider cleaving itself. The first is that if regulators eventually do it, it will likely be much more messy and painful. But secondly, and perhaps more interestingly, Amazon’s web services business has become so large that it is starting to negatively impact its retail business. Amazon web services (AWS) accounted for more than 100% of the company’s operating income, and analysts estimate it would be worth $600 bn on its own, versus just $400 bn for the retail business. Its might is now getting in the way, however, as former AWS customers like Target have now moved away from using it because the don’t want to share information with Amazon’s retail business, which is a major competitor.

FINSUM: We are quite sure this won’t happen any time soon, but it is beginning to be easier to see the value in doing so.

(New York)

While the SEC seems to have largely shrank from the limelight surrounding its investigation of Tesla, there is news on that front, and in a big way. The DOJ is now investigating Tesla, and specifically, it has launched a criminal investigation into Elon Musk’s now infamous tweet about taking the company private. The investigation sits alongside a civil inquiry by the SEC. Tesla said it had received a “voluntary request” for documents but that there was no “subpoena, a request for testimony, or any other formal process”.

FINSUM: Hard to see where this may go, but we imagine it could turn into a big headache (and distraction) for Musk and the company, as well as its shareholders.

(Washington)

One of the many factors that has been odd about the market’s rise since the beginning of summer has been how it did so at the same time as global trade tension was building. No better example of this odd pairing can be found than yesterday’s market—Trump imposed tariffs on $200 bn of extra Chinese goods, and the Dow rose over 0.5%. Why is this the case? Barron’s argues that it is because investors fundamentally believe that China and the US won’t let a trade war get out of control because of fears of mutually assured economic destruction. Accordingly, they see almost all negotiations and actions through rose-colored glasses.

FINSUM: We are not as sanguine as the market about the risks of the current trade war. Our biggest worry is not even about trade negotiations, per say, it is more about the ill will that is being built up which may create a future impasse on a seemingly resolvable issue.

(New York)

The whole market (and the media) seems to be worried about a looming recession. Driving that fear are many factors: a surging economy, very high market valuations, and a nearly inverted yield curve. Several big banks and research houses have put out warnings of a looming recession and bear market. However, one of the most prominent, Goldman Sachs, has just gone on the record doing the opposite. The bank says there is only a 36% chance of recession in the next three years, a figure below the historical average. “There has been increasing investor interest in the chance of a recession in the U.S. over the next few years … Our model paints a more benign picture”, said GS economist Jan Hatzius. The bank did note that if a US recession does occur, it will likely drag many developed economies down with it.

FINSUM: Recessions are famously hard to call, so we won’t go one way or the other. That said, there are some signs that a recession is looming. We certainly think the odds are higher than 36% for the next three years.