(New York)

JP Morgan has just put out a guide which may be very interesting to investors—a manual for how to navigate the end of easy money. The bank thinks the equity market’s response to earnings has been very worrisome lately, and they are very bearish. The bank recommends that in 2019, investors go underweight equities and long gold and long duration as the economic cycle ends and real rates “collapse”.

FINSUM: This is an extraordinarily bearish outlook from JP Morgan, and it seems mostly dictated by weakness in equity prices lately. Investors should take this warning seriously.

(New York)

Something very interesting is going on in the junk bond market—things are good. The market for risky corporate debt has seen a resurgence over the last couple of months, and even as benchmark yields have risen, returns for junk bonds have been positive. The spread between high yield and benchmark Treasuries has shrunk from 369 basis points to just 333 basis points since February 9th.

FINSUM: This is a very important move as it it is a positive sign about the business cycle. Junk bonds and other credits have often been leading indicators, and the fact that investors are still showing faith in them is very positive.

(Washington)

One of the elements that has been weighing on technology companies this spring has been the threat of regulations. To judge that risk, Barron’s interviewed a number of Wall Street Analysts to get their views. Overall, the consensus was that future regulatory risk for fangs was muted. One managing director for Canacord Genuity commented that, “Facebook management addressed important data and privacy issues head-on, outlining new disclosure standards for political ads and hiring aggressively against privacy initiatives.…For the time being, the worst is very likely behind Facebook stock.”

FINSUM: We tend to agree here. We do not see the government taking major action, and the worst seems to be behind tech companies, for now.

(New York)

Barron’s has just put out a strong warning telling investors that they should stay away from long-term bonds. If you step back from the day-to-day movements, the picture is clearly that yields are moving higher. For instance, they started April at 2.7% and are now at 3% for the ten-year. The longer the bond, the more its value is affected by yield movements, a concept called “duration risk”. Therefore, when markets are this volatile, it is best to stick to the short end of the curve.

FINSUM: Most advisors will know that investors have been pouring money into short-term bonds, probably because they seem like a great buy. For instance, two-year Treasuries are yielding around 2.5%.

(New York)

Talk about a mega merger. In a deal with huge regulatory implications, T-Mobile announced an acquisition of Sprint for $26.5 bn. The deal would be all stock, and is a bet that the 3rd and 4th largest mobile providers in the US can team up to create a rival to the leading players, AT&T and Verizon. The two companies, which are owned by Deutsche Telekom and SoftGroup, respectively, tried to merge 5 months ago, but the deal collapsed.

FINSUM: This is a big play to capture the next generation of data, or 5G, which is being heralded as a sort of holy grail for mobile providers.